<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 20, 1997
REGISTRATION NUMBER 333-37375
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
MIDWAY AIRLINES CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 4512 36-3915637
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) No.)
</TABLE>
------------------------
300 WEST MORGAN STREET
SUITE 1200
DURHAM, NORTH CAROLINA 27701
(919) 956-4800
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
------------------------
JONATHAN S. WALLER, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
MIDWAY AIRLINES CORPORATION
300 WEST MORGAN STREET, SUITE 1200
DURHAM, NORTH CAROLINA 27701
(919) 956-4800 (PHONE)
(919) 956-4801 (FAX)
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
HOWARD WOLF, ESQ. JOEL S. KLAPERMAN, ESQ.
Fulbright & Jaworski L.L.P. Shearman & Sterling
1301 McKinney, Suite 5100 599 Lexington Avenue
Houston, Texas 77010-3095 New York, New York 10022
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
- --------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
- --------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This Amendment No. 2 to the Registrant's Registration Statement on Form S-1
(File No. 333-37375) (the "Registration Statement") is being filed solely for
the purpose of filing certain exhibits, and no changes or additions are being
made hereby to the prospectus (the "Prospectus") that forms a part of this
Registration Statement. Accordingly, the Prospectus has been omitted from this
filing.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the Offering, all of which shall
be borne by the Company, are:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............... $ 21,467
NASD Filing Fee................................................... 6,500
Nasdaq National Market Listing Fee................................ 1,000
Legal Fees and Expenses........................................... 200,000
Accounting Fees and Expenses...................................... 350,000
Blue Sky Fees and Expenses (including legal fees)................. 25,000
Printing Expenses................................................. 200,000
Transfer Agent and Registrar Fees................................. 15,000
Miscellaneous..................................................... 31,033
---------
TOTAL......................................................... $ 850,000
---------
---------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to Section 145 of the GCL, the Company generally has the power to
indemnify its current and former directors, officers, employees and agents
against expenses and liabilities incurred by them in connection with any suit to
which they are, or threatened to be made, a party by reason of their serving in
such positions so long as they acted in good faith and in a manner they
reasonably believed to be in, or not opposed to, the best interests of the
Company, and with respect to any criminal action, they had not reasonable cause
to believe their conduct was lawful. With respect to suits by or in the right of
the Company, however, indemnification is generally limited to attorneys' fees
and other expenses and is not available if such person is adjudged to be liable
to the Company unless the court determines that indemnification is appropriate.
The statute expressly provides that the power to indemnify authorized thereby is
not exclusive of any rights granted under any bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise. The Company also has the
power to purchase and maintain insurance for such persons.
The above discussion of Section 145 of the GCL is not intended to be
exhaustive and is qualified in its entirety by such statute.
Reference is made to the form of the Underwriting Agreement, filed as
Exhibit 1.1 hereto, which contains provisions for indemnification of the
Company, its directors, officers and any controlling persons by the Underwriters
against certain liabilities for information furnished by the Underwriters.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since September 30, 1994, the Company has sold unregistered securities in
the amounts, at the time and for the aggregate amounts of consideration listed
below. With respect to sales of preferred stock, all shares and amounts and per
share prices described below have been adjusted to reflect the conversion of
such shares into Common Stock immediately prior to the closing of the Offering
and a 682.9108392-to-1 stock split effected prior to the Offering. The
securities were sold to purchasers directly by the Company, and such sales did
not involve any underwriter. The Company considers these securities to have been
II-1
<PAGE>
offered and sold in transactions not involving a public offering and therefore,
to be exempted from registration under Section 4(2) of the Securities Act of
1933, as amended.
<TABLE>
<CAPTION>
AGGREGATE
AMOUNT OF
SECURITIES AGGREGATE
PURCHASER TYPE DATE ISSUED CONSIDERATION
- -------------------------------- ---------------------------- ------------------ ---------- -------------
<S> <C> <C> <C> <C>
Zell/Chilmark Fund L.P.......... Common Stock Warrant May 1995 3,912,750 $ 5,217,000(1)
Debt Group(2)................... Common Stock Warrants May 1995 587,250 $ 783,000(3)
Zell/Chilmark Fund L.P.......... Common Stock Warrant February 1996 1,500,000 $ 2,000,000(4)
Zell/Chilmark Fund L.P.......... Common Stock Warrant September 1996 750,000 $ 1,000,000(5)
Zell/Chilmark Fund L.P.......... Common Stock Warrant October 1996 750,000 $ 1,000,000(6)
AMR Corporation................. Common Stock Warrant February 1997 390,625 (7)
James H. Goodnight, Ph.D........ Senior Convertible Preferred
Stock February 1997 2,509,697 $ 10,096,143
John P. Sall.................... Senior Convertible Preferred
Stock February 1997 1,218,995 $ 4,903,841
Zell/Chilmark Fund L.P.......... Common Stock February 1997 1,740,056 $ 7,000,000
debis AirFinance B.V............ Common Stock February 1997 260,189 (7)
Wings Aircraft Finance, Inc..... Common Stock February 1997 130,435 (7)
</TABLE>
- ------------------------
(1) Consideration represents subordinated debt financing provided by
Zell/Chilmark to the Company. For each $1,000 of financing provided, the
Company issued to Zell/Chilmark a warrant to purchase 750 shares of Class C
Common Stock of the Company. This warrant was canceled on February 11, 1997.
(2) The Debt Group includes 17 different individuals or trusts and one
partnership.
(3) Consideration represents subordinated debt financing provided by the Debt
Group to the Company in the aggregate amount of $783,000. For each $1,000 of
financing provided, the Company issued to the members of the Debt Group a
warrant to purchase of 750 shares of Class C Common Stock of the Company.
These warrants were canceled on February 11, 1997.
(4) Consideration represents subordinated debt financing provided by
Zell/Chilmark to the Company. For each $1,000 of financing provided, the
Company issued to Zell/Chilmark a warrant to purchase 750 shares of Class C
Common Stock of the Company. This warrant was canceled on February 11, 1997.
(5) See note 4 above.
(6) See note 4 above.
(7) Consideration received included the conversion of certain short term
liabilities into long term debt and the reduction of certain recurring
expenses of the Company.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
1.1+ --Form of Underwriting Agreement.
3.1+ --Amended and Restated Certificate of Incorporation.
3.2+ --Amended and Restated By-laws.
4.1+ --Form of Common Stock Certificate.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
4.2+ --See Exhibits 3.1 and 3.2 for provisions of the Restated Certificate of Incorporation and Amended and
Restated By-laws of Midway defining the rights of the holders of Common Stock.
5.1+ --Opinion of Fulbright & Jaworski L.L.P.
10.1+ --Stock Option Plan.
10.2+ --Profit Sharing Plan.
10.3* --Aircraft Operating Lease Agreement No. AOLAF-111 dated as of November 11, 1993 between First Security
Bank of Utah, N.A. ("FSBU") and Midway as amended.
10.4* --Aircraft Operating Lease Agreement No. AOLAF-112 dated as of November 11, 1993 between FSBU and
Midway as amended.
10.5* --Aircraft Operating Lease Agreement No. AOLAF-113 dated as of November 11, 1993 between FSBU and
Midway as amended.
10.6* --Aircraft Operating Lease Agreement No. AOLAF-114 dated as of November 11, 1993 between FSBU and
Midway as amended.
10.7* --Aircraft Operating Lease Agreement No. AOLAF-115-A dated as of July 10, 1995 between Wings Aircraft
Finance, Inc. ("Wings") and Midway, as amended.
10.8* --Aircraft Operating Lease Agreement No. AOLAF-116-A dated as of July 10, 1995 between Wings and
Midway, as amended.
10.9* --Aircraft Operating Lease Agreement No. AOLAF-117-A dated as of July 10, 1995 between Wings and
Midway, as amended.
10.10* --Aircraft Operating Lease Agreement No. AOLAF-118-A dated as of July 10, 1995 between Wings and
Midway, as amended.
10.11* --Aircraft Operating Lease Agreement No. AOLAF-135 dated as of July 20, 1995 between FSBU and Midway,
as amended.
10.12* -- Aircraft Operating Lease Agreement No. AOLAF-524 dated as of August 1, 1995 between FSBU and Midway,
as amended.
10.13* --Aircraft Operating Lease Agreement No. AOLAF-525 dated as of October 15, 1995 between FSBU and
Midway, as amended.
10.14* --Aircraft Operating Lease Agreement No. AOLAF-136 dated as of December 15, 1995 between FSBU and
Midway, as amended.
10.15* --Aircraft Lease Agreement dated as of May 24, 1995 between Wilmington Trust Company and Midway.
10.16* --Airbus A-320-200 Purchase Agreement dated as of March 17, 1995 between AVSA. S.A.R.L. ("AVSA") and
Midway with Amendment Nos. 1 through 6 thereto.
Letter Agreement No. 2 Re: Purchase Incentives and Miscellaneous Matters, as amended
Letter Agreement No. 3 Re: Option Aircraft, as amended
Letter Agreement Re: Financial Matters with Amendment No. 4 thereto.
10.17* --Agreement of Sublease dated as of January 18, 1995 between American Airlines, Inc. ("AA") and Midway,
as amended.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
10.18* --AAdvantage-Registered Trademark- Participating Carrier Agreement dated as of January 18, 1995 between
AA and Midway, as amended.
10.19* --Secured Promissory Note dated February 7, 1997 from Midway to AA.
10.20* --February 10, 1997 Letter Agreement between American Airlines, Inc. and Midway with Exhibits A and C
through I thereto.
10.21* --Agreement Relating to Repair and Overhaul of Rolls Royce Engines dated as of May 10, 1996 between
Rolls Royce Aero Engine Services Limited and Midway.
10.22* --Purchase Agreement between Bombardier Inc. and Midway dated September 17, 1997 with Letter Agreements
001 through 011.
10.23* --Services and Licenses Agreement between Midway and Airline Management Services, Inc. dated as of
December 7, 1995 with Annex A thereto.
10.24* --Letter Agreement dated as of July 1, 1996 between Fokker Services, Inc. and Midway.
10.25* --Aircraft Maintenance Services Agreement dated August 27, 1997 between Time Air Inc. doing business as
Canadian Regional Airlines and Midway.
10.26* --Warrant to Purchase Shares of Common Stock of Midway Airlines Corporation dated February 11, 1997
issued by Midway in favor of AMR Corporation.
10.27+ --Stockholders Agreement dated as of February 11, 1997.
10.28* --General Terms of Sale between IAE International Aero Engines AG and Midway dated May 17, 1995 with
Side Letter Number 1 and Side Letter Number 2 thereto.
10.29* --Promissory Note dated February 11, 1997 made by Midway to debis AirFinance B.V.
10.30* --Promissory Note dated February 11, 1997 made by Midway to Daimler Benz Aerospace A.G.
10.31+ --Severance Agreement and Other Matters made as of February 11, 1997 between Robert R. Ferguson III and
Midway.
10.32+ --Employment Agreement dated as of July 15, 1996 between Steven Westberg and Midway, as amended.
10.33+ --Employment Agreement dated as of July 15, 1996 between Jonathan S. Waller and Midway, as amended.
10.34+ --Employment Agreement dated as of July 15, 1996 between Joanne Smith and Midway, as amended.
10.35+ --Agreement between Rolls Royce Canada Limited and Midway dated as of September 30, 1997.
10.36+ --Option to Purchase Shares of Common Stock of Midway Airlines Corporation dated as of February 11,
1997 issued by Midway in favor of Robert R. Ferguson III.
10.37+ --Agreement and Plan of Merger dated as of January 17, 1997 by and among Midway, GoodAero, Inc., James
H. Goodnight, Ph.D, John P. Sall and the Zell/Chilmark Fund L.P., as amended.
10.38* --Letter Agreement dated September 12, 1997 between GE Aircraft Engines and Midway.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
10.39* --Sublease dated June 30, 1995 between Peoples Security Life Insurance Company and Midway.
10.40* --Sublease Agreement dated May 1, 1995 between Page Avjet Corporation and Midway.
10.41* --AAirpass Agreement dated as of March 2, 1995 between American Airlines Inc. and Midway.
10.42* --Engine Lease Agreement dated September 11, 1997 between RRPF Engine Leasing Limited and Midway.
10.43+ --Option to Purchase Shares of Common Stock of Midway Airlines Corporation dated as of February 11,
1997 issued by Midway in favor of Steven Westberg.
10.44+ --Option to Purchase Shares of Common Stock of Midway Airlines Corporation dated as of February 11,
1997 issued by Midway in favor of Jonathan S. Waller.
10.45+ --Option to Purchase Shares of Common Stock of Midway Airlines Corporation dated as of February 11,
1997 issued by Midway in favor of Joanne Smith.
10.46+ --Option to Purchase Shares of Common Stock of Midway Airlines Corporation dated as of February 11,
1997 issued by Midway in favor of Thomas Duffy, Jr.
10.47+ --Option to Purchase Shares of Common Stock of Midway Airlines Corporation dated as of February 11,
1997 issued by Midway in favor of David Vance.
10.48* --Agreement, executed September and November 1997, between Rolls-Royce Canada Limitee and Midway.
11.1+ --Statement of Computation of per share earnings.
16.1** --Letter from Arthur Andersen LLP regarding change in independent public accountants.
23.1** --Consent of Ernst & Young LLP.
23.2** --Consent of Arthur Andersen LLP.
23.3+ --Consent of Fulbright & Jaworski L.L.P. (included in Exhibit 5.1).
24.1** --Powers of Attorney from certain members of the Board of Directors of the Company.
</TABLE>
- ------------------------
* Portions have been omitted pursuant to a request for confidential treatment.
** Previously filed.
+ To be filed by amendment.
As permitted by Item 601(b)(4) of Regulation S-K, the Company has not filed
with this Registration Statement certain instruments defining the rights of
holders of long-term debt of the Company, if any, because the total amount of
securities authorized under any of such instruments does not exceed 10% of the
total assets of the Company and its subsidiaries on a consolidated basis. The
Company agrees to furnish a copy of any such agreements to the Securities and
Exchange Commission upon request.
(b) Financial Statement Schedules:
[Not applicable]
II-5
<PAGE>
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Company hereby undertakes to provide to the Underwriters at
the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
The undersigned Company hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as a part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, Midway Airlines
Corporation has duly caused this Amendment No. 2 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Durham, State of North Carolina, on November 20, 1997.
<TABLE>
<S> <C> <C>
MIDWAY AIRLINES CORPORATION
By: /s/ JONATHAN S. WALLER
-----------------------------------------
Jonathan S. Waller
SENIOR VICE PRESIDENT
</TABLE>
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
*
- ------------------------------
Robert R. Ferguson III Chairman November 20, 1997
of the
Board,
President
and
Chief
Executive
Officer
(Principal
Executive
Officer)
*
- ------------------------------
Steven Westberg Senior November 20, 1997
Vice
President
and
Chief
Financial
Officer
(Principal
Financial
and
Accounting
Officer)
*
- ------------------------------
W. Greyson Quarles, Jr. Director November 20, 1997
*
- ------------------------------
Howard Wolf Director November 20, 1997
*
- ------------------------------
Gregory J. Robitaille Director November 20, 1997
*/s/ JONATHAN S. WALLER
- ------------------------------
Jonathan S. Waller
ATTORNEY-IN-FACT
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
1.1+ --Form of Underwriting Agreement.
3.1+ --Amended and Restated Certificate of Incorporation.
3.2+ --Amended and Restated By-laws.
4.1+ --Form of Common Stock Certificate.
4.2+ --See Exhibits 3.1 and 3.2 for provisions of the Restated Certificate of Incorporation and Amended and
Restated By-laws of Midway defining the rights of the holders of Common Stock.
5.1+ --Opinion of Fulbright & Jaworski L.L.P.
10.1+ --Stock Option Plan.
10.2+ --Profit Sharing Plan.
10.3* --Aircraft Operating Lease Agreement No. AOLAF-111 dated as of November 11, 1993 between First Security
Bank of Utah, N.A. ("FSBU") and Midway as amended.
10.4* --Aircraft Operating Lease Agreement No. AOLAF-112 dated as of November 11, 1993 between FSBU and
Midway as amended.
10.5* --Aircraft Operating Lease Agreement No. AOLAF-113 dated as of November 11, 1993 between FSBU and
Midway as amended.
10.6* --Aircraft Operating Lease Agreement No. AOLAF-114 dated as of November 11, 1993 between FSBU and
Midway as amended.
10.7* --Aircraft Operating Lease Agreement No. AOLAF-115-A dated as of July 10, 1995 between Wings Aircraft
Finance, Inc. ("Wings") and Midway, as amended.
10.8* --Aircraft Operating Lease Agreement No. AOLAF-116-A dated as of July 10, 1995 between Wings and
Midway, as amended.
10.9* --Aircraft Operating Lease Agreement No. AOLAF-117-A dated as of July 10, 1995 between Wings and
Midway, as amended.
10.10* --Aircraft Operating Lease Agreement No. AOLAF-118-A dated as of July 10, 1995 between Wings and
Midway, as amended.
10.11* --Aircraft Operating Lease Agreement No. AOLAF-135 dated as of July 20, 1995 between FSBU and Midway,
as amended.
10.12* -- Aircraft Operating Lease Agreement No. AOLAF-524 dated as of August 1, 1995 between FSBU and Midway,
as amended.
10.13* --Aircraft Operating Lease Agreement No. AOLAF-525 dated as of October 15, 1995 between FSBU and
Midway, as amended.
10.14* --Aircraft Operating Lease Agreement No. AOLAF-136 dated as of December 15, 1995 between FSBU and
Midway, as amended.
10.15* --Aircraft Lease Agreement dated as of May 24, 1995 between Wilmington Trust Company and Midway.
10.16* --Airbus A-320-200 Purchase Agreement dated as of March 17, 1995 between AVSA. S.A.R.L. ("AVSA") and
Midway with Amendment Nos. 1 through 6 thereto.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
Letter Agreement No. 2 Re: Purchase Incentives and Miscellaneous Matters, as amended
Letter Agreement No. 3 Re: Option Aircraft, as amended
Letter Agreement Re: Financial Matters with Amendment No. 4 thereto.
10.17* --Agreement of Sublease dated as of January 18, 1995 between American Airlines, Inc. ("AA") and Midway,
as amended.
10.18* --AAdvantage-Registered Trademark- Participating Carrier Agreement dated as of January 18, 1995 between
AA and Midway, as amended.
10.19* --Secured Promissory Note dated February 7, 1997 from Midway to AA.
10.20* --February 10, 1997 Letter Agreement between American Airlines, Inc. and Midway with Exhibits A and C
through I thereto.
10.21* --Agreement Relating to Repair and Overhaul of Rolls Royce Engines dated as of May 10, 1996 between
Rolls Royce Aero Engine Services Limited and Midway.
10.22* --Purchase Agreement between Bombardier Inc. and Midway dated September 17, 1997 with Letter Agreements
001 through 011.
10.23* --Services and Licenses Agreement between Midway and Airline Management Services, Inc. dated as of
December 7, 1995 with Annex A thereto.
10.24* --Letter Agreement dated as of July 1, 1996 between Fokker Services, Inc. and Midway.
10.25* --Aircraft Maintenance Services Agreement dated August 27, 1997 between Time Air Inc. doing business as
Canadian Regional Airlines and Midway.
10.26* --Warrant to Purchase Shares of Common Stock of Midway Airlines Corporation dated February 11, 1997
issued by Midway in favor of AMR Corporation.
10.27+ --Stockholders Agreement dated as of February 11, 1997.
10.28* --General Terms of Sale between IAE International Aero Engines AG and Midway dated May 17, 1995 with
Side Letter Number 1 and Side Letter Number 2 thereto.
10.29* --Promissory Note dated February 11, 1997 made by Midway to debis AirFinance B.V.
10.30* --Promissory Note dated February 11, 1997 made by Midway to Daimler Benz Aerospace A.G.
10.31+ --Severance Agreement and Other Matters made as of February 11, 1997 between Robert R. Ferguson III and
Midway.
10.32+ --Employment Agreement dated as of July 15, 1996 between Steven Westberg and Midway, as amended.
10.33+ --Employment Agreement dated as of July 15, 1996 between Jonathan S. Waller and Midway, as amended.
10.34+ --Employment Agreement dated as of July 15, 1996 between Joanne Smith and Midway, as amended.
10.35+ --Agreement between Rolls Royce Canada Limited and Midway dated as of September 30, 1997.
10.36+ --Option to Purchase Shares of Common Stock of Midway Airlines Corporation dated as of February 11,
1997 issued by Midway in favor of Robert R. Ferguson III.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
10.37+ --Agreement and Plan of Merger dated as of January 17, 1997 by and among Midway, GoodAero, Inc., James
H. Goodnight, Ph.D, John P. Sall and the Zell/Chilmark Fund L.P., as amended.
10.38* --Letter Agreement dated September 12, 1997 between GE Aircraft Engines and Midway.
10.39* --Sublease dated June 30, 1995 between Peoples Security Life Insurance Company and Midway.
10.40* --Sublease Agreement dated May 1, 1995 between Page Avjet Corporation and Midway.
10.41* --AAirpass Agreement dated as of March 2, 1995 between American Airlines Inc. and Midway.
10.42* --Engine Lease Agreement dated September 11, 1997 between RRPF Engine Leasing Limited and Midway.
10.43+ --Option to Purchase Shares of Common Stock of Midway Airlines Corporation dated as of February 11,
1997 issued by Midway in favor of Steven Westberg.
10.44+ --Option to Purchase Shares of Common Stock of Midway Airlines Corporation dated as of February 11,
1997 issued by Midway in favor of Jonathan S. Waller.
10.45+ --Option to Purchase Shares of Common Stock of Midway Airlines Corporation dated as of February 11,
1997 issued by Midway in favor of Joanne Smith.
10.46+ --Option to Purchase Shares of Common Stock of Midway Airlines Corporation dated as of February 11,
1997 issued by Midway in favor of Thomas Duffy, Jr.
10.47+ --Option to Purchase Shares of Common Stock of Midway Airlines Corporation dated as of February 11,
1997 issued by Midway in favor of David Vance.
10.48* --Agreement, executed September and November 1997, between Rolls-Royce Canada Limitee and Midway.
11.1+ --Statement of Computation of per share earnings.
16.1** --Letter from Arthur Andersen LLP regarding change in independent public accountants.
23.1** --Consent of Ernst & Young LLP.
23.2** --Consent of Arthur Andersen LLP.
23.3+ --Consent of Fulbright & Jaworski L.L.P. (included in Exhibit 5.1).
24.1** --Powers of Attorney from certain members of the Board of Directors of the Company.
</TABLE>
- ------------------------
* Portions have been omitted pursuant to a request for confidential treatment.
** Previously filed.
+ To be filed by amendment.
As permitted by Item 601(b)(4) of Regulation S-K, the Company has not filed
with this Registration Statement certain instruments defining the rights of
holders of long-term debt of the Company, if any, because the total amount of
securities authorized under any of such instruments does not exceed 10% of the
total assets of the Company and its subsidiaries on a consolidated basis. The
Company agrees to furnish a copy of any such agreements to the Securities and
Exchange Commission upon request.
(b) Financial Statement Schedules:
[Not applicable]
<PAGE>
EXHIBIT 10.3
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY [***]. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
F-100 LEASE #111
(TAIL # N103ML)
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INDEX
ARTICLE PAGE
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1. Definitions ......................................................... 1
2. Agreement to Lease .................................................. 12
3. Term; Delivery; Acceptance; Delay ................................... 17
4. Registration and Title .............................................. 19
5. Possession and Use .................................................. 20
6. Charges, Method of Payment and Financial
Information ......................................................... 26
7. Maintenance ......................................................... 27
8. Taxes, Duties and Expenses .......................................... 32
9. Liens ............................................................... 37
10. Indemnification ..................................................... 37
11. Insurance ........................................................... 39
12. Assignment and Subletting ........................................... 47
13. Disclaimer, Representations and Warranties .......................... 50
14. Covenants of Lessee ................................................. 55
15. Default by Lessee ................................................... 58
16. Return of Aircraft .................................................. 65
17. Casualty Occurrences ................................................ 67
18. Governing Law and Jurisdiction ...................................... 70
19. Miscellaneous ....................................................... 71
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APPENDICES
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A. Description of Aircraft
B. Further Definitions and Values
C. Certificate of Acceptance
D. Charges
E. Operating Condition at Re-Delivery
F. Aircraft Documents
G. Legal Opinion
H. Certificate of Insurance
I. Broker's Letter of Undertaking
J. FAA Power of Attorney
K. Order of the Bankruptcy Court
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NINE YEAR
AIRCRAFT OPERATING LEASE AGREEMENT
No. AOLAF- 111
THIS AIRCRAFT OPERATING AGREEMENT No. AOLAF-111 is made as of the
11th day of November, 1993 between FIRST SECURITY BANK OF UTAH, N.A., a national
banking association existing pursuant to the laws of the United States, having
its principal place of business at 79 South Main Street, Salt Lake City, Utah
84130-0007, not in its individual capacity (except as expressly herein set
forth) but solely as Owner Trustee under the Trust Agreement (as defined in
Article 1 hereof) and its permitted successors and assigns (herein referred to
as "Lessor") and MIDWAY AIRLINES CORPORATION, a company incorporated under the
laws of the State of Delaware, having its principal place of business at 5713
South Central Avenue, Chicago, Illinois 60638 and its permitted successors and
assigns (herein referred to as "Lessee").
WHEREAS Lessor has the right to possess, use and lease the Aircraft;
and
WHEREAS Lessee desires to lease the Aircraft from Lessor; and
WHEREAS Lessor is willing to lease the Aircraft to Lessee upon the
terms and conditions set out herein.
NOW THEREFORE, in consideration of the mutual promises herein
contained, Lessor and Lessee agree as follows:
1. DEFINITIONS
The following terms shall have the following respective meanings for
all purposes of this Agreement:
1.1 Air Authority shall mean the Federal Aviation Administration of the United
States Department of Transportation and any successor.
1.2 Aircraft shall mean the aircraft identified and described in Appendix A,
including any Engine, Part, or component thereof, and/or ancillary and
loose equipment or devices installed in or on the Aircraft at the Delivery
Date (or which having been removed therefrom remain the property of the
Lessor pursuant to this Agreement) and Aircraft Documents furnished
therewith under this Agreement, or any substitutions, renewals and
replacements from time to time made in or on the said Aircraft in
accordance with this Agreement,
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whether or not for the time being installed on or in the said Aircraft or
any other aircraft.
1.3 Aircraft Documents shall mean the items identified in Appendix F.
1.4 Airframe shall mean the Aircraft, excluding the Engines.
1.5 Appraisal Procedure shall mean the procedure for determining the FMV of
the Aircraft set forth Article 19.10.
1.6 Approved Maintenance Program shall mean the Maintenance Program approved
by Lessor pursuant to Article 2.2 (iii) or such other Maintenance Program
as Lessor shall from time to time approve in writing.
1.7 Authorized Maintenance Performer shall mean Lessee, American Airlines,
Inc., U.S. Air, Aviall, Rolls Royce Canada or any Air Authority approved
original equipment manufacturer for the Aircraft or the Engines or any
Part or any other person approved by Lessor in accordance with the
provisions of Article 7.1.
1.8 Bank shall mean the financial institution(s) and/or other provider(s) of
finance from whom finance respecting the acquisition or continued
ownership of the Aircraft by Lessor is to be, or is for the time being,
obtained and/or in whose favor or for whose benefit security over, or
rights with respect to, the Aircraft is to be, or is for the time being,
granted by Lessor or at its request and shall include any financial
institution providing finance to the Head Lessor in respect of Head
Lessor's acquisition of the Aircraft by whatever means, including without
limitation by way of loan or by way of non-recourse sale of lease
receivables.
1.9 Bankruptcy Case shall mean the bankruptcy case of Jet Express, Inc., Case
No. 91-B-12287 (FGC) in the Bankruptcy Court.
1.10 Bankruptcy Court shall mean the United States Bankruptcy Court for the
Southern District of New York having jurisdiction over Lessee's Bankruptcy
Case.
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1.11 Beneficiary shall mean, Fokker Aircraft B.V., beneficiary under the Trust
Agreement, and its successors and permitted assigns.
1.12 Business Day shall mean a day (other than a Saturday or Sunday) on which
banks are open for business in New York.
1.13 Casualty Occurrence shall have the meaning set forth in Article 17.1.
1.14 Certificate of Acceptance shall mean the Certificate of Acceptance given
in the form of Exhibit C.
1.15 Credit and Security Agreement shall mean the Credit and Security Agreement
dated as of October 29, 1993 therein between FAUSA and Lessee.
1.16 Cycle shall mean one take-off and landing of the Aircraft.
1.17 Default shall mean an Event of Default or any event which, with the giving
of notice and/or lapse of time and/or the making of any relevant
determination, would constitute an Event of Default.
1.18 Delivery Date shall mean the date on which the Aircraft is delivered to
and accepted by the Lessee for the purposes of this Agreement.
1.19 Delivery Location shall mean Schiphol Airport, The Netherlands.
1.20 Dollars and $ shall mean the lawful currency of the United States of
America and in respect of all payments to be made under this Agreement in
Dollars shall mean funds which are for same day settlement in the New York
Clearing House Interbank Payments System (or such other US Dollar funds as
may at the relevant time be customary for the settlement of international
banking transactions denominated in United States Dollars).
1.21 Engine shall mean (i) any engine installed on or furnished with the
Aircraft on the Delivery Date, such Engines being identified as to
manufacturer and type in Appendix A and as to serial numbers in the
Certificate of Acceptance executed by Lessee on the Delivery Date and (ii)
any substitute or replacement engine title to which has, or should have,
transferred to and vested in Lessor in accordance with this Agreement, in
each case
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including all modules or Parts from time to time belonging to or installed
in that engine and irrespective of whether or not the same shall for the
time being be installed on the Aircraft or on any other aircraft. The term
"Engine" shall exclude any properly replaced engine title to which has, or
should have, passed to Lessee pursuant to this Agreement.
1.22 Equipment Change shall have the meaning set forth in Article 17.3(a).
1.23 Equity Commitment shall mean the Financing Agreement dated August 3, 1993
among Lessee, the Equity Investors, and the other parties listed therein,
as the same may be amended from time to time.
1.24 Equity Investors shall mean the parties to the Equity Commitment other
than Lessee, Smith Air Express, Inc., Montgomery Air Incorporated and Jet
Express Funding Corporation.
1.25 Event of Default shall mean any of the events specified in Article 15.1.
1.26 Expected Delivery Date shall mean October 21, 1994.
1.27 Expiry Date shall mean the day preceding the numerically corresponding day
108 (One Hundred Eight) months after the Delivery Date.
1.28 Fair Market Rental Value shall be equal in amount to the value that would
be obtained in an arms'-length transaction between an informed and
willing lessee under no compulsion to lease and an informed and willing
lessor under no compulsion to lease, in accordance with a lease to a
lessee similarly situated with Lessee, for a term equal to the relevant
period and on conditions as herein provided, any such determination (made
for purposes of Article 15.3(b)) to be made on the basis of the then
actual condition of the Aircraft, to be determined pursuant to an
Independent Appraisal and to be the average of the two determinations
obtained thereunder.
1.29 FAUSA shall mean Fokker Aircraft U.S.A., Inc., a company incorporated
under the laws of the State of Delaware, with its principal office at
Alexandria, Virginia.
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1.30 Federal Aviation Act shall mean the Federal Aviation Act of 1958, as
amended.
1.31 First Rent Date shall mean the Delivery Date.
1.32 Flight Hour shall mean each hour or part thereof elapsing from the moment
at which the wheels of the Aircraft leave the ground on the take off of
the Aircraft until the wheels of the Aircraft touch the ground on the
landing of the Aircraft following such flight.
1.33 FMV shall have the meaning set forth in Appendix D.
1.34 Fokker shall mean Fokker Aircraft B.V., a Dutch corporation with its
principal office at Amsterdam Zuid-Oost, The Netherlands, together with
its successors.
1.35 Force Majeure in relation to the delivery of the Aircraft shall mean delay
or non-delivery due to or arising out of acts of God or public enemy,
civil war, insurrection or riot, fire, flood, explosion, earthquake,
accident, epidemic, quarantine restriction, any act of government,
governmental priority, allocation, regulation or order affecting directly
or indirectly, the Aircraft, Lessor or any materials or facilities, strike
or labor dispute causing cessation, slow-down or interruption of work,
inability after due and timely diligence to procure equipment, data or
materials from suppliers in a timely manner, or any other cause whether or
not mentioned above and whether or not similar to any of the foregoing to
the extent that such cause is beyond the control of Lessor or not
occasioned by Lessor's fault or negligence.
1.36 Governing Law shall mean the law of the state of New York
1.37 Government Entity shall mean and include (i) any national or state
government, political subdivision thereof, or local jurisdiction therein;
(ii) any board, commission, department, division, organ, instrumentality,
court, or agency of any thereof, however constituted; and (iii) any
association, organization, or institution of which any thereof is a member
or to whose jurisdiction any thereof is subject or in whose activities any
thereof is a participant.
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1.38 Head Lessor shall mean any person or persons to whom title to the Aircraft
is vested or transferred in accordance with Article 12.3(e).
1.39 Indemnitees shall mean Lessor (in its trust and individual capacities),
the Voting Trustee (in its trust and individual capacities), the
Beneficiary, the Head Lessor, the Bank, Fokker, FAUSA, including any of
their respective successors and assigns and their respective shareholders,
subsidiaries, affiliates, directors, officers, agents and employees.
1.40 Independent Appraisal shall mean a determination of Fair Market Rental
Value of the Aircraft by two independent aircraft appraisers, selected by
Lessor, the costs and expenses of the appraisal to be paid by Lessee.
1.41 Law shall mean and include (i) any law, statute, decree, constitution,
regulation, order or any directive of any Government Entity; (ii) any
treaty, pact, compact or other agreement to which any Government Entity is
a signatory or party; (iii) any judicial or administrative interpretation
or application of any thereof; and (iv) any amendment or revision of any
thereof.
1.42 Lessor or Lessee shall have the meanings respectively ascribed to them in
the first paragraph of this Agreement and shall include their respective
assignees or successors.
1.43 Lessor Liens shall mean:
(a) the Mortgage, the Security Assignment and any security interest
whatsoever from time to time created by or through Lessor and/or
Head Lessor in connection with the financing of the Aircraft;
(b) any other security interest in respect of the Aircraft which results
from acts of or claims against Lessor and/or Head Lessor not related
to the transactions contemplated by or permitted under this
Agreement; and
(c) liens in respect of the Aircraft for Lessor Taxes.
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1.44 Lessor Taxes shall mean Taxes:
(a) imposed as a direct result of activities of a Tax Indemnitee in any
jurisdiction imposing a liability unrelated to that Tax Indemnitee's
dealings with Lessee, to the transactions contemplated by this
Agreement or the operation of the Aircraft by Lessee; or
(b) imposed on or measured by net income, profits or gains, or capital
or net worth (excluding, however, in each case, Taxes that are, or
are in the nature of, license, sales, use, rental, value-added, or
property taxes) of a Tax Indemnitee, by (A) any Governmental Entity
by or in which that Tax Indemnitee would be subject to tax without
regard to the transactions contemplated by this Lease, except to the
extent that the Tax Indemnitee would be subject to such Tax if the
Tax Indemnitee's participation in the transactions contemplated by
this Agreement were the sole connection between the Tax Indemnitee
and the jurisdiction imposing the Tax, or (B) the Federal Government
of the United States of America (including, without limitation, any
withholding taxes imposed by such government); or
(c) imposed with respect to any period or event occurring prior to the
date of this Agreement or after the Expiry Date or earlier
termination of this Agreement in accordance with the terms hereof,
provided that such Tax is unrelated to a Tax Indemnitee's dealings
with Lessee or to the transactions contemplated by this Agreement;
or
(d) imposed as a result of any voluntary sale, assignment, transfer or
other disposition by the Lessor (including to the Head Lessor) or
any other Tax Indemnitee of any interest in the Aircraft or any part
thereof or this Agreement unless such transfer or disposition occurs
(1) in connection with a Tax Indemnitee's pursuing its remedies
while an Event of Default by Lessee is continuing or otherwise
resulting from an Event of Default, or (2) pursuant to Lessee's
exercise of its option to purchase the Aircraft under Article 19.10
of this Agreement.
1.45 Maintenance Program shall mean an Air Authority approved maintenance
program for the Aircraft
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encompassing scheduled maintenance (including block maintenance),
condition monitored maintenance, and on-condition maintenance of Airframe,
Engines and Parts, including but not limited to, servicing, testing,
preventive maintenance, repairs, structural, inspections, system checks,
overhauls, approved modifications, service bulletins, engineering orders,
airworthiness directives, corrosion control, inspections and treatments.
1.46 Major checks shall mean any 12,000 hours Check, 24,000 hours Check or
Intersupplementary Check or segment thereof or any equivalent thereof with
more or less hours, however denominated, to the extent set out in the
Approved Maintenance Program from time to time.
1.47 Manufacturer shall mean Fokker.
1.48 Mortgage shall mean such mortgage or other security as from time to time
may be created over the Aircraft in favor of the Bank or over the
Beneficiary's interest in the Trust Agreement, in favor of the Bank.
1.49 Note shall mean the Secured Promissory Note executed and delivered to
FAUSA by the Lessee and secured by the Credit and Security Agreement.
1.50 One Year Lease shall mean the one year aircraft operating lease agreement
no. AOLAF-107 dated as of October 1, 1993 between Lessor and Lessee.
1.51 Operative Documents shall mean this Agreement, the Support Services
Agreement, the Stock Option Agreement, the Credit and Security Agreement
and the Note.
1.52 Other Aircraft Agreements shall mean Aircraft Operating Lease Agreements
relating to other Fokker 100 aircraft so long as leased to Lessee by a
lessor for the benefit of Fokker, FAUSA or any affiliate thereof, as
Beneficiary.
1.53 Part shall mean, whether or not installed on the Aircraft:
(a) any component, furnishing or equipment (other than a complete
Engine) furnished with the Aircraft on the Delivery Date; and
(b) any other component, furnishing or equipment (other than a complete
Engine) title to which has,
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or should have, passed to Lessor pursuant to this Agreement
but excludes any such items title to which has, or should have, passed to
(i) Lessee pursuant to this Agreement or (ii) any person pursuant to any
agreement relating to the financing of spare parts for the Aircraft,
including, but not limited to, FAUSA pursuant to the Credit and Security
Agreement and the Note.
1.54 Permitted Lien shall mean:
(a) liens of repairers, mechanics, material men, carriers,
hangarkeepers, employees or other similar liens arising in the
ordinary course of business by statute or by operation of law in
respect of obligations which are either not overdue or are being
contested in good faith by appropriate proceedings;
(b) any lien for Taxes of any kind either not assessed or, if assessed,
not yet due and payable or being contested in good faith by
appropriate proceedings, and any lien arising out of a judgment
against Lessee with respect to which at the time an appeal is being
prosecuted in good faith and with respect to which there shall have
been secured a stay of execution pending such appeal,
provided that in the case of this subclause (b):
(i) adequate reserves for the payment of such obligations have
been provided by Lessee;
(ii) such proceedings, or the continued existence of such lien, do
not give rise to any likelihood of the sale, forfeiture or
other loss of the Aircraft or any Engine or any Part or any
interest therein; and
(iii) any such lien does not arise as a result of any default on the
part of Lessee in respect of its obligations under this
Agreement;
(c) any Lessor Lien and the lien of this Agreement; and
(d) any lien for Lessor Taxes.
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1.55 Redelivery Location shall mean Schiphol Airport, The Netherlands.
1.56 Rent Date shall mean the First Rent Date and the numerically corresponding
date of each and every subsequent month during the Term, or (if there is
no corresponding date in any month), the last day of such month.
1.57 Rental Adjustment Period shall mean the period from and including the
Delivery Date up to and including the day preceding the sixth Rent Date
after the Delivery Date and each subsequent period commencing on and
including the day after the immediately preceding Rental Adjustment Period
and ending on and including the day preceding the sixth Rent Date after
the date on which that Rental Adjustment Period commenced.
1.58 Rental Period shall mean the period from and including any Rent Date to
and including the day preceding the next Rent Date.
1.59 Security Assignment shall mean an assignment or pledge in favor of the
Head Lessor or the Bank of the benefit of all or any part of Lessor's
rights hereunder.
1.60 Security Interest shall mean any mortgage, charge, pledge, lien,
assignment, hypothecation, right of set-off or any agreement or
arrangement having the effect of creating a security interest.
1.61 State of Incorporation shall mean the State of Delaware.
1.62 State of Registration shall mean United States of America.
1.63 Stock Option Agreement shall mean the Stock Option Agreement dated as of
October 1, 1993 among Lessee and FAUSA and any other party listed thereon.
1.64 Supplemental Rent shall mean Agreed Value and any other amount which by
the terms of this Agreement is payable by Lessee to Lessor other than Rent
and the Reserve Rate.
1.65 Support Services Agreement shall mean the Aircraft Support Services
Agreement No. ASSAF-110 between FAUSA and Lessee.
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1.66 Taxes shall mean any and all present and future sales, use, property,
customs, value-added, turnover, stamp, interest equalization, income,
gross or net receipts, franchise, excise, net worth, capital or other
taxes, fees, withholdings, imposts, duties, levies, or other charges of
any nature, together with any penalties, fines, or interest thereon,
imposed, levied, or assessed by, or otherwise payable to, any Governmental
Entity and "Tax" shall be construed accordingly.
1.67 Tax Indemnitee shall mean each of the Lessor, Beneficiary, and the Head
Lessor, including any of their respective successors and assigns.
1.68 Term shall bear the meaning ascribed to it in Article 3.4.
1.69 Trust Agreement shall mean the Trust Agreement dated as of November 1,
1993 between the Beneficiary and the Lessor in its individual capacity, as
the same may be amended from time to time.
1.70 Trust Estate shall mean the "Trust Estate" as defined in the Trust
Agreement.
1.71 Voting Trust Agreement shall mean the Voting Trust Agreement dated as of
November 1, 1993 between the Beneficiary and the Voting Trustee, as the
same may be amended from time to time.
1.72 Voting Trustee shall mean First Security Bank of Idaho, N.A., a national
banking association, and its permitted successors and assigns.
1.73 The terms:
Agreed Value,
Assumed Rent,
Deposit,
Enumerated Financial Milestones
Escalated Rent,
Rent,
Reserve Rate,
shall have the meanings and values set forth in Appendix B.
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1.74 References in this Agreement to:
(a) Articles or Appendices are, unless otherwise specified, references
to Articles of, and Appendices to, this Agreement and references to
this Agreement include its Appendices;
(b) any statute or other legislative provision shall be read to include
any statutory or legislative modification or re-enactment thereof,
or any substitution therefor;
(c) the Aircraft include any Part of the Aircraft, and, where the
context so admits, any of the Aircraft Documents and references to
any part of the Aircraft include any part of any Engine;
(d) the word "person" or "persons" or to words importing persons
include, without limitation, individuals, firms, partnerships, joint
ventures, trusts, Government Entities, organizations, associations,
corporations, government agencies, committees, departments,
authorities and other bodies, corporate or incorporate, whether
having distinct legal personality or not, or any member of any of
the same;
(e) words importing the plural include the singular and vice versa;
(f) any agreement or instrument include such agreement or instrument as
it may from time to time be amended or supplemented; and
(g) headings in this Agreement are for ease of reference only.
2. AGREEMENT TO LEASE
2.1 Lessor will lease the Aircraft to Lessee and Lessee will take the Aircraft
on lease from Lessor in "As Is" condition in accordance with the terms and
conditions of this Agreement.
2.2 Lessor's obligation to deliver the Aircraft on the Delivery Date to Lessee
shall be subject to:
(i) the receipt by Lessor from Lessee on or prior to the Expected
Delivery Date of the following, all
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of which shall be in the English language and be satisfactory in
form and substance to Lessor:
(a) a final non-appealable order of the Bankruptcy Court in the
form set forth in Appendix K confirming the Plan of
Reorganization submitted to the Bankruptcy Court;
(b) copies of Lessee's certificate of incorporation and/or
memorandum and articles of association and/or by-laws and/or
other constitutional documents, certified to be true and up to
date copies by a duly authorized officer of Lessee;
(c) copies of resolutions of Lessee's board of directors
authorizing Lessee to enter into and perform this Agreement,
the other Operative Documents and the transactions
contemplated hereby, certified to be true and in full force
and effect by a duly authorized officer of Lessee;
(d) evidence that each approval, license and consent which may be
required in relation to, or in connection with the performance
by Lessee of any of its obligations hereunder and the other
Operative Documents has been granted by or obtained from the
applicable Government Entity in the State of Registration;
(e) copies of Lessee's air transport license, certificate of
public convenience and necessity, and any other air operator
certificates and other licenses, certificates and permits
required by a Governmental Authority enabling Lessee to
operate as an air carrier, certified to be true copies and to
be in full force and effect by a duly authorized officer of
Lessee;
(f) evidence of appointment of Lessee's agent for service of
process in the State of New York;
(g) [intentionally omitted];
(h) the consent referred to in Article 15.5;
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(i) a power of attorney in the form of Appendix J authorizing
Lessor and/or the Head Lessor/and/or the Bank to take action
at the Air Authority and a certified resolution authorizing
same;
(j) such other documents as Lessor may reasonably request;
(ii) the receipt by Lessor from Lessee on or before the Delivery Date of:
(a) opinions satisfactory in form and substance to Lessor of
independent counsel practicing in the State of Registration as
instructed by Lessee, addressing the matters referred to in
the form set out in Appendix G and dated the Delivery Date;
(b) all sums due to Lessor pursuant to this Agreement;
(c) a certificate of insurance in the form of Appendix H, a
broker's letter of undertaking in the form of Appendix I,
certificates of reinsurance if required by Lessor and other
evidence satisfactory to Lessor that Lessee is taking the
required steps to ensure due compliance with the provisions of
this Agreement as to Insurances with effect on and after the
Delivery Date;
(d) evidence that the representations and warranties of Lessee set
forth in Article 13.4 are true and correct;
(iii) Lessor having approved the Maintenance Program under which it is
proposed that the Aircraft will be maintained (which approval shall
be granted or withheld at Lessor's sole discretion);
(iv) Lessor being satisfied that adequate arrangements have been made for
the issue, forthwith following delivery of the Aircraft, of the
acknowledgments referred to in Article 12.3 in the event that a Head
Lessor and/or a Bank has been identified;
(v) evidence (including satisfactory opinions of Crowe & Dunlevy,
special Air Authority aviation counsel, as to Air Authority
registration and recordation
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matters) that on the Delivery Date the Aircraft has been validly
registered under the laws of the State of Registration and that all
filings, registrations, recordings and other actions have been or
will be undertaken which are necessary or advisable to ensure the
validity, effectiveness and enforceability of this Agreement and to
protect the property rights of Lessor and Head Lessor in the
Aircraft or any Part and any Security Interest of the Bank therein;
(vi) Lessor being satisfied that no default shall have occurred under any
Other Aircraft Agreement or any other agreement between Lessor or
FAUSA and Lessee;
(vii) each of the Operative Documents shall have been duly authorized,
executed and delivered by Lessee, shall be satisfactory in form and
substance to Lessor, and shall be in full force and effect; and
(viii) Lessor obtaining an export license for delivery of the Aircraft for
export to the Lessee on or before the Delivery Date if so required
by the Laws of The Netherlands.
2.3 The conditions specified in Article 2.2 are inserted for the sole benefit
of Lessor and may be waived or deferred in whole or in part and with or
without conditions by Lessor. If any of the said conditions are
outstanding on the Delivery Date and Lessor (in its absolute discretion)
nonetheless agrees to deliver the Aircraft to Lessee, Lessee shall ensure
that such outstanding conditions are fulfilled within fifteen (15) days
after the Delivery Date and Lessor shall be entitled to treat the failure
of Lessee to perform such outstanding conditions as an Event of Default.
2.4 The obligation of Lessee to accept delivery of the Aircraft from Lessor is
subject to the satisfaction of the following conditions precedent on or
before the Delivery Date:
(i) each of the Operative Documents to which Lessor or FAUSA is a
party shall have been duly authorized, executed and delivered by Lessor or
FAUSA and shall be in full force and effect, and executed counterparts
shall have been delivered to Lessee;
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(ii) Lessee shall have received the following:
a. an incumbency certificate of each of Lessor and FAUSA as
to the persons authorized to execute and deliver the
Operative Documents to which each is a party and each
other document to be executed on behalf of Lessor and
FAUSA in connection with the transactions contemplated
by the Operative Documents, including the signatures of
such persons; and
b. such other documents and evidence with respect to Lessor
and FAUSA and the transactions contemplated by the
Operative Documents as Lessee may reasonably request in
order to establish the consummation of the transactions
contemplated by the Operative Documents to be performed
by Lessor and FAUSA, the taking of all corporate
proceedings in connection with such transactions and
compliance with the conditions set forth herein;
(iii) on the Delivery Date, the representations and warranties of
Lessor contained in Article 13.6 shall be true and accurate as though made
on and as of such date;
(iv) Lessee shall have received the favorable opinion, addressed to
it and reasonably satisfactory in form and substance to it, from Crowe &
Dunlevy, special Air Authority aviation counsel;
(v) the Aircraft shall meet the delivery conditions specified in
Article 3.6; and
(vi) Lessor submitting an export license for Delivery of the
Aircraft for export to the Lessee on or before the Delivery Date if so
required by the Law of The Netherlands.
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3. TERM; DELIVERY; ACCEPTANCE; DELAY
3.1 Subject to Article 3.2 and 3.3, Lessor shall deliver and Lessee shall
accept the Aircraft and the delivery thereof on the Expected Delivery
Date.
3.2 Lessor may delay the delivery of, or fail to deliver the Aircraft for
reasons of Force Majeure. Lessor shall not be responsible for any losses,
or any loss of profit, arising from any such failure or delay and Lessee
shall not be entitled on the grounds of such delay to terminate this
Agreement or reject the Aircraft when tendered for delivery by Lessor,
subject always to Article 3.3. In the event of any such delay and subject
to Article 3.3, Lessor shall be entitled to specify from time to time such
date as shall then become the "Expected Delivery Date" for the purpose of
this Agreement.
3.3.1 If for any reason the Aircraft has not been delivered by Lessor by the
date falling three (3) months after the original Expected Delivery Date,
either party may terminate this Agreement. Upon any such termination by
Lessee, unless the Aircraft has not been delivered by Lessor due to
Lessee's fault, Lessor shall return the Deposit to Lessee. Otherwise,
Lessor shall retain the Deposit.
3.3.2 If the Aircraft has not been delivered by Lessor by the date falling one
(1) month after the Expected Delivery Date (or any day thereafter) due to
any failure of Lessee to meet the conditions specified in Article 2.2
(other than clauses (iv) and (v) in Article 2.2), Lessor may terminate
this Agreement and retain the Deposit.
3.4 The term of the lease shall commence on the Delivery Date and shall
continue until the Expiry Date unless earlier terminated or extended as
herein provided (such period being herein referred to as the "Term").
3.5 The Aircraft shall be delivered to and accepted by Lessee at the Delivery
Location or such other location as is mutually acceptable to the parties.
It shall be the responsibility of Lessee to obtain at its expense any and
all licenses, permits and approvals under the Law of The Netherlands or
the Air Authority which may be necessary to ferry the Aircraft from the
Netherlands (the "Ferry Permits"). Prior to or on the
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Delivery Date, Lessor shall furnish to Lessee such evidence as may be
reasonably requested by Lessee of the obtaining of any export license
insofar as it may be required by the Law of The Netherlands and such data
and information as may be reasonably requested by Lessee in order to
obtain the Ferry Permits.
Notwithstanding the foregoing, Lessor shall, as agent for Lessee, apply
for the Ferry Permits and approvals, provided, however, that Lessor shall
have no responsibility for any failure to or delay in obtaining the Ferry
Permits. Acceptance by Lessee of the Aircraft by execution and delivery of
the Certificate of Acceptance shall be deemed to be evidence that Lessor
has performed all its obligations under this Article 3.5.
3.6 Prior to the Expected Delivery Date, Lessee shall be given an opportunity
to inspect the Aircraft at the Delivery Location. Lessee's right of
inspection shall include the right to participate in the acceptance flight
provided by Fokker for the purpose of demonstrating that the Aircraft is
in good operating condition in a one to two hour acceptance flight in
accordance with the Manufacturer's Customer Inspection Program and to
verify that it generally accords with the description set forth in
Appendix A. Lessee may assign a maximum of two (2) representatives to
participate in the acceptance flight test as observers. In the event that
Lessee discovers and records any defect and/or non-conformity with said
description during any such inspection and/or during such acceptance
flight test, Lessor shall procure that such defect and/or non-conformity
is corrected as promptly as possible.
3.7 Lessee shall indemnify and hold harmless the Indemnitees from and against
any and all liabilities, damages, losses (including costs and expenses
incident thereto) arising by reason of death of or injury to any such
observer or any employee of Lessee, arising out of, or in any way
connected with the acceptance flight test and inspection of the Aircraft
upon delivery and redelivery of the Aircraft.
3.8 Lessee shall indicate and confirm its acceptance of the Aircraft by the
execution and delivery to Lessor of the Certificate of Acceptance.
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4. REGISTRATION AND TITLE
4.1 It shall be the responsibility of Lessee, at its expense, to effect and
maintain registration of the Aircraft in the name of Lessor or Head
Lessor, as the case may be, under the Laws of the State of Registration
during the Term, such registration to reflect the interests of Lessor or
Head Lessor as the case may be, and to obtain and maintain all licenses,
permits and approvals, including, without limitation, a certificate of
airworthiness from the Air Authority, as may be requisite in connection
with operation of the Aircraft under this Agreement.
4.2 Lessee shall at its own expense and responsibility cause this Agreement to
be kept, filed and recorded at all times during the Term, in such office
or offices for the registration of the Aircraft in the State of
Registration and in such other offices (in the United States but not in
any jurisdiction outside of the United States unless directly required due
to Lessee's operation) as may be necessary, to protect Lessor's, Head
Lessor's and the Bank's rights in any state in which the Aircraft may
operate including the State of Registration of the Aircraft and the State
of Incorporation or as Lessor may reasonably request to protect and
preserve Lessor's, Head Lessor's and the Bank's rights hereunder, and
shall on request furnish to Lessor an opinion of counsel or other evidence
satisfactory to Lessor of such filing and recording.
4.3 Title to and ownership of the Aircraft as between Lessor, Head Lessor and
Lessee shall at all times remain in Lessor or Head Lessor, as the case may
be, and Lessee shall have no right, title or interest in or to the
Aircraft or any part thereof except as expressly provided by this
Agreement. Lessee shall identify and specify the interest of Lessor, Head
Lessor and the Bank and shall affix or keep affixed (i) in a reasonably
prominent position on the flight-deck of the Aircraft and on each Engine a
metal name plate (having dimensions of not less than 10 cm x 7 cm) bearing
the inscription (in fireproof and legible characters) stating:
"NOTICE OF OWNERSHIP
THIS AIRCRAFT/ENGINE IS OWNED BY [________________] AND
IS SUBJECT TO A FIRST PRIORITY MORTGAGE IN FAVOR OF
[________________]"
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The proper completion of the metal name plate shall be advised by Lessor
at its earliest convenience. Lessee shall not remove or deface evidence of
ownership of the Aircraft and shall not do or permit to be done or omitted
any act or thing which would jeopardize the rights of Lessor, Head Lessor
or the Bank in the Aircraft. Lessee will on all occasions when the
ownership of the Aircraft or any Part is relevant make clear to third
parties that title to the same is held by Lessor, Head Lessor or the Bank
as the case may be.
4.4 Lessee acknowledges that the Aircraft may from time to time be owned by
Head Lessor or the Bank and/or be subject to the Mortgage, which shall be
a first priority mortgage, and to the Security Assignment, in favor of
Head Lessor or the Bank. Lessee undertakes to Lessor (both for itself and
as agent for each of Head Lessor and the Bank) at Lessee's expense (except
for the expense of assignments pursuant to Article 12 after the first
refinancing and first assignment described in Article 8.2(a)(ii)) to,
from time to time, cause this Agreement, the Mortgage, the Security
Assignment and such other documents as may be necessary or advisable to
give effect to the transactions contemplated hereby or thereby, to be
kept, recorded or filed in such office or offices in the State of
Incorporation and in the State of Registration as may be necessary or
advisable to protect and perfect the interests of Lessor, Head Lessor and
the Bank in the Aircraft, this Agreement, the Mortgage and the Security
Assignment, and to do, from time to time, all other things which the Bank,
Head Lessor and/or Lessor may reasonably require in order to protect and
perfect their rights.
5. POSSESSION AND USE
5.1 Lessee shall not transfer possession of the Aircraft, the Engines or any
Part to any person or any legal entity or remove any Engine or Part from
the Airframe other than in accordance with the provisions of this Article
5 or of Article 12.1; provided, however, that so long as no Default shall
have occurred and be continuing, Lessee may, without the prior written
consent of Lessor deliver possession of the Aircraft, the Engines or Parts
to the manufacturer thereof for testing or other similar purposes, or to
an Authorized Maintenance Performer for service, repair, maintenance or
overhaul work on the Aircraft, the Engines or Parts, or for alterations,
modifications, or additions
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thereto, to the extent required or permitted by the terms of Article 7.3.
5.1.1 Lessee will ensure that no Engine or Part installed on the Aircraft is at
any time removed from the Aircraft other than:
(a) if replaced as expressly permitted by this Agreement; or
(b) if the removal is of an obsolete item and is in accordance with the
Approved Maintenance Program; or
(c) (i) during the course of maintaining, servicing, repairing,
overhauling or testing that Engine or Part or the Aircraft, as
the case may be; or
(ii) as part of a normal engine or part rotation program; or
(iii) for the purpose of making such modification to the Engine or
Part, or the Aircraft, as the case may be, as are permitted
under this Agreement,
and then in each case only if it is reinstalled or replaced by an
engine or part complying with Article 5.1.2(a) as soon as
practicable and in any event no later than the Expiry Date.
5.1.2 (a) Lessee will ensure that, except as permitted by this Agreement, no
engine or part is installed on the Aircraft unless:
(i) in the case of an engine, it is an engine of the same model
as, or an improved or advanced version of the Engine it
replaces, which is in similar or better operating condition,
and in the case only of a Casualty Occurrence, has
substantially similar hours available until the next scheduled
checks, inspections, overhauls and shop visits and has the
same or greater value and utility as the replaced Engine;
(ii) in the case of a part, it is in as good operating condition,
is of similar or a more advanced make and model and is of the
same
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interchangeable modification status as the replaced Part;
(iii) in the case of any part, it has become and remains the
property of Lessor free from Security Interests and on
installation on the Aircraft will without further act be
subject to this Agreement and the Mortgage; and
(iv) in each case, Lessee has full details as to its source and
maintenance records.
(b) Provided no Default has occurred and is continuing, Lessee shall be
entitled to install any engine or part on the Aircraft by way of
replacement notwithstanding Article 5.1.2(a) if:
(i) there is not available to Lessee at the time and in the place
that 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 Article 5.1.2(a); and
(ii) it would result in an unreasonable disruption of the operation
of the Aircraft and/or the business of Lessee to ground the
Aircraft until an engine or part, as the case may be,
complying with Article 5.1.2(a) becomes available for
installation on the Aircraft; and
(iii) as soon as reasonably practicable after installation of the
same on the Aircraft, Lessee removes any such engine or part
and replaces it with the Engine or Part replaced by it or by
an engine or part, as the case may be, complying with Article
5.1.2(a).
5.1.3 Lessee will:
(a) ensure that any Engine or Part which is not installed on the
Aircraft (or any other aircraft as permitted by this Agreement) is,
except as expressly permitted by this Agreement, properly and safely
stored, and kept free from Security Interests;
(b) from time to time on request, notify Lessor in writing as to the
location of any engine and on
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request shall use its reasonable efforts to procure that any person
to whom possession of an Engine is given acknowledges in writing to
Lessor, in terms satisfactory to Lessor, that it will respect the
interest of the Bank as mortgagee and Lessor (or, as the case may
be, Head Lessor) as owner and lessor of the Engine and will not seek
to exercise any rights whatsoever in relation to it;
(c) (notwithstanding the foregoing provisions of this Article 5.1.3), be
permitted, if no Default has occurred and is continuing, to install
any Engine or Part on an aircraft, or in the case of a Part, on an
engine:
(i) owned and operated by Lessee free from Security Interests; or
(ii) leased or hired to Lessee pursuant to a lease or conditional
sale agreement on a long-term basis and on terms whereby
Lessee has full operational control of that aircraft or
engine; or
(iii) acquired by Lessee and/or financed or refinanced, and operated
by Lessee, on terms that ownership of that aircraft or engine,
as the case may be, pursuant to a lease or conditional sale
agreement, or a Security Interest therein, is vested in or
held by any other person;
provided that in the case of (ii) and (iii):
(1) the terms of any such lease, conditional sale agreement or Security
Interest will not have the effect of prejudicing the interests of
the Bank as mortgagee or Lessor (or, as the case may be, Head
Lessor) as owner and lessor of that Engine or Part; and
(2) the lessor under such lease, the seller under such conditional sale
agreement or the holder of such Security Interest, as the case may
be, has confirmed and acknowledged in writing to Lessor, in form
and substance satisfactory to Lessor, that it will respect the
interest of Lessor (or, as the case may be, Head Lessor) as owner
and lessor and the Bank as mortgagee of that Engine or Part and
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that it will not seek to exercise any rights whatsoever in relation
thereto; and, to the extent such an acknowledgment has been given,
Lessor hereby agrees, for the benefit of the lessor, the seller, or
secured party, as the case may be, of any engine or part (other than
an Engine or a Part) leased to Lessee or owned by Lessee subject to
a conditional sale or other security agreement, that Lessor will not
acquire or claim, as against such lessor, seller or secured party,
any right, title or interest in any engine or engines owned by the
lessor under such lease or subject to a security interest in favor
of the seller or secured party under such conditional sale or other
security agreement as the result of such engine or engines being
installed on the Airframe at any time while such engine or engines
are subject to such lease or conditional sale or other security
agreement.
5.1.4 Lessee will not enter into nor permit any pooling agreement or arrangement
in respect of an Engine or Part without the prior written consent of
Lessor, which shall not be unreasonably withheld.
5.2 Lessee shall use the Aircraft solely in commercial or other operations for
which Lessee is duly authorized by the Laws of the State of Registration
and/or any jurisdiction to whose Laws Lessee's operation of the Aircraft
is subject and shall not use or permit the Aircraft to be used for any
purpose for which the Aircraft is not designed or reasonably suitable.
Lessee shall not use the Aircraft for the carriage of (i) whole animals
living or dead except in the cargo compartments according to the United
States Department of Transportation ("DOT") (or for international
flights, International Civil Aviation Organization ("ICAO"))
regulations, and except domestic pet animals carried in a suitable
container to prevent the escape of any liquid and to ensure the welfare
of the animal; (ii) acids, toxic chemicals, other corrosive materials,
explosives, nuclear fuels, wastes, or any nuclear assemblies or
components, except as permitted for passenger aircraft under the
"Restriction of Goods" schedule issued by the DOT (or for international
flights, ICAO) from time to time and provided that all the requirements
for packaging or otherwise contained therein are fulfilled; or (iii) any
other goods, materials or items of cargo which could reasonably be
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expected to cause damage to the Aircraft and which would not be adequately
covered by the insurance required by or obtained pursuant to Article 11.
5.3 Lessee shall not permit the Aircraft to be maintained, used, or operated
in violation of any Law of any Government Entity having jurisdiction, or
contrary to any manufacturer's operating manuals and instructions, or in
violation of any airworthiness certificate, license or registration
relating to the Aircraft issued by any such Government Entity. In the
event that such Laws require alteration of the Aircraft, Lessee shall
conform therewith at its own expense and shall maintain the same in proper
condition for operation under such Laws. Lessee agrees not to operate the
Aircraft or to permit or suffer the Aircraft to be operated (i) contrary
to applicable Law, and/or (ii) within or into any geographic area unless
the Aircraft is covered by insurance as required by the provisions of
Article 11 or insurance or an indemnity in lieu of such insurance from the
United States government against the risks and in the amounts required by
Article 11 covering such area, and/or (iii) contrary to the terms of such
insurance as required by the provisions of Article 11.
5.4 Throughout the Term and until re-delivery of the Aircraft to Lessor in
accordance with the provisions of this Agreement, the Aircraft and every
part thereof shall be in every respect at the sole risk of Lessee, who
shall bear all risks of loss, theft, damage or destruction to the Aircraft
from any cause whatsoever. Lessor shall not be liable for any liability,
claim, loss, damage or expense of any kind or nature caused directly or
indirectly by the Aircraft or any part thereof by any inadequacy thereof
for any purpose or any deficiency or defect therein, by the use or
performance thereof, by any repairs or servicing thereto or any delay in
providing or failure to provide any thereof, by any interruption or loss
of service or use thereof, or by any loss of business or other
consequential damage or any damage whatsoever and howsoever caused prior
to re-delivery of the Aircraft to Lessor.
5.5 Lessee shall ensure that such crew and engineers as are employed by it in
connection with the operation and maintenance of the Aircraft shall have
such qualifications and hold such licenses as are required by the Air
Authority and by all applicable Laws and regulations.
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6. CHARGES, METHOD OF PAYMENT AND FINANCIAL INFORMATION
6.1 Lessee shall punctually pay to Lessor, when due, the Rent, Reserve Rate
and Supplemental Rent expressed to be payable by the Lessee to the Lessor
hereunder including the monies specified and calculated in accordance with
the provisions of Appendix D at the time and in the manner therein
specified, and shall punctually and duly observe and perform Lessee's
obligations under the said Appendix D which forms an integral part of this
Agreement. The time stipulated in this Agreement for all payments payable
by Lessee to Lessor and for the performance of Lessee's other obligations
under this Agreement shall be of the essence of this Agreement.
6.2 Lessee shall not be entitled to any abatement, compensation, reduction or
set-off against any installment of Rent, the Reserve Rate or Supplemental
Rent, including but not limited to, abatements, compensations, reductions
or set offs, by reason of any past, present or future claims of Lessee
against Lessor or any other person under this Agreement or otherwise.
6.3 Lessee's obligation to pay Rent and make other payments in accordance with
this Agreement, until Lessee shall have redelivered the Aircraft to Lessor
in accordance with Article 16 and shall have complied with its other
obligations hereunder, shall be absolute and unconditional irrespective of
any contingency whatsoever including (but not limited to) (i) any right of
set-off, counterclaim, recoupment, defence or other right which either
party may have against the other, (ii) any unavailability of the Aircraft
for any reason, including, but not limited to, any defect in the
airworthiness, merchantability, fitness for any purpose, condition,
design, or operation of any kind or nature of the Aircraft, or the
ineligibility of the Aircraft for any particular use or trade, or for
registration or documentation under the laws of any relevant jurisdiction,
or (save as herein provided) any Casualty Occurrence in respect of or any
damage to the Aircraft, (iii) any insolvency, bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution, liquidation or similar
proceedings by or against Lessor or Lessee, (iv) any invalidity or
unenforceability or lack of due authorization of, or other defect in this
Agreement, (v) any failure of Lessee to obtain any required license,
certificate,
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authorization or other approval of any Governmental Entity having
jurisdiction over the operation by Lessee of the Aircraft or the operation
by Lessee in any airport and (vi) any other cause which, but for this
provision, would or might have the effect of terminating, frustrating or
in any way affecting any obligation of Lessee hereunder, it being the
declared intention of the parties that the provisions of this Article and
the obligations of Lessee to pay the Rent, the Reserve Rate and
Supplemental Rent provided for by this Agreement shall survive any
frustration and that, save as expressly provided in this Agreement, no
monies payable hereunder by Lessee to Lessor shall in any event or
circumstance be repayable to Lessee.
6.4 Lessee agrees to furnish Lessor during the Term:
(i) any financial reports or projections supplied to the Equity
Investors;
(ii) upon Lessor requesting the same a quarterly unaudited balance sheet
of Lessee prepared by it as of the close of the most recent previous
financial quarter, together with the related profit and loss
statement for such period;
(iii) within ninety (90) days after the close of each financial year of
Lessee, an audited balance sheet and profit and loss statement as of
the close of such financial year;
(iv) from time to time such other information as Lessor may reasonably
request, including, without limitation, information in respect of
the Equity Commitment and any other agreements relating to the
Equity Investors; and
(v) copies of all notices sent by Lessee to its shareholders or
creditors as a group in their respective capacities as such relating
to major business or financial developments of Lessee.
7. MAINTENANCE
7.1 Lessee, during the Term, at its own cost and expense shall:
(a) service, repair, maintain, overhaul, test, or cause the same to be
done to the Aircraft in
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accordance with the Approved Maintenance Program so as to keep the
Aircraft in as good operating condition as when delivered to Lessee
on the Delivery Date, ordinary wear and tear excepted, and such
operating condition as may be necessary to enable the airworthiness
certificate of the Aircraft to be maintained in good standing at all
times under applicable Law, and Lessee shall at all times maintain
current certificates of airworthiness and Air Authority required
records of maintenance in respect of the Aircraft and produce copies
thereof to Lessor upon request;
(b) maintain in the English language all Aircraft Documents, records,
logs, and other materials required by applicable Laws and best
airline practice to be maintained in respect of the Aircraft
including engine trend monitoring data;
(c) perform, or cause to be performed, all airworthiness directives and
mandatory notes and mandatory bulletins affecting the Aircraft
having a compliance date during the Term and issued by (a) the Air
Authority and/or (b) Fokker or any other manufacturer of any part of
the Aircraft (except that, in the event of a conflict, those
required by the Air Authority shall prevail);
(d) maintain the Aircraft in conformity with Air Authority Regulations
and such other rules and regulations of the Air Authority as may
from time to time be applicable to passenger category airline
aircraft;
(e) provide Lessor by telex or fax message with a monthly summation
(which may utilize Air Authority forms) of Flight Hours and Cycles
accumulated on the Airframe, Engines, A.P.U. and Landing Gear and
details of all modifications and material component changes within
five (5) days after the end of each month.
Such maintenance shall be performed by Lessee or by the Authorized
Maintenance Performer identified in Appendix B or such other person as
Lessor may from time to time approve in writing (such approval not to be
unreasonably withheld) which person shall thereupon become an Authorized
Maintenance Performer for the purposes of this Agreement.
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7.2 Except as otherwise provided herein, Lessee, at its own cost and expense,
shall promptly replace all Engines or Parts which may from time to time
become worn out, lost, stolen, destroyed, seized, confiscated, damaged
beyond repair, or unserviceable with an engine or part meeting the
requirements of Article 5.l.2.(a).
7.3 (a) Save as expressly herein provided the Aircraft shall not be
modified, altered, converted or added to (each such action in
relation to the Aircraft being herein referred to as an "Equipment
Change"), provided that Lessee may, at its own expense and subject
to the prior written approval of Lessor (such approval not to be
unreasonably withheld), make such Equipment Changes to the Aircraft
as Lessee may deem desirable in the proper conduct of its business,
provided that no such Equipment change diminishes the value,
utility, condition or airworthiness of the Aircraft below the value,
utility, condition and airworthiness thereof immediately prior to
such Equipment Change, assuming the Aircraft was then in the
condition required to be maintained by the provisions of this
Agreement.
(b) Title to all Parts incorporated or installed in or attached or added
to the Aircraft as the result of such Equipment Change shall,
without further act, vest in Lessor free and clear of all liens,
charges and encumbrances. Lessee shall at its own expense take all
such steps and execute, and procure the execution of, all such
instruments as Lessor may require and which are necessary to ensure
that title to any such replacement Part as aforesaid passes to
Lessor according to the Governing Law and the lex situs, provided,
however, that so long as a Default shall not have occurred and be
continuing, at any time during the Term, Lessee may remove any such
Part if (i) such Part is in addition to, and not in replacement of
or in substitution for, any Part originally incorporated or
installed in or attached to the Aircraft at the time of the delivery
thereof hereunder, (ii) such Part is not required to be incorporated
or installed in or attached or added to the Aircraft pursuant to the
provisions of Article 5.1 and (iii) such Part can be removed from
the Aircraft without diminishing or impairing the value, utility or
airworthiness which the
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Aircraft would have had at such time, had such Equipment Change not
occurred.
(c) Upon the removal by Lessee of any such Part as above provided, title
thereto shall, without further act, vest in Lessee and such Part
shall no longer be deemed a part of the Aircraft. Any Part not
removed by Lessee as above provided prior to the return of the
Aircraft to Lessor hereunder shall remain the property of Lessor
(save as the parties may otherwise agree in writing) provided that
Lessor may require Lessee, prior to the end of the Term, to remove
any Parts incorporated or installed in the Aircraft as a result of
an Equipment Change and to restore the Aircraft to its condition
prior to an Equipment Change.
7.4.1 Upon submission by Lessee to Lessor of invoices or receipts reasonably
satisfactory to Lessor evidencing the performance in accordance with the
provisions of this Agreement by or at the direction of Lessee of:
(a) with respect to the Airframe, the accomplishment of those items of
maintenance characterized as scheduled airframe heavy maintenance as
defined in the Approved Maintenance Program for 12,000 hours and
24,000 hours inspections or any equivalent thereof with more or less
hours ("Airframe Maintenance"), or
(b) with respect to any Engine, the performance of all scheduled shop
visit engine maintenance and repair, other than (i) repairs arising
as a result of foreign object damage or operational mishandling
and/or (ii) maintenance and repair of QEC (Quick Engine Change) kits
("Engine Maintenance"), or
(c) with respect to any nose or main landing gear ("Landing Gear"), the
performance of all scheduled shop visit nose and main landing gear
maintenance and repair, other than repairs arising as a result of
foreign object damage or operational mishandling ("Landing Gear
Maintenance"), or
(d) the Auxiliary Power Unit ("A.P.U.") the performance of all off
Aircraft shop A.P.U. maintenance and repair, other than repairs
arising as a result of foreign object damage or operational
mishandling ("A.P.U. Maintenance"),
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Lessor shall, subject to Article 3.5 of Appendix D and provided that a
Default shall not have occurred and be continuing, release to Lessee, from
the relevant Maintenance Fund as defined in paragraph 3.2 of Appendix D, a
sum equal to the aggregate amount evidenced by such invoices or receipts
for such relevant maintenance, to the extent there are sufficient sums in
the relevant Maintenance Fund at the date of the start of the relevant
maintenance. Lessee agrees to use its reasonable efforts to ensure that
the relevant invoices or receipts are received by Lessor as promptly as
possible after completion of the relevant maintenance. All sums remaining
in any Maintenance Fund at the expiration or other termination of this
Agreement shall be retained by Lessor, except (i) upon payment in full of
Agreed Value and any other amounts due to Lessor or otherwise hereunder
after a Casualty Occurrence pursuant to Article 17.2(b), in which case all
sums remaining in any Maintenance Fund shall be paid to Lessee and (ii)
under the circumstances and to the extent described in Article 3.6 of
Appendix D.
7.4.2 Lessor shall be entitled to delay the release or payment of funds from any
Maintenance Fund (to the extent related to any disputed amounts) to Lessee
provided for by this Article 7 until such time as it shall in its opinion
be in a position to determine (which Lessor agrees to use reasonable
efforts to do as promptly as possible) the amount to be released or paid,
but in any event release all undisputed amounts from the relevant
Maintenance Fund (but where insufficient funds are in such maintenance
Fund the lesser pro rata portion of such funds which corresponds to the
undisputed amount) upon request unless a Default shall have occurred and
be continuing.
7.5.1 During the Term, Lessee shall furnish to Lessor such information
concerning the location, condition, use and operation of the Aircraft as
Lessor may reasonably request. The right of Lessor, or its designated
representatives, to inspect the Aircraft during any Major Checks performed
by or on behalf of Lessee during the Term, shall be absolute and Lessee
shall inform Lessor by providing sixty (60) days' written notice as to
time and location of all Major Checks. During such Major Checks, Lessee
agrees to provide sufficient manpower to allow Lessor, or its authorized
representatives, to inspect any area of the Aircraft which Lessor requests
to inspect and which would normally be required during such a Major Check,
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provided that such inspection is to be made only at the time that Lessee
opens up such area in accordance with the Approved Maintenance Program.
Lessee also shall permit any persons designated by Lessor to visit and
inspect the Aircraft, its condition, use and operation, and the records
maintained in connection therewith.
7.5.2 Lessor shall have the right at any time on reasonable notice to inspect or
survey the Aircraft or any part thereof, or instruct a duly authorized
surveyor to carry out a survey on its behalf, to ascertain the condition
of the Aircraft or any part thereof and satisfy itself that the Aircraft
is being properly repaired and maintained in accordance with the terms of
this Agreement. The cost of any such inspection or survey shall be borne
by Lessor unless an Event of Default has occurred and is continuing.
7.5.3 Lessor shall have no duty to make any such inspection as is referred to in
Article 7.5.1 and 7.5.2 and shall not incur any liability or obligation by
reason of not making any such inspection. No exercise of such inspection
right shall unreasonably interfere with the normal operation or
maintenance of the Aircraft.
8. TAXES, DUTIES AND EXPENSES
8.1 Lessee agrees promptly to pay and indemnify and hold Lessor and Head
Lessor harmless against all Taxes (other than Lessor Taxes) levied or
imposed against or upon or otherwise payable by any Tax Indemnitee or
Lessee and relating to or attributable to Lessee, this Agreement, the
Aircraft and/or the importation, exportation, registration, ownership,
leasing, sub-leasing, delivery, possession, use, operation,
reregistration, repair, maintenance, overhaul, replacement, improvement,
modification, alteration, transportation, landing, storage, presence or
redelivery of or addition to, the Aircraft or any Engine or any Part
thereof or any rent, receipts, insurance proceeds or income arising
therefrom, or any sum payable by Lessee to a Tax Indemnitee under this
Agreement or any other transactions or activities contemplated by this
Agreement. If Lessee is required by any applicable Law or regulation to
deliver or furnish any report or return in connection with any such Taxes,
Lessee shall complete the same in a manner
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satisfactory to the relevant Tax Indemnitee and in particular shall state
therein that Lessor or Head Lessor, as the case may be, is the owner of
the Aircraft and that the Lessee is exclusively responsible for the use
and operation of the Aircraft and for any such Taxes and Lessee shall
supply a copy of such report or return to the relevant Tax Indemnitee.
All payments by Lessee hereunder to Lessor shall be free of withholdings
of any nature whatsoever (and at the time Lessee is required to make any
payment upon which any withholding is required, Lessee shall pay an
additional amount such that the net amount actually received by the Lessor
will, after such withholding, equal the full amount of the payment then
due) and shall be free of expense for collection or other charges. If
Lessee shall have paid any additional amount pursuant to the first
sentence of this paragraph with respect to Taxes not subject to
indemnification pursuant to the provisions of this Section 8.1, the Lessor
for whose benefit such Taxes were paid shall reimburse Lessee within 10
Business Days of written demand therefor for the amount of such Taxes so
paid by Lessee. For the purpose of Article 1.29 and Article 8, the terms,
"Lessor" and "Head Lessor" shall include each group of corporations (and
each member thereof) that includes Lessor or Head Lessor and for which
consolidated, combined, unitary or other group tax returns are filed.
8.2 Except as otherwise specifically provided herein, Lessee shall pay to
Lessor on or after Delivery Date (unless otherwise agreed to be financed
by Lessor) upon demand:
(a) all reasonable expenses paid to third parties (including legal,
printing and out-of-pocket expenses) incurred or payable by Lessor
(i) in connection with the negotiation, preparation and execution of
this Agreement and all related documents, including reasonable out-
of-pocket expenses in connection with this Agreement and (ii) in
connection with the events referred to in Article 2.7 of Appendix D
and (iii) related to any amendment to or extension of, or the
granting of any waiver or consent under, this Agreement;
(b) all reasonable expenses paid to third parties (including legal fees
and disbursements but excluding surveyor costs) payable or incurred
by
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Lessor in connection with, the enforcement of or preservation of any
rights of Lessor under this Agreement or otherwise in respect of
moneys owing under this Agreement by Lessee or in respect of any
breach of Lessee of any representation, warranty, covenant or
undertaking herein contained; and
(c) the ongoing annual fees and reasonable out-of-pocket expenses
related to this Agreement of the Owner Trustee and the voting
Trustee.
8.3 Lessee shall pay all stamp, documentary, registration or other like duties
or taxes (including any such duties or taxes payable by a Tax Indemnitee
but excluding all Lessor Taxes) imposed on or in connection with this
Agreement and shall indemnify that Tax Indemnitee against any liability
arising by reason of any delay or omission by Lessee to pay such duties or
taxes.
8.4 If and to the extent that any sum (the "indemnity sum") constituting
(directly or indirectly) an indemnity to one or more Tax Indemnitees paid
by Lessee to any person other than that Tax Indemnitee shall be treated as
taxable in the hands of the relevant Tax Indemnitee, Lessee shall pay to
the relevant Tax Indemnitee a sum as (after taking into account any
taxation suffered by the relevant Tax Indemnitee on the indemnity sum)
shall reimburse the relevant Tax Indemnitee for the net amount of any
Taxes suffered by them in respect of the indemnity sum (after taking into
account any current tax savings or other benefits to the relevant Tax
Indemnitee resulting from the payment or accrual of the indemnified
expense).
8.5 If and to the extent that any sums payable to a Tax Indemnitee by
Lessee under this Agreement by way of indemnity are insufficient, by
reason of any Taxes payable in respect of those sums, for that Tax
Indemnitee to discharge the corresponding liability to the relevant
third party (including any taxation authority), or to reimburse that
Tax Indemnitee for the cost incurred by it to a third party (including
any taxation authority), a Lessee will pay to that Tax Indemnitee such
sum as will after the tax liability has been fully satisfied leave that
Tax Indemnitee with the same net amount (after taking into account any
current tax savings or other benefits to the that Tax Indemnitee
resulting from the payment or accrual of the
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indemnified expense) as it would have been entitled to receive in the
absence of that liability. For the purpose of computing the amount of an
indemnity payment pursuant to this Article 8.5 and the amount of any
payment to Lessee under Article 8, it shall be assumed that the relevant
Tax Indemnitee is subject to tax on the amount of each indemnity it
receives or accrues under this Agreement and can use any tax savings to
offset Taxes at the highest marginal statutory rates of tax applicable to
that Tax Indemnitee (as certified to Lessee by an officer of that Tax
Indemnitee) at the time such indemnity or tax savings is received or
accrued.
8.6 If, as a result of any indemnity paid by Lessee or any event giving rise
to an indemnity obligation of Lessee, a Tax Indemnitee at any time
realizes any tax savings, refunds or other reductions in taxes not
previously taken into account in computing the amount of the indemnity,
that Tax Indemnitee shall promptly pay to the Lessee the amount of such
tax savings, refunds or other reductions in taxes; provided, however, that
no Tax Indemnitee will be required to make any payment to Lessee pursuant
to this Article 8.6 so long as a Default shall be continuing or if Lessee
shall not have theretofore made all payments due to all Tax Indemnitees
under this Agreement, or to the extent that the amount of such payment
would exceed the amount of all prior payments by Lessee to the relevant
Tax Indemnitee pursuant to this Article 8 less the amount of all prior
payments by the relevant Tax Indemnitee to Lessee pursuant to this Article
8.6. The relevant Tax Indemnitee shall estimate the amount of such tax
savings, refunds and other reductions in Taxes and shall use reasonable
efforts to take such actions in filing its tax returns and in dealing with
taxing authorities to seek and claim each such tax savings, refund and
other reduction in Taxes, but shall not be obligated to take any such
action that it determines in its sole discretion to involve the imposition
or risk of any material unindemnified cost or expense, and in no event
will any person have any right to inspect the books, records, tax returns
or other documents of any Tax Indemnitee, and the positions to be taken by
any Tax Indemnitee on or with respect to its tax returns and in any tax
proceedings shall be within their sole control.
8.7 Lessee's, and each Tax Indemnitee's obligations under this Article 8 shall
continue in full force and effect,
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notwithstanding the expiration or earlier termination of the Term
hereunder.
8.8 If Lessee disputes the payment of any Taxes payable by a Tax Indemnitee
for which Lessee is responsible under this Agreement, that Tax Indemnitee
will take such action as Lessee may reasonably request at Lessee's expense
to contest that payment but that Tax Indemnitee will not be obliged to
take any such action:
(a) which that Tax Indemnitee considers in good faith may result in the
imposition or risks of any material liability cost, or expense for
which that Tax Indemnitee is not indemnified to its satisfaction; or
(b) which that Tax Indemnitee considers not to have a reasonable
prospect of success; or
(c) for which Lessee has not made adequate provision to the satisfaction
of that Tax Indemnitee in respect of the expense concerned.
8.9 Lessor covenants and agrees to deliver to Lessee, (a) within 30 days of
the signing of this Agreement (but in all events prior to the date of the
first payment of Rent to Lessor under this Agreement) and within 30 days
prior to January 1, 1996 and each January 1 falling every three years
thereafter (or at such other date as prescribed by United States Treasury
Regulations) as long as this Agreement has not been terminated, two
accurate and complete original copies of Internal Revenue Service Form
1001 (or any successor form), dated the date hereof or January 1, 1996 (or
such subsequent January 1 or other date) signed by Beneficiary, as
appropriate, and such other related forms (including any certificate with
respect thereto) as Lessee may reasonably request, or (b) within 30 days
of the signing of this Agreement (but in all events prior to the date of
the first payment of Rent to Lessor under this Agreement) and within 30
days prior to the beginning of each taxable year of Lessor beginning
subsequent to the date of this Agreement (or at such other date as
prescribed by United States Treasury Regulations), two accurate and
complete original copies of Internal Revenue Service Form 4224 (or any
successor form), signed by Beneficiary, dated as appropriate, and such
other related forms (including any certificate with respect thereto) as
Lessee may reasonably request. In addition, Lessor shall deliver
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to Lessee two accurate and complete original copies of Form 1001 or Form
4224 signed by Beneficiary, at any time that a change in circumstances
renders the previous form inaccurate in any material respect. Nothing in
this Article 8.9 shall be construed as imposing on the Lessee any
obligation whatsoever, including, without limitation, to indemnify Lessor
or any other party for U.S. withholding taxes.
9. LIENS
9.1 Lessee, during the Term, shall not create or suffer to exist any lien,
attachment, mortgage or other encumbrance upon or against the Aircraft, or
any of its rights under this Agreement, other than the Mortgage, the
Security Assignment and Permitted Liens. If at any time a lien,
attachment, mortgage, or other encumbrance except as permitted above shall
be created or suffered to exist by Lessee, or be levied upon the Aircraft
or any of its rights under this Agreement, Lessee shall forthwith notify
Lessor and cause the same forthwith to be discharged by bond or otherwise.
In the event Lessee shall fail to discharge any such lien, attachment,
mortgage or other encumbrance, Lessor, Head Lessor or the Bank shall be
entitled (but not bound) to discharge the same, in which event Lessee
shall pay to Lessor, on demand, the amount paid by Lessor and/or Head
Lessor and/or the Bank, together with Lessor's and/or Head Lessor's and/or
the Bank's losses, costs and expenses, including reasonable legal fees and
expenses.
10. INDEMNIFICATION
10.1 LESSEE SHALL RELEASE AND DEFEND, HOLD HARMLESS AND INDEMNIFY ANY AND/OR
ALL OF THE INDEMNITEES, FROM AND AGAINST ANY AND ALL CLAIMS, PROCEEDINGS,
SUITS, JUDGEMENTS, COSTS, EXPENSES, PENALTIES, FINES AND LIABILITIES,
DIRECT AND CONSEQUENTIAL DAMAGES AND LOSSES, INCLUDING WITHOUT LIMITATION
COSTS AND EXPENSES INCIDENTAL THERETO, OF WHATSOEVER KIND AND NATURE, AND
INCLUDING REASONABLE LEGAL FEES AND EXPENSES BUT EXCLUDING ANY TAXES,
INDEMNITY FOR WHICH IS ENCOMPASSED SOLELY IN ARTICLE 4.1 AND ARTICLE 8
(EACH A "CLAIM"), WHICH MAY BE SUFFERED BY, ASSERTED AGAINST, CHARGED TO
OR RECOVERABLE FROM, DIRECTLY OR INDIRECTLY, ANY AND/OR ALL OF THE
INDEMNITEES:
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(A) RELATING TO, ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE
POSSESSION, DELIVERY, PERFORMANCE, MANAGEMENT, OWNERSHIP,
REGISTRATION, CONTROL, MAINTENANCE, CONDITION, SERVICE, REPAIR,
OVERHAUL, LEASING, USE, OPERATION OR RETURN OF THE AIRCRAFT, ANY
ENGINE OR ANY PART, OR THE PERFORMANCE OR NON-PERFORMANCE OF ANY
AND/OR ALL OF THE INDEMNITEES OF SERVICES OR DELIVERY OF ANY THINGS
IN CONNECTION WITH THE AIRCRAFT DURING THE TERM, OR OTHERWISE IN
CONNECTION WITH THIS AGREEMENT, WHETHER OR NOT ARISING IN TORT OR
OCCASIONED IN WHOLE OR IN PART BY THE FAULT OR NEGLIGENCE OF ANY
AND/OR ALL OF THE INDEMNITEES; OR
(B) AS A CONSEQUENCE OF ANY DESIGN, ARTICLE OR MATERIAL IN THE AIRCRAFT,
ANY ENGINE OR ANY PART OR ITS OPERATION OR USE CONSTITUTING AN
INFRINGEMENT OF PATENT (TO THE EXTENT AND SCOPE AND SUBJECT TO THE
LIMITATIONS SET FORTH IN PART C OF EXHIBIT G OF THE SUPPORT SERVICES
AGREEMENT), COPYRIGHT, TRADEMARK, DESIGN OR OTHER PROPRIETARY RIGHT
OR A BREACH BY LESSEE OF ANY OBLIGATION OF CONFIDENTIALITY OWED TO
ANY PERSON;
EXCLUDING, HOWEVER, FROM THE FOREGOING ANY SUCH CLAIM TO THE EXTENT
THAT SUCH CLAIM RESULTS FROM THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF SUCH INDEMNITEE OR FROM ANY MISREPRESENTATION BY SUCH
INDEMNITEE CONTAINED IN THIS AGREEMENT OR ANY BREACH BY SUCH
INDEMNITEE OF ANY COVENANT SET FORTH IN THIS AGREEMENT.
10.2 The indemnities contained in this Article 10 shall continue in full force
and effect notwithstanding the expiration or other termination of this
Agreement or of the letting of the Aircraft hereunder.
10.3 The indemnities contained in this Article 10 are given to the Lessor for
itself and as agent and trustee on behalf of the other Indemnitees
10.4 Notwithstanding anything to the contrary contained herein, Lessee does not
release and does not agree to defend, hold harmless or indemnify under
this Agreement (and without limiting any obligations or indemnities
contained in any other agreement with Lessee) Fokker or any other
Indemnitee in its capacity as manufacturer or seller of the Aircraft from
or against (i) claims of third parties made directly against Fokker or
such Indemnitee, based on its product liability or its
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status as manufacturer or Seller, or (ii) claims made against Fokker or
such Indemnitee based on the warranties or indemnities contained in the
Product Assurance Document which is Exhibit G of the Support Services
Agreement, or (iii) the matters described in Article 10.1(B).
10.5 If any Indemnitee has knowledge of the occurrence of any Claim, liability
or other matter for which it is or may be entitled to be indemnified
hereunder, it shall give prompt written notice thereof to the Lessee. Each
Indemnitee shall cooperate in good faith with Lessee and supply such
information as may reasonably be requested by Lessee to enable Lessee to
investigate, defend or contest any Claim, liability or other matter for
which Lessee may be required to indemnify an Indemnitee hereunder. In the
event that Lessee pays any amount to an Indemnitee pursuant to this
Article 10, Lessee shall be subrogated to all rights of the Indemnitee in
respect of the Claim, liability or other matter indemnified against giving
rise to such payment. Lessee or its insurers shall have the right, unless
an Event of Default shall have occurred and be continuing and such matter
is not covered by insurance, to investigate or (provided that Lessee or
its insurers shall agree not to dispute liability hereunder or under any
insurance policies pursuant to which coverage is sought and provided that
Lessee shall have consulted with Lessor prior thereto), defend or
compromise any Claim, and Lessor shall cooperate with Lessee with respect
thereto.
11. INSURANCE
11.1 On or before the Expected Delivery Date of the Aircraft and throughout the
Term, Lessee shall carry and maintain in full force and effect, at its own
cost and expense, in such forms, on such conditions and with such insurers
and, if requested, reinsurers and through such insurance and, if
requested, reinsurance brokers as are satisfactory to Lessor, the
following insurances with respect to the Aircraft, Engines and Parts
(herein referred to as "the Insurances"):
(a) All Risks Aircraft Hull insurance of the type usually insured
against by commercial airlines engaged in the same or similar
business and owning or operating similar aircraft (including Engines
and Parts while not installed on the Aircraft and
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including Extended Coverage Endorsement (Aircraft Hull) AVN5l or
equivalent on the Agreed Value. The insurance may be subject to a
deductible in respect of losses other than total loss, arranged
total loss or constructive total loss of not more than $100,000.00
(Dollars One Hundred Thousand) for each accident.
(b) If operated outside the United States and Canada, Aircraft Hull War
and Allied Perils insurance covering the risks excluded from the All
Risks Aircraft Hull insurance specified in paragraph (a) above by
the terms of the War, Hi-Jacking and Other Perils Exclusion Clause
AVN.48B except paragraph (b) thereof and shall include cover in
respect of confiscation, nationalization, seizure, restraint,
detention, appropriation for title or use by or under the order of
any Government Entity of the State of Registration.
(c) Comprehensive Airline Liability insurance (including without
limitation aircraft Third Party Liability, Passenger and Crew
Liability (including Baggage and Personal Effects)), Cargo
Liability, Mail Liability, Personal Injury Liability, Contractual
Liability, Hangar Keeper's Liability, Aircraft Products Liability
and General Third Party Liability of the types usually insured
against by commercial airlines engaged in the same or similar
business and owning or operating similar aircraft in an amount of
not less than $500,000,000.00 (Dollars Five Hundred Million)
Combined Single Limit any one occurrence each Aircraft but limited
in respect of Personal Injury to the equivalent of $25,000,000.00
(Dollars Twenty Five Million) any one offence and in the aggregate.
Such insurance shall include cover in respect of the risks excluded
by War, Hi-Jacking and Other Perils Exclusion Clause AVN.48B except
paragraph (b) thereof.
This insurance may be subject to deductibles in respect of
passengers baggage and personal effects of not more than $1,250.00
(Dollars One Thousand Two Hundred Fifty) any one claim and in
respect of cargo and mail of not more than $5,000.00 (Dollars Five
Thousand) any one claim. Such deductibles
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shall not apply to claims arising from accidents to the carrying
aircraft.
(d) All Risks insurance on Engines and Parts while any such items are
not installed on the Aircraft and in respect of which cover is not
provided under the All Risks Aircraft Hull insurance and/or Aircraft
Hull War and Allied Perils insurance (respectively specified in
paragraphs (a) and (b) above) of the type usually insured against by
commercial airlines engaged in the same or similar business and
owning or operating similar aircraft for not less than full
replacement value. If Engines and Parts are located outside the
United States and Canada, such insurance shall include War and
Allied Perils to the extent that such insurance is customarily
available in the international insurance market for this type of
insurance.
This insurance may be subject to a deductible of not more than
$10,000.00 (Dollars Ten Thousand).
Lessor's current requirements as at the date of this Agreement as to the
Insurances are as specified in this Article and in Appendices H and I.
Lessor reserves the right to amend the insurance requirements of this
Article 11 to reflect changes in insurance practice.
If required by the first paragraph of Article 11.1, the Lessee shall
procure that the insurers effect reinsurances in the same form and
conditions through such reinsurance brokers and with such reinsurers and
for such proportions as are satisfactory to Lessor.
11.2 All Insurances to be carried in accordance with Article 11.1 above shall:
(a) in respect of All Risks Aircraft Hull insurance, Aircraft Hull War
and Allied Perils insurance and All Risks insurance on Engines and
Parts:
(i) name the Lessor, Head Lessor and the Bank and their respective
successors and assigns as additional assureds;
(ii) provide that all claims in respect of the Aircraft, Engines
and Parts shall be payable to Lessor or as it may direct, such
payee to
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be named Loss Payee; provided, that partial loss amounts up to
the Partial Loss Amount set forth in Appendix B shall be
payable to Lessee unless the insurers have been given notice
that a Default has occurred; and
(iii) if applicable, provide in respect of Hull All Risks and Hull
War and Allied Perils for a 50/50 Claims Settlement Clause in
the form of AVS.103;
(b) in respect of Comprehensive Airline Liability insurance:
(i) name the Lessor, its successors and assigns and its
shareholders, subsidiaries, directors, officers, agents,
employees and the Indemnitees as additional assureds; and
(ii) provide that the insurance shall operate in all respects as if
a separate policy had been issued covering each party insured
thereunder, but this provision shall not operate to include
any claim howsoever arising in respect of loss or damage to
the Aircraft, Engines and Parts insured under the All Risks
Hull, Hull War and Allied Perils or All Risks insurance of the
assured. Notwithstanding the foregoing the total liability of
insurers in respect of any and all assureds shall not exceed
the limits of liability stated in the policy;
(c) in respect of all Insurances:
(i) be effective worldwide except for territories approved in
writing by the Lessor;
(ii) provide that insurers waive all rights of subrogation against
the Lessor, its subcontractors, FAUSA, Fokker, the Head
Lessor, the Bank, and their respective officers, directors,
employees, servants, agents, successors and assigns;
(iii) provide that in the event that the Insurances are cancelled
(including cancellation for non-payment of premium) or are
materially changed such cancellation or change shall not be
effective as to the interest of the Lessor
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until thirty (30) days (but seven (7) days or such lesser
period as is customarily available in accordance with policy
conditions in respect of war and allied perils) after
confirmed receipt by Lessor of written notice by insurers of
such cancellation or change;
(iv) provide that in respect of the interests of the Additional
Assureds, the Insurances shall not be invalidated by any act,
neglect, omission, misrepresentation or non-disclosure on the
part of the Lessee or any other party other than the
Additional Assured seeking to make a claim thereunder, and
shall insure each Additional Assured regardless of any breach
or violation of any warranties, declarations or conditions
contained in such policies by the Lessee or any other party
other than the Additional Assured seeking to make a claim
thereunder;
(v) provide that the Additional Assureds shall have no
responsibility for premium and insurers shall waive any right
of set-off or counterclaim against the Additional Assureds
except in respect of outstanding premium in respect of the
Aircraft, Engines and Parts subject of a claim;
(vi) not provide for any deductible or self insurance other than
the deductibles allowed under the terms of Article 11.1 above;
(vii) be primary without right of contribution from any other
insurance carried by Lessor, Lessee or any other person; and
(viii) be denominated in Dollars.
11.3 If required by the first paragraph of Article 11.1, the re-insurance
policies shall:
(a) provide that cover shall be identical to the cover provided by the
original insurances and be subject to the same terms and conditions
as the original insurances;
(b) provide that so far as the respective interests of the Additional
Assureds are concerned the
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reinsurance shall not be invalidated by any act, neglect, omission,
misrepresentation or nondisclosure on the part of the reinsured
party;
(C) confirm the insurers' agreement to the provision of paragraph (d)
below;
(d) include a "cut-through" clause in the following terms or in such
other terms as may be satisfactory to Lessor:
"In respect of All Risks Aircraft Hull insurance, Aircraft Hull War
Risk and Allied Perils insurance as described in Article 11.1(a) and
(b) above and All Risks insurance on any Engine and Parts as
described in Article 11.1(d) above, the reinsurers and the reassured
hereby agree that in the event of any claim arising under the
relevant reinsurances the reinsurer shall in lieu of payment to the
reassured, its successors in interest and assigns pay to the Loss
Payee specified in the primary insurances all sums payable under or
in connection with such reinsurances by virtue of any reinsured loss
of, or damage to, the Aircraft, Engines and Parts, without any
deduction or deductions whatsoever, other than any outstanding
premium in respect of the Aircraft, Engines or Parts the subject of
the claim, it being understood and agreed that any such payment by
the reinsurers shall fully discharge and release the reinsurers from
any and all further liability in connection therewith.
In respect of Comprehensive Airline Liability insurance as described
in Article 11.1(c) above, the reinsurers and reassured hereby agree
that in the event of any claim arising under the relevant
reinsurances, the reinsurers shall in lieu of payment to the
reassured, its successors in interest and assigns pay to the person
or party who has sustained the relevant loss (or as reimbursement of
any payment made by any Additional Assureds) all sums payable under
such reinsurances by virtue of such reinsured loss, without any
deduction or deductions whatsoever, it being understood and agreed
that any such payment by the reinsurer shall fully discharge and
release the reinsurers from any and all further liability in
connection therewith"; and
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(e) provide that the reinsurers and reassured agree that in the event
that the reassured, its successors in interest and assigns shall at
any time be or become insolvent or suspend business or file a
petition in bankruptcy or be adjudicated insolvent or bankrupt or
admit in writing its inability to pay its debts as they become due,
or make a general assignment for the benefit of creditors or that a
receiver or liquidator or assignee or trustee or state commissioner
of insurance be appointed in respect of the reassured its successors
in interest or assigns or any substantial part of its property for
the purpose of liquidation on account of insolvency, then the
reinsurers, in lieu of payment to the reassured, its successors in
interest or assigns, shall pay upon demand that portion of any loss
due to the party entitled thereto under the terms of the original
insurance for which such reinsurers would under the terms of the
reinsurance be liable to pay the reassured, its successors in
interest or assigns, less any amounts already paid, it being
understood and agreed that any such direct payment by reinsurers
shall fully discharge and release the reinsurers from any and all
further liability for such payment made.
11.4 At least fifteen (15) Business Days prior to the Expected Delivery Date
or, in the event any Parts or Engines are delivered to Lessee prior to
such date, at least fifteen (15) Business Days prior to the date of
delivery of such Parts or Engines, and thereafter during the Term, at
least one month prior to the renewal date of any Insurance required or
maintained by Lessee under Article 11.1 but in no event less than once in
each 12 month period, Lessee shall furnish or cause to be furnished to
Lessor by the insurer or insurance broker and the reinsurance broker
1) a certificate of insurance describing in detail the insurance then
carried and maintained, and certifying that such insurance complies
with the terms of this Agreement, including:
(i) confirmation that the insurance/reinsurance has been placed
with the insurers/reinsurers required (giving the name of such
insurers/reinsurers), the insured/reinsured amount and the
period of the policy and
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(ii) confirmation that all premiums due to insurers/reinsurers have
been paid,
and
2) a letter of undertaking from Lessee's brokers and, if required, from
the reinsurance brokers.
Such certificate(s) of insurance and letter(s) of undertaking shall
be substantially in the form as set out in Appendix H and Appendix
I, respectively.
In the event that Lessee shall fail to effect, maintain or cause to be
effected or maintained, insurance as required by this Article 11, Lessor,
Head Lessor or the Bank may at its option, but without any obligation to
do so, and without prejudice to Lessor's, Head Lessor's and the Bank's
other rights or remedies hereunder, maintain such insurance or provide
such or a similar insurance, and, in such event, Lessee shall, upon
demand, promptly reimburse to Lessor, Head Lessor or the Bank the cost
thereof, including interest thereon at the rate referred to in paragraph 6
of Appendix D.
11.5 In the event of any damage to the Aircraft, Engines or Parts during the
Term not constituting a Casualty Occurrence, Lessee shall, if so consented
to by Lessor (such consent not to be unreasonably withheld), repair, or
cause the same to be repaired by an Authorized Maintenance Performer at
its sole cost and expense. Except as otherwise provided in Section 11.2(a)
(ii), Lessor and Lessee agree that all insurance proceeds payable in
connection with any such damage shall be payable directly to Lessor. In
such event any insurance proceeds received by Lessor shall be applied to
reimburse Lessee for such cost and expense. Any excess remaining shall,
unless a Default shall have occurred and be continuing, be paid over to
Lessee.
11.6 Not later than ten (10) days, prior to the Expected Delivery Date, Lessee
shall deliver to Lessor an irrevocable power of attorney, in form and
substance acceptable to Lessor, authorizing Lessor to initiate, process
and settle any insurance claim with respect to the Aircraft, Engines and
Parts together with an acknowledgment thereof from the insurers.
11.7 When used in this Article 11, the expression Additional Assured(s)
denotes:
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(a) in relation to those insurances referred to in Article 11.2(a),
those persons referred to in subparagraph (i) of Article 11.2(a);
and
(b) in relation to those insurances referred to in Article 11.2(b),
those persons referred to in subparagraph (i) of Article 11.2(b).
12. ASSIGNMENT AND SUBLETTING
12.1 Lessee shall not assign any of its rights or obligations or delegate any
of its duties under this Agreement and, except as permitted by Article 5.1
above, Lessee shall not sublet or otherwise part with possession of the
Aircraft or any Part thereof unless previously approved by Lessor in
writing (such consent not to be unreasonably withheld).
12.2 This Agreement, the Aircraft and Lessor's interest in each thereof is
freely assignable and alienable by Lessor upon written notice to Lessee in
accordance with Article 12.3, provided, however, that so long as the
Aircraft shall be leased to Lessee under this Lease, Lessor will not sell,
assign, convey or otherwise transfer absolutely (and not for security) any
of its right, title, or interest in and to this Agreement or the Aircraft
to any person unless Lessor and the proposed transferee (the "Transferee")
have complied with the following conditions:
(i) Lessor shall give Lessee written notice of such transfer
at least 3 Business Days before the date of such transfer,
specifying the name and address of the proposed Transferee;
(ii) the Transferee shall not be an airline or a commercial
air carrier or person controlling, controlled by or under common
control with an airline or a commercial air carrier which is in
direct competition with Lessee in the United States;
(iii) the Transferee shall qualify as a "citizen of the United
States" within the meaning of Section 101(16) of the Federal
Aviation Act by a Voting Trust Agreement or otherwise; and
(iv) on the transfer date the Lessor and the Transferee shall
enter into an agreement or
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agreements in which the Transferee confirms that it shall be deemed
a party to this Lease and agrees to be bound by all the terms of,
and to undertake all of the obligations of , the Lessor contained in
this Agreement and Lessee shall receive an opinion of counsel to the
Transferee stating, with the customary assumptions and exceptions,
that such agreement or agreements has been duly authorized, executed
and delivered and constitute the legal, valid and binding
obligations of the Transferee enforceable in accordance with their
terms and that the entry into such agreement(s) does not violate any
laws or agreements applicable to such Transferee.
The agreements, covenants, obligations and liabilities contained herein,
including but not limited to all obligations to pay Rent and indemnify
Lessor, are made for the benefit of Lessor, Beneficiary, any assignee
including the Head Lessor and/or the Bank as security assignee, and their
respective successors and assigns, notwithstanding the possibility that
any such person was not originally a party to this Agreement or may, at
the time any enforcement is sought, no longer be a party to this
Agreement. Lessee shall comply with all reasonable requests of Lessor, its
successors and assigns respecting the assignment and Lessee's
acknowledgement of the assignee as Lessor. Notwithstanding anything
contained in this paragraph to the contrary, no assignment of Lessor's
interest in this Agreement or the Aircraft or Beneficiary's interest in
the Trust Estate shall alter the terms of this Agreement in so far as the
costs to Lessee of the performance of its obligations to pay Rent, Reserve
Rate, and Deposits hereunder and, except as otherwise expressly provided
in this Agreement, the rights and liabilities of Lessee under this
Agreement are concerned. Lessee's rights under this Agreement shall not be
subject or subordinate to any Security Assignment or Mortgage executed by
Lessor or Beneficiary (which Security Assignment or Mortgage shall be
subject to this Agreement)
12.3 It is acknowledged and agreed that:
(a) Lessor has the right to assign all of its right, title and interest
in and to this Agreement and the Aircraft to the Head Lessor and/or
the Bank. In order to comply with its obligations in relation
thereto, Lessor will, upon such
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assignment, give Lessee a notice of assignment and it is agreed that
Lessee shall forthwith acknowledge the same by executing and
delivering to Lessor on behalf of Head Lessor and/or the Bank a
consent to assignment in form and substance reasonably acceptable to
Head Lessor and/or the Bank;
(b) Lessor may be required by Head Lessor and/or the Bank to assign to
Head Lessor and/or the Bank all of its rights, title and interest in
and to the Insurances (other than liability insurances). In order to
comply with its obligations in relation thereto, Lessor, upon
assignment of this Agreement pursuant to Article 12.3 (a), shall
give the insurers a notice of assignment of Insurances and the
Lessee shall procure that such insurers forthwith acknowledge the
same by executing and delivering to Lessor an acknowledgement in
form and substance acceptable to Head Lessor and/or the Bank;
(c) Lessor may from time to time require to amend, modify or replace the
security arrangements in respect of the financing or refinancing of
the Aircraft and Lessee agrees to cooperate with Lessor in
connection therewith and, in particular (but without limiting the
generality of the foregoing), to change the plates provided for in
Article 4.3 and to execute and deliver such other or further
acknowledgments of assignment or other documents and to do such
other things as Lessor may reasonably require to be executed and
delivered;
(d) Upon any financing or refinancing of the Aircraft as contemplated by
this Article 12.3, Lessee will promptly and duly execute and deliver
to Lessor, Head Lessor or the Bank such other documents and
assurances and take such further action as may from time to time be
reasonably requested in order more effectively to carry out the
intent and purpose of this Agreement, the Mortgage and the Security
Assignment. Lessee will procure on request of Lessor that the
independent counsel will confirm to the Head Lessor and the Bank
that the Head Lessor and the Bank may rely on the terms of the
opinion as set out in Appendix G as if the Head Lessor and the Bank
were each addressees of such opinion; and
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(e) Title to the Aircraft may be transferred by Lessor to the Head
Lessor to be indicated by Lessor or Beneficiary's interest in the
Trust Estate may be transferred by Beneficiary, in either case for
the purpose of enabling Lessor to raise finance in relation to the
Aircraft. In such event either a lease agreement shall be executed
in respect of the Aircraft between the Head Lessor and Lessor ("Head
Lease") in order to enable Lessor to continue to lease the Aircraft
to Lessee in accordance with this Agreement or Lessor may assign all
or part of its rights, title and interest in and to this Agreement
and the Aircraft to Head Lessor pursuant to Article 12.2 or
Beneficiary may assign all of its right, title and interest in and
to the Trust Estate and Lessee agrees to cooperate with Lessor in
connection therewith and, in particular (but without limiting the
generality of the foregoing), to cooperate in the execution of any
documents, agreements and amendments to this Agreement that are
necessary in connection with such Head Lease or such assignment and
to do such other things as Lessor may require to be executed and
delivered so long as any such amendments to this Agreement do not
materially adversely affect Lessee.
(f) Lessee shall not be liable to (1) any Transferee or (2) any
assignee, purchaser, or transferee of the beneficial interest of the
Trust Estate (a "Beneficiary Transferee") for any payment of Taxes
pursuant to this Agreement in excess of the amount that would have
been payable to the Lessor or the Beneficiary originally party
hereto, as the case may be, if that party had remained as the Lessor
or the Beneficiary, respectively.
13. DISCLAIMER, REPRESENTATIONS AND WARRANTIES
13.1 THE AIRCRAFT IS LEASED IN "AS-IS, WHERE-IS" CONDITION AND LESSEE EXPRESSLY
AGREES AND ACKNOWLEDGES THAT, SAVE AS EXPRESSLY STATED IN THIS AGREEMENT,
LESSOR WILL HAVE NO LIABILITY IN RELATION TO, AND LESSOR HAS NOT AND WILL
NOT BE DEEMED TO HAVE MADE OR GIVEN ANY WARRANTIES, GUARANTEES OR
REPRESENTATIONS, EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE, WITH
RESPECT TO, THE AIRCRAFT LEASED HEREUNDER INCLUDING BUT NOT LIMITED TO (1)
ANY WARRANTY AS TO THE AIRWORTHINESS, CONDITION, DESIGN, MERCHANTABILITY
OR FITNESS FOR USE OR
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OPERATION, (2) ANY WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF
DEALING OR USAGE OF TRADE, (3) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR
REMEDY IN TORT, WHETHER OR NOT ARISING FROM LESSOR'S NEGLIGENCE, ACTUAL OR
IMPUTED, AND (4) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR
LOSS OF OR DAMAGE TO THE AIRCRAFT, FOR LOSS OF USE, REVENUE OR PROFIT WITH
RESPECT TO THE AIRCRAFT, FOR ANY LIABILITY OF LESSEE TO ANY THIRD PARTY,
OR FOR ANY OTHER DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES; AND ALL SUCH
WARRANTIES, GUARANTEES, REPRESENTATIONS, OBLIGATIONS, LIABILITIES, RIGHTS,
CLAIMS OR REMEDIES, EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, ARE
EXPRESSLY EXCLUDED.
Nothing in this Agreement shall afford Lessor or any Indemnitee any wider
or greater exclusion of liability for death or bodily injury than would be
permitted by the Governing Law.
This paragraph shall not be modified except by a written agreement signed
on behalf of Lessor and Lessee by their respective duly authorized
representatives.
13.2 Lessor and Lessee agree that this Article 13 has been the subject of
discussion and negotiation and is fully understood by the parties, and
that the amount of the Rent and other mutual agreements of the parties set
forth in this Agreement were arrived at in consideration of the provisions
of this Article 13 specifically including the waiver by Lessee set forth
in Article 13.1.
13.3 So long as no Event of Default has occurred and is continuing Lessor
agrees to assign or otherwise make available to Lessee for the duration of
the Term such rights as Lessor may have under any warranty, express or
implied, with respect to the Aircraft made by the Manufacturer of the
Aircraft, any subcontractor or supplier thereof, or any other seller
thereof, to the extent that the same may be assigned or otherwise made
available to Lessee and without warranty by Lessor as to enforceability of
any of the rights so assigned.
To the extent that the same may not be assigned or otherwise made
available to Lessee, Lessor agrees to exert its reasonable efforts, at
Lessee's expense, to enforce such rights as Lessor may have with respect
thereto for the benefit of Lessee; provided however, that upon an Event of
Default all such rights shall immediately revert to Lessor including all
claims
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thereunder, whether or not perfected, unless such Event of Default has
forthwith been remedied by Lessee.
13.4 Lessee represents and warrants that:
(a) Lessee is a corporation organized and existing in good standing, in
accordance with the Laws of the State of Incorporation, and has the
corporate power and authority to carry on its business as presently
conducted and to perform its obligations under this Agreement, is an
"air carrier" within the meaning of the Federal Aviation Act
operating under a certificate of convenience and necessity issued
pursuant to Section 401 of such Act and is the holder of all
necessary licenses issued by all Government Entities having
jurisdiction to authorize or permit Lessee to engage in air
transportation and to perform and comply with its obligations
hereunder;
(b) This Agreement has been duly authorized by all necessary corporate
action on the part of Lessee, and neither the execution and delivery
nor the consummation of the transactions contemplated hereby nor
compliance by Lessee with the provisions of this Agreement will
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;
(c) The execution and delivery by Lessee of this Agreement, and all of
the transactions by Lessee contemplated hereby, have received, and
Lessee has complied with, every necessary consent, approval, order,
or authorization of, or registration with, or the giving of prior
notice to, any Government Entity having jurisdiction with respect to
the execution and delivery of this Agreement or the validity and
enforceability of this Agreement or the satisfaction of all monetary
and other obligations hereunder;
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(d) This Agreement has been duly entered into and delivered by Lessee
and constitutes the valid, legal and binding obligations of Lessee,
enforceable in accordance with their terms subject to principles of
equity, laws relating to bankruptcy, insolvency or liquidation or
any other laws or legal procedures generally affecting the
enforcement of creditor's rights or the rights of contracting
parties;
(e) It is not necessary or advisable under the Laws of the State of
Registration in order to ensure the validity, effectiveness and
enforceability of this Agreement, the Mortgage or the Security
Assignment or to protect the property rights of Lessor, Beneficiary,
Head Lessor or the Bank in the Aircraft and under the Mortgage and
Security Assignment that this Agreement, the Mortgage, the Security
Assignment or any other instrument relating thereto be filed,
registered or recorded or that any other action be taken under the
Laws of the State of Incorporation and the State of Registration to
perfect the property rights of Lessor, Head Lessor and the Bank in
the Aircraft other than the filing of all such instruments with the
Air Authority, the filing of UCC-l financing statements in relevant
jurisdictions, and the Mortgage and Security Assignment will have
priority in all respects over the claims of all creditors of Lessee
in or against the Aircraft, except for Permitted Liens;
(f) Under the Laws of the State of Incorporation and the State of
Registration Lessee will not be required to make any deduction or
withholding from any payment it may make under this Agreement. There
is no withholding or other tax to be deducted from any payment to be
made by Lessee under this Agreement;
(g) There are no suits or legal proceedings (including any
administrative proceeding) pending or threatened before any court or
administrative agency against Lessee which, if adversely determined,
would have a material adverse effect upon its financial condition or
business or its ability to perform its obligations hereunder;
(h) Each of the Equity Investors and Lessee has performed all of its
respective obligations under
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the Equity Commitment required to be performed and the Equity
Commitment remains in full force and effect and has not been
modified, supplemented or amended except as has been disclosed in
writing to Lessor;
(i) There has been no material adverse change in the financial position
of Lessee or the consolidated financial position of Lessee and its
subsidiaries from that set forth in the financial statements last
furnished pursuant to Article 6.4 and neither Lessee nor any of its
subsidiaries have any significant liabilities (contingent or
otherwise) which are not disclosed by, or reserved against in such
financial statements;
(j) The chief executive office (as such term is used in Sections 9-103
and 9-401 of the Uniform Commercial Code) of Lessee is located at
Chicago, Illinois, and Lessee agrees to give at least 30 days' prior
notice to Lessor of any relocation of said chief executive office or
place where such records are kept and of any change in its name.
13.5 The representations and warranties in Article 13.4 (other than in clauses
(f), (g) and (i) shall be deemed to be repeated by Lessee on and as of
each Rent Date as if made with reference to the facts and circumstances
existing on each such date.
13.6 Lessor represents, warrants and covenants that:
(a) Lessor is a national banking association duly organized and validly
existing in good standing under the laws of the United States of
America, qualifies a. a "citizen of the United States" within the
meaning of Section 101(16) of the Federal Aviation Act, and has the
corporate power and authority to carry on its business as presently
conducted and to perform its obligations under this Agreement; if at
any time Lessor shall have actual knowledge that it has ceased to
qualify as such a citizen, it will, if such citizenship is then
necessary to maintain the eligibility of the Aircraft for United
States registration, take such action as may be necessary to
maintain such United States registration.
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(b) This Agreement has been duly authorized by all necessary corporate
action on the part of Lessor, has been duly entered into and
delivered by Lessor in accordance with the Trust Agreement and
constitutes the valid, legal and binding obligations of Lessor,
enforceable in accordance with their respective terms subject to
principles of equity, laws relating to bankruptcy, insolvency or
liquidation or any other laws or legal procedures generally
affecting the enforcement of creditor's rights or the rights of
contracting parties;
(c) Neither the execution and delivery nor the consummation of the
transactions contemplated hereby nor compliance by Lessor with the
provisions of this Agreement will result in any breach of, or
constitute any default under, any indenture or any 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;
and
(d) Except for the Ferry Permits described in Article 3.5, the
registration of the Aircraft and the issuance of the licenses
described in Article 4.1, neither the execution and delivery nor the
consummation of the transactions contemplated hereby nor compliance
by Lessor with the provisions of this Agreement requires the consent
or approval of, the giving of notice to, or the registration with,
or the taking of any other action in respect of any Government
Entity.
The representations and warranties contained in clauses (a), (b) and (c)
of this Article 13.6 are made by Lessor in its individual capacity.
13.7 Lessor undertakes that, so long as no Event of Default shall have occurred
and be continuing, Lessor will not interfere with the peaceful and quiet
use and enjoyment of the Aircraft by Lessee in accordance with the terms
of this Agreement.
14. COVENANTS OF LESSEE
14.1 Lessee hereby covenants with Lessor that from the Delivery Date and during
the Term and until redelivery
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of the Aircraft to Lessor in accordance with Article 16 it will:
(a) remain in and continue to operate as an air carrier holding a valid
certificate of convenience and necessity issued pursuant to Section
401 of the Federal Aviation Act to preserve its corporate existence,
to satisfy its debts and obligations as they fall due;
(b) comply with all Laws and regulations for the time being in force in
the State of Incorporation, the State of Registration and in any
country to, from, in or over which the Aircraft is flown;
(c) (i) at its own expense from time to time do and perform such other
and further acts and execute and deliver any and all further
instruments as may be required by Law (in the United States but not
in any Jurisdiction outside the United States unless directly
required due to Lessee's operation), and (ii) at Lessor's expense
(insofar as not covered in Article 8.2(a)) from time to time do and
perform such other and further acts and execute and deliver any and
all further instruments as may be reasonably requested by Lessor to
establish, maintain and protect the respective rights and remedies
of Lessor, Head Lessor and the Bank and to carry out and give effect
to the intents and purposes of this Agreement and the parties;
(d) notify Lessor immediately of the occurrence of any Default;
(e) obtain and maintain all necessary government and other certificates,
consents, licenses, permits and authorizations and take all action
which may be necessary for the continued due performance of Lessee's
obligations under this Agreement and for the use and operation of
the Aircraft;
(f) not do or permit to be done any act or thing which might impair the
respective interests of Lessor, Head Lessor and the Bank in the
Aircraft, or the registration of the Aircraft;
(g) notify Lessor as soon as practicable after becoming aware of any
loss, theft, damage or destruction of or to the Aircraft or any part
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thereof if the potential cost of repair or replacement may exceed
$100,000.00 (Dollars One Hundred Thousand);
(h) not do anything which may subject the Aircraft or any part thereof
to penalty, forfeiture, seizure, arrest, impounding, detention,
confiscation, taking in execution, appropriation or destruction nor
abandon the Aircraft or any part thereof;
(i) not represent or hold out Lessor, Head Lessor or the Bank as
carrying goods or passengers on the Aircraft or as being in any way
connected or associated with any operation or carriage (whether for
hire or reward or gratuitously) which Lessee may undertake;
(j) not pledge the credit of Lessor, Head Lessor or the Bank for any
maintenance, overhauls, replacements, repairs or modifications to
the Aircraft;
(k) keep Lessor and the insurers, as referred to in Article 11, informed
as to current serial numbers of the Engines and any engine installed
on the Aircraft in accordance with the provisions of this Agreement,
and the location of any Engine for the time being not installed on
the Aircraft; and shall notify such insurers of any renewal,
replacement or substitution, or the location of any Engine not
installed on the Aircraft;
(l) discharge all fees, charges and expenses payable to any third party
in relation to the use or operation of the Aircraft or any premises
where the Aircraft is situated;
(m) in the event of any forfeiture, impounding or detention of the
Aircraft or any part thereof not constituting a Casualty Occurrence,
use all reasonable endeavors to procure the immediate release
therefrom of the same;
(n) keep accurate, complete and current records of all flights made by
the Aircraft. Such records shall be kept in such manner as the Air
Authority may from time to time require and in accordance with the
Approved Maintenance Program. Lessee shall permit Lessor or its
authorized representatives to
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examine such records upon giving reasonable notice not involving
delay to the Aircraft;
(o) on request, provide Lessor with evidence satisfactory to Lessor that
all Taxes and charges incurred by Lessee with respect to the
Aircraft, including without limitation any payments due to any
relevant air traffic control authorities and airport authorities,
have been paid and discharged in full;
(p) not consolidate with, or merge into, any other corporation, convey,
transfer or lease substantially all of its assets as an entirety to
any person or acquire the shares of or make any investment in any
firm, corporation or person without the prior written consent of
Lessor (such consent not to be unreasonably withheld) and the
execution and delivery to Lessor of such agreements, certificates
and legal opinions as Lessor may request with respect thereto; and
(q) prior to the payment in full of all deferred amounts of Rent,
Reserve Rate or Deposits under this Agreement and all Other Aircraft
Agreements (such event being referred to as the "Enumerated
Milestone"), obtain the prior written consent of Lessor (such
consent not to be unreasonably withheld) to any commitment of Lessee
to any person where such commitment has a value in excess of
$500,000.00 (Dollars Five Hundred Thousand)
15. DEFAULT BY LESSEE
15.1 Each of the following events shall constitute an "Event of Default":
(a) if default shall be made by Lessee in the making of any Rent,
Reserve Rate and/or Agreed Value payment when due and payable under
this Agreement or of any other Supplemental Rent payment within 5
Business Days after the date when such other Supplemental Rent is
due and payable under this Agreement; or
(b) (i) if default shall be made by Lessee at any time in the
procurement or maintenance of any insurance coverage prescribed
herein or (ii) any insurance
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which may be maintained by Lessor, Head Lessor or the Bank under
Article 11.4 is cancelled or terminated or notice of cancellation is
given; or
(c) if default shall be made by Lessee in the observance or performance
of any of the other obligations of Lessee contained in this
Agreement and, if such default is in the opinion of Lessor capable
of remedy, such default shall continue for a period of fifteen (15)
Business Days after notice from Lessor to Lessee specifying the
default and requiring that the same be remedied; or
(d) if any representation or warranty made (or deemed to be repeated) by
Lessee in or pursuant to this Agreement or in any document or
certificate or statement referred to in or delivered under this
Agreement is or proves to have been incorrect in any material
respect when made or deemed to be repeated and such incorrectness,
if capable of being cured, shall continue for fifteen (15) Business
Days after notice from Lessor specifying such incorrectness; or
(e) if any borrowed money of Lessee or any of its subsidiaries is not
paid when due, or by reason of breach or default under the terms of
any instrument evidencing or guaranteeing the same on the part of
Lessee or any of its subsidiaries any borrowed money of Lessee or
any of its subsidiaries becomes due or capable of being declared due
prior to the date when it would otherwise have become due, or the
security for any such borrowed money or any guarantee in respect
thereof becomes enforceable, or Lessee is in default under any
lease, hire-purchase, conditional sale or credit sale agreement
(including without limitation any other agreement between Lessor,
its associates, subsidiaries or affiliates and Lessee) for equipment
having a casualty value in excess of $100,000; or
(f) if an encumbrancer takes possession or a receiver, administrator,
administrative receiver, trustee, liquidator or similar officer is
appointed of the whole or any part of the assets, rights or revenues
of Lessee or any of its subsidiaries or a distress, execution,
sequestration or other process is levied or enforced upon or sued
out
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against any of the assets, rights or revenues of Lessee or any of
its subsidiaries and is not discharged within fourteen days, or
Lessee applies for or consents to the appointment of a receiver,
administrator, administrative receiver, trustee, liquidator or
similar officer for it or for all or any part of its assets, rights
or revenues; or
(g) if Lessee or any of its subsidiaries suspends payment of its debts,
or is unable or admits its inability to pay its debts as they fall
due, or shall be adjudicated or found, or becomes, bankrupt or
insolvent, or proposes or enters into any composition or other
arrangement for the benefit of its creditors generally, or Lessee or
any of its subsidiaries shall, by voluntary petition, answer or
consent, seek relief under the provisions of any bankruptcy,
insolvency or other similar law providing for the reorganization,
liquidation, administration, dissolution or winding-up of
corporations, or providing for an agreement, composition, extension
or adjustment with its creditors; or
(h) if a petition against Lessee in a proceeding under applicable
bankruptcy or other insolvency laws shall be filed and shall not be
withdrawn or dismissed within 30 days thereafter, or if any order
shall be made by any competent court or resolution passed by Lessee
or any of its subsidiaries or their respective board of management
or supervisory board, whichever is competent to pass such resolution
for the winding-up or dissolution of Lessee or any of its
subsidiaries or for the appointment of a liquidator, trustee or
conservator, save for winding-up or dissolution for the purposes of
amalgamation or reorganization (not involving or arising out of
insolvency) the terms of which shall have received the prior written
approval of Lessor; or
(i) if Lessee or any of its subsidiaries disposes of all or a material
part of its assets, whether by one or a series of transactions,
related or not, other than for the purpose of a reconstruction or
amalgamation the terms of which have received the previous consent
in writing of Lessor; or
(j) if any action shall be taken by Lessee which shall impair the title
or ownership of Lessor (or Head
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Lessor), or the Security Interest of the Bank, in the Aircraft or
this Agreement is or becomes wholly or partly invalid, ineffective
or unenforceable by reason of any act or omission of Lessee; or
(k) if any consent, authorization, license, certificate or approval of
or registration with or declaration to any Government Entity in
connection with this Agreement including, without limitation:
(i) any Certificate of Public Convenience and Necessity; or
(ii) required by Lessee or as a condition precedent required by
Lessor pursuant to Article 2.3 to authorize, or in connection
with, the execution, delivery, validity, enforceability or
admissibility in evidence of this Agreement or the performance
by Lessee of its obligations under this Agreement; or
(iii) the registration of the Aircraft; or
(iv) any airline license or air transport license;
is changed such that it materially impairs the ability of Lessee to
perform its obligations hereunder, or is withheld, or is revoked,
suspended, cancelled, withdrawn, terminated or not renewed, or
otherwise ceases to be in full force; or
(m) if any circumstances analogous to any of the circumstances described
in paragraphs (f), (g) or (h) above arise under the Law of any
applicable jurisdiction; or
(n) if an event of default (however defined) occurs under any Operative
Document or any Other Aircraft Agreement which event permits
acceleration or termination; or
(o) any advance pursuant to the Equity Commitment has not been made when
due; or
(p) the Enumerated Milestone as defined in Article 14.1(q) is not
fulfilled by the last date on which
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a deferral is to be paid and such failure continues for a period of
five (5) days; or
(q) an event of default by or relating to Lessee shall occur under, and
as a result a termination shall occur under, any agreements for
gates, hangars or other facilities at Midway Airport, Chicago,
Illinois or any other airport that are material to Lessee's
operations including any agreements relating to the provision by
American Airlines, Inc. (or any affiliate) of services to Lessee.
15.2 If one or more Events of Default shall have occurred and be continuing, at
Lessor's option and subject to any mandatory requirement of Law:
(a) For Lessee's account Lessor may do anything that may reasonably be
required to cure any Event of Default and recover from Lessee all
costs including legal expenses incurred in so doing, and/or
(b) Lessor may accept such Event of Default as a repudiation of this
Agreement and terminate the lease of the Aircraft to Lessee
hereunder by:
(i) serving notice of such termination on Lessee specifying the
occurrence giving rise to such Event of Default or Events of
Default, provided that such notice shall be deemed to have
been served without the necessity of actual service upon the
occurrence of any Event of Default described in paragraphs
(f), (g) and (h) of Article 15.1.
Thereafter (if the Term shall have commenced) Lessee shall
redeliver possession of the Aircraft to Lessor at Schiphol
Airport, The Netherlands (or such other location as Lessor may
require); or (at Lessor's election)
(ii) taking possession of the Aircraft for which purpose Lessor by
its servants or agents may enter upon Lessee's premises where
the Aircraft may be located, or cause the same to be
redelivered to Lessor at Schiphol Airport, The Netherlands,
(or such other location as Lessor may require Lessee to
assemble and deliver the Aircraft to Lessor, and Lessor shall
be entitled to act as attorney for
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Lessee in causing such redelivery and shall have all the
powers and authorizations legally necessary for taking such
action. In the event of exercise by Lessor of its powers under
this sub-paragraph (ii) such termination shall be deemed to
take effect on such taking of possession by Lessor or such
redelivery of the Aircraft to Lessor at the said airport;
and/or
(c) Lessor may proceed by appropriate court action or actions to enforce
performance of Article 15.2(b) or to recover damage. for the breach
thereof; and/or
(d) all rights of Lessee hereunder shall, in the event the Term shall be
terminated pursuant to Article 15.2(b) henceforth absolutely cease
and terminate but without prejudice to Lessee's obligations under
this Agreement all of which shall continue in full force and effect
except for obligations to pay Rent and Reserve Rate after the
Aircraft is returned to Lessor, and is in the condition required by
Article 16; and Lessee shall take all steps necessary to effect
deregistration of the Aircraft in the State of Registration and
Lessor shall be entitled to sell or otherwise deal with the Aircraft
as if this Agreement had never been made. Without prejudice to the
foregoing, Lessee hereby appoints Lessor as its attorney to do any
act or thing required in connection with such deregistration of the
Aircraft.
15.3 If an Event of Default occurs, Lessor shall have the right to demand that:
(a) Lessee pay all amounts which may be then due and unpaid hereunder,
and
(b) at Lessor's option whether or not Lessor shall have exercised, or
shall thereafter at any time exercise, any of its rights under
Article 15.2, by thirty (30) days written notice to Lessee from
Lessor specifying a payment date, Lessee pay Lessor, and Lessee
shall pay Lessor, on the payment date specified in such notice, as
liquidated damages for loss of bargain and not as a penalty (in lieu
of the Rent due for the Aircraft covered by such notice for the
period
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commencing after the date specified for payment in such notice), any
unpaid Rent for the Aircraft (prorated in the case of Rent on a
daily basis) to and including the payment date specified in such
notice, plus the amount, if any, by which the aggregate Rent for the
Aircraft for the remainder of the Term for the Aircraft, discounted
periodically (equal to installment frequency) to present worth at
the interest rate of six percent (6%) per annum, exceeds the Fair
Market Rental Value of the Aircraft for the remainder of the Term,
after discounting such Fair Market Rental Value periodically (equal
to installment frequency) to present worth as of the payment date
specified in such notice at the interest rate of six percent (6%)
per annum.
Lessee shall fully indemnify Lessor on its own behalf and on behalf of the Head
Lessor and the Bank on demand against any loss (including loss of profit),
damage, expense (including without limitation attorneys' fees), cost or
liability which Lessor, Head Lessor or the Bank may sustain or incur as a
consequence of the occurrence of any Event of Default and/or termination of the
letting of the Aircraft pursuant to this Agreement, including but not limited to
(i) any loss of profit suffered by Lessor and/or the Head Lessor because of
Lessor's inability to place the Aircraft on lease with another lessee on terms
as favorable to Lessor as the terms of this Agreement or because whatever use,
if any, to which Lessor is able to put the Aircraft upon its return to Lessor,
or the funds arising upon a sale or other disposal thereof, is not as profitable
to Lessor as letting the Aircraft in accordance with the terms of this Agreement
would have been to the extent the foregoing loss of profit shall not be
recovered under Article 15.3(b), (ii) any amount of interest, fees or other sums
whatsoever paid or payable on account of funds borrowed in order to carry any
unpaid amount, (iii) any loss, premium, penalty or expense which may be incurred
repaying funds raised to finance the Aircraft or in unwinding any swap, forward
interest rate agreement or other financial instrument relating in whole to
Lessor's financing of the Aircraft and/or the Aircraft under the Other Aircraft
Agreement, and (iv) any loss, cost, expense or liability sustained or incurred
by Lessor owing to Lessee's failure to redeliver the Aircraft in the condition
required by this Agreement.
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15.4 No remedy referred to in this Article 15 is exclusive, but each remedy
shall be cumulative and in addition to any other remedy referred to herein
or otherwise available to Lessor. The exercise by Lessor of any of its
remedies hereunder shall not preclude or estop the exercise or beginning
of exercise by Lessor of any or more of such other remedies.
No express or implied waiver by Lessor of any Event of Default, or failure
or delay of Lessor in exercising any right hereunder shall operate as
waiver thereof unless an express waiver is executed and delivered to
Lessee
15.5 Prior to the Expected Delivery Date Lessee shall deliver to Lessor a duly
authorized consent, undated and in form and substance acceptable to
Lessor, addressed to the Federal Aviation Administration consenting to the
release of this Agreement in connection with the termination of this
Agreement pursuant to the terms hereof and, if so requested by Lessor, the
deregistration of the Aircraft from the register of civil aviation in the
State of Registration.
16. RETURN OF AIRCRAFT
16.1 On the Expiry Date or upon earlier termination of the Term (unless a
Casualty Occurrence shall have occurred with respect to the Aircraft),
Lessee shall, at its own expense, redeliver the Aircraft to Lessor at the
Re-Delivery Location or such other airport as is mutually acceptable to
the parties, in a condition complying with the provisions of Appendix E,
free and clear of all liens and encumbrances (including Permitted Liens
other than Lessor Liens) and thereupon cause the Aircraft to be removed
from the Register of Civil Aircraft in the State of Registration and
Lessee shall return the Aircraft to Lessor together with the Aircraft
Documents and all equipment and records supplied pursuant to this
Agreement when the Aircraft was delivered to Lessee hereunder.
16.2 Immediately prior to such redelivery of the Aircraft, Lessee, at its own
expense, shall make the Aircraft, Aircraft Documents and other records
available to Lessor for inspection ("Final Inspection") in order to verify
that the condition of the Aircraft complies with the provisions of this
Agreement. Such inspection
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shall not unreasonably interfere with the operation of the Aircraft. The
period will be long enough for the Final Inspection to permit the conduct
by Lessor of the following:
(a) Inspection of the Aircraft Documents,
(b) Inspection of the Aircraft structure and Parts;
(c) Inspection of the Engines and Auxiliary Power Unit ("A.P.U."),
including without limitation, a boroscope inspection or any other
equivalent inspection method supported by Rolls Royce, inspection of
the compressor and turbine area, and, if reasonably requested based
on evidence that it is required, the Engine and A.P.U. condition
runs confirming release of each Engine and A.P.U for its remaining
operational life;
(d) A one-hour to two-hour test flight with Lessor's representatives on
board as observers and, if any non compliance is found, a subsequent
test flight to check compliance after rectification.
16.3 To the extent that, upon such Final Inspection, the condition of the
Aircraft and Aircraft Documents does not comply with the provisions of
this Agreement, Lessee, at its own expense, shall cause such noncompliance
to be promptly rectified and to the extent such rectification extends
beyond the Expiry Date, the Term shall, at Lessor's sole option, be deemed
to be automatically extended and the provisions of this Agreement shall
remain in full force and effect until such rectification has been
accomplished. During such extension of the Term the Lessee shall be liable
to pay Rent at a daily pro rata rate equal to the Rent payable during the
last Rental Period of the Term.
16.4 Upon redelivery Lessee shall provide to Lessor all necessary assistance to
enable Lessor to obtain any required documents in relation to the export
of the Aircraft from the State of Registration, and if different, from the
State of Incorporation (including a valid and subsisting export license
for the Aircraft), and shall reassign to Lessor, at the expense of Lessee,
the benefit of any indemnity or warranty which has been assigned to Lessee
pursuant to Article 13.3 above to the extent such indemnity or warranty is
assignable.
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16.5 Prior to the Expiry Date or upon any earlier termination of the Term and
upon Lessor's request, Lessee will provide Lessor or its agent reasonable
access to the Approved Maintenance Program and the Aircraft Documents in
order to facilitate the Aircraft's integration into any subsequent
operator's fleet.
Lessee will, if requested by Lessor to do so, upon return of the Aircraft
deliver to Lessor a certified true current and complete copy of the
Approved Maintenance Program.. Lessor agrees that it. will not disclose
the contents of the Approved Maintenance Program to any person or entity
except to the extent necessary to monitor Lessee's compliance with this
Agreement and/or to bridge the maintenance program for the Aircraft from
the Approved Maintenance Program to another program.
16.6 Upon redelivery of the Aircraft to Lessor, an adjustment shall be made in
respect of fuel on board on the Delivery Date and on redelivery at the
price then prevailing at the Redelivery Location.
16.7 If Lessor shall request that Lessee paint the Aircraft any other basic
color as contemplated by Section 1(h) of Appendix E, Lessor agrees that it
shall bear the cost and expense of the difference between white paint and
such other basic color.
17. CASUALTY OCCURRENCES
17.1 In this Agreement "Casualty Occurrence" shall mean any of the following
events with respect to the Aircraft, the Airframe or an Engine:
(a) the actual, agreed, constructive, arranged or compromised total loss
or destruction of the Aircraft, the Airframe or an Engine, or damage
to the Aircraft, Airframe or Engine rendering repair impracticable
or uneconomical, or the Aircraft, Airframe or Engine being rendered
permanently unfit for normal use;
(b) requisition of title or other compulsory acquisition, requisition,
capture, seizure, deprivation, confiscation or detention for any
reason of the Aircraft, the Airframe or an Engine by any Government
Entity of the State of
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Registration or by any other government or other competent
authority, whether de jure or de facto, but excluding requisition
for use or hire not involving requisition of title by any
Governmental Entity for a temporary period ending on the date
fifteen (15) days (or one hundred eighty (180) days if the
requisition for use or hire is by the United States) after such
requisition, or the Expiry Date, whichever first occurs; and
(c) the hijacking, theft, disappearance, condemnation, confiscation or
seizure of the Aircraft, the Airframe or an Engine other than in the
circumstances referred to in (b) above which deprives Lessee of the
use thereof for more than fifteen (15) consecutive days.
17.2 (a) In the event of a Casualty Occurrence with respect to the Aircraft
or Airframe prior to the Delivery Date, this Agreement shall
immediately terminate with respect to such Aircraft and neither
party shall have any further obligation or liability hereunder, save
that Lessor shall return to Lessee the Deposit or such part thereof
as Lessor shall have received from Lessee and Lessee shall remain
liable to reimburse Lessor for any amounts specified in Article
8.2(a).
(b) In the event of a Casualty Occurrence with respect to the Aircraft
or Airframe after delivery to Lessee hereunder, Lessee shall pay the
Agreed Value and, if applicable, the Additional Amount pursuant to
Appendix D, Article 2.6, to Lessor on or prior to the earlier of (i)
45 days after the Casualty Occurrence and (ii) the Business Day
after the date of receipt of the insurance proceeds in respect of
the Casualty Occurrence and, provided all other amounts which are
then due and payable by Lessee under this Agreement have been paid
in full to Lessor, Lessee's obligation hereunder for payment of Rent
shall cease as from the date on which Lessor receives payment in
full of the Agreed Value. Rent paid in advance for any days which
occur after such Agreed Value and Additional Amount, if any, is paid
shall be repaid to Lessee, so long as no Default has occurred and is
continuing, on a pro rata basis for each day beyond such date of
payment of Agreed Value. Any excess insurance proceeds from the
insurance obtained by Lessee pursuant to Article 11
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remaining after payment of the foregoing amounts shall, unless a
Default shall have occurred and be continuing, be paid over to
Lessee.
(c) Subject to the rights of any insurers and reinsurers or other third
party, upon irrevocable payment in full to Lessor of the Agreed
Value and all other amounts which may be or become payable to Lessor
under this Agreement, Lessor will without recourse or warranty
(except as to Lessor's Liens) and without further act, be deemed to
have transferred to Lessee all of Lessor's rights to any Engines and
Parts not installed when the Casualty Occurrence occurred, all on an
as-is where-is basis, and will at Lessee's expense, execute and
deliver such bills of sale and other documents and instruments as
Lessee may reasonably request to evidence (on the public record or
otherwise) the transfer and the vesting of Lessor's rights in such
Engines and Parts in Lessee, free and clear of all rights of Lessor
and Lessor Liens.
17.3 Upon the Casualty Occurrence with respect to any Engine not involving a
Casualty Occurrence of the Aircraft, Lessee shall give Lessor prompt
written notice thereof and Lessee shall replace such Engine as soon as
reasonably possible with a replacement Engine in accordance with Article
5.1.2(a). Such replacement shall be deemed an "Engine" as defined herein.
Lessee agrees to take such action as Lessor may reasonably request in
order that any such replacement engine shall be duly and properly titled
in Lessor or the Bank and leased hereunder and subject to the Mortgage to
the same extent as the Engine replaced thereby. Lessee's obligation to pay
the Rent hereunder shall continue in full force and effect, but Lessee
shall be entitled to be reimbursed by Lessor the amount of insurance or
condemnation proceeds, if any, received by Lessor with respect to such
replaced Engine.
17.4 In the event of requisition for hire of the Aircraft or any part thereof
not constituting a Casualty Occurrence, then, subject to the proviso
herein contained, the Rent and other charges payable under this Agreement
shall not be suspended or abated either in whole or in part, and Lessee
shall not be released from any of its other obligations (as to payment,
indemnity or otherwise) hereunder (other than operational obligations with
which Lessee is unable to
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comply solely by virtue of such confiscation or requisition). If Lessee
shall duly comply with all its obligations under this Agreement, Lessee
shall during the Term be entitled to any hire paid by the requisitioning
or confiscating authority and Lessee shall, as soon as practicable after
the end of any requisition or confiscation, cause the Aircraft to be put
into the condition required by this Agreement. Lessor shall be entitled to
all compensation payable by the requisitioning or confiscating authority
in respect of any change in the structure, state or condition of the
Aircraft arising. during the period of requisition or confiscation, and
Lessor shall apply such compensation in reimbursing Lessee for the cost of
complying with its obligations as aforesaid, but so that, if any Default
has occurred and is continuing, Lessor shall be entitled to apply such
compensation in or towards settlement of any amounts owing by Lessee under
this Agreement PROVIDED ALWAYS that if following such requisition or
confiscation the Aircraft is treated as an agreed, constructive, arranged
or compromised total loss by the insurers, then the provisions of Article
17.1 shall apply with effect from the date on which the insurer so
determines.
18. GOVERNING LAW AND JURISDICTION
18.1 This Agreement and further agreements resulting herefrom shall be governed
by and construed in accordance with the internal Laws of the State of New
York and without regard to any conflict of law rules. This Agreement is
being delivered in the State of New York.
18.2 Lessor and Lessee hereby irrevocably agree to submit to the non-exclusive
jurisdiction of, and to waive any objection to the laying of venue in, the
County of New York and that any suit, action or proceedings (collectively,
"Proceedings") may be brought by Lessor in any court of the State of New
York or any U.S. Federal court located in New York County, New York.
18.3 Nothing contained in this Article 18 shall limit the right of either party
to this Agreement to take Proceedings against the other in any other court
of competent jurisdiction, nor shall the taking of Proceedings in one or
more jurisdictions preclude the taking of Proceedings in any other
jurisdiction, whether concurrently or not.
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18.4 Promptly after service of any process the Lessor or Lessee shall despatch
a copy thereof to Lessee or Lessor, as the case may be, by registered
mail, postage prepaid but failure of Lessee or Lessor, as the case may be,
to receive such copy shall not invalidate the service of such process.
18.5 To the extent that the parties may in any jurisdiction claim for their or
their assets immunity from suit, execution, attachment (whether in aid of
execution, before judgment or otherwise) or other legal process and to the
extent that in any such jurisdiction there may be attributed to themselves
or their assets such immunity (whether or not claimed) the parties hereby
irrevocably agree not to claim and hereby irrevocably waive any immunity
to the fullest extent permitted by the laws of such jurisdiction with the
intent, inter alia, that the foregoing waiver shall have effect for the
purposes of the Foreign Sovereign Immunities Act of 1976 of the United
States of America.
18.6 Lessee and Lessor shall each at all times maintain an agent for service of
process in the New York, New York. For Lessee, such agent shall be Winston
& Strawn, Attn: R. Evan Smith, 175 Water Street, New York, NY 10038. For
Lessor, such agent shall be Haight, Gardner, Poor & Havens, Attn: John F.
Pritchard, 195 Broadway, New York, NY 10007. Any writ, judgment or other
notice of legal process shall be sufficiently served on Lessee or Lessor
if delivered to such agent at its address for the time being. Each of
Lessee and Lessor undertakes that if it shall revoke the authority of its
above agent or if for any reason any such agent no longer serves as agent
to receive service of process, Lessee or Lessor, as the case may be, shall
promptly appoint another such agent and advise Lessor or Lessee, as the
case may be, thereof.
19. MISCELLANEOUS
19.1 The rights of each of Lessor and Lessee under this Agreement are
cumulative, may be exercised as often as it considers appropriate and are
in addition to its rights under general law. The rights of Lessor against
the Lessee or in relation to the Aircraft (whether arising under this
Agreement or the general law) shall not, as against or in favor of Lessor,
be capable of being waived or varied otherwise than by an express waiver
or variation in writing; and in particular any
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failure to exercise or delay in exercising any of such rights shall not
operate as a waiver or variation of any other such right; and defective or
partial exercise of any such rights shall not preclude any other or
further exercise of that or any other such right; and no act or course of
conduct or negotiation on Lessor's part or on Lessor's behalf shall in any
way preclude Lessor from exercising any such right or constitute a
suspension or any variation of any such right.
19.2 Save where expressly provided in this Agreement, any certificate or
determination by Lessor as to any rate of interest or as. to any other
amount payable under this Agreement shall, in the absence of manifest
error, be conclusive and binding on Lessee.
19.3 If any sum paid or recovered in respect of the liabilities of Lessee under
this Agreement is less than the amount then due, Lessor may apply such sum
to rental, interest, fees or any other amount due under this Agreement in
such proportions and order and generally in such manner as Lessor shall
determine.
19.4 The terms and conditions of this Agreement shall not be varied otherwise
than by an instrument in writing executed by or on behalf of Lessor and
Lessee.
19.5 If any of the provisions of this Agreement becomes invalid, illegal or
unenforceable in any respect under any law, the validity, legality and
enforceability of the remaining provisions shall not in any way be
affected or impaired.
19.6 Every notice, request, demand or other communication under this Agreement
shall:
(a) be in English;
(b) be in writing and made by mail or by fax or telex transmission or by
reputable courier service;
(c) be deemed to have been received, subject as otherwise provided in
this Agreement, in the case of a telex transmission, at the time of
dispatch with confirmed answerback of the addressee appearing at the
beginning and the end of the communication, in the case of a fax
transmission, at the time safe receipt is confirmed by the addressee
provided that if the date of dispatch is not a business day in the
country of the addressee
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any telex or fax transmission shall be deemed to have been received
at the opening of business on the next such business day, in the
case of a letter five days after being deposited in the mail first
class postage prepaid and in the case of a courier three days after
being sent; and
(d) be sent:
(1) to Lessee at:
Midway Airlines Corporation
5713 South Central Avenue
Chicago, Illinois 60638
Tel: (312) 838-2060
Fax: (312) 838-2069
Attention: President
(2) to Lessor at:
First Security Bank of Utah, N.A.
79 South Main Street
Salt Lake City, Utah 84130-0007
Tel: (801) 246-5630
Fax: (801) 246-5053
Attention: Corporate Trust Department
with a copy to FAUSA at:
1199 N. Fairfax Street, Suite 500
Alexandria, VA 22314
Telex: 899462 FAUSA ALE
Fax: (703) 683-2233
Attention: The President.
or to such other address or telex or fax number as is notified by either
party to the other party to this Agreement.
19.7 This Agreement may be executed in any number of counterparts and all of
such counterparts taken together shall be deemed to constitute one and the
same instrument.
19.8 This Agreement is the sole and entire agreement between Lessor and Lessee
in relation to the leasing of the
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Aircraft, and supersedes all previous agreements in relation to such
leasing. Each of Lessee and Lessor represents for itself that no broker
has been retained by it in connection with this Agreement or the other
Operative Documents.
19.9 This Agreement is intended by the parties to be a lease between Lessor and
Lessee. Any waivers, consents, deferrals of the payment of Rent or Reserve
Rates are not intended to be an agreement by Lessor to make any capital
contribution to the business of Lessee or to share in or have liability
for any of Lessee's losses, profits, liabilities or obligations. Nothing
contained in this Agreement or performed by Lessor in connection herewith
and any other agreement between Lessor and Lessee whether now existing or
entered into in the future shall make Lessor a partner or a joint venturer
of Lessee and shall not for any purpose be construed as a joint-venture
between the parties hereto.
19.10 [Intentionally Omitted].
19.11 Section 1110: Lessee acknowledges that Lessor would not have entered into
this Agreement unless it had available to it the benefits of a lessor
under Section 1110 of Title 11 of the United States Code. Lessee and
Lessor hereby state that this Agreement is intended to be a true lease for
U.S. Internal Revenue Code purposes. Lessee covenants and agrees with
Lessor that to better ensure the availability of such benefits, Lessee
shall support any motion, petition or application filed by Lessor with any
bankruptcy court having jurisdiction over Lessee, whereby Lessor seeks
recovery of possession of the Aircraft under said Section 1110 and shall
not in any way oppose such action by Lessor unless Lessee shall have
complied with the requirements of said Section 1110 to be fulfilled in
order to entitle Lessee to continued use and possession of the Aircraft
hereunder. In the event said Section 1110 is amended, or if it is repealed
and another statute is enacted in lieu thereof, Lessor and Lessee agree to
amend this Agreement and take such other action not inconsistent with this
Agreement as Lessor reasonably deems necessary so as to afford to Lessor
the rights and benefits as such amended or substituted statute confers
upon owners and lessors of aircraft similarly situated to Lessor.
19.12 First Security Bank of Utah, N.A. ("FSBU") is entering into this Agreement
solely as trustee under the Trust
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Agreement and not in its individual capacity and in no case whatsoever
shall FSBU (or any entity acting as successor trustee under the Trust
Agreement) be personally liable on, or for any loss in respect of, any of
the statements, representations, warranties, agreements or obligations of
Lessor hereunder as to all of which the other party hereto agrees to look
solely to the Trust Estate, except for any loss caused by FSBU's own
willful misconduct or gross negligence. FSBU warrants that the Aircraft
shall be free of liens attributable to FSBU in its individual capacity
which do not arise from its actions as lessor under this Agreement and
that it shall be personally liable to Lessee for any Claim against Lessee
in respect of any statements, representations, warranties, agreements or
obligations contained herein which are expressly made in its individual
capacity.
19.13 As between Lessor and Lessee, if Lessee fails to make any payment of Rent
or Reserve Rate required to be made by it hereunder or fails to perform or
comply with any of its agreements contained herein, Lessor may itself make
such payment or perform or comply with such agreement, and the amount of
such payment and the amount of the reasonable and properly documented
expenses of Lessor incurred in connection with such payment or the
performance of or compliance with such agreement, as the case may be,
together with interest thereon at the interest rate defined in Appendix D,
Article 6, shall be deemed Supplemental Rent, payable by Lessee upon
demand.
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IN WITNESS whereof the parties have executed this Agreement the day and
year first herein written.
SIGNED on behalf of SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A. MIDWAY AIRLINES
not in its individual capacity, CORPORATION
except as expressly set forth herein,
but solely as owner trustee
By: /s/ Greg Hawley By:
-------------------------- --------------------------
Greg A. Hawley
Its: Assistant Vice President Its:
-------------------------- --------------------------
<PAGE>
IN WITNESS whereof the parties have executed this Agreement the day and
year first herein written.
SIGNED on behalf of SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A. MIDWAY AIRLINES
not in its individual capacity, CORPORATION
except as expressly set forth herein,
but solely as owner trustee
By: By: /s/ [illegible]
-------------------------- --------------------------
Its: Its: VP
-------------------------- --------------------------
<PAGE>
APPENDIX A
DESCRIPTION OF AIRCRAFT
Number of
Manufacturer Model Serial No. Engines Engines
- ------------ ----- ---------- ------- ---------
Fokker 100 11444 Rolls Royce Two
Tay Mk 650-15
1. On the Delivery Date the Aircraft shall be new and shall comply
with the detailed description contained in this Appendix A, as may be amended
from time to time, and which is attached hereto as Appendix A-1.
2. The Aircraft at delivery will have an FAA Type Certificate and a
Netherlands Certificate of Airworthiness for Export, which will make the
Aircraft eligible for an FAA Standard Airworthiness Certificate. The Aircraft
shall at delivery also meet FAR 121 requirements promulgated or in effect and
known to Lessor or Manufacturer on June 27, 1993.
<PAGE>
APPENDIX B
FURTHER DEFINITIONS AND VALUES
AGREED VALUE : [***] for the first year of the
Term through and including the
first anniversary date of the
Delivery Date, and for each
subsequent year the Agreed Value
shall be:
Second Year: [***]
Third Year: [***]
Fourth Year: [***]
Fifth Year: [***]
Sixth Year: [***]
Seventh Year: [***]
Eighth Year: [***]
Ninth Year: [***]
provided that the Agreed Value for
any of the above years may be
adjusted up to FMV (but never in
excess of [***] if Lessor
provides to Lessee an independent
appraisal (at Lessor's cost) prior
to the beginning of any such year.
If Lessee does not agree to such
appraised value, Lessee may follow
the Appraisal Procedure by giving
Lessor written notice of election
to so proceed within 20 days of
receipt of Lessor's independent
appraisal.
ASSUMED RENT : (a) [***] for the Aircraft during
year one up to and including year
two of the Term; and
: (b) [***]
<PAGE>
[***] for the Aircraft during
year three up to and including
year nine of the Term
DEPOSIT : [***].
ENUMERATED FINANCIAL
MILESTONES : (1) all deferred amounts of Rent,
Reserve Rate and Deposits under
this Agreement and all Other
Aircraft Agreements have been paid
in full; and (2) Lessor shall have
received evidence satisfactory to
it that Lessee has had a net
income of $5,000,000 (Dollars Five
Million) as determined in
accordance with generally accepted
United States accounting
principles consistently applied
for each of three consecutive
fiscal years.
ESCALATED RENT : the Assumed Rent for the Aircraft
adjusted in accordance with the
provisions of Appendix D Paragraph
2.2.
PARTIAL LOSS AMOUNT : $250,000, provided, however, that if
the Enumerated Financial Milestones
have been achieved, then $500,000.
RENT : the Escalated Rent for the
Aircraft, (adjusted in accordance
with the provisions of Appendix D
Paragraphs 2.3, 2.6 and 2.7).
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RESERVE RATE : (a) [***] for each Flight Hour
for months one up to and including
twelve of the Term; and
(b) [***] for each Flight Hour for
months thirteen up to and including
one hundred eight of the Term.
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APPENDIX C
CERTIFICATE OF ACCEPTANCE
This Certificate of Acceptance is delivered, on and as of the date set forth
below, by Midway Airlines Corporation (herein referred to as "Lessee") to First
Security Bank of Utah, NA., not in its individual capacity but solely as
trustee, (herein referred to as "Lessor") pursuant to that Aircraft Operating
Lease Agreement dated as of ______ 199__ between Lessor and Lessee (herein
referred to as the "Agreement"):
1. Details of Acceptance
Lessee hereby indicates and confirms to Lessor, its successors and
assigns, that the Lessee has at ______ o'clock on this _____ day of ______
199__ at _____ Airport, ______ accepted the following, in accordance with
the provisions of the Agreement:
(a) Fokker 100 airframe, Manufacturer's serial Number 444
(b) Rolls Royce Tay Mk 650-15 Engines (each of which engines has 750 or
more rated takeoff horsepower).
Engine Number Manufacturer's S/N
1. ______
2. ______
(c) Fuel Status: ______ kilos; ______ litres
(d) Loose Equipment Check List: as per list signed by Lessor and Lessee
and attached.
2. Confirmation of Undertakings
The terms used in this Certificate shall have the meanings given to such
terms in the Agreement.
The Lessee confirms that today being the Delivery Date as defined in the
Agreement:
(i) the Aircraft is duly accepted by the Lessee in accordance with and
subject to the provisions of the Agreement and the execution and
delivery of this Certificate constitutes the acceptance of the
Aircraft by the Lessee for all purposes of the Agreement.
<PAGE>
DELIVERY BY LESSEE TO LESSOR OF THIS CERTIFICATE OF ACCEPTANCE SHALL
CONSTITUTE CONCLUSIVE PROOF AS BETWEEN LESSOR AND LESSEE THAT ON THE
DELIVERY DATE LESSEE'S TECHNICAL EXPERTS EXAMINED AND INVESTIGATED
THE AIRCRAFT AND EVERY PART THEREOF AND THAT THE AIRCRAFT AND EVERY
PART THEREOF CORRESPOND TO THE DESCRIPTION SPECIFIED IN APPENDIX A
TO THE AGREEMENT AND ARE AIRWORTHY AND IN GOOD WORKING ORDER AND
REPAIR, WITHOUT DEFECT WHETHER OR NOT DISCOVERABLE AS AT THE
DELIVERY DATE AND IN EVERY WAY SATISFACTORY TO LESSEE;
(ii) the Lessee is obliged to pay to the Lessor the amount provided for
in the Agreement with respect to the Aircraft;
(iii) the Aircraft is insured in accordance with the Agreement;
(iv) the representations and warranties contained in Article 13 of the
Agreement remain, and if made at the date of this Certificate of
Acceptance, would be, true and correct in all respects;
(v) there have been affixed to the Aircraft and the Engines the fire
resistant notices required by Article 4.3 of the Agreement;
(vi) the Lessee has no right of set-off, deduction, withholding or
counterclaim against the Lessor whatsoever; and
(vii) no Default is subsisting.
IN WITNESS WHEREOF, Lessee has caused this Certificate of Acceptance to be
executed in its name, by its duly authorized officer(s) or representative(s),
pursuant to due corporate authority, all as of the date written in Paragraph 1
above.
MIDWAY AIRLINES CORPORATION
By:
----------------------------
Title:
-------------------------
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APPENDIX D
CHARGES
1. Deposit
Lessor has received payment of [***] for the Aircraft before the date of
this Agreement.
Lessee shall pay the balance of the Deposit to Lessor in twenty five (25)
consecutive equal monthly installments for the first time on or before the
first Business Day one year and ninety days after the date of the start of
revenue operation by Lessee and thereafter each time on the corresponding
day in following calendar month and, if that is not a Business Day, then
on the last Business Day preceding such numerically corresponding day.
The Deposit shall be held by Lessor during the Term as security for the
full and punctual performance of all of Lessee's obligations to Lessor
under this Agreement. Lessor may, but shall not be obliged to, apply the
Deposit in whole or in part for the payment of any rent, maintenance
accruals, indemnities, attorneys fees and other expenses, insurance and
other casualty payments and any other amount owing from time to time by
Lessee hereunder or any other Operative Document, between Beneficiary or
its affiliate companies, and Lessee, or for the payment of any loss or
damage suffered by Lessor as a result of any Event of Default or utilize
the Deposit in whole or in part to perform any of Lessee's obligations
under this Agreement or otherwise remedy any other Event of Default,
including, without limitation, in the redelivery condition for the
Aircraft without prejudice to any other remedy of Lessor. In any such
event Lessee shall on demand restore the Deposit to the full amount
provided for herein by payment to Lessor of an amount in cash equal to the
amount applied or utilized. Lessee shall not attempt to subject the
Deposit to any other lien, security interest, charge or other encumbrance
or assign any interest therein to any other person and, to the extent of
its interest therein, if any, Lessee hereby grants to Lessor a security
interest in the Deposit and assigns and transfers to Lessor any and all of
Lessee's right, title and interest therein, if any, as security as
provided above, and Lessor shall be entitled to the remedy of offset
against and application of the Deposit, without any notice to or demand
against Lessee, all of which are hereby waived. Lessee further agrees that
the Deposit may be, without derogating from the terms of this Agreement,
be assigned as security to
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the Bank or transferred to any other transferee of Lessor. Should any
Event of Default hereunder occur, the Deposit shall automatically be
applied to any sum due to Lessor or as a prepayment of any sum to become
payable to Lessor, unless Lessor thereafter elects otherwise by notice to
Lessee.
Any remaining Deposit shall be repaid by Lessor to Lessee ten (10) days
following the Expiry Date or other date after redelivery of the Aircraft
in accordance with this Agreement. In the event there is a dispute as to
whether Lessee is entitled to a return of any portion of the Deposit,
Lessor shall so return the undisputed amount of the Deposit. Upon a
repayment of such Deposit or portion thereof, Lessor's security interest
in and assignment of such Deposit or portion thereof being repaid shall be
deemed released.
Lessor's obligations in respect of the return of the Deposit shall be
those of debtor of Lessee, not of a trustee or other fiduciary.
The Deposit shall bear interest on the amounts then held at a rate of
interest per annum yielding $10,500 (Dollars Ten Thousand Five Hundred)
per year payable annually commencing on the first anniversary of the
Delivery Date, and on each anniversary thereafter unless the Deposit and
interest thereon shall have been applied pursuant to this Agreement. Any
reference to the Deposit in this Agreement shall include the interest
accumulated thereon and not paid to Lessee.
2. Rent
2.1 For the purposes of the calculation and payment of Rent, the Term
shall be divided into two sets of periods ("Rental Periods" and
"Rental Adjustment Periods").
Rent shall be due and payable on each Rent Date. If such date is not
a Business Day then Rent shall be due and payable on the last
Business Day preceding such date.
2.2 The Escalated Rent shall be calculated by increasing the Assumed
Rent with a fixed escalation factor of one half of one percent
(0.5%) per month or a pro rata portion thereof as from the month of
September, 1993 up to and
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including the month of delivery of the Aircraft under the One Year
Lease.
2.3.1 The Rent payable in respect of the Rental Periods One (1) up to and
including Twenty Four (24) is based on an assumed three-years US
Treasury Bond Rate of Four point Ten percent (4.10%) per annum. To
the extent that the actual US Treasury Bond Rate varies from 4.l0%
per annum on the delivery of the Aircraft under the One Year Lease,
the Rent will be adjusted up or down with $16,500.00 (Dollars
Sixteen Thousand Five Hundred) per month for each one percent of
variation (or pro rated in the case the variation is less than one
Percent (1%)). The amount of $16,500.00 (Dollars Sixteen Thousand
Five Hundred) shall have been, upon delivery of the Aircraft under
the One Year Lease, adjusted with the escalation factor mentioned in
2.2 of this Appendix D.
2.3.2 The Rent payable in respect of the Rental Period Twenty Five (25) up
to and including One Hundred Eight (108) shall be adjusted upward or
downward calculated as follows:
E + ((L - Y) x N), where
E is the Escalated Rent, and
Y is Three point Twenty Five percent (3.25%)
L means the arithmetic mean expressed as a number (i.e., 40 per
cent is 40 and not 0.4) of the rates of interest per cent per
annum (rounded if not already such a multiple, to the nearest
whole multiple of 1/16th of one per cent.) at which, at or
about 11.00 a.m. (London time) on the day two Business Days
before the beginning of the Rental Adjustment Period in which
such Rental Period falls, deposits in Dollars are offered for
the duration of such Rental Adjustment Period on the REUTERS
"LIBO" page (or such other page as may replace it from time to
time) ("LIBOR"), and
N is $15,318.00 if such Rental Period falls in the fifth Rental
Adjustment Period;
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is $14,927.00 if such Rental Period falls in the sixth Rental
Adjustment Period;
is $14,527.00 if such Rental Period falls in the seventh Rental
Adjustment Period;
is $14,119.00 if such Rental Period falls in the eighth Rental
Adjustment Period;
is $13,702.00 if such Rental Period falls in the ninth Rental
Adjustment Period;
is $13,277.00 if such Rental Period falls in the tenth Rental
Adjustment Period;
is $12,842.00 if such Rental Period falls in the eleventh
Rental Adjustment Period;
is $12,399.00 if such Rental Period falls in the twelfth Rental
Adjustment Period;
is $11,945.00 if such Rental Period falls in the thirteenth
Rental Adjustment Period;
is $11,482.00 if such Rental Period falls in the fourteenth
Rental Adjustment Period;
is $11,010.00 if such Rental Period falls in the fifteenth
Rental Adjustment Period;
is $10,527.00 if such Rental Period falls in the sixteenth
Rental Adjustment Period;
is $10,034.00 if such Rental Period falls in the seventeenth
Rental Adjustment Period;
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is $ 9,530.00 if such Rental Period falls in the eighteenth
Rental Adjustment Period;
Such N-amounts shall - upon delivery of the Aircraft - be adjusted with
the escalation factor mentioned in Article 2.2. of this Appendix D.
2.3.3 The monthly Escalated Rent shall also be adjusted upward by an amount
equal to $875 (Dollars Eight Hundred Seventy Five) per month which shall
be payable to Lessor by check annually commencing on the first anniversary
of the Delivery Date, and on each anniversary thereafter. Lessee may elect
to authorize Lessor in writing to set-off amounts payable pursuant to this
Article 2.3.3 against interest on the Deposit which is payable by Lessor
pursuant to Article 1 of this Appendix D irrespective of whether or not an
Event of Default shall have occurred and be continuing.
2.4 Any notice with respect to rental adjustments given by Lessor shall set
out the basis of calculation of "L" and of the Rent specified therein and
shall, save in the case of manifest error, be conclusive.
2.5 The payment of the Rent for the aggregate of the first four (4) months
which shall have been payable on the Expiry Date of the One Year Lease
shall be paid by Lessee to Lessor in twenty four (24) consecutive equal
monthly installments for the first time on or before the first Business
Day on which Rent is payable pursuant to 2.1 above occurring one (1) year
after the date of the start of revenue operation by Lessee and thereafter
on each Rent Date.
2.6 To finance the payments required to be paid by Lessee under Article 8.2(a)
(i), the Escalated Rent shall also be adjusted upward in an amount (the
"Adjustment Amount") of $l,551 (Dollars One Thousand Four Hundred Sixty
Three) for each Rent Date through and including the thirty sixth Rent
Date. If a Casualty Occurrence occurs on or prior to such thirty sixth
Rent Date, an amount (the "Additional Amount") in Dollars equal to the
present value (discounted at the interest rate of six point one percent
(6.1%)), of all unpaid Adjustment Amounts through the Rent Date on or
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immediately preceding the date of the Casualty Occurrence shall be due and
payable, with interest thereon at six point one percent (6.1%), on the
date on which Agreed Value is payable pursuant to Article 17.2(b).
2.7 Unless payments for a first refinancing and/or assignment shall be due or
shall have been paid pursuant to Article 8.2 (a) (ii) of the One Year
Lease, Lessee shall pay to Lessor all reasonable expenses paid to third
parties (including legal, printing and out-of-pocket expenses) incurred or
payable by Lessor in connection with the negotiation, preparation and
execution of the first refinancing of the Aircraft and this Agreement by
the initial Lessor and its beneficiary with a Bank and the related first
assignment by Lessor (in its trust capacity) or its Beneficiary to another
Lessor or Beneficiary with a related Bank financing, subject, however,
that Lessee's obligation to pay such expenses is limited to $150,000
(Dollars One Hundred Fifty Thousand) for such first refinancing of the
Aircraft and if such first refinancing transaction includes the first
refinancing of aircraft which are the subject of Other Aircraft
Agreements, then Lessee's obligation to pay such expenses pursuant to this
Article 2.7 and Article 2.7 of Appendix D in each applicable Other
Aircraft Agreement, in the aggregate shall be limited to the foregoing
$150,000 plus (x) $100,000 (Dollars One Hundred Thousand) for a first
refinancing transaction involving one additional aircraft; and (y) $50,000
(Dollars Fifty Thousand) per each further additional aircraft. Lessor
hereby agrees to finance the payments required to be paid by Lessee under
this Article 2.7 as follows: The Escalated Rent shall be adjusted upward
for each Rent Date commencing on the Rent Date next succeeding the date of
the first refinancing described in this Article 2.7 in an amount equal to
the expenses referred to herein (subject to the maximum amounts referred
to herein) plus the product of such expenses multiplied by an interest
rate (the "Aircraft Refinancing Interest Rate") agreed to by Lessee and
Beneficiary and calculated on an accrual basis using the same method
applied by the Beneficiary in obtaining the monthly Escalated Rent amount
set forth in Article 2.6 above, the sum thereof divided by the total
number of
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aircraft which are the subject of the first refinancing described herein
(such quotient, the "Aircraft Refinancing Amount") and further divided by
the lesser of forty eight (48) or the total number of remaining Rent Dates
to occur during the Term (each such amount an "Aircraft Refinancing
Installment"). Such amount shall be payable on each Rent Date commencing
on the Rent Date next succeeding the date of the first refinancing
described in this Article 2.7. If a Casualty Occurrence occurs prior to
the Expiry Date, an amount (in Dollars) equal to the present value
(discounted at the Aircraft Refinancing Interest Rate) of all unpaid
Aircraft Refinancing Amount through the Rent Date on or immediately
preceding the date of the Casualty Occurrence shall be due and payable,
with interest thereon at the Aircraft Refinancing Interest Rate, on the
date on which Agreed Value is payable pursuant to Article 17.2(b). For the
avoidance of doubt, any payments being financed under Article 2.8 below
shall not be the subject of adjustment of Escalated Rent pursuant to this
Article 2.7.
2.8 To finance the payments required to be paid by Lessee under Article
8.2(a)(ii) of the One Year Lease on the Expiry Date thereof, the Escalated
Rent shall also be adjusted upward for each Rent Date commencing on the
First Rent Date by an amount equal the Aircraft Refinancing Installment
calculated pursuant to Article 2.7 of Appendix D of the One Year Lease and
shall be paid by Lessee to Lessor in consecutive monthly installments
until the remaining Aircraft Refinancing Amount calculated pursuant to
Article 2.7 of Appendix D of the One Year Lease (the "Remaining Aircraft
Refinancing Amount") shall be paid in full. If a Casualty Occurrence
occurs prior to the Expiry Date, an amount (in Dollars) equal to the
present value (discounted at the Aircraft Refinancing Interest Rate
determined pursuant to Article 2.7 of Appendix D of the One Year Lease) of
all unpaid Remaining Aircraft Refinancing Amount through the Rent Date on
or immediately preceding the date of the Casualty Occurrence shall be due
and payable, with interest thereon at the aforesaid Aircraft Refinancing
Interest Rate, on the date on which Agreed Value is payable pursuant to
Article 17.2(b).
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3. Reserve Rate
3.1 In addition to installments of Rent, Lessee shall pay to Lessor the
Reserve Rate as follows:
(a) by way of an Airframe maintenance accrual, the sum of [***]
for the months one up to and including twelve of
the Term and [***] for the months thirteen up to
and including one hundred eight of the Term for each Flight Hour the
Aircraft is operated during the Term ("Airframe Maintenance
Accrual"), and
(b) by way of an Engine maintenance accrual, in respect of each Engine
the sum of [***] for the months one up to and
including twelve of the Term [***] for the months
thirteen up to and including one hundred eight of the Term for each
Flight Hour operated by each Engine during the Term ("Engine
Maintenance Accrual"); and
(c) by way of a landing gear maintenance accrual, the sum of
[***] for the months one up to and including twelve
of the Term and [***] for the months thirteen
up to and including one hundred eight of the Term for each Cycle
operated by the landing gear during the Term ("Landing Gear
Maintenance Accrual") and
(d) by way of an A.P.U. maintenance accrual, the sum of [***]
for the months one up to and including twe1ve of the Term
and [***] for the months thirteen up to and
including one hundred eight of the Term for each Flight Hour
operated by the A.P.U. during the Term ("A.P.U. Maintenance
Accrual").
The Airframe, Engine, Landing Gear and A.P.U. Maintenance Accruals
accruing in any Rental Period shall be paid by Lessee to Lessor not later
than ten (10) days after the end of the calendar month in which such
Rental Period shall end. Concurrently with the payment thereof, Lessee
shall report to Lessor (in accordance with Article 7.1 (e)) the number of
Flight Hours and Cycles
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accumulated in respect of the period for which payment is being made.
The Reserve Rate will be subject to adjustment every six (6) months during
the Term by reference for 65% to the Employment and Earnings Index for
U.S.A. labor cost average hourly earnings of production (Aircraft
Equipment) SIC 3728, table C-2 and for 35% to the Producer Price Index for
U.S.A. material cost commodity groupings (Machinery and Equipment) Code
11/table 6. In addition the Engine Maintenance Accrual will be subject to
adjustment every six (6) months during the Term having regard to the
Engine Manufacturer recommendations, industry experience and any change in
the operational environment of the Aircraft.
Any Reserve Rate shall, if requested by either Lessor or (unless an Event
of Default shall have occurred and be continuing) Lessee, be adjusted to
take into account any changes in the maintenance intervals upon which
Reserve Rates are based.
3.2 Maintenance Accruals as defined in paragraph 3.1 above and received by
Lessor shall respectively be credited to funds (collectively "Maintenance
Funds") to be known as the "Airframe Maintenance Fund", the "Engine
Maintenance Fund, the "Landing Gear Maintenance Fund" and the "A.P.U.
Maintenance Fund" which funds shall reduce as monies are released to
Lessee therefrom in accordance with Article 7.4.1.
3.3 The payment of the applicable Reserve Rate for the first three (3) months
of the One Year Lease which shall have been payable on the Expiry Date of
the One Year Lease shall be deferred. The aggregate amount of such
deferred Reserve Rate shall be paid by Lessee to Lessor in twenty four
(24) consecutive equal monthly installments for the first time on or
before the first Business Day on which Reserve Rate is payable pursuant to
3.1 above occurring one (1) year after the date of the start of revenue
operation by Lessee and thereafter each Business Day on which the Reserve
Rate is payable.
3.4 The Reserve Rates shall accrue interest at the applicable six (6) months
US Dollar LIBOR rate
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minus point twenty five percent (.25%) per annum, which interest shall be
added to the relevant Maintenance Fund.
3.5 If the Enumerated Financial Milestones have been achieved, then Lessee's
obligation to continue to pay Reserve Rates hereunder shall be stayed,
provided, however, that in connection with the release of monies to Lessee
from the Maintenance Fund pursuant to Article 7.4.1 occurring thereafter,
prior to the release of monies, Lessee shall provide Lessor with evidence,
reasonably satisfactory to Lessor, that Lessee has retained accumulated
net earnings (as determined in accordance with generally accepted United
States accounting principles consistently applied) of not less than
$15,000,000 (Dollars Fifteen Million), and provided, further, that if such
evidence cannot be provided or is not reasonably satisfactory to Lessor,
Lessee's obligation to pay Reserve Rates shall recommence pursuant to the
terms hereof and no monies shall be released from the Maintenance Fund
until such time as it shall have been restored to the level at which it
would have been had this paragraph not been in effect.
If Lessee has achieved the payment in full of all deferred amounts as set
forth in clause (1) of the definition of Enumerated Financial Milestones,
Lessee may, at its election, pay to Lessor the amount which is necessary
to cause monies standing in the Maintenance Fund to equal $1,500,000
(Dollars One Million Five Hundred Thousand) and thereafter Lessee shall
have no further obligation to make Reserve Rate payments hereunder,
provided, however, that thereafter no funds shall be released to Lessee
from the Maintenance Fund pursuant to Article 7.4.1. It is understood, for
the avoidance of doubt, that the foregoing terms of this Article 3.5 shall
not affect Lessee's or Lessor's obligations under Article 3.6 of this
Appendix D.
3.6 On the Expiry Date, if there is any Excess (as defined below) in any
Maintenance Fund, such Excess shall, unless a Default shall have occurred
and be continuing (in which case only after termination, return of the
Aircraft and payment of all amounts due following exercise of remedies
under Article 15), be paid to Lessee, and on such
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date, if there is any Shortfall (as defined below) in any Maintenance
Fund, Lessee shall pay such Shortfall to Lessor.
"Excess" in any Maintenance Fund on the Expiry Date shall mean any
positive difference obtained by subtracting (x) from (y) for the Airframe,
Engines, Landing Gears or A.P.U., as the case may be; (x) shall mean the
product of (I) the then market cost from the original equipment
manufacturer and corrected for the experience of all United States based
operators of Fokker 100 aircraft for the relevant item:
with respect to the Aircraft, to perform a scheduled airframe heavy
maintenance as defined in the Maintenance Program for 12,000 hours
and 24,000 hours inspections or any equivalent thereof with more or
less hours ("Airframe Maintenance"), or
with respect to any Engine, to perform a scheduled shop visit engine
maintenance and repair, other than (i) repairs arising as a result
of foreign object damage or operations mishandling and/or (ii)
maintenance and repair of QEC (Quick Engine Change) kits ("Engine
Maintenance"), or
with respect to any nose or main landing gear to perform a schedule
shop visit nose and main landing gear maintenance and repair, other
than repairs arising as a result of foreign object damage or
operational mishandling ("Landing Gear Maintenance"), or
with respect to Auxiliary Power Unit ("A.P.U.") to perform an off
Aircraft shop A.P.U. maintenance and repair, other than repairs
arising as a result of foreign object damage or operational
mishandling ("A.P.U. Maintenance"), and
(II) a fraction of which (a) the numerator shall be the difference between
the actual number of hours or cycles (as to landing gear), as the case may
be, of operation remaining on the Airframe, Engine, Landing Gear or
A.P.U., as the case may be, to the next such Airframe Maintenance, Engine
Maintenance, Landing Gear Maintenance or A.P.U.
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Maintenance, as the case may be, and the total number of hours or cycles,
as the case may be, of operation allowable between such Maintenance and
(b) the denominator shall be the total number of hours or cycles, as the
case may be, of operation allowable between such Maintenance.
(y) shall mean the actual dollar amount remaining in the respective
Maintenance Fund.
"Shortfall" in any Maintenance Fund on the Expiry Date shall mean any
negative difference obtained by subtracting (x) above from (y) above.
3.7 The Reserve Rate for the first months of this Agreement shall be adjusted
upward in an amount equal to the Reserve Rate (as such term is defined in
the Short Term Aircraft Operating Lease Agreement No. AOLAF-107 between
Lessor and Lessee) which was deferred in the Expiry Date thereunder, and
shall be further deferred pursuant to Article 3.3 of this Appendix D.
4. Payments
All payments due hereunder shall be effected by Lessee to Lessor by
transfer to Chemical Bank in New York, New York, in favor of the
Beneficiary, account number 544-0-46285, Ref. Aircraft MSN 11444,
AOLAF-111, in Dollars and in immediately available funds, and all such
payments shall be initiated adequately in advance of the due dates to
ensure that Lessor receives credit for the full amount of such payment on
the due dates. All such payments shall be made in full without any
deduction or withholding (whether in respect of set-off, counterclaim,
duties, taxes, charges or otherwise howsoever) unless Lessee is prohibited
by Law from doing so, in which event Lessee shall (a) ensure that the
deduction or withholding does not exceed the minimum amount legally
required; (b) forthwith pay to Lessor such additional amount as shall
result in the net amount received by Lessor being equal to the amount
which would have been received by Lessor had such a deduction or
withholding not been made; (c) pay to the relevant taxation or other
authorities within the period for payment permitted by applicable Law the
full amount of the deduction or withholding; and (d) upon request in
writing from Lessor to Lessee furnish to Lessor, within the period for
payment permitted by applicable Law, an official receipt of the
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relevant taxation or other authorities involved for all amounts deducted
or withheld as aforesaid.
5. Currencies
If under any applicable Law, whether as a result of judgment against
Lessee or the liquidation of Lessee or for any other reason, any payment
under or in connection with this Agreement is made or recovered in a
currency other than United States Dollars then, to the extent that the
payment (when converted to United States Dollars at the rate of exchange
on the date of payment or, in the case of the liquidation, the latest date
for the determination of liability permitted by the applicable Law) falls
short of the amount unpaid under this Agreement, Lessee shall, as a
separate and independent obligation, fully indemnify Lessor against the
amount of the short fall; for the purposes of this paragraph, "rate of
exchange" means the rate at which Lessor is able on the relevant date to
purchase United States Dollars in London with that other currency.
6. Default Interest
If any amount payable pursuant to this Agreement is not paid by Lessee on
the due date, Lessee shall pay to Lessor interest (after as well as before
judgment) on such amount, at the rate of LIBOR (as defined in Article
2.3.2 of this Appendix D, but for the duration of six months and as
applicable two Business Days before the Default), plus four per cent (4%)
per annum from the due date to the date of payment in full by Lessee to
Lessor, but in the event such rate shall be in excess of the highest rate
permitted by applicable law, then it shall mean the highest rate allowed
by applicable law. All amounts of interest payable hereunder shall be
calculated on the basis of the actual number of days elapsed and a 360 day
year.
7. Set-off
At any time after a Default shall have occurred and be continuing, Lessor
shall be entitled to set-off or withhold from any amount due and payable
to Lessee under this Agreement or any other Operative Document, or any
amount standing to the credit of Lessee on any account, in or towards the
satisfaction of any amounts from time to time due and payable by Lessee
under this Agreement or any other Operative Document or any liability or
obligation of Lessee under this Agreement or any other Operative Document,
and shall be entitled to do so notwithstanding that any such amount or
amounts may not be expressed in the same currency.
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8. Time at which payments are due
Supplemental Rent shall be due and payable on demand unless otherwise
expressly stated herein.
9. Purchase Option
Lessor grants to Lessee the right to purchase and to take delivery of
the Aircraft on the Expiry Date of this Agreement for a price equal to
the greater of the fair market value (as deferred to the penultimate
sentence of this paragraph, "FMV") of the Aircraft on the Expiry Date
and [***]. If Lessee elects to exercise its right to purchase the
Aircraft, Lessee shall do so by giving to Lessor written notice of such
election at least two hundred seventy (270) days prior to the Expiry
Date. The FMV of the Aircraft on the Expiry Date shall be established
by an independent internationally reputed aircraft appraiser appointed
by mutual agreement of Lessor and Lessee within one (1) month of the
date of receipt by Lessor of Lessee's notice of election to purchase.
If Lessor and Lessee shall be unable to agree on such aircraft
appraiser, FMV shall be established by a mutually agreed appraisal
prepared and delivered by two independent internationally reputed
aircraft appraisers, one of which shall be chosen by Lessor and one by
Lessee. If such appraisers shall be unable to agree on FMV, FMV shall
be equal to the average of the fair market values established by such
appraisers. Any appraisal shall meet internationally accepted standards
and shall be binding upon Lessee and Lessor. The appraisal procedure
outlined in this Article 9 shall be referred to herein as the
"Appraisal Procedure". The FMV shall be equal in amount to the value
that would be obtained as of the Expiry Date in an arms'-length
transaction between an informed and willing purchaser under no
compulsion to buy and an informed and willing seller under no
compulsion to sell with the Aircraft assumed to be in the condition
required upon the return thereof at the end of the Term in accordance
with Article 16 without considering the encumbrance of this Agreement.
All costs and expenses of the FMV appraisal shall be shared equally by
Lessor and Lessee.
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APPENDIX E
OPERATING CONDITION AT RE-DELIVERY
Upon redelivery of the Aircraft to Lessor, the Aircraft shall, subject to
ordinary wear and tear generally:
1. General Condition
(a) Be clean by airline standards;
(b) Have installed the Engines, and other equipment, Parts and
accessories and loose equipment as would remain installed in such
Aircraft, and shall be in a condition suitable for operation in
commercial service;
(c) Have in existence a valid Certificate of Airworthiness with respect
to the Aircraft issued by the Air Authority of the State of
Registration with a validity of at least nine (9) months after the
date of redelivery of the Aircraft to Lessor;
(d) Comply with the manufacturer's original specifications therefor;
(e) Have undergone, immediately prior to redelivery, a 3000 Check or any
subsequent higher inspection, if due within 3000 hrs, in accordance
with the Approved Maintenance Program, shall be free of any waivers,
and all deferred maintenance, if any, shall have been accomplished;
each engine and A.P.U. shall have had an inspection in accordance
with Article 16 confirming release for its remaining operational
life;
(f) All outstanding airworthiness directives and mandatory orders
affecting such model of Aircraft issued by the Air Authority which
require compliance during the Term shall have been accomplished;
(g) Have installed all applicable vendors' and manufacturers' service
bulletin kits theretofore received by Lessee free of charge that are
appropriate for the Aircraft and to the extent not installed, such
kits shall be furnished free of charge to Lessor;
(h) stripped of all Lessee's paint scheme and repainted through an
Authorized Maintenance Performer with Manufacturer approved paints
in white or any other basic color requested by Lessor; and
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(i) Have been inspected and treated with respect to corrosion as defined
in the Approved Maintenance Program.
2. Airframe and major components
The Airframe and major components shall have not less than the following
hours/cycles/months expected life remaining to the next Major Check and/or
overhaul:
-Airframe : 3000 hours and 12 months to
next Major Check;
-Engine : half life on average to next
Engine shop visit but in no
event less than 3000 hours;
-Main Landing Gear : 3000 cycles to next overhaul;
-Nose Landing Gear : 3000 cycles to next overhaul;
*The records as to remaining engine life shall be certified by Lessee in
writing to Lessor upon redelivery of the Aircraft to Lessor.
3. Components
(a) Each life-limited Part shall have not less than 3000 (Three
Thousand) flight hours or cycles of the total approved life
remaining to the scheduled replacement, in accordance with the
Approved Maintenance Program;
(b) Each hard-time controlled component shall have not less than 3000
(Three Thousand) Flight Hours or 3000 (Three Thousand) Cycles or 12
(twelve) months whatever is applicable, remaining to the next
scheduled overhaul/inspection, in accordance with the Approved
Maintenance Program;
(c) "On-condition" and "Condition Monitored" components shall be
serviceable;
(d) The A.P.U. shall be serviceable
4. Fuselage, Windows and Doors
(a) Fuselage shall be free of major dents and abrasions, scab patches
and loose or pulled or missing rivets;
(b) Windows shall be free of delamination, blemishes, crazing and shall
be properly sealed;
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<PAGE>
(c) Doors shall be free moving, correctly rigged and be fitted with
serviceable seals.
5. Wings and Empennage
(a) All leading edges shall be free from damage;
(b) All unpainted cowlings, fairings and other surfaces shall be
polished;
(c) Wings shall be free of fuel leaks.
6. Interior
(a) Ceilings, sidewalls and bulkhead panels shall be clean and free of
cracks and stains;
(b) All carpets and seat covers shall be in good condition, clean and
stain free and meet Air Authority fire resistance regulations;
(c) All seats shall be serviceable, in good condition and repainted as
necessary;
(d) All signs and decals shall be clean and legible;
(e) All emergency equipment having a calendar life shall have a minimum
of one year or one hundred per cent of its total approved life,
whichever is less, remaining.
7. Cockpit
(a) All decals shall be clean, secure and legible;
(b) All fairing panels shall be free of stains and cracks, shall be
clean, secure and repainted as necessary;
(c) Floor coverings shall be clean and effectively sealed;
(d) Seat covers shall be in good condition, clean and shall conform to
Air Authority fire resistance regulations;
(e) Seats shall be fully serviceable and shall be repainted as
necessary.
8. Cargo Compartments
(a) All panels shall be in good condition;
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<PAGE>
(b) All nets shall be in good condition;
9. Landing Gear and Wheel Wells
(a) Shall be clean, free of leaks and repaired as necessary;
(b) All decals shall be clean, secure and legible.
10. Corrosion
(a) Entire fuselage shall be substantially free from corrosion and shall
be adequately treated and an approved corrosion prevention program
shall be in operation;
(b) Fuel tanks shall be free from contamination and corrosion and a tank
treatment program shall be in operation.
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<PAGE>
APPENDIX F
AIRCRAFT DOCUMENTS
FOKKER 100 AIRCRAFT
Aircraft Documents shall include the documents referred to in Table I ("Aircraft
Documentation"), Section (D), Exhibit (D) of the Support Services Agreement No.
ASSAF-110 between FAUSA and Lessee.
Aircraft Documents shall also include all logs, certificates and data, and
inspection, modification and overhaul records, relating to the Aircraft and
required to be maintained by the Air Authority and/or by the Approved
Maintenance Program.
Upon Expiry Date or upon earlier termination of the Agreement all Aircraft
Documents shall be redelivered by Lessee to Lessor complete and fully updated
simultaneously with the redelivery of the Aircraft.
<PAGE>
APPENDIX G
LEGAL OPINION
[Certain provisions of this opinion may be given by different law firms or
individuals: revision required if the Bank is a party]
[Closing Date]
[____________________]
1199 N. Fairfax Street
Alexandria, VA 22314
Dear Sirs:
We have acted as counsel to [_________], a [________] corporation ("Lessee"), in
connection with the execution and delivery by Lessee of the Aircraft Operating
Lease Agreement AOLAF - [___________], dated as of [_________] between
[______________] ("Lessor") and Lessee (the "Agreement"). Except as otherwise
herein defined, the terms used in this opinion letter have the same meanings as
the terms used in the Agreement.
We have examined the Agreement and the other Operative Documents. We have also
examined the original, or photostatic or certified copies of such agreements and
records of Lessee and of public officials, orders and certificates of regulatory
bodies and courts of competent jurisdiction and such other documents as we have
deemed relevant and necessary. We have relied upon the accuracy of the factual
information set forth in all such documents.
In our examination we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as photostatic or certified
copies and the authenticity of the originals of such latter documents.
Based upon our examination, we are of the opinion that:
1. Lessee is a corporation duly incorporated and organized and validly
existing in good standing under the laws of the state of [_____], and has
all requisite corporate power and authority to carry on its business as
presently conducted and to execute and deliver, and to incur and perform
its obligations under the Agreement and the other Operative Documents and,
to the best of our knowledge, no steps have been taken or are being taken
to appoint a receiver or liquidator over, or to wind up, Lessee.
<PAGE>
2. The execution, delivery and performance by Lessee of the Agreement and the
other Operative Documents and the compliance by Lessee with the terms and
provisions thereof have been duly authorized by all necessary corporate
action, do not require any approval of stockholders of Lessee, and will
not violate any provision of law or any governmental rule or regulation or
any judgment, decree, or order binding on Lessee, or of the Certificate of
Incorporation or By-laws of Lessee.
3. Lessee is not in violation of any provision of its Certificate of
Incorporation or By-laws, and to the best of our knowledge, is not in
violation of any provision of any agreement, instrument or document to
which it is a party or by which it is bound, nor has there occurred and is
continuing any event which, under the provision of any such agreement,
instrument, instrument or document, which the lapse of time or giving of
notice, or both, would constitute a default by Lessee. Lessee is not in
violation of any law, rule or regulation, or any order, injunction or
decree of any court or administrative body applicable to it, which
violation could materially and adversely affect its business, property or
assets, operations or condition, financial or otherwise.
4. The Agreement and the other Operative Documents have been duly executed
and delivered by Lessee and constitute the legal, valid and binding
obligations of Lessee, enforceable in accordance with their respective
terms, except as may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights
generally (including, without limitation, laws regarding fraudulent
conveyance and equitable subordination) and by general principles of
equity (regardless of whether enforcement is sought in a proceeding in
equity or at law), and (ii) applicable laws which may affect certain of
the remedies provided in the Agreement and the other Operative Documents
but which do not, in our opinion, make the remedies provided therein
inadequate for the practical realization of the benefits afforded thereby.
5. No consent, approval or authorization of, nor registration, qualification,
designation, declaration of filing with, any governmental authority in the
United States of America or any political subdivision or instrumentality
therein or thereof is required in connection with the execution, delivery
or performance by lessee of the Agreement and the other Operative
Documents, or any other document or instrument contemplated thereby,
except for (i) the registration of the Aircraft in Lessor's name with the
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<PAGE>
Federal Aviation Administration (the "FAA") pursuant to the Federal
Aviation Act of 1958, as amended (the "Act"), the Equipment Lease, and the
Credit and Security Agreement; the filing of the Agreement for recordation
with the FAA pursuant to, and in accordance with, the Act; and (iii) the
filing of financing statements with respect to the interest created by the
Agreement under the Uniform Commercial Code with the Secretary of the
State of the State of Illinois.
6. No other filing or recording of any document is necessary under the laws
of the United States or [ ] in order to perfect Lessor's title to the
Aircraft under the Agreement and Aircraft Equipment under the Equipment
Lease and to perfect Lessor's security interest in the Collateral under
the Credit and Security Agreement as against Lessee and any third parties
within the United States.
7. No United States Federal withholding taxes will be applicable to the
rentals and other payments made by Lessee under the Agreement and the
other Operative Documents.
8. No tax will be imposed by any state of the United States of America or any
political subdivision thereof on Lessor's interest in the Aircraft solely
by virtue of the execution, delivery and performance of the Agreement and
the other Operative Documents.
9. In any action to enforce the Agreement commenced in courts of the state of
New York or a United States District Court located in New York, such
courts would give effect to the choice of the parties thereto of New York
law as the governing law thereof.
10. The obligations of the Lessee for the payment of money under the Agreement
and the other Operative Documents rank at least equally and ratably (pari
pasu) with respect to priority and security with all other unsecured
obligations of the Lessee.
11. No claims of creditors and/or possessory liens will rank ahead of the
respective rights and interests of the Lessor, Head Lessor and the Bank in
the Aircraft.
We are members of the bar of the state of New York and [_______] and we
are not, and do not purport to be, experts in the laws of any other
jurisdiction other than the Federal laws of the United States of America.
The opinions set forth in this opinion letter are limited solely to the
laws of the State of New York, the Uniform Commercial Code, as
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<PAGE>
applicable in the State of Illinois, the corporate law of the State of
Delaware and the United States of America.
Very truly yours,
-4-
<PAGE>
APPENDIX H
CERTIFICATE OF INSURANCE
To: (Lessor)
CERTIFICATE OF INSURANCE
THIS IS TO CERTIFY that we in our capacity as insurance brokers have effected
insurance (reinsurance) on behalf of:
ASSURED ______
(REASSURED) ______
as herein described in respect of:
AIRCRAFT: FOKKER 100 REGISTRATION ______
Subject to policy terms, conditions, limitations and exclusions the insurance
covers:
1) HULL ALL RISKS of loss or damage to the Aircraft for an Agreed Value
of US$______ (United States Dollars____________).
This policy includes Excluded Coverage Endorsement (Aircraft Hull)
AVN51 or equivalent.
This insurance is subject to a deductible (other than total loss,
arranged total loss or constructive total loss) of US$______ (United
States Dollars ______) any one accident.
The geographical limits of the insurance are worldwide and the
insurance is in force during the period ______.
2) If operated outside the United States and Canada, HULL WAR and
ALLIED PERILS insurance for the Aircraft for an Agreed Value of
US$______ (United States Dollars____________) covering the risks
excluded from the Hull All Risks insurance by the terms of the War,
Hijacking and Other Perils Exclusion Clause AVN.48B except paragraph
(b) thereof and includes cover in respect of confiscation,
nationalization, seizure, restraint, detention, appropriation for
title or use by or under the order of the Government or public or
local authority of the State of Registration.
<PAGE>
This insurance is not subject to a deductible.
(The insurance for the Aircraft also covers other aircraft of the
Assured's fleet and is subject to an overall limit in respect of all
aircraft insured of _______ in the aggregate.)
The geographical limits of the insurance are worldwide and the
insurance is in force during the period ________
3) Comprehensive Airline Liability including aircraft Third Party
Liability, Passenger and Crew Liability (including Baggage and
Personal Effects), Cargo Liability, Mail Liability, Personal Injury
Liability Contractual Liability, Hangar Keeper's Liability, Aircraft
Products Liability and General Third Party Liability for a combined
single limit of US$______ (United States Dollars ______) any one
occurrence each aircraft but limited in respect of Personal Injury
(as covered by Personal Injury Extension clause AVN.60) to the
equivalent of US$25,000,000.00 (United States Dollars Twenty Five
Million) any one offence and in the aggregate.
This insurance is subject to the War, Hijacking and Other Perils
Exclusion AVN.48B with paragraphs (a) and (c) through (g) deleted
subject to Extended Coverage Endorsement (Aircraft Liabilities)
AVN52C.
This insurance is subject to deductibles in respect of Baggage and
Personal Effects of US$1,250.00 (United States Dollars One Thousand
Two Hundred Fifty) any one claim and in respect of Cargo and Mail
Liability of US$5,000.00 (United States Dollars Five Thousand) any
one claim. Such deductibles do not apply to claims arising from
accidents to the carrying aircraft.
The geographical limits of this insurance are worldwide and the
insurance is in force during the period _______.
4) ALL RISKS INSURANCE in respect of any Engine and Parts while any
such items are not installed on the Aircraft and in respect of which
cover is not provided under the Hull All Risks insurance 1) above
for not less than the full replacement value and/or the Hull War and
Allied Perils Insurance 2) above including cover in respect of War
and Allied Perils except that War cover is provided only in respect
of Marine and Air Transits.
This insurance is subject to a limit of US$______
-2-
<PAGE>
(United States Dollars ______.
This insurance is subject to a deductible of US$______ (United
States Dollars ______) any one accident.
The geographical limits of the insurance are worldwide and the
insurance is in force during the period ______.
THE INSURERS (REINSURERS) have been advised that ______ has entered
into a lease agreement with ______ in respect of the Aircraft and
insurers (reinsurers) have agreed to endorse the insurances as
follows:
A) In respect of All Risks Aircraft Hull insurance, Aircraft Hull
War and Allied Perils insurance and All Risks insurance on
Engines and Parts to:
(i) name the Lessor, Head Lessor and the Bank and their
respective successors and assigns as Additional
Assureds;
(ii) provide that all claims in respect of the Aircraft,
Engines and Parts shall be payable to Lessor or as it
may direct, such payee to be named Loss Payee; provided
that partial loss amounts up to $250,000 shall be
payable to Lessee unless the insurers have been given
notice that a Default has occurred;
(iii) if applicable, provide in respect of Hull All Risks and
Hull War and Allied Perils for a 50/50 Claims Settlement
Clause in the form of AVS.103.
B) In respect of Comprehensive Airline Liability insurance to:
(i) name the Lessor, its successors and assigns and its
shareholders, subsidiaries, directors, officers, agents,
employees and the Indemnitees as Additional Assureds.
(ii) provide that the insurance shall operate in all respects
as if a separate policy had been issued covering each
party insured hereunder, but this provision shall not
operate to include any claim howsoever arising in
respect of loss or damage to the Aircraft, Engines and
Parts insured under the All Risks
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<PAGE>
Hull, Hull War and Allied Perils or All Risks insurance
of the Assured.
Notwithstanding the foregoing the total liability of
insurers in respect of any and all Assureds shall not
exceed the limits of liability stated in the policy.
C) In respect of all insurances to:
(i) be effective worldwide except for territories approved
in writing by the Lessor.
(ii) provide that insurers waive all rights of subrogation
against the Lessor, its subcontractors, FAUSA, Fokker
Aircraft B.V., the Head Lessor, the Bank, and their
respective officers, directors, employees, servants,
agents, successors and assigns.
(iii) provide that in the event that the insurances are
cancelled (including cancellation for non payment of
premium) or are materially changed such cancellation or
change shall not be effective as to the interest of the
Additional Assureds until thirty (30) days (but seven
(7) days or such lesser period as is customarily
available in accordance with policy conditions in
respect of war and allied perils) after confirmed
receipt by Lessor of written notice by insurers of such
cancellation or change.
(iv) provide that in respect of the interest of the
Additional Assureds the insurances shall not be
invalidated by any act, neglect, omission,
misrepresentation or non-disclosure on the part of the
Lessee or any other party other than the Additional
Assured seeking to make a claim thereunder and shall
insure Lessor, and each Additional Assured regardless of
any breach or violation of any warranties, declarations
or conditions contained in such policies by the Lessee
or any other party other than the Additional Assured
seeking to make a claim thereunder.
(v) provide that the Additional Assureds shall have no
responsibility for premiums and Insurers shall waive any
right of set-off or
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<PAGE>
counter claim against the Additional Assureds except in
respect of outstanding premium in respect of the
Aircraft, Engines and Parts subject of a claim.
(vi) not provide for any deductible or self-insurance other
than the deductible allowed above.
(vii) be primary without right of contribution from any other
insurance carried by Lessor, Lessee or any other party.
D) if required, in respect of reinsurance to:
(i) provide that cover shall be identical to the cover
provided by the original insurances and be subject to
the same terms and conditions as the original
insurances.
(ii) provide that so far as the respective interests of the
Additional Assureds are concerned the reinsurance shall
not be invalidated by any act, neglect, omission,
misrepresentation or non-disclosure on the part of the
reinsured party.
(iii) provide that in respect of All Risks Aircraft Hull
insurance, Aircraft Hull War Risk and Allied Perils
insurance as described above and All Risks insurance on
any Engine and Parts as described above, the reinsurers
and the reassured hereby agree that in the event of any
claim arising under the relevant reinsurances the
reinsurers shall in lieu of payment to the reassured,
its successors in interest and assigns pay to the Loss
Payee specified in the primary insurances all sums
payable under or in connection with such reinsurances by
virtue of any reinsured loss of, or damage to, the
Aircraft, Engines or Parts, without any deduction or
deductions whatsoever, other than any outstanding
premium in respect of the Aircraft, Engines or Parts the
subject of the claim, it being understood and agreed
that any such payment by the reinsurers shall fully
discharge and release the reinsurers from any and all
further liability in connection therewith.
-5-
<PAGE>
(iv) provide that in respect of Comprehensive Airline
Liability insurance as described above, the reinsurers
and reassured hereby agree that in the event of any
claim arising under the relevant reinsurances, the
reinsurers shall in lieu of payment to the reassured,
its successors in interest and assigns pay to the person
or party who has sustained the relevant loss (or as
reimbursement of any payment made by any Additional
Assured) all sums payable under such reinsurances by
virtue of such reinsured loss, without any deduction or
deductions whatsoever, it being understood and agreed
that any such payment by the reinsurers shall fully
discharge and release the reinsurers from any and all
further liability in connection therewith;
(v) provide that the reinsurers and reassured agree that in
the event that the reassured, its successors in interest
and assigns shall at any time be or become insolvent or
suspend business or file a petition in bankruptcy or be
adjudicated insolvent or bankrupt or admit in writing
its inability to pay its debts as they become due, or
make a general assignment for the benefit of creditors
or that a receiver or liquidator or assignee or trustee
or state commissioner of insurance be appointed in
respect of the reassured its successors in interest or
assigns or any substantial part of its property for the
purpose of liquidation on account of insolvency, then
the reinsurers, in lieu of payment to the reassured its
successors in interest or assigns, shall pay upon demand
that portion of any loss due to the party entitled
thereto under the terms of the original insurance for
which such reinsurers would under the terms of the
reinsurance be liable to pay the reassured, its
successors in interest or assigns, less any amounts
already paid, it being understood and agreed that any
such direct payment by reinsurers shall fully discharge
and release the reinsurers from any and all further
liability for such payment made.
-6-
<PAGE>
APPENDIX I
To: (Lessor)
BROKER'S LETTER OF UNDERTAKING
We confirm that insurances (reinsurances) are in effect on and in respect of
aircraft FOKKER 100 REGISTRATION ______ for the period and in respect of the
risks as set out in the attached Certificate of Insurance.
We undertake to hold the insurance (reinsurance) slips or contracts and the
policies or any policies substituted therefore and the benefit of the insurance
(reinsurances) to the extent of your interest therein, to your order.
We further undertake:
1. to pay to the loss payee as stated in the Certificate of Insurance
(Reinsurance) without set off or deduction of any kind any and all
proceeds of the insurance (reinsurance) collected by us from the insurers
(reinsurers) in respect of loss or damage to the Aircraft, Parts, Engines,
components and equipment except for any outstanding premiums due in
respect of the Aircraft and the Parts, Engines, components and equipment.
2. to advise you promptly upon our becoming aware of:
(i) any change or alteration made or proposed to be made to the
insurances (reinsurances) which would be adverse to your interest.
(ii) any act or omission or any event which in our opinion may invalidate
or render unenforceable in whole or in part the insurance
(reinsurance) as far as your interest is concerned.
3. to advise you immediately:
(i) upon our receiving or becoming aware of any notice of cancellation
(including for non payment of premium) or material change given by
insurers (reinsurers) or the Assured.
(ii) if we have not received renewal instructions fifteen (15) business
days prior to the renewal date of the insurances (reinsurances) and
in the event of our receiving instructions to renew to advise you
promptly of the details thereof.
<PAGE>
(iii) upon our ceasing to be insurance brokers to the Assured (Reassured).
The above undertakings are given:
a) subject to our lien, if any, on the policies referred to above for
premiums due under such policies in respect of the aircraft and
subject to the insurers' right of cancellation on default in payment
of such premiums, but we undertake to advise you immediately if any
such premiums are not paid to us in due time in accordance with our
accounting procedures with the assured and insurers and to give you
a reasonable opportunity of paying such amounts of such premiums
outstanding before notification of non-payment of premiums to
insurers (reinsurers).
b) subject to our continuing appointment for the time being as
insurance brokers to Assured (Reassured).
All notices or advises given in accordance with the above undertakings shall be
communicated by telefacsimile or telex to the addressee at the above address.
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<PAGE>
APPENDIX J
FAA POWER OF ATTORNEY
This POWER OF ATTORNEY in favor of LESSOR [HEAD LESSOR] ("Lessor")
dated October ___, 1993 from MIDWAY AIRLINES CORPORATION ("Lessee") [is
consented to by BANK ("Bank")].
RECITALS:
A. Lessor and Lessee have entered into an Aircraft Operating Lease
Agreement (AOLAF No ______) dated as of October ___, 1993 (the
"Lease Agreement") with respect to the Fokker 100 aircraft, serial
no. ___, U.S. registration no. ________ (the "Aircraft").
B. Capitalized terms used herein and not otherwise defined shall have
the respective meanings ascribed to such terms in the Lease
Agreement.
NOW, THEREFORE, for good and valuable consideration, the adequacy of
which is hereby acknowledged, it is hereby agreed as follows:
Lessee hereby irrevocably constitutes and appoints Lessor, with full
power of substitution, for and in the name and on behalf of Lessee, as the act
and deed or otherwise of Lessee:
to direct, authorize and instruct the insurer or insurance broker
with respect to the Aircraft, as if Lessor were policy holder,
pursuant to Article 11.6 of the Lease Agreement, in order to
initiate, process and settle any insurance claim with respect to the
Aircraft, Engines or Parts;
to execute, sign, deliver, authorize and file such instruments
legally necessary for any and all actions necessary to take
possession and effect redelivery of the Aircraft, Engines or Parts
upon termination of the Lease Agreement due to an Event of Default;
to execute, sign, deliver and file all such instruments requested by
Lessor [Head Lessor] that may be required to deregister the Aircraft
from the FAA, or to terminate the Lease for the Aircraft that is
recorded at the FAA, or that may be deemed proper in or in
connection with all or any of the purposes aforesaid,
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<PAGE>
and to appoint substitutes or agents to take any such action on its
behalf.
Lessee hereby ratifies and confirms and agrees to ratify and confirm
any direction, authorization and instruction of Lessor [Head Lessor] taken
pursuant to this Power of Attorney.
This Power of Attorney shall expire on ________ ___, 200_ [11 years
from the Delivery Date of the Aircraft] or earlier termination of the Lease.
IN WITNESS WHEREOF, Lessee has duly caused this Power of Attorney to
be executed on the date first set forth above.
MIDWAY AIRLINES CORPORATION
By:
------------------------
Name:
Title:
Consented and Agreed:
[BANK]
By:
------------------------
Name:
Title:
[CERTIFIED RESOLUTIONS OF LESSEE AUTHORIZING THIS
POWER OF ATTORNEY TO BE ATTACHED]
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<PAGE>
AMENDMENT NO. 1
dated as of February 26, 1996
to
AIRCRAFT OPERATING LEASE AGREEMENT
No. 111
dated as of November 11, 1993
between
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee, as
Lessor
and
MIDWAY AIRLINES CORPORATION
as
Lessee
Aircraft: Fokker 100
Serial No./RN: 11444/N103ML
<PAGE>
THIS AMENDMENT No. 1 dated as of February 26, 1996 (this
"Amendment"), is between FIRST SECURITY BANK OF UTAH, N.A., a national banking
association existing pursuant to the laws of the United States, having its
principal place of business at 79 South Main Street, Salt Lake City, Utah
84130-0007, not in its individual capacity (except as expressly set forth in the
Lease) but solely as Owner Trustee under the Trust Agreement, ("Lessor") and
MIDWAY AIRLINES CORPORATION, a company incorporated under the laws of the State
of Delaware, having its principal place of business at 300 West Morgan Street,
Durham, North Carolina 27702 ("Lessee").
WHEREAS, Lessor and Lessee are parties to that certain Aircraft
Operating Lease Agreement No. 111, dated as of November 11, 1993, and recorded
by the Federal Aviation Administration on February 6, 1996 under conveyance
number FF19653, (as amended hereby, the "Lease"; capitalized terms used herein
and not otherwise defined herein shall have the meanings ascribed to them in the
Lease);
WHEREAS, debis AirFinance B.V. ("debis") is the beneficial owner of
the Aircraft;
WHEREAS, Lessee is in default under the Lease by reason of its
failure to make certain Rent payments due thereunder in December 1995 and
January and February 1996; and
WHEREAS, Lessor and Lessee desire to amend the Lease as hereinafter
set forth.
NOW THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Definitions.
(a) Section 1 of the Lease is hereby amended by deleting
sub-sections 1.11 and 1.52 thereof in their entirety and replacing them with the
following:
"1.11 Beneficiary shall mean debis AirFinance B.V., beneficiary under the
Trust Agreement, and its successors and permitted assigns.
1.52 Other Aircraft Agreements shall mean all other aircraft operating
lease agreements relating to other aircraft so long as such other
aircraft are leased to Lessee by a lessor for the benefit, directly
or indirectly, of debis or any affiliate of debis. For purposes of
this definition, affiliate shall mean any corporation or other
entity that, directly or indirectly, controls, is
<PAGE>
controlled by or is under common control with debis."
(b) Section 1 of the Lease is hereby further amended by deleting
"Fokker" and "FAUSA" from the definition of Indemnitee (subsection 1.39 thereof)
and adding "debis" in their stead. In addition, the references to "Fokker" and
"FAUSA" in Section 11.2(c)(ii) of the Lease are hereby deleted and replaced with
"debis".
2. Inspection.
Section 7 of the Lease is hereby amended by adding a new sub-section
7.6 thereto as follows:
"7.6 Lessee hereby acknowledges that the inspection rights and rights to
information and notice pursuant to this Section 7 shall extend to
debis as well as Lessor. In addition, without in any way limiting
the rights contained elsewhere in the Lease, debis shall have the
right to have observers (who may or may not be employees of debis)
on site at Lessee's premises (provided such observers do not
unreasonably interfere with Lessee's business or operations) and,
provided the recipients of any financial and operational information
of Lessee (which recipients may include employees or other
representatives of debis or any of its affiliates, or agents,
attorneys or accountants of debis or any of its affiliates) keep
strictly confidential any such information, debis shall have the
right to inspect and review any internal financial and operational
information of Lessee as debis may reasonably request (provided such
request is made to Lessee's controller or to a vice president,
senior vice president or the president of Lessee) including, without
limitation, cash flow statements, financial books and records, and
any other records relating to the operation of Lessee's fleet.
Lessee covenants that it will fully cooperate with debis regarding
any inspection of Lessee's fleet and records pursuant to the terms
of the Lease."
3. Default by Lessee.
Section 15 of the Lease is hereby amended as follows:
(a) Sub-section 15.1 is hereby amended by deleting paragraph (n)
thereof in its entirety and replacing it with the following:
2
<PAGE>
"(n) if an event of default (however defined) occurs under (i) any
of the Other Aircraft Agreements, (ii) any other lease
agreements between Lessee and a lessor for the benefit,
directly or indirectly, of Fokker, FAUSA, Daimler-Benz
Aerospace A.G. or any affiliate of any of them, relating to
other aircraft ("Fokker Aircraft Agreements") or (iii) any
aircraft maintenance agreement or other agreement entered into
by Lessee in lieu of Reserve Rate payments ("Maintenance
Agreements") , which event permits acceleration or
termination; or"
(b) Sub-section 15.1 is further amended by deleting the period at
the end of paragraph (q) thereof and replacing it with a semicolon and the word
"or" and by adding new paragraphs (r), (s) and (t) thereto as follows:
"(r) if Lessee's financial performance deviates in any material
adverse way (as determined by debis in its sole, but
reasonable discretion) from the projections set forth on
Lessee's Business Plan for calendar year 1996 (attached hereto
as Exhibit A), taken as a whole, and such deviation is not the
result of a natural disaster which effectively makes it
impossible for Lessee to meet such projections; or
(s) if, prior to satisfaction of Lessee's obligation to pay
Default Payments pursuant to Section 6 of this Amendment,
Lessee shall make (i) any payment of principal or interest on
any amounts owed by Lessee to Zell/Chilmark Fund, L.P.
("Zell") or any affiliate of Zell, (ii) any redemption of, or
any dividend or distribution with respect to, any shares of
Lessee owned by Zell or any affiliate of Zell, (iii) any
prepayment of principal or interest with respect to any other
subordinated debt owed by Lessee or (iv) any redemption of, or
any dividend or other distribution with respect to, any other
shares of Lessee; or
(t) if Lessee shall fail to fulfill any of the obligations set
forth in paragraphs (c) or (d) of Section 6 of this
Amendment."
3
<PAGE>
(c) Sub-section 15.2 is hereby amended by adding "(a), (n), (t)" to
clause (i) of paragraph (b) thereof following the word "paragraphs"; it being
understood that the effect of this amendment is to include payment defaults,
cross-defaults with Other Aircraft Agreements, Fokker Aircraft Agreements and
Maintenance Agreements, and failure to fulfill any of the obligations set forth
in paragraphs (c) or (d) of Section 6 of this Amendment as events giving rise to
automatic termination of the Lease without the necessity of any service of
notice thereof upon Lessee; provided, however, that such automatic termination
shall not apply with respect to defaults of the type referred to in paragraphs
(a) or (n) of sub-section 15.1 of the Lease prior to the date hereof or for
payment defaults for Rent Dates occurring in February and March 1996, for so
long as Lessee fulfills the obligations set forth in paragraphs (c) and (d) of
Section 6 of this Amendment.
4. Return of Aircraft.
Section 16 of the Lease is hereby amended by adding a new
sub-section 16.9 thereto as follows:
"16.9 Notwithstanding anything to the contrary contained in the Lease, on
the Expiry Date or upon earlier termination of the Term including,
without limitation, any termination of the Lease pursuant to Section
15 (unless a Casualty Occurrence shall have occurred with respect to
the Aircraft), Lessee shall immediately deliver possession of the
Aircraft to Lessor at Schiphol Airport, the Netherlands (or such
other location as Lessor may require) and hereby covenants that it
will not interpose any defense to any action commenced by Lessor to
regain possession of the Aircraft. The foregoing shall apply whether
or not Lessee is or shall subsequently become a debtor in a case
under Title 11, U.S.C., and in such event, Lessee covenants that it
will not oppose, and will join in, any application by Lessor seeking
to regain possession of the Aircraft."
5. Notice.
Section 19 of the Lease is hereby amended by deleting clause (2) of
paragraph (d) of sub-section 19.6 thereof in its entirety and replacing it with
the following:
4
<PAGE>
"(2) to Lessor at:
First Security Bank of Utah, N.A.
79 South Main Street
Salt Lake City, Utah 84130-0007
Tel: (801) 246-5630
Fax: (801) 246-5053
Attention: Corporate Trust Department
with a copy to debis at:
Evert van de Beekstraat 22,
NL-1118 CL Luchthaven Schiphol,
Amsterdam Airport Schiphol
Tel: 011 3120 316-1431
Fax: 011 3120 653-5419"
6. Forbearance. Execution of this Amendment shall serve as Lessor's
agreement to forebear from exercising its rights (including, without limitation,
its rights under Section 15 of the Lease) with respect to:
(a) Lessee's failure to make payments of Rent or security deposit
amounts due under the Lease prior to the date of this Amendment and for the Rent
Date occurring in March 1996; and
(b) Lessee's failure to make payment of Reserve Rate constituting
Engine Maintenance Accruals due under the Other Aircraft Agreements identified
as AOLAF 135, 524 and 525 on account of Flight Hours and/or Cycles operated
prior to February 1, 1996;
provided, however, that Lessor's agreement to forbear shall be
effective for so long, and only so long, as Lessee otherwise complies with all
the terms of the Lease, as amended, and fulfills the obligations set forth in
paragraphs (c) and (d) of this Section 6, as follows:
(c) Lessee shall pay to Lessor the following amounts (which amounts
Lessee hereby agrees to pay):
(i) [***] on the Rent Date occurring in February 1996;
(ii) [***] on the Rent Date occurring in March 1996; and
(iii) Amounts identified on Exhibit B to this Amendment ("Default
Payments") on the Rent Date occurring in April 1996 and for
the next
5
<PAGE>
succeeding forty-seven (47) Rent Dates thereafter; it being
understood that Lessee shall pay such Default Payments
together with Rent and any other amounts otherwise due
pursuant to the Lease. Lessee may satisfy its obligations to
pay the Default Payments at any time by paying the portion of
all such Default Payments which constitutes principal,
together with the portion of such Default Payments which
constitutes interest accrued and unpaid as of the date of
payment, all as reflected on Exhibit B to this Amendment.
(d) On or before March 7, 1996, Lessee shall pay all unpaid Reserve
Rate owed with respect to Other Aircraft Agreements identified as AOLAF 135, 524
and 525, or shall enter into a maintenance agreement reasonably satisfactory to
debis providing for the maintenance of the engines of the Aircraft which are the
subject of such Other Aircraft Agreements.
Execution of this Amendment shall not constitute a waiver of any Rent payment
defaults or of any other defaults which may have occurred and be continuing or
which may occur in the future. Lessor's agreement to forbear shall terminate
automatically if Lessee fails to fulfill any of the obligations set forth in
paragraphs (c) or (d) of Section 6 of this Amendment or if any Event of Default
occurs or has occurred and is continuing under the Lease (other than an Event of
Default to which this forbearance agreement set forth in Section 6 of this
Amendment applies). For so long, and only so long as Lessor's agreement to
forbear has not terminated, and provided that the obligation set forth in
paragraph (d) of Section 6 of this Amendment has been fulfilled (i) Lessee shall
be entitled to exercise its rights and privileges under Sections 5.1.2(b),
5.1.3, 7.4.1 and 13.3 of the Lease and (ii) Lessor shall be deemed to have
elected not to apply the Deposit to sums due or to become due to Lessor pursuant
to Section 1 of Appendix D of the Lease, notwithstanding the occurrence and
continuation of a Default or Event of Default under the Lease.
7. Payments
Paragraph 4 of Exhibit D to the Lease is hereby amended by deleting
the first sentence thereof and replacing it with the following:
"All payments due hereunder shall be effected by Lessee to Lessor to
Bank of New York, in New York, New York, ABA # 021-000-018, Account
No. 802-6002-533 in
6
<PAGE>
favor of Rabobank Nederland, New York Branch, Account No. 14102, in
favor of debis AirFinance B.V., or to such other account as debis
may designate in writing, and all such payments shall be in Dollars
and in immediately available funds, and all such payments shall be
initiated adequately in advance of the due dates to ensure that
Lessor receives credit for the full amount of such payment on the
due dates."
8. Governing Law. This Amendment shall be governed by and construed
in accordance with the internal laws of the State of New York and without regard
to any conflict of law rules. This Amendment is being delivered in the State of
New York.
9. Miscellaneous. Except as specifically amended or supplemented by
this Amendment, the Lease is hereby ratified, approved, confirmed and continued
in all respects and all provisions of the Lease as heretofore amended shall
remain in full force and effect. The parties hereto acknowledge and confirm that
the Lease is intended to be a true lease and not a financing arrangement. This
Amendment may be executed in any number of counterparts, and all of such
counterparts taken together shall be deemed and constitute one and the same
instrument.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee
By: /s/ [illegible]
--------------------------------
Title: Asst Vice President
SIGNED on behalf of
MIDWAY AIRLINES CORPORATION
By:
--------------------------------
Title:
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee
By:
--------------------------------
Title:
SIGNED on behalf of
MIDWAY AIRLINES CORPORATION
By: /s/ Jonathan S. Waller
--------------------------------
Title:
JONATHAN S. WALLER
SENIOR VICE PRESIDENT
GENERAL COUNSEL
8
<PAGE>
EXHIBIT A
[***]
(2 pages omitted)
<PAGE>
EXHIBIT B
[***]
(2 pages omitted)
<PAGE>
AMENDMENT NO. 2
dated as of January 31, 1997
to
AIRCRAFT OPERATING LEASE AGREEMENT
NO. 111
dated as of November 11,1993
between
FIRST SECURITY BANK, N.A., formerly known as
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee, as
Lessor
and
MIDWAY AIRLINES CORPORATION, as
Lessee
Aircraft: Fokker 100
Serial No./RN: 11444/N103ML
<PAGE>
THIS AMENDMENT NO. 2 dated as of January 31, 1997 (this
"Amendment"), is between FIRST SECURITY BANK, N.A., formerly known as First
Security Bank of Utah, N.A., a national banking association existing pursuant to
the laws of the United States, having its principal place of business at 79
South Main Street, Salt Lake City, Utah 84130-0007, not in its individual
capacity (except as expressly set forth in the Lease) but solely as Owner
Trustee under the Trust Agreement ("Lessor"), and MIDWAY AIRLINES CORPORATION, a
company incorporated under the laws of the State of Delaware, having its
principal place of business at 300 West Morgan Street, Durham, North Carolina
27701 ("Lessee").
WHEREAS, Lessor and Lessee are parties to that certain Aircraft
Operating Lease Agreement No. 111, dated as of November 11, 1993, (as amended
from time to time, the "Lease"; capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the Lease);
WHEREAS, Lessor and Lessee entered into Amendment No. 1 to the
Lease, dated as of February 26, 1996 ("Amendment No. 1");
WHEREAS, debis AirFinance B.V. ("debis AF") is the beneficial owner
of the Aircraft;
WHEREAS, debis AF, Lessee, and Lessor entered into a Deferral
Agreement dated as of October 25, 1996 ("Deferral Agreement"), which provided
for the deferral of certain payments due under the Lease, and amended the Lease
in certain other respects;
WHEREAS, debis AF and Lessee entered into an Amendment to Deferral
Agreements dated as of December 30, 1996, which modified the Deferral Agreement
in certain respects (the "Amendment to Deferral Agreements");
WHEREAS, Lessee has entered into an Agreement and Plan of Merger
dated as of January 17, 1997 (as amended, the "Merger Agreement") with GoodAero,
Inc., a Delaware corporation ("GoodAero") and Zell/Chilmark Fund, L.P., a
Delaware limited partnership, whereby it is proposed that GoodAero will be
merged into Lessee to effect a recapitalization of Lessee (the "Merger"),
subject to certain conditions precedent having been satisfied; and
WHEREAS, Lessor and Lessee desire to amend the Lease to become
effective upon the consummation of the Merger and to enter into further
agreements as hereinafter set forth.
NOW THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Amendment of Lease. The Lease is hereby amended as follows:
(a) Section 1 of the Lease is amended by eliminating the
period at the end of Subsection 1.27 thereof, and by inserting in lieu thereof
the following clause:
<PAGE>
"or such earlier date as may be specified by Lessor pursuant
to notice given in accordance with, and subject to the terms
of Section 16.10 hereof."
(b) Section 1.52 of the Lease is amended by deleting the
period at the end of the first sentence and by inserting the following in lieu
thereof: "or any successor or assign thereof.
(c) Section 6.4 of the Lease is amended as follows: (a) by
deleting subsection (i) thereof in its entirety and by inserting in lieu thereof
the following: "(i) any financial reports or projections supplied to the
majority shareholder of Lessee"; and (b) by deleting the words "upon Lessor
requesting the same" from subsection (ii) thereof.
(d) Section 11.1(a) of the Lease is amended by deleting the
period at the end thereof and by inserting the following clause:
provided, however, that the deductible may be $500,000
(Dollars Five Hundred Thousand) for each accident, but only if
Lessee procures and maintains in favor of debis AirFinance
B.V. for the benefit of the Beneficiary and/or the Lessor
under each of the Leases identified on Schedule 16.10 hereof
(as those terms are defined therein) an irrevocable letter of
credit (the "Letter of Credit") in the face amount of $800,000
(Dollars Eight Hundred Thousand) issued by Wachovia Bank or
another banking institution reasonably acceptable to debis
AirFinance B.V. and in a form reasonably acceptable to debis
AirFinance B.V. containing the terms set forth in Schedule
11.1(a).1 of this Lease; provided, however, that Lessee may
reduce the amount of the Letter of Credit to $400,000 in any
year where Lessee's audited financial statements for the prior
year show that Lessee had net income (as determined in
accordance with generally accepted accounting principles ("Net
Income")) greater than the amount for such prior year
identified as "Net Income (1)" on Schedule 11.1(a).2, but
less than the amount for such prior year identified as "Net
Income (2)" on Schedule 11.1(a).2; and Lessee shall not be
required to maintain the Letter of Credit in any year where
Lessee's audited financial statements for the prior year show
that Lessee had Net Income for such prior year greater than
the amount for such prior year identified as "Net Income (2)"
on Schedule 11.1(a).2; and provided, further, that
notwithstanding any reduction or cancellation of the Letter of
Credit in accordance with the terms hereof, Lessee shall be
required to restore the Letter of Credit in any year where
Lessee's audited financial statements for the immediately
preceding year show that Lessee's Net Income was less than the
threshold set by Schedule 11.1(a).2 for such prior year for
reduction of the Letter of Credit or in any year in which
audited financials for Lessee for the immediately
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<PAGE>
preceding year have not been certified on or before April 15
following such preceding year. For purposes of determining the
amount required for the Letter of Credit in any year,
reductions, if any, shall not be permitted until 30 days after
receipt by debis AirFinance B.V. of the audited financial
statements of Lessee for the prior year and, in the event that
the Letter of Credit is to be reinstated or increased in any
year as aforedescribed, such Letter of Credit shall be
required on or before April 15 of such year. Any failure by
Lessee to comply with the provisions of this Section 11.1(a)
shall be an Event of Default under Section 15.1(b) of the
Lease.
(e) Section 14.1(b) of the Lease is amended by deleting the
semicolon at the end of such Section and by inserting in lieu thereof the
following clause:
"the failure with which to comply is likely to have a material
adverse effect on Lessee; provided, however, that such failure
shall have no adverse effect on the Aircraft or on the
interests of Lessor the Bank therein or in this Agreement or
on the Insurances required to be maintained pursuant to
Article 11."
(f) Section 14.1(p) is amended by deleting the same in its
entirety and by inserting in lieu thereof the following:
"not become the surviving corporation of a merger with any
other entity, or itself consolidate with, or merge into, any
other corporation, or convey, transfer or lease substantially
all of its assets as entirety to any person, without the prior
written consent of Lessor (such consent not to be unreasonably
withheld) and the execution and delivery to Lessor of such
agreements, certificates and legal opinions as Lessor may
reasonably request with respect thereto;"
(g) Section 14.1(q) of the Lease is deleted in its entirety.
(h) Section 15.1(a) of the Lease is amended by deleting the
same in its entirety and by inserting in lieu thereof the following:
"if default shall be made by Lessee in the making of any Rent,
Reserve Rate, or Supplemental Rent payment within five (5)
Business Days after the date when such payment is due and
payable under this Lease."
(i) Section 15.1(e) of the Lease is deleted in its entirety
and the following is inserted in lieu thereof:
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<PAGE>
"if (i) if Lessee or any of its subsidiaries is in default
under any lease, hire-purchase, conditional sale or credit
sale agreement for equipment having a casualty value in excess
of [***] and such default is not cured or waived within
the applicable grace period or five (5) Business Days
(whichever is greater); (ii) (regardless of the amount of
money involved), any event occurs which with or without notice
or lapse of time or both would constitute a default under any
agreement between Lessee and, or promissory note executed by
Lessee in favor of, (a) [***]; (b) Zell/Chilmark Fund, L.P.;
(c) [***]; (d) [***]; (e) any affiliate of any of
the foregoing; unless such default or event of default is
cured or waived within the applicable grace period or five (5)
Business Days (whichever is greater); or (iii) any
indebtedness owed by Lessee or any of its subsidiaries in an
amount in excess of [***] is not paid when due or becomes
due or capable of being declared due prior to the date when it
would otherwise become due provided, however, the failure of
Lessee to pay amounts [***] Event of Default hereunder."
(j) Section 15.1(n) is modified by inserting the following
clause after the word "affiliate": ", successor or assign".
(k) Sections 15.1(o), (p), (q), (r), (s) and (t) are deleted
in their entirety and the following new Sections 15.1(o) and (p) are inserted in
lieu thereof:
"(o) if, an Event of Default shall occur under and as defined
in that certain Promissory Note dated as of January 31, 1997
from the Lessee to debis AirFinance B.V. or under, and as
defined in that certain Promissory Note dated as of January
31, 1997 from the Lessee to DASA Aircraft Finance XVI, B.V.
(each, a "Note" and collectively, the "Notes");
(p) if, prior to satisfaction of Lessee's obligations pursuant
to the Notes, Lessee shall make (i) any payment of principal
or interest on any debt owed by Lessee to Zell/Chilmark Fund,
L.P. or to any holder of equity in Lessee representing the
right to vote twenty percent (20%) or more of the stock in
Lessee on any matter presented for vote to the shareholders of
Lessee (an "Insider") or any affiliate of an Insider; or (ii)
any redemption of, or any dividend or
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<PAGE>
distribution with respect to, any shares of Lessee owned by an
Insider or any affiliate thereof."
(l) Section 15.2 is amended by deleting clause (i) of
paragraph (b) thereof in its entirety and inserting the following new clause (i)
in lieu thereof:
"(i) serving notice of such termination on Lessee specifying
the occurrence giving rise to such Event of Default or Events
of Default, provided that such notice shall be deemed to have
been served without the necessity of actual service and this
Lease shall terminate automatically without the necessity of
any service of notice thereof upon Lessee upon the occurrence
of any Event of Default described in paragraphs (a), (f), (g),
(h), (n) or (o) of Section 15.1 of this Lease; provided,
however, that actual service of notice of such termination on
Lessee shall be required where an Event of Default described
in paragraph (n) of Section 15.1 of the Lease has occurred
solely by reason of occurrence of an event of default under an
Other Aircraft Agreement or under a Fokker Aircraft Agreement,
which event of default does not, under the terms of such Other
Aircraft Agreement or Fokker Aircraft Agreement, result in
automatic termination of such Other Aircraft Agreement or such
Fokker Aircraft Agreement."
(m) Article 16 of the Lease is amended by adding a new Section
16.10 as follows:
"(a) Notwithstanding anything to the contrary contained in
this Lease, Lessor may terminate this Lease by giving not less
than six (6) months' prior written notice of the termination
date to Lessee provided that in no event may Lessor choose a
termination date earlier than September 15, 1998 ("Lessor's
Termination Option") and the termination date specified in
such notice shall become the Expiry Date; provided, however,
that (subject to the following sentence) Lessor shall not be
entitled to exercise Lessor's Termination Option with respect
to this Lease where the same would result in the termination
of four (4) or more of the aircraft operating lease agreements
identified in Schedule 16.10 to the Lease in any twelve (12)
month period, taking into account the scheduled or actual
Expiry Date of each such aircraft operating lease agreement.
Nothing herein shall be construed to limit the Lessor's rights
upon the occurrence of any Default or Event of Default or upon
the termination of this Lease as a result thereof or upon the
expiration of any Lease in the absence of the exercise of
Lessor's Termination Option.
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<PAGE>
(b) Lessee shall in no event be liable for any costs,
expenses, liabilities, losses, damages or amounts incurred by
Lessor which arise solely from the Lessor exercising Lessor's
Termination Option hereunder such as the loss of any tax
benefit, or fees or penalties arising from the breakage of any
contract or agreement. Except as expressly provided in
subsection (c) below, Lessor shall in no event be liable for
any costs, expenses, liabilities, losses, damages or amounts
incurred by Lessee as a result of Lessor exercising Lessor's
Termination Option in accordance with this Section 16.10.
(c) Notwithstanding the terms of clause (b) above, if Lessor
exercises Lessor's Termination Option hereunder in accordance
with this Article 16.10, then Lessee shall be responsible for
performing all of its obligations under and in accordance with
the terms of this Section 16, subject to the following:
(i) the Lessor shall pay or cause to be paid to Lessee
for Lessee's application against the "C Check" completed
pursuant to Appendix E, Item 1(e), an amount equal to
the lesser of (x) $100,000 or (y) an amount equal to the
product of the full cost of the "C Check" completed by
Lessee pursuant to Appendix E, Item 1(e) on the Aircraft
multiplied by a fraction, the numerator of which is the
number of hours (including fractions of an hour)
remaining on the Aircraft until Lessee's next scheduled
"C Check" for the Aircraft (assuming Lessor had not
exercised Lessor's Termination Option hereunder) and the
denominator of which is 3000; and
(ii) for purposes of Section 7.4.1(b) and (c), any shop
visit required to meet the conditions of Appendix E
shall be deemed a "scheduled" shop visit."
(n) Section 18.6 of the Lease is amended (i) by deleting the
firm of "Winston & Strawn, Attn: R. Evan Smith, 175 Water Street, New York, NY
10038" as agent for Lessee and by inserting in lieu thereof the new agent for
Lessee as follows: "Paul, Hastings, Janofsky & Walker, Attn: Jon Howitt, 399
Park Avenue, New York, NY 10022; and (ii) by deleting the firm of "Haight,
Gardner, Poor & Havens, Attn: Bonny L.Y. Kwoh, 195 Broadway, New York, NY 10007"
as agent for Lessor and by inserting in lieu thereof the new agent for Lessor as
follows: "Hertzog, Calamari & Gleason, Attn: Carla Craig, 100 Park Avenue, New
York, New York 10017".
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<PAGE>
(o) Appendix B to the Lease is hereby amended as follows:
(i) The amount set forth as the "AGREED VALUE" is deleted in
its entirety and the amount of [***] is substituted therefor.
(ii) The Amount set forth as "RENT" is deleted in its entirety
and the amount of [***] is substituted therefor.
(p) Appendix D to the Lease is hereby amended by deleting
Sections 2.2 through 2.7 in their entirety and by deleting Section 1 in its
entirety and inserting the following in lieu thereof:
"1. Deposit. Lessee has paid to Lessor the amount set forth on
Schedule B.1 as a Deposit for the Aircraft prior to January 31 1997.
Lessor has applied such Deposit (plus all accrued interest thereon)
to the Default Payments (as defined in Section 6 of Amendment No. 1
to this Lease) and/or to Default Payments (as defined in Section 6
of Amendment No. 1 to the Other Aircraft Agreements)."
(q) Appendix D is hereby amended by (a) deleting the first
word of Section 3.1 thereof and by inserting the following in lieu thereof:
"Lessee shall be relieved of its obligation to pay the Reserve Rate
at any time that the Aircraft Maintenance Agreement between Lessee
and American Airlines, Inc., dated as of November 1, 1993, or any
subsequent aircraft maintenance agreement between Lessee and any
Authorized Maintenance Performer, which in the reasonable opinion of
Lessor, is in substance substantially similar to such Aircraft
Maintenance Agreement is in effect with respect to the Aircraft. At
any time that the above-referenced Aircraft Maintenance Agreement,
or such subsequent aircraft maintenance agreement is not in effect,
then Lessee shall, in";
and (b) by adding the following sentence after subsection (d) of Section 3.1
thereof:
"In the event that Lessee enters into any substitute maintenance
agreement in lieu of paying Engine Maintenance Accrual, such
substitute agreement shall be similar in substance to the Approved
Maintenance Agreement (as that term is defined in Amendment No.
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<PAGE>
2 and Consent, each dated as of May, 1996, with respect to Aircraft
Operating Lease Agreements Nos. 524, 525, and 135, each between
Midway Airlines Corporation, as Lessor, and First Security Bank of
Utah, N.A., as Lessee (collectively, "Amendment No. 2"); and in such
event Lessee shall pay to Lessor as Reserve Rate, on the date when
Reserve Rate is due, an amount calculated, for the Lease, in the
same manner as Reduced Engine Maintenance Accrual (as that term is
defined in Amendment No. 2)."
(r) Schedule 16.10 attached to this Amendment is hereby
attached to the Lease as Schedule 16.10 thereto and is incorporated therein.
2. Waiver of Default. Lessor agrees that any Default or Event of
Default under Sections 15.1(a), 15.1(e), 15.1(g) or 15.1(r) of the Lease (prior
to the amendment of any such Sections hereunder) which occurred prior to the
date of this Amendment is hereby deemed to have been cured by Lessee and Lessor
waives any rights or remedies it may have had with respect to the occurrence of
any such Default or Event of Default.
3. Representations Warranties and Covenants
The following shall be, as applicable, representations, warranties
or covenants of Lessee pursuant to Articles 13 and 14 of the Lease:
(a) Representations
(i) This Amendment and the Notes have been duly entered into
and delivered by Lessee, and each constitutes a valid, legal and binding
obligation of Lessee enforceable against Lessee in accordance with its terms.
(ii) As of the date of this Amendment, Lessee has entered,
or will contemporaneously herewith enter, into an agreement with [***] having
terms which are substantially in accordance with the terms set forth under
the heading [***] in Exhibit 6.02(k) to the Agreement and Plan of Merger dated
as of January 17, 1997 by and among GoodAero, Inc., James H. Goodnight, John
P. Sall, Midway Airlines Corporation and Zell/Chilmark Fund, L.P., as
amended, except to the extent otherwise specifically set forth in the letter
dated as of February 10, 1997, from Lessee to Lessor.
(b) Covenants
Lessee covenants that it will not make any prepayment in
respect of the Promissory Note dated February 7, 1997 in the amount of [***],
or amend the [***] to provide for terms more favorable to the payee thereof
(including, without limitation, any increase in the interest rate or
acceleration of payment).
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<PAGE>
4. Deferral Agreement. Lessor and Lessee agree that the Deferral
Agreement and the Amendment to Deferral Agreements are hereby declared null and
void and shall have no further force or effect with respect to the Lease.
5. Merger. Lessor hereby consents to the Merger.
6. Governing Law. This Amendment shall be governed by and construed
in accordance with the internal laws of the State of New York and without regard
to any conflict of law rules. This Amendment is being delivered in the State of
New York.
7. Miscellaneous. Except as specifically amended or supplemented by
this Amendment, the Lease is hereby ratified, approved, confirmed and continued
in all respects and all provisions of the Lease as heretofore amended shall
remain in full force and effect. The parties hereto acknowledge and confirm that
the Lease is intended to be a true lease and not a financing arrangement. This
Amendment may be executed in any number of counterparts, and all of such
counterparts taken together shall be deemed and constitute one and the same
instrument.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
on the day and year first above written.
FIRST SECURITY BANK, N.A., formerly
known as First Security Bank of
Utah, N.A. not in its individual
capacity but solely as owner trustee
By: /s/ Greg A. Hawley
---------------------------------
Name: Greg A. Hawley
Title: Vice President
MIDWAY AIRLINES CORPORATION
By: /s/ Jonathan S. Waller
---------------------------------
Name:
Title:
<PAGE>
Schedule 11.1(a).1
The Letter of Credit shall contain the following terms:
debis AirFinance B.V. shall be entitled to draw amounts under the Letter of
Credit upon notice to the issuing bank signed by debis AirFinance B.V. stating
that amounts are due under one or more of the following, and that such amounts
remain unpaid:
Promissory Note dated as of January 31, 1997 executed by Midway
Airlines Corporation in favor of debis AirFinance B.V.
Promissory Note dated as of January 31, 1997 executed by Midway
Airlines Corporation in favor of Daimler-Benz Aerospace A.G.
Aircraft Operating Lease Agreement No. 111 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 112 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 113 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 114 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 135 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 136 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 524 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 525 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
<PAGE>
Aircraft Operating Lease Agreement No. 115-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
Aircraft Operating Lease Agreement No. 116-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
Aircraft Operating Lease Agreement No. 117-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
Aircraft Operating Lease Agreement No. 118-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
<PAGE>
Schedule 11.1(a).2
Midway Airlines
Net Income Thresholds for Reduction in Amount of Letter of Credit Pursuant to
Section 11.1(a)
US$ millions
Year 1997 1998 1999 2000 2001
Net Income(2) 12.0 18.0 25.2 32.8 41.0
Net Income(1) 8.0 12.0 16.8 21.8 27.3
Year 2002 2003 2004 2005 2006
Net Income(2) 49.1 57.7 67.8 67.8 67.8
Net Income(1) 32.8 38.5 45.2 45.2 45.2
Year 2007 2008 2009 2010 2011
Net Income(2) 67.8 67.8 67.8 67.8 67.8
Net Income(1) 45.2 45.2 45.2 45.2 45.2
Year 2012 2013 2014
Net Income(2) 67.8 67.8 67.8
Net Income(1) 45.2 45.2 45.2
Amount of
Letter of Credit
$800,000 If actual Net Income is less than or equal to Net Income(1)
$400,000 If actual Net Income is greater than Net Income(1) but less than or
equal to Net Income(2)
0 If actual Net Income is greater than Net Income(2)
<PAGE>
Schedule 16.10
1. Aircraft Operating Lease Agreement No. 111, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
2. Aircraft Operating Lease Agreement No. 112, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
3. Aircraft Operating Lease Agreement No. 113, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
4. Aircraft Operating Lease Agreement No. 114, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
5. Aircraft Operating Lease Agreement No. AOLAF-115-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
6. Aircraft Operating Lease Agreement No. AOLAF-116-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
7. Aircraft Operating Lease Agreement No. AOLAF-117-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
8. Aircraft Operating Lease Agreement No. AOLAF-118-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
9. Aircraft Operating Lease Agreement No. 135, dated as of July 20, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
10. Aircraft Operating Lease Agreement No. 136, dated as of December 15, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
11. Aircraft Operating Lease Agreement No. 524, dated as of August 1, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
12. Aircraft Operating Lease Agreement No. 525, dated as of October 15, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
<PAGE>
Schedule B.1
Security Deposits Paid by Midway
Aircraft AOLAF Deposit
MSN No. Paid
-------- ----- -------
11321 525 [***]
11323 524 [***]
11329 135 [***]
11330 136 [***]
11444 111 [***]
11445 112 [***]
11475 113 [***]
11477 114 [***]
11450 115 [***]
11484 116 [***]
11485 117 [***]
11486 118 [***]
<PAGE>
EXHIBIT 10.4
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS
EXHIBIT. THE CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE
DENOTED BY {***}. THE CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
F-100 LEASE #112
(TAIL # N104ML)
<PAGE>
[Letterhead of debis AirFinance B.V.]
16 October 1998
By fax: +1 919 956 4801 / + 1 919 956 8619
Midway Airlines Corporation
300 W. Morgan St.
Durham, North Carolina 27702
Attention: President
Copy to: Steven Westberg, Senior Vice President Finance and
Planning & Lyn Dorman, Finance Department
Notification of Change of Bank Account
Re: Change of bank account in relation to all payments under Aircraft
Operating Lease Agreement No. AOLAF-112 dated as of November 11,
1993, as amended from time to time, relating to one (1) Fokker 100
aircraft bearing manufacturer's serial number: 11445 (the "Lease").
Beneficiaty: American Aircraft Finance I B.V.
Dear Sirs,
We refer to the Lease and the Amendment No. 1 thereto, dated as of February 26,
1996 (the "Amendment"), each agreement between First Security Bank of Utah,
N.A., not in its individual capacity, but solely as owner trustee under the
trust agreement ("Lessor") and Midway Airlines Corporation ("Lessee").
In accordance with Section 7 (Payments) of the Amendment, debis AirFinance B.V.
herewith formally designates for all payments the following new account:
Rabobank International, Utrecht, the Netherlands,
account number 1010.56.966
Please note that payment of the invoices effective from November 1996 has to be
effected to this new account.
1
<PAGE>
For the avoidance of doubt, save for the change of account nothing in this
notification shall have the effect at supplementing or amending the Lease and
the Amendment and all provisions of the Lease as heretofore amended, shall
remain in full force and effect.
Yours sincerely,
debis AirFinance B.V.
/s/ F. Haspel /s/ S. Engels
F. Haspel S. Engels
Managing Director (CEO) Managing Director
Acknowledged for receipt on behalf of Midway Airlines Corporation by:
Name :
Its :
2
<PAGE>
THE SINGLE EXECUTED ORIGINAL OF THIS AGREEMENT MARKED "ORIGINAL" SHALL BE
THE "ORIGINAL" AND ALL OTHER COUNTERPARTS OF THIS AGREEMENT SHALL BE DUPLICATES
AND MARKED "DUPLICATE" OR "DUPLICATE ORIGINAL". TO THE EXTENT THAT THIS
AGREEMENT AND CERTIFICATE OF ACCEPTANCE RELATED THERETO CONSTITUTES CHATTEL
PAPER, AS SUCH TERM IS DEFINED IN TIRE UNIFORM COMMERCIAL CODE AS IN EFFECT IN
ANY APPLICABLE JURISDICTION, NO SECURITY INTEREST MAY BE CREATED THROUGH
TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE "ORIGINAL".
LONG TERM LEASE
AIRCRAFT OPERATING LEASE AGREEMENT
No. AOLAF-112
Dated as of
November 11, 1993
between
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual
capacity but solely as trustee,
as
Lessor
and
MIDWAY AIRLINES CORPORATION
as
Lessee
Aircraft : Fokker 100
Serial No : 11445
Date November 11, 1993
<PAGE>
INDEX
ARTICLE PAGE
- ------- ----
1. Definitions .................................................. 1
2. Agreement to Lease ........................................... 12
3. Term; Delivery; Acceptance; Delay ............................ 16
4. Registration and Title ....................................... 18
5. Possession and Use ........................................... 20
6. Charges, Method of Payment and Financial Information ......... 25
7. Maintenance .................................................. 27
8. Taxes, Duties and Expenses ................................... 32
9. Liens ........................................................ 36
10. Indemnification .............................................. 37
12. Insurance .................................................... 39
12. Assignment and Subletting .................................... 46
13. Disclaimer, Representations and Warranties ................... 50
14. Covenants of Lessee .......................................... 55
15. Default by Lessee ............................................ 59
16. Return of Aircraft ........................................... 65
17. Casualty Occurrences ......................................... 67
18. Governing Law and Jurisdiction ............................... 70
19. Miscellaneous ................................................ 71
i
<PAGE>
APPENDICES
A. Description of Aircraft
B. Further Definitions and Values
C. Certificate of Acceptance
D. Charges
E. Operating Condition at Re-Delivery
F. Aircraft Documents
G. Legal Opinion
H. Certificate of Insurance
I. Broker's Letter of Undertaking
J. FAA Power of Attorney
K. Order of the Bankruptcy Court
-ii-
<PAGE>
AIRCRAFT OPERATING LEASE AGREEMENT
No. AOLAF-112
THIS AIRCRAFT OPERATING AGREEMENT No. AOLAF-112 is made as of the
11th day of November, 1993 between FIRST SECURITY BANK OF UTAH, NA., a national
banking association existing pursuant to the laws of the United States, having
its principal place of business at 79 South Main Street, Salt Lake City, Utah
84130-0007, not in its individual capacity (except as expressly herein set
forth) but solely as Owner Trustee under the Trust Agreement (as defined in
Article 1 hereof) and its permitted successors and assigns (herein referred to
as "Lessor") and MIDWAY AIRLINES CORPORATION a company incorporated under the
laws of the State of Delaware, having its principal place of business at 5713
South Central Avenue, Chicago, Illinois 60638 and its permitted successors and
assigns (herein referred to as "Lessee").
WHEREAS Lessor has the right to possess, use and lease the Aircraft;
and
WHEREAS Lessee desires to lease the Aircraft from Lessor; and
WHEREAS Lessor is willing to lease the Aircraft to Lessee upon the
terms and conditions set out herein.
NOW THEREFORE, in consideration of the mutual promises herein
contained, Lessor and Lessee agree as follows:
1. DEFINITIONS
The following terms shall have the following respective meanings for
all purposes of this Agreement:
1.1 Air Authority shall mean the Federal Aviation Administration of the
United States Department of Transportation and any successor.
1.2 Aircraft shall mean the aircraft identified and described in
Appendix A, including any Engine, Part, or component thereof, and/or
ancillary and loose equipment or devices installed in or on the
Aircraft at the Delivery Date (or which having been removed
therefrom remain the property of the Lessor pursuant to this
Agreement) and Aircraft Documents furnished therewith under this
Agreement, or any substitutions, renewals and replacements from time
to time made in or on the said Aircraft in accordance with this
Agreement,
<PAGE>
whether or not for the time being installed on or in the said
Aircraft or any other aircraft.
1.3 Aircraft Documents shall mean the items identified in Appendix F.
1.4 Airframe shall mean the Aircraft, excluding the Engines.
1.5 Appraisal Procedure shall mean the procedure for determining the FMV
of the Aircraft set forth Article 19.10.
1.6 Approved Maintenance Program shall mean the Maintenance Program
approved by Lessor pursuant to Article 2.2(iii) or such other
Maintenance Program as Lessor shall from time to time approve in
writing.
1.7 Authorized Maintenance Performer shall mean Lessee, American
Airlines, Inc., U.S. Air, Aviall, Rolls Royce Canada or any Air
Authority approved original equipment manufacturer for the Aircraft
or the Engines or any Part or any other person approved by Lessor in
accordance with the provisions of Article 7.1.
1.8 Bank shall mean the financial institution(s) and/or other
provider(s) of finance from whom finance respecting the acquisition
or continued ownership of the Aircraft by Lessor is to be, or is for
the time being, obtained and/or in whose favor or for whose benefit
security over, or rights with respect to, the Aircraft is to be, or
is for the time being, granted by Lessor or at its request and shall
include any financial institution providing finance to the Head
Lessor in respect of Head Lessor's acquisition of the Aircraft by
whatever means, including without limitation by way of loan or by
way of non-recourse sale of lease receivables.
1.9 Bankruptcy Case shall mean the bankruptcy case of Jet Express, Inc.,
Case No. 91-B-12287 (FGC) in the Bankruptcy Court.
1.10 Bankruptcy Court shall mean the United States Bankruptcy Court for
the Southern District of New York having jurisdiction over Lessee's
Bankruptcy Case.
1.11 Beneficiary shall mean, Fokker Aircraft B.V., beneficiary under the
Trust Agreement, and its successors and permitted assigns.
-2-
<PAGE>
1.12 Business Day shall mean a day (other than a Saturday or Sunday) on
which banks are open for business in New York.
1.13 Casualty Occurrence shall have the meaning set forth in Article
17.1.
1.14 Certificate of Acceptance shall mean the Certificate of Acceptance
given in the form of Exhibit C.
1.15 Credit and Security Agreement shall mean the Credit and Security
Agreement dated as of October 29, 1993 therein between FAUSA and
Lessee.
1.16 Cycle shall mean one take-off and landing of the Aircraft.
1.17 Default shall mean an Event of Default or any event which, with the
giving of notice and/or lapse of time and/or the making of any
relevant determination, would constitute an Event of Default.
1.18 Delivery Date shall mean the date on which the Aircraft is delivered
to and accepted by the Lessee for the purposes of this Agreement.
1.19 Delivery Location shall mean Schiphol Airport, The Netherlands.
1.20 Dollars and $ shall mean the lawful currency of the United States of
America and in respect of all payments to be made under this
Agreement in Dollars shall mean funds which are for same day
settlement in the New York Clearing House Interbank Payments System
(or such other US Dollar funds as may at the relevant time be
customary for the settlement of international banking transactions
denominated in United States Dollars).
1.21 Engine shall mean (i) any engine installed on or furnished with the
Aircraft on the Delivery Date, such Engines being identified as to
manufacturer and type in Appendix A and as to serial numbers in
the Certificate of Acceptance executed by Lessee on the Delivery
Date and (ii) any substitute or replacement engine title to which
has, or should have, transferred to and vested in Lessor in
accordance with this Agreement, in each case including all modules
or Parts from time to time belonging to or installed in that engine
and irrespective of whether or not the same shall for the time
being be installed on the Aircraft or on any other
-3-
<PAGE>
aircraft. The term "Engine" shall exclude any properly replaced
engine title to which has, or should have, passed to Lessee pursuant
to this Agreement.
1.22 Equipment Change shall have the meaning set forth in Article
17.3(a).
1.23 Equity Commitment shall mean the Financing Agreement dated August 3,
1993 among Lessee, the Equity Investors, and the other parties
listed therein, as the same may be amended from time to time.
1.24 Equity Investors shall mean the parties to the Equity Commitment
other than Lessee, Smith Air Express, Inc., Montgomery Air
Incorporated and Jet Express Funding Corporation.
1.25 Event of Default shall mean any of the events specified in Article
15.1.
1.26 Expected Delivery Date shall mean November 12, 1993.
1.27 Expiry Date shall mean the day preceding the numerically
corresponding day 120 (One Hundred Twenty) months after the Delivery
Date.
1.28 Fair Market Rental Value shall be equal in amount to the value that
would be obtained in an arms' -length transaction between an
informed and willing lessee under no compulsion to lease and an
informed and willing lessor under no compulsion to lease, in
accordance with a lease to a lessee similarly situated with Lessee,
for a term equal to the relevant period and on conditions as herein
provided, any such determination (made for purposes of Article
15.3(b)) to be made on the basis of the then actual condition of the
Aircraft, to be determined pursuant to an Independent Appraisal and
to be the average of the two determinations obtained thereunder.
1.29 FAUSA shall mean Fokker Aircraft U.S.A., Inc., a company
incorporated under the laws of the State of Delaware, with its
principal office at Alexandria, Virginia.
1.30 Federal Aviation Act shall mean the Federal Aviation Act of 1958, as
amended.
1.31 First Rent Date shall mean the Delivery Date.
-4-
<PAGE>
1.32 Flight Hour shall mean each hour or part thereof elapsing from the
moment at which the wheels of the Aircraft leave the ground on the
take off of the Aircraft until the wheels of the Aircraft touch the
ground on the landing of the Aircraft following such flight.
1.33 FMV shall have the meaning set forth in Appendix D.
1.34 Fokker shall mean Fokker Aircraft B.V., a Dutch corporation with its
principal office at Amsterdam Zuid-Oost, The Netherlands, together
with its successors.
1.35 Force Majeure in relation to the delivery of the Aircraft shall mean
delay or non-delivery due to or arising out of acts of God or public
enemy, civil war, insurrection or riot, fire, flood, explosion,
earthquake, accident, epidemic, quarantine restriction, any act of
government, governmental priority, allocation, regulation or order
affecting directly or indirectly, the Aircraft, Lessor or any
materials or facilities, strike or labor dispute causing cessation,
slow-down or interruption of work, inability after due and timely
diligence to procure equipment, data or materials from suppliers in
a timely manner, or any other cause whether or not mentioned above
and whether or not similar to any of the foregoing to the extent
that such cause is beyond the control of Lessor or not occasioned by
Lessor's fault or negligence.
1.36 Governing Law shall mean the law of the state of New York.
1.37 Government Entity shall mean and include (i) any national or state
government, political subdivision thereof, or local jurisdiction
therein; (ii) any board, commission, department, division, organ,
instrumentality, court, or agency of any thereof, however
constituted; and (iii) any association, organization, or institution
of which any thereof is a member or to whose jurisdiction any
thereof is subject or in whose activities any thereof is a
participant.
1.38 Head Lessor shall mean any person or persons to whom title to the
Aircraft is vested or transferred in accordance with Article
12.3(e).
1.39 Indemnitees shall mean Lessor (in its trust and individual
capacities), the Voting Trustee (in its
-5-
<PAGE>
trust and individual capacities , the Beneficiary, the Head Lessor,
the Bank, Fokker, FAUSA, including any of their respective
successors and assigns and their respective shareholders,
subsidiaries, affiliates, directors, officers, agents and employees.
1.40 Independent Appraisal shall mean a determination of Fair Market
Rental Value of the Aircraft by two independent aircraft appraisers,
selected by Lessor, the costs and expenses of the appraisal to be
paid by Lessee.
1.41 Law shall mean and include (i) any law, statute, decree,
constitution, regulation, order or any directive of any Government
Entity; (ii) any treaty, pact, compact or other agreement to which
any Government Entity is a signatory or party; (iii) any judicial or
administrative interpretation or application of any thereof; and
(iv) any amendment or revision of any thereof.
1.42 Lessor or Lessee shall have the meanings respectively ascribed to
them in the first paragraph of this Agreement and shall include
their respective assignees or successors.
1.43 Lessor Liens shall mean:
(a) the Mortgage, the Security Assignment and any security
interest whatsoever from time to time created by or through
Lessor and/or Head Lessor in connection with the financing of
the Aircraft;
(b) any other security interest in respect of the Aircraft which
results from acts of or claims against Lessor and/or Head
Lessor not related to the transactions contemplated by or
permitted under this Agreement; and
(c) liens in respect of the Aircraft for Lessor Taxes.
1.44 Lessor Taxes shall mean Taxes:
(a) imposed as a direct result of activities of a Tax Indemnitee
in any jurisdiction imposing a liability unrelated to that Tax
Indemnitee's dealings with Lessee, to the transactions
contemplated by this Agreement or the operation of the
Aircraft by Lessee; or
-6-
<PAGE>
(b) imposed on or measured by net income, profits or gains, or
capital or net worth (excluding, however, in each case, Taxes
that are, or are in the nature of, license, sales, use,
rental, value-added, or property taxes) of a Tax Indemnitee,
by (A) any Governmental Entity by or in which that Tax
Indemnitee would be subject to tax without regard to the
transactions contemplated by this Lease, except to the extent
that the Tax Indemnitee would be subject to such Tax if the
Tax Indemnitee's participation in the transactions
contemplated by this Agreement were the sole connection
between the Tax Indemnitee and the jurisdiction imposing the
Tax, or (B) the Federal Government of the United States of
America (including, without limitation, any withholding taxes
imposed by such government); or
(c) imposed with respect to any period or event occurring prior to
the date of this Agreement or after the Expiry Date or earlier
termination of this Agreement in accordance with the terms
hereof, provided that such Tax is unrelated to a Tax
Indemnitee's dealings with Lessee or to the transactions
contemplated by this Agreement; or
(d) imposed as a result of any voluntary sale, assignment,
transfer or other disposition by the Lessor (including to the
Head Lessor) or any other Tax Indemnitee of any interest in
the Aircraft or any part thereof or this Agreement unless such
transfer or disposition occurs (1) in connection with a Tax
Indemnitee's pursuing its remedies while an Event of Default
by Lessee is continuing or otherwise resulting from an Event
of Default, or (2) pursuant to Lessee's exercise of its option
to purchase the Aircraft under Article 19.10 of this
Agreement.
1.45 Maintenance Program shall mean an Air Authority approved maintenance
program for the Aircraft encompassing scheduled maintenance
(including block maintenance), condition monitored maintenance, and
on-condition maintenance of Airframe, Engines and Parts, including
but not limited to, servicing, testing, preventive maintenance,
repairs, structural, inspections, system checks, overhauls, approved
modifications, service bulletins, engineering orders, airworthiness
directives, corrosion control, inspections and treatments.
-7-
<PAGE>
1.46 Major Checks shall mean any 12,000 hours Check, 24,000 hours Check
or Intersupplementary Check or segment thereof or any equivalent
thereof with more or less hours, however denominated, to the extent
set out in the Approved Maintenance Program from time to time.
1.47 Manufacturer shall mean Fokker.
1.48 Mortgage shall mean such mortgage or other security as from time to
time may be created over the Aircraft in favor of the Bank or over
the Beneficiary's interest in the Trust Agreement, in favor of the
Bank.
1.49 Note shall mean the Secured Promissory Note executed and delivered
to FAUSA by the Lessee and secured by the Credit and Security
Agreement.
1.50 Operative Documents shall mean this Agreement, the Support Services
Agreement, the Stock Option Agreement, the Credit and Security
Agreement and the Note.
1.51 Other Aircraft Agreements shall mean Aircraft Operating Lease
Agreements relating to other Fokker 100 aircraft so long as leased
to Lessee by a lessor for the benefit of Fokker, FAUSA or any
affiliate thereof, as Beneficiary.
1.52 Part shall mean, whether or not installed on the Aircraft:
(a) any component, furnishing or equipment (other than a complete
Engine) furnished with the Aircraft on the Delivery Date; and
(b) any other component, furnishing or equipment (other than a
complete Engine) title to which has, or should have, passed to
Lessor pursuant to this Agreement
but excludes any such items title to which has, or should have,
passed to (i) Lessee pursuant to this Agreement or (ii) any person
pursuant to any agreement relating to the financing of spare parts
for the Aircraft, including, but not limited to, FAUSA pursuant to
the Credit and Security Agreement and the Note.
1.53 Permitted Lien shall mean:
(a) liens of repairers, mechanics, material men, carriers,
hangarkeepers, employees or other
-8-
<PAGE>
similar liens arising in the ordinary course of business by
statute or by operation of law in respect of obligations which
are either not overdue or are being contested in good faith by
appropriate proceedings;
(b) any lien for Taxes of any kind either not assessed or, if
assessed, not yet due and payable or being contested in good
faith by appropriate proceedings, and any lien arising out of
a judgment against Lessee with respect to which at the time an
appeal is being prosecuted in good faith and with respect to
which there shall have been secured a stay of execution
pending such appeal,
provided that in the case of this subclause (b):
(i) adequate reserves for the payment of such obligations
have been provided by Lessee;
(ii) such proceedings, or the continued existence of such
lien, do not give rise to any likelihood of the sale,
forfeiture or other loss of the Aircraft or any Engine
or any Part or any interest therein; and
(iii) any such lien does not arise as a result of any default
on the part of Lessee in respect of its obligations
under this Agreement;
(c) any Lessor Lien and the lien of this Agreement; and
(d) any lien for Lessor Taxes.
1.54 Redelivery Location shall mean Schiphol Airport, The Netherlands.
1.55 Rent Date shall mean the First Rent Date and the numerically
corresponding date of each and every subsequent month during the
Term, or (if there is no corresponding date in any month), the last
day of such month.
1.56 Rental Adjustment Period shall mean the period from and including
the Delivery Date up to and including the day preceding the sixth
Rent Date after the Delivery Date and each subsequent period
commencing on and including the day after the immediately preceding
Rental
-9-
<PAGE>
Adjustment Period and ending on and including the day preceding the
sixth Rent Date after the date on which that Rental Adjustment
Period commenced.
1.57 Rental Period shall mean the period from and including any Rent Date
to and including the day preceding the next Rent Date.
1.58 Security Assignment shall mean an assignment or pledge in favor of
the Head Lessor or the Bank of the benefit of all or any part of
Lessor's rights hereunder.
1.59 Security Interest shall mean any mortgage, charge, pledge, lien,
assignment, hypothecation, right of set-off or any agreement or
arrangement having the effect of creating a security interest.
1.60 State of Incorporation shall mean the State of Delaware.
1.61 State of Registration shall mean United States of America.
1.62 Stock Option Agreement shall mean the Stock Option Agreement dated
as of October 1, 1993 among Lessee and FAUSA and any other party
listed thereon.
1.63 Supplemental Rent shall mean Agreed Value and any other amount which
by the terms of this Agreement is payable by Lessee to Lessor other
than Rent and the Reserve Rate.
1.64 Support Services Agreement shall mean the Aircraft Support Services
Agreement No. ASSAF-110 between FAUSA and Lessee.
1.65 Taxes shall mean any and all present and future sales, use,
property, customs, value-added, turnover, stamp, interest
equalization, income, gross or net receipts, franchise, excise, net
worth, capital or other taxes, fees, withholdings, imposts, duties,
levies, or other charges of any nature, together with any penalties,
fines, or interest thereon, imposed, levied, or assessed by, or
otherwise payable to, any Governmental Entity and "Tax" shall be
construed accordingly.
1.66 Tax Indemnitee shall mean each of the Lessor, Beneficiary, and the
Head Lessor, including any of their respective successors and
assigns.
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1.67 Term shall bear the meaning ascribed to it in Article 3.4.
1.68 Trust Agreement shall mean the Trust Agreement dated as of November
1, 1993 between the Beneficiary and the Lessor in its individual
capacity, as the same may be amended from time to time.
1.69 Trust Estate shall mean the "Trust Estate" as defined in the Trust
Agreement.
1.70 Voting Trust Agreement shall mean the Voting Trust Agreement dated
as of November 1, 1993 between the Beneficiary and the Voting
Trustee, as the same may be amended from time to time.
1.71 Voting Trustee shall mean First Security Bank of Idaho, N.A., a
national banking association, and its permitted successors and
assigns.
1.72 The terms:
Agreed Value,
Assumed Rent,
Deposit,
Enumerated Financial Milestones
Escalated Rent,
Rent,
Reserve Rate,
shall have the meanings and values set forth in Appendix B.
1.73 References in this Agreement to:
(a) Articles or Appendices are, unless otherwise specified,
references to Articles of, and Appendices to, this Agreement
and references to this Agreement include its Appendices;
(b) any statute or other legislative provision shall be read to
include any statutory or legislative modification or
re-enactment thereof, or any substitution therefor;
(c) the Aircraft include any Part of the Aircraft, and, where the
context so admits, any of the Aircraft Documents and
references to any part of the Aircraft include any part of any
Engine;
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(d) the word "person" or "persons" or to words importing persons
include, without limitation, individuals, firms, partnerships,
joint ventures, trusts, Government Entities, organizations,
associations, corporations, government agencies, committees,
departments, authorities and other bodies, corporate or
incorporate, whether having distinct legal personality or not,
or any member of any of the same;
(e) words importing the plural include the singular and vice
versa;
(f) any agreement or instrument include such agreement or
instrument as it may from time to time be amended or
supplemented; and
(g) headings in this Agreement are for ease of reference only.
2. AGREEMENT TO LEASE
2.1 Lessor will lease the Aircraft to Lessee and Lessee will take the
Aircraft on lease from Lessor in "As Is" condition in accordance
with the terms and conditions of this Agreement.
2.2 Lessor's obligation to deliver the Aircraft on the Delivery Date to
Lessee shall be subject to:
(i) the receipt by Lessor from Lessee on or prior to the Expected
Delivery Date of the following, all of which shall be in the
English language and be satisfactory in form and substance to
Lessor:
(a) a final non-appealable order of the Bankruptcy Court in
the form set forth in Appendix K confirming the Plan of
Reorganization submitted to the Bankruptcy Court;
(b) copies of Lessee's certificate of incorporation and/or
memorandum and articles of association and/or by-laws
and/or other constitutional documents, certified to be
true and up to date copies by a duly authorized officer
of Lessee;
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(c) copies of resolutions of Lessee's board of directors
authorizing Lessee to enter into and perform this
Agreement, the other Operative Documents and the
transactions contemplated hereby, certified to be true
and in full force and effect by a duly authorized
officer of Lessee;
(d) evidence that each approval, license and consent which
may be required in relation to, or in connection with
the performance by Lessee of any of its obligations
hereunder and the other Operative Documents has been
granted by or obtained from the applicable Government
Entity in the State of Registration;
(e) copies of Lessee's air transport license, certificate of
public convenience and necessity, and any other air
operator certificates and other licenses, certificates
and permits required by a Governmental Authority
enabling Lessee to operate as an air carrier, certified
to be true copies and to be in full force and effect by
a duly authorized officer of Lessee;
(f) evidence of appointment of Lessee's agent for service of
process in the State of New York;
(g) [intentionally omitted];
(h) the consent referred to in Article 15.5;
(i) a power of attorney in the form of Appendix J
authorizing Lessor and/or the Head Lessor/and/or the
Bank to take action at the Air Authority and a certified
resolution authorizing same;
(j) such other documents as Lessor may reasonably request;
(ii) the receipt by Lessor from Lessee on or before the Delivery
Date of:
(a) opinions satisfactory in form and substance to Lessor of
independent counsel practicing in the State of
Registration as instructed by Lessee, addressing the
matters referred to in
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the form set out in Appendix G and dated the Delivery
Date;
(b) all sums due to Lessor pursuant to this Agreement;
(c) a certificate of insurance in the form of Appendix H, a
broker's letter of undertaking in the form of Appendix
I, certificates of reinsurance if required by Lessor and
other evidence satisfactory to Lessor that Lessee is
taking the required steps to ensure due compliance with
the provisions of this Agreement as to Insurances with
effect on and after the Delivery Date;
(d) evidence that the representations and warranties of
Lessee set forth in Article 13.4 are true and correct;
(iii) Lessor having approved the Maintenance Program under which it
is proposed that the Aircraft will be maintained (which
approval shall be granted or withheld at Lessor's sole
discretion);
(iv) Lessor being satisfied that adequate arrangements have been
made for the issue, forthwith following delivery of the
Aircraft, of the acknowledgments referred to in Article 12.3
in the event that a Head Lessor and/or a Bank has been
identified;
(v) evidence (including satisfactory opinions of Crowe & Dunlevy,
special Air Authority aviation counsel, as to Air Authority
registration and recordation matters) that on the Delivery
Date the Aircraft has been validly registered under the laws
of the State of Registration and that all filings,
registrations, recordings and other actions have been or will
be undertaken which are necessary or advisable to ensure the
validity, effectiveness and enforceability of this Agreement
and to protect the property rights of Lessor and Head Lessor
in the Aircraft or any Part and any Security Interest of the
Bank therein;
(vi) Lessor being satisfied that no default shall have occurred
under any Other Aircraft Agreement or any other agreement
between Lessor or FAUSA and Lessee;
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(vii) each of the Operative Documents shall have been duly
authorized, executed and delivered by Lessee, shall be
satisfactory in form and substance to Lessor, and shall be in
full force and effect; and
(viii) Lessor obtaining an export license for delivery of the
Aircraft for export to the Lessee on or before the Delivery
Date if so required by the Laws of The Netherlands.
2.3 The conditions specified in Article 2.2 are inserted for the sole
benefit of Lessor and may be waived or deferred in whole or in part
and with or without conditions by Lessor. If any of the said
conditions are outstanding on the Delivery Date and Lessor (in its
absolute discretion) nonetheless agrees to deliver the Aircraft to
Lessee, Lessee shall ensure that such outstanding conditions are
fulfilled within fifteen (15) days after the Delivery Date and
Lessor shall be entitled to treat the failure of Lessee to perform
such outstanding conditions as an Event of Default.
2.4 The obligation of Lessee to accept delivery of the Aircraft from
Lessor is subject to the satisfaction of the following conditions
precedent on or before the Delivery Date:
(i) each of the Operative Documents to which Lessor or FAUSA
is a party shall have been duly authorized, executed and delivered
by Lessor or FAUSA and shall be in full force and effect, and
executed counterparts shall have been delivered to Lessee;
(ii) Lessee shall have received the following:
a. an incumbency certificate of each of Lessor and FAUSA as
to the persons authorized to execute and deliver the
Operative Documents to which each is a party and each
other document to be executed on behalf of Lessor and
FAUSA in connection with the transactions contemplated
by the Operative Documents, including the signatures of
such persons; and
b. such other documents and evidence with respect to Lessor
and FAUSA and the transactions contemplated by the
Operative Documents as Lessee may
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reasonably request in order to establish the
consummation of the transactions contemplated by the
Operative Documents to be performed by Lessor and FAUSA,
the taking of all corporate proceedings in connection
with such transactions and compliance with the
conditions set forth herein;
(iii) on the Delivery Date, the representations and warranties
of Lessor contained in Article 13.6 shall be true and accurate as
though made on and as of such date;
(iv) Lessee shall have received the favorable opinion,
addressed to it and reasonably satisfactory in form and substance to
it, from Crowe & Dunlevy, special Air Authority aviation counsel;
(v) the Aircraft shall meet the delivery conditions specified
in Article 3.6; and
(vi) Lessor submitting an export license for Delivery of the
Aircraft for export to the Lessee on or before the Delivery Date if
so required by the Law of The Netherlands.
3. TERM; DELIVERY; ACCEPTANCE; DELAY
3.1 Subject to Article 3.2 and 3.3, Lessor shall deliver and Lessee
shall accept the Aircraft and the delivery thereof on the Expected
Delivery Date.
3.2 Lessor may delay the delivery of, or fail to deliver the Aircraft
for reasons of Force Majeure. Lessor shall not be responsible for
any losses, or any loss of profit, arising from any such failure or
delay and Lessee shall not be entitled on the grounds of such delay
to terminate this Agreement or reject the Aircraft when tendered for
delivery by Lessor, subject always to Article 3.3. In the event of
any such delay and subject to Article 3.3, Lessor shall be entitled
to specify from time to time such date as shall then become the
"Expected Delivery Date" for the purpose of this Agreement.
3.3.1 If for any reason the Aircraft has not been delivered by Lessor by
the date falling three (3) months after the original Expected
Delivery Date, either party may
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terminate this Agreement. Upon any such termination by Lessee,
unless the Aircraft has not been delivered by Lessor due to Lessee's
fault, Lessor shall return the Deposit to Lessee. Otherwise, Lessor
shall retain the Deposit.
3.3.2 If the Aircraft has not been delivered by Lessor by the date falling
one (1) month after the Expected Delivery Date (or any day
thereafter) due to any failure of Lessee to meet the conditions
specified in Article 2.2 (other than clauses (iv) and (v) in Article
2.2), Lessor may terminate this Agreement and retain the Deposit.
3.4 The term of the lease shall commence on the Delivery Date and shall
continue until the Expiry Date unless earlier terminated or extended
as herein provided (such period being herein referred to as the
"Term").
3.5 The Aircraft shall be delivered to and accepted by Lessee at the
Delivery Location or such other location as is mutually acceptable
to the parties.
It shall be the responsibility of Lessee to obtain at its expense
any and all licenses, permits and approvals under the Law of The
Netherlands or the Air Authority which may be necessary to ferry the
Aircraft from the Netherlands (the "Ferry Permits"). Prior to or on
the Delivery Date, Lessor shall furnish to Lessee such evidence as
may be reasonably requested by Lessee of the obtaining of any export
license insofar as it may be required by the Law of The Netherlands
and such data and information as may be reasonably requested by
Lessee in order to obtain the Ferry Permits.
Notwithstanding the foregoing, Lessor shall, as agent for Lessee,
apply for the Ferry Permits and approvals, provided, however, that
Lessor shall have no responsibility for any failure to or delay in
obtaining the Ferry Permits. Acceptance by Lessee of the Aircraft by
execution and delivery of the Certificate of Acceptance shall be
deemed to be evidence that Lessor has performed all its obligations
under this Article 3.5.
3.6 Prior to the Expected Delivery Date, Lessee shall be given an
opportunity to inspect the Aircraft at the Delivery Location.
Lessee's right of inspection shall include the right to participate
in the acceptance flight provided by Fokker for the purpose of
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demonstrating that the Aircraft is in good operating condition in a
one to two hour acceptance flight in accordance with the
Manufacturer's Customer Inspection Program and to verify that it
generally accords with the description set forth in Appendix A.
Lessee may assign a maximum of two (2) representatives to
participate in the acceptance flight test as observers. In the event
that Lessee discovers and records any defect and/or non-conformity
with said description during any such inspection and/or during such
acceptance flight test, Lessor shall procure that such defect and/or
non-conformity is corrected as promptly as possible.
3.7 Lessee shall indemnify and hold harmless the Indemnitees from and
against any and all liabilities, damages, losses (including costs
and expenses incident thereto) arising by reason of death of or
injury to any such observer or any employee of Lessee, arising out
of, or in any way connected with the acceptance flight test and
inspection of the Aircraft upon delivery and redelivery of the
Aircraft.
3.8 Lessee shall indicate and confirm its acceptance of the Aircraft by
the execution and delivery to Lessor of the Certificate of
Acceptance.
4. REGISTRATION AND TITLE
4.1 It shall be the responsibility of Lessee, at its expense, to effect
and maintain registration of the Aircraft in the name of Lessor or
Head Lessor, as the case may be, under the Laws of the State of
Registration during the Term, such registration to reflect the
interests of Lessor or Head Lessor as the case may be, and to obtain
and maintain all licenses, permits and approvals, including, without
limitation, a certificate of airworthiness from the Air Authority,
as may be requisite in connection with operation of the Aircraft
under this Agreement.
4.2 Lessee shall at its own expense and responsibility cause this
Agreement to be kept, filed and recorded at all times during the
Term, in such office or offices for the registration of the Aircraft
in the State of Registration and in such other offices (in the
United States but not in any jurisdiction outside of the United
States unless directly required due to Lessee's operation) as may be
necessary, to protect Lessor's,
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Head Lessor's and the Bank's rights in any state in which the
Aircraft may operate including the State of Registration of the
Aircraft and the State of Incorporation or as Lessor may reasonably
request to protect and preserve Lessor's, Head Lessor's and the
Bank's rights hereunder, and shall on request furnish to Lessor an
opinion of counsel or other evidence satisfactory to Lessor of such
filing and recording.
4.3 Title to and ownership of the Aircraft as between Lessor, Head
Lessor and Lessee shall at all times remain in Lessor or Head
Lessor, as the case may be, and Lessee shall have no right, title or
interest in or to the Aircraft or any part thereof except as
expressly provided by this Agreement. Lessee shall identify and
specify the interest of Lessor, Head Lessor and the Bank and shall
affix or keep affixed (i) in a reasonably prominent position on the
flight-deck of the Aircraft and on each Engine a metal name plate
(having dimensions of not less than 10 cm x 7 cm) bearing the
inscription (in fireproof and legible characters) stating:
"NOTICE OF OWNERSHIP
THIS AIRCRAFT/ENGINE IS OWNED BY [ _________] AND IS SUBJECT TO A
FIRST PRIORITY MORTGAGE IN FAVOR OF [____________]"
The proper completion of the metal name plate shall be advised by
Lessor at its earliest convenience. Lessee shall not remove or
deface evidence of ownership of the Aircraft and shall not do or
permit to be done or omitted any act or thing which would jeopardize
the rights of Lessor, Head Lessor or the Bank in the Aircraft.
Lessee will on all occasions when the ownership of the Aircraft or
any Part is relevant make clear to third parties that title to the
same is held by Lessor, Head Lessor or the Bank as the case may be.
4.4 Lessee acknowledges that the Aircraft may from time to time be owned
by Head Lessor or the Bank and/or be subject to the Mortgage, which
shall be a first priority mortgage, and to the Security Assignment,
in favor of Head Lessor or the Bank. Lessee undertakes to Lessor
(both for itself and as agent for each of Head Lessor and the Bank)
at Lessee's expense (except for the expense of assignments pursuant
to Article 12 after the first refinancing and first assignment
described in Article 8.2(a) (ii)) to, from time to time, cause this
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Agreement, the Mortgage, the Security Assignment and such other
documents as may be necessary or advisable to give effect to the
transactions contemplated hereby or thereby, to be kept, recorded or
filed in such office or offices in the State of Incorporation and in
the State of Registration as may be necessary or advisable to
protect and perfect the interests of Lessor, Head Lessor and the
Bank in the Aircraft, this Agreement, the Mortgage and the Security
Assignment, and to do, from time to time, all other things which the
Bank, Head Lessor and/or Lessor may reasonably require in order to
protect and perfect their rights.
5. POSSESSION AND USE
5.1 Lessee shall not transfer possession of the Aircraft, the Engines or
any Part to any person or any legal entity or remove any Engine or
Part from the Airframe other than in accordance with the provisions
of this Article 5 or of Article 12.1; provided, however, that so
long as no Default shall have occurred and be continuing, Lessee
may, without the prior written consent of Lessor deliver possession
of the Aircraft, the Engines or Parts to the manufacturer thereof
for testing or other similar purposes, or to an Authorized
Maintenance Performer for service, repair, maintenance or overhaul
work on the Aircraft, the Engines or Parts, or for alterations,
modifications, or additions thereto, to the extent required or
permitted by the terms of Article 7.3.
5.1.1 Lessee will ensure that no Engine or Part installed on the Aircraft
is at any time removed from the Aircraft other than:
(a) if replaced as expressly permitted by this Agreement; or
(b) if the removal is of an obsolete item and is in accordance
with the Approved Maintenance Program; or
(c) (i) during the course of maintaining, servicing,
repairing, overhauling or testing that Engine or Part or
the Aircraft, as the case may be; or
(ii) as part of a normal engine or part rotation program; or
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(iii) for the purpose of making such modification to the
Engine or Part, or the Aircraft, as the case may be, as
are permitted under this Agreement,
and then in each case only if it is reinstalled or replaced by an
engine or part complying with Article 5.1.2(a) as soon as
practicable and in any event no later than the Expiry Date.
5.1.2 (a) Lessee will ensure that, except as permitted by this
Agreement, no engine or part is installed on the Aircraft
unless:
(i) in the case of an engine, it is an engine of the same
model as, or an improved or advanced version of the
Engine it replaces, which is in similar or better
operating condition, and in the case only of a Casualty
Occurrence, has substantially similar hours available
until the next scheduled checks, inspections, overhauls
and shop visits and has the same or greater value and
utility as the replaced Engine;
(ii) in the case of a part, it is in as good operating
condition, is of similar or a more advanced make and
model and is of the same interchangeable modification
status as the replaced Part;
(iii) in the case of any part, it has become and remains the
property of Lessor free from Security Interests and on
installation on the Aircraft will without further act be
subject to this Agreement and the Mortgage; and
(iv) in each case, Lessee has full details as to its source
and maintenance records.
(b) Provided no Default has occurred and is continuing, Lessee
shall be entitled to install any engine or part on the
Aircraft by way of replacement notwithstanding Article
5.1.2(a) if:
(i) there is not available to Lessee at the time and in the
place that engine or part is required to be installed on
the Aircraft, a replacement engine or, as the case may
be,
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part complying with the requirements of Article
5.1.2(a); and
(ii) it would result in an unreasonable disruption of the
operation of the Aircraft and/or the business of Lessee
to ground the Aircraft until an engine or part, as the
case may be, complying with Article 5.1.2(a) becomes
available for installation on the Aircraft; and
(iii) as soon as reasonably practicable after installation of
the same on the Aircraft, Lessee removes any such engine
or part and replaces it with the Engine or Part replaced
by it or by an engine or part, as the case may be,
complying with Article 5.1.2(a).
5.1.3 Lessee will:
(a) ensure that any Engine or Part which is not installed on the
Aircraft (or any other aircraft as permitted by this
Agreement) is, except as expressly permitted by this
Agreement, properly and safely stored, and kept free from
Security Interests;
(b) from time to time on request, notify Lessor in writing as to
the location of any engine and on request shall use its
reasonable efforts to procure that any person to whom
possession of an Engine is given acknowledges in writing to
Lessor, in terms satisfactory to Lessor, that it will respect
the interest of the Bank as mortgagee and Lessor (or, as the
case may be, Head Lessor) as owner and lessor of the Engine
and will not seek to exercise any rights whatsoever in
relation to it;
(c) (notwithstanding the foregoing provisions of this Article
5.1.3), be permitted, if no Default has occurred and is
continuing, to install any Engine or Part on an aircraft, or
in the case of a Part, on an engine:
(i) owned and operated by Lessee free from Security
Interests; or
(ii) leased or hired to Lessee pursuant to a lease or
conditional sale agreement on a long-term
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basis and on terms whereby Lessee as full operational
control of that aircraft or engine; or
(iii) acquired by Lessee and/or financed or refinanced, and
operated by Lessee, on terms that ownership of that
aircraft or engine, as the case may be, pursuant to a
lease or conditional sale agreement, or a Security
Interest therein, is vested in or held by any other
person;
provided that in the case of (ii) and (iii):
(1) the terms of any such lease, conditional sale agreement or
Security Interest will not have the effect of prejudicing the
interests of the Bank as mortgagee or Lessor (or, as the case
may be, Head Lessor) as owner and lessor of that Engine or
Part; and
(2) the lessor under such lease, the seller under such conditional
sale agreement or the holder of such Security Interest, as the
case may be, has confirmed and acknowledged in writing to
Lessor, in form and substance satisfactory to Lessor, that it
will respect the interest of Lessor (or, as the case may be,
Head Lessor) as owner and lessor and the Bank as mortgagee of
that Engine or Part and that it will not seek to exercise any
rights whatsoever in relation thereto; and, to the extent such
an acknowledgment has been given, Lessor hereby agrees, for
the benefit of the lessor, the seller, or secured party, as
the case may be, of any engine or part (other than an Engine
or a Part) leased to Lessee or owned by Lessee subject to a
conditional sale or other security agreement, that Lessor will
not acquire or claim, as against such lessor, seller or
secured party, any right, title or interest in any engine or
engines owned by the lessor under such lease or subject to a
security interest in favor of the seller or secured party
under such conditional sale or other security agreement as the
result of such engine or engines being installed on the
Airframe at any time while such engine or engines are subject
to such lease or conditional sale or other security agreement.
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5.1.4 Lessee will not enter into nor permit any pooling agreement or
arrangement in respect of an Engine or Part without the prior
written consent of Lessor, which shall not be unreasonably withheld.
5.2 Lessee shall use the Aircraft solely in commercial or other
operations for which Lessee is duly authorized by the Laws of the
State of Registration and/or any jurisdiction to whose Laws Lessee's
operation of the Aircraft is subject and shall not use or permit the
Aircraft to be used for any purpose for which the Aircraft is not
designed or reasonably suitable.
Lessee shall not use the Aircraft for the carriage of (i) whole
animals living or dead except in the cargo compartments according to
the United States Department of Transportation ("DOT") (or for
international flights, International Civil Aviation Organization
("ICAO")) regulations, and except domestic pet animals carried in a
suitable container to prevent the escape of any liquid and to ensure
the welfare of the animal; (ii) acids, toxic chemicals, other
corrosive materials, explosives, nuclear fuels, wastes, or any
nuclear assemblies or components, except as permitted for passenger
aircraft under the "Restriction of Goods" schedule issued by the DOT
(or for international flights, ICAO) from time to time and provided
that all the requirements for packaging or otherwise contained
therein are fulfilled; or (iii) any other goods, materials or items
of cargo which could reasonably be expected to cause damage to the
Aircraft and which would not be adequately covered by the insurance
required by or obtained pursuant to Article ii.
5.3 Lessee shall not permit the Aircraft to be maintained, used, or
operated in violation of any Law of any Government Entity having
jurisdiction, or contrary to any manufacturer's operating manuals
and instructions, or in violation of any airworthiness certificate,
license or registration relating to the Aircraft issued by any such
Government Entity. In the event that such Laws require alteration of
the Aircraft, Lessee shall conform therewith at its own expense and
shall maintain the same in proper condition for operation under such
Laws. Lessee agrees not to operate the Aircraft or to permit or
suffer the Aircraft to be operated (i) contrary to applicable Law,
and/or (ii) within or into any geographic area unless the Aircraft
is covered by insurance as required by the provisions of Article 11
or insurance or an indemnity in lieu of such insurance
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from the United States government against the risks and in the
amounts required by Article 11 covering such area, and/or (iii)
contrary to the terms of such insurance as required by the
provisions of Article 11.
5.4 Throughout the Term and until re-delivery of the Aircraft to Lessor
in accordance with the provisions of this Agreement, the Aircraft
and every part thereof shall be in every respect at the sole risk of
Lessee, who shall bear all risks of loss, theft, damage or
destruction to the Aircraft from any cause whatsoever. Lessor shall
not be liable for any liability, claim, loss, damage or expense of
any kind or nature caused directly or indirectly by the Aircraft or
any part thereof by any inadequacy thereof for any purpose or any
deficiency or defect therein, by the use or performance thereof, by
any repairs or servicing thereto or any delay in providing or
failure to provide any thereof, by any interruption or loss of
service or use thereof, or by any loss of business or other
consequential damage or any damage whatsoever and howsoever caused
prior to re-delivery of the Aircraft to Lessor.
5.5 Lessee shall ensure that such crew and engineers as are employed by
it in connection with the operation and maintenance of the Aircraft
shall have such qualifications and hold such licenses as are
required by the Air Authority and by all applicable Laws and
regulations.
6. CHARGES, METHOD OF PAYMENT AND FINANCIAL INFORMATION
6.1 Lessee shall punctually pay to Lessor, when due, the Rent, Reserve
Rate and Supplemental Rent expressed to be payable by the Lessee to
the Lessor hereunder including the monies specified and calculated
in accordance with the provisions of Appendix D at the time and in
the manner therein specified, and shall punctually and duly observe
and perform Lessee's obligations under the said Appendix D which
forms an integral part of this Agreement. The time stipulated in
this Agreement for all payments payable by Lessee to Lessor and for
the performance of Lessee's other obligations under this Agreement
shall be of the essence of this Agreement.
6.2 Lessee shall not be entitled to any abatement, compensation,
reduction or set-off against any
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installment of Rent, the Reserve Rate or Supplemental Rent,
including but not limited to, abatements, compensations, reductions
or set offs, by reason of any past, present or future claims of
Lessee against Lessor or any other person under this Agreement or
otherwise.
6.3 Lessee's obligation to pay Rent and make other payments in
accordance with this Agreement, until Lessee shall have redelivered
the Aircraft to Lessor in accordance with Article 16 and shall have
complied with its other obligations hereunder, shall be absolute and
unconditional irrespective of any contingency whatsoever including
(but not limited to) (i) any right of set-off, counterclaim,
recoupment, defence or other right which either party may have
against the other, (ii) any unavailability of the Aircraft for any
reason, including, but not limited to, any defect in the
airworthiness, merchantability, fitness for any purpose, condition,
design, or operation of any kind or nature of the Aircraft, or the
ineligibility of the Aircraft for any particular use or trade, or
for registration or documentation under the laws of any relevant
jurisdiction, or (save as herein provided) any Casualty Occurrence
in respect of or any damage to the Aircraft, (iii) any insolvency,
bankruptcy, reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceedings by or against Lessor
or Lessee, (iv) any invalidity or unenforceability or lack of due
authorization of, or other defect in this Agreement, (v) any failure
of Lessee to obtain any required license, certificate, authorization
or other approval of any Governmental Entity having jurisdiction
over the operation by Lessee of the Aircraft or the operation by
Lessee in any airport and (vi) any other cause which, but for this
provision, would or might have the effect of terminating,
frustrating or in any way affecting any obligation of Lessee
hereunder, it being the declared intention of the parties that the
provisions of this Article and the obligations of Lessee to pay the
Rent, the Reserve Rate and Supplemental Rent provided for by this
Agreement shall survive any frustration and that, save as expressly
provided in this Agreement, no monies payable hereunder by Lessee to
Lessor shall in any event or circumstance be repayable to Lessee.
6.4 Lessee agrees to furnish Lessor during the Term:
(i) any financial reports or projections supplied to the Equity
Investors;
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(ii) upon Lessor requesting the same a quarterly unaudited balance
sheet of Lessee prepared by it as of the close of the most
recent previous financial quarter, together with the related
profit and loss statement for such period;
(iii) within ninety (90) days after the close of each financial year
of Lessee, an audited balance sheet and profit and loss
statement as of the close of such financial year;
(iv) from time to time such other information as Lessor may
reasonably request, including, without limitation, information
in respect of the Equity Commitment and any other agreements
relating to the Equity Investors; and
(v) copies of all notices sent by Lessee to its shareholders or
creditors as a group in their respective capacities as such
relating to major business or financial developments of
Lessee.
7. MAINTENANCE
7.1 Lessee, during the Term, at its own cost and expense shall:
(a) service, repair, maintain, overhaul, test, or cause the same
to be done to the Aircraft in accordance with the Approved
Maintenance Program so as to keep the Aircraft in as good
operating condition as when delivered to Lessee on the
Delivery Date, ordinary wear and tear excepted, and such
operating condition as may be necessary to enable the
airworthiness certificate of the Aircraft to be maintained in
good standing at all times under applicable Law, and Lessee
shall at all times maintain current certificates of
airworthiness and Air Authority required records of
maintenance in respect of the Aircraft and produce copies
thereof to Lessor upon request;
(b) maintain in the English language all Aircraft Documents,
records, logs, and other materials required by applicable Laws
and best airline practice to be maintained in respect of the
Aircraft including engine trend monitoring data;
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(c) perform, or cause to be performed, all airworthiness
directives and mandatory notes and mandatory bulletins
affecting the Aircraft having a compliance date during the
Term and issued by (a) the Air Authority and/or (b) Fokker or
any other manufacturer of any part of the Aircraft (except
that, in the event of a conflict, those required by the Air
Authority shall prevail);
(d) maintain the Aircraft in conformity with Air Authority
Regulations and such other rules and regulations of the Air
Authority as may from time to time be applicable to passenger
category airline aircraft;
(e) provide Lessor by telex or fax message with a monthly
summation (which may utilize Air Authority forms) of Flight
Hours and Cycles accumulated on the Airframe, Engines, A.P.U.
and Landing Gear and details of all modifications and material
component changes within five (5) days after the end of each
month.
Such maintenance shall be performed by Lessee or by the Authorized
Maintenance Performer identified in Appendix B or such other person
as Lessor may from time to time approve in writing (such approval
not to be unreasonably withheld) which person shall thereupon become
an Authorized Maintenance Performer for the purposes of this
Agreement.
7.2 Except as otherwise provided herein, Lessee, at its own cost and
expense, shall promptly replace all Engines or Parts which may from
time to time become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair, or unserviceable with an engine
or part meeting the requirements of Article 5.1.2(a).
7.3 (a) Save as expressly herein provided the Aircraft shall not
be modified, altered, converted or added to (each such action
in relation to the Aircraft being herein referred to as an
"Equipment Change"), provided that Lessee may, at its own
expense and subject to the prior written approval of Lessor
(such approval not to be unreasonably withheld), make such
Equipment Changes to the Aircraft as Lessee may deem desirable
in the proper conduct of its business, provided that no such
Equipment Change diminishes the value, utility, condition or
airworthiness of the
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Aircraft below the value, utility, condition and airworthiness
thereof immediately prior to such Equipment Change, assuming
the Aircraft was then in the condition required to be
maintained by the provisions of this Agreement.
(b) Title to all Parts incorporated or installed in or attached or
added to the Aircraft as the result of such Equipment Change
shall, without further act, vest in Lessor free and clear of
all liens, charges and encumbrances. Lessee shall at its own
expense take all such steps and execute, and procure the
execution of, all such instruments as Lessor may require and
which are necessary to ensure that title to any such
replacement Part as aforesaid passes to Lessor according to
the Governing Law and the lex situs, provided, however, that
so long as a Default shall not have occurred and be
continuing, at any time during the Term, Lessee may remove any
such Part if (i) such Part is in addition to, and not in
replacement of or in substitution for, any Part originally
incorporated or installed in or attached to the Aircraft at
the time of the delivery thereof hereunder, (ii) such Part is
not required to be incorporated or installed in or attached or
added to the Aircraft pursuant to the provisions of Article
5.1 and (iii) such Part can be removed from the Aircraft
without diminishing or impairing the value, utility or
airworthiness which the Aircraft would have had at such time,
had such Equipment Change not occurred.
(c) Upon the removal by Lessee of any such Part as above provided,
title thereto shall, without further act, vest in Lessee and
such Part shall no longer be deemed a part of the Aircraft.
Any Part not removed by Lessee as above provided prior to the
return of the Aircraft to Lessor hereunder shall remain the
property of Lessor (save as the parties may otherwise agree in
writing) provided that Lessor may require Lessee, prior to the
end of the Term, to remove any Parts incorporated or installed
in the Aircraft as a result of an Equipment Change and to
restore the Aircraft to its condition prior to an Equipment
Change.
7.4.1 Upon submission by Lessee to Lessor of invoices or receipts
reasonably satisfactory to Lessor evidencing
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the performance in accordance with the provisions of this Agreement
by or at the direction of Lessee of:
(a) with respect to the Airframe, the accomplishment of those
items of maintenance characterized as scheduled airframe heavy
maintenance as defined in the Approved Maintenance Program for
12,000 hours and 24,000 hours inspections or any equivalent
thereof with more or less hours ("Airframe Maintenance"), or
(b) with respect to any Engine, the performance of all scheduled
shop visit engine maintenance and repair, other than (i)
repairs arising as a result of foreign object damage or
operational mishandling and/or (ii) maintenance and repair of
QEC (Quick Engine Change) kits ("Engine Maintenance"), or
(c) with respect to any nose or main landing gear ("Landing
Gear"), the performance of all scheduled shop visit nose and
main landing gear maintenance and repair, other than repairs
arising as a result of foreign object damage or operational
mishandling ("Landing Gear Maintenance"), or
(d) the Auxiliary Power Unit ("A.P.U.") the performance of all off
Aircraft shop A.P.U. maintenance and repair, other than
repairs arising as a result of foreign object damage or
operational mishandling ("A.P.U. Maintenance"),
Lessor shall, subject to Article 3.5 of Appendix D and provided that
a Default shall not have occurred and be continuing, release to
Lessee, from the relevant Maintenance Fund as defined in paragraph
3.2 of Appendix D, a sum equal to the aggregate amount evidenced by
such invoices or receipts for such relevant maintenance, to the
extent there are sufficient sums in the relevant Maintenance Fund at
the date of the start of the relevant maintenance; Lessee agrees to
use its reasonable efforts to ensure that the relevant invoices or
receipts are received by Lessor as promptly as possible after
completion of the relevant maintenance. All sums remaining in any
Maintenance Fund at the expiration or other termination of this
Agreement shall be retained by Lessor, except (i) upon payment in
full of Agreed Value and any other amounts due to Lessor or
otherwise hereunder after a Casualty Occurrence pursuant to Article
17.2(b), in which case all sums
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remaining in any Maintenance Fund shall be paid to Lessee and (ii)
under the circumstances and to the extent described in Article 3.6
of Appendix D.
7.4.2 Lessor shall be entitled to delay the release or payment of funds
from any Maintenance Fund (to the extent related to any disputed
amounts) to Lessee provided for by this Article 7 until such time as
it shall in its opinion be in a position to determine (which Lessor
agrees to use reasonable efforts to do as promptly as possible) the
amount to be released or paid, but in any event release all
undisputed amounts from the relevant Maintenance Fund (but where
insufficient funds are in such maintenance Fund the lesser pro rata
portion of such funds which corresponds to the undisputed amount)
upon request unless a Default shall have occurred and be continuing.
7.5.1 During the Term, Lessee shall furnish to Lessor such information
concerning the location, condition, use and operation of the
Aircraft as Lessor may reasonably request. The right of Lessor, or
its designated representatives, to inspect the Aircraft during any
Major Checks performed by or on behalf of Lessee during the Term,
shall be absolute and Lessee shall inform Lessor by providing sixty
(60) days' written notice as to time and location of all Major
Checks. During such Major Checks, Lessee agrees to provide
sufficient manpower to allow Lessor, or its authorized
representatives, to inspect any area of the Aircraft which Lessor
requests to inspect and which would normally be required during such
a Major Check, provided that such inspection is to be made only at
the time that Lessee opens up such area in accordance with the
Approved Maintenance Program.
Lessee also shall permit any persons designated by Lessor to visit
and inspect the Aircraft, its condition, use and operation, and the
records maintained in connection therewith.
7.5.2 Lessor shall have the right at any time on reasonable notice to
inspect or survey the Aircraft or any part thereof, or instruct a
duly authorized surveyor to carry out a survey on its behalf, to
ascertain the condition of the Aircraft or any part thereof and
satisfy itself that the Aircraft is being properly repaired and
maintained in accordance with the terms of this Agreement. The cost
of any such inspection or
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survey shall be borne by Lessor unless an Event of Default has
occurred and is continuing.
7.5.3 Lessor shall have no duty to make any such inspection as is referred
to in Article 7.5.1 and 7.5.2 and shall not incur any liability or
obligation by reason of not making any such inspection. No exercise
of such inspection right shall unreasonably interfere with the
normal operation or maintenance of the Aircraft.
8. TAXES, DUTIES AND EXPENSES
8.1 Lessee agrees promptly to pay and indemnify and hold Lessor and Head
Lessor harmless against all Taxes (other than Lessor Taxes) levied
or imposed against or upon or otherwise payable by any Tax
Indemnitee or Lessee and relating to or attributable to Lessee, this
Agreement, the Aircraft and/or the importation, exportation,
registration, ownership, leasing, sub-leasing, delivery, possession,
use, operation, reregistration, repair, maintenance, overhaul,
replacement, improvement, modification, alteration, transportation,
landing, storage, presence or redelivery of or addition to, the
Aircraft or any Engine or any Part thereof or any rent, receipts,
insurance proceeds or income arising therefrom, or any sum payable
by Lessee to a Tax Indemnitee under this Agreement or any other
transactions or activities contemplated by this Agreement. If Lessee
is required by any applicable Law or regulation to deliver or
furnish any report or return in connection with any such Taxes,
Lessee shall complete the same in a manner satisfactory to the
relevant Tax Indemnitee and in particular shall state therein that
Lessor or Head Lessor, as the case may be, is the owner of the
Aircraft and that the Lessee is exclusively responsible for the use
and operation of the Aircraft and for any such Taxes and Lessee
shall supply a copy of such report or return to the relevant Tax
Indemnitee.
All payments by Lessee hereunder to Lessor shall be free of
withholdings of any nature whatsoever (and at the time Lessee is
required to make any payment upon which any withholding is required,
Lessee shall pay an additional amount such that the net amount
actually received by the Lessor will, after such withholding, equal
the full amount of the payment then due) and shall be free of
expense for collection or other charges. If Lessee shall have paid
any additional
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amount pursuant to the first sentence of this paragraph with
respect to Taxes not subject to indemnification pursuant to the
provisions of this Section 8.1, the Lessor for whose benefit such
Taxes were paid shall reimburse Lessee within 10 Business Days of
written demand therefor for the amount of such Taxes so paid by
Lessee. For the purpose of Article 1.29 and Article 8, the terms,
"Lessor" and "Head Lessor" shall include each group of corporations
(and each member thereof) that includes Lessor or Head Lessor and
for which consolidated, combined, unitary or other group tax
returns are filed.
8.2 Except as otherwise specifically provided herein, Lessee shall pay
to Lessor on or after Delivery Date (unless otherwise agreed to be
financed by Lessor) upon demand:
(a) all reasonable expenses paid to third parties (including
legal, printing and out-of-pocket expenses) incurred or
payable by Lessor (i) in connection with the negotiation,
preparation and execution of this Agreement and all related
documents, including reasonable out-of-pocket expenses in
connection with this Agreement and (ii) in connection with the
events referred to in Article 2.7 of Appendix D and (iii)
related to any amendment to or extension of, or the granting
of any waiver or consent under, this Agreement;
(b) all reasonable expenses paid to third parties (including legal
fees and disbursements but excluding surveyor costs) payable
or incurred by Lessor in connection with, the enforcement of
or preservation of any rights of Lessor under this Agreement
or otherwise in respect of moneys owing under this Agreement
by Lessee or in respect of any breach of Lessee of any
representation, warranty, covenant or undertaking herein
contained; and
(c) the ongoing annual fees and reasonable out-of-pocket expenses
related to this Agreement of the Owner Trustee and the Voting
Trustee.
8.3 Lessee shall pay all stamp, documentary, registration or other like
duties or taxes (including any such duties or taxes payable by a Tax
Indemnitee but excluding all Lessor Taxes) imposed on or in
connection with this Agreement and shall indemnify that Tax
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Indemnitee against any liability arising by reason of any delay or
omission by Lessee to pay such duties or taxes.
8.4 If and to the extent that any sum (the "indemnity sum") constituting
(directly or indirectly) an indemnity to one or more Tax Indemnitees
paid by Lessee to any person other than that Tax Indemnitee shall be
treated as taxable in the hands of the relevant Tax Indemnitee,
Lessee shall pay to the relevant Tax Indemnitee a sum as (after
taking into account any taxation suffered by the relevant Tax
Indemnitee on the indemnity sum) shall reimburse the relevant Tax
Indemnitee for the net amount of any Taxes suffered by them in
respect of the indemnity sum (after taking into account any current
tax savings or other benefits to the relevant Tax Indemnitee
resulting from the payment or accrual of the indemnified expense).
8.5 If and to the extent that any sums payable to a Tax Indemnitee by
Lessee under this Agreement by way of indemnity are insufficient, by
reason of any Taxes payable in respect of those sums, for that Tax
Indemnitee to discharge the corresponding liability to the relevant
third party (including any taxation authority), or to reimburse that
Tax Indemnitee for the cost incurred by it to a third party
(including any taxation authority), Lessee will pay to that Tax
Indemnitee such sum as will after the tax liability has been fully
satisfied leave that Tax Indemnitee with the same net amount (after
taking into account any current tax savings or other benefits to the
that Tax Indemnitee resulting from the payment or accrual of the
indemnified expense) as it would have been entitled to receive in
the absence of that liability. For the purpose of computing the
amount of an indemnity payment pursuant to this Article 8.5 and the
amount of any payment to Lessee under Article 8, it shall be assumed
that the relevant Tax Indemnitee is subject to tax on the amount of
each indemnity it receives or accrues under this Agreement and can
use any tax savings to offset Taxes at the highest marginal
statutory rates of tax applicable to that Tax Indemnitee (as
certified to Lessee by an officer of that Tax Indemnitee) at the
time such indemnity or tax savings is received or accrued.
8.6 If, as a result of any indemnity paid by Lessee or any event giving
rise to an indemnity obligation of Lessee, a Tax Indemnitee at any
time realizes any tax savings,
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refunds or other reductions in taxes not previously taken into
account in computing the amount of the indemnity, that Tax
Indemnitee shall promptly pay to the Lessee the amount of such tax
savings, refunds or other reductions in taxes; provided, however,
that no Tax Indemnitee will be required to make any payment to
Lessee pursuant to this Article 8.6 so long as a Default shall be
continuing or if Lessee shall not have theretofore made all payments
due to all Tax Indemnitees under this Agreement, or to the extent
that the amount of such payment would exceed the amount of all prior
payments by Lessee to the relevant Tax Indemnitee pursuant to this
Article 8 less the amount of all prior payments by the relevant Tax
Indemnitee to Lessee pursuant to this Article 8.6. The relevant Tax
Indemnitee shall estimate the amount of such tax savings, refunds
and other reductions in Taxes and shall use reasonable efforts to
take such actions in filing its tax returns and in dealing with
taxing authorities to seek and claim each such tax savings, refund
and other reduction in Taxes, but shall not be obligated to take any
such action that it determines in its sole discretion to involve the
imposition or risk of any material unindemnified cost or expense,
and in no event will any person have any right to inspect the books,
records, tax returns or other documents of any Tax Indemnitee, and
the positions to be taken by any Tax Indemnitee on or with respect
to its tax returns and in any tax proceedings shall be within their
sole control
8.7 Lessee's, and each Tax Indemnitee's obligations under this Article 8
shall continue in full force and effect, notwithstanding the
expiration or earlier termination of the Term hereunder.
8.8 If Lessee disputes the payment of any Taxes payable by a Tax
Indemnitee for which Lessee is responsible under this Agreement,
that Tax Indemnitee will take such action as Lessee may reasonably
request at Lessee's expense to contest that payment but that Tax
Indemnitee will not be obliged to take any such action:
(a) which that Tax Indemnitee considers in good faith may result
in the imposition or risks of any material liability cost, or
expense for which that Tax Indemnitee is not indemnified to
its satisfaction; or
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(b) which that Tax Indemnitee considers not to have a reasonable
prospect of success; or
(c) for which Lessee has not made adequate provision to the
satisfaction of that Tax Indemnitee in respect of the expense
concerned.
8.9 Lessor covenants and agrees to deliver to Lessee, (a) within 30 days
of the signing of this Agreement (but in all events prior to the
date of the first payment of Rent to Lessor under this Agreement)
and within 30 days prior to January 1, 1996 and each January 1
falling every three years thereafter (or at such other date as
prescribed by United States Treasury Regulations) as long as this
Agreement has not been terminated, two accurate and complete
original copies of Internal Revenue Service Form 1001 (or any
successor form) dated the date hereof or January 1, 1996 (or such
subsequent January 1 or other date) signed by Beneficiary, as
appropriate, and such other related forms (including any certificate
with respect thereto) as Lessee may reasonably request, or (b)
within 30 days of the signing of this Agreement (but in all events
prior to the date of the first payment of Rent to Lessor under this
Agreement) and within 30 days prior to the beginning of each taxable
year of Lessor beginning subsequent to the date of this Agreement
(or at such other date as prescribed by United States Treasury
Regulations), two accurate and complete original copies of Internal
Revenue Service Form 4224 (or any successor form), signed by
Beneficiary, dated as appropriate, and such other related forms
(including any certificate with respect thereto) as Lessee may
reasonably request. In addition, Lessor shall deliver to Lessee two
accurate and complete original copies of Form 1001 or Form 4224
signed by Beneficiary, at any time that a change in circumstances
renders the previous form inaccurate in any material respect.
Nothing in this Article 8.9 shall be construed as imposing on the
Lessee any obligation whatsoever, including, without limitation, to
indemnify Lessor or any other party for U.S. withholding taxes.
9. LEINS
9.1 Lessee, during the Term, shall not create or suffer to exist any
lien, attachment, mortgage or other encumbrance upon or against the
Aircraft, or any of its rights under this Agreement, other than the
Mortgage,
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the Security Assignment and Permitted Liens. If at any time a lien,
attachment, mortgage, or other encumbrance except as permitted above
shall be created or suffered to exist by Lessee, or be levied upon
the Aircraft or any of its rights under this Agreement, Lessee shall
forthwith notify Lessor and cause the same forthwith to be
discharged by bond or otherwise. In the event Lessee shall fail to
discharge any such lien, attachment, mortgage or other encumbrance,
Lessor, Head Lessor or the Bank shall be entitled (but not bound) to
discharge the same, in which event Lessee shall pay to Lessor, on
demand, the amount paid by Lessor and/or Head Lessor and/or the
Bank, together with Lessor's and/or Head Lessor's and/or the Bank's
losses, costs and expenses, including reasonable legal fees and
expenses.
10. INDEMNIFICATION
10.1 LESSEE SHALL RELEASE AND DEFEND, HOLD HARMLESS AND INDEMNIFY ANY
AND/OR ALL OF THE INDEMNITEES, FROM AND AGAINST ANY AND ALL CLAIMS,
PROCEEDINGS, SUITS, JUDGEMENTS, COSTS, EXPENSES, PENALTIES, FINES
AND LIABILITIES, DIRECT AND CONSEQUENTIAL DAMAGES AND LOSSES,
INCLUDING WITHOUT LIMITATION COSTS AND EXPENSES INCIDENTAL THERETO,
OF WHATSOEVER KIND AND NATURE, AND INCLUDING REASONABLE LEGAL FEES
AND EXPENSES BUT EXCLUDING ANY TAXES, INDEMNITY FOR WHICH IS
ENCOMPASSED SOLELY IN ARTICLE 4.1 AND ARTICLE 8 (EACH A "CLAIM"),
WHICH MAY BE SUFFERED BY, ASSERTED AGAINST, CHARGED TO OR
RECOVERABLE FROM, DIRECTLY OR INDIRECTLY, ANY AND/OR ALL OF THE
INDEMNITEES:
(A) RELATING TO, ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE
POSSESSION, DELIVERY, PERFORMANCE, MANAGEMENT, OWNERSHIP,
REGISTRATION, CONTROL, MAINTENANCE, CONDITION, SERVICE,
REPAIR, OVERHAUL, LEASING, USE, OPERATION OR RETURN OF THE
AIRCRAFT, ANY ENGINE OR ANY PART, OR THE PERFORMANCE OR
NON-PERFORMANCE OF ANY AND/OR ALL OF THE INDEMNITEES OF
SERVICES OR DELIVERY OF ANY THINGS IN CONNECTION WITH THE
AIRCRAFT DURING THE TERM, OR OTHERWISE IN CONNECTION WITH THIS
AGREEMENT, WHETHER OR NOT ARISING IN TORT OR OCCASIONED IN
WHOLE OR IN PART BY THE FAULT OR NEGLIGENCE OF ANY AND/OR ALL
OF THE INDEMNITEES; OR
(B) AS A CONSEQUENCE OF ANY DESIGN, ARTICLE OR MATERIAL IN THE
AIRCRAFT, ANY ENGINE OR ANY PART OR ITS OPERATION OR USE
CONSTITUTING AN
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INFRINGEMENT OF PATENT (TO THE EXTENT AND SCOPE AND SUBJECT TO
THE LIMITATIONS SET FORTH IN PART C OF EXHIBIT G OF THE
SUPPORT SERVICES AGREEMENT) COPYRIGHT, TRADEMARK, DESIGN OR
OTHER PROPRIETARY RIGHT OR A BREACH BY LESSEE OF ANY
OBLIGATION OF CONFIDENTIALITY OWED TO ANY PERSON;
EXCLUDING, HOWEVER, FROM THE FOREGOING ANY SUCH CLAIM TO THE
EXTENT THAT SUCH CLAIM RESULTS FROM THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF SUCH INDEMNITEE OR FROM ANY
MISREPRESENTATION BY SUCH INDEMNITEE CONTAINED IN THIS
AGREEMENT OR ANY BREACH BY SUCH INDEMNITEE OF ANY COVENANT SET
FORTH IN THIS AGREEMENT.
10.2 The indemnities contained in this Article 10 shall continue in full
force and effect notwithstanding the expiration or other termination
of this Agreement or of the letting of the Aircraft hereunder.
10.3 The indemnities contained in this Article 10 are given to the Lessor
for itself and as agent and trustee on behalf of the other
Indemnitees
10.4 Notwithstanding anything to the contrary contained herein, Lessee
does not release and does not agree to defend, hold harmless or
indemnify under this Agreement (and without limiting any obligations
or indemnities contained in any other agreement with Lessee) Fokker
or any other Indemnitee in its capacity as manufacturer or seller of
the Aircraft from or against (i) claims of third parties made
directly against Fokker or such Indemnitee, based on its product
liability or its status as manufacturer or Seller, or (ii) claims
made against Fokker or such Indemnitee based on the warranties or
indemnities contained in the Product Assurance Document which is
Exhibit G of the Support Services Agreement, or (iii) the matters
described in Article 10.1(B).
10.5 If any Indemnitee has knowledge of the occurrence of any Claim,
liability or other matter for which it is or may be entitled to be
indemnified hereunder, it shall give prompt written notice thereof
to the Lessee. Each Indemnitee shall cooperate in good faith with
Lessee and supply such information as may reasonably be requested by
Lessee to enable Lessee to investigate, defend or contest any Claim,
liability or other matter for which Lessee may be required to
indemnify an Indemnitee hereunder. In the event that Lessee pays
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any amount to an Indemnitee pursuant to this Article 10, Lessee
shall be subrogated to all rights of the Indemnitee in respect of
the Claim, liability or other matter indemnified against giving rise
to such payment. Lessee or its insurers shall have the right, unless
an Event of Default shall have occurred and be continuing and such
matter is not covered by insurance, to investigate or (provided that
Lessee or its insurers shall agree not to dispute liability
hereunder or under any insurance policies pursuant to which coverage
is sought and provided that Lessee shall have consulted with Lessor
prior thereto), defend or compromise any Claim, and Lessor shall
cooperate with Lessee with respect thereto.
11. INSURANCE
11.1 On or before the Expected Delivery Date of the Aircraft and
throughout the Term, Lessee shall carry and maintain in full force
and effect, at its own cost and expense, in such forms, on such
conditions and with such insurers and, if requested, reinsurers and
through such insurance and, if requested, reinsurance brokers as are
satisfactory to Lessor, the following insurances with respect to the
Aircraft, Engines and Parts (herein referred to as "the
Insurances"):
(a) All Risks Aircraft Hull insurance of the type usually insured
against by commercial airlines engaged in the same or similar
business and owning or operating similar aircraft (including
Engines and Parts while not installed on the Aircraft and
including Extended Coverage Endorsement (Aircraft Hull) AVN51
or equivalent on the Agreed Value. The insurance may be
subject to a deductible in respect of losses other than total
loss, arranged total loss or constructive total loss of not
more than $100,000.00 (Dollars One Hundred Thousand) for each
accident.
(b) If operated outside the United States and Canada, Aircraft
Hull War and Allied Perils insurance covering the risks
excluded from the All Risks Aircraft Hull insurance specified
in paragraph (a) above by the terms of the War, Hi-Jacking and
Other Perils Exclusion Clause AVN.48B except paragraph (b)
thereof and shall include cover in respect of confiscation,
nationalization, seizure, restraint, detention, appropriation
for title or
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use by or under the order of any Government Entity of the
State of Registration.
(c) Comprehensive Airline Liability insurance (including without
limitation aircraft Third Party Liability, Passenger and Crew
Liability (including Baggage and Personal Effects)), Cargo
Liability, Mail Liability, Personal Injury Liability,
Contractual Liability, Hangar Keeper's Liability, Aircraft
Products Liability and General Third Party Liability of the
types usually insured against by commercial airlines engaged
in the same or similar business and owning or operating
similar aircraft in an amount of not less than $500,000,000.00
(Dollars Five Hundred Million) Combined Single Limit any one
occurrence each Aircraft but limited in respect of Personal
Injury to the equivalent of $25,000,000.00 (Dollars Twenty
Five Million) any one offence and in the aggregate.
Such insurance shall include cover in respect of the risks
excluded by War, Hi-Jacking and Other Perils Exclusion Clause
AVN.48B except paragraph (b) thereof.
This insurance may be subject to deductibles in respect of
passengers baggage and personal effects of not more than
$1,250.00 (Dollars One Thousand Two Hundred Fifty) any one
claim and in respect of cargo and mail of not more than
$5,000.00 (Dollars Five Thousand) any one claim. Such
deductibles shall not apply to claims arising from accidents
to the carrying aircraft.
(d) All Risks insurance on Engines and Parts while any such items
are not installed on the Aircraft and in respect of which
cover is not provided under the All Risks Aircraft Hull
insurance and/or Aircraft Hull War and Allied Perils insurance
(respectively specified in paragraphs (a) and (b) above) of
the type usually insured against by commercial airlines
engaged in the same or similar business and owning or
operating similar aircraft for not less than full replacement
value. If Engines and Parts are located outside the United
States and Canada, such insurance shall include War and Allied
Perils to the extent that such insurance is customarily
available in the
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international insurance market for this type of insurance.
This insurance may be subject to a deductible of not more than
$10,000.00 (Dollars Ten Thousand)
Lessor's current requirements as at the date of this Agreement as to
the Insurances are as specified in this Article and in Appendices H
and I. Lessor reserves the right to amend the insurance requirements
of this Article 11 to reflect changes in insurance practice.
If required by the first paragraph of Article 11.1, the Lessee shall
procure that the insurers effect reinsurances in the same form and
conditions through such reinsurance brokers and with such reinsurers
and for such proportions as are satisfactory to Lessor.
11.2 All Insurances to be carried in accordance with Article 11.1 above
shall:
(a) in respect of All Risks Aircraft Hull insurance, Aircraft Hull
War and Allied Perils insurance and All Risks insurance on
Engines and Parts:
(i) name the Lessor, Head Lessor and the Bank and their
respective successors and assigns as additional
assureds;
(ii) provide that all claims in respect of the Aircraft,
Engines and Parts shall be payable to Lessor or as it
may direct, such payee to be named Loss Payee; provided,
that partial loss amounts up to the Partial Loss Amount
set forth in Appendix B shall be payable to Lessee
unless the insurers have been given notice that a
Default has occurred; and
(iii) if applicable, provide in respect of Hull All Risks and
Hull War and Allied Perils for a 50/50 Claims Settlement
Clause in the form of AVS.103;
(b) in respect of Comprehensive Airline Liability insurance:
(i) name the Lessor, its successors and assigns and its
shareholders, subsidiaries,
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directors, officers, agents, employees and the
Indemnitees as additional assureds; and
(ii) provide that the insurance shall operate in all respects
as if a separate policy had been issued covering each
party insured thereunder, but this provision shall not
operate to include any claim howsoever arising in
respect of loss or damage to the Aircraft, Engines and
Parts insured under the All Risks Hull, Hull War and
Allied Perils or All Risks insurance of the assured.
Notwithstanding the foregoing the total liability of
insurers in respect of any and all assureds shall not
exceed the limits of liability stated in the policy;
(c) in respect of all Insurances:
(i) be effective worldwide except for territories approved
in writing by the Lessor;
(ii) provide that insurers waive all rights of subrogation
against the Lessor, its subcontractors, FAUSA, Fokker,
the Head Lessor, the Bank, and their respective
officers, directors, employees, servants, agents,
successors and assigns;
(iii) provide that in the event that the Insurances are
cancelled (including cancellation for non-payment of
premium) or are materially changed such cancellation or
change shall not be effective as to the interest of the
Lessor until thirty (30) days (but seven (7) days or
such lesser period as is customarily available in
accordance with policy conditions in respect of war and
allied perils) after confirmed receipt by Lessor of
written notice by insurers of such cancellation or
change;
(iv) provide that in respect of the interests of the
Additional Assureds, the Insurances shall not be
invalidated by any act, neglect, omission,
misrepresentation or non-disclosure on the part of the
Lessee or any other party other than the Additional
Assured seeking to make a claim thereunder, and shall
insure each Additional Assured regardless of any
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breach or violation of any warranties, declarations or
conditions contained in such policies by the Lessee or
any other party other than the Additional Assured
seeking to make a claim thereunder;
(v) provide that the Additional Assureds shall have no
responsibility for premium and insurers shall waive any
right of set-off or counterclaim against the Additional
Assureds except in respect of outstanding premium in
respect of the Aircraft, Engines and Parts subject of a
claim;
(vi) not provide for any deductible or self insurance other
than the deductibles allowed under the terms of Article
11.1 above;
(vii) be primary without right of contribution from any other
insurance carried by Lessor, Lessee or any other person;
and
(viii) be denominated in Dollars.
11.3 If required by the first paragraph of Article 11.1, the re-insurance
policies shall:
(a) provide that cover shall be identical to the cover provided by
the original insurances and be subject to the same terms and
conditions as the original insurances;
(b) provide that so far as the respective interests of the
Additional Assureds are concerned the reinsurance shall not be
invalidated by any act, neglect, omission, misrepresentation
or nondisclosure on the part of the reinsured party;
(c) confirm the insurers' agreement to the provision of paragraph
(d) below;
(d) include a cut-through clause in the following terms or in such
other terms as may be satisfactory to Lessor:
"In respect of All Risks Aircraft Hull insurance, Aircraft
Hull War Risk and Allied Perils insurance as described in
Article 11.1(a) and (b) above and All Risks insurance on any
Engine and Parts as described in Article 11.1(d) above, the
reinsurers
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and the reassured hereby agree that in the event of any claim
arising under the relevant reinsurances the reinsurers shall
in lieu of payment to the reassured, its successors in
interest and assigns pay to the Loss Payee specified in the
primary insurances all sums payable under or in connection
with such reinsurances by virtue of any reinsured loss of, or
damage to, the Aircraft, Engines and Parts, without any
deduction or deductions whatsoever, other than any outstanding
premium in respect of the Aircraft, Engines or Parts the
subject of the claim, it being understood and agreed that any
such payment by the reinsurers shall fully discharge and
release the reinsurers from any and all further liability in
connection therewith.
In respect of Comprehensive Airline Liability insurance as
described in Article 11.1(c) above, the reinsurers and
reassured hereby agree that in the event of any claim arising
under the relevant reinsurances, the reinsurers shall in lieu
of payment to the reassured, its successors in interest and
assigns pay to the person or party who has sustained the
relevant loss (or as reimbursement of any payment made by any
Additional Assureds) all sums payable under such reinsurances
by virtue of such reinsured loss, without any deduction or
deductions whatsoever, it being understood and agreed that any
such payment by the reinsurers shall fully discharge and
release the reinsurers from any and all further liability in
connection therewith"; and
(e) provide that the reinsurers and reassured agree that in the
event that the reassured, its successors in interest and
assigns shall at any time be or become insolvent or suspend
business or file a petition in bankruptcy or be adjudicated
insolvent or bankrupt or admit in writing its inability to pay
its debts as they become due, or make a general assignment for
the benefit of creditors or that a receiver or liquidator or
assignee or trustee or state commissioner of insurance be
appointed in respect of the reassured its successors in
interest or assigns or any substantial part of its property
for the purpose of liquidation on account of insolvency, then
the reinsurers, in lieu of payment to the reassured, its
successors in interest or assigns, shall pay
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upon demand that portion of any loss due to the party entitled
thereto under the terms of the original insurance for which
such reinsurers would under the terms of the reinsurance be
liable to pay the reassured, its successors in interest or
assigns, less any amounts already paid, it being understood
and agreed that any such direct payment by reinsurers shall
fully discharge and release the reinsurers from any and all
further liability for such payment made.
11.4 At least fifteen (15) Business Days prior to the Expected Delivery
Date or, in the event any Parts or Engines are delivered to Lessee
prior to such date, at least fifteen (15) Business Days prior to the
date of delivery of such Parts or Engines, and thereafter during the
Term, at least one month prior to the renewal date of any Insurance
required or maintained by Lessee under Article 11.1 but in no event
less than once in each 12 month period, Lessee shall furnish or
cause to be furnished to Lessor by the insurer or insurance broker
and the reinsurance broker
1) a certificate of insurance describing in detail the insurance
then carried and maintained, and certifying that such
insurance complies with the terms of this Agreement,
including:
(i) confirmation that the insurance/reinsurance has been
placed with the insurers/reinsurers required (giving the
name of such insurers/reinsurers), the insured/reinsured
amount and the period of the policy and
(ii) confirmation that all premiums due to
insurers/reinsurers have been paid,
and
2) a letter of undertaking from Lessee's brokers and, if
required, from the reinsurance brokers.
Such certificate(s) of insurance and letter(s) of undertaking
shall be substantially in the form as set out in Appendix H
and Appendix I, respectively.
In the event that Lessee shall fail to effect, maintain or cause to
be effected or maintained, insurance as required by this Article 11,
Lessor, Head Lessor or the
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Bank may at its option, but without any obligation to do so, and
without prejudice to Lessor's, Head Lessor's and the Bank's other
rights or remedies hereunder, maintain such insurance or provide
such or a similar insurance, and, in such event, Lessee shall, upon
demand, promptly reimburse to Lessor, Head Lessor or the Bank the
cost thereof, including interest thereon at the rate referred to in
paragraph 6 of Appendix D.
11.5 In the event of any damage to the Aircraft, Engines or Parts during
the Term not constituting a Casualty Occurrence, Lessee shall, if so
consented to by Lessor (such consent not to be unreasonably
withheld), repair, or cause the same to be repaired by an Authorized
Maintenance Performer at its sole cost and expense. Except as
otherwise provided in Section 11.2(a)(ii), Lessor and Lessee agree
that all insurance proceeds payable in connection with any such
damage shall be payable directly to Lessor. In such event any
insurance proceeds received by Lessor shall be applied to reimburse
Lessee for such cost and expense. Any excess remaining shall, unless
a Default shall have occurred and be continuing, be paid over to
Lessee.
11.6 Not later than ten (10) days, prior to the Expected Delivery Date,
Lessee shall deliver to Lessor an irrevocable power of attorney, in
form and substance acceptable to Lessor, authorizing Lessor to
initiate, process and settle any insurance claim with respect to the
Aircraft, Engines and Parts together with an acknowledgment thereof
from the insurers.
11.7 When used in this Article 11, the expression Additional Assured(s)
denotes:
(a) in relation to those insurances referred to in Article
11.2(a), those persons referred to in sub-paragraph (i) of
Article 11.2(a); and
(b) in relation to those insurances referred to in Article
11.2(b), those persons referred to in sub-paragraph (i) of
Article 11.2(b).
12. ASSIGNMENT AND SUBLETTING
12.1 Lessee shall not assign any of its rights or obligations or delegate
any of its duties under this Agreement and, except as permitted by
Article 5.1 above, Lessee shall not sublet or otherwise part with
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possession of the Aircraft or any Part thereof unless previously
approved by Lessor in writing (such consent not to be unreasonably
withheld).
12.2 This Agreement, the Aircraft and Lessor's interest in each thereof
is freely assignable and alienable by Lessor upon written notice to
Lessee in accordance with Article 12.3, provided, however, that so
long as the Aircraft shall be leased to Lessee under this Lease,
Lessor will not sell, assign, convey or otherwise transfer
absolutely (and not for security) any of its right, title, or
interest in and to this Agreement or the Aircraft to any person
unless Lessor and the proposed transferee (the "Transferee") have
complied with the following conditions:
(i) Lessor shall give Lessee written notice of such
transfer at least 3 Business Days before the date of such
transfer, specifying the name and address of the proposed
Transferee;
(ii) the Transferee shall not be an airline or a
commercial air carrier or person controlling, controlled by or
under common control with an airline or a commercial air
carrier which is in direct competition with Lessee in the
United States;
(iii) the Transferee shall qualify as a "citizen of the
United States" within the meaning of Section 101(16) of the
Federal Aviation Act by a Voting Trust Agreement or otherwise;
and
(iv) on the transfer date the Lessor and the Transferee
shall enter into an agreement or agreements in which the
Transferee confirms that it shall be deemed a party to this
Lease and agrees to be bound by all the terms of, and to
undertake all of the obligations of, the Lessor contained in
this Agreement and Lessee shall receive an opinion of counsel
to the Transferee stating, with the customary assumptions and
exceptions, that such agreement or agreements has been duly
authorized, executed and delivered and constitute the legal,
valid and binding obligations of the Transferee enforceable in
accordance with their terms and that the entry into such
agreement(s) does not violate any laws or agreements
applicable to such Transferee.
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The agreements, covenants, obligations and liabilities contained
herein, including but not limited to all obligations to pay Rent and
indemnify Lessor, are made for the benefit of Lessor, Beneficiary,
any assignee including the Head Lessor and/or the Bank as security
assignee, and their respective successors and assigns,
notwithstanding the possibility that any such person was not
originally a party to this Agreement or may, at the time any
enforcement is sought, no longer be a party to this Agreement.
Lessee shall comply with all reasonable requests of Lessor, its
successors and assigns respecting the assignment and Lessee's
acknowledgement of the assignee as Lessor. Notwithstanding anything
contained in this paragraph to the contrary, no assignment of
Lessor's interest in this Agreement or the Aircraft or Beneficiary's
interest in the Trust Estate shall alter the terms of this Agreement
in so far as the costs to Lessee of the performance of its
obligations to pay Rent, Reserve Rate, and Deposits hereunder and,
except as otherwise expressly provided in this Agreement, the rights
and liabilities of Lessee under this Agreement are concerned.
Lessee's rights under this Agreement shall not be subject or
subordinate to any Security Assignment or Mortgage executed by
Lessor or Beneficiary (which Security Assignment or Mortgage shall
be subject to this Agreement).
12.3 It is acknowledged and agreed that:
(a) Lessor has the right to assign all of its right, title and
interest in and to this Agreement and the Aircraft to the Head
Lessor and/or the Bank. In order to comply with its
obligations in relation thereto, Lessor will, upon such
assignment, give Lessee a notice of assignment and it is
agreed that Lessee shall forthwith acknowledge the same by
executing and delivering to Lessor on behalf of Head Lessor
and/or the Bank a consent to assignment in form and substance
reasonably acceptable to Head Lessor and/or the Bank;
(b) Lessor may be required by Head Lessor and/or the Bank to
assign to Head Lessor and/or the Bank all of its rights, title
and interest in and to the Insurances (other than liability
insurances). In order to comply with its obligations in
relation thereto, Lessor, upon assignment of this Agreement
pursuant to Article 12.3 (a), shall give the
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insurers a notice of assignment of Insurances and the Lessee
shall procure that such insurers forthwith acknowledge the
same by executing and delivering to Lessor an acknowledgement
in form and substance acceptable to Head Lessor and/or the
Bank;
(c) Lessor may from time to time require to amend, modify or
replace the security arrangements in respect of the financing
or refinancing of the Aircraft and Lessee agrees to cooperate
with Lessor in connection therewith and, in particular (but
without limiting the generality of the foregoing), to change
the plates provided for in Article 4.3 and to execute and
deliver such other or further acknowledgments of assignment or
other documents and to do such other things as Lessor may
reasonably require to be executed and delivered;
(d) Upon any financing or refinancing of the Aircraft as
contemplated by this Article 12.3, Lessee will promptly and
duly execute and deliver to Lessor, Head Lessor or the Bank
such other documents and assurances and take such further
action as may from time to time be reasonably requested in
order more effectively to carry out the intent and purpose of
this Agreement, the Mortgage and the Security Assignment.
Lessee will procure on request of Lessor that the independent
counsel will confirm to the Head Lessor and the Bank that the
Head Lessor and the Bank may rely on the terms of the opinion
as set out in Appendix G as if the Head Lessor and the Bank
were each addressees of such opinion;
(e) Title to the Aircraft may be transferred by Lessor to the Head
Lessor to be indicated by Lessor or Beneficiary's interest in
the Trust Estate may be transferred by Beneficiary, in either
case for the purpose of enabling Lessor to raise finance in
relation to the Aircraft. In such event either a lease
agreement shall be executed in respect of the Aircraft between
the Head Lessor and Lessor ("Head Lease") in order to enable
Lessor to continue to lease the Aircraft to Lessee in
accordance with this Agreement or Lessor may assign all or
part of its rights, title and interest in and to this
Agreement and the Aircraft to Head Lessor pursuant to Article
12.2 or
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Beneficiary may assign all of its right, title and interest in
and to the Trust Estate and Lessee agrees to cooperate with
Lessor in connection therewith and, in particular (but without
limiting the generality of the foregoing), to cooperate in the
execution of any documents, agreements and amendments to this
Agreement that are necessary in connection with such Head
Lease or such assignment and to do such other things as Lessor
may require to be executed and delivered so long as any such
amendments to this Agreement do not materially adversely
affect Lessee; and
(f) Lessee shall not be liable to (1) any Transferee or (2) any
assignee, purchaser, or transferee of the beneficial interest
of the Trust Estate (a "Beneficiary Transferee") for any
payment of Taxes pursuant to this Agreement in excess of the
amount that would have been payable to the Lessor or the
Beneficiary originally party hereto, as the case may be, if
that party had remained as the Lessor or the Beneficiary,
respectively.
13. DISCLAIMER, REPRESENTATIONS AND WARRANTIES
13.1 THE AIRCRAFT IS LEASED IN "AS-IS, WHERE-IS" CONDITION AND LESSEE
EXPRESSLY AGREES AND ACKNOWLEDGES THAT, SAVE AS EXPRESSLY STATED IN
THIS AGREEMENT, LESSOR WILL HAVE NO LIABILITY IN RELATION TO, AND
LESSOR HAS NOT AND WILL NOT BE DEEMED TO HAVE MADE OR GIVEN ANY
WARRANTIES, GUARANTEES OR REPRESENTATIONS, EXPRESS OR IMPLIED,
ARISING BY LAW OR OTHERWISE, WITH RESPECT TO, THE AIRCRAFT LEASED
HEREUNDER INCLUDING BUT NOT LIMITED TO (1) ANY WARRANTY AS TO THE
AIRWORTHINESS, CONDITION, DESIGN, MERCHANTABILITY OR FITNESS FOR USE
OR OPERATION, (2) ANY WARRANTY ARISING FROM COURSE OF PERFORMANCE,
COURSE OF DEALING OR USAGE OF TRADE, (3) ANY OBLIGATION, LIABILITY,
RIGHT, CLAIM OR REMEDY IN TORT, WHETHER OR NOT ARISING FROM LESSOR'S
NEGLIGENCE, ACTUAL OR IMPUTED, AND (4) ANY OBLIGATION, LIABILITY,
RIGHT, CLAIM OR REMEDY FOR LOSS OF OR DAMAGE TO THE AIRCRAFT, FOR
LOSS OF USE, REVENUE OR PROFIT WITH RESPECT TO THE AIRCRAFT, FOR ANY
LIABILITY OF LESSEE TO ANY THIRD PARTY, OR FOR ANY OTHER DIRECT,
INCIDENTAL OR CONSEQUENTIAL DAMAGES; AND ALL SUCH WARRANTIES,
GUARANTEES, REPRESENTATIONS, OBLIGATIONS, LIABILITIES, RIGHTS,
CLAIMS OR REMEDIES, EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, ARE
EXPRESSLY EXCLUDED.
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Nothing in this Agreement shall afford Lessor or any Indemnitee any
wider or greater exclusion of liability for death or bodily injury
than would be permitted by the Governing Law.
This paragraph shall not be modified except by a written agreement
signed on behalf of Lessor and Lessee by their respective duly
authorized representatives.
13.2 Lessor and Lessee agree that this Article 13 has been the subject of
discussion and negotiation and is fully understood by the parties,
and that the amount of the Rent and other mutual agreements of the
parties set forth in this Agreement were arrived at in consideration
of the provisions of this Article 13 specifically including the
waiver by Lessee set forth in Article 13.1.
13.3 So long as no Event of Default has occurred and is continuing Lessor
agrees to assign or otherwise make available to Lessee for the
duration of the Term such rights as Lessor may have under any
warranty, express or implied, with respect to the Aircraft made by
the Manufacturer of the Aircraft, any subcontractor or supplier
thereof, or any other seller thereof, to the extent that the same
may be assigned or otherwise made available to Lessee and without
warranty by Lessor as to enforceability of any of the rights so
assigned.
To the extent that the same may not be assigned or otherwise made
available to Lessee, Lessor agrees to exert its reasonable efforts,
at Lessee's expense, to enforce such rights as Lessor may have with
respect thereto for the benefit of Lessee; provided however, that
upon an Event of Default all such rights shall immediately revert to
Lessor including all claims thereunder, whether or not perfected,
unless such Event of Default has forthwith been remedied by Lessee.
13.4 Lessee represents and warrants that:
(a) Lessee is a corporation organized and existing in good
standing, in accordance with the Laws of the State of
Incorporation, and has the corporate power and authority to
carry on its business as presently conducted and to perform
its obligations under this Agreement, is an "air carrier"
within the meaning of the Federal Aviation Act operating under
a certificate of convenience and necessity issued pursuant to
Section 401 of such Act and is
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the holder of all necessary licenses issued by all Government
Entities having jurisdiction to authorize or permit Lessee to
engage in air transportation and to perform and comply with
its obligations hereunder;
(b) This Agreement has been duly authorized by all necessary
corporate action on the part of Lessee, and neither the
execution and delivery nor the consummation of the
transactions contemplated hereby nor compliance by Lessee with
the provisions of this Agreement will 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;
(c) The execution and delivery by Lessee of this Agreement, and
all of the transactions by Lessee contemplated hereby, have
received, and Lessee has complied with, every necessary
consent, approval, order, or authorization of, or registration
with, or the giving of prior notice to, any Government Entity
having jurisdiction with respect to the execution and delivery
of this Agreement or the validity and enforceability of this
Agreement or the satisfaction of all monetary and other
obligations hereunder;
(d) This Agreement has been duly entered into and delivered by
Lessee and constitutes the valid, legal and binding
obligations of Lessee, enforceable in accordance with their
terms subject to principles of equity, laws relating to
bankruptcy, insolvency or liquidation or any other laws or
legal procedures generally affecting the enforcement of
creditor's rights or the rights of contracting parties;
(e) It is not necessary or advisable under the Laws of the State
of Registration in order to ensure the validity, effectiveness
and enforceability of this Agreement, the Mortgage or the
Security Assignment or to protect the property rights of
Lessor,
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Beneficiary, Head Lessor or the Bank in the Aircraft and under
the Mortgage and Security Assignment that this Agreement, the
Mortgage, the Security Assignment or any other instrument
relating thereto be filed, registered or recorded or that any
other action be taken under the Laws of the State of
Incorporation and the State of Registration to perfect the
property rights of Lessor, Head Lessor and the Bank in the
Aircraft other than the filing of all such instruments with
the Air Authority, the filing of UCC-1 financing statements in
relevant jurisdictions, and the Mortgage and Security
Assignment will have priority in all respects over the claims
of all creditors of Lessee in or against the Aircraft, except
for Permitted Liens;
(f) Under the Laws of the State of Incorporation and the State of
Registration Lessee will not be required to make any deduction
or withholding from any payment it may make under this
Agreement. There is no withholding or other tax to be deducted
from any payment to be made by Lessee under this Agreement;
(g) There are no suits or legal proceedings (including any
administrative proceeding) pending or threatened before any
court or administrative agency against Lessee which, if
adversely determined, would have a material adverse effect
upon its financial condition or business or its ability to
perform its obligations hereunder;
(h) Each of the Equity Investors and Lessee has performed all of
its respective obligations under the Equity Commitment
required to be performed and the Equity Commitment remains in
full force and effect and has not been modified, supplemented
or amended except as has been disclosed in writing to Lessor;
(i) There has been no material adverse change in the financial
position of Lessee or the consolidated financial position of
Lessee and its subsidiaries from that set forth in the
financial statements last furnished pursuant to Article 6.4
and neither Lessee nor any of its subsidiaries have any
significant liabilities (contingent or otherwise) which are
not disclosed by, or reserved against in such financial
statements;
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(j) The chief executive office (as such term is used in Sections
9-103 and 9-401 of the Uniform Commercial Code) of Lessee is
located at Chicago, Illinois, and Lessee agrees to give at
least 30 days' prior notice to Lessor of any relocation of
said chief executive office or place where such records are
kept and of any change in its name.
13.5 The representations and warranties in Article 13.4 (other than in
clauses (f), (g) and (i) shall be deemed to be repeated by Lessee on
and as of each Rent Date as if made with reference to the facts and
circumstances existing on each such date.
13.6 Lessor represents, warrants and covenants that:
(a) Lessor is a national banking association duly organized and
validly existing in good standing under the laws of the United
States of America, qualifies as a "citizen of the United
States" within the meaning of Section 101(16) of the Federal
Aviation Act, and has the corporate power and authority to
carry on its business as presently conducted and to perform
its obligations under this Agreement; if at any time Lessor
shall have actual knowledge that it has ceased to qualify as
such a citizen, it will, if such citizenship is then necessary
to maintain the eligibility of the Aircraft for United States
registration, take such action as may be necessary to maintain
such United States registration;
(b) This Agreement has been duly authorized by all necessary
corporate action on the part of Lessor, has been duly entered
into and delivered by Lessor in accordance with the Trust
Agreement and constitutes the valid, legal and binding
obligations of Lessor, enforceable in accordance with their
respective terms subject to principles of equity, laws
relating to bankruptcy, insolvency or liquidation or any other
laws or legal procedures generally affecting the enforcement
of creditor's rights or the rights of contracting parties;
(c) Neither the execution and delivery nor the consummation of the
transactions contemplated hereby nor compliance by Lessor with
the provisions of this Agreement will result in any breach of,
or constitute any default under, any
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indenture or any 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; and
(d) Except for the Ferry Permits described in Article 3.5, the
registration of the Aircraft and the issuance of the licenses
described in Article 4.1, neither the execution and delivery
nor the consummation of the transactions contemplated hereby
nor compliance by Lessor with the provisions of this Agreement
requires the consent or approval of, the giving of notice to,
or the registration with, or the taking of any other action
in respect of any Government Entity.
The representations and warranties contained in clauses (a),
(b) and (c) of this Article 13.6 are made by Lessor in its
individual capacity.
13.7 Lessor undertakes that, so long as no Event of Default shall have
occurred and be continuing, Lessor will not interfere with the
peaceful and quiet use and enjoyment of the Aircraft by Lessee in
accordance with the terms of this Agreement.
14. COVENANTS OF LESSEE
14.1 Lessee hereby covenants with Lessor that from the Delivery Date and
during the Term and until redelivery of the Aircraft to Lessor in
accordance with Article 16 it will:
(a) remain in and continue to operate as an air carrier holding a
valid certificate of convenience and necessity issued pursuant
to Section 401 of the Federal Aviation Act to preserve its
corporate existence, to satisfy its debts and obligations as
they fall due;
(b) comply with all Laws and regulations for the time being in
force in the State of Incorporation, the State of Registration
and in any country to, from, in or over which the Aircraft is
flown;
(c) (i) at its own expense from time to time do and perform such
other and further acts and execute and deliver any and all
further instruments as may be required by Law (in the United
States but not
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in any jurisdiction outside the United States unless directly
required due to Lessee's operation), and (ii) at Lessor's
expense (insofar as not covered in Article 8.2(a)) from time
to time do and perform such other and further acts and execute
and deliver any and all further instruments as may be
reasonably requested by Lessor to establish, maintain and
protect the respective rights and remedies of Lessor, Head
Lessor and the Bank and to carry out and give effect to the
intents and purposes of this Agreement and the parties;
(d) notify Lessor immediately of the occurrence of any Default;
(e) obtain and maintain all necessary government and other
certificates, consents, licenses, permits and authorizations
and take all action which may be necessary for the continued
due performance of Lessee's obligations under this Agreement
and for the use and operation of the Aircraft;
(f) not do or permit to be done any act or thing which might
impair the respective interests of Lessor, Head Lessor and the
Bank in the Aircraft, or the registration of the Aircraft;
(g) notify Lessor as soon as practicable after becoming aware of
any loss, theft, damage or destruction of or to the Aircraft
or any part thereof if the potential cost of repair or
replacement may exceed $100,000.00 (Dollars One Hundred
Thousand);
(h) not do anything which may subject the Aircraft or any part
thereof to penalty, forfeiture, seizure, arrest, impounding,
detention, confiscation, taking in execution, appropriation or
destruction nor abandon the Aircraft or any part thereof;
(i) not represent or hold out Lessor, Head Lessor or the Bank as
carrying goods or passengers on the Aircraft or as being in
any way connected or associated with any operation or carriage
(whether for hire or reward or gratuitously) which Lessee may
undertake;
(j) not pledge the credit of Lessor, Head Lessor or the Bank for
any maintenance, overhauls,
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replacements, repairs or modifications to the Aircraft;
(k) keep Lessor and the insurers, as referred to in Article 11,
informed as to current serial numbers of the Engines and any
engine installed on the Aircraft in accordance with the
provisions of this Agreement, and the location of any Engine
for the time being not installed on the Aircraft; and shall
notify such insurers of any renewal, replacement or
substitution, or the location of any Engine not installed on
the Aircraft;
(l) discharge all fees, charges and expenses payable to any third
party in relation to the use or operation of the Aircraft or
any premises where the Aircraft is situated;
(m) in the event of any forfeiture, impounding or detention of the
Aircraft or any part thereof not constituting a Casualty
Occurrence, use all reasonable endeavors to procure the
immediate release therefrom of the same;
(n) keep accurate, complete and current records of all flights
made by the Aircraft. Such records shall be kept in such
manner as the Air Authority may from time to time require and
in accordance with the Approved Maintenance Program. Lessee
shall permit Lessor or its authorized representatives to
examine such records upon giving reasonable notice not
involving delay to the Aircraft;
(o) on request, provide Lessor with evidence satisfactory to
Lessor that all Taxes and charges incurred by Lessee with
respect to the Aircraft, including without limitation any
payments due to any relevant air traffic control authorities
and airport authorities, have been paid and discharged in
full;
(p) not consolidate with, or merge into, any other corporation,
convey, transfer or lease substantially all of its assets as
an entirety to any person or acquire the shares of or make any
investment in any firm, corporation or person without the
prior written consent of Lessor (such consent not to be
unreasonably withheld) and the execution and delivery to
Lessor of such
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agreements, certificates and legal opinions as Lessor may
request with respect thereto; and
(q) prior to the payment in full of all deferred amounts of Rent,
Reserve Rate or Deposits under this Agreement and all Other
Aircraft Agreements (such event being referred to as the
"Enumerated Milestone"), obtain the prior written consent of
Lessor (such consent not to be unreasonably withheld) to any
commitment of Lessee to any person where such commitment has a
value in excess of $500,000.00 (Dollars Five Hundred
Thousand).
15. DEFAULT BY LESSEE
15.1 Each of the following events shall constitute an "Event of Default":
(a) if default shall be made by Lessee in the making of any Rent,
Reserve Rate and/or Agreed Value payment when due and payable
under this Agreement or of any other Supplemental Rent payment
within 5 Business Days after the date when such other
Supplemental Rent is due and payable under this Agreement; or
(b) (i) if default shall be made by Lessee at any time in the
procurement or maintenance of any insurance coverage
prescribed herein or (ii) any insurance which may be
maintained by Lessor, Head Lessor or the Bank under Article
11.4 is cancelled or terminated or notice of cancellation is
given; or
(c) if default shall be made by Lessee in the observance or
performance of any of the other obligations of Lessee
contained in this Agreement and, if such default is in the
opinion of Lessor capable of remedy, such default shall
continue for a period of fifteen (15) Business Days after
notice from Lessor to Lessee specifying the default and
requiring that the same be remedied; or
(d) if any representation or warranty made (or deemed to be
repeated) by Lessee in or pursuant to this Agreement or in any
document or certificate or statement referred to in or
delivered under this Agreement is or proves to have been
incorrect in
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any material respect when made or deemed to be repeated and
such incorrectness, if capable of being cured, shall continue
for fifteen (15) Business Days after notice from Lessor
specifying such incorrectness; or
(e) if any borrowed money of Lessee or any of its subsidiaries is
not paid when due, or by reason of breach or default under the
terms of any instrument evidencing or guaranteeing the same on
the part of Lessee or any of its subsidiaries any borrowed
money of Lessee or any of its subsidiaries becomes due or
capable of being declared due prior to the date when it would
otherwise have become due, or the security for any such
borrowed money or any guarantee in respect thereof becomes
enforceable, or Lessee is in default under any lease,
hire-purchase, conditional sale or credit sale agreement
(including without limitation any other agreement between
Lessor, its associates, subsidiaries or affiliates and Lessee)
for equipment having a casualty value in excess of $100,000;
or
(f) if an encumbrancer takes possession or a receiver,
administrator, administrative receiver, trustee, liquidator or
similar officer is appointed of the whole or any part of the
assets, rights or revenues of Lessee or any of its
subsidiaries or a distress, execution, sequestration or other
process is levied or enforced upon or sued out against any of
the assets, rights or revenues of Lessee or any of its
subsidiaries and is not discharged within fourteen days, or
Lessee applies for or consents to the appointment of a
receiver, administrator, administrative receiver, trustee,
liquidator or similar officer for it or for all or any part of
its assets, rights or revenues; or
(g) if Lessee or any of its subsidiaries suspends payment of its
debts, or is unable or admits its inability to pay its debts
as they fall due, or shall be adjudicated or found, or
becomes, bankrupt or insolvent, or proposes or enters into any
composition or other arrangement for the benefit of its
creditors generally, or Lessee or any of its subsidiaries
shall, by voluntary petition, answer or consent, seek relief
under the provisions of any bankruptcy, insolvency or other
similar law providing for the reorganization,
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liquidation, administration, dissolution or winding-up of
corporations, or providing for an agreement, composition,
extension or adjustment with its creditors; or
(h) if a petition against Lessee in a proceeding under applicable
bankruptcy or other insolvency laws shall be filed and shall
not be withdrawn or dismissed within 30 days thereafter, or if
any order shall be made by any competent court or resolution
passed by Lessee or any of its subsidiaries or their
respective board of management or supervisory board, whichever
is competent to pass such resolution for the winding-up or
dissolution of Lessee or any of its subsidiaries or for the
appointment of a liquidator, trustee or conservator, save for
winding-up or dissolution for the purposes of amalgamation or
reorganization (not involving or arising out of insolvency)
the terms of which shall have received the prior written
approval of Lessor; or
(i) if Lessee or any of its subsidiaries disposes of all or a
material part of its assets, whether by one or a series of
transactions, related or not, other than for the purpose of a
reconstruction or amalgamation the terms of which have
received the previous consent in writing of Lessor; or
(j) if any action shall be taken by Lessee which shall impair the
title or ownership of Lessor (or Head Lessor), or the
Security Interest of the Bank, in the Aircraft or this
Agreement is or becomes wholly or partly invalid, ineffective
or unenforceable by reason of any act or omission of Lessee;
or
(k) if any consent, authorization, license, certificate or
approval of or registration with or declaration to any
Government Entity in connection with this Agreement including,
without limitation:
(i) any Certificate of Public Convenience and Necessity; or
(ii) required by Lessee or as a condition precedent required
by Lessor pursuant to Article 2.3 to authorize, or in
connection with, the execution, delivery, validity,
enforceability or admissibility in evidence
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of this Agreement or the performance by Lessee of its
obligations under this Agreement; or
(iii) the registration of the Aircraft; or
(iv) any airline license or air transport license;
is changed such that it materially impairs the ability of
Lessee to perform its obligations hereunder, or is withheld,
or is revoked, suspended, cancelled, withdrawn, terminated or
not renewed, or otherwise ceases to be in full force; or
(m) if any circumstances analogous to any of the circumstances
described in paragraphs (f), (g) or (h) above arise under the
Law of any applicable jurisdiction; or
(n) if an event of default (however defined) occurs under any
Operative Document or any Other Aircraft Agreement which event
permits acceleration or termination; or
(o) any advance pursuant to the Equity Commitment has not been
made when due; or
(p) the Enumerated Milestone as defined in Article 14.1(q) is not
fulfilled by the last date on which a deferral is to be paid
and such failure continues for a period of five (5) days; or
(q) an event of default by or relating to Lessee shall occur
under, and as a result a termination shall occur under, any
agreements for gates, hangars or other facilities at Midway
Airport, Chicago, Illinois or any other airport that are
material to Lessee's operations including any agreements
relating to the provision by American Airlines, Inc. (or any
affiliate) of services to Lessee.
15.2 If one or more Events of Default shall have occurred and be
continuing, at Lessor's option and subject to any mandatory
requirement of Law:
(a) For Lessee's account Lessor may do anything that may
reasonably be required to cure any Event of Default and
recover from Lessee all costs
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including legal expenses incurred in so doing, and/or
(b) Lessor may accept such Event of Default as a repudiation of
this Agreement and terminate the lease of the Aircraft to
Lessee hereunder by:
(i) serving notice of such termination on Lessee specifying
the occurrence giving rise to such Event of Default or
Events of Default, provided that such notice shall be
deemed to have been served without the necessity of
actual service upon the occurrence of any Event of
Default described in paragraphs (f), (g) and (h) of
Article 15.1.
Thereafter (if the Term shall have commenced) Lessee
shall redeliver possession of the Aircraft to Lessor at
Schiphol Airport, The Netherlands (or such other
location as Lessor may require); or (at Lessor's
election)
(ii) taking possession of the Aircraft for which purpose
Lessor by its servants or agents may enter upon Lessee's
premises where the Aircraft may be located, or cause the
same to be redelivered to Lessor at Schiphol Airport,
The Netherlands, (or such other location as Lessor may
require Lessee to assemble and deliver the Aircraft to
Lessor, and Lessor shall be entitled to act as attorney
for Lessee in causing such redelivery and shall have all
the powers and authorizations legally necessary for
taking such action. In the event of exercise by Lessor
of its powers under this sub-paragraph (ii) such
termination shall be deemed to take effect on such
taking of possession by Lessor or such redelivery of the
Aircraft to Lessor at the said airport; and/or
(c) Lessor may proceed by appropriate court action or actions to
enforce performance of Article 15.2(b) or to recover damages
for the breach thereof; and/or
(d) all rights of Lessee hereunder shall, in the event the Term
shall be terminated pursuant to Article 15.2(b) henceforth
absolutely cease and terminate but without prejudice to
Lessee's obligations
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under this Agreement all of which shall continue in full force
and effect except for obligations to pay Rent and Reserve Rate
after the Aircraft is returned to Lessor, and is in the
condition required by Article 16; and Lessee shall take all
steps necessary to effect deregistration of the Aircraft in
the State of Registration and Lessor shall be entitled to sell
or otherwise deal with the Aircraft as if this Agreement had
never been made. Without prejudice to the foregoing, Lessee
hereby appoints Lessor as its attorney to do any act or thing
required in connection with such deregistration of the
Aircraft.
15.3 If an Event of Default occurs, Lessor shall have the right to demand
that:
(a) Lessee pay all amounts which may be then due and unpaid
hereunder, and
(b) at Lessor's option whether or not Lessor shall have exercised,
or shall thereafter at any time exercise, any of its rights
under Article 15.2, by thirty (30) days written notice to
Lessee from Lessor specifying a payment date, Lessee pay
Lessor, and Lessee shall pay Lessor, on the payment date
specified in such notice, as liquidated damages for loss of
bargain and not as a penalty (in lieu of the Rent due for the
Aircraft covered by such notice for the period commencing
after the date specified for payment in such notice), any
unpaid Rent for the Aircraft (prorated in the case of Rent on
a daily basis) to and including the payment date specified in
such notice, plus the amount, if any, by which the aggregate
Rent for the Aircraft for the remainder of the Term for the
Aircraft, discounted periodically (equal to installment
frequency) to present worth at the interest rate of six
percent (6%) per annum, exceeds the Fair Market Rental Value
of the Aircraft for the remainder of the Term, after
discounting such Fair Market Rental Value periodically (equal
to installment frequency) to present worth as of the payment
date specified in such notice at the interest rate of six
percent (6%) per annum.
Lessee shall fully indemnify Lessor on its own behalf and on behalf
of the Head Lessor and the Bank on demand
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against any loss (including loss of profit), damage, expense
(including without limitation attorneys' fees), cost or liability
which Lessor, Head Lessor or the Bank may sustain or incur as a
consequence of the occurrence of any Event of Default and/or
termination of the letting of the Aircraft pursuant to this
Agreement, including but not limited to (i) any loss of profit
suffered by Lessor and/or the Head Lessor because of Lessor's
inability to place the Aircraft on lease with another lessee on
terms as favorable to Lessor as the terms of this Agreement or
because whatever use, if any, to which Lessor is able to put the
Aircraft upon its return to Lessor, or the funds arising upon a sale
or other disposal thereof, is not as profitable to Lessor as letting
the Aircraft in accordance with the terms of this Agreement would
have been to the extent the foregoing loss of profit shall not be
recovered under Article 15.3(b), (ii) any amount of interest, fee's
or other sums whatsoever paid or payable on account of funds
borrowed in order to carry any unpaid amount, (iii) any loss,
premium, penalty or expense which may be incurred repaying funds
raised to finance the Aircraft or in unwinding any swap, forward
interest rate agreement or other financial instrument relating in
whole to Lessor's financing of the Aircraft and/or the Aircraft
under the Other Aircraft Agreement, and (iv) any loss, cost, expense
or liability sustained or incurred by Lessor owing to Lessee's
failure to redeliver the Aircraft in the condition required by this
Agreement.
15.4 No remedy referred to in this Article 15 is exclusive, but each
remedy shall be cumulative and in addition to any other remedy
referred to herein or otherwise available to Lessor. The exercise by
Lessor of any of its remedies hereunder shall not preclude or estop
the exercise or beginning of exercise by Lessor of any or more of
such other remedies.
No express or implied waiver by Lessor of any Event of Default, or
failure or delay of Lessor in exercising any right hereunder shall
operate as waiver thereof unless an express waiver is executed and
delivered to Lessee.
15.5 Prior to the Expected Delivery Date Lessee shall deliver to Lessor a
duly authorized consent, undated and in form and substance
acceptable to Lessor, addressed to the Federal Aviation
Administration consenting to the release of this Agreement in
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connection with the termination of this Agreement pursuant to the
terms hereof and, if so requested by Lessor, the deregistration of
the Aircraft from the register of civil aviation in the State of
Registration.
16. RETURN OF AIRCRAFT
16.1 On the Expiry Date or upon earlier termination of the Term (unless a
Casualty Occurrence shall have occurred with respect to the
Aircraft), Lessee shall, at its own expense, redeliver the Aircraft
to Lessor at the Re-Delivery Location or such other airport as is
mutually acceptable to the parties, in a condition complying with
the provisions of Appendix E, free and clear of all liens and
encumbrances (including Permitted Liens other than Lessor Liens) and
thereupon cause the Aircraft to be removed from the Register of
Civil Aircraft in the State of Registration and Lessee shall return
the Aircraft to Lessor together with the Aircraft Documents and all
equipment and records supplied pursuant to this Agreement when the
Aircraft was delivered to Lessee hereunder.
16.2 Immediately prior to such redelivery of the Aircraft, Lessee, at its
own expense, shall make the Aircraft, Aircraft Documents and other
records available to Lessor for inspection ("Final Inspection") in
order to verify that the condition of the Aircraft complies with the
provisions of this Agreement. Such inspection shall not unreasonably
interfere with the operation of the Aircraft. The period will be
long enough for the Final Inspection to permit the conduct by Lessor
of the following:
(a) Inspection of the Aircraft Documents;
(b) Inspection of the Aircraft structure and Parts;
(c) Inspection of the Engines and Auxiliary Power Unit ("A.P.U."),
including without limitation, a boroscope inspection or any
other equivalent inspection method supported by Rolls Royce,
inspection of the compressor and turbine area, and, if
reasonably requested based on evidence that it is required,
the Engine and A.P.U. condition runs confirming release of
each Engine and A.P.U for its remaining operational life;
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(d) A one-hour to two-hour test flight with Lessor's
representatives on board as observers and, if any non
compliance is found, a subsequent test flight to check
compliance after rectification.
16.3 To the extent that, upon such Final Inspection, the condition of the
Aircraft and Aircraft Documents does not comply with the provisions
of this Agreement, Lessee, at its own expense, shall cause such
non-compliance to be promptly rectified and to the extent such
rectification extends beyond the Expiry Date, the Term shall, at
Lessor's sole option, be deemed to be automatically extended and the
provisions of this Agreement shall remain in full force and effect
until such rectification has been accomplished. During such
extension of the Term the Lessee shall be liable to pay Rent at a
daily pro rata rate equal to the Rent payable during the last Rental
Period of the Term.
16.4 Upon redelivery Lessee shall provide to Lessor all necessary
assistance to enable Lessor to obtain any required documents in
relation to the export of the Aircraft from the State of
Registration, and if different, from the State of Incorporation
(including a valid and subsisting export license for the Aircraft),
and shall reassign to Lessor, at the expense of Lessee, the benefit
of any indemnity or warranty which has been assigned to Lessee
pursuant to Article 13.3 above to the extent such indemnity or
warranty is assignable.
16.5 Prior to the Expiry Date or upon any earlier termination of the Term
and upon Lessor's request, Lessee will provide Lessor or its agent
reasonable access to the Approved Maintenance Program and the
Aircraft Documents in order to facilitate the Aircraft's integration
into any subsequent operator's fleet.
Lessee will, if requested by Lessor to do so, upon return of the
Aircraft deliver to Lessor a certified true current and complete
copy of the Approved Maintenance Program. Lessor agrees that it will
not disclose the contents of the Approved Maintenance Program to any
person or entity except to the extent necessary to monitor Lessee's
compliance with this Agreement and/or to bridge the maintenance
program for the Aircraft from the Approved Maintenance Program to
another program.
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16.6 Upon redelivery of the Aircraft to Lessor, an adjustment shall be
made in respect of fuel on board on the Delivery Date and on
redelivery at the price then prevailing at the Redelivery Location.
16.7 If Lessor shall request that Lessee paint the Aircraft any other
basic color as contemplated by Section 1(h) of Appendix E, Lessor
agrees that it shall bear the cost and expense of the difference
between white paint and such other basic color.
17. CASUALTY OCCURANCES
17.1 In this Agreement "Casualty Occurrence" shall mean any of the
following events with respect to the Aircraft, the Airframe or an
Engine:
(a) the actual, agreed, constructive, arranged or compromised
total loss or destruction of the Aircraft, the Airframe or an
Engine, or damage to the Aircraft, Airframe or Engine
rendering repair impracticable or uneconomical, or the
Aircraft, Airframe or Engine being rendered permanently unfit
for normal use;
(b) requisition of title or other compulsory acquisition,
requisition, capture, seizure, deprivation, confiscation or
detention for any reason of the Aircraft, the Airframe or an
Engine by any Government Entity of the State of Registration
or by any other government or other competent authority,
whether de jure or de facto, but excluding requisition for use
or hire not involving requisition of title by any Governmental
Entity for a temporary period ending on the date fifteen (15)
days (or one hundred eighty (180) days if the requisition for
use or hire is by the United States) after such requisition,
or the Expiry Date, whichever first occurs; and
(c) the hijacking, theft, disappearance, condemnation,
confiscation or seizure of the Aircraft, the Airframe or an
Engine other than in the circumstances referred to in (b)
above which deprives Lessee of the use thereof for more than
fifteen (15) consecutive days.
17.2 (a) In the event of a Casualty Occurrence with respect to the
Aircraft or Airframe prior to the Delivery
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Date, this Agreement shall immediately terminate with respect
to such Aircraft and neither party shall have any further
obligation or liability hereunder, save that Lessor shall
return to Lessee the Deposit or such part thereof as Lessor
shall have received from Lessee and Lessee shall remain liable
to reimburse Lessor for any amounts specified in Article
8.2(a).
(b) In the event of a Casualty Occurrence with respect to the
Aircraft or Airframe after delivery to Lessee hereunder,
Lessee shall pay the Agreed Value and, if applicable, the
Additional Amount pursuant to Appendix D, Article 2.6, to
Lessor on or prior to the earlier of (i) 45 days after the
Casualty Occurrence and (ii) the Business Day after the date
of receipt of the insurance proceeds in respect of the
Casualty Occurrence and, provided all other amounts which are
then due and payable by Lessee under this Agreement have been
paid in full to Lessor, Lessee's obligation hereunder for
payment of Rent shall cease as from the date on which Lessor
receives payment in full of the Agreed Value. Rent paid in
advance for any days which occur after such Agreed Value and
Additional Amount, if any, is paid shall be repaid to Lessee,
so long as no Default has occurred and is continuing, on a pro
rata basis for each day beyond such date of payment of Agreed
Value. Any excess insurance proceeds from the insurance
obtained by Lessee pursuant to Article 11 remaining after
payment of the foregoing amounts shall, unless a Default shall
have occurred and be continuing, be paid over to Lessee.
(c) Subject to the rights of any insurers and reinsurers or other
third party, upon irrevocable payment in full to Lessor of the
Agreed Value and all other amounts which may be or become
payable to Lessor under this Agreement, Lessor will without
recourse or warranty (except as to Lessor's Liens) and without
further act, be deemed to have transferred to Lessee all of
Lessor's rights to any Engines and Parts not installed when
the Casualty Occurrence occurred, all on an as-is where-is
basis, and will at Lessee's expense, execute and deliver such
bills of sale and other documents and instruments as Lessee
may reasonably request to evidence (on the public record or
otherwise) the transfer and the vesting of
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Lessor's rights in such Engines and Parts in Lessee, free and
clear of all rights of Lessor and Lessor Liens.
17.3 Upon the Casualty Occurrence with respect to any Engine not
involving a Casualty Occurrence of the Aircraft, Lessee shall give
Lessor prompt written notice thereof and Lessee shall replace such
Engine as soon as reasonably possible with a replacement Engine in
accordance with Article 5.1.2(a). Such replacement shall be deemed
an "Engine" as defined herein. Lessee agrees to take such action as
Lessor may reasonably request in order that any such replacement
engine shall be duly and properly titled in Lessor or the Bank and
leased hereunder and subject to the Mortgage to the same extent as
the Engine replaced thereby. Lessee's obligation to pay the Rent
hereunder shall continue in full force and effect, but Lessee shall
be entitled to be reimbursed by Lessor the amount of insurance or
condemnation proceeds, if any, received by Lessor with respect to
such replaced Engine.
17.4 In the event of requisition for hire of the Aircraft or any part
thereof not constituting a Casualty Occurrence, then, subject to the
proviso herein contained, the Rent and other charges payable under
this Agreement shall not be suspended or abated either in whole or
in part, and Lessee shall not be released from any of its other
obligations (as to payment, indemnity or otherwise) hereunder (other
than operational obligations with which Lessee is unable to comply
solely by virtue of such confiscation or requisition). If Lessee
shall duly comply with all its obligations under this Agreement,
Lessee shall during the Term be entitled to any hire paid by the
requisitioning or confiscating authority and Lessee shall, as soon
as practicable after the end of any requisition or confiscation,
cause the Aircraft to be put into the condition required by this
Agreement. Lessor shall be entitled to all compensation payable by
the requisitioning or confiscating authority in respect of any
change in the structure, state or condition of the Aircraft arising
during the period of requisition or confiscation, and Lessor shall
apply such compensation in reimbursing Lessee for the cost of
complying with its obligations as aforesaid, but so that, if any
Default has occurred and is continuing, Lessor shall be entitled to
apply such compensation in or towards settlement of any amounts
owing by Lessee under this Agreement PROVIDED ALWAYS that if
following
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such requisition or confiscation the Aircraft is treated as an
agreed, constructive, arranged or compromised total loss by the
insurers, then the provisions of Article 17.1 shall apply with
effect from the date on which the insurer so determines.
18. GOVERNING LAW AND JURISDICTION
18.1 This Agreement and further agreements resulting herefrom shall be
governed by and construed in accordance with the internal Laws of
the State of New York and without regard to any conflict of law
rules. This Agreement is being delivered in the State of New York.
18.2 Lessor and Lessee hereby irrevocably agree to submit to the
non-exclusive jurisdiction of, and to waive any objection to the
laying of venue in, the County of New York and that any suit, action
or proceedings (collectively, "Proceedings") may be brought by
Lessor in any court of the State of New York or any U.S. Federal
court located in New York County, New York.
18.3 Nothing contained in this Article 18 shall limit the right of either
party to this Agreement to take Proceedings against the other in any
other court of competent jurisdiction, nor shall the taking of
Proceedings in one or more jurisdictions preclude the taking of
Proceedings in any other jurisdiction, whether concurrently or not.
18.4 Promptly after service of any process the Lessor or Lessee shall
despatch a copy thereof to Lessee or Lessor, as the case may be, by
registered mail, postage prepaid but failure of Lessee or Lessor, as
the case may be, to receive such copy shall not invalidate the
service of such process.
18.5 To the extent that the parties may in any jurisdiction claim for
their or their assets immunity from suit, execution, attachment
(whether in aid of execution, before judgment or otherwise) or other
legal process and to the extent that in any such jurisdiction there
may be attributed to themselves or their assets such immunity
(whether or not claimed) the parties hereby irrevocably agree not to
claim and hereby irrevocably waive any immunity to the fullest
extent permitted by the laws of such jurisdiction with the intent,
inter alia, that the foregoing waiver shall have effect for
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the purposes of the Foreign Sovereign Immunities Act of 1976 of the
United States of America.
18.6 Lessee and Lessor shall each at all times maintain an agent for
service of process in the New York, New York. For Lessee, such agent
shall be Winston & Strawn, Attn: R. Evan Smith, 175 Water Street,
New York, NY 10038. For Lessor, such agent shall be Haight, Gardner,
Poor & Havens, Attn: John F. Pritchard, 195 Broadway, New York, NY
10007. Any writ, judgment or other notice of legal process shall be
sufficiently served on Lessee or Lessor if delivered to such agent
at its address for the time being. Each of Lessee and Lessor
undertakes that if it shall revoke the authority of its above agent
or if for any reason any such agent no longer serves as agent to
receive service of process, Lessee or Lessor, as the case may be,
shall promptly appoint another such agent and advise Lessor or
Lessee, as the case may be, thereof.
19. MISCELLANEOUS
19.1 The rights of each of Lessor and Lessee under this Agreement are
cumulative, may be exercised as often as it considers appropriate
and are in addition to its rights under general law. The rights of
Lessor against the Lessee or in relation to the Aircraft (whether
arising under this Agreement or the general law) shall not, as
against or in favor of Lessor, be capable of being waived or varied
otherwise than by an express waiver or variation in writing; and in
particular any failure to exercise or delay in exercising any of
such rights shall not operate as a waiver or variation of any other
such right; and defective or partial exercise of any such rights
shall not preclude any other or further exercise of that or any
other such right; and no act or course of conduct or negotiation on
Lessor's part or on Lessor's behalf shall in any way preclude Lessor
from exercising any such right or constitute a suspension or any
variation of any such right.
19.2 Save where expressly provided in this Agreement, any certificate or
determination by Lessor as to any rate of interest or as to any
other amount payable under this Agreement shall, in the absence of
manifest error, be conclusive and binding on Lessee.
19.3 If any sum paid or recovered in respect of the liabilities of Lessee
under this Agreement is less than
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the amount then due, Lessor may apply such sum to rental, interest,
fees or any other amount due under this Agreement in such
proportions and order and generally in such manner as Lessor shall
determine.
19.4 The terms and conditions of this Agreement shall not be varied
otherwise than by an instrument in writing executed by or on behalf
of Lessor and Lessee.
19.5 If any of the provisions of this Agreement becomes invalid, illegal
or unenforceable in any respect under any law, the validity,
legality and enforceability of the remaining provisions shall not in
any way be affected or impaired.
19.6 Every notice, request, demand or other communication under this
Agreement shall:
(a) be in English;
(b) be in writing and made by mail or by fax or telex transmission
or by reputable courier service;
(c) be deemed to have been received, subject as otherwise provided
in this Agreement, in the case of a telex transmission, at the
time of dispatch with confirmed answerback of the addressee
appearing at the beginning and the end of the communication,
in the case of a fax transmission, at the time safe receipt is
confirmed by the addressee provided that if the date of
dispatch is not a business day in the country of the addressee
any telex or fax transmission shall be deemed to have been
received at the opening of business on the next such business
day, in the case of a letter five days after being deposited
in the mail first class postage prepaid and in the case of a
courier three days after being sent; and
(d) be sent:
(1) to Lessee at:
Midway Airlines Corporation
5713 South Central Avenue
Chicago, Illinois 60638
Tel: (312) 838-2060
Fax: (312) 838-2069
Attention: President
-72-
<PAGE>
(2) to Lessor at:
First Security Bank of Utah, N.A.
79 South Main Street
Salt Lake City, Utah 84130-0007
Tel: (801) 246-5630
Fax: (801) 246-5053
Attention: Corporate Trust Department
with a copy to FAUSA at:
1199 N. Fairfax Street, Suite 500
Alexandria, VA 22314
Telex: 899462 FAUSA ALE
Fax: (703) 683-2233
Attention: The President.
or to such other address or telex or fax number as is notified by
either party to the other party to this Agreement.
19.7 This Agreement may be executed in any number of counterparts and all
of such counterparts taken together shall be deemed to constitute
one and the same instrument.
19.8 This Agreement is the sole and entire agreement between Lessor and
Lessee in relation to the leasing of the Aircraft, and supersedes
all previous agreements in relation to such leasing. Each of Lessee
and Lessor represents for itself that no broker has been retained by
it in connection with this Agreement or the other Operative
Documents.
19.9 This Agreement is intended by the parties to be a lease between
Lessor and Lessee. Any waivers, consents, deferrals of the payment
of Rent or Reserve Rates are not intended to be an agreement by
Lessor to make any capital contribution to the business of Lessee or
to share in or have liability for any of Lessee's losses, profits,
liabilities or obligations. Nothing contained in this Agreement or
performed by Lessor in connection herewith and any other agreement
between Lessor and Lessee whether now existing or entered into in
the future shall make Lessor a partner or a joint venturer of Lessee
and shall not for any purpose be construed as a joint-venture
between the parties hereto.
-73-
<PAGE>
19.10 [Intentionally Omitted].
19.11 Section 1110: Lessee acknowledges that Lessor would not have entered
into this Agreement unless it had available to it the benefits of a
lessor under Section 1110 of Title 11 of the United States Code.
Lessee and Lessor hereby state that this Agreement is intended to be
a true lease for U.S. Internal Revenue Code purposes. Lessee
covenants and agrees with Lessor that to better ensure the
availability of such benefits, Lessee shall support any motion,
petition or application filed by Lessor with any bankruptcy court
having jurisdiction over Lessee, whereby Lessor seeks recovery of
possession of the Aircraft under said Section 1110 and shall not in
any way oppose such action by Lessor unless Lessee shall have
complied with the requirements of said Section 1110 to be fulfilled
in order to entitle Lessee to continued use and possession of the
Aircraft hereunder. In the event said Section 1110 is amended, or if
it is repealed and another statute is enacted in lieu thereof,
Lessor and Lessee agree to amend this Agreement and take such other
action not inconsistent with this Agreement as Lessor reasonably
deems necessary so as to afford to Lessor the rights and benefits as
such amended or substituted statute confers upon owners and lessors
of aircraft similarly situated to Lessor.
19.12 First Security Bank of Utah, N.A. ("FSBU") is entering into this
Agreement solely as trustee under the Trust Agreement and not in its
individual capacity and in no case whatsoever shall FSBU (or any
entity acting as successor trustee under the Trust Agreement) be
personally liable on, or for any loss in respect of, any of the
statements, representations, warranties, agreements or obligations
of Lessor hereunder as to all of which the other party hereto agrees
to look solely to the Trust Estate, except for any loss caused by
FSBU's own willful misconduct or gross negligence. FSBU warrants
that the Aircraft shall be free of liens attributable to FSBU in its
individual capacity which do not arise from its actions as lessor
under this Agreement and that it shall be personally liable to
Lessee for any Claim against Lessee in respect of any statements,
representations, warranties, agreements or obligations contained
herein which are expressly made in its individual capacity.
19.13 As between Lessor and Lessee, if Lessee fails to make any payment of
Rent or Reserve Rate required to be made
-74-
<PAGE>
by it hereunder or fails to perform or comply with any of its
agreements contained herein, Lessor may itself make such payment or
perform or comply with such agreement, and the amount of such
payment and the amount of the reasonable and properly documented
expenses of Lessor incurred in connection with such payment or the
performance of or compliance with such agreement, as the case may
be, together with interest thereon at the interest rate defined in
Appendix D, Article 6, shall be deemed Supplemental Rent, payable by
Lessee upon demand.
-75-
<PAGE>
IN WITNESS whereof the parties have executed this Agreement the day and
year first herein written.
SIGNED on behalf of SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A. MIDWAY AIRLINES
not in its individual capacity, CORPORATION
except as expressly set forth herein,
but solely as owner trustee
By: /s/ Greg A. Hawley By:_________________________
-------------------------
Greg A. Hawley
Its: Assistant Vice President Its: _______________________
<PAGE>
IN WITNESS whereof the parties have executed this Agreement the day
and year first herein written.
SIGNED on behalf of SIGNED on behalf of
FIRST SECURITY BANK MIDWAY AIRLINES CORPORATION
OF UTAH, N.A.
not in its individual
capacity, except as
expressly set forth
herein, but solely
as owner trustee
By: By: /s/ [Illegible]
-------------------------- -----------------------
Its:_________________________ Its: VP
<PAGE>
APPENDIX A
DESCRIPTION OF AIRCRAFT
Number of
Manufacturer Model Serial No. Engines Engines
- ------------ ----- ---------- ------- -------
Fokker 100 11445 Rolls Royce Two
Tay MK 650-15
1. On the Delivery Date the Aircraft shall be new and shall comply
with the detailed description contained in this Appendix A, as may be amended
from time to time, and which is attached hereto as Appendix A-1.
2. The Aircraft at delivery will have an FAA Type Certificate and a
Netherlands Certificate of Airworthiness for Export, which will make the
Aircraft eligible for an FAA Standard Airworthiness Certificate. The Aircraft
shall at delivery also meet FAR 121 requirements promulgated or in effect and
known to Lessor or Manufacturer on June 27, 1993.
<PAGE>
APPENDIX A-1
AIRCRAFT CONFIGURATION
relating to Fokker 100 aircraft
This Appendix A-I consists of the following pans:
- Part A: Type Specification.
- Part B: Specification items for Fokker 100
aircraft in addition to the Type
Specification.
- Part C: Seller Furnished Equipment.
Page: 1
<PAGE>
APPENDIX A-1, Part A
PART A: TYPE SPECIFICATION
Type Specification as per printed copy supplied by Lessor to Lessee.
Reference document : TD F28:PL-004
Date of issue : February 1, 1983
Date of latest amendment : July 1, 1991
Engine specification : Rolls-Royce Tay Mk650-15 as
affected by 72-00 in Pan B
Page: 2
<PAGE>
APPENDIX A-1, Part B
PART B: SPECIFICATION ITEMS FOR FOKKER 100 AIRCRAFT -- IN ADDITION TO THE TYPE
SPECIFICATION
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
02 GENERAL REQUIREMENTS
02-20.02 FAA Certification 0
The aircraft is configured in accordance with
the FAA requirements originating from the FAA
Type Certification. Operational requirements,
possibly requested by local airworthiness
authorities are not included.
02-20.10 FAR 121 Requirements TBD
To comply with FAR 121 requirements the following changes will
be made to the aircraft:
- Certificate holder (ref. 25-19)
- Medical kit (ref. 25-60)
- Second megaphone (ref. 23-33)
- 3 additional smoke hoods (ref. 35-30)
- Life vests for crew (ref. 25-60)
- Red anti-collision lights (ref. 33-42)
- Seat cushions as flotation devices (ref. 25-21)
- Placards and markings to comply with FAA
requirements (ref. 11-30)
- At least 50% of aisle seats will have movable arm
rests (ref. 25-21).
02-51.10 Exterior Finish 0
The exterior decorative paint scheme shall be as
specified by Customer. Wings will be white.
Page: 3
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
02-81.01 SPE i.l.o. BFE 0
All Systems and Components as listed in the
Type Specification as Buyer Furnished Equipment
(BFE) shall be supplied as Seller Furnished
Equipment (SFE). In addition to this all
equipment related to the Specification items in
Pan B shall also be Seller Furnished Equipment.
03 STRUCTURAL DESIGN CRITERIA
03-20.01 Increased Design Weights 0
The aircraft shall be certified for operation with the
following design weights:
Maximum Take-off Weight 98,000 lbs.
Maximum Zero Fuel Weight 81,000 lbs.
Maximum Landing Weight 88,000 lbs.
Maximum Taxi Weight 98,500 lbs.
11 PLACARDS AND MARKINGS
11-20.10 Exterior Placards and Markings 0
Exterior placards and markings shall be in
English Units of measurement.
11-30.10 Interior Placards and Markings 0
Interior placards and markings shall be adapted
for FAA/FAR requirements, and shall be in
English Units of measurement.
Page: 4
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
23 COMMUNICATIONS
23-11.01 HF Communication System Provisions 31
The aircraft shall have full provisions for a
single Collins HF Communication system
according to ARINC 719 characteristics.
To arrive at an operational system, the
following equipment has to be added to the
Specification:
- (01) Transceiver, Collins HFS 700
- (01) Antenna tuner, Collins 490S-1
- (01) Control Panel, Gables
23-32.01 Passenger Entertainment System 22
Installation of a pre-recorded announcement and
boarding music system. The system comprises a
Matsushita RDAX 7201 recorder system.
23-33.10 Portable Communications TBD
Installation of one additional megaphone in the
rear of the passenger compartment, in the
left-hand rear stowage.
24 ELECTRICAL POWER
24-55.10 Razor Outlets in Lavatories 0
Installation of 110 V AC razor power outlets in
the aft lavatories (i.l.o. the 220 V AC supply).
Page: 5
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
25 EQUIPMENT/FURNISHINGS
25-19.10 Certificate Holder Negl.
A certificate holder shall be installed in the
flight compartment on the cockpit door.
25-20.10 Passenger Compartment Lay-out TBD
The Passenger compartment lay-out shall be as
per attached Fokker drawing F100-04-145, sheet
2, issue B. This lay-out features
- 100 passengers at 34 (33) inch seat-pitch
- One Half-size Galley 1 (see attached drawing)
- One Full-size Galley 2 (see attached drawing)
- Two Lavatories
- Stowage compartment in forward cabin
- Wardrobe in forward cabin
- 4 Cabin Attendant seats
In the layout, a 13-inch passage-way at the
triple seat side, and a 10-inch passageway at
the double seat side, near the overwing
emergency exits are anticipated to comply with
the FAR regulations. This results in 5 triple
seats at 33 inch pitch. It is the Customer's
responsibility to get approval for this layout
from the FAA. Color and materials for seat
covers, curtain, carpet and entrance floor will
be as specified by Customer.
25-21.11 Dual Aft Facing Cabin Attendant Seat 29
Installation of a rear facing double cabin
attendant seat in the entrance against forward
wardrobe/stowage wall, on floor hardpoints and
a third top-point, i.l.o. the standard single
seat.
Page: 6
<PAGE>
[Graphic Omitted]
[Floor Plan]
<PAGE>
[Graphic Omitted]
[Galleys]
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
25-21.10 Passenger seats 803
(Delta to standard)
The passenger seats will be Flight Equipment
FEEL Space Gen III, with leather seat covers.
Due to leather covering, cushion material has
to be changed for fire blocking requirements.
Seats shall have cushions to be used as
flotation devices. Seats will be modified with
movable armrests on aisle side, except near the
overwing emergency exits. The leather seat
covers are priced separately in Specification
Change Notice JE1 25-21.10. Price is US$
30,000.- per aircraft (price level Sept. 93), to
be paid on or before delivery of the aircraft.
25-23.01 Window Blinds 57
Installation of a rolling blind in each window
of the passenger compartment.
25-29 Aft Trolley Stowage / Wardrobe 53
The standard wardrobes in the rear of the
aircraft cabin (forward of the lavatories)
shall be made suitable for stowage of one half
size trolley (one on each side) and a standard
container unit.
The stowage shall be closed by means of a door.
A folding panel shall allow the use of the
compartment as wardrobe.
25-31 Curtain between Galley 1 and 2 4
A curtain will be installed between Galley 1
and 2 to be able to close the Galley area from
the passenger entrance and aisle.
Page: 7
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
26-60.10 Emergency Equipment TBD
Emergency equipment and locations shall be as
per attached drawing. In addition to the
standard aircraft the following equipment has
been added:
- Second megaphone (p/n S243, Ovenaire-Audio-Carpenter)
- Crash axe (p/n 42D8331, Van Dusen)
- Medical kit (p/n TBD)
- Crew life vests p/n S21850-7300, Switlik)
- Passenger flotation cushions
- Escape slide for forward opening passenger door
- Additional flashlight for additional cabin attendant
seat in front cabin
- 3 Smokehoods located near the portable fire
extinguishers (p/n 119003, Puritan Bennett)
25-61.01 Crash Axe 2
A crash axe shall be installed in the flight
compartment. The axe shall be located on the RH
aft wall, with the blade housed in a protective
cover.
25-63.01 Emergency Locator Transmitter 7
An emergency locator transmitter shall be installed,
comprising the following components:
- Emergency locator transmitter, located in the
ceiling at the rear of the passenger compartment;
- Antenna mounted on the upper fuselage;
- Test switch, located on the overhead panel in the
flight compartment.
Page: 8
<PAGE>
[Graphic Omitted]
[Floor Plan]
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
26 FIRE PROTECTION
26-12.01 Audible Fire Warning Horn 4
Installation of a warning horn in the nose
landing gear bay for audible APU fire warning
during APU ground operation. The function of
the warning horn will be inhibited during an
APU fire warning test.
28 FUEL
28-40.10 Fuel Quantity Indication 0
Fuel quantity indication in the flight
compartment and on the fueling control panel
shall be in pounds (lbs.). (Installation of
alternate part number for combined processor
totalizer). Fuel related data on FMS shall be
in pounds (lbs.).
Fuel flow display in the MFDS shall be in
pounds per hour (lbs/hr.).
Magnetic fuel level indication will be adapted
to read in pounds (lbs.) or US. Gallons.
31 INDICATING/RECORDING SYSTEMS
31-00.10 Instrument Calibration 0
Instrument calibration shall be in English units:
- (degrees)F i.l.o. (degrees)C
- lbs i.l.o. kg
- inches Hg i.l.o. mbar
- feet i.l.o. m
Page: 9
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
33 LIGHTS
33-28.01 Galley Area Light 2
A light shall be installed into the ceiling
between galley 1 and 2, and shall be controlled
by a switch located on galley 1.
33-42.10 Anti-Collision Lights 0
Two anti-collision lights with red lens i.l.o.
the standard clear lens shall be installed.
33-46.01 Logo Lights 11
Light fixtures will be installed on the inboard
side of the outboard flap track fairings, to
illuminate both sides of the vertical
stabilizer.
33-47.01 Strobe Lights 18
Installation of high intensity recognition in
each wing tip and in the tail cone.
34 NAVIGATION
34-16.01 Windshear 2
Windshear detection, alerting and recovery
guidance shall be incorporated. The Flight
Management System shall provide the detection
function. The GPWS and EEIS shall provide
warning, whereas the recovery guidance/automatic
recovery (when selected), is provided by AFCAS.
In combination with the windshear detection a
speedbrake auto retract logic has to be
installed.
Page: 10
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
34-26.01 Flight Director Presentation - V-bars 0
This provides V-bar Flight Director
presentation instead of the standard crossbar
presentation.
34-28.01 Dual IRS 29
Installation of a dual Inertial Reference System
(IRS) i.l.o. the standard installed triple
Attitude Heading and Reference System (AHRS).
This will comprise the following Seller
Furnished Equipment:
- (02) IRS unit Honeywell
- (01) Mode selector panel Honeywell
- (01) Inertial System Display Unit Honeywell
34-46.10 TCAS II System 66
In combination with the dual ATC S-mode system
in 34-54.10, a Bendix TCAS II system shall be
installed, comprising the following (Seller
Furnished) equipment:
- One TCAS II processor in Avionics bay.
- Two TCAS omni-directional antennas, on top and bottom
of fuselage.
- Combined ATC/TCAS control panel.
- EFIS control panels with TCAS button.
TCAS information shall be displayed on EFIS:
Traffic alerts on Navigation Display,
resolution alerts and vertical escape guidance
on the Primary Flight Displays.
Page: 11
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
34-54.10 Dual Air Traffic Control System (ATC). (See 34-46.10)
Installation of a dual ATC system with S-mode
i.l.o. the baseline single system. This will
comprise the following Seller Furnished equipment:
- Two Bendix ARINC 700 mode-S ATC
transponders, located in the aft rack of
the avionics bay (Bendix ATC needed due
to Bendix TCAS).
- Three additional antennas, one located on
the bottom of the fuselage and two on the
top of the fuselage.
- Two program integrating panels, located
in the avionics bay, to provide the
aircraft identification code to the
S-mode transponders.
34-61.10 FMS Airline Option 0
The so-called Airline option in the FMS will be
as developed for US customers. This option
deviates from the standard on the following
points:
- Altitude constraints in climb can not be
cleared by dialing FMP altitude above
constraint altitude.
- Deletion of pilot defined waypoints upon
landing.
- Engine Out Acceleration Altitude (EO
ACCEL ALT) default set at 800 ft AFL
instead of 1000 ft.
- FUEL CONSUMPTION can only be altered by
password input.
- No holding fuel (FINAL/TIME) and no route
reserve % (RTE RES) on CDU, only
dedicated total reserve fuel (RTE RES
FUEL) Default is changeable, but is set
at 3.3 klbs.
Page: 12
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
38 WATER/WASTE
38-12.02 Water Heater 13
Installation of a water faucet with two "PUSH"
switches for hot/cold (red/blue) water. The
faucet opens when actuated and automatically
closes after approx. 5 seconds. To provide warm
water to the faucet, a heater is installed in
each toilet.
The installation comprises the following Seller
Furnished units:
- (02) Heater Inventum
- (02) Faucet Adams Rite
49 AIRBORNE AUXILIARY POWER
49-10.01 APU TBD
An Auxiliary Power Unit (APU) GTCP36-150 RR
with increased starting and loading
capabilities will be installed instead of the
GTCP36-150-R.
52 DOORS
52-13.01 Forward Opening Passenger Door 29
A forward opening passenger door shall be
installed instead Of the downward opening door
with integral airstair. In addition, an escape
slide plus cover will be installed.
Page: 13
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
52-31.01 Enlarged Cargo Compartment Doors 560
The aircraft will be equipped with enlarged,
upward opening cargo doors, i.l.o. the standard
downward opening doors.
52-70.01 Avionics Bay Access Hatch Warning 2
Two micro switches shall be installed on each
of the two avionics hatches to detect an
unlocked (or open) condition. Separate
warnings, one for each hatch, shall be supplied
to the flight warning computer and displayed on
the Multi-Function Display System (MFDS).
53 FUSELAGE
53-73.01 Scuff Plate Service/Emergency Door 9
A corrosion resistant steel scuff plate shall
be installed around the lower end of the
forward S/B door opening. The scuff plate shall
be easily removable.
53-73.02 Scuff Plate Forward Opening Passenger Door 11
A corrosion resistant steel scuff plate shall
be installed around the lower end of the
opening of the forward opening passenger door.
The scuff plate shall be easily removable.
53-73.03 Scuff Plates Enlarged Cargo Doors 53
A corrosion resistant steel scuff plate shall
be installed around the lower end of each cargo
compartment door opening. The scuff plates
shall be easily removable.
Page: 14
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
72 ENGINES
72-00.01 Engine Installation 302
Installation of two Rolls-Royce Tay Mk650-15
turbofan engines, i.l.o. the standard Tay Mk
620-15 engines.
Page: 15
<PAGE>
APPENDIX A-1, Part C
PART C: SELLER FURNTSHED EOUIPMENT
(Type Specification Equipment plus adaptions for Additional
Specification items in Part B)
- --------------------------------------------------------------------------------
ATA DESCRIPIlON QTY. PARTNUMBER VENDOR
- --------------------------------------------------------------------------------
23 COMMUNICATIONS
23-12 VHF Transceiver ARINC 700 2 622-5219-003 Collins
23-31 Amplifier type PAU-700 1 662-5342-001 Collins
23-32 Passenger entertainment 1 RDAX 7201 Matsushita
Tape reproducer
23-32 Control Panel 1 RDAX 7211 Matsushita
23-33 Megaphone 2 S243 Ovenaire-Audio-
Carpenter
23-71 Cockpit Voice Recorder 1 93A100-80 Fairchild
type A-1OOA
23-71 Microphone monitor 1 93A151-20 Fairchild
25 EQUIPMENT & FURNISHING
25-21 Passenger Seats, Triple 15 D3111F814-10 Flight Equipment
1 D3111F802-10 Flight Equipment
1 D3111F806-10 Flight Equipment
1 D3111F812-10 Flight Equipment
1 D3111F904-10 Flight Equipment
1 D3111F904-10 Flight Equipment
25-21 Passenger Seats, Double 15 D2111F623-10 Flight Equipment
1 D2111F611-10 Flight Equipment
1 D2111F615-10 Flight Equipment
1 D2111F621-10 Flight Equipment
1 D2111F667-10 Flight Equipment
1 D2111F667-10 Flight Equipment
Page: 16
<PAGE>
APPENDIX A-1, Part C
- --------------------------------------------------------------------------------
ATA DESCRIPIlON QTY. PARTNUMBER VENDOR
- --------------------------------------------------------------------------------
25-21 Seatbelt 100 500810HT14B3AD- American Safety
500810HTl4B34-2258
25-31 Galley 1 1 1001X01A00000 Sell
25-31 Container 1 DLH306-16 Driessen
25-31 Coffee-maker 2 50405-200 Nordskog
25-31 Trolley, half-size (KSSU) 3 DLH573-043 Driessen
25-32 Galley 2 1 1001X02A00000 Sell
25-32 Hot/Cold jug 3 DLH141-066 Driessen
25-32 Oven 3 8054-01-0000 Sell
25-32 Oven Control Panel 3 7110-26-0000 Sell
25-32 Trolley, full-size (KSSU) 3 DLH621-37 Driessen
25-61 Crash Axe 1 42D8331 Van Dusen
25-63 Emergency Locator 1 DMELT8-1 Dorn & Margolin
Transmitter
31 INSTRUMENTS
31-31 Flight Data Recorder 1 17M800-261 Fairchild
34 NAVIGATION
34-28 Inertial Reference Unit 2 HG1050AD05 Honeywell
34-28 Mode Selector Unit 1 CG1288AC01 Honeywell
34.28 Inertial System Display Unit 1 CG1135AC02 Honeywell
Page: 17
<PAGE>
APPENDIX A-1, Part C
- --------------------------------------------------------------------------------
ATA DESCRIPIlON QTY. PARTNUMBER VENDOR
- --------------------------------------------------------------------------------
34-32 Receiver, ILS, ARINC 700 2 622-522I-002 Collins
34-41 Weather Radar Transceiver 1 622-5132-104 Collins
34-41 Weather radar control panel 1 622-5129-106 Collins
34-41 Weather Radar Antenna 1 622-5137-201 Collins
34-41 Antenna Pedestal 1 622-5135-202 Collins
34-42 Radio Altimeter Transceiver 2 F6170 TRT
Type AHV530 - Arinc 700
34-42 Radio Altimeter Antenna 4 S67-2002-19 Sensor Systems
34-43 Ground Prox Warning Comp 1 965-0676-003 Sundstrand
Type Mk V
34-46 TCAS II Processor 1 066-50000-8102 Bendix
34-51 VOR Receiver, ARINC 700 2 622-5220-002 Collins
34-52 DME Interrogator, ARINC 700 2 622-4540--001 Collins
34-53 ADF Receiver, ARINC 700 1 622-5222-002 Collins
34-54 ATC Transponder Mode-S 2 066-01127-1101 Bendix
Page: 18
<PAGE>
APPENDIX B
FURTHER DEFINITIONS AND VALUES
AGREED VALUE: {***} for the first year of the Term through
and including the first anniversary date of the Delivery
Date, and for each subsequent year the Agreed Value
shall be:
Second Year: {***}
Third Year: {***}
Fourth Year: {***}
Fifth Year: {***}
Sixth Year: {***}
Seventh Year: {***}
Eighth Year: {***}
Ninth Year: {***}
Tenth Year: {***}
provided that the Agreed Value for any of the above
years may be adjusted up to FMV (but never in excess of
{***} if Lessor provides to Lessee an independent
appraisal (at Lessor's cost) prior to the beginning
of any such year. If Lessee does not agree to
such appraised value, Lessee may follow the Appraisal
Procedure by giving Lessor written notice of election to
so proceed within 20 days of receipt of Lessors'
independent appraisal.
ASSUMED RENT: (a) {***} for the Aircraft during year one up to
and including year three of the Term; and
<PAGE>
(b) {***} for the Aircraft during year four up to
and including year ten of the Term
DEPOSIT: {***}
ENUMERATED FINANCIAL
MILESTONES: (1) all deferred amounts of Rent, Reserve Rate and
Deposits under this Agreement and all Other Aircraft
Agreements have been paid in full; and (2) Lessor shall
have received evidence satisfactory to it that Lessee
has had a net income of $5,000,000 (Dollars Five
Million) as determined in accordance with generally
accepted United States accounting principles
consistently applied for each of three consecutive
fiscal years.
ESCALATED RENT: the Assumed Rent for the Aircraft adjusted in accordance
with the provisions of Appendix D Paragraph 2.2.
PARTIAL LOSS AMOUNT: $250,000, provided, however, that if the Enumerated
Financial Milestones have been achieved, then $500,000.
RENT: the Escalated Rent for the Aircraft, (adjusted in
accordance with the provisions of Appendix D Paragraphs
2.3, 2.6, 2.7 and 2.8).
-2-
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RESERVE RATE: (a) {***} for the months one up to and including
twelve of the Term;
(b) {***} for the months thirteen up to and
including twenty four of the Term; and
(c) {***} months twenty five up to and including one
hundred twenty of the Term.
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APPENDIX C
CERTIFICATE OF ACCEPTANCE
This Certificate of Acceptance is delivered, on and as of the date set forth
below, by Midway Airlines Corporation (herein referred to as "Lessee") to First
Security Bank of Utah, N.A., not in its individual capacity but solely as
trustee, (herein referred to as "Lessor") pursuant to that Aircraft Operating
Lease Agreement dated as of November 1, 1993 between Lessor and Lessee (herein
referred to as the "Agreement"):
2. Details of Acceptance
Lessee hereby indicates and confirms to Lessor, its successors and
assigns, that the Lessee has at ______ o'clock on this ______ day of
______ 199__ at ______ Airport, ______ accepted the following, in
accordance with the provisions of the Agreement:
(a) Fokker 100 airframe, Manufacturer's serial Number 11445
(b) Rolls Royce Tay Mk 650-15 Engines (each of which engines has 750 or
more rated takeoff horsepower).
Engine Number Manufacturer's S/N
1. _____
2. _____
(c) Fuel Status: ______ kilos; ______ litres
(d) Loose Equipment Check List: as per list signed by Lessor and Lessee
and attached.
2. Confirmation of Undertakings
The terms used in this Certificate shall have the meanings given to such
terms in the Agreement.
The Lessee confirms that today being the Delivery Date as defined in the
Agreement:
(i) the Aircraft is duly accepted by the Lessee in accordance with and
subject to the provisions of the Agreement and the execution and
delivery of this Certificate constitutes the acceptance of the
Aircraft
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by the Lessee for all purposes of the Agreement. DELIVERY BY LESSEE
TO LESSOR OF THIS CERTIFICATE OF ACCEPTANCE SHALL CONSTITUTE
CONCLUSIVE PROOF AS BETWEEN LESSOR AND LESSEE THAT ON THE DELIVERY
DATE LESSEE'S TECHNICAL EXPERTS EXAMINED AND INVESTIGATED THE
AIRCRAFT AND EVERY PART THEREOF AND THAT THE AIRCRAFT AND EVERY PART
THEREOF CORRESPOND TO THE DESCRIPTION SPECIFIED IN APPENDIX A TO THE
AGREEMENT AND ARE AIRWORTHY AND IN GOOD WORKING ORDER AND REPAIR,
WITHOUT DEFECT WHETHER OR NOT DISCOVERABLE AS AT THE DELIVERY DATE
AND IN EVERY WAY SATISFACTORY TO LESSEE;
(ii) the Lessee is obliged to pay to the Lessor the amount provided for
in the Agreement with respect to the Aircraft;
(iii) the Aircraft is insured in accordance with the Agreement;
(iv) the representations and warranties contained in Article 13 of the
Agreement remain, and if made at the date of this Certificate of
Acceptance, would be, true and correct in all respects;
(v) there have been affixed to the Aircraft and the Engines the fire
resistant notices required by Article 4.3 of the Agreement;
(vi) the Lessee has no right of set-off, deduction, withholding or
counterclaim against the Lessor whatsoever; and
(vii) no Default is subsisting.
IN WITNESS WHEREOF, Lessee has caused this Certificate of Acceptance to be
executed in its name, by its duly authorized officer(s) or representative(s),
pursuant to due corporate authority, all as of the date written in Paragraph 1
above.
MIDWAY AIRLINES CORPORATION
By: _______________________
Title: ____________________
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APPENDIX D
CHARGES
1. Deposit
Lessor has received payment of {***} for the Aircraft before the date
of this Agreement.
Lessee shall pay the balance of the Deposit to Lessor in thirty four (34)
consecutive equal monthly installments for the first time on or before the
first Business Day ninety days after the date of the start of revenue
operation by Lessee and thereafter each time on the corresponding day in
following calendar month and, if that is not a Business Day, then on the
last Business Day preceding such numerically corresponding day.
The Deposit shall be held by Lessor during the Term as security for the
full and punctual performance of all of Lessee's obligations to Lessor
under this Agreement. Lessor may, but shall not be obliged to, apply the
Deposit in whole or in part for the payment of any rent, maintenance
accruals, indemnities, attorneys fees and other expenses, insurance and
other casualty payments and any other amount owing from time to time by
Lessee hereunder or any other Operative Document, between Beneficiary or
its affiliate companies, and Lessee, or for the payment of any loss or
damage suffered by Lessor as a result of any Event of Default or utilize
the Deposit in whole or in part to perform any of Lessee's obligations
under this Agreement or otherwise remedy any other Event of Default,
including, without limitation, in the redelivery condition for the
Aircraft without prejudice to any other remedy of Lessor. In any such
event Lessee shall on demand restore the Deposit to the full amount
provided for herein by payment to Lessor of an amount in cash equal to the
amount applied or utilized. Lessee shall not attempt to subject the
Deposit to any other lien, security interest, charge or other encumbrance
or assign any interest therein to any other person and, to the extent of
its interest therein, if any, Lessee hereby grants to Lessor a security
interest in the Deposit and assigns and transfers to Lessor any and all of
Lessee's right, title and interest therein, if any, as security as
provided above, and Lessor shall be entitled to the remedy of offset
against and application of the Deposit, without any notice to or demand
against Lessee, all of which are hereby waived. Lessee further agrees that
the Deposit may be, without derogating from the terms of this Agreement,
be assigned as security to
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the Bank or transferred to any other transferee of Lessor. Should any
Event of Default hereunder occur, the Deposit shall automatically be
applied to any sum due to Lessor or as a prepayment of any sum to become
payable to Lessor, unless Lessor thereafter elects otherwise by notice to
Lessee.
Any remaining Deposit shall be repaid by Lessor to Lessee ten (10) days
following the Expiry Date or other date after redelivery of the Aircraft
in accordance with this Agreement. In the event there is a dispute as to
whether Lessee is entitled to a return of any portion of the Deposit,
Lessor shall so return the undisputed amount of the Deposit. Upon a
repayment of such Deposit or portion thereof, Lessor's security interest
in and assignment of such Deposit or portion thereof being repaid shall be
deemed released.
Lessor's obligations in respect of the return of the Deposit shall be
those of debtor of Lessee, not of a trustee or other fiduciary.
The Deposit shall bear interest on the amounts then held at a rate of
interest per annum yielding $10,500 (Dollars Ten Thousand Five Hundred)
per year payable annually commencing on the first anniversary of the
Delivery Date, and on each anniversary thereafter unless the Deposit and
interest thereon shall have been applied pursuant to this Agreement. Any
reference to the Deposit in this Agreement shall include the interest
accumulated thereon and not paid to Lessee.
2. Rent
2.1 For the purposes of the calculation and payment of Rent, the
Term shall be divided into two sets of periods ("Rental
Periods" and "Rental Adjustment Periods").
Rent shall be due and payable on each Rent Date. If such date
is not a Business Day then Rent shall be due and payable on
the last Business Day preceding such date.
2.2 The Escalated Rent shall be calculated by increasing the
Assumed Rent with a fixed escalation factor of one half of one
percent (0.5%) per month or a pro rata portion thereof as from
the month of September, 1993 up to and
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including the month of delivery of the Aircraft under the One
Year Lease.
2.3.1 The Rent payable in respect of the Rental Periods One (1) up
to and including Thirty Six (36) is based on an assumed
three-years US Treasury Bond Rate of Four point Ten percent
(4.10%) per annum. To the extent that the actual US Treasury
Bond Rate varies from 4.10% per annum on the delivery of the
Aircraft, the Rent will be adjusted up or down with $16,500.00
(Dollars Sixteen Thousand Five Hundred) per month for each one
percent of variation (or pro rated in the case the variation
is less than one Percent (1%)). The amount of $16,500.00
(Dollars Sixteen Thousand Five Hundred) shall have been, upon
delivery of the Aircraft, adjusted with the escalation factor
mentioned in 2.2 of this Appendix D.
2.3.2 The Rent payable in respect of the Rental Period Thirty Seven
(37) up to and including One Hundred Twenty (120) shall be
adjusted upward or downward calculated as follows:
E + ((L - Y) x N), where
E is the Escalated Rent, and
Y is Three point Twenty Five percent (3.25%)
L means the arithmetic mean expressed as a number (i.e.,
40 per cent is 40 and not 0.4) of the rates of interest
per cent per annum (rounded if not already such a
multiple, to the nearest whole multiple of 1/16th of one
per cent.) at which, at or about 11.00 a.m. (London
time) on the day two Business Days before the beginning
of the Rental Adjustment Period in which such Rental
Period falls, deposits in Dollars are offered for the
duration of such Rental Adjustment Period on the REUTERS
"LIBO" page (or such other page as may replace it from
time to time) ("LIBOR"), and
N is $15,318.00 if such Rental Period falls in the seventh
Rental Adjustment Period;
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is $14,927.00 if such Rental Period falls in
the eighth Rental Adjustment
Period;
is $14,527.00 if such Rental Period falls in
the ninth Rental Adjustment
Period;
is $14,119.00 if such Rental Period falls in
the tenth Rental Adjustment
Period;
is $13,702.00 if such Rental Period falls in
the eleventh Rental Adjustment
Period;
is $13,277.00 if such Rental Period falls in
the twelfth Rental Adjustment
Period;
is $12,842.00 if such Rental Period falls in
the thirteenth Rental Adjustment
Period;
is $12,399.00 if such Rental Period falls in
the fourteenth Rental Adjustment
Period;
is $11,945.00 if such Rental Period falls in
the fifteenth Rental Adjustment
Period;
is $11,482.00 if such Rental Period falls in
the sixteenth Rental Adjustment
Period;
is $11,010.00 if such Rental Period falls in
the seventeenth Rental
Adjustment Period;
is $10,527.00 if such Rental Period falls in
the eighteenth Rental Adjustment
Period;
is $10,034.00 if such Rental Period falls in
the nineteenth Rental Adjustment
Period;
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is $9,530.00 if such Rental Period falls in
the twentieth Rental Adjustment
Period;
Such N-amounts shall - upon delivery of the Aircraft - be
adjusted with the escalation factor mentioned in Article 2.2.
of this Appendix D.
2.3.3 The monthly Escalated Rent shall also be adjusted upward by an
amount equal to $875 (Dollars Eight Hundred Seventy Five) per
month which shall be payable to Lessor by check annually
commencing on the first anniversary of the Delivery Date, and
on each anniversary thereafter. Lessee may elect to authorize
Lessor in writing to set-off amounts payable pursuant to this
Article 2.3.3 against interest on the Deposit which is payable
by Lessor pursuant to Article 1 of this Appendix D
irrespective of whether or not an Event of Default shall have
occurred and be continuing.
2.4 Any notice with respect to rental adjustments given by Lessor
shall set out the basis of calculation of "L" and of the Rent
specified therein and shall, save in the case of manifest
error, be conclusive.
2.5 The payment of the Rent for the first three (3) months shall
be deferred. The aggregate amount of such deferred Rent shall
be paid by Lessee to Lessor in twenty four (24) consecutive
equal monthly installments for the first time on or before the
first Business Day on which Rent is payable pursuant to 2.1
above occurring one (1) year after the date of the start of
revenue operation by Lessee and thereafter on each Rent Date.
2.6 To finance the payments required to be paid by Lessee under
Article 8.2(a)(i), the Escalated Rent shall also be adjusted
upward in an amount (the "Adjustment Amount") of $1,551
(Dollars One Thousand Five Hundred Fifty One) for each Rent
Date through and including the forty eighth Rent Date. If a
Casualty Occurrence occurs on or prior to such forty eighth
Rent Date, an amount (the "Additional Amount") in Dollars
equal to the present value (discounted at the interest rate of
six point one percent (6.1%)), of all unpaid Adjustment
Amounts through the Rent Date on or
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immediately preceding the date of the Casualty Occurrence
shall be due and payable, with interest thereon at six point
one percent (6.1%), on the date on which Agreed Value is
payable pursuant to Article 17.2(b).
2.7 Lessee shall pay to Lessor all reasonable expenses paid to
third parties (including legal, printing and out-of-pocket
expenses) incurred or payable by Lessor in connection with the
negotiation, preparation and execution of the first
refinancing of the Aircraft and this Agreement by the initial
Lessor and its Beneficiary with a Bank and the related first
assignment by Lessor (in its trust capacity) or its
Beneficiary to another Lessor or Beneficiary with a related
Bank financing, subject, however, that Lessee's obligation to
pay such expenses is limited to $150,000 (Dollars One Hundred
Fifty Thousand) for such first refinancing of the Aircraft and
if such first refinancing transaction includes the first
refinancing of aircraft which are the subject of Other
Aircraft Agreements, then Lessee's obligation to pay such
expenses pursuant to this Article 2.7 and Article 2.7 of
Appendix D in each applicable Other Aircraft Agreement, in the
aggregate shall be limited to the foregoing $150,000 plus (x)
$100,000 (Dollars One Hundred Thousand) for a first
refinancing transaction involving one additional aircraft; and
(y) $50,000 (Dollars Fifty Thousand) per each further
additional aircraft. Lessor hereby agrees to finance the
payments required to be paid by Lessee under this Article 2.7
as follows: The Escalated Rent shall be adjusted upward for
each Rent Date commencing on the Rent Date next succeeding the
date of the first refinancing described in this Article 2.7 in
an amount equal to the expenses referred to herein (subject to
the maximum amounts referred to herein) plus the product of
such expenses multiplied by an interest rate (the "Aircraft
Refinancing Interest Rate") agreed to by Lessee and
Beneficiary and calculated on an accrual basis using the same
method applied by the Beneficiary in obtaining the monthly
Escalated Rent amount set forth in Article 2.6 above, the sum
thereof divided by the total number of aircraft which are the
subject of the first refinancing described herein (such
quotient, the "Aircraft Refinancing Amount") and further
divided by the lesser of
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forty eight (48) or the total number of remaining Rent Dates
to occur during the Term (each such amount an "Aircraft
Refinancing Installment"). Such amount shall be payable on
each Rent Date commencing on the Rent Date next succeeding the
date of the first refinancing described in this Article 2.7.
If a Casualty Occurrence occurs prior to the payment in full
of the Aircraft Refinancing Amount, an amount (in Dollars)
equal to the present value (discounted at the Aircraft
Refinancing Interest Rate) of all unpaid Aircraft Refinancing
Amount through the Rent Date on or immediately preceding the
date of the Casualty Occurrence shall be due and payable, with
interest thereon at the Aircraft Refinancing Interest Rate, on
the date on which Agreed Value is payable pursuant to Article
17.2(b).
3. Reserve Rate
3.1 In addition to installments of Rent, Lessee shall pay to
Lessor the Reserve Rate as follows:
(a) by way of an Airframe maintenance accrual, the sum of
{***} for the months one up to and including twelve of
the Term, {***} for the months thirteen up to and
including twenty four of the Term and {***} for the
months twenty five up to and including one hundred
twenty of the Term for each Flight Hour the Aircraft
is operated during the Term ("Airframe Maintenance
Accrual"), and
(b) by way of an Engine maintenance accrual, in respect of
each Engine the sum of {***} for the months one up to
and including twelve of the Term, {***} for the months
thirteen up to and including twenty four of the Term
and {***} for the months twenty five up to and including
one hundred twenty of the Term for each Flight Hour
operated by each Engine during the Term ("Engine
Maintenance Accrual"), and
(c) by way of a landing gear maintenance accrual, the sum of
{***} for the months one up to and including twelve of
the
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<PAGE>
Term, {***} for the months thirteen up to and including
twenty four of the Term and {***} for the months twenty
five up to and including one hundred twenty of the Term
for each Cycle operated by the landing gear during the
Term ("Landing Gear Maintenance Accrual"), and
(d) by way of an A.P.U. maintenance accrual, the sum of
{***} for the months one up to and including twelve of
the Term, {***} for the months thirteen up to and
including twenty four of the Term and {***} for the
months twenty five up to and including one hundred
twenty of the Term for each Flight Hour operated
by the A.P.U. during the Term ("A.P.U. Maintenance
Accrual").
The Airframe, Engine, Landing Gear and A.P.U. Maintenance
Accruals accruing in any Rental Period shall be paid by Lessee
to Lessor not later than ten (10) days after the end of the
calendar month in which such Rental Period shall end.
Concurrently with the payment thereof, Lessee shall report to
Lessor (in accordance with Article 7.1(e)) the number of
Flight Hours and Cycles accumulated in respect of the period
for which payment is being made.
The Reserve Rate will be subject to adjustment every six (6)
months during the Term by reference for 65% to the Employment
and Earnings Index for U.S.A. labor cost average hourly
earnings of production (Aircraft Equipment) SIC 3728, table
C-2 and for 35% to the Producer Price Index for U.S.A.
material cost commodity groupings (Machinery and Equipment)
Code 11/table 6. In addition the Engine Maintenance Accrual
will be subject to adjustment every six (6) months during the
Term having regard to the Engine Manufacturer recommendations,
industry experience and any change in the operational
environment of the Aircraft.
Any Reserve Rate shall, if requested by either Lessor or
(unless an Event of Default shall have occurred and be
continuing) Lessee, be adjusted to
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<PAGE>
take into account any changes in the maintenance intervals
upon which Reserve Rates are based.
3.2 Maintenance Accruals as defined in paragraph 3.1 above and
received by Lessor shall respectively be credited to funds
(collectively "Maintenance Funds") to be known as the
"Airframe Maintenance Fund", the "Engine Maintenance Fund, the
"Landing Gear Maintenance Fund" and the "A.P.U. Maintenance
Fund" which funds shall reduce as monies are released to
Lessee therefrom in accordance with Article 7.4.1.
3.3 The payment of the applicable Reserve Rate for the first three
(3) months shall be deferred. The aggregate amount of such
deferred Reserve Rate shall be paid by Lessee to Lessor in
twenty four (24) consecutive equal monthly installments for
the first time on or before the first Business Day on which
Reserve Rate is payable pursuant to 3.1 above occurring one
(1) year after the date of the start of revenue operation by
Lessee and thereafter each Business Day on which the Reserve
Rate is payable.
3.4 The Reserve Rates shall accrue interest at the applicable six
(6) months US Dollar LIBOR rate minus point twenty five
percent (.25%) per annum, which interest shall be added to the
relevant Maintenance Fund.
3.5 If the Enumerated Financial Milestones have been achieved,
then Lessee's obligation to continue to pay Reserve Rates
hereunder shall be stayed, provided, however, that in
connection with the release of monies to Lessee from the
Maintenance Fund pursuant to Article 7.4.1 occurring
thereafter, prior to the release of monies, Lessee shall
provide Lessor with evidence, reasonably satisfactory to
Lessor, that Lessee has retained accumulated net earnings (as
determined in accordance with generally accepted United States
accounting principles consistently applied) of not less than
$15,000,000 (Dollars Fifteen Million), and provided, further,
that if such evidence cannot be provided or is not reasonably
satisfactory to Lessor, Lessee's obligation to pay Reserve
Rates shall recommence pursuant to the terms hereof and no
monies shall be released from the Maintenance Fund until such
time as it shall
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<PAGE>
have been restored to the level at which it would have been
had this paragraph not been in effect.
If Lessee has achieved the payment in full of all deferred
amounts as set forth in clause (1) of the definition of
Enumerated Financial Milestones, Lessee may, at its election,
pay to Lessor the amount which is necessary to cause monies
standing in the Maintenance Fund to equal $1,500,000 (Dollars
One Million Five Hundred Thousand) and thereafter Lessee shall
have no further obligation to make Reserve Rate payments
hereunder, provided, however, that thereafter no funds shall
be released to Lessee from the Maintenance Fund pursuant to
Article 7.4.1. It is understood, for the avoidance of doubt,
that the foregoing terms of this Article 3.5 shall not affect
Lessee's or Lessor's obligations under Article 3.6 of this
Appendix D.
3.6 On the Expiry Date, if there is any Excess (as defined below)
in any Maintenance Fund, such Excess shall, unless a Default
shall have occurred and be continuing (in which case only
after termination, return of the Aircraft and payment of all
amounts due following exercise of remedies under Article 15),
be paid to Lessee, and on such date, if there is any Shortfall
(as defined below) in any Maintenance Fund, Lessee shall pay
such Shortfall to Lessor.
"Excess" in any Maintenance Fund on the Expiry Date shall mean
any positive difference obtained by subtracting (x) from (y)
for the Airframe, Engines, Landing Gears or A.P.U., as the
case may be; (x) shall mean the product of (I) the then market
cost from the original equipment manufacturer and corrected
for the experience of all United States based operators of
Fokker 100 aircraft for the relevant item:
with respect to the Aircraft, to perform a scheduled
airframe heavy maintenance as defined in the Maintenance
Program for 12,000 hours and 24,000 hours inspections or
any equivalent thereof with more or less hours
("Airframe Maintenance"), or
with respect to any Engine, to perform a scheduled shop
visit engine maintenance and
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<PAGE>
repair, other than (i) repairs arising as a result of
foreign object damage or operations mishandling and/or
(ii) maintenance and repair of QEC (Quick Engine Change)
kits ("Engine Maintenance"), or
with respect to any nose or main landing gear to perform
a schedule shop visit nose and main landing gear
maintenance and repair, other than repairs arising as a
result of foreign object damage or operational
mishandling ("Landing Gear Maintenance"), or
with respect to Auxiliary Power Unit ("A.P.U.") to
perform an off Aircraft shop A.P.U. maintenance and
repair, other than repairs arising as a result of
foreign object damage or operational mishandling
("A.P.U. Maintenance"), and
(II) a fraction of which (a) the numerator shall be the
difference between the actual number of hours or cycles (as to
landing gear), as the case may be, of operation remaining on
the Airframe, Engine, Landing Gear or A.P.U., as the case may
be, to the next such Airframe Maintenance, Engine Maintenance,
Landing Gear Maintenance or A.P.U. Maintenance, as the case
may be, and the total number of hours or cycles, as the case
may be, of operation allowable between such Maintenance and
(b) the denominator shall be the total number of hours or
cycles, as the case may be, of operation allowable between
such Maintenance.
(y) shall mean the actual dollar amount remaining in the
respective Maintenance Fund.
"Shortfall" in any Maintenance Fund on the Expiry Date shall
mean any negative difference obtained by subtracting (x) above
from (y) above.
4. Payments
All payments due hereunder shall be effected by Lessee to Lessor by
transfer to Chemical Bank in New York, New York, in favor of the
Beneficiary, account number 544-0-46285, Ref. Aircraft MSN 11445,
AOLAF-112, in Dollars and in immediately available funds, and all such
payments shall be initiated adequately in advance of the due dates to
ensure
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<PAGE>
that Lessor receives credit for the full amount of such payment on the due
dates. All such payments shall be made in full without any deduction or
withholding (whether in respect of set-off, counterclaim, duties, taxes,
charges or otherwise howsoever) unless Lessee is prohibited by Law from
doing so, in which event Lessee shall (a) ensure that the deduction or
withholding does not exceed the minimum amount legally required; (b)
forthwith pay to Lessor such additional amount as shall result in the net
amount received by Lessor being equal to the amount which would have been
received by Lessor had such a deduction or withholding not been made; (c)
pay to the relevant taxation or other authorities within the period for
payment permitted by applicable Law the full amount of the deduction or
withholding; and (d) upon request in writing from Lessor to Lessee furnish
to Lessor, within the period for payment permitted by applicable Law, an
official receipt of the relevant taxation or other authorities involved
for all amounts deducted or withheld as aforesaid.
5. Currencies
If under any applicable Law, whether as a result of judgment against
Lessee or the liquidation of Lessee or for any other reason, any payment
under or in connection with this Agreement is made or recovered in a
currency other than United States Dollars then, to the extent that the
payment (when converted to United States Dollars at the rate of exchange
on the date of payment or, in the case of the liquidation, the latest date
for the determination of liability permitted by the applicable Law) falls
short of the amount unpaid under this Agreement, Lessee shall, as a
separate and independent obligation, fully indemnify Lessor against the
amount of the short fall; for the purposes of this paragraph, "rate of
exchange" means the rate at which Lessor is able on the relevant date to
purchase United States Dollars in London with that other currency.
6. Default Interest
If any amount payable pursuant to this Agreement is not paid by Lessee on
the due date, Lessee shall pay to Lessor interest (after as well as before
judgment) on such amount, at the rate of LIBOR (as defined in Article
2.3.2 of this Appendix D, but for the duration of six months and as
applicable two Business Days before the Default), plus four per cent (4%)
per annum from the due date to the date of payment in full by Lessee to
Lessor, but in the event such rate shall be in excess of the highest rate
permitted by applicable law, then it shall mean the highest rate allowed
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<PAGE>
by applicable law. All amounts of interest payable hereunder shall be
calculated on the basis of the actual number of days elapsed and a 360 day
year.
7. Set-off
At any time after a Default shall have occurred and be continuing, Lessor
shall be entitled to set-off or withhold from any amount due and payable
to Lessee under this Agreement or any other Operative Document, or any
amount standing to the credit of Lessee on any account, in or towards the
satisfaction of any amounts from time to time due and payable by Lessee
under this Agreement or any other Operative Document or any liability or
obligation of Lessee under this Agreement or any other Operative Document,
and shall be entitled to do so notwithstanding that any such amount or
amounts may not be expressed in the same currency.
8. Time at which payments are due
Supplemental Rent shall be due and payable on demand unless otherwise
expressly stated herein.
9. Purchase Option
Lessor grants to Lessee the right to purchase and to take delivery of the
Aircraft on the Expiry Date of this Agreement for a price equal to the
greater of the fair market value (as deferred to the penultimate sentence
of this paragraph, "FMV") of the Aircraft on the Expiry Date and
{***}. If Lessee elects to exercise its right to purchase the
Aircraft, Lessee shall do so by giving to Lessor written notice of
such election at least two hundred seventy (270) days prior to
the Expiry Date. The FMV of the Aircraft on the Expiry Date shall
be established by an independent internationally reputed aircraft
appraiser appointed by mutual agreement of Lessor and Lessee within one
(1) month of the date of receipt by Lessor of Lessee's notice of election
to purchase. If Lessor and Lessee shall be unable to agree on such
aircraft appraiser, FMV shall be established by a mutually agreed
appraisal prepared and delivered by two independent internationally
reputed aircraft appraisers, one of which shall be chosen by Lessor and
one by Lessee. If such appraisers shall be unable to agree on FMV, FMV
shall be equal to the average of the fair market values established by
such appraisers. Any appraisal shall meet internationally accepted
standards and shall be binding upon Lessee and Lessor. The appraisal
procedure outlined in this Article 9 shall be referred to herein as the
"Appraisal
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<PAGE>
Procedure". The FMV shall be equal in amount to the value that would be
obtained as of the Expiry Date in an arm's-length transaction between an
informed and willing purchaser under no compulsion to buy and an informed
and willing seller under no compulsion to sell with the Aircraft assumed
to be in the condition required upon the return thereof at the end of the
Term in accordance with Article 16 without considering the encumbrance of
this Agreement. All costs and expenses of the FMV appraisal shall be
shared equally by Lessor and Lessee.
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APPENDIX E
OPERATING CONDITION AT RE-DELIVERY
Upon redelivery of the Aircraft to Lessor, the Aircraft shall, subject to
ordinary wear and tear generally:
1. General Condition
(a) Be clean by airline standards;
(b) Have installed the Engines, and other equipment, Parts and
accessories and loose equipment as would remain installed in such
Aircraft, and shall be in a condition suitable for operation in
commercial service;
(c) Have in existence a valid Certificate of Airworthiness with respect
to the Aircraft issued by the Air Authority of the State of
Registration with a validity of at least nine (9) months after the
date of redelivery of the Aircraft to Lessor;
(d) Comply with the manufacturer's original specifications therefor;
(e) Have undergone, immediately prior to redelivery, a 3000 Check or any
subsequent higher inspection, if due within 3000 hrs, in accordance
with the Approved Maintenance Program, shall be free of any waivers,
and all deferred maintenance, if any, shall have been accomplished;
each engine and A.P.U. shall have had an inspection in accordance
with Article 16 confirming release for its remaining operational
life;
(f) All outstanding airworthiness directives and mandatory orders
affecting such model of Aircraft issued by the Air Authority which
require compliance during the Term shall have been accomplished;
(g) Have installed all applicable vendors' and manufacturers' service
bulletin kits theretofore received by Lessee free of charge that are
appropriate for the Aircraft and to the extent not installed, such
kits shall be furnished free of charge to Lessor;
(h) Stripped of all Lessee's paint scheme and repainted through an
Authorized Maintenance Performer with manufacturer approved paints
in white or any other basic color requested by Lessor; and
<PAGE>
(i) Have been inspected and treated with respect to corrosion as defined
in the Approved Maintenance Program.
2. Airframe and major components
The Airframe and major components shall have not less than the following
hours/cycles/months expected life remaining to the next Major Check and/or
overhaul:
-Airframe : 3000 hours and 12 months to
next Major Check;
-Engine : half life on average to next
Engine shop visit but in no
event less than 3000 hours;
-Main Landing Gear : 3000 cycles to next overhaul;
-Nose Landing Gear : 3000 cycles to next overhaul;
*The records as to remaining engine life shall be certified by Lessee in
writing to Lessor upon redelivery of the Aircraft to Lessor.
3. Components
(a) Each life-limited Part shall have not less than 3000 (Three
Thousand) flight hours or cycles of the total approved life
remaining to the scheduled replacement, in accordance with the
Approved Maintenance Program;
(b) Each hard-time controlled component shall have not less than 3000
(Three Thousand) Flight Hours or 3000 (Three Thousand) Cycles or 12
(twelve) months whatever is applicable, remaining to the next
scheduled overhaul/inspection, in accordance with the Approved
Maintenance Program;
(c) "On-condition" and "Condition Monitored" components shall be
serviceable;
(d) The A.P.U. shall be serviceable.
4. Fuselage, Windows and Doors
(a) Fuselage shall be free of major dents and abrasions, scab patches
and loose or pulled or missing rivets;
(b) Windows shall be free of delamination, blemishes, crazing and shall
be properly sealed;
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<PAGE>
(c) Doors shall be free moving, correctly rigged and be fitted with
serviceable seals.
5. Wings and Empennage
(a) All leading edges shall be free from damage;
(b) All unpainted cowlings, fairings and other surfaces shall be
polished;
(c) Wings shall be free of fuel leaks.
6. Interior
(a) Ceilings, sidewalls and bulkhead panels shall be clean and free of
cracks and stains;
(b) All carpets and seat covers shall be in good condition, clean and
stain free and meet Air Authority fire resistance regulations;
(c) All seats shall be serviceable, in good condition and repainted as
necessary;
(d) All signs and decals shall be clean and legible;
(e) All emergency equipment having a calendar life shall have a minimum
of one year or one hundred per cent of its total approved life,
whichever is less, remaining.
7. Cockpit
(a) All decals shall be clean, secure and legible;
(b) All fairing panels shall be free of stains and cracks, shall be
clean, secure and repainted as necessary;
(c) Floor coverings shall be clean and effectively sealed;
(d) Seat covers shall be in good condition, clean and shall conform to
Air Authority fire resistance regulations;
(e) Seats shall be fully serviceable and shall be repainted as
necessary.
8. Cargo Compartments
(a) All panels shall be in good condition;
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<PAGE>
(b) All nets shall be in good condition.
9. Landing Gear and Wheel Wells
(a) Shall be clean, free of leaks and repaired as necessary;
(b) All decals shall be clean, secure and legible.
10. Corrosion
(a) Entire fuselage shall be substantially free from corrosion and shall
be adequately treated and an approved corrosion prevention program
shall be in operation;
(b) Fuel tanks shall be free from contamination and corrosion and a tank
treatment program shall be in operation.
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<PAGE>
APPENDIX F
AIRCRAFT DOCUMENTS
FOKKER 100 AIRCRAFT
Aircraft Documents shall include the documents referred to in Table I ("Aircraft
Documentation"), Section (D), Exhibit (D) of the Support Services Agreement No.
ASSAF-110 between FAUSA and Lessee.
Aircraft Documents shall also include all logs, certificates and data, and
inspection, modification and overhaul records, relating to the Aircraft and
required to be maintained by the Air Authority and/or by the Approved
Maintenance Program.
Upon Expiry Date or upon earlier termination of the Agreement all Aircraft
Documents shall be redelivered by Lessee to Lessor complete and fully updated
simultaneously with the redelivery of the Aircraft.
<PAGE>
APPENDIX G
LEGAL OPINION
(Certain provisions of this opinion may be given by different law firms or
individuals: revision required if the Bank is a party)
[Closing Date]
[___________________]
1199 N. Fairfax Street
Alexandria, VA 22314
Dear Sirs:
We have acted as counsel to Midway Airlines Corporation, a Delaware corporation
("Lessee"), in connection with the execution and delivery by Lessee of the
Aircraft Operating Lease Agreement AOLAF-112, dated as of November 11, 1993
between First Security Bank of Utah, N.A., not in its individual capacity but
solely as trustee ("Lessor") and Lessee (the "Agreement"). Except as otherwise
herein defined, the terms used in this opinion letter have the same meanings as
the terms used in the Agreement.
We have examined the Agreement and the other Operative Documents. We have also
examined the original, or photostatic or certified copies of such agreements and
records of Lessee and of public officials, orders and certificates of regulatory
bodies and courts of competent jurisdiction and such other documents as we have
deemed relevant and necessary. We have relied upon the accuracy of the factual
information set forth in all such documents.
In our examination we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as photostatic or certified
copies and the authenticity of the originals of such latter documents.
Based upon our examination, we are of the opinion that:
1. Lessee is a corporation duly incorporated and organized and validly
existing in good standing under the laws of the State of Delaware, and has
all requisite corporate power and authority to carry on its business as
presently conducted and to execute and deliver, and to incur and perform
its obligations under the Agreement and the other Operative Documents and,
to the best of our knowledge, no steps have been taken or are being taken
to appoint a receiver or liquidator over, or to wind up, Lessee.
<PAGE>
2. The execution, delivery and performance by Lessee of the Agreement and the
other Operative Documents and the compliance by Lessee with the terms and
provisions thereof have been duly authorized by all necessary corporate
action, do not require any approval of stockholders of Lessee, and will
not violate any provision of law or any governmental rule or regulation or
any judgment, decree, or order binding on Lessee, or of the Certificate of
Incorporation or By-laws of Lessee.
3. Lessee is not in violation of any provision of its Amended and Second
Restated Certificate of Incorporation as that document may be further
amended and/or restated (hereafter referred to as the Certificate of
Incorporation), or By-laws, and to the best of our knowledge, is not in
violation of any provision of any agreement, instrument or document to
which it is a party or by which it is bound, nor has there occurred and is
continuing any event which, under the provision of any such agreement,
instrument, instrument or document, which the lapse of time or giving of
notice, or both, would constitute a default by Lessee. Lessee is not in
violation of any law, rule or regulation, or any order, injunction or
decree of any court or administrative body applicable to it, which
violation could materially and adversely affect its business, property or
assets, operations or condition, financial or otherwise.
4. The Agreement and the other Operative Documents have been duly executed
and delivered by Lessee and constitute the legal, valid and binding
obligations of Lessee, enforceable in accordance with their respective
terms, except as may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights
generally (including, without limitation, laws regarding fraudulent
conveyance and equitable subordination) and by general principles of
equity (regardless of whether enforcement is sought in a proceeding in
equity or at law), and (ii) applicable laws which may affect certain of
the remedies provided in the Agreement and the other Operative Documents
but which do not, in our opinion, make the remedies provided therein
inadequate for the practical realization of the benefits afforded thereby.
5. No consent, approval or authorization of, nor registration, qualification,
designation, declaration of filing with, any governmental authority in the
United States of America or any political subdivision or instrumentality
therein or thereof is required in connection with the execution, delivery
or performance by lessee of the Agreement and the other Operative
Documents, or any other document or
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<PAGE>
instrument contemplated thereby, except for (i) the registration of the
Aircraft in Lessor's name with the Federal Aviation Administration (the
"FAA") pursuant to the Federal Aviation Act of 1958, as amended (the
"Act"), the Equipment Lease, and the Credit and Security Agreement; the
filing of the Agreement for recordation with the FAA pursuant to, and in
accordance with, the Act; and (iii) the filing of financing statements
with respect to the interest created by the Agreement under the Uniform
Commercial Code with the Secretary of the State of the State of Illinois.
6. No other filing or recording of any document is necessary under the laws
of the United States or [ ] in order to perfect Lessor's title to the
Aircraft under the Agreement and Aircraft Equipment under the Equipment
Lease and to perfect Lessor's security interest in the Collateral under
the Credit and Security Agreement as against Lessee and any third parties
within the United States.
7. No United States Federal withholding taxes will be applicable to the
rentals and other payments made by Lessee under the Agreement and the
other Operative Documents.
8. No tax will be imposed by any state of the United States of America or any
political subdivision thereof on Lessor's interest in the Aircraft solely
by virtue of the execution, delivery and performance of the Agreement and
the other Operative Documents.
9. In any action to enforce the Agreement commenced in courts of the state of
New York or a United States District Court located in New York, such
courts would give effect to the choice of the parties thereto of New York
law as the governing law thereof.
10. The obligations of the Lessee for the payment of money under the Agreement
and the other Operative Documents rank at least equally and ratably (pari
pasu) with respect to priority and security with all other unsecured
obligations of the Lessee.
11. No claims of creditors and/or possessory liens will rank ahead of the
respective rights and interests of the Lessor, Head Lessor and the Bank in
the Aircraft.
We are members of the bar of the state of New York and [_______] and we
are not, and do not purport to be, experts in the laws of any other
jurisdiction other than the Federal laws of the United States of America.
The opinions set forth in this opinion letter are limited solely to the
laws of the
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<PAGE>
State of New York, the Uniform Commercial Code, as applicable in the State
of Illinois, the corporate law of the State of Delaware and the United
States of America.
Very truly yours,
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<PAGE>
APPENDIX H
CERTIFICATE OF INSURANCE
To: (Lessor)
CERTIFICATE OF INSURANCE
THIS IS TO CERTIFY that we in our capacity as insurance brokers have effected
insurance (reinsurance) on behalf of:
ASSURED _______
(REASSURED) ______
as herein described in respect of:
AIRCRAFT: FOKKER 100 REGISTRATION ______
Subject to policy terms, conditions, limitations and exclusions the insurance
covers.
1) HULL ALL RISKS of loss or damage to the Aircraft for an Agreed Value
of US$______ (United States Dollars ______).
This policy includes Excluded Coverage Endorsement (Aircraft Hull)
AVN51 or equivalent.
This insurance is subject to a deductible (other than total loss,
arranged total loss or constructive total loss) of US$______ (United
States Dollars ______) any one accident.
The geographical limits of the insurance are worldwide and the
insurance is in force during the period ______.
2) If operated outside the United States and Canada, HULL WAR and
ALLIED PERILS insurance for the Aircraft for an Agreed Value of
US$______ (United States Dollars ________) covering the risks
excluded from the Hull All Risks insurance by the terms of the War,
Hijacking and Other Perils Exclusion Clause AVN.48B except paragraph
(b) thereof and includes cover in respect of confiscation,
nationalization, seizure, restraint, detention, appropriation for
title or use by or under the order of the Government or public or
local authority of the State of Registration.
<PAGE>
This insurance is not subject to a deductible.
(The insurance for the Aircraft also covers other aircraft of the
Assured's fleet and is subject to an overall limit in respect of all
aircraft insured of ______ in the aggregate.)
The geographical limits of the insurance are worldwide and the
insurance is in force during the period ______
3) Comprehensive Airline Liability including aircraft Third Party
Liability, Passenger and Crew Liability (including Baggage and
Personal Effects), Cargo Liability, Mail Liability, Personal Injury
Liability Contractual Liability, Hangar Keepers, Liability, Aircraft
Products Liability and General Third Party Liability for a combined
single limit of US$______ (United States Dollars ______) any one
occurrence each aircraft but limited in respect of Personal Injury
(as covered by Personal Injury Extension clause AVN.60) to the
equivalent of US$25,000,000.00 (United States Dollars Twenty Five
Million) any one offence and in the aggregate.
This insurance is subject to the War, Hijacking and Other Perils
Exclusion AVN.48B with paragraphs (a) and (c) through (g) deleted
subject to Extended Coverage Endorsement (Aircraft Liabilities)
AVN52C.
This insurance is subject to deductibles in respect of Baggage and
Personal Effects of US$1,250.00 (United States Dollars One Thousand
Two Hundred Fifty) any one claim and in respect of Cargo and Mail
Liability of US$5,000.00 (United States Dollars Five Thousand) any
one claim. Such deductibles do not apply to claims arising front
accidents to the carrying aircraft.
The geographical limits of this insurance are worldwide and the
insurance is in force during the period ______.
4) ALL RISKS INSURANCE in respect of any Engine and Parts while any
such items are not installed on the Aircraft and in respect of which
cover is not provided under the Hull All Risks insurance 1) above
for not less than the full replacement value and/or the Hull War and
Allied Perils Insurance 2) above including cover in respect of War
and Allied Perils except that War cover is provided only in respect
of Marine and Air Transits.
-2-
<PAGE>
This insurance is subject to a limit of US$______ (United States
Dollars ______).
This insurance is subject to a deductible of US$______ (United
States Dollars ______) any one accident.
The geographical limits of the insurance are worldwide and the
insurance is in force during the period ______.
THE INSURERS (REINSURERS) have been advised that Lessor has entered
into a lease agreement with Lessee in respect of the Aircraft and
insurers (reinsurers) have agreed to endorse the insurances as
follows:
A) In respect of All Risks Aircraft Hull insurance, Aircraft Hull
War and Allied Perils insurance and All Risks insurance on
Engines and Parts to:
(i) name the Lessor, Head Lessor and the Bank and their
respective successors and assigns as Additional
Assureds;
(ii) provide that all claims in respect of the Aircraft,
Engines and Parts shall be payable to Lessor or as it
may direct, such payee to be named Loss Payee; provided
that partial loss amounts up to $250,000 shall be
payable to Lessee unless the insurers have been given
notice that a Default has occurred;
(iii) if applicable, provide in respect of Hull All Risks and
Hull War and Allied Perils for a 50/50 Claims Settlement
Clause in the form of AVS.103.
B) In respect of Comprehensive Airline Liability insurance to:
(i) name the Lessor, its successors and assigns and its
shareholders, subsidiaries, directors, officers, agents,
employees and the Indemnitees as Additional Assureds.
(ii) provide that the insurance shall operate in all respects
as if a separate policy had been issued covering each
party insured hereunder, but this provision shall not
operate to include any claim howsoever arising in
respect of loss or damage to the Aircraft, Engines and
Parts insured under the All Risks
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<PAGE>
Hull, Hull War and Allied Perils or All Risks insurance
of the Assured.
Notwithstanding the foregoing the total liability of
insurers in respect of any and all Assureds shall not
exceed the limits of liability stated in the policy.
C) In respect of all insurances to:
(i) be effective worldwide except for territories approved in
writing by the Lessor.
(ii) provide that insurers waive all rights of subrogation against
the Lessor, its subcontractors, FAUSA, Fokker Aircraft B.V.,
the Head Lessor, the Bank, and their respective officers,
directors, employees, servants, agents, successors and
assigns.
(iii) provide that in the event that the insurances are cancelled
(including cancellation for non payment of premium) or are
materially changed such cancellation or change shall not be
effective as to the interest of the Additional Assureds until
thirty (30) days (but seven (7) days or such lesser period as
is customarily available in accordance with policy conditions
in respect of war and allied perils) after confirmed receipt
by Lessor of written notice by insurers of such cancellation
or change.
(iv) provide that in respect of the interest of the Additional
Assureds the insurances shall not be invalidated by any act,
neglect, omission, misrepresentation or non-disclosure on the
part of the Lessee or any other party other than the
Additional Assured seeking to make a claim thereunder and
shall insure Lessor, and each Additional Assured regardless of
any breach or violation of any warranties, declarations or
conditions contained in such policies by the Lessee or any
other party other than the Additional Assured seeking to make
a claim thereunder.
(v) provide that the Additional Assureds shall have no
responsibility for premiums and Insurers shall waive any right
of set-off or
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<PAGE>
counter claim against the Additional Assureds except in
respect of outstanding premium in respect of the Aircraft,
Engines and Parts subject of a claim.
(vi) not provide for any deductible or self-insurance other than
the deductible allowed above.
(vii) be primary without right of contribution from any other
insurance carried by Lessor, Lessee or any other party.
D) if required, in respect of reinsurance to:
(i) provide that cover shall be identical to the cover provided by
the original insurances and be subject to the same terms and
conditions as the original insurances.
(ii) provide that so far as the respective interests of the
Additional Assureds are concerned the reinsurance shall not be
invalidated by any act, neglect, omission, misrepresentation
or non-disclosure on the part of the reinsured party.
(iii) provide that in respect of All Risks Aircraft Hull insurance,
Aircraft Hull War Risk and Allied Perils insurance as
described above and All Risks insurance on any Engine and
Parts as described above, the reinsurers and the reassured
hereby agree that in the event of any claim arising under the
relevant reinsurances the reinsurers shall in lieu of payment
to the reassured, its successors in interest and assigns pay
to the Loss Payee specified in the primary insurances all sums
payable under or in connection with such reinsurances by
virtue of any reinsured loss of, or damage to, the Aircraft,
Engines or Parts, without any deduction or deductions
whatsoever, other than any outstanding premium in respect of
the Aircraft, Engines or Parts the subject of the claim, it
being understood and agreed that any such payment by the
reinsurers shall fully discharge and release the reinsurers
from any and all further liability in connection therewith.
-5-
<PAGE>
(iv) provide that in respect of Comprehensive Airline Liability
insurance as described above, the reinsurers and reassured
hereby agree that in the event of any claim arising under the
relevant reinsurances, the reinsurers shall in lieu of payment
to the reassured, its successors in interest and assigns pay
to the person or party who has sustained the relevant loss (or
as reimbursement of any payment made by any Additional
Assured) all sums payable under such reinsurances by virtue of
such reinsured loss, without any deduction or deductions
whatsoever, it being understood and agreed that any such
payment by the reinsurers shall fully discharge and release
the reinsurers from any and all further liability in
connection therewith;
(v) provide that the reinsurers and reassured agree that in the
event that the reassured, its successors in interest and
assigns shall at any time be or become insolvent or suspend
business or file a petition in bankruptcy or be adjudicated
insolvent or bankrupt or admit in writing its inability to pay
its debts as they become due, or make a general assignment for
the benefit of creditors or that a receiver or liquidator or
assignee or trustee or state commissioner of insurance be
appointed in respect of the reassured its successors in
interest or assigns or any substantial part of its property
for the purpose of liquidation on account of insolvency, then
the reinsurers, in lieu of payment to the reassured its
successors in interest or assigns, shall pay upon demand that
portion of any loss due to the party entitled thereto under
the terms of the original insurance for which such reinsurers
would under the terms of the reinsurance be liable to pay the
reassured, its successors in interest or assigns, less any
amounts already paid, it being understood and agreed that any
such direct payment by reinsurers shall fully discharge and
release the reinsurers from any and all further liability for
such payment made.
-6-
<PAGE>
APPENDIX I
To: (Lessor)
BROKER'S LETTER OF UNDERTAKING
We confirm that insurances (reinsurances) are in effect on and in respect of
aircraft FOKKER 100 REGISTRATION ______ for the period and in respect of the
risks as set out in the attached Certificate of Insurance.
We undertake to hold the insurance (reinsurance) slips or contracts and the
policies or any policies substituted therefore and the benefit of the insurance
(reinsurances) to the extent of your interest therein, to your order.
We further undertake:
1. to pay to the loss payee as stated in the Certificate of Insurance
(Reinsurance) without set off or deduction of any kind any and all
proceeds of the insurance (reinsurance) collected by us from the insurers
(reinsurers) in respect of loss or damage to the Aircraft, Parts, Engines,
components and equipment except for any outstanding premiums due in
respect of the Aircraft and the Parts, Engines, components and equipment.
2. to advise you promptly upon our becoming aware of:
(i) any change or alteration made or proposed to be made to the
insurances (reinsurances) which would be adverse to your interest.
(ii) any act or omission or any event which in our opinion may invalidate
or render unenforceable in whole or in part the insurance
(reinsurance) as far as your interest is concerned.
3. to advise you immediately:
(i) upon our receiving or becoming aware of any notice of cancellation
(including for non payment of premium) or material change given by
insurers (reinsurers) or the Assured.
(ii) if we have not received renewal instructions fifteen (15) business
days prior to the renewal date of the insurances (reinsurances) and
in the event of our receiving instructions to renew to advise you
promptly of the details thereof.
<PAGE>
(iii) upon our ceasing to be insurance brokers to the Assured (Reassured).
The above undertakings are given:
a) subject to our lien, if any, on the policies referred to above for
premiums due under such policies in respect of the aircraft and
subject to the insurers' right of cancellation on default in payment
of such premiums, but we undertake to advise you immediately if any
such premiums are not paid to us in due time in accordance with our
accounting procedures with the assured and insurers and to give you
a reasonable opportunity of paying such amounts of such premiums
outstanding before notification of non-payment of premiums to
insurers (reinsurers).
b) subject to our continuing appointment for the time being as
insurance brokers to Assured (Reassured).
All notices or advises given in accordance with the above undertakings shall be
communicated by telefacsimile or telex to the addressee at the above address.
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<PAGE>
APPENDIX J
FAA POWER OF ATTORNEY
This POWER OF ATTORNEY in favor of LESSOR [HEAD LESSOR] ("Lessor")
dated ____________, 199__ from MIDWAY AIRLINES CORPORATION ("Lessee") [is
consented to by BANK ("Bank")].
RECITALS:
A. Lessor and Lessee have entered into an Aircraft Operating Lease
Agreement (AOLAF No 112) dated as of November 11, 1993 (the "Lease
Agreement") with respect to the Fokker 100 aircraft, serial no.
11445, U.S. registration no. ________ (the "Aircraft").
B. Capitalized terms used herein and not otherwise defined shall have
the respective meanings ascribed to such terms in the Lease
Agreement.
NOW, THEREFORE, for good and valuable consideration, the adequacy of
which is hereby acknowledged, it is hereby agreed as follows:
Lessee hereby irrevocably constitutes and appoints Lessor, with full
power of substitution, for and in the name and on behalf of Lessee, as the act
and deed or otherwise of Lessee:
to direct, authorize and instruct the insurer or insurance broker
with respect to the Aircraft, as if Lessor were policy holder,
pursuant to Article 11.6 of the Lease Agreement, in order to
initiate, process and settle any insurance claim with respect to the
Aircraft, Engines or Parts;
to execute, sign, deliver, authorize and file such instruments
legally necessary for any and all actions necessary to take
possession and effect redelivery of the Aircraft, Engines or Parts
upon termination of the Lease Agreement due to an Event of Default;
to execute, sign, deliver and file all such instruments requested by
Lessor [Head Lessor] that may be required to deregister the Aircraft
from the FAA, or to terminate the Lease for the Aircraft that is
recorded at the FAA, or that may be deemed proper in or in
connection with all or any of the purposes aforesaid, and to appoint
substitutes or agents to take any such action on its behalf.
<PAGE>
Lessee hereby ratifies and confirms and agrees to ratify and confirm
any direction, authorization and instruction of Lessor [Head Lessor] taken
pursuant to this Power of Attorney.
This Power of Attorney shall expire on __________ ___, 200__ [11
years from the Delivery Date of the Aircraft] or earlier termination of the
Lease.
IN WITNESS WHEREOF, Lessee has duly caused this Power of Attorney to
be executed on the date first set forth above.
MIDWAY AIRLINES CORPORATION
By: __________________________
Name:
Title:
Consented and Agreed:
[BANK]
By: _____________________________
Name:
Title:
[CERTIFIED RESOLUTIONS OF LESSEE AUTHORIZING THIS
POWER OF ATTORNEY TO BE ATTACHED]
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<PAGE>
APPENDIX K
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- --------------------------------------x
In Re :
: Chapter 11 Case
JET EXPRESS, INC. : Case No. 91 B 12287 (FGC)
:
Debtor. :
- --------------------------------------x
ORDER OF CONFIRMATION
Jet Express, Inc, the debtor in this Chapter 11 case (the "Debtor"),
having filed with the Court the Debtor's Plan of Reorganization under Chapter 11
of the United States Bankruptcy Code, dated on, or about August 10, 1993, (the
"Plan"; capitalized terms used in this Order and not otherwise defined shall
have the respective meanings ascribed to such terms in the Plan); and the
Debtor's Disclosure Statement, dated September 18, 1993 (the "Disclosure
Statement"), having been filed with and approved by this Court pursuant to this
Court's order (the "Disclosure Statement Order") as containing "adequate
information" pursuant to section 1125 or title 11, United States Code (the
"Bankruptcy Code"); and copies of (a) the Plan, (b) the Disclosure Statement and
(c) the appropriate ballot(s) (for those Creditors entitled to vote on the
Plan), having been transmitted to all Creditors entitled to receive the same
pursuant to the Disclosure Statement Order, the United States Trustee, and those
parties who have filed notices of appearance in the Debtor's Chapter 11 case
pursuant to Bankruptcy Rule 2002, the Securities and Exchange Commission, the
District Director of Internal Revenue for the district in which this Chapter 11
case is pending, and the United
<PAGE>
States Attorney for the Southern District of New York, all in accordance with
the Disclosure Statement Order; and the Disclosure Statement Order having fixed
(a) on or before October 8, 1993, as the last date and time by which all
objections must be properly completed, executed, marked and received by the
Debtor at one of the addressee specified for that purpose in the Disclosure
Statement and in the Published Notice described in the Disclosure Statement
Order, in order to be considered as acceptances, or rejections of the Plan; and
This Court having set a confirmation hearing on the Plan of
Reorganization filed by Jet Express, Inc., the Debtor in the above captioned
case (the "Debtor") for the 13th day of October, 1993, at 11:00 a.m., to be
heard before this Court at the United States Bankruptcy Court, 67 Merchants Row,
Opera House, 2nd Floor, Rutland, Vermont, and this Court having fixed October 8,
1993, as the date for the filing of any objections to confirmation of the Plan,
and an objection having been filed by Allstate Financial Corporation, and this
Court having heard the evidence of the Debtor in accordance with 11 U.S.C.
section 1129 and finding that the objection of Allstate Financial Corporation is
denied as moot, and being otherwise sufficiently advised;
The Court makes the following Findings of Fact and Conclusions of
Law setting forth the reasons for the Court's issuance of this Order confirming
the Plan, overruling the outstanding objections, and granting the other relief
provided
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<PAGE>
for herein:
THE COURT HEREBY FINDS THAT:
1. The Plan of Reorganization proposed by the Debtor, is found to be
fair and equitable and in the best interest of the Debtor and the creditors.
2. The impaired classes entitled to vote upon the Plan of
Reorganization, being Classes B-1, C-1, and C-2, as defined by the Plan of
Reorganization, have voted in favor of the Plan of Reorganization and have
accepted the Plan of Reorganization in conformity with 11 U.S.C.
section 1129(7).
3. The Plan complies with the applicable provisions of the
Bankruptcy Code as required by section 1129(a)(1) thereof.
4. The Debtor, as proponent of the Plan, has complied with the
applicable provisions of the Bankruptcy Code as required by section 1129(a)(2)
thereof.
5. The Plan has been proposed in good faith and not by any means
forbidden by law as required by section 1129 (a) (3) of the Bankruptcy Code.
6. Any payment made or to be made by the Debtor, or by a person
issuing securities or acquiring property under the Plan, for services or for
costs and expenses in or in connection with these Chapter 11 cases, or in
connection with the Plan and incident to these Chapter 11 cases, shall be
subject to the approval of the Court as reasonable as required by section
1129(a)(4) of the Bankruptcy Code.
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<PAGE>
7. At the confirmation Hearing or in the Disclosure Statement, the
Debtor has disclosed the identity and affiliations of the individuals proposed
to serve, after the Effective Date of the Plan, as directors and officers of the
reorganized Debtor. The continuance or appointment of such individuals as
directors and to such offices is consistent with the interests of Creditors and
Equity Interest Holders and with public policy, and the Debtor has disclosed the
identity of any insider that will be employed or retained by the reorganized
Debtor, and the nature of any compensation for such insider, all as required by
section 1129(a)(5) of the Bankruptcy Code.
8. The Plan has not been accepted by each holder of a Claim, or
Equity Interest of every class that is impaired under the Plan; however, each
non-accepting holder of a Claim or Equity Interest of each such class will
receive or retain under the Plan on account of such Claim or Equity Interest
property of a value, as of the Effective Date, that is not less than the amount
that such holder would so receive or retain if each Debtor were liquidated under
chapter 7 of the Bankruptcy Code on such date as required by section
1129(a)(7)(A) thereof. With respect to any Equity Interest, the Plan is in
compliance with section 1129 (a) (7).
9. Except to the extent that the holder of a particular claim has
agreed to a different treatment of such Claim (including, without limitation,
such agreements relating to
-4-
<PAGE>
certain deferrals of rent and certain claims incurred in the ordinary course of
the Debtor's business), the Plan complies with section 1129(a)(9) of the
Bankruptcy Code.
10. In view of the foregoing, the Court finds that the Plan is
feasible and that confirmation and consummation of the Plan is not likely to be
followed by the liquidation, or the need for further financial reorganization of
the reorganized Debtor, all as required by section 1129(a)(11) of the Bankruptcy
Code.
11. All fees payable under 28 U.S.C. section 1930 have been paid,
or the Plan provides for the payment of all such tees on the Effective Date
as required by section 1129(a)(12) of the Bankruptcy Code.
12. The Plan does not discriminate unfairly, and is fair and
equitable, with respect to each class of Claims or Equity Interests that is
impaired under, and has not accepted, the Plan, as required by section
1129(b)(1) of the Bankruptcy Code.
13. Holders of Equity Interests will not receive or retain any
property under the Plan on account of such Equity Interests and are deemed to
have rejected the Plan. Such holders would not receive or retain any property on
account of such Equity Interests if each Debtor were liquidated under Chapter 7
of the Bankruptcy Code on the Effective Date.
14. There is no class of Claims or Equity Interests junior to Class
C-2.
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<PAGE>
15. it appears that the Debtor will satisfy each and every condition
precedent to the effectiveness of the Plan set forth in the Plan.
16. After the Effective Date, the reorganized Debtor shall continue
to engage in business and the Plan does not provide for the liquidation of all
or substantially all of the property of the Debtor's estates.
17. The Debtor has made a careful review of its executory contracts
and unexpired leases, and it is a reasonable exercise of the Debtor's business
judgment for it to reject all such exucutory contracts and unexpired lease.
other than the "Assured Agreements" referred to in the Plan, i.e., those
executory contracts and unexpired leases that have either already been assumed
pursuant to an order of the court or are the subject of a pending motion to
assume. The assumption on the Effective Date pursuant to section 365 of the
Bankruptcy Code of the agreements identified in the Plan including those
agreements entered into with Fokker Aircraft U.S.A., inc., pursuant to a prior
Order of this Court, is the result of the exercise of sound business judgment by
the Debtor, and is in the best interest of the Debtor, its respective bankruptcy
estates, and its creditors.
Therefore, THIS COURT HEREBY CONCLUDES, as a matter of law, that:
1. This is a core proceeding within the meaning of 28 U.S.C.
section 157.
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<PAGE>
2. The Court shall confirm a plan if it satisfies all the
requirements of section 1129 of the Bankruptcy Code.
3. Notice and distribution of the Plan and the Disclosure Statement
were appropriate and complied with the applicable provisions of the Bankruptcy
Code and the Bankruptcy Rules. The opportunity for a hearing on these matters
was full and adequate.
4. The Plan complies with the applicable provisions of the
Bankruptcy Code as required by section 1129(a)(1) thereof, and the Debtor, as
proponent of the Plan, has complied with the applicable provisions of the
Bankruptcy Code as required by section 1129(a)(2) thereof.
5. The Plan has been proposed in good faith and not by any means
forbidden by law as required by section 1129(a) (3) of the Bankruptcy Code.
6. The Plan is feasible and provides adequate means for
implementation of the Plan.
7. The Plan of Reorganization proposed by the Debtor is hereby
confirmed according to the terms and conditions set forth therein and the Debtor
is hereby authorized to take any and all actions set forth in the Plan of
Reorganization.
8. The Debtor shall file a final accounting under its Plan of
Reorganization on or before the 31st day of March, 1994.
9. The United States Bankruptcy Court for the Southern District of
New York shall retain exclusive jurisdiction
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<PAGE>
over all matters arising under, or arising in, or related to the Debtor's
Chapter 11 case or the Debtor's Plan of Reorganization, as confirmed, to the
full extent permitted by 28 U.S.C. section 1334, to hear, and to the full
extent permitted under 28 U.S.C. section 157, to determine, all proceedings
in respect thereof, including, but not limited to, proceedings to supervise
the Plan of Reorganization. Specifically, without limitation, and if
applicable law provides, the Bankruptcy Court shall have jurisdiction:
(a) to hear any and all objections or settlement, relating to
the allowance of claims;
(b) to hear any and all applications for payment of fees to
attorneys or other professionals pursuant to section 330 or 503 of the
Bankruptcy Code, or for payment of any other fees or expenses authorized to
be paid or reimbursed by the Debtor under the Bankruptcy Code, and any and
all objections thereto;
(c) to hear any and all pending applications for rejection,
the assumption or the assumption and assignment, as the case may be, of
unexpired leases and executory contracts to which the Debtor is a party or with
respect to which they may be liable, and any and all claims arising therefrom;
(d) to hear any and all motions, applications, adversary
proceedings and contested or litigated matters properly before the Bankruptcy
Court;
(e) to approve modifications of or amendments to the Plan of
Reorganization;
-8-
<PAGE>
(f) to hear disputes regarding the implementation or
consummation of the Plan of Reorganization:
(g) to hear all controversies, disputes, settlements and suits
which may arise in connection with the interpretation or enforcement of this
Plan of Reorganization, the orders of this Court, or in connection with the
enforcement of remedies under this Plan of Reorganization;
(h) to hear during the time period the Chapter 11 case is
open, all controversies, disputes and issues dealing with the discharge of the
Debtor or the dischargability of any claims;
(i) to approve compromises, settlements, or adjudications of
any objections to claims:
(j) to estimate disputed, contingent and unliquidated claims
for purposes of distribution under the Plan of Reorganization;
(k) to correct any defect, cure any omission, or reconcile any
inconsistency in the Plan of Reorganization;
(l) to resolve issues of disputes relating to the division,
title, sale or liquidation of the assets of the Debtor;
(m) to enter a final decree closing this case; and
(n) to hear and determine such other matters as may arise in
connection with this Plan or Reorganization or the Confirmation Order.
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<PAGE>
10. The Debtor and the United States of America, through its
Department of Treasury-Internal Revenue Service, having stipulated that this
Confirmation Order and the Bar Date of October 15, 1993, which has been ordered
by this Court, shall not be effective as to the claims of the United States of
America regarding pre-petition and post-petition taxes alleged to be due and
payable, that this Court shall retain jurisdiction over any claim of the United
States of America and any objections which may be made by the Debtor thereto.
How, upon the motion of the Debtor and after due deliberation, the
Court hereby ORDERS, ADJUDGES AND DECREES THAT:
1. The Plan be, and it hereby is, confirmed.
2. The Debtor is hereby authorized to assume all executory contracts
and unexpired leases that are the subject of a motion to assume pending on the
date hereof, either without amendment, or with such amendments thereto as shall
be agreed upon between the Debtor party thereto and the non-Debtor parties
thereto, and to reject all executory contracts and unexpired leases that are not
assumed Agreements under the Plan. The agreements identified in the Plan, shall
be and hereby are assumed pursuant to section 365 of the Bankruptcy Code,
effective as of the Effective Date.
3. In accordance with this Court's Interim Order dated September 30,
1993 permitting Debtor to obtain Credit an a superpriority basis (the "Interim
Order") the Interim Order is
- 10 -
<PAGE>
hereby made final.
4. In accordance with section 1141 of the Bankruptcy Code, the Plan
and its provisions shall be binding upon the Debtor and its successors
(including the reorganized Debtor) and any other entity created pursuant to the
Plan, any Person or entity issuing securities under the Plan, any Person or
entity acquiring or receiving property under the Plan, any lessor or lessee of
property to or from the Debtor, and any holder of a Claim against or Equity
Interest in the Debtor, whether or not the Claim or Equity Interest of such
Creditor or Equity Interest Holder is impaired under the Plan and whether or not
such Creditor or Equity Interest Holder has filed, or is deemed to have filed, a
proof of Claim or Equity Interest, or has accepted or rejected the Plan.
5. In accordance with section 1141 of the Bankruptcy Code, and
except for any security interests provided under the Plan or contemplated by the
Financing Transaction, any property transferred or otherwise dealt with in the
Plan shall be free and clear of all Claims against and Equity Interests in the
Debtor, and all such property of the Debtor's estate shall, on the Effective
Date, vest in those entities as designated in and provided for by the Plan.
Pending the occurrence of the Effective Date, all such property shall remain
property of Debtor's bankruptcy estate, and such bankruptcy estate shall
continue until the occurrence of the Effective Date.
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<PAGE>
6. In accordance with the Plan and section 1141 of the Bankruptcy
Code, except as otherwise specifically provided in the Plan, upon the occurrence
at the Effective Date the consideration distributed under the Plan shall be in
exchange for and in complete satisfaction, discharge, release, and termination
of, all Claims of any nature whatsoever against any Debtor or any of its assets
or properties and all Equity Interests in any Debtor; and except as otherwise
provided herein or in the Plan, upon the Effective Date (i) the Debtor shall be
discharged and released pursuant to section 1141(d)(1)(A) of the Bankruptcy Code
from any and all Claims, including but not limited to demands and liabilities
that arose before the Effective Date, all Stockholder Actions as they relate to
such Debtor, all debts of the kind specified in section 502(g), 502(h) or 502(i)
of the Bankruptcy Code, whether or not (a) a proof of claim based upon such debt
is filed or deemed filed under section 501 of the Bankruptcy Code; (b) a Claim
based upon such debt is allowed under section 502 of the Bankruptcy Code; or (c)
the holder of a Claim based upon such debt has accepted the Plan, and (ii) all
rights and interests of holders of Equity Interests in each Debtor shall be
determined pursuant to section 1141(d)(1)(B) of the Bankruptcy Code. This Order
shall be a judicial determination, effective on the occurrence of the Effective
Date, of discharge and termination of all liabilities of and all Claims against,
and all Equity Interests in, the Debtor, except as otherwise specifically
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<PAGE>
provided in the Plan. On the Effective Date, as to every discharged debt, Claim
or Equity Interest is permanently enjoined and precluded from asserting against
the reorganized Debtor, or against its assets or properties or any transferee
thereof, any other or further Claim or Equity Interest based upon any document,
instrument or act, omission, transaction or other activity of any kind or nature
that occurred prior to the Effective Date, except as expressly set forth in the
Plan.
7. In accordance with section 1142 of the Bankruptcy Code, the
Debtor, the reorganized Debtor, and any other entity created or Person
designated pursuant to the Plan be, and they hereby are, authorized, empowered
and directed to issue, execute, deliver, file and record any document, and to
take any action necessary or appropriate to implement, effectuate and consummate
the Plan and any transactions contemplated thereby in accordance with their
respective terms, including the agreements with Fokker Aircraft U.S.A., Inc.,
whether or not any such document is specifically referred to in the Plan, and
without further application to or order of this Court. Pursuant to section
1142(b) of the Bankruptcy Code, but subject to the retained jurisdiction of the
Court to resolve disputes as provided in the next sentence, all Persons holding
Claims or Equity Interests which are dealt with under the Plan be, and they
hereby are, directed to execute, deliver, file or record any document, and to
take any action necessary to implement, effectuate and consummate
- l3 -
<PAGE>
the Plan in accordance with its terms, and all such Persons shall be bound by
the terms and provisions of all documents to be executed by them in connection
with the Plan, whether or not such documents actually have been executed by such
Persons. The Court retains jurisdiction to hear and determine any dispute
concerning the proposed application of section 1142 of the Bankruptcy Code and
of the preceding sentence. The foregoing shall not, however, in any manner
adversely affect or impair any of the rights of the parties to the Investment
Agreement or the Plan Debt Financing pursuant to, or release any such party from
any condition under, the agreements and instruments relating thereto.
8. All steps necessary (i) for the reorganized Debtor to be duly
incorporated and (ii) to effect the mergers, contributions of assets and
assumptions of liability as contemplated by the Plan be, and they hereby are,
authorized and approved.
9. Pursuant to the Plan, from and after the Effective Date, the
reorganized Debtor my use, operate and deal with their respective assets, and
may conduct and change their businesses, without any supervision by the
Bankruptcy Court or the Office of the United States Trustee, and free of any
restrictions imposed on the Debtors by the Bankruptcy Code or by the Court
during these Chapter 11 cases.
10. All equity Interests in each Debtor be, and they hereby are,
canceled effective as of the Effective Date.
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<PAGE>
11. (a) Pursuant to the Plan, and in accordance with section 1142 of
the Bankruptcy Code, the Debtor is hereby authorized to take such corporate
action as may be necessary and appropriate to implement and effectuate
consummation of the Plan, each of the agreements and instruments referred to
therein or contemplated thereby (including all documents, instruments,
certificates and agreements to be entered into pursuant to the Plan by the
Debtor or the reorganized Debtor and any successors to the Debtor.
(b) This Order shall constitute all approvals and consents,
including without limitation, approvals of the boards of directors and
shareholders or the Debtor, in any, required by the laws of the State of
Delaware (and the laws of any other state) with respect to the implementation
and consummation of the Plan, including without limitation, the election of the
Board of Directors of the reorganized Debtor (which shall consist of the persons
identified as such at the Confirmation Hearing, the adoption of the Restated
Certificate and By-Laws of the reorganized Debtor, the adoption of any
certificate of designation for preferred stock to be issued pursuant to the
Plan, the election of the officers of the reorganized Debtor by the Plan. the
adoption of all necessary and appropriate resolutions consistent with the Plan,
the mergers contemplated by the Plan, and the execution, delivery and
performance of any agreement. The Secretary of State of the State of Delaware
(and
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<PAGE>
any other state and any other governmental agency, board, bureau or office of
any of the foregoing or the United States or any other state) are authorized and
directed to accept for filing and to file any certificates or articles of
merger, the Merger Agreements, restated certificates of incorporation,
certificates of designation for preferred stock, or other instruments necessary
and to take any and all other actions necessary to give effect to the mergers
and such other transactions contemplated by the Plan.
This Confirmation Order constitutes a final and appealable order of
this Court and is entered on this the 13th day of October, 1993 in Rutland,
Vermont.
/s/ Francis G. Conrad
---------------------------------------
HON. FRANCIS G. CONRAD
JUDGE, UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
TENDERED BY:
ALAGIA, DAY, TRAUTWEIN AND SMITH
BY /s/ Bruce D. Atherton
-----------------------------
BRUCE D. ATHERTON
2000 WATERFRONT PLAZA
325 WEST MAIN STREET
LOUISVILLE, KENTUCKY 40202
(502) 585-4131
COUNSEL FOR DEBTOR, JET EXPRESS, INC.
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<PAGE>
12. The objection to confirmation of Allstate Financial Corporation is
overruled as moot as Allstate and the Debtor have agreed to an
administrative claim in the amount of $83,000, in full and complete
settlement of Allstate Financial Corporation's administrative claim and in
termination of the Account Receivable Factoring Agreement between Allstate
Financial Corporation and the Debtor. The administrative claim shall be
paid as follows:
a. $48,680, shall be paid by the Debtor to Allstate Financial
Corporation at or before 5:00 p.m. Eastern Standard Time October 14,
1993, by the Debtor; and
b. The Debtor shall pay the remaining $34,314 to Allstate Financial
Corporation on or before the First Distribution Date, as defined by
the Plan.
c. All payments to Allstate Financial Corporation shall be paid by wire
transfer on the dates specified above.
13. The objection to confirmation of Patterson, [ILLEGIBLE], Webb and Tyler is
overruled as moot, the Debtor having stated that said law firm shall be
paid in full on the First Distribution Date or according to such terms and
conditions as may be agreed to between the parties, as set forth in the
Plan.
14. The joint objection of Concord Asset Management, Inc., and [ILLEGIBLE],
Inc., is withdrawn, the Debtor, [ILLEGIBLE], and Concord having agreed to
resolution of the administrative claim of [ILLEGIBLE] and Concord upon the
terms set forth in the Court record, which shall be subject to written
stipulation between the parties.
<PAGE>
The terms of the agreement between the parties are so ordered.
16. The Agreements entered into between the Debtor and Fokker Aircraft USA,
Inc., authorized by order of this Court, dated September 30, 1993, are
approved as finally executed and shall remain legal, valid and binding of
the reorganized Debtor.
<PAGE>
AMENDMENT NO. 1
dated as of February 26, 1996
to
AIRCRAFT OPERATING LEASE AGREEMENT
No. 112
dated as of November 11, 1993
between
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee, as
Lessor
and
MIDWAY AIRLINES CORPORATION
as
Lessee
Aircraft: Fokker 100
Serial No./RN: 11445/N104ML
<PAGE>
THIS AMENDMENT No. 1 dated as of February 26, 1996 (this
"Amendment"), is between FIRST SECURITY BANK OF UTAH, N.A., a national banking
association existing pursuant to the laws of the United States, having its
principal place of business at 79 South Main Street, Salt Lake City, Utah
84130-0007, not in its individual capacity (except as expressly set forth in the
Lease) but solely as Owner Trustee under the Trust Agreement, ("Lessor") and
MIDWAY AIRLINES CORPORATION, a company incorporated under the laws of the State
of Delaware, having its principal place of business at, 300 West Morgan Street,
Durham, North Carolina 27702 ("Lessee").
WHEREAS, Lessor and Lessee are parties to that certain Aircraft
Operating Lease Agreement No. 112, dated as of November 11, 1993, and recorded
by the Federal Aviation Administration on November 23, 1993, under conveyance
number J74171 (as amended hereby, the "Lease"; capitalized terms used herein and
not otherwise defined herein shall have the meanings ascribed to them in the
Lease);
WHEREAS, debis AirFinance B.V. ("debis") is the beneficial owner of
the Aircraft;
WHEREAS, Lessee is in default under the Lease by reason of its
failure to make certain Rent payments due thereunder in January and February
1996; and
WHEREAS, Lessor and Lessee desire to amend the Lease as hereinafter
set forth.
NOW THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Definitions.
(a) Section 1 of the Lease is hereby amended by deleting
sub-sections 1.11 and 1.51 thereof in their entirety and replacing them with the
following:
"1.11 Beneficiary shall mean American Aircraft Finance I B.V. which is (i)
a company incorporated under the laws of the Netherlands, (ii)
wholly-owned by debis and (iii) the beneficiary under the Trust
Agreement, together with its successors and permitted assigns.
1.51 Other Aircraft Agreements shall mean all other aircraft operating
lease agreements relating to other aircraft so long as such other
aircraft are leased to Lessee by a lessor for the benefit, directly
or indirectly, of debis or any affiliate of debis. For purposes of
this definition,
<PAGE>
affiliate shall mean any corporation or other entity that, directly
or indirectly, controls, is controlled by or is under common
control with debis."
(b) Section 1 of the Lease is hereby further amended by deleting
"Fokker" and "FAUSA" from the definition of Indemnitee (subsection 1.39 thereof)
and adding "debis" in their stead. In addition, the references to "Fokker" and
"FAUSA" in Section ll.2(c)(ii) of the Lease are hereby deleted and replaced with
"debis".
2. Inspection.
Section 7 of the Lease is hereby amended by adding a new
sub-section 7.6 thereto as follows:
"7.6 Lessee hereby acknowledges that the inspection rights and rights to
information and notice pursuant to this Section 7 shall extend to
debis as well as Lessor. In addition, without in any way limiting
the rights contained elsewhere in the Lease, debis shall have the
right to have observers (who may or may not be employees of debis)
on site at Lessee's premises (provided such observers do not
unreasonably interfere with Lessee's business or operations) and,
provided the recipients of any financial and operational information
of Lessee (which recipients may include employees or other
representatives of debis or any of its affiliates, or agents,
attorneys or accountants of debis or any of its affiliates) keep
strictly confidential any such information, debis shall have the
right to inspect and review any internal financial and operational
information of Lessee as debis may reasonably request (provided such
request is made to Lessee's controller or to a vice president,
senior vice president or the president of Lessee) including, without
limitation, cash flow statements, financial books and records, and
any other records relating to the operation of Lessee's fleet.
Lessee covenants that it will fully cooperate with debis regarding
any inspection of Lessee's fleet and records pursuant to the terms
of the Lease."
3. Default by Lessee.
Section 15 of the Lease is hereby amended as follows:
2
<PAGE>
(a) Sub-section 15.1 is hereby amended by deleting paragraph (n)
thereof in its entirety and replacing it with the following:
"(n) if an event of default (however defined) occurs under (i) any
of the Other Aircraft Agreements, (ii) any other lease
agreements between Lessee and a lessor for the benefit,
directly or indirectly, of Fokker, FAUSA, Daimler-Benz
Aerospace A.G. or any affiliate of any of them, relating to
other aircraft ("Fokker Aircraft Agreements") or (iii) any
aircraft maintenance agreement or other agreement entered into
by Lessee in lieu of Reserve Rate payments ("Maintenance
Agreements"), which event permits acceleration or termination;
or"
(b) Sub-section 15.1 is further amended by deleting the period at
the end of paragraph (q) thereof and replacing it with a semicolon and the word
"or" and by adding new paragraphs (r), (s) and (t) thereto as follows:
"(r) if Lessee's financial performance deviates in any material
adverse way (as determined by debis in its sole, but
reasonable discretion) from the projections set forth on
Lessee's Business Plan for calendar year 1996 (attached hereto
as Exhibit A), taken as a whole, and such deviation is not the
result of a natural disaster which effectively makes it
impossible for Lessee to meet such projections; or
(s) if, prior to satisfaction of Lessee's obligation to pay
Default Payments pursuant to Section 6 of this Amendment,
Lessee shall make (i) any payment of principal or interest on
any amounts owed by Lessee to Zell/Chilmark Fund, L.P.
("Zell") or any affiliate of Zell, (ii) any redemption of, or
any dividend or distribution with respect to, any shares of
Lessee owned by Zell or any affiliate of Zell, (iii) any
prepayment of principal or interest with respect to any other
subordinated debt owed by Lessee or (iv) any redemption of, or
any dividend or other distribution with respect to, any other
shares of Lessee; or
3
<PAGE>
and shall reassign to Lessor, at the expense of Lessee, the benefit
of any indemnity or warranty which has been assigned to Lessee
pursuant to Article 13.3 above to the extent such indemnity or
warranty is assignable.
16.5 Prior to the Expiry Date or upon any earlier termination of the Term
and upon Lessor's request, Lessee will provide Lessor or its agent
reasonable access to and Lessor may make and retain copies of the
Approved Maintenance Program and the Aircraft Documents in order to
facilitate the Aircraft's integration into any subsequent operator's
fleet.
Lessor agrees that it will not disclose the contents of the Approved
Maintenance Program to any person or entity except to the extent
necessary to monitor Lessee's compliance with this Lease and/or to
bridge the maintenance program for the Aircraft from the Approved
Maintenance Program to another program.
16.6 Upon redelivery of the Aircraft to Lessor, an adjustment shall be
made in respect of fuel on board on the Original Delivery Date and
on redelivery at the price then prevailing at the Redelivery
Location.
16.7 If Lessor shall request that Lessee paint the Aircraft any other
basic color as contemplated by Section 1(h) of Appendix E, Lessor
agrees that it shall bear the cost and expense of the difference
between white paint and such other basic color.
16.8 Upon written request of Lessor given to Lessee not later than thirty
(30) days prior to the Expiry Date or termination of the Lease,
Lessee, at the Expiry Date or upon termination of the Lease, will
provide, or will cause to be provided, up to thirty (30) days'
storage of the Aircraft at Lessee's premises, at Lessor's cost and
expense. Lessee shall cause the Aircraft to be delivered to such
designated location at Lessor's cost and expense. During such period
of storage, Lessee will arrange for insurance and maintenance at
Lessor's cost and expense. Lessee shall allow Lessor or any person
designated by Lessor, including the authorized representatives of
any prospective purchaser or user of the Aircraft, to inspect the
same at all reasonable times.
-88-
<PAGE>
(t) if Lessee shall fail to fulfill any of the obligations set
forth in paragraphs (c) or (d) of Section 6 of this
Amendment."
(c) Sub-section 15.2 is hereby amended by adding "(a), (n), (t)" to
clause (i) of paragraph (b) thereof following the word "paragraphs"; it being
understood that the effect of this amendment is to include payment defaults,
cross-defaults with Other Aircraft Agreements, Fokker Aircraft Agreements and
Maintenance Agreements, and failure to fulfill any of the obligations set forth
in paragraphs (c) or (d) of Section 6 of this Amendment as events giving rise to
automatic termination of the Lease without the necessity of any service of
notice thereof upon Lessee; provided, however, that such automatic termination
shall not apply with respect to defaults of the type referred to in paragraphs
(a) or (n) of sub-section 15.1 of the Lease prior to the date hereof or for
payment defaults for Rent Dates occurring in March and April 1996, for so long
as Lessee fulfills the obligations set forth in paragraphs (c) and (d) of
Section 6 of this Amendment.
4. Return of Aircraft.
Section 16 of the Lease is hereby amended by adding a new
sub-section 16.8 thereto as follows:
"16.8 Notwithstanding anything to the contrary contained in the Lease, on
the Expiry Date or upon earlier termination of the Term including,
without limitation, any termination of the Lease pursuant to Section
15 (unless a Casualty Occurrence shall have occurred with respect to
the Aircraft), Lessee shall immediately deliver possession of the
Aircraft to Lessor at Schiphol Airport, the Netherlands (or such
other location as Lessor may require) and hereby covenants that it
will not interpose any defense to any action commenced by Lessor to
regain possession of the Aircraft. The foregoing shall apply whether
or not Lessee is or shall subsequently become a debtor in a case
under Title 11, U.S.C., and in such event, Lessee covenants that it
will not oppose, and will join in, any application by Lessor seeking
to regain possession of the Aircraft."
5. Notice.
Section 19 of the Lease is hereby amended by deleting paragraph (d)
of sub-section 19.6 thereof in its entirety and replacing it with the following:
4
<PAGE>
"(1) to Lessee at:
Midway Airlines Corporation
300 W. Morgan Street
Durham, North Carolina 27702
Tel: (919) 956-4982
Fax: (919) 956-7314
Attention: President
(2) to Lessor at:
First Security Bank of Utah, N.A.
79 South Main Street
Salt Lake City, Utah 84130-0007
Tel: (801) 246-5630
Fax: (801) 246-5053
Attention: Corporate Trust Department
with a copy to debis at:
Evert van de Beekstraat 22,
NL-1118 CL Luchthaven Schiphol,
Amsterdam Airport Schiphol
Tel: 011 3120 316-1431
Fax: 011 3120 653-5419
or to such other address or telex or fax number as is notified
by either party to the other party to this Agreement."
6. Forbearance. Execution of this Amendment shall serve as Lessor's
agreement to forebear from exercising its rights (including, without limitation,
its rights under Section 15 of the Lease) with respect to:
(a) Lessee's failure to make payments of Rent or security deposit
amounts due under the Lease prior to the date of this Amendment and for Rent
Dates occurring in March and April 1996; and
(b) Lessee's failure to make payment of Reserve Rate constituting
Engine Maintenance Accruals due under Other Aircraft Agreements identified as
AOLAF 135, 524 and AOLAF 525 on account of Flight Hours and/or Cycles operated
prior to February 1, 1996;
provided, however, that Lessor's agreement to forbear shall be
effective for so long, and only so long, as
5
<PAGE>
Lessee otherwise complies with all the terms of the Lease, as amended, and
fulfills the obligations set forth in paragraphs (c) and (d) of this Section 6,
as follows:
(c) Lessee shall pay to Lessor the following amounts (which amounts
Lessee hereby agrees to pay):
(i) {***} on the Rent Date occurring in February 1996;
(ii) {***} on the Rent Date occurring in March 1996;
(iii) {***} on the Rent Date occurring in April 1996; and
(iv) Amounts identified on Exhibit B to this Amendment ("Default
Payments") on the Rent Date occurring in May 1996 and for the
next succeeding forty-seven (47) Rent Dates thereafter; it
being understood that Lessee shall pay such Default Payments
together with Rent and any other amounts otherwise due
pursuant to the Lease. Lessee may satisfy its obligations to
pay the Default Payments at any time by paying the portion of
all such Default Payments which constitutes principal,
together with the portion of such Default Payments which
constitutes interest accrued and unpaid as of the date of
payment, all as reflected on Exhibit B to this Amendment.
(d) On or before March 7, 1996, Lessee shall pay all unpaid Reserve
Rate owed with respect to Other Aircraft Agreements identified as AOLAF 135, 524
and 525, or shall enter into a maintenance agreement reasonably satisfactory to
debis providing for the maintenance of the engines of the Aircraft which are the
subject of such Other Aircraft Agreements.
Execution of this Amendment shall not constitute a waiver of any Rent payment
defaults or of any other defaults which may have occurred and be continuing or
which may occur in the future. Lessor's agreement to forbear shall terminate
automatically if Lessee fails to fulfill any of the obligations set forth in
paragraphs (c) or (d) of Section 6 of this Amendment or if any Event of Default
occurs or has occurred and is continuing under the Lease (other than an Event of
Default to which this forbearance agreement set forth in Section 6 of this
Amendment applies). For so long, and only so long as Lessor's agreement to
forbear has not terminated, and provided that the obligation set forth in
paragraph (d) of Section 6 of this Amendment has been fulfilled (i) Lessee shall
be entitled to exercise its rights and privileges under Sections 5.1.2(b),
5.1.3, 7.4.1
6
<PAGE>
and 13.3 of the Lease and (ii) Lessor shall be deemed to have elected not to
apply the Deposit to sums due or to become due to Lessor pursuant to Section 1
of Appendix D of the Lease, notwithstanding the occurrence and continuation of a
Default or Event of Default under the Lease.
7. Payments
Paragraph 4 of Exhibit D to the Lease is hereby amended by deleting
the first sentence thereof and replacing it with the following:
"All payments due hereunder shall be effected by Lessee to Lessor to
Generale Bank Nederland BV, in Amsterdam, in favor of American
Aircraft Finance I B.V., account number 64.26.09.659, or to such
other account as debis may designate in writing, and all such
payments shall be in Dollars and in immediately available funds, and
all such payments shall be initiated adequately in advance of the
due dates to ensure that Lessor receives credit for the full amount
of such payment on the due dates."
8. Governing Law. This Amendment shall be governed by and construed
in accordance with the internal laws of the State of New York and without regard
to any conflict of law rules. This Amendment is being delivered in the State of
New York.
9. Miscellaneous. Except as specifically amended or supplemented by
this Amendment, the Lease is hereby ratified, approved, confirmed and continued
in all respects and all provisions of the Lease as heretofore amended shall
remain in full force and effect. The parties hereto acknowledge and confirm that
the Lease is intended to be a true lease and not a financing arrangement. This
Amendment may be executed in any number of counterparts, and all of such
counterparts taken together shall be deemed and constitute one and the same
instrument.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee
By: /s/ {Illegible}
-----------------------------------
Title: Asst. Vice President
SIGNED on behalf of
MIDWAY AIRLINES CORPORATION
By:_____________________________________
Title:
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee
By:______________________________________________
Title:
SIGNED on behalf of
MIDWAY AIRLINES CORPORATION
By: /s/ J. S. Waller
-------------------------------------------
Title: JONATHAN S. WALLER
SENIOR VICE PRESIDENT
GENERAL COUNSEL
8
<PAGE>
EXHIBIT A
{***} (2 pages omitted)
<PAGE>
EXHIBIT B
{***} (2 pages omitted)
<PAGE>
AMENDMENT NO. 2
dated as of January 3l, 1997
to
AIRCRAFT OPERATING LEASE AGREEMENT
NO. 112
dated as of November 11, 1993
between
SECURITY BANK, N.A., formerly known as
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee, as
Lessor
and
MIDWAY AIRLINES CORPORATION, as
Lessee
Aircraft: Fokker 100
Serial No./RN: 11445/N104ML
<PAGE>
112
THIS AMENDMENT NO. 2 dated as of January 31, 1997 (this
"Amendment"), is between FIRST SECURITY BANK, N.A., formerly known as First
Security Bank of Utah, N.A., a national banking association existing pursuant to
the laws of the United States, having its principal place of business at 79
South Main Street, Salt Lake City, Utah 84130-0007, not in its individual
capacity (except as expressly set forth in the Lease) but solely as Owner
Trustee under the Trust Agreement ("Lessor"), and MIDWAY AIRLINES CORPORATION, a
company incorporated under the laws of the State of Delaware, having its
principal place of business at 300 West Morgan Street, Durham, North Carolina
27701 ("Lessee").
WHEREAS, Lessor and Lessee are parties to that certain Aircraft
Operating Lease Agreement No. 112, dated as of November 11, 1993, (as amended
from time to time, the "Lease"; capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the Lease);
WHEREAS, Lessor and Lessee entered into Amendment No. 1 to the
Lease, dated as of February 26, 1996 ("Amendment No. 1");
WHEREAS, debis AirFinance B.V. ("debis AF") is the beneficial owner
of the Aircraft;
WHEREAS, debis AF, Lessee, and Lessor entered into a Deferral
Agreement dated as of October 25, 1996 ("Deferral Agreement"), which provided
for the deferral of certain payments due under the Lease, and amended the Lease
in certain other respects;
WHEREAS, debis AF and Lessee entered into an Amendment to Deferral
Agreements dated as of December 30, 1996, which modified the Deferral Agreement
in certain respects (the "Amendment to Deferral Agreements");
WHEREAS, Lessee has entered into an Agreement and Plan of Merger
dated as of January 17, 1997 (as amended, the "Merger Agreement") with GoodAero,
Inc., a Delaware corporation ("GoodAero") and Zell/Chilmark Fund, L.P., a
Delaware limited partnership, whereby it is proposed that GoodAero will be
merged into Lessee to effect a recapitalization of Lessee (the "Merger"),
subject to certain conditions precedent having been satisfied; and
WHEREAS, Lessor and Lessee desire to amend the Lease to become
effective upon the consummation of the Merger and to enter into further
agreements as hereinafter set forth.
NOW THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Amendment of Lease. The Lease is hereby amended as follows:
(a) Section 1 of the Lease is amended by eliminating the
period at the end of Subsection 1.27 thereof, and by inserting in lieu thereof
the following clause:
<PAGE>
112
"or such earlier date as may be specified by Lessor pursuant
to notice given in accordance with, and subject to the terms
of Section 16.9 hereof."
(b) Section 1.51 of the Lease is amended by deleting the
period at the end of the first sentence and by inserting the following in lieu
thereof: "or any successor or assign thereof.
(c) Section 6.4 of the Lease is amended as follows: (a) by
deleting subsection (i) thereof in its entirety and by inserting in lieu thereof
the following: "(i) any financial reports or projections supplied to the
majority shareholder of Lessee"; and (b)by deleting the words "upon Lessor
requesting the same" from subsection (ii) thereof.
(d) Section 11.1(a) of the Lease is amended by deleting the
period at the end thereof and by inserting the following clause:
provided, however, that the deductible may be $500,000
(Dollars Five Hundred Thousand) for each accident, but only if
Lessee procures and maintains in favor of debis AirFinance
B.V. for the benefit of the Beneficiary and/or the Lessor
under each of the Leases identified on Schedule 16.9 hereof
(as those terms are defined therein) an irrevocable letter of
credit (the "Letter of Credit") in the face amount of $800,000
(Dollars Eight Hundred Thousand) issued by Wachovia Bank or
another banking institution reasonably acceptable to debis
AirFinance B.V. and in a form reasonably acceptable to debis
AirFinance B.V. containing the terms set forth in Schedule
11.1(a).1 of this Lease; provided, however, that Lessee may
reduce the amount of the Letter of Credit to $400,000 in any
year where Lessee's audited financial statements for the prior
year show that Lessee had net income (as determined in
accordance with generally accepted accounting principles ("Net
Income")) greater than the amount for such prior year
identified as "Net Income (1)" on Schedule 11.1(a).2, but less
than the amount for such prior year identified as "Net Income
(2)" on Schedule 11.1(a).2; and Lessee shall not be required
to maintain the Letter of Credit in any year where Lessee's
audited financial statements for the prior year show that
Lessee had Net Income for such prior year greater than the
amount for such prior year identified as "Net Income (2)" on
Schedule 11.1(a).2; and provided, further, that
notwithstanding any reduction or cancellation of the Letter of
Credit in accordance with the terms hereof, Lessee shall be
required to restore the Letter of Credit in any year where
Lessee's audited financial statements for the immediately
preceding year show that Lessee's Net Income was less than the
threshold set by Schedule 11.1(a).2 for such prior year for
reduction of the Letter of Credit or in any year in which
audited financials for Lessee for the immediately preceding
year have not been certified on or before April 15 following
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<PAGE>
112
such preceding year. For purposes of determining the amount
required for the Letter of Credit in any year, reductions, if
any, shall not be permitted until 30 days after receipt by
debis AirFinance B.V. of the audited financial statements of
Lessee for the prior year and, in the event that the Letter of
Credit is to be reinstated or increased in any year as
aforedescribed, such Letter of Credit shall be required on or
before April 15 of such year. Any failure by Lessee to comply
with the provisions of this Section 11.1(a) shall be an Event
of Default under Section 15.1(b) of the Lease.
(e) Section 14. 1(b) of the Lease is amended by deleting the
semicolon at the end of such Section and by inserting in lieu thereof the
following clause:
"the failure with which to comply is likely to have a material
adverse effect on Lessee; provided, however, that such failure
shall have no adverse effect on the Aircraft or on the
interests of Lessor the Bank therein or in this Agreement or
on the Insurances required to be maintained pursuant to
Article 11."
(f) Section 14.1(p) is amended by deleting the same in its
entirety and by inserting in lieu thereof the following:
"not become the surviving corporation of a merger with any
other entity, or itself consolidate with, or merge into, any
other corporation, or convey, transfer or lease substantially
all of its assets as entirety to any person, without the prior
written consent of Lessor (such consent not to be unreasonably
withheld) and the execution and delivery to Lessor of such
agreements, certificates and legal opinions as Lessor may
reasonably request with respect thereto;"
(g) Section 14.1(q) of the Lease is deleted in its entirety.
(h) Section 15.1(a) of the Lease is amended by deleting the
same in its entirety and by inserting in lieu thereof the following:
"if default shall be made by Lessee in the making of any
Rent, Reserve Rate, or Supplemental Rent payment within five
(5) Business Days after the date when such payment is due and
payable under this Lease."
(i) Section 15.1(e) of the Lease is deleted in its entirety
and the following is inserted in lieu thereof:
if (i) if Lessee or any of its subsidiaries is in default
under any lease, hire-purchase, conditional sale or credit
sale agreement for equipment having a casualty value in excess
of {***} and such
-3-
<PAGE>
112
default is not cured or waived within the applicable grace
period or five (5) Business Days (whichever is greater); (ii)
(regardless of the amount of money involved), any event occurs
which with or without notice or lapse of time or both would
constitute a default under any agreement between Lessee and,
or promissory note executed by Lessee in favor of, (a)
{***} (b) Zell/Chilmark Fund, L.P.; (c) {***} (e) any
affiliate of any of the foregoing; unless such default or
event of default is cured or waived within the applicable
grace period or five (5) Business Days (whichever is greater);
or (iii) any indebtedness owed by Lessee or any of its
subsidiaries in an amount in excess of {***} is not paid
when due or becomes due or capable of being declared due prior
to the date when it would otherwise become due provided,
however, the failure of Lessee to pay amounts {***}."
(j) Section 15.1(n) is modified by inserting the following
clause after the word "affiliate": ", successor or assign".
(k) Sections 15.1(o), (p), (q), (r), (s) and (t) are deleted
in their entirety and the following new Sections 15.1(o) and (p) are inserted in
lieu thereof:
"(o) if, an Event of Default shall occur under and as defined
in that certain Promissory Note dated as of January 31, 1997
from the Lessee to debis AirFinance B.V. or under, and as
defined in that certain Promissory Note dated as of January
31, 1997 from the Lessee to DASA Aircraft Finance XVI, B.V.
(each, a "Note" and collectively, the "Notes");
(p) if, prior to satisfaction of Lessee's obligations pursuant
to the Notes, Lessee shall make (i) any payment of principal
or interest on any debt owed by Lessee to Zell/Chilmark Fund,
L.P. or to any holder of equity in Lessee representing the
right to vote twenty percent (20%) or more of the stock in
Lessee on any matter presented for vote to the shareholders of
Lessee (an "Insider") or any affiliate of an Insider; or (ii)
any redemption of, or any dividend or distribution with
respect to, any shares of Lessee owned by an Insider or any
affiliate thereof."
(l) Section 15.2 is amended by deleting clause (i) of
paragraph (b) thereof in its entirety and inserting the following new clause (i)
in lieu thereof:
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<PAGE>
112
"(i) serving notice of such termination on Lessee specifying
the occurrence giving rise to such Event of Default or Events
of Default, provided that such notice shall be deemed to have
been served without the necessity of actual service and this
Lease shall terminate automatically without the necessity of
any service of notice thereof upon Lessee upon the occurrence
of any Event of Default described in paragraphs (a), (f), (g),
(h), (n) or (o) of Section 15.1 of this Lease; provided,
however, that actual service of notice of such termination on
Lessee shall be required where an Event of Default described
in paragraph (n) of Section 15.1 of the Lease has occurred
solely by reason of occurrence of an event of default under an
Other Aircraft Agreement or under a Fokker Aircraft Agreement,
which event of default does not, under the terms of such Other
Aircraft Agreement or Fokker Aircraft Agreement, result in
automatic termination of such Other Aircraft Agreement or such
Fokker Aircraft Agreement."
(m) Article 16 of the Lease is amended by adding a new Section
16.9 as follows:
"(a) Notwithstanding anything to the contrary contained in
this Lease, Lessor may terminate this Lease by giving not less
than six (6) months' prior written notice of the termination
date to Lessee provided that in no event may Lessor choose a
termination date earlier than September 15, 1998 ("Lessor's
Termination Option") and the termination date specified in
such notice shall become the Expiry Date; provided, however,
that (subject to the following sentence) Lessor shall not be
entitled to exercise Lessor's Termination Option with respect
to this Lease where the same would result in the termination
of four (4) or more of the aircraft operating lease agreements
identified in Schedule 16.9 to the Lease in any twelve (12)
month period, taking into account the scheduled or actual
Expiry Date of each such aircraft operating lease agreement.
Nothing herein shall be construed to limit the Lessor's rights
upon the occurrence of any Default or Event of Default or upon
the termination of this Lease as a result thereof or upon the
expiration of any Lease in the absence of the exercise of
Lessor's Termination Option.
(b) Lessee shall in no event be liable for any costs,
expenses, liabilities, losses, damages or amounts incurred by
Lessor which arise solely from the Lessor exercising Lessor's
Termination Option hereunder such as the loss of any tax
benefit, or fees or penalties arising from the breakage of any
contract or agreement. Except as expressly provided in
subsection (c) below, Lessor shall in no event be liable for
any costs, expenses, liabilities, losses, damages or amounts
<PAGE>
112
incurred by Lessee as a result of Lessor exercising Lessor's
Termination Option in accordance with this Section 16.9.
(c) Notwithstanding the terms of clause (b) above, if Lessor
exercises Lessor's Termination Option hereunder in accordance
with this Article 16.9, then Lessee shall be responsible for
performing all of its obligations under and in accordance with
the terms of this Section 16, subject to the following:
(i) the Lessor shall pay or cause to be paid to Lessee
for Lessee's application against the "C Check" completed
pursuant to Appendix E, Item 1(e), an amount equal to
the lesser of (x) $100,000 or (y) an amount equal to the
product of the full cost of the "C Check" completed by
Lessee pursuant to Appendix E, Item 1(e) on the Aircraft
multiplied by a fraction, the numerator of which is the
number of hours (including fractions of an hour)
remaining on the Aircraft until Lessee's next scheduled
"C Check" for the Aircraft (assuming Lessor had not
exercised Lessor's Termination Option hereunder) and the
denominator of which is 3000; and
(ii) for purposes of Section 7.4.1(b) and (c), any shop
visit required to meet the conditions of Appendix E
shall be deemed a "scheduled" shop visit."
(n) Section 18.6 of the Lease is amended (i) by deleting the
firm of "Winston & Strawn, Attn: R. Evan Smith, 175 Water Street, New York, NY
10038" as agent for Lessee and by inserting in lieu thereof the new agent for
Lessee as follows: "Paul, Hastings, Janofsky & Walker, Attn: Jon Howitt, 399
Park Avenue, New York, NY 10022; and (ii) by deleting the firm of "Haight,
Gardner, Poor & Havens, Attn: Bonny L.Y. Kwoh, 195 Broadway, New York, NY 10007"
as agent for Lessor and by inserting in lieu thereof the new agent for Lessor as
follows: "Hertzog, Calamari & Gleason, Attn: Carla Craig, 100 Park Avenue, New
York, New York 10017".
(o) Appendix B to the Lease is hereby amended as follows:
(i) The amount set forth as the "AGREED VALUE" is deleted in
its entirety and the amount of {***} is substituted therefor
(ii) The Amount set forth as "RENT" is deleted in its entirety
and the amount of {***} is substituted therefor.
-6-
<PAGE>
112
(p) Appendix D to the Lease is hereby amended by deleting
Sections 2.2 through 2.7 in their entirety and by deleting Section 1 in its
entirety and inserting the following in lieu thereof:
"1. Deposit. Lessee has paid to Lessor the amount
set forth on Schedule B.1 as a Deposit for the Aircraft
prior to January 31, 1997. Lessor has applied such Deposit
(plus all accrued interest thereon) to the Default Payments
(as defined in Section 6 of Amendment No. 1 to this Lease)
and/or to Default Payments (as defined in Section 6 of
Amendment No. 1 to the Other Aircraft Agreements)."
(q) Appendix D is hereby amended by (a) deleting the first
word of Section 3.1 thereof and by inserting the following in lieu thereof:
"Lessee shall be relieved of its obligation to pay the
Reserve Rate at any time that the Aircraft Maintenance
Agreement between Lessee and American Airlines, Inc., dated
as of November 1, 1993, or any subsequent aircraft
maintenance agreement between Lessee and any Authorized
Maintenance Performer, which in the reasonable opinion of
Lessor. is in substance substantially similar to such
Aircraft Maintenance Agreement is in effect with respect to
the Aircraft. At any time that the above-referenced Aircraft
Maintenance Agreement, or such subsequent aircraft
maintenance agreement is not in effect, then Lessee shall,
in"
and (b) by adding the following sentence after subsection (d) of Section 3.1
thereof:
"In the event that Lessee enters into any substitute
maintenance agreement in lieu of paying Engine Maintenance
Accrual, such substitute agreement shall be similar in
substance to the Approved Maintenance Agreement (as that term
is defined in Amendment No. 2 and Consent, each dated as of
May, 1996, with respect to Aircraft Operating Lease
Agreements Nos. 524, 525, and 135, each between Midway
Airlines Corporation, as Lessor, and First Security Bank of
Utah, N.A., as Lessee (collectively, "Amendment No. 2"); and
in such event Lessee shall pay to Lessor as Reserve Rate, on
the date when Reserve Rate is due, an amount calculated, for
the Lease, in the same manner as Reduced Engine Maintenance
Accrual (as that term is defined in Amendment No. 2)."
-7-
<PAGE>
112
(r) Schedule 16.9 attached to this Amendment is hereby
attached to the Lease as Schedule 16.9 thereto and is incorporated therein.
2. Waiver of Default. Lessor agrees that any Default or Event of
Default under Sections 15.1(a), 15.1(e), 15.1(g) or 15.1(r) of the Lease (prior
to the amendment of any such Sections hereunder) which occurred prior to the
date of this Amendment is hereby deemed to have been cured by Lessee and Lessor
waives any rights or remedies it may have had with respect to the occurrence of
any such Default or Event of Default.
3. Representations, Warranties and Covenants
The following shall be, as applicable, representations, warranties
or covenants of Lessee pursuant to Articles 13 and 14 of the Lease:
(a) Representations
(i) This Amendment and the Notes have been duly entered into
and delivered by Lessee, and each constitutes a valid, legal and binding
obligation of Lessee enforceable against Lessee in accordance with its terms.
(ii) As of the date of this Amendment, Lessee has entered,
or will contemporaneously herewith enter, into an agreement with {***} having
terms which are substantially in accordance with the terms set forth under
the heading {***} in Exhibit 6.02(k) to the Agreement and Plan of Merger
dated as of January 17, 1997 by and among GoodAero, Inc., James H. Goodnight,
John P. Sall, Midway Airlines Corporation and Zell/Chilmark Fund, L.P., as
amended, except to the extent otherwise specifically set forth in the letter
dated as of February 10, 1997, from Lessee to Lessor.
(b) Covenants
Lease covenants that it will not make any prepayment in
respect of the Promissory Note dated February 7, 1997 in the amount of {***},
or amend the {***} to provide for terms more favorable to the payee thereof
(including, without limitation, any increase in the interest rate or
acceleration of payment).
4. Deferral Agreement. Lessor and Lessee agree that the Deferral
Agreement and the Amendment to Deferral Agreements are hereby declared null and
void and shall have no further force or effect with respect to the Lease.
5. Merger. Lessor hereby consents to the Merger.
6. Governing Law. This Amendment shall be governed by and construed
in accordance with the internal laws of the State of New York and without regard
to any conflict of law rules. This Amendment is being delivered in the State of
New York.
-8-
<PAGE>
112
7. Miscellaneous. Except as specifically amended or supplemented by
this Amendment, the Lease is hereby ratified, approved, confirmed and continued
in all respects and all provisions of the Lease as heretofore amended shall
remain in full force and effect. The parties hereto acknowledge and confirm that
the Lease is intended to be a true lease and not a financing arrangement. This
Amendment may be executed in any number of counterparts, and all of such
counterparts taken together shall be deemed and constitute one and the same
instrument.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
on the day and year first above written.
FIRST SECURITY BANK, N.A., formerly
known as First Security Bank of Utah, N.A. not
in its individual capacity but solely as owner
trustee
By: /s/ Greg A. Hawley
---------------------------------
Name: Greg A. Hawley
Title: Vice President
MIDWAY AIRLINES CORPORATION
By: /s/ J S Waller
Name: __________________________________
Title:__________________________________
<PAGE>
112
Schedule 11.1(a).1
The Letter of Credit shall contain the following terms:
debis AirFinance B.V. shall be entitled to draw amounts under the Letter of
Credit upon notice to the issuing bank signed by debis AirFinance B.V.
stating that amounts are due under one or more of the following, and that
such amounts remain unpaid:
Promissory Note dated as of January 31, 1997 executed by Midway
Airlines Corporation in favor of debis AirFinance B.V.
Promissory Note dated as of January 31, 1997 executed by Midway
Airlines Corporation in favor of Daimler-Benz Aerospace A.G.
Aircraft Operating Lease Agreement No. 111 between Midway
Airlines Corporation, as Lessee, and First Security Bank, N.A.
(formerly known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 112 between Midway
Airlines Corporation, as Lessee, and First Security Bank, N.A.
(formerly known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 113 between Midway
Airlines Corporation, as Lessee, and First Security Bank, N.A.
(formerly known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 114 between Midway
Airlines Corporation, as Lessee, and First Security Bank, N.A.
(formerly known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 135 between Midway
Airlines Corporation, as Lessee, and First Security Bank, N.A.
(formerly known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 136 between Midway
Airlines Corporation, as Lessee, and First Security Bank, N.A.
(formerly known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 524 between Midway
Airlines Corporation, as Lessee, and First Security Bank, N.A.
(formerly known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 525 between Midway
Airlines Corporation, as Lessee, and First Security Bank, N.A.
(formerly known as First Security Bank of Utah, N.A.), as Lessor
<PAGE>
112
Aircraft Operating Lease Agreement No. 115-A between Midway
Airlines Corporation, as Lessee, and Wings Aircraft Finance, Inc.,
as Lessor
Aircraft Operating Lease Agreement No. 116-A between Midway
Airlines Corporation, as Lessee, and Wings Aircraft Finance, Inc.,
as Lessor
Aircraft Operating Lease Agreement No. 117-A between Midway
Airlines Corporation, as Lessee, and Wings Aircraft Finance, Inc.,
as Lessor
Aircraft Operating Lease Agreement No. 118-A between Midway
Airlines Corporation, as Lessee, and Wings Aircraft Finance, Inc.,
as Lessor
<PAGE>
112
Schedule 11.1(a).2
Midway Airlines
Net Income Thresholds for Reduction in Amount of Letter of Credit Pursuant to
Section 11.1(a)
US$ millions
Year 1997 1998 1999 2000 2001
Net Income(2) 12.0 18.0 25.2 32.8 41.0
Net Income(1) 8.0 12.0 16.8 21.8 27.3
Year 2002 2003 2004 2005 2006
Net Income(2) 49.1 57.7 67.8 67.8 67.8
Net Income(1) 32.8 38.5 45.2 45.2 45.2
Year 2007 2008 2009 2010 2011
Net Income(2) 67.8 67.8 67.8 67.8 67.8
Net Income(1) 45.2 45.2 45.2 45.2 45.2
Year 2012 2013 2014
Net Income(2) 67.8 67.8 67.8
Net Income(l) 45.2 45.2 45.2
Amount of
Letter of Credit
$800,000 If actual Net Income is less than or equal to Net Income(1)
$400,000 If actual Net Income is greater than Net Income(1) but less
than or equal to Net Income(2)
0 If actual Net Income is greater than Net Income(2)
<PAGE>
112
Schedule 16.9
1. Aircraft Operating Lease Agreement No. 111, dated as of November 11,
1993, between First Security Bank, N.A. and Midway Airlines Corporation.
2. Aircraft Operating Lease Agreement No. 112, dated as of November 11,
1993, between First Security Bank, N.A. and Midway Airlines Corporation.
3. Aircraft Operating Lease Agreement No. 113, dated as of November 11,
1993, between First Security Bank, N.A. and Midway Airlines Corporation.
4. Aircraft Operating Lease Agreement No. 114, dated as of November 11,
1993, between First Security Bank, N.A. and Midway Airlines Corporation.
5. Aircraft Operating Lease Agreement No. AOLAF-115-A, dated as of July
10,1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
6. Aircraft Operating Lease Agreement No. AOLAF-116-A, dated as of July
10, 1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
7. Aircraft Operating Lease Agreement No. AOLAF-117-A, dated as of July
10, 1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
8. Aircraft Operating Lease Agreement No. AOLAF-118-A, dated as of July
10, 1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
9. Aircraft Operating Lease Agreement No. 135, dated as of July 20, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
10. Aircraft Operating Lease Agreement No. 136, dated as of December 15,
1995, between First Security Bank, N.A. and Midway Airlines Corporation.
11. Aircraft Operating Lease Agreement No. 524, dated as of August 1, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
12. Aircraft Operating Lease Agreement No. 525, dated as of October 15,
1995, between First Security Bank, N.A. and Midway Airlines Corporation.
<PAGE>
112
Schedule B.1
Security Deposits Paid by Midway
Aircraft AOLAF Deposit
MSN No. Paid
- -------- ----- -------
11321 525 {***}
11323 524 {***}
11329 135 {***}
11330 136 {***}
11444 111 {***}
11445 112 {***}
11475 113 {***}
11477 114 {***}
11450 115 {***}
11484 116 {***}
11485 117 {***}
11486 118 {***}
<PAGE>
EXHIBIT 10.5
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY {***}. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
F-100 LEASE #113
(TAIL # N105ML)
<PAGE>
[LETTERHEAD OF DEBIS AIRFINANCE B.V.]
16 October 1996
By fax: + 1 919 956 4801 /+ 1 919 956 8619
- -------------------------------------------
Midway Airlines Corporation
300 W. Morgan St.
Durham, North Carolina 27702
Attention: President
Copy to: Steven Westberg, Senior Vice President Finance and Planning
& Lyn Dorman, Finance Department
Notification of Change of Bank Account
Re: Change of bank account in relation to all payments: under Aircraft
Operating Lease Agreement No. AOLAF-113 dated as of November 11, 1993,
as amended from time to time, relating to one (1) Fokker 100 aircraft
bearing manufacturer's serial number: 11475 (the "Lease").
Beneficiary: American Aircraft Finance II B.V.
Dear Sirs,
We refer to the Lease and the Amendment No.1 thereto, dated as of February
26, 1996 (the "Amendment"), each agreement between First Security Bank of
Utah, N.A., not in its individual capacity, but solely as owner trustee under
the trust agreement ("Lessor") and Midway Airlines Corporation ("Lessee").
In accordance with Section 7 (Payments) of the Amendment, debis AirFinance
B.V. herewith formally designates for all payments the following new account:
Rabobank International, Utrecht, the Netherlands, account number 1010.56.974
Please note that payment of the invoices effective from November 1996 has to
be effected to this new account.
1
<PAGE>
[LETTERHEAD OF DEBIS AIRFINANCE B.V.]
For the avoidance of doubt, save for the change of account nothing in this
notification shall have the effect of supplementing or amending the Lease and
the Amendment and all provisions of the Lease as heretofore amended, shall
remain in full force and effect.
Yours sincerely,
debis AirFinance B.V.
/s/ F. Haspel /s/ S. Engels
F. Haspel S. Engels
Managing Director (CEO) Managing Director
- ----------
Acknowledged for receipt on behalf of Midway Airlines Corporation by:
Name:
Its :
2
<PAGE>
THE SINGLE EXECUTED ORIGINAL OF THIS AGREEMENT MARKED "ORIGINAL" SHALL BE THE
"ORIGINAL" AND ALL OTHER COUNTERPARTS OF THIS AGREEMENT SHALL BE DUPLICATES
AND MARKED "DUPLICATE" OR "DUPLICATE ORIGINAL". TO THE EXTENT THAT THIS
AGREEMENT AND CERTIFICATE OF ACCEPTANCE RELATED THERETO CONSTITUTES CHATTEL
PAPER, AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN
ANY APPLICABLE JURISDICTION, NO SECURITY INTEREST MAY BE CREATED THROUGH
TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE "ORIGINAL".
LONG TERM LEASE
AIRCRAFT OPERATING LEASE AGREEMENT
No. AOLAF-113
Dated as of
November 11, 1993
between
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual
capacity but solely as trustee,
as
Lessor
and
MIDWAY AIRLINES CORPORATION
as
Lessee
Aircraft : Fokker 100
Serial No: 11475
Date : November 11, 1993
<PAGE>
INDEX
<TABLE>
<CAPTION>
ARTICLE PAGE
- ------- ----
<S> <C>
1. Definitions ......................................................... 1
2. Agreement to Lease .................................................. 12
3. Term; Delivery; Acceptance; Delay ................................... 16
4. Registration and Title .............................................. 18
5. Possession and Use .................................................. 20
6. Charges, Method of Payment and Financial
Information ......................................................... 25
7. Maintenance ......................................................... 27
8. Taxes, Duties and Expenses .......................................... 32
9. Liens ............................................................... 36
10. Indemnification ..................................................... 37
11. Insurance ........................................................... 39
12. Assignment and Subletting ........................................... 46
13. Disclaimer, Representations and Warranties .......................... 50
14. Covenants of Lessee ................................................. 55
15. Default by Lessee ................................................... 58
16. Return of Aircraft .................................................. 65
17. Casualty Occurrences ................................................ 67
18. Governing Law and Jurisdiction ...................................... 70
19. Miscellaneous ....................................................... 71
</TABLE>
-i-
<PAGE>
APPENDICES
- ----------
A. Description of Aircraft
B. Further Definitions and Values
C. Certificate of Acceptance
D. Charges
E. Operating Condition at Re-Delivery
F. Aircraft Documents
G. Legal Opinion
H. Certificate of Insurance
I. Broker's Letter of Undertaking
J. FAA Power of Attorney
K. Order of the Bankruptcy Court
-ii-
<PAGE>
AIRCRAFT OPERATING LEASE AGREEMENT
No. AOLAF-113
THIS AIRCRAFT OPERATING AGREEMENT No. AOLAF-113 is made as of the
11th day of November, 1993 between FIRST SECURITY BANK OF UTAH, N.A., a
national banking association existing pursuant to the laws of the United
States, having its principal place of business at 79 South Main Street, Salt
Lake City, Utah 84130-0007, not in its individual capacity (except as
expressly herein set forth) but solely as Owner Trustee under the Trust
Agreement (as defined in Article 1 hereof) and its permitted successors and
assigns (herein referred to as "Lessor") and MIDWAY AIRLINES CORPORATION a
company incorporated under the laws of the State of Delaware, having its
principal place of business at 5713 South Central Avenue, Chicago, Illinois
60638 and its permitted successors and assigns (herein referred to as
"Lessee").
WHEREAS Lessor has the right to possess, use and lease the
Aircraft; and
WHEREAS Lessee desires to lease the Aircraft from Lessor; and
WHEREAS Lessor is willing to lease the Aircraft to Lessee upon the
terms and conditions set out herein.
NOW THEREFORE, in consideration of the mutual promises herein
contained, Lessor and Lessee agree as follows:
1. DEFINITIONS
The following terms shall have the following respective meanings
for all purposes of this Agreement:
1.1 Air Authority shall mean the Federal Aviation Administration of the
United States Department of Transportation and any successor.
1.2 Aircraft shall mean the aircraft identified and described in
Appendix A, including any Engine, Part, or component thereof,
and/or ancillary and loose equipment or devices installed in or
on the Aircraft at the Delivery Date (or which having been removed
therefrom remain the property of the Lessor pursuant to this
Agreement) and Aircraft Documents furnished therewith under this
Agreement, or any substitutions, renewals and replacements from
time to time made in or on the said Aircraft in accordance with
this Agreement,
<PAGE>
whether or not for the time being installed on or in the said
Aircraft or any other aircraft.
1.3 Aircraft Documents shall mean the items identified in Appendix F.
1.4 Airframe shall mean the Aircraft, excluding the Engines.
1.5 Appraisal Procedure shall mean the procedure for determining the
FMV of the Aircraft set forth Article 19.10.
1.6 Approved Maintenance Program shall mean the Maintenance Program
approved by Lessor pursuant to Article 2.2 (iii) or such other
Maintenance Program as Lessor shall from time to time approve in
writing.
1.7 Authorized Maintenance Performer shall mean Lessee, American
Airlines, Inc., U.S. Air, Aviall, Rolls Royce Canada or any Air
Authority approved original equipment manufacturer for the Aircraft
or the Engines or any Part or any other person approved by Lessor
in accordance with the provisions of Article 7.1.
1.8 Bank shall mean the financial institution(s) and/or other
provider(s) of finance from whom finance respecting the acquisition
or continued ownership of the Aircraft by Lessor is to be, or is
for the time being, obtained and/or in whose favor or for whose
benefit security over, or rights with respect to, the Aircraft is
to be, or is for the time being, granted by Lessor or at its
request and shall include any financial institution providing
finance to the Head Lessor in respect of Head Lessor's acquisition
of the Aircraft by whatever means, including without limitation by
way of loan or by way of non-recourse sale of lease receivables.
1.9 Bankruptcy Case shall mean the bankruptcy case of Jet Express,
Inc., Case No. 91-B-12287 (FGC) in the Bankruptcy Court.
1.10 Bankruptcy Court shall mean the United States Bankruptcy Court for
the Southern District of New York having jurisdiction over Lessee's
Bankruptcy Case.
1.11 Beneficiary shall mean, Fokker Aircraft B.V., beneficiary under the
Trust Agreement, and its successors and permitted assigns.
-2-
<PAGE>
1.12 Business Day shall mean a day (other than a Saturday or Sunday) on
which banks are open for business in New York.
1.13 Casualty Occurrence shall have the meaning set forth in Article
17.1.
1.14 Certificate of Acceptance shall mean the Certificate of Acceptance
given in the form of Exhibit C.
1.15 Credit and Security Agreement shall mean the Credit and Security
Agreement dated as of October 29, 1993 therein between FAUSA and
Lessee.
1.16 Cycle shall mean one take-off and landing of the Aircraft.
1.17 Default shall mean an Event of Default or any event which, with the
giving of notice and/or lapse of time and/or the making of any
relevant determination, would constitute an Event of Default.
1.18 Delivery Date shall mean the date on which the Aircraft is
delivered to and accepted by the Lessee for the purposes of this
Agreement.
1.19 Delivery Location shall mean Schiphol Airport, The Netherlands.
1.20 Dollars and $ shall mean the lawful currency of the United States
of America and in respect of all payments to be made under this
Agreement in Dollars shall mean funds which are for same day
settlement in the New York Clearing House Interbank Payments System
(or such other US Dollar funds as may at the relevant time be
customary for the settlement of international banking transactions
denominated in United States Dollars).
1.21 Engine shall mean (i) any engine installed on or furnished with the
Aircraft on the Delivery Date, such Engines being identified as to
manufacturer and type in Appendix A and as to serial numbers in the
Certificate of Acceptance executed by Lessee on the Delivery Date
and (ii) any substitute or replacement engine title to which has,
or should have, transferred to and vested in Lessor in accordance
with this Agreement, in each case including all modules or Parts
from time to time belonging to or installed in that engine and
irrespective of whether or not the same shall for the time being be
installed on the Aircraft or on any other
-3-
<PAGE>
aircraft. The term "Engine" shall exclude any properly replaced
engine title to which has, or should have, passed to Lessee
pursuant to this Agreement.
1.22 Equipment Change shall have the meaning set forth in Article
17.3(a).
1.23 Equity Commitment shall mean the Financing Agreement dated
August 3, 1993 among Lessee, the Equity Investors, and the other
parties listed therein, as the same may be amended from time to
time.
1.24 Equity Investors shall mean the parties to the Equity Commitment
other than Lessee, Smith Air Express, Inc., Montgomery Air
Incorporated and Jet Express Funding Corporation.
1.25 Event of Default shall mean any of the events specified in Article
15.1.
1.26 Expected Delivery Date shall mean December 23, 1993.
1.27 Expiry Date shall mean the day preceding the numerically
corresponding day 120 (One Hundred Twenty) months after the
Delivery Date.
1.28 Fair Market Rental Value shall be equal in amount to the value that
would be obtained in an arms'-length transaction between an
informed and willing lessee under no compulsion to lease and an
informed and willing lessor under no compulsion to lease, in
accordance with a lease to a lessee similarly situated with Lessee,
for a term equal to the relevant period and on conditions as herein
provided, any such determination (made for purposes of Article
15.3(b)) to be made on the basis of the then actual condition of
the Aircraft, to be determined pursuant to an Independent Appraisal
and to be the average of the two determinations obtained
thereunder.
1.29 FAUSA shall mean Fokker Aircraft U.S.A., Inc., a company
incorporated under the laws of the State of Delaware, with its
principal office at Alexandria, Virginia.
1.30 Federal Aviation Act shall mean the Federal Aviation Act of 1958,
as amended.
1.31 First Rent Date shall mean the Delivery Date.
-4-
<PAGE>
1.32 Flight Hour shall mean each hour or part thereof elapsing from the
moment at which the wheels of the Aircraft leave the ground on the
take off of the Aircraft until the wheels of the Aircraft touch the
ground on the landing of the Aircraft following such flight.
1.33 FMV shall have the meaning set forth in Appendix D.
1.34 Fokker shall mean Fokker Aircraft B.V., a Dutch corporation with
its principal office at Amsterdam Zuid-Oost, The Netherlands,
together with its successors.
1.35 Force Majeure in relation to the delivery of the Aircraft shall
mean delay or non-delivery due to or arising out of acts of God or
public enemy, civil war, insurrection or riot, fire, flood,
explosion, earthquake, accident, epidemic, quarantine restriction,
any act of government, governmental priority, allocation,
regulation or order affecting directly or indirectly, the Aircraft,
Lessor or any materials or facilities, strike or labor dispute
causing cessation, slow-down or interruption of work, inability
after due and timely diligence to procure equipment, data or
materials from suppliers in a timely manner, or any other cause
whether or not mentioned above and whether or not similar to any of
the foregoing to the extent that such cause is beyond the control
of Lessor or not occasioned by Lessor's fault or negligence.
1.36 Governing Law shall mean the law of the state of New York.
1.37 Government Entity shall mean and include (i) any national or state
government, political subdivision thereof, or local jurisdiction
therein; (ii) any board, commission, department, division, organ,
instrumentality, court, or agency of any thereof, however
constituted; and (iii) any association, organization, or
institution of which any thereof is a member or to whose
jurisdiction any thereof is subject or in whose activities any
thereof is a participant.
1.38 Head Lessor shall mean any person or persons to whom title to the
Aircraft is vested or transferred in accordance with Article
12.3(e).
1.39 Indemnitees shall mean Lessor (in its trust and individual
capacities), the Voting Trustee (in its
-5-
<PAGE>
trust and individual capacities), the Beneficiary, the Head Lessor,
the Bank, Fokker, FAUSA, including any of their respective
successors and assigns and their respective shareholders,
subsidiaries, affiliates, directors, officers, agents and
employees.
1.40 Independent Appraisal shall mean a determination of Fair Market
Rental Value of the Aircraft by two independent aircraft
appraisers, selected by Lessor, the costs and expenses of the
appraisal to be paid by Lessee.
1.41 Law shall mean and include (i) any law, statute, decree,
constitution, regulation, order or any directive of any Government
Entity; (ii) any treaty, pact, compact or other agreement to which
any Government Entity is a signatory or party; (iii) any judicial
or administrative interpretation or application of any thereof; and
(iv) any amendment or revision of any thereof.
1.42 Lessor or Lessee shall have the meanings respectively ascribed to
them in the first paragraph of this Agreement and shall include
their respective assignees or successors.
1.43 Lessor Liens shall mean:
(a) the Mortgage, the Security Assignment and any security
interest whatsoever from time to time created by or through
Lessor and/or Head Lessor in connection with the financing of
the Aircraft;
(b) any other security interest in respect of the Aircraft which
results from acts of or claims against Lessor and/or Head
Lessor not related to the transactions contemplated by or
permitted under this Agreement; and
(c) liens in respect of the Aircraft for Lessor Taxes.
1.44 Lessor Taxes shall mean Taxes:
(a) imposed as a direct result of activities of a Tax Indemnitee
in any jurisdiction imposing a liability unrelated to that
Tax Indemnitee's dealings with Lessee, to the transactions
contemplated by this Agreement or the operation of the
Aircraft by Lessee; or
-6-
<PAGE>
(b) imposed on or measured by net income, profits or gains, or
capital or net worth (excluding, however, in each case, Taxes
that are, or are in the nature of, license, sales, use,
rental, value-added, or property taxes) of a Tax Indemnitee,
by (A) any Governmental Entity by or in which that Tax
Indemnitee would be subject to tax without regard to the
transactions contemplated by this Lease, except to the extent
that the Tax Indemnitee would be subject to such Tax if the
Tax Indemnitee's participation in the transactions
contemplated by this Agreement were the sole connection
between the Tax Indemnitee and the jurisdiction imposing the
Tax, or (B) the Federal Government of the United States of
America (including, without limitation, any withholding taxes
imposed by such government); or
(c) imposed with respect to any period or event occurring prior to
the date of this Agreement or after the Expiry Date or earlier
termination of this Agreement in accordance with the terms
hereof, provided that such Tax is unrelated to a Tax
Indemnitee's dealings with Lessee or to the transactions
contemplated by this Agreement; or
(d) imposed as a result of any voluntary sale, assignment,
transfer or other disposition by the Lessor (including to the
Head Lessor) or any other Tax Indemnitee of any interest in
the Aircraft or any part thereof or this Agreement unless such
transfer or disposition occurs (1) in connection with a Tax
Indemnitee's pursuing its remedies while an Event of Default
by Lessee is continuing or otherwise resulting from an Event
of Default, or (2) pursuant to Lessee's exercise of its option
to purchase the Aircraft under Article 19.10 of this
Agreement.
1.45 Maintenance Program shall mean an Air Authority approved maintenance
program for the Aircraft encompassing scheduled maintenance
(including block maintenance), condition monitored maintenance, and
on-condition maintenance of Airframe, Engines and Parts, including
but not limited to, servicing, testing, preventive maintenance,
repairs, structural, inspections, system checks, overhauls, approved
modifications, service bulletins, engineering orders, airworthiness
directives, corrosion control, inspections and treatments.
-7-
<PAGE>
1.46 Major Checks shall mean any 12,000 hours Check, 24,000 hours Check
or Intersupplementary Check or segment thereof or any equivalent
thereof with more or less hours, however denominated, to the extent
set out in the Approved Maintenance Program from time to time.
1.47 Manufacturer shall mean Fokker.
1.48 Mortgage shall mean such mortgage or other security as from time to
time may be created over the Aircraft in favor of the Bank or over
the Beneficiary's interest in the Trust Agreement, in favor of the
Bank.
1.49 Note shall mean the Secured Promissory Note executed and delivered
to FAUSA by the Lessee and secured by the Credit and Security
Agreement.
1.50 Operative Documents shall mean this Agreement, the Support Services
Agreement, the Stock Option Agreement, the Credit and Security
Agreement and the Note.
1.51 Other Aircraft Agreements shall mean Aircraft Operating Lease
Agreements relating to other Fokker 100 aircraft so long as leased
to Lessee by a lessor for the benefit of Fokker, FAUSA or any
affiliate thereof, as Beneficiary.
1.52 Part shall mean, whether or not installed on the Aircraft:
(a) any component, furnishing or equipment (other than a complete
Engine) furnished with the Aircraft on the Delivery Date; and
(b) any other component, furnishing or equipment (other than a
complete Engine) title to which has, or should have, passed to
Lessor pursuant to this Agreement
but excludes any such items title to which has, or should have,
passed to (i) Lessee pursuant to this Agreement or (ii) any person
pursuant to any agreement relating to the financing of spare parts
for the Aircraft, including, but not limited to, FAUSA pursuant to
the Credit and Security Agreement and the Note.
1.53 Permitted Lien shall mean:
(a) liens of repairers, mechanics, material men, carriers,
hangarkeepers, employees or other
-8-
<PAGE>
similar liens arising in the ordinary course of business by
statute or by operation of law in respect of obligations which
are either not overdue or are being contested in good faith by
appropriate proceedings;
(b) any lien for Taxes of any kind either not assessed or, if
assessed, not yet due and payable or being contested in good
faith by appropriate proceedings, and any lien arising out of
a judgment against Lessee with respect to which at the time an
appeal is being prosecuted in good faith and with respect to
which there shall have been secured a stay of execution
pending such appeal,
provided that in the case of this subclause (b):
(i) adequate reserves for the payment of such obligations
have been provided by Lessee;
(ii) such proceedings, or the continued existence of such
lien, do not give rise to any likelihood of the sale,
forfeiture or other loss of the Aircraft or any Engine
or any Part or any interest therein; and
(iii) any such lien does not arise as a result of any default
on the part of Lessee in respect of its obligations
under this Agreement;
(c) any Lessor Lien and the lien of this Agreement; and
(d) any lien for Lessor Taxes.
1.54 Redelivery Location shall mean Schiphol Airport, The Netherlands.
1.55 Rent Date shall mean the First Rent Date and the numerically
corresponding date of each and every subsequent month during the
Term, or (if there is no corresponding date in any month), the last
day of such month.
1.56 Rental Adjustment Period shall mean the period from and including
the Delivery Date up to and including the day preceding the sixth
Rent Date after the Delivery Date and each subsequent period
commencing on and including the day after the immediately preceding
Rental
-9-
<PAGE>
Adjustment period and ending on and including the day preceding the
sixth Rent Date after the date on which that Rental Adjustment
Period commenced.
1.57 Rental Period shall mean the period from and including any Rent Date
to and including the day preceding the next Rent Date.
1.58 Security Assignment shall mean an assignment or pledge in favor of
the Head Lessor or the Bank of the benefit of all or any part of
Lessor's rights hereunder.
1.59 Security Interest shall mean any mortgage, charge, pledge, lien,
assignment, hypothecation, right of set-off or any agreement or
arrangement having the effect of creating a security interest.
1.60 State of Incorporation shall mean the State of Delaware.
1.61 State of Registration shall mean United States of America.
1.62 Stock Option Agreement shall mean the Stock Option Agreement dated
as of October 1, 1993 among Lessee and FAUSA and any other party
listed thereon.
1.63 Supplemental Rent shall mean Agreed Value and any other amount which
by the terms of this Agreement is payable by Lessee to Lessor other
than Rent and the Reserve Rate.
1.64 Support Services Agreement shall mean the Aircraft Support Services
Agreement No. ASSAF-ll0 between FAUSA and Lessee.
1.65 Taxes shall mean any and all present and future sales, use,
property, customs, value-added, turnover, stamp, interest
equalization, income, gross or net receipts, franchise, excise, net
worth, capital or other taxes, fees, withholdings, imposts, duties,
levies, or other charges of any nature, together with any penalties,
fines, or interest thereon, imposed, levied, or assessed by, or
otherwise payable to, any Governmental Entity and "Tax" shall be
construed accordingly.
1.66 Tax Indemnitee shall mean each of the Lessor, Beneficiary, and the
Head Lessor, including any of their respective successors and
assigns.
-10-
<PAGE>
1.67 Term shall bear the meaning ascribed to it in Article 3.4.
1.68 Trust Agreement shall mean the Trust Agreement dated as of November
1, 1993 between the Beneficiary and the Lessor in its individual
capacity, as the same may be amended from time to time.
1.69 Trust Estate shall mean the "Trust Estate" as defined in the Trust
Agreement.
1.70 Voting Trust Agreement shall mean the Voting Trust Agreement dated
as of November 1, 1993 between the Beneficiary and the Voting
Trustee, as the same may be amended from time to time.
1.71 Voting Trustee shall mean First Security Bank of Idaho, N.A., a
national banking association, and its permitted successors and
assigns.
1.72 The terms:
Agreed Value,
Assumed Rent,
Deposit,
Enumerated Financial Milestones
Escalated Rent,
Rent,
Reserve Rate,
shall have the meanings and values set forth in Appendix B.
1.73 References in this Agreement to:
(a) Articles or Appendices are, unless otherwise specified,
references to Articles of, and Appendices to, this Agreement
and references to this Agreement include its Appendices;
(b) any statute or other legislative provision shall be read to
include any statutory or legislative modification or
re-enactment thereof, or any substitution therefor;
(c) the Aircraft include any Part of the Aircraft, and, where the
context so admits, any of the Aircraft Documents and
references to any part of the Aircraft include any part of any
Engine;
-11-
<PAGE>
(d) the word "person" or "persons" or to words importing persons
include, without limitation, individuals, firms, partnerships,
joint ventures, trusts, Government Entities, organizations,
associations, corporations, government agencies, committees,
departments, authorities and other bodies, corporate or
incorporate, whether having distinct legal personality or not,
or any member of any of the same;
(e) words importing the plural include the singular and vice
versa;
(f) any agreement or instrument include such agreement or
instrument as it may from time to time be amended or
supplemented; and
(g) headings in this Agreement are for ease of reference only.
2. AGREEMENT TO LEASE
2.1 Lessor will lease the Aircraft to Lessee and Lessee will take the
Aircraft on lease from Lessor in "As Is" condition in accordance
with the terms and conditions of this Agreement.
2.2 Lessor's obligation to deliver the Aircraft on the Delivery Date to
Lessee shall be subject to:
(i) the receipt by Lessor from Lessee on or prior to the Expected
Delivery Date of the following, all of which shall be in the
English language and be satisfactory in form and substance to
Lessor:
(a) a final non-appealable order of the Bankruptcy Court in
the form set forth in Appendix K confirming the Plan of
Reorganization submitted to the Bankruptcy Court;
(b) copies of Lessee's certificate of incorporation and/or
memorandum and articles of association and/or by-laws
and/or other constitutional documents, certified to be
true and up to date copies by a duly authorized officer
of Lessee;
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(c) copies of resolutions of Lessee's board of directors
authorizing Lessee to enter into and perform this
Agreement, the other Operative Documents and the
transactions contemplated hereby, certified to be true
and in full force and effect by a duly authorized
officer of Lessee;
(d) evidence that each approval, license and consent which
may be required in relation to, or in connection with
the performance by Lessee of any of its obligations
hereunder and the other Operative Documents has been
granted by or obtained from the applicable Government
Entity in the State of Registration;
(e) copies of Lessee's air transport license, certificate of
public convenience and necessity, and any other air
operator certificates and other licenses, certificates
and permits required by a Governmental Authority
enabling Lessee to operate as an air carrier, certified
to be true copies and to be in full force and effect by
a duly authorized officer of Lessee;
(f) evidence of appointment of Lessee's agent for service of
process in the State of New York;
(g) [intentionally omitted];
(h) the consent referred to in Article 15.5;
(i) a power of attorney in the form of Appendix J
authorizing Lessor and/or the Head Lessor/and/or the
Bank to take action at the Air Authority and a certified
resolution authorizing same;
(j) such other documents as Lessor may reasonably request;
(ii) the receipt by Lessor from Lessee on or before the Delivery
Date of:
(a) opinions satisfactory in form and substance to Lessor of
independent counsel practicing in the State of
Registration as instructed by Lessee, addressing the
matters referred to in
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the form set out in Appendix G and dated the Delivery
Date;
(b) all sums due to Lessor pursuant to this Agreement;
(c) a certificate of insurance in the form of Appendix H, a
broker's letter of undertaking in the form of Appendix
I, certificates of reinsurance if required by Lessor and
other evidence satisfactory to Lessor that Lessee is
taking the required steps to ensure due compliance with
the provisions of this Agreement as to Insurances with
effect on and after the Delivery Date;
(d) evidence that the representations and warranties of
Lessee set forth in Article 13.4 are true and correct;
(iii) Lessor having approved the Maintenance Program under which it
is proposed that the Aircraft will be maintained (which
approval shall be granted or withheld at Lessor's sole
discretion);
(iv) Lessor being satisfied that adequate arrangements have been
made for the issue, forthwith following delivery of the
Aircraft, of the acknowledgments referred to in Article 12.3
in the event that a Head Lessor and/or a Bank has been
identified;
(v) evidence (including satisfactory opinions of Crowe & Dunlevy,
special Air Authority aviation counsel, as to Air Authority
registration and recordation matters) that on the Delivery
Date the Aircraft has been validly registered under the laws
of the State of Registration and that all filings,
registrations, recordings and other actions have been or will
be undertaken which are necessary or advisable to ensure the
validity, effectiveness and enforceability of this Agreement
and to protect the property rights of Lessor and Head Lessor
in the Aircraft or any Part and any Security Interest of the
Bank therein;
(vi) Lessor being satisfied that no default shall have occurred
under any Other Aircraft Agreement or any other agreement
between Lessor or FAUSA and Lessee;
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(vii) each of the Operative Documents shall have been duly
authorized, executed and delivered by Lessee, shall be
satisfactory in form and substance to Lessor, and shall be in
full force and effect; and
(viii) Lessor obtaining an export license for delivery of the
Aircraft for export to the Lessee on or before the Delivery
Date if so required by the Laws of The Netherlands.
2.3 The conditions specified in Article 2.2 are inserted for the sole
benefit of Lessor and may be waived or deferred in whole or in part
and with or without conditions by Lessor. If any of the said
conditions are outstanding on the Delivery Date and Lessor (in its
absolute discretion) nonetheless agrees to deliver the Aircraft to
Lessee, Lessee shall ensure that such outstanding conditions are
fulfilled within fifteen (15) days after the Delivery Date and
Lessor shall be entitled to treat the failure of Lessee to perform
such outstanding conditions as an Event of Default.
2.4 The obligation of Lessee to accept delivery of the Aircraft from
Lessor is subject to the satisfaction of the following conditions
precedent on or before the Delivery Date:
(i) each of the Operative Documents to which Lessor or FAUSA
is a party shall have been duly authorized, executed and delivered
by Lessor or FAUSA and shall be in full force and effect, and
executed counterparts shall have been delivered to Lessee;
(ii) Lessee shall have received the following:
a. an incumbency certificate of each of Lessor and
FAUSA as to the persons authorized to execute and
deliver the Operative Documents to which each is a
party and each other document to be executed on
behalf of Lessor and FAUSA in connection with the
transactions contemplated by the Operative
Documents, including the signatures of such
persons; and
b. such other documents and evidence with respect to
Lessor and FAUSA and the transactions contemplated
by the Operative Documents as Lessee may
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reasonably request in order to establish the
consummation of the transactions contemplated by
the Operative Documents to be performed by Lessor
and FAUSA, the taking of all corporate proceedings
in connection with such transactions and
compliance with the conditions set forth herein;
(iii) on the Delivery Date, the representations and warranties
of Lessor contained in Article 13.6 shall be true and accurate as
though made on and as of such date;
(iv) Lessee shall have received the favorable opinion,
addressed to it and reasonably satisfactory in form and substance to
it, from Crowe & Dunlevy, special Air Authority aviation counsel;
(v) the Aircraft shall meet the delivery conditions specified
in Article 3.6; and
(vi) Lessor submitting an export license for Delivery of the
Aircraft for export to the Lessee on or before the Delivery Date if
so required by the Law of The Netherlands.
3. TERM; DELIVERY; ACCEPTANCE; DELAY
3.1 Subject to Article 3.2 and 3.3, Lessor shall deliver and Lessee
shall accept the Aircraft and the delivery thereof on the Expected
Delivery Date.
3.2 Lessor may delay the delivery of, or fail to deliver the Aircraft
for reasons of Force Majeure. Lessor shall not be responsible for
any losses, or any loss of profit, arising from any such failure or
delay and Lessee shall not be entitled on the grounds of such delay
to terminate this Agreement or reject the Aircraft when tendered for
delivery by Lessor, subject always to Article 3.3. In the event of
any such delay and subject to Article 3.3, Lessor shall be entitled
to specify from time to time such date as shall then become the
"Expected Delivery Date" for the purpose of this Agreement.
3.3.1 If for any reason the Aircraft has not been delivered by Lessor by
the date falling three (3) months after the original Expected
Delivery Date, either party may
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terminate this Agreement. Upon any such termination by Lessee,
unless the Aircraft has not been delivered by Lessor due to Lessee's
fault, Lessor shall return the Deposit to Lessee. Otherwise, Lessor
shall retain the Deposit.
3.3.2 If the Aircraft has not been delivered by Lessor by the date falling
one (1) month after the Expected Delivery Date (or any day
thereafter) due to any failure of Lessee to meet the conditions
specified in Article 2.2 (other than clauses (iv) and (v) in Article
2.2), Lessor may terminate this Agreement and retain the Deposit.
3.4 The term of the lease shall commence on the Delivery Date and shall
continue until the Expiry Date unless earlier terminated or extended
as herein provided (such period being herein referred to as the
"Term").
3.5 The Aircraft shall be delivered to and accepted by Lessee at the
Delivery Location or such other location as is mutually acceptable
to the parties.
It shall be the responsibility of Lessee to obtain at its expense
any and all licenses, permits and approvals under the Law of The
Netherlands or the Air Authority which may be necessary to ferry the
Aircraft from the Netherlands (the "Ferry Permits"). Prior to or on
the Delivery Date, Lessor shall furnish to Lessee such evidence as
may be reasonably requested by Lessee of the obtaining of any export
license insofar as it may be required by the Law of The Netherlands
and such data and information as may be reasonably requested by
Lessee in order to obtain the Ferry Permits.
Notwithstanding the foregoing, Lessor shall, as agent for Lessee,
apply for the Ferry Permits and approvals, provided, however, that
Lessor shall have no responsibility for any failure to or delay in
obtaining the Ferry Permits. Acceptance by Lessee of the Aircraft by
execution and delivery of the Certificate of Acceptance shall be
deemed to be evidence that Lessor has performed all its obligations
under this Article 3.5.
3.6 Prior to the Expected Delivery Date, Lessee shall be given an
opportunity to inspect the Aircraft at the Delivery Location.
Lessee's right of inspection shall include the right to participate
in the acceptance flight provided by Fokker for the purpose of
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demonstrating that the Aircraft is in good operating condition in a
one to two hour acceptance flight in accordance with the
Manufacturer's Customer Inspection Program and to verify that it
generally accords with the description set forth in Appendix A.
Lessee may assign a maximum of two (2) representatives to
participate in the acceptance flight test as observers. In the event
that Lessee discovers and records any defect and/or non-conformity
with said description during any such inspection and/or during such
acceptance flight test, Lessor shall procure that such defect and/or
non-conformity is corrected as promptly as possible.
3.7 Lessee shall indemnify and hold harmless the Indemnitees from and
against any and all liabilities, damages, losses (including costs
and expenses incident thereto) arising by reason of death of or
injury to any such observer or any employee of Lessee, arising out
of, or in any way connected with the acceptance flight test and
inspection of the Aircraft upon delivery and redelivery of the
Aircraft.
3.8 Lessee shall indicate and confirm its acceptance of the Aircraft by
the execution and delivery to Lessor of the Certificate of
Acceptance.
4. REGISTRATION AND TITLE
4.1 It shall be the responsibility of Lessee, at its expense, to effect
and maintain registration of the Aircraft in the name of Lessor or
Head Lessor, as the case may be, under the Laws of the State of
Registration during the Term, such registration to reflect the
interests of Lessor or Head Lessor as the case may be, and to obtain
and maintain all licenses, permits and approvals, including, without
limitation, a certificate of airworthiness from the Air Authority,
as may be requisite in connection with operation of the Aircraft
under this Agreement.
4.2 Lessee shall at its own expense and responsibility cause this
Agreement to be kept, filed and recorded at all times during the
Term, in such office or offices for the registration of the Aircraft
in the State of Registration and in such other offices (in the
United States but not in any jurisdiction outside of the United
States unless directly required due to Lessee's operation) as may be
necessary, to protect Lessor's,
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Head Lessor's and the Bank's rights in any state in which the
Aircraft may operate including the State of Registration of the
Aircraft and the State of Incorporation or as Lessor may reasonably
request to protect and preserve Lessor's, Head Lessor's and the
Bank's rights hereunder, and shall on request furnish to Lessor an
opinion of counsel or other evidence satisfactory to Lessor of such
filing and recording.
4.3 Title to and ownership of the Aircraft as between Lessor, Head
Lessor and Lessee shall at all times remain in Lessor or Head
Lessor, as the case may be, and Lessee shall have no right, title or
interest in or to the Aircraft or any part thereof except as
expressly provided by this Agreement. Lessee shall identify and
specify the interest of Lessor, Head Lessor and the Bank and shall
affix or keep affixed (i) in a reasonably prominent position on the
flight-deck of the Aircraft and on each Engine a metal name plate
(having dimensions of not less than 10 cm x 7 cm) bearing the
inscription (in fireproof and legible characters) stating:
"NOTICE OF OWNERSHIP
THIS AIRCRAFT/ENGINE IS OWNED BY [__________________] AND
IS SUBJECT TO A FIRST PRIORITY MORTGAGE IN FAVOR OF
[________________]"
The proper completion of the metal name plate shall be advised by
Lessor at its earliest convenience. Lessee shall not remove or
deface evidence of ownership of the Aircraft and shall not do or
permit to be done or omitted any act or thing which would jeopardize
the rights of Lessor, Head Lessor or the Bank in the Aircraft.
Lessee will on all occasions when the ownership of the Aircraft or
any Part is relevant make clear to third parties that title to the
same is held by Lessor, Head Lessor or the Bank as the case may be.
4.4 Lessee acknowledges that the Aircraft may from time to time be owned
by Head Lessor or the Bank and/or be subject to the Mortgage, which
shall be a first priority mortgage, and to the Security Assignment,
in favor of Head Lessor or the Bank. Lessee undertakes to Lessor
(both for itself and as agent for each of Head Lessor and the Bank)
at Lessee's expense (except for the expense of assignments pursuant
to Article 12 after the first refinancing and first assignment
described in Article 8.2(a)(ii)) to, from time to time, cause this
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Agreement, the Mortgage, the Security Assignment and such other
documents as may be necessary or advisable to give effect to the
transactions contemplated hereby or thereby, to be kept, recorded or
filed in such office or offices in the State of Incorporation and in
the State of Registration as may be necessary or advisable to
protect and perfect the interests of Lessor, Head Lessor and the
Bank in the Aircraft, this Agreement, the Mortgage and the Security
Assignment, and to do, from time to time, all other things which the
Bank, Head Lessor and/or Lessor may reasonably require in order to
protect and perfect their rights.
5. POSSESSION AND USE
5.1 Lessee shall not transfer possession of the Aircraft, the Engines or
any Part to any person or any legal entity or remove any Engine or
Part from the Airframe other than in accordance with the provisions
of this Article 5 or of Article 12.1; provided, however, that so
long as no Default shall have occurred and be continuing, Lessee
may, without the prior written consent of Lessor deliver possession
of the Aircraft, the Engines or Parts to the manufacturer thereof
for testing or other similar purposes, or to an Authorized
Maintenance Performer for service, repair, maintenance or overhaul
work on the Aircraft, the Engines or Parts, or for alterations,
modifications, or additions thereto, to the extent required or
permitted by the terms of Article 7.3.
5.1.1 Lessee will ensure that no Engine or Part installed on the Aircraft
is at any time removed from the Aircraft other than:
(a) if replaced as expressly permitted by this Agreement; or
(b) if the removal is of an obsolete item and is in accordance
with the Approved Maintenance Program; or
(c) (i) during the course of maintaining, servicing, repairing,
overhauling or testing that Engine or Part or the
Aircraft, as the case may be; or
(ii) as part of a normal engine or part rotation program; or
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(iii) for the purpose of making such modification to the
Engine or Part, or the Aircraft, as the case may be, as
are permitted under this Agreement,
and then in each case only if it is reinstalled or replaced by an
engine or part complying with Article 5.1.2(a) as soon as
practicable and in any event no later than the Expiry Date.
5.1.2 (a) Lessee will ensure that, except as permitted by this
Agreement, no engine or part is installed on the Aircraft
unless:
(i) in the case of an engine, it is an engine of the same
model as, or an improved or advanced version of the
Engine it replaces, which is in similar or better
operating condition, and in the case only of a Casualty
Occurrence, has substantially similar hours available
until the next scheduled checks, inspections, overhauls
and shop visits and has the same or greater value and
utility as the replaced Engine;
(ii) in the case of a part, it is in as good operating
condition, is of similar or a more advanced make and
model and is of the same interchangeable modification
status as the replaced Part;
(iii) in the case of any part, it has become and remains the
property of Lessor free from Security Interests and on
installation on the Aircraft will without further act be
subject to this Agreement and the Mortgage; and
(iv) in each case, Lessee has full details as to its source
and maintenance records.
(b) Provided no Default has occurred and is continuing, Lessee
shall be entitled to install any engine or part on the
Aircraft by way of replacement notwithstanding Article
5.1.2(a) if:
(i) there is not available to Lessee at the time and in the
place that engine or part is required to be installed on
the Aircraft, a replacement engine or, as the case may
be,
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<PAGE>
part complying with the requirements of Article
5.1.2(a); and
(ii) it would result in an unreasonable disruption of the
operation of the Aircraft and/or the business of Lessee
to ground the Aircraft until an engine or part, as the
case may be, complying with Article 5.1.2(a) becomes
available for installation on the Aircraft; and
(iii) as soon as reasonably practicable after installation of
the same on the Aircraft, Lessee removes any such engine
or part and replaces it with the Engine or Part replaced
by it or by an engine or part, as the case may be,
complying with Article 5.1.2(a).
5.1.3 Lessee will:
(a) ensure that any Engine or Part which is not installed on the
Aircraft (or any other aircraft as permitted by this
Agreement) is, except as expressly permitted by this
Agreement, properly and safely stored, and kept free from
Security Interests;
(b) from time to time on request, notify Lessor in writing as to
the location of any engine and on request shall use its
reasonable efforts to procure that any person to whom
possession of an Engine is given acknowledges in writing to
Lessor, in terms satisfactory to Lessor, that it will respect
the interest of the Bank as mortgagee and Lessor (or, as the
case may be, Head Lessor) as owner and lessor of the Engine
and will not seek to exercise any rights whatsoever in
relation to it;
(c) (notwithstanding the foregoing provisions of this Article
5.1.3), be permitted, if no Default has occurred and is
continuing, to install any Engine or Part on an aircraft, or
in the case of a Part, on an engine:
(i) owned and operated by Lessee free from Security
Interests; or
(ii) leased or hired to Lessee pursuant to a lease or
conditional sale agreement on a long-term
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basis and on terms whereby Lessee has full operational
control of that aircraft or engine; or
(iii) acquired by Lessee and/or financed or refinanced, and
operated by Lessee, on terms that ownership of that
aircraft or engine, as the case may be, pursuant to a
lease or conditional sale agreement, or a Security
Interest therein, is vested in or held by any other
person;
provided that in the case of (ii) and (iii):
(1) the terms of any such lease, conditional sale agreement or
Security Interest will not have the effect of prejudicing the
interests of the Bank as mortgagee or Lessor (or, as the case
may be, Head Lessor) as owner and lessor of that Engine or
Part; and
(2) the lessor under such lease, the seller under such conditional
sale agreement or the holder of such Security Interest, as the
case may be, has confirmed and acknowledged in writing to
Lessor, in form and substance satisfactory to Lessor, that it
will respect the interest of Lessor (or, as the case may be,
Head Lessor) as owner and lessor and the Bank as mortgagee of
that Engine or Part and that it will not seek to exercise any
rights whatsoever in relation thereto; and, to the extent such
an acknowledgment has been given, Lessor hereby agrees, for
the benefit of the lessor, the seller, or secured party, as
the case may be, of any engine or part (other than an Engine
or a Part) leased to Lessee or owned by Lessee subject to a
conditional sale or other security agreement, that Lessor will
not acquire or claim, as against such lessor, seller or
secured party, any right, title or interest in any engine or
engines owned by the lessor under such lease or subject to a
security interest in favor of the seller or secured party
under such conditional sale or other security agreement as the
result of such engine or engines being installed on the
Airframe at any time while such engine or engines are subject
to such lease or conditional sale or other security agreement.
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5.1.4 Lessee will not enter into nor permit any pooling agreement or
arrangement in respect of an Engine or Part without the prior
written consent of Lessor, which shall not be unreasonably withheld.
5.2 Lessee shall use the Aircraft solely in commercial or other
operations for which Lessee is duly authorized by the Laws of the
State of Registration and/or any jurisdiction to whose Laws Lessee's
operation of the Aircraft is subject and shall not use or permit the
Aircraft to be used for any purpose for which the Aircraft is not
designed or reasonably suitable.
Lessee shall not use the Aircraft for the carriage of (i) whole
animals living or dead except in the cargo compartments according to
the United States Department of Transportation ("DOT") (or for
international flights, International Civil Aviation Organization
("ICAO")) regulations, and except domestic pet animals carried in a
suitable container to prevent the escape of any liquid and to ensure
the welfare of the animal; (ii) acids, toxic chemicals, other
corrosive materials, explosives, nuclear fuels, wastes, or any
nuclear assemblies or components, except as permitted for passenger
aircraft under the "Restriction of Goods" schedule issued by the DOT
(or for international flights, ICAO) from time to time and provided
that all the requirements for packaging or otherwise contained
therein are fulfilled; or (iii) any other goods, materials or items
of cargo which could reasonably be expected to cause damage to the
Aircraft and which would not be adequately covered by the insurance
required by or obtained pursuant to Article 11.
5.3 Lessee shall not permit the Aircraft to be maintained, used, or
operated in violation of any Law of any Government Entity having
jurisdiction, or contrary to any manufacturer's operating manuals
and instructions, or in violation of any airworthiness certificate,
license or registration relating to the Aircraft issued by any such
Government Entity. In the event that such Laws require alteration of
the Aircraft, Lessee shall conform therewith at its own expense and
shall maintain the same in proper condition for operation under such
Laws. Lessee agrees not to operate the Aircraft or to permit or
suffer the Aircraft to be operated (i) contrary to applicable Law,
and/or (ii) within or into any geographic area unless the Aircraft
is covered by insurance as required by the provisions of Article 11
or insurance or an indemnity in lieu of such insurance
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from the United States government against the risks and in the
amounts required by Article 11 covering such area, and/or (iii)
contrary to the terms of such insurance as required by the
provisions of Article 11.
5.4 Throughout the Term and until re-delivery of the Aircraft to Lessor
in accordance with the provisions of this Agreement, the Aircraft
and every part thereof shall be in every respect at the sole risk of
Lessee, who shall bear all risks of loss, theft, damage or
destruction to the Aircraft from any cause whatsoever. Lessor shall
not be liable for any liability, claim, loss, damage or expense of
any kind or nature caused directly or indirectly by the Aircraft or
any part thereof by any inadequacy thereof for any purpose or any
deficiency or defect therein, by the use or performance thereof, by
any repairs or servicing thereto or any delay in providing or
failure to provide any thereof, by any interruption or loss of
service or use thereof, or by any loss of business or other
consequential damage or any damage whatsoever and howsoever caused
prior to re-delivery of the Aircraft to Lessor.
5.5 Lessee shall ensure that such crew and engineers as are employed by
it in connection with the operation and maintenance of the Aircraft
shall have such qualifications and hold such licenses as are
required by the Air Authority and by all applicable Laws and
regulations.
6. CHARGES, METHOD OF PAYMENT AND FINANCIAL INFORMATION
6.1 Lessee shall punctually pay to Lessor, when due, the Rent, Reserve
Rate and Supplemental Rent expressed to be payable by the Lessee to
the Lessor hereunder including the monies specified and calculated
in accordance with the provisions of Appendix D at the time and in
the manner therein specified, and shall punctually and duly observe
and perform Lessee's obligations under the said Appendix D which
forms an integral part of this Agreement. The time stipulated in
this Agreement for all payments payable by Lessee to Lessor and for
the performance of Lessee's other obligations under this Agreement
shall be of the essence of this Agreement.
6.2 Lessee shall not be entitled to any abatement, compensation,
reduction or set-off against any
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installment of Rent, the Reserve Rate or Supplemental Rent,
including but not limited to, abatements, compensations, reductions
or set offs, by reason of any past, present or future claims of
Lessee against Lessor or any other person under this Agreement or
otherwise.
6.3 Lessee's obligation to pay Rent and make other payments in
accordance with this Agreement, until Lessee shall have redelivered
the Aircraft to Lessor in accordance with Article 16 and shall have
complied with its other obligations hereunder, shall be absolute and
unconditional irrespective of any contingency whatsoever including
(but not limited to) (i) any right of set-off, counterclaim,
recoupment, defence or other right which either party may have
against the other, (ii) any unavailability of the Aircraft for any
reason, including, but not limited to, any defect in the
airworthiness, merchantability, fitness for any purpose, condition,
design, or operation of any kind or nature of the Aircraft, or the
ineligibility of the Aircraft for any particular use or trade, or
for registration or documentation under the laws of any relevant
jurisdiction, or (save as herein provided) any Casualty Occurrence
in respect of or any damage to the Aircraft, (iii) any insolvency,
bankruptcy, reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceedings by or against Lessor
or Lessee, (iv) any invalidity or unenforceability or lack of due
authorization of, or other defect in this Agreement, (v) any failure
of Lessee to obtain any required license, certificate, authorization
or other approval of any Governmental Entity having jurisdiction
over the operation by Lessee of the Aircraft or the operation by
Lessee in any airport and (vi) any other cause which, but for this
provision, would or might have the effect of terminating,
frustrating or in any way affecting any obligation of Lessee
hereunder, it being the declared intention of the parties that the
provisions of this Article and the obligations of Lessee to pay the
Rent, the Reserve Rate and Supplemental Rent provided for by this
Agreement shall survive any frustration and that, save as expressly
provided in this Agreement, no monies payable hereunder by Lessee to
Lessor shall in any event or circumstance be repayable to Lessee.
6.4 Lessee agrees to furnish Lessor during the Term:
(i) any financial reports or projections supplied to the Equity
Investors;
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(ii) upon Lessor requesting the same a quarterly unaudited balance
sheet of Lessee prepared by it as of the close of the most
recent previous financial quarter, together with the related
profit and loss statement for such period;
(iii) within ninety (90) days after the close of each financial year
of Lessee, an audited balance sheet and profit and loss
statement as of the close of such financial year;
(iv) from time to time such other information as Lessor may
reasonably request, including, without limitation, information
in respect of the Equity Commitment and any other agreements
relating to the Equity Investors; and
(v) copies of all notices sent by Lessee to its shareholders or
creditors as a group in their respective capacities as such
relating to major business or financial developments of
Lessee.
7. MAINTENANCE
7.1 Lessee, during the Term, at its own cost and expense shall:
(a) service, repair, maintain, overhaul, test, or cause the same
to be done to the Aircraft in accordance with the Approved
Maintenance Program so as to keep the Aircraft in as good
operating condition as when delivered to Lessee on the
Delivery Date, ordinary wear and tear excepted, and such
operating condition as may be necessary to enable the
airworthiness certificate of the Aircraft to be maintained in
good standing at all times under applicable Law, and Lessee
shall at all times maintain current certificates of
airworthiness and Air Authority required records of
maintenance in respect of the Aircraft and produce copies
thereof to Lessor upon request;
(b) maintain in the English language all Aircraft Documents,
records, logs, and other materials required by applicable Laws
and best airline practice to be maintained in respect of the
Aircraft including engine trend monitoring data;
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(c) perform, or cause to be performed, all airworthiness
directives and mandatory notes and mandatory bulletins
affecting the Aircraft having a compliance date during the
Term and issued by (a) the Air Authority and/or (b) Fokker or
any other manufacturer of any part of the Aircraft (except
that, in the event of a conflict, those required by the Air
Authority shall prevail);
(d) maintain the Aircraft in conformity with Air Authority
Regulations and such other rules and regulations of the Air
Authority as may from time to time be applicable to passenger
category airline aircraft;
(e) provide Lessor by telex or fax message with a monthly
summation (which may utilize Air Authority forms) of Flight
Hours and Cycles accumulated on the Airframe, Engines, A.P.U.
and Landing Gear and details of all modifications and material
component changes within five (5) days after the end of each
month.
Such maintenance shall be performed by Lessee or by the Authorized
Maintenance Performer identified in Appendix B or such other person
as Lessor may from time to time approve in writing (such approval
not to be unreasonably withheld) which person shall thereupon become
an Authorized Maintenance Performer for the purposes of this
Agreement.
7.2 Except as otherwise provided herein, Lessee, at its own cost and
expense, shall promptly replace all Engines or Parts which may from
time to time become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair, or unserviceable with an engine
or part meeting the requirements of Article 5.1.2.(a).
7.3 (a) Save as expressly herein provided the Aircraft shall not be
modified, altered, converted or added to (each such action in
relation to the Aircraft being herein referred to as an
"Equipment Change"), provided that Lessee may, at its own
expense and subject to the prior written approval of Lessor
(such approval not to be unreasonably withheld), make such
Equipment Changes to the Aircraft as Lessee may deem desirable
in the proper conduct of its business, provided that no such
Equipment Change diminishes the value, utility, condition or
airworthiness of the
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Aircraft below the value, utility, condition and airworthiness
thereof immediately prior to such Equipment Change, assuming
the Aircraft was then in the condition required to be
maintained by the provisions of this Agreement.
(b) Title to all Parts incorporated or installed in or attached or
added to the Aircraft as the result of such Equipment Change
shall, without further act, vest in Lessor free and clear of
all liens, charges and encumbrances. Lessee shall at its own
expense take all such steps and execute, and procure the
execution of, all such instruments as Lessor may require and
which are necessary to ensure that title to any such
replacement Part as aforesaid passes to Lessor according to
the Governing Law and the lex situs, provided, however, that
so long as a Default shall not have occurred and be
continuing, at any time during the Term, Lessee may remove any
such Part if (i) such Part is in addition to, and not in
replacement of or in substitution for, any Part originally
incorporated or installed in or attached to the Aircraft at
the time of the delivery thereof hereunder, (ii) such Part is
not required to be incorporated or installed in or attached or
added to the Aircraft pursuant to the provisions of Article
5.1 and (iii) such Part can be removed from the Aircraft
without diminishing or impairing the value, utility or
airworthiness which the Aircraft would have had at such time,
had such Equipment Change not occurred.
(c) Upon the removal by Lessee of any such Part as above provided,
title thereto shall, without further act, vest in Lessee and
such Part shall no longer be deemed a part of the Aircraft.
Any Part not removed by Lessee as above provided prior to the
return of the Aircraft to Lessor hereunder shall remain the
property of Lessor (save as the parties may otherwise agree in
writing) provided that Lessor may require Lessee, prior to the
end of the Term, to remove any Parts incorporated or installed
in the Aircraft as a result of an Equipment Change and to
restore the Aircraft to its condition prior to an Equipment
Change.
7.4.1 Upon submission by Lessee to Lessor of invoices or receipts
reasonably satisfactory to Lessor evidencing
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the performance in accordance with the provisions of this Agreement
by or at the direction of Lessee of:
(a) with respect to the Airframe, the accomplishment of those
items of maintenance characterized as scheduled airframe heavy
maintenance as defined in the Approved Maintenance Program for
12,000 hours and 24,000 hours inspections or any equivalent
thereof with more or less hours ("Airframe Maintenance"), or
(b) with respect to any Engine, the performance of all scheduled
shop visit engine maintenance and repair, other than (i)
repairs arising as a result of foreign object damage or
operational mishandling and/or (ii) maintenance and repair of
QEC (Quick Engine Change) kits ("Engine Maintenance"), or
(c) with respect to any nose or main landing gear ("Landing
Gear"), the performance of all scheduled shop visit nose and
main landing gear maintenance and repair, other than repairs
arising as a result of foreign object damage or operational
mishandling ("Landing Gear Maintenance"), or
(d) the Auxiliary Power Unit ("A.P.U.") the performance of all off
Aircraft shop A.P.U. maintenance and repair, other than
repairs arising as a result of foreign object damage or
operational mishandling ("A.P.U. Maintenance"),
Lessor shall, subject to Article 3.5 of Appendix D and provided that
a Default shall not have occurred and be continuing, release to
Lessee, from the relevant Maintenance Fund as defined in paragraph
3.2 of Appendix D, a sum equal to the aggregate amount evidenced by
such invoices or receipts for such relevant maintenance, to the
extent there are sufficient sums in the relevant Maintenance Fund at
the date of the start of the relevant maintenance. Lessee agrees to
use its reasonable efforts to ensure that the relevant invoices or
receipts are received by Lessor as promptly as possible after
completion of the relevant maintenance. All sums remaining in any
Maintenance Fund at the expiration or other termination of this
Agreement shall be retained by Lessor, except (i) upon payment in
full of Agreed Value and any other amounts due to Lessor or
otherwise hereunder after a Casualty Occurrence pursuant to Article
17.2(b), in which case all sums
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remaining in any Maintenance Fund shall be paid to Lessee and (ii)
under the circumstances and to the extent described in Article 3.6
of Appendix D.
7.4.2 Lessor shall be entitled to delay the release or payment of funds
from any Maintenance Fund (to the extent related to any disputed
amounts) to Lessee provided for by this Article 7 until such time as
it shall in its opinion be in a position to determine (which Lessor
agrees to use reasonable efforts to do as promptly as possible) the
amount to be released or paid, but in any event release all
undisputed amounts from the relevant Maintenance Fund (but where
insufficient funds are in such maintenance Fund the lesser pro rata
portion of such funds which corresponds to the undisputed amount)
upon request unless a Default shall have occurred and be continuing.
7.5.1 During the Term, Lessee shall furnish to Lessor such information
concerning the location, condition, use and operation of the
Aircraft as Lessor may reasonably request. The right of Lessor, or
its designated representatives, to inspect the Aircraft during any
Major Checks performed by or on behalf of Lessee during the Term,
shall be absolute and Lessee shall inform Lessor by providing sixty
(60) days' written notice as to time and location of all Major
Checks. During such Major Checks, Lessee agrees to provide
sufficient manpower to allow Lessor, or its authorized
representatives, to inspect any area of the Aircraft which Lessor
requests to inspect and which would normally be required during such
a Major Check, provided that such inspection is to be made only at
the time that Lessee opens up such area in accordance with the
Approved Maintenance Program.
Lessee also shall permit any persons designated by Lessor to visit
and inspect the Aircraft, its condition, use and operation, and the
records maintained in connection therewith.
7.5.2 Lessor shall have the right at any time on reasonable notice to
inspect or survey the Aircraft or any part thereof, or instruct a
duly authorized surveyor to carry out a survey on its behalf, to
ascertain the condition of the Aircraft or any part thereof and
satisfy itself that the Aircraft is being properly repaired and
maintained in accordance with the terms of this Agreement. The cost
of any such inspection or
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survey shall be borne by Lessor unless an Event of Default has
occurred and is continuing.
7.5.3 Lessor shall have no duty to make any such inspection as is referred
to in Article 7.5.1 and 7.5.2 and shall not incur any liability or
obligation by reason of not making any such inspection. No exercise
of such inspection right shall unreasonably interfere with the
normal operation or maintenance of the Aircraft.
8. TAXES, DUTIES AND EXPENSES
8.1 Lessee agrees promptly to pay and indemnify and hold Lessor and Head
Lessor harmless against all Taxes (other than Lessor Taxes) levied
or imposed against or upon or otherwise payable by any Tax
Indemnitee or Lessee and relating to or attributable to Lessee, this
Agreement, the Aircraft and/or the importation, exportation,
registration, ownership, leasing, sub-leasing, delivery, possession,
use, operation, reregistration, repair, maintenance, overhaul,
replacement, improvement, modification, alteration, transportation,
landing, storage, presence or redelivery of or addition to, the
Aircraft or any Engine or any Part thereof or any rent, receipts,
insurance proceeds or income arising therefrom, or any sum payable
by Lessee to a Tax Indemnitee under this Agreement or any other
transactions or activities contemplated by this Agreement. If Lessee
is required by any applicable Law or regulation to deliver or
furnish any report or return in connection with any such Taxes,
Lessee shall complete the same in a manner satisfactory to the
relevant Tax Indemnitee and in particular shall state therein that
Lessor or Head Lessor, as the case may be, is the owner of the
Aircraft and that the Lessee is exclusively responsible for the use
and operation of the Aircraft and for any such Taxes and Lessee
shall supply a copy of such report or return to the relevant Tax
Indemnitee.
All payments by Lessee hereunder to Lessor shall be free of
withholdings of any nature whatsoever (and at the time Lessee is
required to make any payment upon which any withholding is required,
Lessee shall pay an additional amount such that the net amount
actually received by the Lessor will, after such withholding, equal
the full amount of the payment then due) and shall be free of
expense for collection or other charges. If Lessee shall have paid
any additional
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amount pursuant to the first sentence of this paragraph with respect
to Taxes not subject to indemnification pursuant to the provisions
of this Section 8.1, the Lessor for whose benefit such Taxes were
paid shall reimburse Lessee within 10 Business Days of written
demand therefor for the amount of such Taxes so paid by Lessee. For
the purpose of Article 1.29 and Article 8, the terms, "Lessor" and
"Head Lessor" shall include each group of corporations (and each
member thereof) that includes Lessor or Head Lessor and for which
consolidated, combined, unitary or other group tax returns are
filed.
8.2 Except as otherwise specifically provided herein, Lessee shall pay
to Lessor on or after Delivery Date (unless otherwise agreed to be
financed by Lessor) upon demand:
(a) all reasonable expenses paid to third parties (including
legal, printing and out-of-pocket expenses) incurred or
payable by Lessor (i) in connection with the negotiation,
preparation and execution of this Agreement and all related
documents, including reasonable out-of-pocket expenses in
connection with this Agreement and (ii) in connection with the
events referred to in Article 2.7 of Appendix D and (iii)
related to any amendment to or extension of, or the granting
of any waiver or consent under, this Agreement;
(b) all reasonable expenses paid to third parties (including legal
fees and disbursements but excluding surveyor costs) payable
or incurred by Lessor in connection with, the enforcement of
or preservation of any rights of Lessor under this Agreement
or otherwise in respect of moneys owing under this Agreement
by Lessee or in respect of any breach of Lessee of any
representation, warranty, covenant or undertaking herein
contained; and
(c) the ongoing annual fees and reasonable out-of-pocket expenses
related to this Agreement of the Owner Trustee and the Voting
Trustee.
8.3 Lessee shall pay all stamp, documentary, registration or other like
duties or taxes (including any such duties or taxes payable by a Tax
Indemnitee but excluding all Lessor Taxes) imposed on or in
connection with this Agreement and shall indemnify that Tax
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Indemnitee against any liability arising by reason of any delay or
omission by Lessee to pay such duties or taxes.
8.4 If and to the extent that any sum (the "indemnity sum") constituting
(directly or indirectly) an indemnity to one or more Tax Indemnitees
paid by Lessee to any person other than that Tax Indemnitee shall be
treated as taxable in the hands of the relevant Tax Indemnitee,
Lessee shall pay to the relevant Tax Indemnitee a sum as (after
taking into account any taxation suffered by the relevant Tax
Indemnitee on the indemnity sum) shall reimburse the relevant Tax
Indemnitee for the net amount of any Taxes suffered by them in
respect of the indemnity sum (after taking into account any current
tax savings or other benefits to the relevant Tax Indemnitee
resulting from the payment or accrual of the indemnified expense).
8.5 If and to the extent that any sums payable to a Tax Indemnitee by
Lessee under this Agreement by way of indemnity are insufficient, by
reason of any Taxes payable in respect of those sums, for that Tax
Indemnitee to discharge the corresponding liability to the relevant
third party (including any taxation authority), or to reimburse that
Tax Indemnitee for the cost incurred by it to a third party
(including any taxation authority), Lessee will pay to that Tax
Indemnitee such sum as will after the tax liability has been fully
satisfied leave that Tax Indemnitee with the same net amount (after
taking into account any current tax savings or other benefits to the
that Tax Indemnitee resulting from the payment or accrual of the
indemnified expense) as it would have been entitled to receive in
the absence of that liability. For the purpose of computing the
amount of an indemnity payment pursuant to this Article 8.5 and the
amount of any payment to Lessee under Article 8, it shall be assumed
that the relevant Tax Indemnitee is subject to tax on the amount of
each indemnity it receives or accrues under this Agreement and can
use any tax savings to offset Taxes at the highest marginal
statutory rates of tax applicable to that Tax Indemnitee (as
certified to Lessee by an officer of that Tax Indemnitee) at the
time such indemnity or tax savings is received or accrued.
8.6 If, as a result of any indemnity paid by Lessee or any event giving
rise to an indemnity obligation of Lessee, a Tax Indemnitee at any
time realizes any tax savings,
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refunds or other reductions in taxes not previously taken into
account in computing the amount of the indemnity, that Tax
Indemnitee shall promptly pay to the Lessee the amount of such tax
savings, refunds or other reductions in taxes; provided, however,
that no Tax Indemnitee will be required to make any payment to
Lessee pursuant to this Article 8.6 so long as a Default shall be
continuing or if Lessee shall not have theretofore made all payments
due to all Tax Indemnitees under this Agreement, or to the extent
that the amount of such payment would exceed the amount of all prior
payments by Lessee to the relevant Tax Indemnitee pursuant to this
Article 8 less the amount of all prior payments by the relevant Tax
Indemnitee to Lessee pursuant to this Article 8.6. The relevant Tax
Indemnitee shall estimate the amount of such tax savings, refunds
and other reductions in Taxes and shall use reasonable efforts to
take such actions in filing its tax returns and in dealing with
taxing authorities to seek and claim each such tax savings, refund
and other reduction in Taxes, but shall not be obligated to take any
such action that it determines in its sole discretion to involve the
imposition or risk of any material unindemnified cost or expense,
and in no event will any person have any right to inspect the books,
records, tax returns or other documents of any Tax Indemnitee, and
the positions to be taken by any Tax Indemnitee on or with respect
to its tax returns and in any tax proceedings shall be within their
sole control.
8.7 Lessee's, and each Tax Indemnitee's obligations under this Article 8
shall continue in full force and effect, notwithstanding the
expiration or earlier termination of the Term hereunder.
8.8 If Lessee disputes the payment of any Taxes payable by a Tax
Indemnitee for which Lessee is responsible under this Agreement,
that Tax Indemnitee will take such action as Lessee may reasonably
request at Lessee's expense to contest that payment but that Tax
Indemnitee will not be obliged to take any such action:
(a) which that Tax Indemnitee considers in good faith may result
in the imposition or risks of any material liability cost, or
expense for which that Tax Indemnitee is not indemnified to
its satisfaction; or
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(b) which that Tax Indemnitee considers not to have a reasonable
prospect of success; or
(c) for which Lessee has not made adequate provision to the
satisfaction of that Tax Indemnitee in respect of the expense
concerned.
8.9 Lessor covenants and agrees to deliver to Lessee, (a) within 30 days
of the signing of this Agreement (but in all events prior to the
date of the first payment of Rent to Lessor under this Agreement)
and within 30 days prior to January 1, 1996 and each January 1
falling every three years thereafter (or at such other date as
prescribed by United States Treasury Regulations) as long as this
Agreement has not been terminated, two accurate and complete
original copies of Internal Revenue Service Form 1001 (or any
successor form), dated the date hereof or January 1, 1996 (or such
subsequent January 1 or other date) signed by Beneficiary, as
appropriate, and such other related forms (including any certificate
with respect thereto) as Lessee may reasonably request, or (b)
within 30 days of the signing of this Agreement (but in all events
prior to the date of the first payment of Rent to Lessor under this
Agreement) and within 30 days prior to the beginning of each taxable
year of Lessor beginning subsequent to the date of this Agreement
(or at such other date as prescribed by United States Treasury
Regulations), two accurate and complete original copies of Internal
Revenue Service Form 4224 (or any successor form), signed by
Beneficiary, dated as appropriate, and such other related forms
(including any certificate with respect thereto) as Lessee may
reasonably request. In addition, Lessor shall deliver to Lessee two
accurate and complete original copies of Form 1001 or Form 4224
signed by Beneficiary, at any time that a change in circumstances
renders the previous form inaccurate in any material respect.
Nothing in this Article 8.9 shall be construed as imposing on the
Lessee any obligation whatsoever, including, without limitation, to
indemnify Lessor or any other party for U.S. withholding taxes.
9. LIENS
9.1 Lessee, during the Term, shall not create or suffer to exist any
lien, attachment, mortgage or other encumbrance upon or against the
Aircraft, or any of its rights under this Agreement, other than the
Mortgage,
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the Security Assignment and Permitted Liens. If at any time a lien,
attachment, mortgage, or other encumbrance except as permitted above
shall be created or suffered to exist by Lessee, or be levied upon
the Aircraft or any of its rights under this Agreement, Lessee shall
forthwith notify Lessor and cause the same forthwith to be
discharged by bond or otherwise. In the event Lessee shall fail to
discharge any such lien, attachment, mortgage or other encumbrance,
Lessor, Head Lessor or the Bank shall be entitled (but not bound) to
discharge the same, in which event Lessee shall pay to Lessor, on
demand, the amount paid by Lessor and/or Head Lessor and/or the
Bank, together with Lessor's and/or Head Lessor's and/or the Bank's
losses, costs and expenses, including reasonable legal fees and
expenses.
10. INDEMNIFICATION
10.1 LESSEE SHALL RELEASE AND DEFEND, HOLD HARMLESS AND INDEMNIFY ANY
AND/OR ALL OF THE INDEMNITEES, FROM AND AGAINST ANY AND ALL CLAIMS,
PROCEEDINGS, SUITS, JUDGEMENTS, COSTS, EXPENSES, PENALTIES, FINES
AND LIABILITIES, DIRECT AND CONSEQUENTIAL DAMAGES AND LOSSES,
INCLUDING WITHOUT LIMITATION COSTS AND EXPENSES INCIDENTAL THERETO,
OF WHATSOEVER KIND AND NATURE, AND INCLUDING REASONABLE LEGAL FEES
AND EXPENSES BUT EXCLUDING ANY TAXES, INDEMNITY FOR WHICH IS
ENCOMPASSED SOLELY IN ARTICLE 4.1 AND ARTICLE 8 (EACH A "CLAIM"),
WHICH MAY BE SUFFERED BY, ASSERTED AGAINST, CHARGED TO OR
RECOVERABLE FROM, DIRECTLY OR INDIRECTLY, ANY AND/OR ALL OF THE
INDEMNITEES:
(A) RELATING TO, ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE
POSSESSION, DELIVERY, PERFORMANCE, MANAGEMENT, OWNERSHIP,
REGISTRATION, CONTROL, MAINTENANCE, CONDITION, SERVICE,
REPAIR, OVERHAUL, LEASING, USE, OPERATION OR RETURN OF THE
AIRCRAFT, ANY ENGINE OR ANY PART, OR THE PERFORMANCE OR
NON-PERFORMANCE OF ANY AND/OR ALL OF THE INDEMNITEES OF
SERVICES OR DELIVERY OF ANY THINGS IN CONNECTION WITH THE
AIRCRAFT DURING THE TERM, OR OTHERWISE IN CONNECTION WITH THIS
AGREEMENT, WHETHER OR NOT ARISING IN TORT OR OCCASIONED IN
WHOLE OR IN PART BY THE FAULT OR NEGLIGENCE OF ANY AND/OR ALL
OF THE INDEMNITEES; OR
(B) AS A CONSEQUENCE OF ANY DESIGN, ARTICLE OR MATERIAL IN THE
AIRCRAFT, ANY ENGINE OR ANY PART OR ITS OPERATION OR USE
CONSTITUTING AN
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INFRINGEMENT OF PATENT (TO THE EXTENT AND SCOPE AND SUBJECT TO
THE LIMITATIONS SET FORTH IN PART C OF EXHIBIT G OF THE
SUPPORT SERVICES AGREEMENT), COPYRIGHT, TRADEMARK, DESIGN OR
OTHER PROPRIETARY RIGHT OR A BREACH BY LESSEE OF ANY
OBLIGATION OF CONFIDENTIALITY OWED TO ANY PERSON;
EXCLUDING, HOWEVER, FROM THE FOREGOING ANY SUCH CLAIM TO THE
EXTENT THAT SUCH CLAIM RESULTS FROM THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF SUCH INDEMNITEE OR FROM ANY
MISREPRESENTATION BY SUCH INDEMNITEE CONTAINED IN THIS
AGREEMENT OR ANY BREACH BY SUCH INDEMNITEE OF ANY COVENANT SET
FORTH IN THIS AGREEMENT.
10.2 The indemnities contained in this Article 10 shall continue in full
force and effect notwithstanding the expiration or other termination
of this Agreement or of the letting of the Aircraft hereunder.
10.3 The indemnities contained in this Article 10 are given to the Lessor
for itself and as agent and trustee on behalf of the other
Indemnitees
10.4 Notwithstanding anything to the contrary contained herein, Lessee
does not release and does not agree to defend, hold harmless or
indemnify under this Agreement (and without limiting any obligations
or indemnities contained in any other agreement with Lessee) Fokker
or any other Indemnitee in its capacity as manufacturer or seller of
the Aircraft from or against (i) claims of third parties made
directly against Fokker or such Indemnitee, based on its product
liability or its status as manufacturer or Seller, or (ii) claims
made against Fokker or such Indemnitee based on the warranties or
indemnities contained in the Product Assurance Document which is
Exhibit G of the Support Services Agreement, or (iii) the matters
described in Article 10.1(B).
10.5 If any Indemnitee has knowledge of the occurrence of any Claim,
liability or other matter for which it is or may be entitled to be
indemnified hereunder, it shall give prompt written notice thereof
to the Lessee. Each Indemnitee shall cooperate in good faith with
Lessee and supply such information as may reasonably be requested by
Lessee to enable Lessee to investigate, defend or contest any Claim,
liability or other matter for which Lessee may be required to
indemnify an Indemnitee hereunder. In the event that Lessee pays
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any amount to an Indemnitee pursuant to this Article 10, Lessee
shall be subrogated to all rights of the Indemnitee in respect of
the Claim, liability or other matter indemnified against giving rise
to such payment. Lessee or its insurers shall have the right, unless
an Event of Default shall have occurred and be continuing and such
matter is not covered by insurance, to investigate or (provided that
Lessee or its insurers shall agree not to dispute liability
hereunder or under any insurance policies pursuant to which coverage
is sought and provided that Lessee shall have consulted with Lessor
prior thereto), defend or compromise any Claim, and Lessor shall
cooperate with Lessee with respect thereto.
11. INSURANCE
11.1 On or before the Expected Delivery Date of the Aircraft and
throughout the Term, Lessee shall carry and maintain in full force
and effect, at its own cost and expense, in such forms, on such
conditions and with such insurers and, if requested, reinsurers and
through such insurance and, if requested, reinsurance brokers as are
satisfactory to Lessor, the following insurances with respect to the
Aircraft, Engines and Parts (herein referred to as "the
Insurances"):
(a) All Risks Aircraft Hull insurance of the type usually insured
against by commercial airlines engaged in the same or similar
business and owning or operating similar aircraft (including
Engines and Parts while not installed on the Aircraft and
including Extended Coverage Endorsement (Aircraft Hull) AVN5l
or equivalent on the Agreed Value. The insurance may be
subject to a deductible in respect of losses other than total
loss, arranged total loss or constructive total loss of not
more than $100,000.00 (Dollars One Hundred Thousand) for each
accident.
(b) If operated outside the United States and Canada, Aircraft
Hull War and Allied Perils insurance covering the risks
excluded from the All Risks Aircraft Hull insurance specified
in paragraph (a) above by the terms of the War, Hi-Jacking and
Other Perils Exclusion Clause AVN.48B except paragraph (b)
thereof and shall include cover in respect of confiscation,
nationalization, seizure, restraint, detention, appropriation
for title or
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use by or under the order of any Government Entity of the
State of Registration.
(c) Comprehensive Airline Liability insurance (including without
limitation aircraft Third Party Liability, Passenger and Crew
Liability (including Baggage and Personal Effects)), Cargo
Liability, Mail Liability, Personal Injury Liability,
Contractual Liability, Hangar Keeper's Liability, Aircraft
Products Liability and General Third Party Liability of the
types usually insured against by commercial airlines engaged
in the same or similar business and owning or operating
similar aircraft in an amount of not less than $500,000,000.00
(Dollars Five Hundred Million) Combined Single Limit any one
occurrence each Aircraft but limited in respect of Personal
Injury to the equivalent of $25,000,000.00 (Dollars Twenty
Five Million) any one offence and in the aggregate.
Such insurance shall include cover in respect of the risks
excluded by War, Hi-Jacking and Other Perils Exclusion Clause
AVN.49B except paragraph (b) thereof.
This insurance may be subject to deductibles in respect of
passengers baggage and personal effects of not more than
$1,250.00 (Dollars One Thousand Two Hundred Fifty) any one
claim and in respect of cargo and mail of not more than
$5,000.00 (Dollars Five Thousand) any one claim. Such
deductibles shall not apply to claims arising from accidents
to the carrying aircraft.
(d) All Risks insurance on Engines and Parts while any such items
are not installed on the Aircraft and in respect of which
cover is not provided under the All Risks Aircraft Hull
insurance and/or Aircraft Hull War and Allied Perils insurance
(respectively specified in paragraphs (a) and (b) above) of
the type usually insured against by commercial airlines
engaged in the same or similar business and owning or
operating similar aircraft for not less than full replacement
value. If Engines and Parts are located outside the United
States and Canada, such insurance shall include War and Allied
Perils to the extent that such insurance is customarily
available in the
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international insurance market for this type of insurance.
This insurance may be subject to a deductible of not more than
$10,000.00 (Dollars Ten Thousand).
Lessor's current requirements as at the date of this Agreement as to
the Insurances are as specified in this Article and in Appendices H
and I. Lessor reserves the right to amend the insurance requirements
of this Article 11 to reflect changes in insurance practice.
If required by the first paragraph of Article 11.1, the Lessee shall
procure that the insurers effect reinsurances in the same form and
conditions through such reinsurance brokers and with such reinsurers
and for such proportions as are satisfactory to Lessor.
11.2 All Insurances to be carried in accordance with Article 11.1 above
shall:
(a) in respect of All Risks Aircraft Hull insurance, Aircraft Hull
War and Allied Perils insurance and All Risks insurance on
Engines and Parts:
(i) name the Lessor, Head Lessor and the Bank and their
respective successors and assigns as additional
assureds;
(ii) provide that all claims in respect of the Aircraft,
Engines and Parts shall be payable to Lessor or as it
may direct, such payee to be named Loss Payee; provided,
that partial loss amounts up to the Partial Loss Amount
set forth in Appendix B shall be payable to Lessee
unless the insurers have been given notice that a
Default has occurred; and
(iii) if applicable, provide in respect of Hull All Risks and
Hull War and Allied Perils for a 50/50 Claims Settlement
Clause in the form of AVS.103;
(b) in respect of Comprehensive Airline Liability insurance:
(i) name the Lessor, its successors and assigns and its
shareholders, subsidiaries,
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directors, officers, agents, employees and the
Indemnitees as additional assureds; and
(ii) provide that the insurance shall operate in all respects
as if a separate policy had been issued covering each
party insured thereunder, but this provision shall not
operate to include any claim howsoever arising in
respect of loss or damage to the Aircraft, Engines and
Parts insured under the All Risks Hull, Hull War and
Allied Perils or All Risks insurance of the assured.
Notwithstanding the foregoing the total liability of
insurers in respect of any and all assureds shall not
exceed the limits of liability stated in the policy;
(c) in respect of all Insurances:
(i) be effective worldwide except for territories approved
in writing by the Lessor;
(ii) provide that insurers waive all rights of subrogation
against the Lessor, its subcontractors, FAUSA, Fokker,
the Head Lessor, the Bank, and their respective
officers, directors, employees, servants, agents,
successors and assigns;
(iii) provide that in the event that the Insurances are
cancelled (including cancellation for non-payment of
premium) or are materially changed such cancellation or
change shall not be effective as to the interest of the
Lessor until thirty (30) days (but seven (7) days or
such lesser period as is customarily available in
accordance with policy conditions in respect of war and
allied perils) after confirmed receipt by Lessor of
written notice by insurers of such cancellation or
change;
(iv) provide that in respect of the interests of the
Additional Assureds, the Insurances shall not be
invalidated by any act, neglect, omission,
misrepresentation or non-disclosure on the part of the
Lessee or any other party other than the Additional
Assured seeking to make a claim thereunder, and shall
insure each Additional Assured regardless of any
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breach or violation of any warranties, declarations or
conditions contained in such policies by the Lessee or
any other party other than the Additional Assured
seeking to make a claim thereunder;
(v) provide that the Additional Assureds shall have no
responsibility for premium and insurers shall waive any
right of set-off or counterclaim against the Additional
Assureds except in respect of outstanding premium in
respect of the Aircraft, Engines and Parts subject of a
claim;
(vi) not provide for any deductible or self insurance other
than the deductibles allowed under the terms of Article
11.1 above;
(vii) be primary without right of contribution from any other
insurance carried by Lessor, Lessee or any other person;
and
(viii) be denominated in Dollars.
11.3 If required by the first paragraph of Article 11.1, the re-insurance
policies shall:
(a) provide that cover shall be identical to the cover provided by
the original insurances and be subject to the same terms and
conditions as the original insurances;
(b) provide that so far as the respective interests of the
Additional Assureds are concerned the reinsurance shall not be
invalidated by any act, neglect, omission, misrepresentation
or nondisclosure on the part of the reinsured party;
(c) confirm the insurers' agreement to the provision of paragraph
(d) below;
(d) include a "cut-through" clause in the following terms or in
such other terms as may be satisfactory to Lessor:
"In respect of All Risks Aircraft Hull insurance, Aircraft
Hull War Risk and Allied Perils insurance as described in
Article 11.1(a) and (b) above and All Risks insurance on any
Engine and Parts as described in Article 11.1(d) above, the
reinsurers
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and the reassured hereby agree that in the event of any claim
arising under the relevant reinsurances the reinsurers shall
in lieu of payment to the reassured, its successors in
interest and assigns pay to the Loss Payee specified in the
primary insurances all sums payable under or in connection
with such reinsurances by virtue of any reinsured loss of, or
damage to, the Aircraft, Engines and Parts, without any
deduction or deductions whatsoever, other than any outstanding
premium in respect of the Aircraft, Engines or Parts the
subject of the claim, it being understood and agreed that any
such payment by the reinsurers shall fully discharge and
release the reinsurers from any and all further liability in
connection therewith.
In respect of Comprehensive Airline Liability insurance as
described in Article 11.1(c) above, the reinsurers and
reassured hereby agree that in the event of any claim arising
under the relevant reinsurances, the reinsurers shall in lieu
of payment to the reassured, its successors in interest and
assigns pay to the person or party who has sustained the
relevant loss (or as reimbursement of any payment made by any
Additional Assureds) all sums payable under such reinsurances
by virtue of such reinsured loss, without any deduction or
deductions whatsoever, it being understood and agreed that any
such payment by the reinsurers shall fully discharge and
release the reinsurers from any and all further liability in
connection therewith"; and
(e) provide that the reinsurers and reassured agree that in the
event that the reassured, its successors in interest and
assigns shall at any time be or become insolvent or suspend
business or file a petition in bankruptcy or be adjudicated
insolvent or bankrupt or admit in writing its inability to pay
its debts as they become due, or make a general assignment for
the benefit of creditors or that a receiver or liquidator or
assignee or trustee or state commissioner of insurance be
appointed in respect of the reassured its successors in
interest or assigns or any substantial part of its property
for the purpose of liquidation on account of insolvency, then
the reinsurers, in lieu of payment to the reassured, its
successors in interest or assigns, shall pay
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upon demand that portion of any loss due to the party entitled
thereto under the terms of the original insurance for which
such reinsurers would under the terms of the reinsurance be
liable to pay the reassured, its successors in interest or
assigns, less any amounts already paid, it being understood
and agreed that any such direct payment by reinsurers shall
fully discharge and release the reinsurers from any and all
further liability for such payment made.
11.4 At least fifteen (15) Business Days prior to the Expected Delivery
Date or, in the event any Parts or Engines are delivered to Lessee
prior to such date, at least fifteen (15) Business Days prior to the
date of delivery of such Parts or Engines, and thereafter during the
Term, at least one month prior to the renewal date of any Insurance
required or maintained by Lessee under Article 11.1 but in no event
less than once in each 12 month period, Lessee shall furnish or
cause to be furnished to Lessor by the insurer or insurance broker
and the reinsurance broker
1) a certificate of insurance describing in detail the insurance
then carried and maintained, and certifying that such
insurance complies with the terms of this Agreement,
including:
(i) confirmation that the insurance/reinsurance has been
placed with the insurers/reinsurers required (giving the
name of such insurers/reinsurers), the insured/reinsured
amount and the period of the policy and
(ii) confirmation that all premiums due to
insurers/reinsurers have been paid,
and
2) a letter of undertaking from Lessee's brokers and, if
required, from the reinsurance brokers.
Such certificate(s) of insurance and letter(s) of undertaking
shall be substantially in the form as set out in Appendix H
and Appendix I, respectively.
In the event that Lessee shall fail to effect, maintain or cause to
be effected or maintained, insurance as required by this Article 11,
Lessor, Head Lessor or the
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Bank may at its option, but without any obligation to do so, and
without prejudice to Lessor's, Head Lessor's and the Bank's other
rights or remedies hereunder, maintain such insurance or provide
such or a similar insurance, and, in such event, Lessee shall, upon
demand, promptly reimburse to Lessor, Head Lessor or the Bank the
cost thereof, including interest thereon at the rate referred to in
paragraph 6 of Appendix D.
11.5 In the event of any damage to the Aircraft, Engines or Parts during
the Term not constituting a Casualty Occurrence, Lessee shall, if so
consented to by Lessor (such consent not to be unreasonably
withheld), repair, or cause the same to be repaired by an Authorized
Maintenance Performer at its sole cost and expense. Except as
otherwise provided in Section 11.2(a)(ii), Lessor and Lessee agree
that all insurance proceeds payable in connection with any such
damage shall be payable directly to Lessor. In such event any
insurance proceeds received by Lessor shall be applied to reimburse
Lessee for such cost and expense. Any excess remaining shall, unless
a Default shall have occurred and be continuing, be paid over to
Lessee.
11.6 Not later than ten (10) days, prior to the Expected Delivery Date,
Lessee shall deliver to Lessor an irrevocable power of attorney, in
form and substance acceptable to Lessor, authorizing Lessor to
initiate, process and settle any insurance claim with respect to the
Aircraft, Engines and Parts together with an acknowledgment thereof
from the insurers.
11.7 When used in this Article 11, the expression Additional Assured(s)
denotes:
(a) in relation to those insurances referred to in Article
11.2(a), those persons referred to in subparagraph (i) of
Article 11.2(a); and
(b) in relation to those insurances referred to in Article
11.2(b), those persons referred to in subparagraph (i) of
Article 11.2(b).
12. ASSIGNMENT AND SUBLETTING
12.1 Lessee shall not assign any of its rights or obligations or delegate
any of its duties under this Agreement and, except as permitted by
Article 5.1 above, Lessee shall not sublet or otherwise part with
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possession of the Aircraft or any Part thereof unless previously
approved by Lessor in writing (such consent not to be unreasonably
withheld).
12.2 This Agreement, the Aircraft and Lessor's interest in each thereof
is freely assignable and alienable by Lessor upon written notice to
Lessee in accordance with Article 12.3, provided, however, that so
long as the Aircraft shall be leased to Lessee under this Lease,
Lessor will not sell, assign, convey or otherwise transfer
absolutely (and not for security) any of its right, title, or
interest in and to this Agreement or the Aircraft to any person
unless Lessor and the proposed transferee (the "Transferee") have
complied with the following conditions:
(i) Lessor shall give Lessee written notice of such
transfer at least 3 Business Days before the date of such
transfer, specifying the name and address of the proposed
Transferee;
(ii) the Transferee shall not be an airline or a
commercial air carrier or person controlling, controlled by or
under common control with an airline or a commercial air
carrier which is in direct competition with Lessee in the
United States;
(iii) the Transferee shall qualify as a "citizen of the
United States" within the meaning of Section 101(16) of the
Federal Aviation Act by a Voting Trust Agreement or otherwise;
and
(iv) on the transfer date the Lessor and the Transferee
shall enter into an agreement or agreements in which the
Transferee confirms that it shall be deemed a party to this
Lease and agrees to be bound by all the terms of, and to
undertake all of the obligations of, the Lessor contained in
this Agreement and Lessee shall receive an opinion of counsel
to the Transferee stating, with the customary assumptions and
exceptions, that such agreement or agreements has been duly
authorized, executed and delivered and constitute the legal,
valid and binding obligations of the Transferee enforceable in
accordance with their terms and that the entry into such
agreement(s) does not violate any laws or agreements
applicable to such Transferee.
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The agreements, covenants, obligations and liabilities contained
herein, including but not limited to all obligations to pay Rent and
indemnify Lessor, are made for the benefit of Lessor, Beneficiary,
any assignee including the Head Lessor and/or the Bank as security
assignee, and their respective successors and assigns,
notwithstanding the possibility that any such person was not
originally a party to this Agreement or may, at the time any
enforcement is sought, no longer be a party to this Agreement.
Lessee shall comply with all reasonable requests of Lessor, its
successors and assigns respecting the assignment and Lessee's
acknowledgement of the assignee as Lessor. Notwithstanding anything
contained in this paragraph to the contrary, no assignment of
Lessor's interest in this Agreement or the Aircraft or Beneficiary's
interest in the Trust Estate shall alter the terms of this Agreement
in so far as the costs to Lessee of the performance of its
obligations to pay Rent, Reserve Rate, and Deposits hereunder and,
except as otherwise expressly provided in this Agreement, the rights
and liabilities of Lessee under this Agreement are concerned.
Lessee's rights under this Agreement shall not be subject or
subordinate to any Security Assignment or Mortgage executed by
Lessor or Beneficiary (which Security Assignment or Mortgage shall
be subject to this Agreement).
12.3 It is acknowledged and agreed that:
(a) Lessor has the right to assign all of its right, title and
interest in and to this Agreement and the Aircraft to the Head
Lessor and/or the Bank. In order to comply with its
obligations in relation thereto, Lessor will, upon such
assignment, give Lessee a notice of assignment and it is
agreed that Lessee shall forthwith acknowledge the same by
executing and delivering to Lessor on behalf of Head Lessor
and/or the Bank a consent to assignment in form and substance
reasonably acceptable to Head Lessor and/or the Bank;
(b) Lessor may be required by Head Lessor and/or the Bank to
assign to Head Lessor and/or the Bank all of its rights, title
and interest in and to the Insurances (other than liability
insurances). In order to comply with its obligations in
relation thereto, Lessor, upon assignment of this Agreement
pursuant to Article 12.3(a), shall give the
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insurers a notice of assignment of Insurances and the Lessee
shall procure that such insurers forthwith acknowledge the
same by executing and delivering to Lessor an acknowledgement
in form and substance acceptable to Head Lessor and/or the
Bank;
(c) Lessor may from time to time require to amend, modify or
replace the security arrangements in respect of the financing
or refinancing of the Aircraft and Lessee agrees to cooperate
with Lessor in connection therewith and, in particular (but
without limiting the generality of the foregoing), to change
the plates provided for in Article 4.3 and to execute and
deliver such other or further acknowledgments of assignment or
other documents and to do such other things as Lessor may
reasonably require to be executed and delivered;
(d) Upon any financing or refinancing of the Aircraft as
contemplated by this Article 12.3, Lessee will promptly and
duly execute and deliver to Lessor, Head Lessor or the Bank
such other documents and assurances and take such further
action as may from time to time be reasonably requested in
order more effectively to carry out the intent and purpose of
this Agreement, the Mortgage and the Security Assignment.
Lessee will procure on request of Lessor that the independent
counsel will confirm to the Head Lessor and the Bank that the
Head Lessor and the Bank may rely on the terms of the opinion
as set out in Appendix G as if the Head Lessor and the Bank
were each addressees of such opinion; and
(e) Title to the Aircraft may be transferred by Lessor to the Head
Lessor to be indicated by Lessor or Beneficiary's interest in
the Trust Estate may be transferred by Beneficiary, in either
case for the purpose of enabling Lessor to raise finance in
relation to the Aircraft. In such event either a lease
agreement shall be executed in respect of the Aircraft between
the Head Lessor and Lessor ("Head Lease") in order to enable
Lessor to continue to lease the Aircraft to Lessee in
accordance with this Agreement or Lessor may assign all or
part of its rights, title and interest in and to this
Agreement and the Aircraft to Head Lessor pursuant to Article
12.2 or
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Beneficiary may assign all of its right, title and interest in
and to the Trust Estate and Lessee agrees to cooperate with
Lessor in connection therewith and, in particular (but without
limiting the generality of the foregoing), to cooperate in the
execution of any documents, agreements and amendments to this
Agreement that are necessary in connection with such Head
Lease or such assignment and to do such other things as Lessor
may require to be executed and delivered so long as any such
amendments to this Agreement do not materially adversely
affect Lessee.
(f) Lessee shall not be liable to (1) any Transferee or (2) any
assignee, purchaser, or transferee of the beneficial interest
of the Trust Estate (a "Beneficiary Transferee") for any
payment of Taxes pursuant to this Agreement in excess of the
amount that would have been payable to the Lessor or the
Beneficiary originally party hereto, as the case may be, if
that party had remained as the Lessor or the Beneficiary,
respectively.
13. DISCLAIMER, REPRESENTATIONS AND WARRANTIES
13.1 THE AIRCRAFT IS LEASED IN "AS-IS, WHERE-IS" CONDITION AND LESSEE
EXPRESSLY AGREES AND ACKNOWLEDGES THAT, SAVE AS EXPRESSLY STATED IN
THIS AGREEMENT, LESSOR WILL HAVE NO LIABILITY IN RELATION TO, AND
LESSOR HAS NOT AND WILL NOT BE DEEMED TO HAVE MADE OR GIVEN ANY
WARRANTIES, GUARANTEES OR REPRESENTATIONS, EXPRESS OR IMPLIED,
ARISING BY LAW OR OTHERWISE, WITH RESPECT TO, THE AIRCRAFT LEASED
HEREUNDER INCLUDING BUT NOT LIMITED TO (1) ANY WARRANTY AS TO THE
AIRWORTHINESS, CONDITION, DESIGN, MERCHANTABILITY OR FITNESS FOR USE
OR OPERATION, (2) ANY WARRANTY ARISING FROM COURSE OF PERFORMANCE,
COURSE OF DEALING OR USAGE OF TRADE, (3) ANY OBLIGATION, LIABILITY,
RIGHT, CLAIM OR REMEDY IN TORT, WHETHER OR NOT ARISING FROM LESSOR'S
NEGLIGENCE, ACTUAL OR IMPUTED, AND (4) ANY OBLIGATION, LIABILITY,
RIGHT, CLAIM OR REMEDY FOR LOSS OF OR DAMAGE TO THE AIRCRAFT, FOR
LOSS OF USE, REVENUE OR PROFIT WITH RESPECT TO THE AIRCRAFT, FOR ANY
LIABILITY OF LESSEE TO ANY THIRD PARTY, OR FOR ANY OTHER DIRECT,
INCIDENTAL OR CONSEQUENTIAL DAMAGES; AND ALL SUCH WARRANTIES,
GUARANTEES, REPRESENTATIONS, OBLIGATIONS, LIABILITIES, RIGHTS,
CLAIMS OR REMEDIES, EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, ARE
EXPRESSLY EXCLUDED.
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Nothing in this Agreement shall afford Lessor or any Indemnitee any
wider or greater exclusion of liability for death or bodily injury
than would be permitted by the Governing Law.
This paragraph shall not be modified except by a written agreement
signed on behalf of Lessor and Lessee by their respective duly
authorized representatives.
13.2 Lessor and Lessee agree that this Article 13 has been the subject of
discussion and negotiation and is fully understood by the parties,
and that the amount of the Rent and other mutual agreements of the
parties set forth in this Agreement were arrived at in consideration
of the provisions of this Article 13 specifically including the
waiver by Lessee set forth in Article 13.1.
13.3 So long as no Event of Default has occurred and is continuing Lessor
agrees to assign or otherwise make available to Lessee for the
duration of the Term such rights as Lessor may have under any
warranty, express or implied, with respect to the Aircraft made by
the Manufacturer of the Aircraft, any subcontractor or supplier
thereof, or any other seller thereof, to the extent that the same
may be assigned or otherwise made available to Lessee and without
warranty by Lessor as to enforceability of any of the rights so
assigned.
To the extent that the same may not be assigned or otherwise made
available to Lessee, Lessor agrees to exert its reasonable efforts,
at Lessee's expense, to enforce such rights as Lessor may have with
respect thereto for the benefit of Lessee; provided however, that
upon an Event of Default all such rights shall immediately revert to
Lessor including all claims thereunder, whether or not perfected,
unless such Event of Default has forthwith been remedied by Lessee.
13.4 Lessee represents and warrants that:
(a) Lessee is a corporation organized and existing in good
standing, in accordance with the Laws of the State of
Incorporation, and has the corporate power and authority to
carry on its business as presently conducted and to perform
its obligations under this Agreement, is an "air carrier"
within the meaning of the Federal Aviation Act operating under
a certificate of convenience and necessity issued pursuant to
Section 401 of such Act and is
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the holder of all necessary licenses issued by all Government
Entities having jurisdiction to authorize or permit Lessee to
engage in air transportation and to perform and comply with
its obligations hereunder;
(b) This Agreement has been duly authorized by all necessary
corporate action on the part of Lessee, and neither the
execution and delivery nor the consummation of the
transactions contemplated hereby nor compliance by Lessee with
the provisions of this Agreement will 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;
(c) The execution and delivery by Lessee of this Agreement, and
all of the transactions by Lessee contemplated hereby, have
received, and Lessee has complied with, every necessary
consent, approval, order, or authorization of, or registration
with, or the giving of prior notice to, any Government Entity
having jurisdiction with respect to the execution and delivery
of this Agreement or the validity and enforceability of this
Agreement or the satisfaction of all monetary and other
obligations hereunder;
(d) This Agreement has been duly entered into and delivered by
Lessee and constitutes the valid, legal and binding
obligations of Lessee, enforceable in accordance with their
terms subject to principles of equity, laws relating to
bankruptcy, insolvency or liquidation or any other laws or
legal procedures generally affecting the enforcement of
creditor's rights or the rights of contracting parties;
(e) It is not necessary or advisable under the Laws of the State
of Registration in order to ensure the validity, effectiveness
and enforceability of this Agreement, the Mortgage or the
Security Assignment or to protect the property rights of
Lessor,
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Beneficiary, Head Lessor or the Bank in the Aircraft and under
the Mortgage and Security Assignment that this Agreement, the
Mortgage, the Security Assignment or any other instrument
relating thereto be filed, registered or recorded or that any
other action be taken under the Laws of the State of
Incorporation and the State of Registration to perfect the
property rights of Lessor, Head Lessor and the Bank in the
Aircraft other than the filing of all such instruments with
the Air Authority, the filing of UCC-1 financing statements in
relevant jurisdictions, and the Mortgage and Security
Assignment will have priority in all respects over the claims
of all creditors of Lessee in or against the Aircraft, except
for Permitted Liens;
(f) Under the Laws of the State of Incorporation and the State of
Registration Lessee will not be required to make any deduction
or withholding from any payment it may make under this
Agreement. There is no withholding or other tax to be deducted
from any payment to be made by Lessee under this Agreement;
(g) There are no suits or legal proceedings (including any
administrative proceeding) pending or threatened before any
court or administrative agency against Lessee which, if
adversely determined, would have a material adverse effect
upon its financial condition or business or its ability to
perform its obligations hereunder;
(h) Each of the Equity Investors and Lessee has performed all of
its respective obligations under the Equity Commitment
required to be performed and the Equity Commitment remains in
full force and effect and has not been modified, supplemented
or amended except as has been disclosed in writing to Lessor;
(i) There has been no material adverse change in the financial
position of Lessee or the consolidated financial position of
Lessee and its subsidiaries from that set forth in the
financial statements last furnished pursuant to Article 6.4
and neither Lessee nor any of its subsidiaries have any
significant liabilities (contingent or otherwise) which are
not disclosed by, or reserved against in such financial
statements;
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(j) The chief executive office (as such term is used in Sections
9-103 and 9-401 of the Uniform Commercial Code) of Lessee is
located at Chicago, Illinois, and Lessee agrees to give at
least 30 days' prior notice to Lessor of any relocation of
said chief executive office or place where such records are
kept and of any change in its name.
13.5 The representations and warranties in Article 13.4 (other than in
clauses (f), (g) and (i) shall be deemed to be repeated by Lessee on
and as of each Rent Date as if made with reference to the facts and
circumstances existing on each such date.
13.6 Lessor represents, warrants and covenants that:
(a) Lessor is a national banking association duly organized and
validly existing in good standing under the laws of the United
States of America, qualifies as a "citizen of the United
States" within the meaning of Section 101(16) of the Federal
Aviation Act, and has the corporate power and authority to
carry on its business as presently conducted and to perform
its obligations under this Agreement; if at any time Lessor
shall have actual knowledge that it has ceased to qualify as
such a citizen, it will, if such citizenship is then necessary
to maintain the eligibility of the Aircraft for United States
registration, take such action as may be necessary to maintain
such United States registration.
(b) This Agreement has been duly authorized by all necessary
corporate action on the part of Lessor, has been duly entered
into and delivered by Lessor in accordance with the Trust
Agreement and constitutes the valid, legal and binding
obligations of Lessor, enforceable in accordance with their
respective terms subject to principles of equity, laws
relating to bankruptcy, insolvency or liquidation or any other
laws or legal procedures generally affecting the enforcement
of creditor's rights or the rights of contracting parties;
(c) Neither the execution and delivery nor the consummation of the
transactions contemplated hereby nor compliance by Lessor with
the
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provisions of this Agreement will result in any breach of, or
constitute any default under, any indenture or any 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; and
(d) Except for the Ferry Permits described in Article 3.5, the
registration of the Aircraft and the issuance of the licenses
described in Article 4.1, neither the execution and delivery
nor the consummation of the transactions contemplated hereby
nor compliance by Lessor with the provisions of this Agreement
requires the consent or approval of, the giving of notice to,
or the registration with, or the taking of any other action in
respect of any Government Entity.
The representations and warranties contained in clauses (a), (b) and
(c) of this Article 13.6 are made by Lessor in its individual
capacity.
13.7 Lessor undertakes that, so long as no Event of Default shall have
occurred and be continuing, Lessor will not interfere with the
peaceful and quiet use and enjoyment of the Aircraft by Lessee in
accordance with the terms of this Agreement.
14. COVENANTS OF LESSEE
14.1 Lessee hereby covenants with Lessor that from the Delivery Date and
during the Term and until redelivery of the Aircraft to Lessor in
accordance with Article 16 it will:
(a) remain in and continue to operate as an air carrier holding a
valid certificate of convenience and necessity issued pursuant
to Section 401 of the Federal Aviation Act to preserve its
corporate existence, to satisfy its debts and obligations as
they fall due;
(b) comply with all Laws and regulations for the time being in
force in the State of Incorporation, the State of Registration
and in any country to, from in or over which the Aircraft is
flown;
(c) (i) at its own expense from time to time do and perform such
other and further acts and execute
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and deliver any and all further instruments as may be required
by Law (in the United States but not in any jurisdiction
outside the United States unless directly required due to
Lessee's operation), and (ii) at Lessor's expense (insofar as
not covered in Article 8.2(a)) from time to time do and
perform such other and further acts and execute and deliver
any and all further instruments as may be reasonably requested
by Lessor to establish, maintain and protect the respective
rights and remedies of Lessor, Head Lessor and the Bank and to
carry out and give effect to the intents and purposes of this
Agreement and the parties;
(d) notify Lessor immediately of the occurrence of any Default;
(e) obtain and maintain all necessary government and other
certificates, consents, licenses, permits and authorizations
and take all action which may be necessary for the continued
due performance of Lessee's obligations under this Agreement
and for the use and operation of the Aircraft;
(f) not do or permit to be done any act or thing which might
impair the respective interests of Lessor, Head Lessor and the
Bank in the Aircraft, or the registration of the Aircraft;
(g) notify Lessor as soon as practicable after becoming aware of
any loss, theft, damage or destruction of or to the Aircraft
or any part thereof if the potential cost of repair or
replacement may exceed $100,000.00 (Dollars One Hundred
Thousand);
(h) not do anything which may subject the Aircraft or any part
thereof to penalty, forfeiture, seizure, arrest, impounding,
detention, confiscation, taking in execution, appropriation or
destruction nor abandon the Aircraft or any part thereof;
(i) not represent or hold out Lessor, Head Lessor or the Bank as
carrying goods or passengers on the Aircraft or as being in
any way connected or associated with any operation or carriage
(whether for hire or reward or gratuitously) which Lessee may
undertake;
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(j) not pledge the credit of Lessor, Head Lessor or the Bank for
any maintenance, overhauls, replacements, repairs or
modifications to the Aircraft;
(k) keep Lessor and the insurers, as referred to in Article 11,
informed as to current serial numbers of the Engines and any
engine installed on the Aircraft in accordance with the
provisions of this Agreement, and the location of any Engine
for the time being not installed on the Aircraft; and shall
notify such insurers of any renewal, replacement or
substitution, or the location of any Engine not installed on
the Aircraft;
(l) discharge all fees, charges and expenses payable to any third
party in relation to the use or operation of the Aircraft or
any premises where the Aircraft is situated;
(m) in the event of any forfeiture, impounding or detention of the
Aircraft or any part thereof not constituting a Casualty
Occurrence, use all reasonable endeavors to procure the
immediate release therefrom of the same;
(n) keep accurate, complete and current records of all flights
made by the Aircraft. Such records shall be kept in such
manner as the Air Authority may from time to time require and
in accordance with the Approved Maintenance Program. Lessee
shall permit Lessor or its authorized representatives to
examine such records upon giving reasonable notice not
involving delay to the Aircraft;
(o) on request, provide Lessor with evidence satisfactory to
Lessor that all Taxes and charges incurred by Lessee with
respect to the Aircraft, including without limitation any
payments due to any relevant air traffic control authorities
and airport authorities, have been paid and discharged in
full;
(p) not consolidate with, or merge into, any other corporation,
convey, transfer or lease substantially all of its assets as
an entirety to any person or acquire the shares of or make any
investment in any firm, corporation or person without the
prior written consent of Lessor (such consent not to be
unreasonably withheld) and the
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execution and delivery to Lessor of such agreements,
certificates and legal opinions as Lessor may request with
respect thereto; and
(q) prior to the payment in full of all deferred amounts of Rent,
Reserve Rate or Deposits under this Agreement and all Other
Aircraft Agreements (such event being referred to as the
"Enumerated Milestone"), obtain the prior written consent of
Lessor (such consent not to be unreasonably withheld) to any
commitment of Lessee to any person where such commitment has a
value in excess of $500,000.00 (Dollars Five Hundred
Thousand).
15. DEFAULT BY LESSEE
15.1 Each of the following events shall constitute an "Event of Default":
(a) if default shall be made by Lessee in the making of any Rent,
Reserve Rate and/or Agreed Value payment when due and payable
under this Agreement or of any other Supplemental Rent payment
within 5 Business Days after the date when such other
Supplemental Rent is due and payable under this Agreement; or
(b) (i) if default shall be made by Lessee at any time in the
procurement or maintenance of any insurance coverage
prescribed herein or (ii) any insurance which may be
maintained by Lessor, Head Lessor or the Bank under Article
11.4 is cancelled or terminated or notice of cancellation is
given; or
(c) if default shall be made by Lessee in the observance or
performance of any of the other obligations of Lessee
contained in this Agreement and, if such default is in the
opinion of Lessor capable of remedy, such default shall
continue for a period of fifteen (15) Business Days after
notice from Lessor to Lessee specifying the default and
requiring that the same be remedied; or
(d) if any representation or warranty made (or deemed to be
repeated) by Lessee in or pursuant to this Agreement or in any
document or certificate or statement referred to in or
delivered under this
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Agreement is or proves to have been incorrect in any material
respect when made or deemed to be repeated and such
incorrectness, if capable of being cured, shall continue for
fifteen (15) Business Days after notice from Lessor specifying
such incorrectness; or
(e) if any borrowed money of Lessee or any of its subsidiaries is
not paid when due, or by reason of breach or default under the
terms of any instrument evidencing or guaranteeing the same on
the part of Lessee or any of its subsidiaries any borrowed
money of Lessee or any of its subsidiaries becomes due or
capable of being declared due prior to the date when it would
otherwise have become due, or the security for any such
borrowed money or any guarantee in respect thereof becomes
enforceable, or Lessee is in default under any lease,
hire-purchase, conditional sale or credit sale agreement
(including without limitation any other agreement between
Lessor, its associates, subsidiaries or affiliates and Lessee)
for equipment having a casualty value in excess of $100,000;
or
(f) if an encumbrancer takes possession or a receiver,
administrator, administrative receiver, trustee, liquidator or
similar officer is appointed of the whole or any part of the
assets, rights or revenues of Lessee or any of its
subsidiaries or a distress, execution, sequestration or other
process is levied or enforced upon or sued out against any of
the assets, rights or revenues of Lessee or any of its
subsidiaries and is not discharged within fourteen days, or
Lessee applies for or consents to the appointment of a
receiver, administrator, administrative receiver, trustee,
liquidator or similar officer for it or for all or any part of
its assets, rights or revenues; or
(g) if Lessee or any of its subsidiaries suspends payment of its
debts, or is unable or admits its inability to pay its debts
as they fall due, or shall be adjudicated or found, or
becomes, bankrupt or insolvent, or proposes or enters into any
composition or other arrangement for the benefit of its
creditors generally, or Lessee or any of its subsidiaries
shall, by voluntary petition, answer or consent, seek relief
under the provisions of any bankruptcy, insolvency or other
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similar law providing for the reorganization, liquidation,
administration, dissolution or winding-up of corporations, or
providing for an agreement, composition, extension or
adjustment with its creditors; or
(h) if a petition against Lessee in a proceeding under applicable
bankruptcy or other insolvency laws shall be filed and shall
not be withdrawn or dismissed within 30 days thereafter, or if
any order shall be made by any competent court or resolution
passed by Lessee or any of its subsidiaries or their
respective board of management or supervisory board, whichever
is competent to pass such resolution for the winding-up or
dissolution of Lessee or any of its subsidiaries or for the
appointment of a liquidator, trustee or conservator, save for
winding-up or dissolution for the purposes of amalgamation or
reorganization (not involving or arising out of insolvency)
the terms of which shall have received the prior written
approval of Lessor; or
(i) if Lessee or any of its subsidiaries disposes of all or a
material part of its assets, whether by one or a series of
transactions, related or not, other than for the purpose of a
reconstruction or amalgamation the terms of which have
received the previous consent in writing of Lessor; or
(j) if any action shall be taken by Lessee which shall impair the
title or ownership of Lessor (or Head Lessor), or the Security
Interest of the Bank, in the Aircraft or this Agreement is or
becomes wholly or partly invalid, ineffective or unenforceable
by reason of any act or omission of Lessee; or
(k) if any consent, authorization, license, certificate or
approval of or registration with or declaration to any
Government Entity in connection with this Agreement including,
without limitation:
(i) any Certificate of Public Convenience and Necessity; or
(ii) required by Lessee or as a condition precedent required
by Lessor pursuant to Article 2.3 to authorize, or in
connection with, the execution, delivery, validity,
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enforceability or admissibility in evidence of this
Agreement or the performance by Lessee of its
obligations under this Agreement; or
(iii) the registration of the Aircraft; or
(iv) any airline license or air transport license;
is changed such that it materially impairs the ability of
Lessee to perform its obligations hereunder, or is withheld,
or is revoked, suspended, cancelled, withdrawn, terminated or
not renewed, or otherwise ceases to be in full force; or
(m) if any circumstances analogous to any of the circumstances
described in paragraphs (f), (g) or (h) above arise under the
Law of any applicable jurisdiction; or
(n) if an event of default (however defined) occurs under any
Operative Document or any Other Aircraft Agreement which event
permits acceleration or termination; or
(o) any advance pursuant to the Equity Commitment has not been
made when due; or
(p) the Enumerated Milestone as defined in Article 14.1(q) is not
fulfilled by the last date on which a deferral is to be paid
and such failure continues for a period of five (5) days; or
(q) an event of default by or relating to Lessee shall occur
under, and as a result a termination shall occur under, any
agreements for gates, hangars or other facilities at Midway
Airport, Chicago, Illinois or any other airport that are
material to Lessee's operations including any agreements
relating to the provision by American Airlines, Inc. (or any
affiliate) of services to Lessee.
15.2 If one or more Events of Default shall have occurred and be
continuing, at Lessor's option and subject to any mandatory
requirement of Law:
(a) For Lessee's account Lessor may do anything that may
reasonably be required to cure any Event of Default and
recover from Lessee all costs
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including legal expenses incurred in so doing, and/or
(b) Lessor may accept such Event of Default as a repudiation of
this Agreement and terminate the lease of the Aircraft to
Lessee hereunder by:
(i) serving notice of such termination on Lessee specifying
the occurrence giving rise to such Event of Default or
Events of Default, provided that such notice shall be
deemed to have been served without the necessity of
actual service upon the occurrence of any Event of
Default described in paragraphs (f), (g) and (h) of
Article 15.1.
Thereafter (if the Term shall have commenced) Lessee
shall redeliver possession of the Aircraft to Lessor at
Schiphol Airport, The Netherlands (or such other
location as Lessor may require); or (at Lessor's
election)
(ii) taking possession of the Aircraft for which purpose
Lessor by its servants or agents may enter upon Lessee's
premises where the Aircraft may be located, or cause the
same to be redelivered to Lessor at Schiphol Airport,
The Netherlands, (or such other location as Lessor may
require Lessee to assemble and deliver the Aircraft to
Lessor, and Lessor shall be entitled to act as attorney
for Lessee in causing such redelivery and shall have all
the powers and authorizations legally necessary for
taking such action. In the event of exercise by Lessor
of its powers under this sub-paragraph (ii) such
termination shall be deemed to take effect on such
taking of possession by Lessor or such redelivery of the
Aircraft to Lessor at the said airport; and/or
(c) Lessor may proceed by appropriate court action or actions to
enforce performance of Article 15.2(b) or to recover damages
for the breach thereof; and/or
(d) all rights of Lessee hereunder shall, in the event the Term
shall be terminated pursuant to Article 15.2(b) henceforth
absolutely cease and terminate but without prejudice to
Lessee's obligations
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under this Agreement all of which shall continue in full force
and effect except for obligations to pay Rent and Reserve Rate
after the Aircraft is returned to Lessor, and is in the
condition required by Article 16; and Lessee shall take all
steps necessary to effect deregistration of the Aircraft in
the State of Registration and Lessor shall be entitled to sell
or otherwise deal with the Aircraft as if this Agreement had
never been made. Without prejudice to the foregoing, Lessee
hereby appoints Lessor as its attorney to do any act or thing
required in connection with such deregistration of the
Aircraft.
15.3 If an Event of Default occurs, Lessor shall have the right to demand
that:
(a) Lessee pay all amounts which may be then due and unpaid
hereunder, and
(b) at Lessor's option whether or not Lessor shall have exercised,
or shall thereafter at any time exercise, any of its rights
under Article 15.2, by thirty (30) days written notice to
Lessee from Lessor specifying a payment date, Lessee pay
Lessor, and Lessee shall pay Lessor, on the payment date
specified in such notice, as liquidated damages for loss of
bargain and not as a penalty (in lieu of the Rent due for the
Aircraft covered by such notice for the period commencing
after the date specified for payment in such notice), any
unpaid Rent for the Aircraft (prorated in the case of Rent on
a daily basis) to and including the payment date specified in
such notice, plus the amount, if any, by which the aggregate
Rent for the Aircraft for the remainder of the Term for the
Aircraft, discounted periodically (equal to installment
frequency) to present worth at the interest rate of six
percent (6%) per annum, exceeds the Fair Market Rental Value
of the Aircraft for the remainder of the Term, after
discounting such Fair Market Rental Value periodically (equal
to installment frequency) to present worth as of the payment
date specified in such notice at the interest rate of six
percent (6%) per annum.
Lessee shall fully indemnify Lessor on its own behalf and on behalf
of the Head Lessor and the Bank on demand
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against any loss (including loss of profit), damage, expense
(including without limitation attorneys' fees), cost or liability
which Lessor, Head Lessor or the Bank may sustain or incur as a
consequence of the occurrence of any Event of Default and/or
termination of the letting of the Aircraft pursuant to this
Agreement, including but not limited to (i) any loss of profit
suffered by Lessor and/or the Head Lessor because of Lessor's
inability to place the Aircraft on lease with another lessee on
terms as favorable to Lessor as the terms of this Agreement or
because whatever use, if any, to which Lessor is able to put the
Aircraft upon its return to Lessor, or the funds arising upon a sale
or other disposal thereof, is not as profitable to Lessor as letting
the Aircraft in accordance with the terms of this Agreement would
have been to the extent the foregoing loss of profit shall not be
recovered under Article l5.3(b), (ii) any amount of interest, fees
or other sums whatsoever paid or payable on account of funds
borrowed in order to carry any unpaid amount, (iii) any loss,
premium, penalty or expense which may be incurred repaying funds
raised to finance the Aircraft or in unwinding any swap, forward
interest rate agreement or other financial instrument relating in
whole to Lessor's financing of the Aircraft and/or the Aircraft
under the Other Aircraft Agreement, and (iv) any loss, cost, expense
or liability sustained or incurred by Lessor owing to Lessee's
failure to redeliver the Aircraft in the condition required by this
Agreement.
15.4 No remedy referred to in this Article 15 is exclusive, but each
remedy shall be cumulative and in addition to any other remedy
referred to herein or otherwise available to Lessor. The exercise by
Lessor of any of its remedies hereunder shall not preclude or estop
the exercise or beginning of exercise by Lessor of any or more of
such other remedies.
No express or implied waiver by Lessor of any Event of Default, or
failure or delay of Lessor in exercising any right hereunder shall
operate as waiver thereof unless an express waiver is executed and
delivered to Lessee.
15.5 Prior to the Expected Delivery Date Lessee shall deliver to Lessor a
duly authorized consent, undated and in form and substance
acceptable to Lessor, addressed to the Federal Aviation
Administration consenting to the release of this Agreement in
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connection with the termination of this Agreement pursuant to the
terms hereof and, if so requested by Lessor, the deregistration of
the Aircraft from the register of civil aviation in the State of
Registration.
16. RETURN OF AIRCRAFT
16.1 On the Expiry Date or upon earlier termination of the Term (unless a
Casualty Occurrence shall have occurred with respect to the
Aircraft), Lessee shall, at its own expense, redeliver the Aircraft
to Lessor at the Re-Delivery Location or such other airport as is
mutually acceptable to the parties, in a condition complying with
the provisions of Appendix E, free and clear of all liens and
encumbrances (including Permitted Liens other than Lessor Liens) and
thereupon cause the Aircraft to be removed from the Register of
Civil Aircraft in the State of Registration and Lessee shall return
the Aircraft to Lessor together with the Aircraft Documents and all
equipment and records supplied pursuant to this Agreement when the
Aircraft was delivered to Lessee hereunder.
16.2 Immediately prior to such redelivery of the Aircraft, Lessee, at its
own expense, shall make the Aircraft, Aircraft Documents and other
records available to Lessor for inspection ("Final Inspection") in
order to verify that the condition of the Aircraft complies with the
provisions of this Agreement. Such inspection shall not unreasonably
interfere with the operation of the Aircraft. The period will be
long enough for the Final Inspection to permit the conduct by Lessor
of the following:
(a) Inspection of the Aircraft Documents;
(b) Inspection of the Aircraft structure and Parts;
(c) Inspection of the Engines and Auxiliary Power Unit ("A.P.U."),
including without limitation, a boroscope inspection or any
other equivalent inspection method supported by Rolls Royce,
inspection of the compressor and turbine area, and, if
reasonably requested based on evidence that it is required,
the Engine and A.P.U. condition runs confirming release of
each Engine and A.P.U for its remaining operational life;
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(d) A one-hour to two-hour test flight with Lessor's
representatives on board as observers and, if any non
compliance is found, a subsequent test flight to check
compliance after rectification.
16.3 To the extent that, upon such Final Inspection, the condition of the
Aircraft and Aircraft Documents does not comply with the provisions
of this Agreement, Lessee, at its own expense, shall cause such
non-compliance to be promptly rectified and to the extent such
rectification extends beyond the Expiry Date, the Term shall, at
Lessor's sole option, be deemed to be automatically extended and the
provisions of this Agreement shall remain in full force and effect
until such rectification has been accomplished. During such
extension of the Term the Lessee shall be liable to pay Rent at a
daily pro rata rate equal to the Rent payable during the last Rental
Period of the Term.
16.4 Upon redelivery Lessee shall provide to Lessor all necessary
assistance to enable Lessor to obtain any required documents in
relation to the export of the Aircraft from the State of
Registration, and if different, from the State of Incorporation
(including a valid and subsisting export license for the Aircraft),
and shall reassign to Lessor, at the expense of Lessee, the benefit
of any indemnity or warranty which has been assigned to Lessee
pursuant to Article 13.3 above to the extent such indemnity or
warranty is assignable.
16.5 Prior to the Expiry Date or upon any earlier termination of the Term
and upon Lessor's request, Lessee will provide Lessor or its agent
reasonable access to the Approved Maintenance Program and the
Aircraft Documents in order to facilitate the Aircraft's integration
into any subsequent operator's fleet.
Lessee will, if requested by Lessor to do so, upon return of the
Aircraft deliver to Lessor a certified true current and complete
copy of the Approved Maintenance Program. Lessor agrees that it will
not disclose the contents of the Approved Maintenance Program to any
person or entity except to the extent necessary to monitor Lessee's
compliance with this Agreement and/or to bridge the maintenance
program for the Aircraft from the Approved Maintenance Program to
another program.
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16.6 Upon redelivery of the Aircraft to Lessor, an adjustment shall be
made in respect of fuel on board on the Delivery Date and on
redelivery at the price then prevailing at the Redelivery Location.
16.7 If Lessor shall request that Lessee paint the Aircraft any other
basic color as contemplated by Section 1(h) of Appendix E, Lessor
agrees that it shall bear the cost and expense of the difference
between white paint and such other basic color.
17. CASUALTY OCCURRENCES
17.1 In this Agreement "Casualty Occurrence" shall mean any of the
following events with respect to the Aircraft, the Airframe or an
Engine:
(a) the actual, agreed, constructive, arranged or compromised
total loss or destruction of the Aircraft, the Airframe or an
Engine, or damage to the Aircraft, Airframe or Engine
rendering repair impracticable or uneconomical, or the
Aircraft, Airframe or Engine being rendered permanently unfit
for normal use;
(b) requisition of title or other compulsory acquisition,
requisition, capture, seizure, deprivation, confiscation or
detention for any reason of the Aircraft, the Airframe or an
Engine by any Government Entity of the State of Registration
or by any other government or other competent authority,
whether de jure or de facto, but excluding requisition for use
or hire not involving requisition of title by any Governmental
Entity for a temporary period ending on the date fifteen (15)
days (or one hundred eighty (180) days if the requisition for
use or hire is by the United States) after such requisition,
or the Expiry Date, whichever first occurs; and
(c) the hijacking, theft, disappearance, condemnation,
confiscation or seizure of the Aircraft, the Airframe or an
Engine other than in the circumstances referred to in (b)
above which deprives Lessee of the use thereof for more than
fifteen (15) consecutive days.
17.2 (a) In the event of a Casualty Occurrence with respect to the
Aircraft or Airframe prior to the Delivery
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Date, this Agreement shall immediately terminate with respect
to such Aircraft and neither party shall have any further
obligation or liability hereunder, save that Lessor shall
return to Lessee the Deposit or such part thereof as Lessor
shall have received from Lessee and Lessee shall remain liable
to reimburse Lessor for any amounts specified in Article
8.2(a).
(b) In the event of a Casualty Occurrence with respect to the
Aircraft or Airframe after delivery to Lessee hereunder,
Lessee shall pay the Agreed Value and, if applicable, the
Additional Amount pursuant to Appendix D, Article 2.6, to
Lessor on or prior to the earlier of (i) 45 days after the
Casualty Occurrence and (ii) the Business Day after the date
of receipt of the insurance proceeds in respect of the
Casualty Occurrence and, provided all other amounts which are
then due and payable by Lessee under this Agreement have been
paid in full to Lessor, Lessee's obligation hereunder for
payment of Rent shall cease as from the date on which Lessor
receives payment in full of the Agreed Value. Rent paid in
advance for any days which occur after such Agreed Value and
Additional Amount, if any, is paid shall be repaid to Lessee,
so long as no Default has occurred and is continuing, on a pro
rata basis for each day beyond such date of payment of Agreed
Value. Any excess insurance proceeds from the insurance
obtained by Lessee pursuant to Article 11 remaining after
payment of the foregoing amounts shall, unless a Default shall
have occurred and be continuing, be paid over to Lessee.
(c) Subject to the rights of any insurers and reinsurers or other
third party, upon irrevocable payment in full to Lessor of the
Agreed Value and all other amounts which may be or become
payable to Lessor under this Agreement, Lessor will without
recourse or warranty (except as to Lessor's Liens) and without
further act, be deemed to have transferred to Lessee all of
Lessor's rights to any Engines and Parts not installed when
the Casualty Occurrence occurred, all on an as-is where-is
basis, and will at Lessee's expense, execute and deliver such
bills of sale and other documents and instruments as Lessee
may reasonably request to evidence (on the public record or
otherwise) the transfer and the vesting of
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Lessor's rights in such Engines and Parts in Lessee, free and
clear of all rights of Lessor and Lessor Liens.
17.3 Upon the Casualty Occurrence with respect to any Engine not
involving a Casualty Occurrence of the Aircraft, Lessee shall give
Lessor prompt written notice thereof and Lessee shall replace such
Engine as soon as reasonably possible with a replacement Engine in
accordance with Article 5.1.2(a). Such replacement shall be deemed
an "Engine" as defined herein. Lessee agrees to take such action as
Lessor may reasonably request in order that any such replacement
engine shall be duly and properly titled in Lessor or the Bank and
leased hereunder and subject to the Mortgage to the same extent as
the Engine replaced thereby. Lessee's obligation to pay the Rent
hereunder shall continue in full force and effect, but Lessee shall
be entitled to be reimbursed by Lessor the amount of insurance or
condemnation proceeds, if any, received by Lessor with respect to
such replaced Engine.
17.4 In the event of requisition for hire of the Aircraft or any part
thereof not constituting a Casualty Occurrence, then, subject to the
proviso herein contained, the Rent and other charges payable under
this Agreement shall not be suspended or abated either in whole or
in part, and Lessee shall not be released from any of its other
obligations (as to payment, indemnity or otherwise) hereunder (other
than operational obligations with which Lessee is unable to comply
solely by virtue of such confiscation or requisition). If Lessee
shall duly comply with all its obligations under this Agreement,
Lessee shall during the Term be entitled to any hire paid by the
requisitioning or confiscating authority and Lessee shall, as soon
as practicable after the end of any requisition or confiscation,
cause the Aircraft to be put into the condition required by this
Agreement. Lessor shall be entitled to all compensation payable by
the requisitioning or confiscating authority in respect of any
change in the structure, state or condition of the Aircraft arising
during the period of requisition or confiscation, and Lessor shall
apply such compensation in reimbursing Lessee for the cost of
complying with its obligations as aforesaid, but so that, if any
Default has occurred and is continuing, Lessor shall be entitled to
apply such compensation in or towards settlement of any amounts
owing by Lessee under this Agreement PROVIDED ALWAYS that if
following
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such requisition or confiscation the Aircraft is treated as an
agreed, constructive, arranged or compromised total loss by the
insurers, then the provisions of Article 17.1 shall apply with
effect from the date on which the insurer so determines.
18. GOVERNING LAW AND JURISDICTION
18.1 This Agreement and further agreements resulting herefrom shall be
governed by and construed in accordance with the internal Laws of
the State of New York and without regard to any conflict of law
rules. This Agreement is being delivered in the State of New York.
18.2 Lessor and Lessee hereby irrevocably agree to submit to the
non-exclusive jurisdiction of, and to waive any objection to the
laying of venue in, the County of New York and that any suit, action
or proceedings (collectively, "Proceedings") may be brought by
Lessor in any court of the State of New York or any U.S. Federal
court located in New York County, New York.
18.3 Nothing contained in this Article 18 shall limit the right of either
party to this Agreement to take Proceedings against the other in any
other court of competent jurisdiction, nor shall the taking of
Proceedings in one or more jurisdictions preclude the taking of
Proceedings in any other jurisdiction, whether concurrently or not.
18.4 Promptly after service of any process the Lessor or Lessee shall
despatch a copy thereof to Lessee or Lessor, as the case may be, by
registered mail, postage prepaid but failure of Lessee or Lessor, as
the case may be, to receive such copy shall not invalidate the
service of such process.
18.5 To the extent that the parties may in any jurisdiction claim for
their or their assets immunity from suit, execution, attachment
(whether in aid of execution, before judgment or otherwise) or other
legal process and to the extent that in any such jurisdiction there
may be attributed to themselves or their assets such immunity
(whether or not claimed) the parties hereby irrevocably agree not to
claim and hereby irrevocably waive any immunity to the fullest
extent permitted by the laws of such jurisdiction with the intent,
inter alia, that the foregoing waiver shall have effect for
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the purposes of the Foreign Sovereign Immunities Act of 1976 of the
United States of America.
18.6 Lessee and Lessor shall each at all times maintain an agent for
service of process in the New York, New York. For Lessee, such agent
shall be Winston & Strawn, Attn: R. Evan Smith, 175 Water Street,
New York, NY 10038. For Lessor, such agent shall be Haight, Gardner,
Poor & Havens, Attn: John F. Pritchard, 195 Broadway, New York, NY
10007. Any writ, judgment or other notice of legal process shall be
sufficiently served on Lessee or Lessor if delivered to such agent
at its address for the time being. Each of Lessee and Lessor
undertakes that if it shall revoke the authority of its above agent
or if for any reason any such agent no longer serves as agent to
receive service of process, Lessee or Lessor, as the case may be,
shall promptly appoint another such agent and advise Lessor or
Lessee, as the case may be, thereof.
19. MISCELLANEOUS
19.1 The rights of each of Lessor and Lessee under this Agreement are
cumulative, may be exercised as often as it considers appropriate
and are in addition to its rights under general law. The rights of
Lessor against the Lessee or in relation to the Aircraft (whether
arising under this Agreement or the general law) shall not, as
against or in favor of Lessor, be capable of being waived or varied
otherwise than by an express waiver or variation in writing; and in
particular any failure to exercise or delay in exercising any of
such rights shall not operate as a waiver or variation of any other
such right; and defective or partial exercise of any such rights
shall not preclude any other or further exercise of that or any
other such right; and no act or course of conduct or negotiation on
Lessor's part or on Lessor's behalf shall in any way preclude Lessor
from exercising any such right or constitute a suspension or any
variation of any such right.
19.2 Save where expressly provided in this Agreement, any certificate or
determination by Lessor as to any rate of interest or as to any
other amount payable under this Agreement shall, in the absence of
manifest error, be conclusive and binding on Lessee.
19.3 If any sum paid or recovered in respect of the liabilities of Lessee
under this Agreement is less than
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the amount then due, Lessor may apply such sum to rental, interest,
fees or any other amount due under this Agreement in such
proportions and order and generally in such manner as Lessor shall
determine.
19.4 The terms and conditions of this Agreement shall not be varied
otherwise than by an instrument in writing executed by or on behalf
of Lessor and Lessee.
19.5 If any of the provisions of this Agreement becomes invalid, illegal
or unenforceable in any respect under any law, the validity,
legality and enforceability of the remaining provisions shall not in
any way be affected or impaired.
19.6 Every notice, request, demand or other communication under this
Agreement shall:
(a) be in English;
(b) be in writing and made by mail or by fax or telex transmission
or by reputable courier service;
(c) be deemed to have been received, subject as otherwise provided
in this Agreement, in the case of a telex transmission, at the
time of dispatch with confirmed answerback of the addressee
appearing at the beginning and the end of the communication,
in the case of a fax transmission, at the time safe receipt is
confirmed by the addressee provided that if the date of
dispatch is not a business day in the country of the addressee
any telex or fax transmission shall be deemed to have been
received at the opening of business on the next such business
day, in the case of a letter five days after being deposited
in the mail first class postage prepaid and in the case of a
courier three days after being sent; and
(d) be sent:
(1) to Lessee at:
Midway Airlines Corporation
5713 South Central Avenue
Chicago, Illinois 60638
Tel: (312) 838-2060
Fax: (312) 838-2069
Attention: President
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(2) to Lessor at:
First Security Bank of Utah, N.A.
79 South Main Street
Salt Lake City, Utah 84130-0007
Tel: (801) 246-5630
Fax: (801) 246-5053
Attention: Corporate Trust Department
with a copy to FAUSA at:
1199 N. Fairfax Street, Suite 500
Alexandria, VA 22314
Telex: 899462 FAUSA ALE
Fax: (703) 683-2233
Attention: The President.
or to such other address or telex or fax number as is notified by
either party to the other party to this Agreement.
19.7 This Agreement may be executed in any number of counterparts and all
of such counterparts taken together shall be deemed to constitute
one and the same instrument.
19.8 This Agreement is the sole and entire agreement between Lessor and
Lessee in relation to the leasing of the Aircraft, and supersedes
all previous agreements in relation to such leasing. Each of Lessee
and Lessor represents for itself that no broker has been retained by
it in connection with this Agreement or the other Operative
Documents.
19.9 This Agreement is intended by the parties to be a lease between
Lessor and Lessee. Any waivers, consents, deferrals of the payment
of Rent or Reserve Rates are not intended to be an agreement by
Lessor to make any capital contribution to the business of Lessee or
to share in or have liability for any of Lessee's losses, profits,
liabilities or obligations. Nothing contained in this Agreement or
performed by Lessor in connection herewith and any other agreement
between Lessor and Lessee whether now existing or entered into in
the future shall make Lessor a partner or a joint venturer of Lessee
and shall not for any purpose be construed as a joint-venture
between the parties hereto.
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19.10 [Intentionally Omitted].
19.11 Section 1110: Lessee acknowledges that Lessor would not have entered
into this Agreement unless it had available to it the benefits of a
lessor under Section 1110 of Title 11 of the United States Code.
Lessee and Lessor hereby state that this Agreement is intended to be
a true lease for U.S. Internal Revenue Code purposes. Lessee
covenants and agrees with Lessor that to better ensure the
availability of such benefits, Lessee shall support any motion,
petition or application filed by Lessor with any bankruptcy court
having jurisdiction over Lessee, whereby Lessor seeks recovery of
possession of the Aircraft under said Section 1110 and shall not in
any way oppose such action by Lessor unless Lessee shall have
complied with the requirements of said Section 1110 to be fulfilled
in order to entitle Lessee to continued use and possession of the
Aircraft hereunder. In the event said Section 1110 is amended, or if
it is repealed and another statute is enacted in lieu thereof,
Lessor and Lessee agree to amend this Agreement and take such other
action not inconsistent with this Agreement as Lessor reasonably
deems necessary so as to afford to Lessor the rights and benefits as
such amended or substituted statute confers upon owners and lessors
of aircraft similarly situated to Lessor.
19.12 First Security Bank of Utah, N.A. ("FSBU") is entering into this
Agreement solely as trustee under the Trust Agreement and not in its
individual capacity and in no case whatsoever shall FSBU (or any
entity acting as successor trustee under the Trust Agreement) be
personally liable on, or for any loss in respect of, any of the
statements, representations, warranties, agreements or obligations
of Lessor hereunder as to all of which the other party hereto agrees
to look solely to the Trust Estate, except for any loss caused by
FSBU's own willful misconduct or gross negligence. FSBU warrants
that the Aircraft shall be free of liens attributable to FSBU in its
individual capacity which do not arise from its actions as lessor
under this Agreement and that it shall be personally liable to
Lessee for any Claim against Lessee in respect of any statements,
representations, warranties, agreements or obligations contained
herein which are expressly made in its individual capacity.
19.13 As between Lessor and Lessee, if Lessee fails to make any payment of
Rent or Reserve Rate required to be made
-74-
<PAGE>
by it hereunder or fails to perform or comply with any of its
agreements contained herein, Lessor may itself make such payment or
perform or comply with such agreement, and the amount of such
payment and the amount of the reasonable and properly documented
expenses of Lessor incurred in connection with such payment or the
performance of or compliance with such agreement, as the case may
be, together with interest thereon at the interest rate defined in
Appendix D, Article 6, shall be deemed Supplemental Rent, payable by
Lessee upon demand.
-75-
<PAGE>
IN WITNESS whereof the parties have executed this Agreement the day and
year first herein written.
SIGNED on behalf of SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A. MIDWAY AIRLINES
not in its individual capacity, CORPORATION
except as expressly set forth herein,
but solely as owner trustee
By: /s/ Greg A. Hawley By:
--------------------------------- --------------------------
Greg A. Hawley
Its: Assistant Vice President Its:
--------------------------------- --------------------------
<PAGE>
IN WITNESS whereof the parties have executed this Agreement the day and
year first herein written.
SIGNED on behalf of SIGNED on behalf of
FIRST SECURITY BANK MIDWAY AIRLINES CORPORATION
OF UTAH, N.A.
not in its individual
capacity, except as -
expressly set forth
herein, but solely
as owner trustee
By: By: /s/ [ILLEGIBLE]
---------------------------- --------------------------
Its: Its: VP
---------------------------- --------------------------
<PAGE>
APPENDIX A
DESCRIPTION OF AIRCRAFT
Number of
Manufacturer Model Serial No. Engines Engines
- ------------ ----- ---------- ------- ---------
Fokker 100 11475 Rolls Royce Two
Tay MK 650-15
1. On the Delivery Date the Aircraft shall be new and shall comply
with the detailed description contained in this Appendix A, as may be amended
from time to time, and which is attached hereto as Appendix A-1.
2. The Aircraft at delivery will have an FAA Type Certificate and a
Netherlands Certificate of Airworthiness for Export, which will make the
Aircraft eligible for an FAA Standard Airworthiness Certificate. The Aircraft
shall at delivery also meet FAR 121 requirements promulgated or in effect and
known to Lessor or Manufacturer on June 27, 1993.
<PAGE>
APPENDIX A-1
AIRCRAFT CONFIGURATION
relating to Fokker 100 aircraft
- --------------------------------------------------------------------------------
This Appendix A-1 consists of the following parts:
- Part A: Type Specification.
- Part B: Specification items for Fokker 100
aircraft in addition to the Type
Specification.
- Part C: Seller Furnished Equipment.
Page: 1
<PAGE>
APPENDIX A-1, Part A
PART A: TYPE SPECIFICATION
Type Specification as per printed copy supplied by Lessor to Lessee.
Reference document : TD F28:PL-004
Date of issue : February 1, 1983
Date of latest amendment : July 1, 1991
Engine specification : Rolls-Royce Tay Mk650-15 as affected by
72-00 in Part B
Page: 2
<PAGE>
APPENDIX A-1, Part B
PART B: SPECIFICATION ITEMS FOR FOKKER 100 AIRCRAFT --
IN ADDITION TO THE TYPE SPECIFICATION
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
02 GENERAL REQUIREMENTS
02-20.02 FAA Certification 0
The aircraft is configured in accordance with the FAA
requirements originating from the FAA Type
Certification. Operational requirements, possibly
requested by local airworthiness authorities are not
included.
02-20.10 FAR 121 Requirements TBD
To comply with FAR 121 requirements the following changes will
be made to the aircraft:
- Certificate holder (ref. 25-19)
- Medical kit (ref. 25-60)
- Second megaphone (ref. 23-33)
- 3 additional smoke hoods (ref. 35-30)
- Life vests for crew (ref. 25-60)
- Red anti-collision lights (ref. 33-42)
- Seat cushions as flotation devices (ref. 25-21)
- Placards and markings to comply with FAA
requirements (ref. 11-30)
- At least 50% of aisle seats will have movable
arm rests (ref. 25-21).
02-51.10 Exterior Finish 0
The exterior decorative paint scheme shall be as
specified by Customer. Wings will be white.
Page: 3
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
02-81.01 SFE i.l.o. BFE 0
All Systems and Components as listed in the Type
Specification as Buyer Furnished Equipment (BFE) shall
be supplied as Seller Furnished Equipment (SFE). In
addition to this all equipment related to the
Specification items in Part B shall also be Seller
Furnished Equipment.
03 STRUCTURAL DESIGN CRITERIA
03-20.01 Increased Design Weights 0
The aircraft shall be certified for operation with the
following design weights:
Maximum Take-off Weight 98,000 lbs.
Maximum Zero Fuel Weight 81,000 lbs.
Maximum Landing Weight 88,000 lbs.
Maximum Taxi Weight 98,500 lbs.
11 PLACARDS AND MARKINGS
11-20.10 Exterior Placards and Markings 0
Exterior placards and markings shall be in English
Units of measurement.
11-30.10 Interior Placards and Markings 0
Interior placards and markings shall be adapted for
FAA/FAR requirements, and shall be in English Units of
measurement.
Page: 4
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
23 COMMUNICATIONS
23-11.01 HF Communication System Provisions 31
The aircraft shall have full provisions for a single
Collins HF Communication system according to ARINC 719
characteristics.
To arrive at an operational system, the following
equipment has to be added to the Specification:
- (01) Transceiver, Collins HFS 700
- (01) Antenna tuner, Collins 490S-1
- (01) Control Panel, Gables
23-32.01 Passenger Entertainment System 22
Installation of a pre-recorded announcement and
boarding music system. The system comprises a
Matsushita RDAX 7201 recorder system.
23-33.10 Portable Communications TBD
Installation of one additional megaphone in the rear
of the passenger compartment, in the left-hand rear
stowage.
24 ELECTRICAL POWER
24-55.10 Razor Outlets in Lavatories 0
Installation of 110 V AC razor power outlets in the
aft lavatories (i.l.o. the 220 V AC supply).
Page: 5
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
25 EQUIPMENT/FURNISHINGS
25-19.10 Certificate Holder Negl.
A certificate holder shall be installed in the flight
compartment on the cockpit door.
25-20.10 Passenger Compartment Lay-out TBD
The Passenger compartment lay-out shall be as per
attached Fokker drawing F100-04-145, sheet 2, issue B.
This lay-out features:
- 100 passengers at 34 (33) inch seat-pitch
- One Half-size Galley 1 (see attached drawing)
- One Full-size Galley 2 (see attached drawing)
- Two Lavatories
- Stowage compartment in forward cabin
- Wardrobe in forward cabin
- 4 Cabin Attendant seats
In the layout, a 13-inch passage-way at the triple
seat side , and a 10-inch passageway at the double
seat side, near the overwing emergency exits are
anticipated to comply with the FAR regulations. This
results in 5 triple seats at 33 inch pitch. It Is the
Customer's responsibility to get approval for this
layout from the FAA. Color and materials for seat
covers, curtain, carpet and entrance floor will be as
specified by Customer.
25-21.11 Dual Aft Facing Cabin Attendant Seat 29
Installation of a rear facing double cabin attendant
seat in the entrance against forward wardrobe/stowage
wall, on floor hardpoints and a third top-point,
i.l.o. the standard single seat.
Page: 6
<PAGE>
[GRAPHIC DESCRIPTION]
The passenger compartment layout per attached Fokker drawing F100-04-145,
sheet 2, issue B.
The Layout features
- 100 passengers at 34(33) inch seat pitch
- One half-size galley
- One full size galley
- two lavatories
- stowage compartment in forward compartment
- Wardrobe in forward cabin
- 4 cabin Attendants
<PAGE>
[GRAPHIC DESCRIPTION]
Fokker drawing of half-size galley and full-size galley.
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
25-21.10 Passenger seats 803
(Delta to standard)
The passenger seats will be Flight Equipment FEEL
Space Gen III, with leather seat covers. Due to
leather covering, cushion material has to be changed
for fire blocking requirements. Seats shall have
cushions to be used as flotation devices. Seats will
be modified with movable armrests on aisle side,
except near the overwing emergency exits. The leather
seat covers are priced separately in Specification
Change Notice JE1 25-21.10. Price is US$ 30,000. - per
aircraft (price level Sept. 93), to be paid on or
before delivery of the aircraft.
25-23.01 Window Blinds 57
Installation of a rolling blind in each window of the
passenger compartment.
25-29 Aft Trolley Stowage / Wardrobe 53
The standard wardrobes in the rear of the aircraft
cabin (forward of the lavatories) shall be made
suitable for stowage of one half size trolley (one on
each side) and a standard container unit.
The stowage shall be closed by means of a door. A
folding panel shall allow the use of the compartment
as wardrobe.
25-31 Curtain between Galley 1 and 2 4
A curtain will be installed between Galley 1 and 2 to
be able to close the Galley area from the passenger
entrance and aisle.
Page: 7
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
26-60.10 Emergency Equipment TBD
Emergency equipment and locations shall be as per
attached drawing. In addition to the standard aircraft
the following equipment has been added:
- Second megaphone
(p/n S243,Ovenaire-Audio-Carpenter)
- Crash axe (p/n 42D8331, Van Dusen)
- Medical kit (p/n TBD)
- Crew life vests (p/n S21850-7300, Switlik)
- Passenger flotation cushions
- Escape slide for forward opening
passenger door
- Additional flashlight for additional
cabin attendant seat in front cabin
- 3 Smokehoods located near the
portable fire extinguishers
(p/n 119003, Puritan Bennett)
25-61.01 Crash Axe 2
A crash axe shall be installed in the flight
compartment. The axe shall be located on the RH aft
wall, with the blade housed in a protective cover.
25-63.01 Emergency Locator Transmitter 7
An emergency locator transmitter shall be installed,
comprising the following components:
- Emergency locator transmitter,
located in the ceiling at the rear of
the passenger compartment;
- Antenna, mounted on the upper
fuselage;
- Test switch, located on the overhead
panel in the flight compartment.
Page: 8
<PAGE>
[GRAPHIC DESCRIPTION]
Layout of emergency equipment and locations.
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
26 FIRE PROTECTION
26-12.01 Audible Fire Warning Horn 4
Installation of a warning horn in the nose landing
gear bay for audible APU fire warning during APU
ground operation. The function of the warning horn
will be inhibited during an APU fire warning test.
28 FUEL
28-40.10 Fuel Quantity Indication 0
Fuel quantity indication in the flight compartment and
on the fueling control panel shall be in pounds (lbs.).
(Installation of alternate part number for combined
processor totalizer). Fuel related data on FMS shall
be in pounds (lbs.).
Fuel flow display in the MFDS shall be in pounds per
hour (lbs/hr.).
Magnetic fuel level indicators will be adapted to read
in pounds (lbs.) or U.S. Gallons.
31 INDICATING/RECORDING SYSTEMS
31-00.10 Instrument Calibration 0
Instrument calibration shall be in English units:
- (degree)F i.l.o. (degree)C
- lbs i.l.o. kg
- inches Hg i.l.o. mbar
- feet i.l.o. m
Page: 9
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
33 LIGHTS
33-28.01 Galley Area Light 2
A light shall be installed int he ceiling between
galley 1 and 2, and shall be controlled by a switch
located on galley 1.
33-42.10 Anti-Collision Lights 0
Two anti-collision lights with red lens i.l.o. the
standard clear lens shall be installed.
33-46.01 Logo Lights 11
Light fixtures will be installed on the inboard side
of the outboard flap track fairings, to illuminate
both sides of the vertical stabilizer.
33-47.01 Strobe Lights 18
Installation of high intensity recognition in each
wing tip and in the tail cone.
34 NAVIGATION
34-16.01 Windshear 2
Windshear detection, alerting and recovery guidance
shall be incorporated. The Flight Management System
shall provide the detection function. The GPWS and
EFIS shall provide warning, whereas the recovery
guidance/automatic recovery (when selected), is
provided by AFCAS.
In combination with the windshear detection a
speedbrake auto retract logic has to be installed.
Page: 10
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
34-26.01 Flight Director Presentation - V-bars 0
This provides V-bar Flight Director presentation
instead of the standard crossbar presentation.
34-28.01 Dual IRS 29
Installation of a dual Inertial Reference System (IRS)
i.l.o. the standard installed triple Attitude Heading
and Reference System (AHRS). This will comprise the
following Seller Furnished Equipment:
- (02) IRS unit Honeywell
- (01) Mode selector panel Honeywell
- (01) Inertial System Display Unit Honeywell
34-46.10 TCAS II System 66
In combination with the dual ATC S-mode system in
34-54.10, a Bendix TCAS II system shall be installed,
comprising the following (Seller Furnished) equipment:
- One TCAS II processor in Avionics bay.
- Two TCAS omni-directional antennas, on
top and bottom of fuselage.
- Combined ATC/TCAS control panel.
- EFIS control panels with TCAS button.
TCAS information shall be displayed on EFIS: Traffic
alerts on Navigation Display, resolution alerts and
vertical escape guidance on the Primary Flight
Displays.
Page: 11
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
34-54.10 Dual Air Traffic Control System (ATC) (See 34-46.10)
Installation of a dual ATC system with S-mode i.l.o.
the baseline single system. This will comprise the
following Seller Furnished equipment:
- Two Bendix ARINC 700 mode-S ATC transponders,
located in the aft rack of the avionics bay (Bendix
ATC needed due to Bendix TCAS).
- Three additional antennas, one located on the bottom
of the fuselage and two on the top of the fuselage.
- Two program integrating panels, located in the
avionics bay, to provide the aircraft
identification code to the S-mode transponders.
34-61.10 FMS Airline Option 0
The so-called Airline option in the FMS will be as
developed for US customers. This option deviates from
the standard on the following points:
- Altitude constraints in climb can not be cleared by
dialing FMP altitude above constraint altitude.
- Deletion of pilot defined waypoints upon landing.
- Engine Out Acceleration Altitude (EO ACCEL ALT)
default set at 800 ft AFL in stead of 1000 ft.
- FUEL CONSUMPTION can only be altered by password input.
- No holding fuel (FINAL/TIME) and no route reserve %
(RTE RES) on CDU, only dedicated total reserve fuel
(RTE RES FUEL). Default is changeable, but is set
at 3.3 klbs.
Page: 12
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
38 WATER/WASTE
38-12.02 Water Heater 13
Installation of a water faucet with two "PUSH"
switches for hot/cold (red/blue) water. The faucet
opens when actuated and automatically closes after
approx. 5 seconds. To provide warm water to the
faucet, a heater is installed in each toilet.
The installation comprises the following Seller
Furnished units:
- (02) Heater Inventum
- (02) Faucet Adams Rite
49 AIRBORNE AUXILIARY POWER
49-10.01 APU TBD
An Auxiliary Power Unit (APU) GTCP36-150 RR with
increased starting and loading capabilities will be
installed instead of the GTCP3-150R.
52 DOORS
52-13.01 Forward Opening Passenger Door 29
A forward opening passenger door shall be installed
instead of the downward opening door with integral
airstair. In addition, an escape slide plus cover will
be installed.
Page: 13
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
52-31.01 Enlarged Cargo Compartment Doors 560
The aircraft will be equipped with enlarged, upward
opening cargo doors, i.l.o. the standard downward
opening doors.
52-70.01 Avionics Bay Access Hatch Warning 2
Two micro switches shall be installed on each of the
two avionics hatches to detect an unlocked (or open)
condition. Separate warnings, one for each hatch,
shall be supplied to the flight warning computer and
displayed on the Multi-Function Display System (MFDS).
53 FUSELAGE
53-73.01 Scuff Plate Service/Emergency Door 9
A corrosion resistant steel scuff plate shall be
installed around the lower end of the forward S/E door
opening. The scuff plate shall be easily removable.
53-73.02 Scuff Plate Forward Opening Passenger Door 11
A corrosion resistant steel scuff plate shall be
installed around the lower end of the opening of the
forward opening passenger door. The scuff plate shall
be easily removable.
53-73.03 Scuff Plates Enlarged Cargo Doors 53
A corrosion resistant steel scuff plate shall be
installed around the lower end of each cargo
compartment door opening. The scuff plates shall be
easily removable.
Page: 14
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
72 ENGINES
72-00.01 Engine Installation 302
Installation of two Rolls-Royce Tay Mk650-15 turbofan
engines, i.l.o. the standard Tay Mk 620-15 engines.
Page: 15
<PAGE>
APPENDIX A-1, Part C
PART C: SELLER FURNISHED EQUIPMENT
(Type Specification Equipment plus adaptions for
Additional Specification items in Part B)
- --------------------------------------------------------------------------------
ATA DESCRIPTION QTY. PARTNUMBER VENDOR
- --------------------------------------------------------------------------------
23 COMMUNICATIONS
23-12 VHF Transceiver ARINC 700 2 622-5219-003 Collins
23-31 Amplifier type PAU-700 1 662-5342-001 Collins
23-32 Passenger entertainment 1 RDAX 7201 Matsushita
Tape reproducer
23-32 Control Panel 1 RDAX 7211 Matsushita
23-33 Megaphone 2 S243 Ovenaire-Audio-
Carpenter
23-71 Cockpit Voice Recorder 1 93A100-80 Fairchild
type A-100A
23-71 Microphone monitor 1 93Al51-20 Fairchild
25 EQUIPMENT & FURNISHING
25-21 Passenger Seats, Triple 15 D3111F814-10 Flight Equipment
1 D3111F802-10 Flight Equipment
1 D3111F806-10 Flight Equipment
1 D3111F812-10 Flight Equipment
1 D3111F904-10 Flight Equipment
1 D3111F904-10 Flight Equipment
25-21 Passenger Seats, Double 15 D2111F623-10 Flight Equipment
1 D2111F611-10 Flight Equipment
1 D2111F615-10 Flight Equipment
1 D2111F621-10 Flight Equipment
1 D2111F667-10 Flight Equipment
1 D2111F667-10 Flight Equipment
Page: 16
<PAGE>
APPENDIX A-1, Part C
- --------------------------------------------------------------------------------
ATA DESCRIPTION QTY. PARTNUMBER VENDOR
- --------------------------------------------------------------------------------
25-21 Seatbelt 100 500810HT14B3AD- American Safety
500810HT14B34-2258
25-31 Galley 1 1 1001X01A00000 Sell
25.31 Container 1 DLH306-16 Driessen
25-31 Coffee-maker 2 50405-200 Nordskog
25-31 Trolley, hall-size (KSSU) 3 DLH573-043 Driessen
25-32 Galley 2 1 1001X02A00000 Sell
25-32 Hot/Cold jug 3 DLH141-066 Driessen
25-32 Oven 3 8054-01-0000 Sell
25-32 Oven Control Panel 3 7110-26-0000 Sell
25-32 Trolley, full-size (KSSU) 3 DLH621-37 Driessen
25-61 Crash Axe 1 42D8331 Van Dusen
25-63 Emergency Locator Transmitter 1 DMELT8-1 Dorne & Margolin
31 INSTRUMENTS
31-31 Flight Data Recorder 1 17M800-261 Fairchild
34 NAVIGATION
34-28 Inertial Reference Unit 2 HG1050AD05 Honeywell
34-28 Mode Selector Unit 1 CG1288AC01 Honeywell
34-28 Inertial System Display Unit 1 CG1135AC02 Honeywell
Page: 17
<PAGE>
APPENDIX A-1, Part C
- --------------------------------------------------------------------------------
ATA DESCRIPTION QTY. PARTNUMBER VENDOR
- --------------------------------------------------------------------------------
34-32 Receiver, ILS, ARINC 700 2 622-5221-002 Collins
34-41 Weather Radar Transceiver 1 622-5132-104 Collins
34-41 Weather radar control panel 1 622-5129-106 Collins
34-41 Weather Radar Antenna 1 622-5137-201 Collins
34-41 Antenna Pedestal 1 622-5135-202 Collins
34-42 Radio Altimeter Transceiver 2 F6170 TRT
Type AHV53O - Arinc 700
34-42 Radio Altimeter Antenna 4 S67-2002-19 Sensor Systems
34-43 Ground Prox Warning Comp 1 965-0676-003 Sundstrand
Type Mk V
34-46 TCAS II Processor 1 066-50000-8102 Bendix
34-51 VOR Receiver, ARINC 700 2 622-5220-002 Collins
34-52 DME Interrogator, ARINC 700 2 622-4540--001 Collins
34-53 ADF Receiver, ARINC 700 1 622-5222-002 Collins
34-54 ATC Transponder Mode-S 2 066-01127-1101 Bendix
Page: 18
<PAGE>
APPENDIX B
FURTHER DEFINITIONS AND VALUES
AGREED VALUE : {***} for the first year of the Term
through and including the first
anniversary date of the Delivery Date,
and for each subsequent year the Agreed
Value shall be:
Second Year: {***}
Third Year: {***}
Fourth Year: {***}
Fifth Year: {***}
Sixth Year: {***}
Seventh Year: {***}
Eighth Year: {***}
Ninth Year: {***}
Tenth Year: {***}
provided that the Agreed Value for any of
the above years may be adjusted up to FMV
(but never in excess {***} if Lessor
provides to Lessee an independent
appraisal (at Lessor's cost) prior to the
beginning of any such year. If Lessee
does not agree to such appraised value,
Lessee may follow the Appraisal Procedure
by giving Lessor written notice of
election to so proceed within 20 days
of receipt of Lessor's independent
appraisal.
ASSUMED RENT : (a) {***} for the Aircraft during year one
up to and including year three of the
Term; and
<PAGE>
: (b) {***} for the Aircraft during year
four up to and including year ten of
the Term
DEPOSIT : {***}
ENUMERATED FINANCIAL
MILESTONES : (1) all deferred amounts of Rent, Reserve
Rate and Deposits under this Agreement and
all Other Aircraft Agreements have been
paid in full; and (2) Lessor shall have
received evidence satisfactory to it that
Lessee has had a net income of $5,000,000
(Dollars Five Million) as determined in
accordance with generally accepted United
States accounting principles consistently
applied for each of three consecutive
fiscal years.
ESCALATED RENT : the Assumed Rent for the Aircraft adjusted
in accordance with the provisions of
Appendix D Paragraph 2.2.
PARTIAL LOSS AMOUNT : $250,000, provided, however, that if the
Enumerated Financial Milestones have been
achieved, then $500,000.
RENT : the Escalated Rent for the Aircraft,
(adjusted in accordance with the
provisions of Appendix D Paragraphs 2.3,
2.6, 2.7 and 2.8).
-2-
<PAGE>
RESERVE RATE : (a) {***} for the months one up to and
including twelve of the Term;
(b) {***} for the months thirteen up to
and including twenty four of the Term;
and
(c) {***} for the months twenty five up
to and including one hundred twenty
of the Term.
-3-
<PAGE>
APPENDIX C
CERTIFICATE OF ACCEPTANCE
This Certificate of Acceptance is delivered, on and as of the date set forth
below, by Midway Airlines Corporation (herein referred to as "Lessee") to First
Security Bank of Utah, N.A., not in its individual capacity but solely as
trustee, (herein referred to as "Lessor") pursuant to that Aircraft Operating
Lease Agreement dated as of November 1, 1993 between Lessor and Lessee (herein
referred to as the "Agreement"):
1. Details of Acceptance
Lessee hereby indicates and confirms to Lessor, its successors and
assigns, that the Lessee has at ______ o'clock on this _____ day of _____
199_ at _____ Airport, ______ accepted the following, in accordance with
the provisions of the Agreement:
(a) Fokker 100 airframe, Manufacturer's serial Number 11445
(b) Rolls Royce Tay Mk 650-15 Engines (each of which engines has 750 or
more rated takeoff horsepower).
Engine Number Manufacturer's S/N
1. ______
2. ______
(c) Fuel Status: ___________ kilos; ________litres
(d) Loose Equipment Check List: as per list signed by Lessor and Lessee
and attached.
2. Confirmation of Undertakings
The terms used in this Certificate shall have the meanings given to such
terms in the Agreement.
The Lessee confirms that today being the Delivery Date as defined in the
Agreement:
(i) the Aircraft is duly accepted by the Lessee in accordance with and
subject to the provisions of the Agreement and the execution and
delivery of this Certificate constitutes the acceptance of the
Aircraft
<PAGE>
by the Lessee for all purposes of the Agreement. DELIVERY BY LESSEE
TO LESSOR OF THIS CERTIFICATE OF ACCEPTANCE SHALL CONSTITUTE
CONCLUSIVE PROOF AS BETWEEN LESSOR AND LESSEE THAT ON THE DELIVERY
DATE LESSEE'S TECHNICAL EXPERTS EXAMINED AND INVESTIGATED THE
AIRCRAFT AND EVERY PART THEREOF AND THAT THE AIRCRAFT AND EVERY PART
THEREOF CORRESPOND TO THE DESCRIPTION SPECIFIED IN APPENDIX A TO THE
AGREEMENT AND ARE AIRWORTHY AND IN GOOD WORKING ORDER AND REPAIR,
WITHOUT DEFECT WHETHER OR NOT DISCOVERABLE AS AT THE DELIVERY DATE
AND IN EVERY WAY SATISFACTORY TO LESSEE;
(ii) the Lessee is obliged to pay to the Lessor the amount provided for
in the Agreement with respect to the Aircraft;
(iii) the Aircraft is insured in accordance with the Agreement;
(iv) the representations and warranties contained in Article 13 of the
Agreement remain, and if made at the date of this Certificate of
Acceptance, would be, true and correct in all respects;
(v) there have been affixed to the Aircraft and the Engines the fire
resistant notices required by Article 4.3 of the Agreement;
(vi) the Lessee has no right of set-off, deduction, withholding or
counterclaim against the Lessor whatsoever; and
(vii) no Default is subsisting.
IN WITNESS WHEREOF, Lessee has caused this Certificate of Acceptance to be
executed in its name, by its duly authorized officer(s) or representative(s),
pursuant to due corporate authority, all as of the date written in Paragraph 1
above.
MIDWAY AIRLINES CORPORATION
By:
---------------------------
Title:
------------------------
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APPENDIX D
CHARGES
1. Deposit
Lessor has received payment of {***} for the Aircraft before the date of
this Agreement.
Lessee shall pay the balance of the Deposit to Lessor in thirty four (34)
consecutive equal monthly installments for the first time on or before the
first Business Day ninety days after the date of the start of revenue
operation by Lessee and thereafter each time on the corresponding day in
following calendar month and, if that is not a Business Day, then on the
last Business Day preceding such numerically corresponding day.
The Deposit shall be held by Lessor during the Term as security for the
full and punctual performance of all of Lessee's obligations to Lessor
under this Agreement. Lessor may, but shall not be obliged to, apply the
Deposit in whole or in part for the payment of any rent, maintenance
accruals, indemnities, attorneys fees and other expenses, insurance and
other casualty payments and any other amount owing from time to time by
Lessee hereunder or any other Operative Document, between Beneficiary or
its affiliate companies, and Lessee, or for the payment of any loss or
damage suffered by Lessor as a result of any Event of Default or utilize
the Deposit in whole or in part to perform any of Lessee's obligations
under this Agreement or otherwise remedy any other Event of Default,
including, without limitation, in the redelivery condition for the
Aircraft without prejudice to any other remedy of Lessor. In any such
event Lessee shall on demand restore the Deposit to the full amount
provided for herein by payment to Lessor of an amount in cash equal to the
amount applied or utilized. Lessee shall not attempt to subject the
Deposit to any other lien, security interest, charge or other encumbrance
or assign any interest therein to any other person and, to the extent of
its interest therein, if any, Lessee hereby grants to Lessor a security
interest in the Deposit and assigns and transfers to Lessor any and all of
Lessee's right, title and interest therein, if any, as security as
provided above, and Lessor shall be entitled to the remedy of offset
against and application of the Deposit, without any notice to or demand
against Lessee, all of which are hereby waived. Lessee further agrees that
the Deposit may be, without derogating from the terms of this Agreement,
be assigned as security to
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the Bank or transferred to any other transferee of Lessor. Should any
Event of Default hereunder occur, the Deposit shall automatically be
applied to any sum due to Lessor or as a prepayment of any sum to become
payable to Lessor, unless Lessor thereafter elects otherwise by notice to
Lessee.
Any remaining Deposit shall be repaid by Lessor to Lessee ten (10) days
following the Expiry Date or other date after redelivery of the Aircraft
in accordance with this Agreement. In the event there is a dispute as to
whether Lessee is entitled to a return of any portion of the Deposit,
Lessor shall so return the undisputed amount of the Deposit. Upon a
repayment of such Deposit or portion thereof, Lessor's security interest
in and assignment of such Deposit or portion thereof being repaid shall be
deemed released.
Lessor's obligations in respect of the return of the Deposit shall be
those of debtor of Lessee, not of a trustee or other fiduciary.
The Deposit shall bear interest on the amounts then held at a rate of
interest per annum yielding $10,500 (Dollars Ten Thousand Five Hundred)
per year payable annually commencing on the first anniversary of the
Delivery Date, and on each anniversary thereafter unless the Deposit and
interest thereon shall have been applied pursuant to this Agreement. Any
reference to the Deposit in this Agreement shall include the interest
accumulated thereon and not paid to Lessee.
2. Rent
2.1 For the purposes of the calculation and payment of Rent, the Term
shall be divided into two sets of periods ("Rental Periods" and
"Rental Adjustment Periods").
Rent shall be due and payable on each Rent Date. If such date is not
a Business Day then Rent shall be due and payable on the last
Business Day preceding such date.
2.2 The Escalated Rent shall be calculated by increasing the Assumed
Rent with a fixed escalation factor of one half of one percent
(0.5%) per month or a pro rata portion thereof as from the month of
September, 1993 up to and
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including the month of delivery of the Aircraft under the One Year
Lease.
2.3.1 The Rent payable in respect of the Rental Periods One (1) up to and
including Thirty Six (36) is based on an assumed three-years US
Treasury Bond Rate of Four point Ten percent (4.10%) per annum. To
the extent that the actual US Treasury Bond Rate varies from 4.10%
per annum on the delivery of the Aircraft, the Rent will be adjusted
up or down with $16,500.00 (Dollars Sixteen Thousand Five Hundred)
per month for each one percent of variation (or pro rated in the
case the variation is less than one Percent (1%)). The amount of
$16,500.00 (Dollars Sixteen Thousand Five Hundred) shall have been,
upon delivery of the Aircraft, adjusted with the escalation factor
mentioned in 2.2 of this Appendix D.
2.3.2 The Rent payable in respect of the Rental Period Thirty Seven (37)
up to and including One Hundred Twenty (120) shall be adjusted
upward or downward calculated as follows:
E + ((L - Y) x N), where
E is the Escalated Rent, and
Y is Three point Twenty Five percent (3.25%)
L means the arithmetic mean expressed as a number (i.e., 40 per
cent is 40 and not 0.4) of the rates of interest per cent per
annum (rounded if not already such a multiple, to the nearest
whole multiple of 1/16th of one per cent.) at which, at or
about 11.00 a.m. (London time) on the day two Business Days
before the beginning of the Rental Adjustment Period in which
such Rental Period falls, deposits in Dollars are offered for
the duration of such Rental Adjustment Period on the REUTERS
"LIBO" page (or such other page as may replace it from time to
time) ("LIBOR"), and
N is $15,318.00 if such Rental Period falls in the seventh
Rental Adjustment Period;
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is $14,927.00 if such Rental Period falls in the eighth Rental
Adjustment Period;
is $14,527.00 if such Rental Period falls in the ninth Rental
Adjustment Period;
is $14,119.00 if such Rental Period falls in the tenth Rental
Adjustment Period;
is $13,702.00 if such Rental Period falls in the eleventh
Rental Adjustment Period;
is $13,277.00 if such Rental Period falls in the twelfth
Rental Adjustment Period;
is $12,842.00 if such Rental Period falls in the thirteenth
Rental Adjustment Period;
is $12,399.00 if such Rental Period falls in the fourteenth
Rental Adjustment Period;
is $11,945.00 if such Rental Period falls in the fifteenth
Rental Adjustment Period;
is $11,482.00 if such Rental Period falls in the sixteenth
Rental Adjustment Period;
is $11,010.00 if such Rental Period falls in the seventeenth
Rental Adjustment Period;
is $10,527.00 if such Rental Period falls in the eighteenth
Rental Adjustment Period;
is $10,034.00 if such Rental Period falls in the nineteenth
Rental Adjustment Period;
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is $9,530.00 if such Rental Period falls in the twentieth
Rental Adjustment Period;
Such N-amounts shall - upon delivery of the Aircraft - be adjusted
with the escalation factor mentioned in Article 2.2. of this
Appendix D.
2.3.3 The monthly Escalated Rent shall also be adjusted upward by an
amount equal to $875 (Dollars Eight Hundred Seventy Five) per month
which shall be payable to Lessor by check annually commencing on the
first anniversary of the Delivery Date, and on each anniversary
thereafter. Lessee may elect to authorize Lessor in writing to
set-off amounts payable pursuant to this Article 2.3.3 against
interest on the Deposit which is payable by Lessor pursuant to
Article 1 of this Appendix D irrespective of whether or not an Event
of Default shall have occurred and be continuing.
2.4 Any notice with respect to rental adjustments given by Lessor shall
set out the basis of calculation of "L" and of the Rent specified
therein and shall, save in the case of manifest error, be
conclusive.
2.5 The payment of the Rent for the first three (3) months shall be
deferred. The aggregate amount of such deferred Rent shall be paid
by Lessee to Lessor in twenty four (24) consecutive equal monthly
installments for the first time on or before the first Business Day
on which Rent is payable pursuant to 2.1 above occurring one (1)
year after the date of the start of revenue operation by Lessee and
thereafter on each Rent Date.
2.6 To finance the payments required to be paid by Lessee under Article
8.2(a)(i), the Escalated Rent shall also be adjusted upward in an
amount (the "Adjustment Amount") of $1,551 (Dollars One Thousand
Five Hundred Fifty One) for each Rent Date through and including the
forty eighth Rent Date. If a Casualty Occurrence occurs on or prior
to such forty eighth Rent Date, an amount (the "Additional Amount")
in Dollars equal to the present value (discounted at the interest
rate of six point one percent (6.1%)), of all unpaid Adjustment
Amounts through the Rent Date on or
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immediately preceding the date of the Casualty Occurrence shall be
due and payable, with interest thereon at six point one percent
(6.1%), on the date on which Agreed Value is payable pursuant to
Article 17.2(b).
2.7 Lessee shall pay to Lessor all reasonable expenses paid to third
parties (including legal, printing and out-of-pocket expenses)
incurred or payable by Lessor in connection with the negotiation,
preparation and execution of the first refinancing of the Aircraft
and this Agreement by the initial Lessor and its Beneficiary with a
Bank and the related first assignment by Lessor (in its trust
capacity) or its Beneficiary to another Lessor or Beneficiary with a
related Bank financing, subject, however, that Lessee's obligation
to pay such expenses is limited to $150,000 (Dollars One Hundred
Fifty Thousand) for such first refinancing of the Aircraft and if
such first refinancing transaction includes the first refinancing of
aircraft which are the subject of Other Aircraft Agreements, then
Lessee's obligation to pay such expenses pursuant to this Article
2.7 and Article 2.7 of Appendix D in each applicable Other Aircraft
Agreement, in the aggregate shall be limited to the foregoing
$150,000 plus (x) $100,000 (Dollars One Hundred Thousand) for a
first refinancing transaction involving one additional aircraft; and
(y) $50,000 (Dollars Fifty Thousand) per each further additional
aircraft. Lessor hereby agrees to finance the payments required to
be paid by Lessee under this Article 2.7 as follows: The Escalated
Rent shall be adjusted upward for each Rent Date commencing on the
Rent Date next succeeding the date of the first refinancing
described in this Article 2.7 in an amount equal to the expenses
referred to herein (subject to the maximum amounts referred to
herein) plus the product of such expenses multiplied by an interest
rate (the "Aircraft Refinancing Interest Rate") agreed to by Lessee
and Beneficiary and calculated on an accrual basis using the same
method applied by the Beneficiary in obtaining the monthly Escalated
Rent amount set forth in Article 2.6 above, the sum thereof divided
by the total number of aircraft which are the subject of the first
refinancing described herein (such quotient, the "Aircraft
Refinancing Amount") and further divided by the lesser of
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forty eight (48) or the total number of remaining Rent Dates to
occur during the Term (each such amount an "Aircraft Refinancing
Installment"). Such amount shall be payable on each Rent Date
commencing on the Rent Date next succeeding the date of the first
refinancing described in this Article 2.7. If a Casualty Occurrence
occurs prior to the payment in full of the Aircraft Refinancing
Amount, an amount (in Dollars) equal to the present value
(discounted at the Aircraft Refinancing Interest Rate) of all unpaid
Aircraft Refinancing Amount through the Rent Date on or immediately
preceding the date of the Casualty Occurrence shall be due and
payable, with interest thereon at the Aircraft Refinancing Interest
Rate, on the date on which Agreed Value is payable pursuant to
Article 17.2(b).
3. Reserve Rate
3.1 In addition to installments of Rent, Lessee shall pay to Lessor the
Reserve Rate as follows:
(a) by way of an Airframe maintenance accrual, the sum of {***}
for the months one up to and including twelve of the Term,
{***}; for the months thirteen up to and including twenty four
of the Term and {***} for the months twenty five up to and
including one hundred twenty of the Term for each Flight Hour
the Aircraft is operated during the Term ("Airframe
Maintenance Accrual"), and
(b) by way of an Engine maintenance accrual, in respect of each
Engine the sum of {***} for the months one up to and including
twelve of the Term, {***} for the months thirteen up to and
including twenty four of the Term and {***} for the months
twenty five up to and including one hundred twenty of the Term
for each Flight Hour operated by each Engine during the Term
("Engine Maintenance Accrual"); and
(c) by way of a landing gear maintenance accrual, the sum of
{***} for the months one up to and including twelve of the
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Term, {***} for the months thirteen up to and including
twenty four of the Term and {***} for the months twenty five
up to and including one hundred twenty of the Term for each
Cycle operated by the landing gear during the Term ("Landing
Gear Maintenance Accrual") and
(d) by way of an A.P.U. maintenance accrual, the sum of {***} for
the months one up to and including twelve of the Term, {***}
for the months thirteen up to and including twenty four of
the Term and {***} for the months twenty five up to and
including one hundred twenty of the Term for each Flight Hour
operated by the A.P.U. during the Term ("A.P.U. Maintenance
Accrual").
The Airframe, Engine, Landing Gear and A.P.U. Maintenance Accruals
accruing in any Rental Period shall be paid by Lessee to Lessor not
later than ten (10) days after the end of the calendar month in
which such Rental Period shall end. Concurrently with the payment
thereof, Lessee shall report to Lessor (in accordance with Article
7.1 (e)) the number of Flight Hours and Cycles accumulated in
respect of the period for which payment is being made.
The Reserve Rate will be subject to adjustment every six (6) months
during the Term by reference for 65% to the Employment and Earnings
Index for U.S.A. labor cost average hourly earnings of production
(Aircraft Equipment) SIC 3728, table C-2 and for 35% to the Producer
Price Index for U.S.A. material cost commodity groupings (Machinery
and Equipment) Code 11/table 6. In addition the Engine Maintenance
Accrual will be subject to adjustment every six (6) months during
the Term having regard to the Engine Manufacturer recommendations,
industry experience and any change in the operational environment of
the Aircraft.
Any Reserve Rate shall, if requested by either Lessor or (unless an
Event of Default shall have occurred and be continuing) Lessee, be
adjusted to
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take into account any changes in the maintenance intervals upon
which Reserve Rates are based.
3.2 Maintenance Accruals as defined in paragraph 3.1 above and received
by Lessor shall respectively be credited to funds (collectively
"Maintenance Funds") to be known as the "Airframe Maintenance Fund",
the "Engine Maintenance Fund, the "Landing Gear Maintenance Fund"
and the "A.P.U. Maintenance Fund" which funds shall reduce as monies
are released to Lessee therefrom in accordance with Article 7.4.1.
3.3 The payment of the applicable Reserve Rate for the first three (3)
months shall be deferred. The aggregate amount of such deferred
Reserve Rate shall be paid by Lessee to Lessor in twenty four (24)
consecutive equal monthly installments for the first time on or
before the first Business Day on which Reserve Rate is payable
pursuant to 3.1 above occurring one (1) year after the date of the
start of revenue operation by Lessee and thereafter each Business
Day on which the Reserve Rate is payable.
3.4 The Reserve Rates shall accrue interest at the applicable six (6)
months US Dollar LIBOR rate minus point twenty five percent (.25%)
per annum, which interest shall be added to the relevant Maintenance
Fund.
3.5 If the Enumerated Financial Milestones have been achieved, then
Lessee's obligation to continue to pay Reserve Rates hereunder shall
be stayed, provided, however, that in connection with the release of
monies to Lessee from the Maintenance Fund pursuant to Article 7.4.1
occurring thereafter, prior to the release of monies, Lessee shall
provide Lessor with evidence, reasonably satisfactory to Lessor,
that Lessee has retained accumulated net earnings (as determined in
accordance with generally accepted United States accounting
principles consistently applied) of not less than $15,000,000
(Dollars Fifteen Million), and provided, further, that if such
evidence cannot be provided or is not reasonably satisfactory to
Lessor, Lessee's obligation to pay Reserve Rates shall recommence
pursuant to the terms hereof and no monies shall be released from
the Maintenance Fund until such time as it shall
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have been restored to the level at which it would have been had this
paragraph not been in effect.
If Lessee has achieved the payment in full of all deferred amounts
as set forth in clause (1) of the definition of Enumerated Financial
Milestones, Lessee may, at its election, pay to Lessor the amount
which is necessary to cause monies standing in the Maintenance Fund
to equal $1,500,000 (Dollars One Million Five Hundred Thousand) and
thereafter Lessee shall have no further obligation to make Reserve
Rate payments hereunder, provided, however, that thereafter no funds
shall be released to Lessee from the Maintenance Fund pursuant to
Article 7.4.1. It is understood, for the avoidance of doubt, that
the foregoing terms of this Article 3.5 shall not affect Lessee's or
Lessor's obligations under Article 3.6 of this Appendix D.
3.6 On the Expiry Date, if there is any Excess (as defined below) in any
Maintenance Fund, such Excess shall, unless a Default shall have
occurred and be continuing (in which case only after termination,
return of the Aircraft and payment of all amounts due following
exercise of remedies under Article 15), be paid to Lessee, and on
such date, if there is any Shortfall (as defined below) in any
Maintenance Fund, Lessee shall pay such Shortfall to Lessor.
"Excess" in any Maintenance Fund on the Expiry Date shall mean any
positive difference obtained by subtracting (x) from (y) for the
Airframe, Engines, Landing Gears or A.P.U., as the case may be; (x)
shall mean the product of (I) the then market cost from the original
equipment manufacturer and corrected for the experience of all
United States based operators of Fokker 100 aircraft for the
relevant item:
with respect to the Aircraft, to perform a scheduled airframe
heavy maintenance as defined in the Maintenance Program for
12,000 hours and 24,000 hours inspections or any equivalent
thereof with more or less hours ("Airframe Maintenance"), or
with respect to any Engine, to perform a scheduled shop visit
engine maintenance and
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repair, other than (i) repairs arising as a result of foreign
object damage or operations mishandling and/or (ii)
maintenance and repair of QEC (Quick Engine Change) kits
("Engine Maintenance"), or
with respect to any nose or main landing gear to perform a
schedule shop visit nose and main landing gear maintenance and
repair, other than repairs arising as a result of foreign
object damage or operational mishandling ("Landing Gear
Maintenance"), or
with respect to Auxiliary Power Unit ("A.P.U.") to perform an
off Aircraft shop A.P.U. maintenance and repair, other than
repairs arising as a result of foreign object damage or
operational mishandling ("A.P.U. Maintenance"), and
(II) a fraction of which (a) the numerator shall be the difference
between the actual number of hours or cycles (as to landing gear),
as the case may be, of operation remaining on the Airframe, Engine,
Landing Gear or A.P.U., as the case may be, to the next such
Airframe Maintenance, Engine Maintenance, Landing Gear Maintenance
or A.P.U. Maintenance, as the case may be, and the total number of
hours or cycles, as the case may be, of operation allowable between
such Maintenance and (b) the denominator shall be the total number
of hours or cycles, as the case may be, of operation allowable
between such Maintenance.
(y) shall mean the actual dollar amount remaining in the respective
Maintenance Fund.
"Shortfall" in any Maintenance Fund on the Expiry Date shall mean
any negative difference obtained by subtracting (x) above from (y)
above.
4. Payments
All payments due hereunder shall be effected by Lessee to Lessor by
transfer to Chemical Bank in New York, New York, in favor of the
Beneficiary, account number 544-0-46285, Ref. Aircraft MSN 11475,
ADLAF-113, in Dollars and in immediately available funds, and all such
payments shall be initiated adequately in advance of the due dates to
ensure
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that Lessor receives credit for the full amount of such payment on the due
dates. All such payments shall be made in full without any deduction or
withholding (whether in respect of set-off, counterclaim, duties, taxes,
charges or otherwise howsoever) unless Lessee is prohibited by Law from
doing so, in which event Lessee shall (a) ensure that the deduction or
withholding does not exceed the minimum amount legally required; (b)
forthwith pay to Lessor such additional amount as shall result in the net
amount received by Lessor being equal to the amount which would have been
received by Lessor had such a deduction or withholding not been made; (c)
pay to the relevant taxation or other authorities within the period for
payment permitted by applicable Law the full amount of the deduction or
withholding; and (d) upon request in writing from Lessor to Lessee furnish
to Lessor, within the period for payment permitted by applicable Law, an
official receipt of the relevant taxation or other authorities involved
for all amounts deducted or withheld as aforesaid.
5. Currencies
If under any applicable Law, whether as a result of judgment against
Lessee or the liquidation of Lessee or for any other reason, any payment
under or in connection with this Agreement is made or recovered in a
currency other than United States Dollars then, to the extent that the
payment (when converted to United States Dollars at the rate of exchange
on the date of payment or, in the case of the liquidation, the latest date
for the determination of liability permitted by the applicable Law) falls
short of the amount unpaid under this Agreement, Lessee shall, as a
separate and independent obligation, fully indemnify Lessor against the
amount of the short fall; for the purposes of this paragraph, "rate of
exchange" means the rate at which Lessor is able on the relevant date to
purchase United States Dollars in London with that other currency.
6. Default Interest
If any amount payable pursuant to this Agreement is not paid by Lessee on
the due date, Lessee shall pay to Lessor interest (after as well as before
judgment) on such amount, at the rate of LIBOR (as defined in Article
2.3.2 of this Appendix D, but for the duration of six months and as
applicable two Business Days before the Default), plus four per cent (4%)
per annum from the due date to the date of payment in full by Lessee to
Lessor, but in the event such rate shall be in excess of the highest rate
permitted by applicable law, then it shall mean the highest rate allowed
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by applicable law. All amounts of interest payable hereunder shall be
calculated on the basis of the actual number of days elapsed and a 360 day
year.
7. Set-off
At any time after a Default shall have occurred and be continuing, Lessor
shall be entitled to set-off or withhold from any amount due and payable
to Lessee under this Agreement or any other Operative Document, or any
amount standing to the credit of Lessee on any account, in or towards the
satisfaction of any amounts from time to time due and payable by Lessee
under this Agreement or any other Operative Document or any liability or
obligation of Lessee under this Agreement or any other Operative Document,
and shall be entitled to do so notwithstanding that any such amount or
amounts may not be expressed in the same currency.
8. Time at which payments are due
Supplemental Rent shall be due and payable on demand unless otherwise
expressly stated herein.
9. Purchase Option
Lessor grants to Lessee the right to purchase and to take delivery of the
Aircraft on the Expiry Date of this Agreement for a price equal to the
greater of the fair market value (as deferred to the penultimate sentence
of this paragraph, "FMV") of the Aircraft on the Expiry Date and {***}.
If Lessee elects to exercise its right to purchase the Aircraft, Lessee
shall do so by giving to Lessor written notice of such election at least
two hundred seventy (270) days prior to the Expiry Date. The FMV of the
Aircraft on the Expiry Date shall be established by an independent
internationally reputed aircraft appraiser appointed by mutual agreement
of Lessor and Lessee within one (1) month of the date of receipt by
Lessor of Lessee's notice of election to purchase. If Lessor and Lessee
shall be unable to agree on such aircraft appraiser, FMV shall be
established by a mutually agreed appraisal prepared and delivered by two
independent internationally reputed aircraft appraisers, one of which
shall be chosen by Lessor and one by Lessee. If such appraisers shall be
unable to agree on FMV, FMV shall be equal to the average of the fair
market values established by such appraisers. Any appraisal shall meet
internationally accepted standards and shall be binding upon Lessee and
Lessor. The appraisal procedure outlined in this
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Article 9 shall be referred to herein as the "Appraisal Procedure". The
FMV shall be equal in amount to the value that would be obtained as of the
Expiry Date in an arms'-length transaction between an informed and willing
purchaser under no compulsion to buy and an informed and willing seller
under no compulsion to sell with the Aircraft assumed to be in the
condition required upon the return thereof at the end of the Term in
accordance with Article 16 without considering the encumbrance of this
Agreement. All costs and expenses of the FMV appraisal shall be shared
equally by Lessor and Lessee.
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APPENDIX E
OPERATING CONDITION AT RE-DELIVERY
Upon redelivery of the Aircraft to Lessor, the Aircraft shall, subject to
ordinary wear and tear generally:
1. General Condition
(a) Be clean by airline standards;
(b) Have installed the Engines, and other equipment, Parts and
accessories and loose equipment as would remain installed in such
Aircraft, and shall be in a condition suitable for operation in
commercial service;
(c) Have in existence a valid Certificate of Airworthiness with respect
to the Aircraft issued by the Air Authority of the State of
Registration with a validity of at least nine (9) months after the
date of redelivery of the Aircraft to Lessor;
(d) Comply with the manufacturer's original specifications therefor;
(e) Have undergone, immediately prior to redelivery, a 3000 Check or any
subsequent higher inspection, if due within 3000 hrs, in accordance
with the Approved Maintenance Program, shall be free of any waivers,
and all deferred maintenance, if any, shall have been accomplished;
each engine and A.P.U. shall have had an inspection in accordance
with Article 16 confirming release for its remaining operational
life;
(f) All outstanding airworthiness directives and mandatory orders
affecting such model of Aircraft issued by the Air Authority which
require compliance during the Term shall have been accomplished;
(g) Have installed all applicable vendors' and manufacturers' service
bulletin kits theretofore received by Lessee free of charge that are
appropriate for the Aircraft and to the extent not installed, such
kits shall be furnished free of charge to Lessor;
(h) stripped of all Lessee's paint scheme and repainted through an
Authorized Maintenance Performer with Manufacturer approved paints
in white or any other basic color requested by Lessor; and
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(i) Have been inspected and treated with respect to corrosion as defined
in the Approved Maintenance Program.
2. Airframe and major components
The Airframe and major components shall have not less than the following
hours/cycles/months expected life remaining to the next Major Check and/or
overhaul:
-Airframe : 3000 hours and 12 months to
next Major Check;
-Engine : half life on average to next
Engine shop visit but in no
event less than 3000 hours;
-Main Landing Gear : 3000 cycles to next overhaul;
-Nose Landing Gear : 3000 cycles to next overhaul;
*The records as to remaining engine life shall be certified by Lessee in
writing to Lessor upon redelivery of the Aircraft to Lessor.
3. Components
(a) Each life-limited Part shall have not less than 3000 (Three
Thousand) flight hours or cycles of the total approved life
remaining to the scheduled replacement, in accordance with the
Approved Maintenance Program;
(b) Each hard-time controlled component shall have not less than 3000
(Three Thousand) Flight Hours or 3000 (Three Thousand) Cycles or 12
(twelve) months whatever is applicable, remaining to the next
scheduled overhaul/inspection, in accordance with the Approved
Maintenance Program;
(c) "On-condition" and "Condition Monitored" components shall be
serviceable;
(d) The A.P.U. shall be serviceable
4. Fuselage, Windows and Doors
(a) Fuselage shall be free of major dents and abrasions, scab patches
and loose or pulled or missing rivets;
(b) Windows shall be free of delamination, blemishes, crazing and shall
be properly sealed;
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<PAGE>
(c) Doors shall be free moving, correctly rigged and be fitted with
serviceable seals.
5. Wings and Empennage
(a) All leading edges shall be free from damage;
(b) All unpainted cowlings, fairings and other surfaces shall be
polished;
(c) Wings shall be free of fuel leaks.
6. Interior
(a) Ceilings, sidewalls and bulkhead panels shall be clean and free of
cracks and stains;
(b) All carpets and seat covers shall be in good condition, clean and
stain free and meet Air Authority fire resistance regulations;
(c) All seats shall be serviceable, in good condition and repainted as
necessary;
(d) All signs and decals shall be clean and legible;
(e) All emergency equipment having a calendar life shall have a minimum
of one year or one hundred per cent of its total approved life,
whichever is less, remaining.
7. Cockpit
(a) All decals shall be clean, secure and legible;
(b) All fairing panels shall be free of stains and cracks, shall be
clean, secure and repainted as necessary;
(c) Floor coverings shall be clean and effectively sealed;
(d) Seat covers shall be in good condition, clean and shall conform to
Air Authority fire resistance regulations;
(e) Seats shall be fully serviceable and shall be repainted as
necessary.
8. Cargo Compartments
(a) All panels shall be in good condition;
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<PAGE>
(b) All nets shall be in good condition;
9. Landing Gear and Wheel Wells
(a) Shall be clean, free of leaks and repaired as necessary;
(b) All decals shall be clean, secure and legible.
10. Corrosion
(a) Entire fuselage shall be substantially free from corrosion and shall
be adequately treated and an approved corrosion prevention program
shall be in operation;
(b) Fuel tanks shall be free from contamination and corrosion and a tank
treatment program shall be in operation.
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<PAGE>
APPENDIX F
AIRCRAFT DOCUMENTS
FOKKER 100 AIRCRAFT
Aircraft Documents shall include the documents referred to in Table I ("Aircraft
Documentation"), Section (D), Exhibit (D) of the Support Services Agreement No.
ASSAF-110 between FAUSA and Lessee.
Aircraft Documents shall also include all logs, certificates and data, and
inspection, modification and overhaul records, relating to the Aircraft and
required to be maintained by the Air Authority and/or by the Approved
Maintenance Program.
Upon Expiry Date or upon earlier termination of the Agreement all Aircraft
Documents shall be redelivered by Lessee to Lessor complete and fully updated
simultaneously with the redelivery of the Aircraft.
<PAGE>
APPENDIX G
LEGAL OPINION
[Certain provisions of this opinion may be given by different law firms or
individuals: revision required if the Bank is a party]
[Closing Date]
[_____________________]
1199 N. Fairfax Street
Alexandria, VA 22314
Dear Sirs:
We have acted as counsel to Midway Airlines Corporation, a Delaware corporation
("Lessee"), in connection with the execution and delivery by Lessee of the
Aircraft Operating Lease Agreement AOLAF-113, dated as of November 11, 1993
between First Security Bank of Utah, N.A., not in its individual capacity but
solely as trustee ("Lessor") and Lessee (the "Agreement"). Except as otherwise
herein defined, the terms used in this opinion letter have the same meanings as
the terms used in the Agreement.
We have examined the Agreement and the other Operative Documents. We have also
examined the original, or photostatic or certified copies of such agreements and
records of Lessee and of public officials, orders and certificates of regulatory
bodies and courts of competent jurisdiction and such other documents as we have
deemed relevant and necessary. We have relied upon the accuracy of the factual
information set forth in all such documents.
In our examination we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as photostatic or certified
copies and the authenticity of the originals of such latter documents.
Based upon our examination, we are of the opinion that:
1. Lessee is a corporation duly incorporated and organized and validly
existing in good standing under the laws of the State of Delaware, and has
all requisite corporate power and authority to carry on its business as
presently conducted and to execute and deliver, and to incur and perform
its obligations under the Agreement and the other Operative Documents and,
to the best of our knowledge, no steps have been taken or are being taken
to appoint a receiver or liquidator over, or to wind up, Lessee.
<PAGE>
2. The execution, delivery and performance by Lessee of the Agreement and the
other Operative Documents and the compliance by Lessee with the terms and
provisions thereof have been duly authorized by all necessary corporate
action, do not require any approval of stockholders of Lessee, and will
not violate any provision of law or any governmental rule or regulation or
any judgment, decree, or order binding on Lessee, or of the Certificate of
Incorporation or By-laws of Lessee.
3. Lessee is not in violation of any provision of its Amended and Second
Restated Certificate of Incorporation as that document may be further
amended and/or restated (hereafter referred to as the Certificate of
Incorporation), or By-laws, and to the best of our knowledge, is not in
violation of any provision of any agreement, instrument or document to
which it is a party or by which it is bound, nor has there occurred and is
continuing any event which, under the provision of any such agreement,
instrument, instrument or document, which the lapse of time or giving of
notice, or both, would constitute a default by Lessee. Lessee is not in
violation of any law, rule or regulation, or any order, injunction or
decree of any court or administrative body applicable to it, which
violation could materially and adversely affect its business, property or
assets, operations or condition, financial or otherwise.
4. The Agreement and the other Operative Documents have been duly executed
and delivered by Lessee and constitute the legal, valid and binding
obligations of Lessee, enforceable in accordance with their respective
terms, except as may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights
generally (including, without limitation, laws regarding fraudulent
conveyance and equitable subordination) and by general principles of
equity (regardless of whether enforcement is sought in a proceeding in
equity or at law), and (ii) applicable laws which may affect certain of
the remedies provided in the Agreement and the other Operative Documents
but which do not, in our opinion, make the remedies provided therein
inadequate for the practical realization of the benefits afforded thereby.
5. No consent, approval or authorization of, nor registration, qualification,
designation, declaration of filing with, any governmental authority in the
United States of America or any political subdivision or instrumentality
therein or thereof is required in connection with the execution, delivery
or performance by lessee of the Agreement and the other Operative
Documents, or any other document or
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<PAGE>
instrument contemplated thereby, except for (i) the registration of the
Aircraft in Lessor's name with the Federal Aviation Administration (the
"FAA") pursuant to the Federal Aviation Act of 1958, as amended (the
"Act"), the Equipment Lease, and the Credit and Security Agreement; the
filing of the Agreement for recordation with the FAA pursuant to, and in
accordance with, the Act; and (iii) the filing of financing statements
with respect to the interest created by the Agreement under the Uniform
Commercial Code with the Secretary of the State of the State of Illinois.
6. No other filing or recording of any document is necessary under the laws
of the United States or [ ] in order to perfect Lessor's title to the
Aircraft under the Agreement and Aircraft Equipment under the Equipment
Lease and to perfect Lessor's security interest in the Collateral under
the Credit and Security Agreement as against Lessee and any third parties
within the United States.
7. No United States Federal withholding taxes will be applicable to the
rentals and other payments made by Lessee under the Agreement and the
other Operative Documents.
8. No tax will be imposed by any state of the United States of America or any
political subdivision thereof on Lessor's interest in the Aircraft solely
by virtue of the execution, delivery and performance of the Agreement and
the other Operative Documents.
9. In any action to enforce the Agreement commenced in courts of the state of
New York or a United States District Court located in New York, such
courts would give effect to the choice of the parties thereto of New York
law as the governing law thereof.
10. The obligations of the Lessee for the payment of money under the Agreement
and the other Operative Documents rank at least equally and ratably (pari
pasu) with respect to priority and security with all other unsecured
obligations of the Lessee.
11. No claims of creditors and/or possessory liens will rank ahead of the
respective rights and interests of the Lessor, Head Lessor and the Bank in
the Aircraft.
We are members of the bar of the state of New York and [______] and we are
not, and do not purport to be, experts in the laws of any other
jurisdiction other than the Federal laws of the United States of America.
The opinions set forth in this opinion letter are limited solely to the
laws of the
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<PAGE>
State of New York, the Uniform Commercial Code, as applicable in the State
of Illinois, the corporate law of the State of Delaware and the United
States of America.
Very truly yours,
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<PAGE>
APPENDIX H
CERTIFICATE OF INSURANCE
To: (Lessor)
CERTIFICATE OF INSURANCE
THIS IS TO CERTIFY that we in our capacity as insurance brokers have effected
insurance (reinsurance) on behalf of:
ASSURED ______
(REASSURED) ______
as herein described in respect of:
AIRCRAFT: FOKKER 100 REGISTRATION ______
Subject to policy terms, conditions, limitations and exclusions the insurance
covers:
1) HULL ALL RISKS of loss or damage to the Aircraft for an Agreed Value
of US$______ (United States Dollars _____).
This policy includes Excluded Coverage Endorsement (Aircraft Hull)
AVN5l or equivalent.
This insurance is subject to a deductible (other than total loss,
arranged total loss or constructive total loss) of US$______ (United
States Dollars ______) any one accident.
The geographical limits of the insurance are worldwide and the
insurance is in force during the period _____.
2) If operated outside the United States and Canada, HULL WAR and
ALLIED PERILS insurance for the Aircraft for an Agreed Value of
US$______ (United States Dollars ______) covering the risks excluded
from the Hull All Risks insurance by the terms of the War, Hijacking
and Other Perils Exclusion Clause AVN.48B except paragraph (b)
thereof and includes cover in respect of confiscation,
nationalization, seizure, restraint, detention, appropriation for
title or use by or under the order of the Government or public or
local authority of the State of Registration.
<PAGE>
This insurance is not subject to a deductible.
(The insurance for the Aircraft also covers other aircraft of the
Assured's fleet and is subject to an overall limit in respect of all
aircraft insured of ______ in the aggregate.)
The geographical limits of the insurance are worldwide and the
insurance is in force during the period ______.
3) Comprehensive Airline Liability including aircraft Third Party
Liability; Passenger and Crew Liability (including Baggage and
Personal Effects), Cargo Liability, Mail Liability, Personal Injury
Liability Contractual Liability, Hangar Keeper's Liability, Aircraft
Products Liability and General Third Party Liability for a combined
single limit of US$______ (United States Dollars ______) any one
occurrence each aircraft but limited in respect of Personal Injury
(as covered by Personal Injury Extension clause AVN.60) to the
equivalent of US$25,000,000.00 (United States Dollars Twenty Five
Million) any one offence and in the aggregate.
This insurance is subject to the War, Hijacking and Other Perils
Exclusion AVN.48B with paragraphs (a) and (c) through (g) deleted
subject to Extended Coverage Endorsement (Aircraft Liabilities)
AVN52C.
This insurance is subject to deductibles in respect of Baggage and
Personal Effects of US$1,250.00 (United States Dollars One Thousand
Two Hundred Fifty) any one claim and in respect of Cargo and Mail
Liability of US$5,000.00 (United States Dollars Five Thousand) any
one claim. Such deductibles do not apply to claims arising from
accidents to the carrying aircraft.
The geographical limits of this insurance are worldwide and the
insurance is in force during the period ________.
4) ALL RISKS INSURANCE in respect of any Engine and Parts while any
such items are not installed on the Aircraft and in respect of which
cover is not provided under the Hull All Risks insurance 1) above
for not less than the full replacement value and/or the Hull War and
Allied Perils Insurance 2) above including cover in respect of War
and Allied Perils except that War cover is provided only in respect
of Marine and Air Transits.
This insurance is subject to a limit of US$_______
-2-
<PAGE>
(United States Dollars ______).
This insurance is subject to a deductible of US$______ (United
States Dollars ______) any one accident.
The geographical limits of the insurance are worldwide and the
insurance is in force during the period ______ .
THE INSURERS (REINSURERS) have been advised that Lessor has entered
into a lease agreement with Lessee in respect of the Aircraft and
insurers (reinsurers) have agreed to endorse the insurances as
follows:
A) In respect of All Risks Aircraft Hull insurance, Aircraft Hull
War and Allied Perils insurance and All Risks insurance on
Engines and Parts to:
(i) name the Lessor, Head Lessor and the Bank and their
respective successors and assigns as Additional
Assureds;
(ii) provide that all claims in respect of the Aircraft,
Engines and Parts shall be payable to Lessor or as it
may direct, such payee to be named Loss Payee; provided
that partial loss amounts up to $250,000 shall be
payable to Lessee unless the insurers have been given
notice that a Default has occurred;
(iii) if applicable, provide in respect of Hull All Risks and
Hull War and Allied Perils for a 50/50 Claims Settlement
Clause in the form of AVS.103.
B) In respect of Comprehensive Airline Liability insurance to:
(i) name the Lessor, its successors and assigns and its
shareholders, subsidiaries, directors, officers, agents,
employees and the Indemnitees as Additional Assureds.
(ii) provide that the insurance shall operate in all respects
as if a separate policy had been issued covering each
party insured hereunder, but this provision shall not
operate to include any claim howsoever arising in
respect of loss or damage to the Aircraft, Engines and
Parts insured under the All Risks
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<PAGE>
Hull, Hull War and Allied Perils or All Risks insurance
of the Assured.
Notwithstanding the foregoing the total liability of
insurers in respect of any and all Assureds shall not
exceed the limits of liability stated in the policy.
C) In respect of all insurances to:
(i) be effective worldwide except for territories approved
in writing by the Lessor.
(ii) provide that insurers waive all rights of subrogation
against the Lessor, its subcontractors, FAUSA, Fokker
Aircraft B.V., the Head Lessor, the Bank, and their
respective officers, directors, employees, servants,
agents, successors and assigns.
(iii) provide that in the event that the insurances are
cancelled (including cancellation for non payment of
premium) or are materially changed such cancellation or
change shall not be effective as to the interest of the
Additional Assureds until thirty (30) days (but seven
(7) days or such lesser period as is customarily
available in accordance with policy conditions in
respect of war and allied perils) after confirmed
receipt by Lessor of written notice by insurers of such
cancellation or change.
(iv) provide that in respect of the interest of the
Additional Assureds the insurances shall not be
invalidated by any act, neglect, omission,
misrepresentation or non-disclosure on the part of the
Lessee or any other party other than the Additional
Assured seeking to make a claim thereunder and shall
insure Lessor, and each Additional Assured regardless of
any breach or violation of any warranties, declarations
or conditions contained in such policies by the Lessee
or any other party other than the Additional Assured
seeking to make a claim thereunder.
(v) provide that the Additional Assureds shall have no
responsibility for premiums and Insurers shall waive any
right of set-off or
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<PAGE>
counter claim against the Additional Assureds except in
respect of outstanding premium in respect of the
Aircraft, Engines and Parts subject of a claim.
(vi) not provide for any deductible or self-insurance other
than the deductible allowed above.
(vii) be primary without right of contribution from any other
insurance carried by Lessor, Lessee or any other party.
D) if required, in respect of reinsurance to:
(i) provide that cover shall be identical to the cover
provided by the original insurances and be subject to
the same terms and conditions as the original
insurances.
(ii) provide that so far as the respective interests of the
Additional Assureds are concerned the reinsurance shall
not be invalidated by any act, neglect, omission,
misrepresentation or non-disclosure on the part of the
reinsured party.
(iii) provide that in respect of All Risks Aircraft Hull
insurance, Aircraft Hull War Risk and Allied Perils
insurance as described above and All Risks insurance on
any Engine and Parts as described above, the reinsurers
and the reassured hereby agree that in the event of any
claim arising under the relevant reinsurances the
reinsurers shall in lieu of payment to the reassured,
its successors in interest and assigns pay to the Loss
Payee specified in the primary insurances all sums
payable under or in connection with such reinsurances by
virtue of any reinsured loss of, or damage to, the
Aircraft, Engines or Parts, without any deduction or
deductions whatsoever, other than any outstanding
premium in respect of the Aircraft, Engines or Parts the
subject of the claim, it being understood and agreed
that any such payment by the reinsurers shall fully
discharge and release the reinsurers from any and all
further liability in connection therewith.
-5-
<PAGE>
(iv) provide that in respect of Comprehensive Airline
Liability insurance as described above, the reinsurers
and reassured hereby agree that in the event of any
claim arising under the relevant reinsurances, the
reinsurers shall in lieu of payment to the reassured,
its successors in interest and assigns pay to the person
or party who has sustained the relevant loss (or as
reimbursement of any payment made by any Additional
Assured) all sums payable under such reinsurances by
virtue of such reinsured loss, without any deduction or
deductions whatsoever, it being understood and agreed
that any such payment by the reinsurers shall fully
discharge and release the reinsurers from any and all
further liability in connection therewith;
(v) provide that the reinsurers and reassured agree that in
the event that the reassured, its successors in interest
and assigns shall at any time be or become insolvent or
suspend business or file a petition in bankruptcy or be
adjudicated insolvent or bankrupt or admit in writing
its inability to pay its debts as they become due, or
make a general assignment for the benefit of creditors
or that a receiver or liquidator or assignee or trustee
or state commissioner of insurance be appointed in
respect of the reassured its successors in interest or
assigns or any substantial part of its property for the
purpose of liquidation on account of insolvency, then
the reinsurers, in lieu of payment to the reassured its
successors in interest or assigns, shall pay upon demand
that portion of any loss due to the party entitled
thereto under the terms of the original insurance for
which such reinsurers would under the terms of the
reinsurance be liable to pay the reassured, its
successors in interest or assigns, less any amounts
already paid, it being understood and agreed that any
such direct payment by reinsurers shall fully discharge
and release the reinsurers from any and all further
liability for such payment made.
-6-
<PAGE>
APPENDIX I
To: (Lessor)
BROKER'S LETTER OF UNDERTAKING
We confirm that insurances (reinsurances) are in effect on and in respect of
aircraft FOKKER 100 REGISTRATION ______ for the period and in respect of the
risks as set out in the attached Certificate of Insurance.
We undertake to hold the insurance (reinsurance) slips or contracts and the
policies or any policies substituted therefore and the benefit of the insurance
(reinsurances) to the extent of your interest therein, to your order.
We further undertake:
1. to pay to the loss payee as stated in the Certificate of Insurance
(Reinsurance) without set off or deduction of any kind any and all
proceeds of the insurance (reinsurance) collected by us from the insurers
(reinsurers) in respect of loss or damage to the Aircraft, Parts, Engines,
components and equipment except for any outstanding premiums due in
respect of the Aircraft and the Parts, Engines, components and equipment.
2. to advise you promptly upon our becoming aware of:
(i) any change or alteration made or proposed to be made to the
insurances (reinsurances) which would be adverse to your interest.
(ii) any act or omission or any event which in our opinion may invalidate
or render unenforceable in whole or in part the insurance
(reinsurance) as far as your interest is concerned.
3. to advise you immediately:
(i) upon our receiving or becoming aware of any notice of cancellation
(including for non payment of premium) or material change given by
insurers (reinsurers) or the Assured.
(ii) if we have not received renewal instructions fifteen (15) business
days prior to the renewal date of the insurances (reinsurances) and
in the event of our receiving instructions to renew to advise you
promptly of the details thereof.
<PAGE>
(iii) upon our ceasing to be insurance brokers to the Assured (Reassured).
The above undertakings are given:
a) subject to our lien, if any, on the policies referred to above for
premiums due under such policies in respect of the aircraft and
subject to the insurers' right of cancellation an default in payment
of such premiums, but we undertake to advise you immediately if any
such premiums are not paid to us in due time in accordance with our
accounting procedures with the assured and insurers and to give you
a reasonable opportunity of paying such amounts of such premiums
outstanding before notification of non-payment of premiums to
insurers (reinsurers).
b) subject to our continuing appointment for the time being as
insurance brokers to Assured (Reassured).
All notices or advises given in accordance with the above undertakings shall be
communicated by telefacsimile or telex to the addressee at the above address.
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<PAGE>
APPENDIX J
FAA POWER OF ATTORNEY
This POWER OF ATTORNEY in favor of LESSOR [HEAD LESSOR] ("Lessor") dated
_____________, 199__ from MIDWAY AIRLINES CORPORATION ("Lessee") [is consented
to by BANK ("Bank")].
RECITALS:
A. Lessor and Lessee have entered into an Aircraft Operating Lease Agreement
(AOLAF No 113) dated as of November 11, 1993 (the "Lease Agreement") with
respect to the Fokker 100 aircraft, serial no. 11475, U.S. registration
no. _______ (the "Aircraft").
B. Capitalized terms used herein and not otherwise defined shall have the
respective meanings ascribed to such terms in the Lease Agreement.
NOW, THEREFORE, for good and valuable consideration, the adequacy of which
is hereby acknowledged, it is hereby agreed as follows:
Lessee hereby irrevocably constitutes and appoints Lessor, with full power
of substitution, for and in the name and on behalf of Lessee, as the act and
deed or otherwise of Lessee:
to direct, authorize and instruct the insurer or insurance broker with
respect to the Aircraft, as if Lessor were policy holder, pursuant to
Article 11.6 of the Lease Agreement, in order to initiate, process and
settle any insurance claim with respect to the Aircraft, Engines or Parts;
to execute, sign, deliver, authorize and file such instruments legally
necessary for any and all actions necessary to take possession and effect
redelivery of the Aircraft, Engines or Parts upon termination of the Lease
Agreement due to an Event of Default;
to execute, sign, deliver and file all such instruments requested by
Lessor [Head Lessor] that may be required to deregister the Aircraft from
the FAA, or to terminate the Lease for the Aircraft that is recorded at
the FAA, or that may be deemed proper in or in connection with all or any
of the purposes aforesaid, and to appoint substitutes or agents to take
any such action on its behalf.
<PAGE>
Lessee hereby ratifies and confirms and agrees to ratify and confirm any
direction, authorization and instruction of Lessor [Head Lessor] taken pursuant
to this Power of Attorney.
This Power of Attorney shall expire on _________ 200_ [11 years from the
Delivery Date of the Aircraft] or earlier termination of the Lease.
IN WITNESS WHEREOF, Lessee has duly caused this Power of Attorney to be
executed on the date first set forth above.
MIDWAY AIRLINES CORPORATION
By:
-------------------------
Name:
Title:
Consented and Agreed:
[BANK]
By:
-------------------------
Name:
Title:
(CERTIFIED RESOLUTIONS OF LESSEE AUTHORIZING THIS
POWER OF ATTORNEY TO BE ATTACHED]
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<PAGE>
APPENDIX K
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- -----------------------------------X
In Re :
:
: Chapter 11 Case
JET EXPRESS, INC., : Case No. 91 B 12287 (FGC)
:
Debtor. :
- -----------------------------------X
ORDER OF CONFIRMATION
Jet Express, Inc., the debtor in this Chapter 11 case (the "Debtor"),
having filed with the Court the Debtor's Plan of Reorganization under Chapter 11
of the United States Bankruptcy Code, dated on or about August 10, 1993, (the
"Plan"; capitalized terms used in this Order and not otherwise defined shall
have the respective meanings ascribed to such terms in the Plan); and the
Debtor's Disclosure Statement, dated September 18, 1993 (the "Disclosure
Statement"), having been filed with and approved by this Court pursuant to this
Court's order (the "Disclosure Statement Order") as containing "adequate
information" pursuant to section 1125 of title 11, United States Code (the
"Bankruptcy Code") and copies of (a) the Plan, (b) the Disclosure Statement and
(c) the appropriate ballot(s) (for those Creditors entitled to vote on the
Plan), having been transmitted to all Creditors entitled to receive the same
pursuant to the Disclosure Statement Order, the United States Trustee, and those
parties who have filed notices of appearance in the Debtor's Chapter 11 case
pursuant to Bankruptcy Rule 2002, the Securities and Exchange Commission, the
District Director of Internal Revenue for the district in which this Chapter 11
case is pending, and the United
<PAGE>
States Attorney for the Southern District of New York, all in accordance with
the Disclosure Statement Order; and the Disclosure Statement Order having fixed
(a) an or before October 8, 1993, at the last date and time by which all
objections must be properly completed, executed, marked and received by the
Debtor at one of the addresses specified for that purpose in the Disclosure
Statement and in the Published Notice described in the Disclosure Statement
Order, in order to be considered as acceptances or rejections of the Plan; and
This Court having set a confirmation hearing on the Plan of Reorganization
filed by Jet Express, Inc., the Debtor in the above captioned case (the
"Debtor") for the 13th day of October, 1993, at 11:00 a.m., to be heard before
this Court at the United States Bankruptcy Court, 67 Merchants Row, Opera House,
2nd Floor, Rutland, Vermont, and this Court having fixed October 8, 1993, as the
date for the filing of any objections to confirmation of the Plan, and an
objection having been filed by Allstate Financial Corporation, and this Court
having heard the evidence of the Debtor in accordance with 11 U.S.C. ss.1129 and
finding that the objection of Allstate Financial Corporation is denied as moot,
and being otherwise sufficiently advised;
The Court makes the following Findings of Fact and Conclusions of Law
setting forth the reasons for the Court's issuance of this Order confirming the
Plan, overruling the outstanding Objections, and granting the other relief
provided
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<PAGE>
for herein:
THE COURT HEREBY FINDS THAT:
1. The Plan of Reorganization proposed by the Debtor, is found to be fair
and equitable and in the best interest of the Debtor and the creditors.
2. The impaired classes entitled to vote upon the Plan of Reorganization,
being Classes B-1, C-1, and C-2, as defined by the Plan of Reorganization, have
voted in favor of the Plan of Reorganization and have accepted the Plan of
Reorganization in conformity with 11 U.S.C. ss.1129(7).
3. The Plan complies with the applicable provisions of the Bankruptcy Code
as required by section 1l29(a)(1) thereof.
4. The Debtor, as proponent of the Plan, has complied with the applicable
provisions of the Bankruptcy Code as required by section 1129(a)(2) thereof.
5. The Plan has been proposed in good faith and not by any means forbidden
by law as required by section 1129(a) (3) of the Bankruptcy Code.
6. Any payment made or to be made by the Debtor, or by a person issuing
securities or acquiring property under the Plan, for services or for costs and
expenses in or in connection with these Chapter 11 cases, or in connection with
the Plan and incident to these Chapter 11 cases, shall be subject to the
approval of the Court as reasonable as required by section 1129(a)(4) of the
Bankruptcy Code.
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<PAGE>
7. At the Confirmation Hearing or in the Disclosure Statement, the Debtor
has disclosed the identity and affiliations of the individuals proposed to
serve, after the Effective Date of the Plan, as directors and officers of the
reorganized Debtor. The continuance or appointment of such individuals as
directors and to such offices is consistent with the interests of Creditors and
Equity Interest Holders and with public policy, and the Debtor has disclosed the
identity of any insider that will be employed or retained by the reorganized
Debtor, and the nature of any compensation for such insider, all as required by
section 1129(a)(5) of the Bankruptcy Code.
8. The Plan has not been accepted by each holder of a Claim or Equity
Interest of every class that is impaired under the Plan; however, each
non-accepting holder of a Claim or Equity Interest of each such class will
receive or retain under the Plan on account of such Claim or Equity Interest
property of a value, as of the Effective Date, that is not less than the amount
that such holder would so receive or retain if each Debtor were liquidated under
Chapter 7 of the Bankruptcy Code on such date as required by section
1129(a)(7)(A) thereof. With respect to any Equity Interest, the Plan is in
compliance with section 1129(a)(7).
9. Except to the extent that the holder of a particular Claim has agreed
to a different treatment of such Claim (including, without limitation, such
agreements relating to
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<PAGE>
certain deferrals of rent and certain claims incurred in the ordinary course of
the Debtor's business), the Plan complies with section 1129(a)(9) of the
Bankruptcy Code.
10. In view of the foregoing, the Court finds that the Plan is feasible
and that confirmation and consummation of the Plan is not likely to be followed
by the liquidation, or the need for further financial reorganization of the
reorganized Debtor, all as required by section 1129(a)(11) of the Bankruptcy
Code.
11. All fees payable under 28 U.S.C. ss. 1930 have been paid, or the Plan
provides for the payment of all such fees on the Effective Date as required by
section 1129(a)(12) of the Bankruptcy Code.
12. The Plan does not discriminate unfairly, and is fair and equitable,
with respect to each class of Claims or Equity Interests that is impaired under,
and has not accepted, the Plan, as required by section 1129(b)(1) of the
Bankruptcy Code.
13. Holders of Equity Interests will not receive or retain any property
under the Plan on account of much Equity Interests and are deemed to have
rejected the Plan. Such holders would not receive or retain any property on
account of such Equity Interests if each Debtor were liquidated under Chapter 7
of the Bankruptcy Code on the Effective Date.
14. There is no class of Claims or Equity Interests junior to Class C-2.
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<PAGE>
15. It appears that the Debtor will satisfy each and every condition
precedent to the effectiveness of the Plan set forth in the Plan.
16. After the Effective Date, the reorganized Debtor shall continue to
engage in business and the Plan does not provide for the liquidation of all or
substantially all of the property of the Debtor's estates.
17. The Debtor has made a careful review of its executory contracts and
unexpired leases, and it is a reasonable exercise of the Debtor's business
judgment for it to reject all such executory contracts and unexpired leases
other than the "Assumed Agreements" referred to in the Plan, i.e., those
executory contracts and unexpired leases that have either already been assumed
pursuant to an order of the court or are the subject of a pending motion to
assume. The assumption on the Effective Date pursuant to section 365 of the
Bankruptcy Code of the agreements identified in the Plan, including those
agreements entered into with Fokker Aircraft U.S.A., Inc., pursuant to a prior
Order of this Court, is the result of the exercise of sound business judgment by
the Debtor, and is in the best interest of the Debtor, its respective bankruptcy
estates, and its creditors.
Therefore, THIS COURT HEREBY CONCLUDES, as a matter of law, that:
1. This is a core proceeding within the meaning of 28 U.S.C. ss.157.
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<PAGE>
2. The Court shall confirm a plan if it satisfies all the requirements of
section 1129 of the Bankruptcy Code.
3. Notice and distribution of the Plan and the Disclosure Statement were
appropriate and complied with the applicable provisions of the Bankruptcy Code
and the Bankruptcy Rules. The opportunity for a hearing on these matters was
full and adequate.
4. The Plan complies with the applicable provisions of the Bankruptcy Code
as required by section 1129(a)(1) thereof, and the Debtor, as proponent of the
Plan, has complied with the applicable provisions of the Bankruptcy Code as
required by section 1129(a)(2) thereof.
5. The Plan has been proposed in good faith and not by any means forbidden
by law as required by section 1129(a)(3) of the Bankruptcy Code.
6. The Plan is feasible and provides adequate means for implementation of
the Plan.
7. The Plan of Reorganization proposed by the Debtor is hereby confirmed
according to the terms and conditions set forth therein and the Debtor is hereby
authorized to take any and all actions set forth in the Plan of Reorganization.
8. The Debtor shall file a final accounting under its Plan of
Reorganization on or before the 31st day of March, 1994.
9. The United States Bankruptcy Court for the Southern District of New
York shall retain exclusive jurisdiction
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<PAGE>
over all matters arising under, or arising in, or related to the Debtor's
Chapter 11 case or the Debtor's Plan of Reorganization, as confirmed, to the
full extent permitted by 28 U.S.C. ss.1334, to hear, and to the full extent
permitted under 28 U.S.C. ss.157, to determine, all proceedings in respect
thereof, including, but not limited to, proceedings to supervise the Plan of
Reorganization. Specifically, without limitation, and if applicable law
provides, the Bankruptcy Court shall have jurisdiction:
(a) to hear any and all objections or settlements relating to the
allowance of claims;
(b) to hear any and all applications for payment of fees to attorneys or
other professionals pursuant to ss.ss.330 or 503 of the Bankruptcy Code, or for
payment of any other fees or expenses authorized to be paid or reimbursed by the
Debtor under the Bankruptcy Code, and any and all objections thereto;
(c) to hear any and all pending applications for rejection, the assumption
or the assumption and assignment, as the case may be, of unexpired leases and
executory contracts to which the Debtor is a party or with respect to which they
may be liable, and any and all claims arising therefrom;
(d) to hear any and all motions, applications, adversary proceedings and
contested or litigated matters properly before the Bankruptcy Court;
(e) to approve modifications of or amendments to the Plan of
Reorganization;
-8-
<PAGE>
(f) to hear disputes regarding the implementation or consummation of the
Plan of Reorganization;
(g) to hear all controversies, disputes, settlements and suits which may
arise in connection with the interpretation or enforcement of this Plan of
Reorganization, the orders of this Court, or in connection with the enforcement
of remedies under this Plan of Reorganization;
(h) to hear during the time period the Chapter 11 case is open, all
controversies, disputes and issues dealing with the discharge of the Debtor or
the dischargeability of any claims;
(i) to approve compromises, settlements, or adjudications of any
objections to claims;
(j) to estimate disputed, contingent and unliquidated claims for purposes
of distribution under the Plan of Reorganization;
(k) to correct any defect, cure any omission, or reconcile any
inconsistency in the Plan or Reorganization;
(l) to resolve issues of disputes relating to the division, title, sale or
liquidation of the assets of the Debtor;
(m) to enter a final decree closing this case; and
(n) to hear and determine such other matters as may arise in connection
with this Plan or Reorganization or the Confirmation Order.
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<PAGE>
10. The Debtor and the United States of America, through its Department of
Treasury-Internal Revenue Service, having stipulated that this Confirmation
Order and the Bar Date of October 15, 1993, which has been ordered by this
Court, shall not be effective as to the claims of the United States of America
regarding pre-petition and post-petition taxes alleged to be due and payable,
that this Court shall retain jurisdiction over any claim of the United States of
America and any objections which may be made by the Debtor thereto.
Now, upon the motion of the Debtor and after due deliberation, the Court
hereby ORDERS, ADJUDGES AND DECREES THAT:
1. The Plan be, and it hereby is, confirmed.
2. The Debtor is hereby authorized to assume all executory contracts and
unexpired leases that are the subject of a motion to assume pending on the date
hereof, either without amendment, or with such amendments thereto as shall be
agreed upon between the Debtor party thereto and the non-Debtor parties thereto,
and to reject all executory contracts and unexpired leases that are not assumed
Agreements under the Plan. The agreements identified in the Plan, shall be and
hereby are assumed pursuant to section 365 of the Bankruptcy Code, effective as
of the Effective Date.
3. In accordance with this Court's Interim Order dated September 30, 1993
permitting Debtor to obtain Credit on a superpriority basis (the "Interim
Order") the Interim Order is
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<PAGE>
hereby made final.
4. In accordance with section 1141 of the Bankruptcy Code, the Plan and
its provisions shall be binding upon the Debtor and its successors (including
the reorganized Debtor) and any other entity created pursuant to the Plan, any
Person or entity issuing securities under the Plan, any Person or entity
acquiring or receiving property under the Plan, any lessor or lessee of property
to or from the Debtor, and any holder of a Claim against or Equity Interest in
the Debtor, whether or not the Claim or Equity Interest of such Creditor or
Equity Interest Holder is impaired under the Plan and whether or not such
Creditor or Equity Interest Holder has filed, or is deemed to have filed, a
proof of Claim or Equity Interest, or has accepted or rejected the Plan.
5. In accordance with section 1141 of the Bankruptcy Code, and except for
any security interests provided under the Plan or contemplated by the Financing
Transaction, any property transferred or otherwise dealt with in the Plan shall
be free and clear of all Claims against and Equity Interests in the Debtor, and
all such property of the Debtor's estate shall, on the Effective Date, vest in
those entities as designated in and provided for by the Plan. Pending the
occurrence of the Effective Date, all such property shall remain property of
Debtor's bankruptcy estate, and such bankruptcy estate shall continue until the
occurrence of the Effective Date.
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<PAGE>
6. In accordance with the Plan and section 1141 of the Bankruptcy Code,
except as otherwise specifically provided in the Plan, upon the occurrence of
the Effective Date the consideration distributed under the Plan shall be in
exchange for and in complete satisfaction, discharge, release, and termination
of, all Claims of any nature whatsoever against any Debtor or any of its assets
or properties and all Equity Interests in any Debtor; and except as otherwise
provided herein or in the Plan, upon the Effective Date (i) the Debtor shall be
discharged and released pursuant to section 1141(d)(1)(A) of the Bankruptcy Code
from any and all Claims, including but not limited to demands and liabilities
that arose before the Effective Date, all Stockholder Actions as they relate to
such Debtor, all debts of the kind specified in section 502(g), 502(h) or 502(i)
of the Bankruptcy Code, whether or not (a) a proof of claim based upon such debt
is filed or deemed filed under section 501 of the Bankruptcy Code; (b) a Claim
based upon such debt is allowed under section 502 of the Bankruptcy Code; or (c)
the holder of a Claim based upon such debt has accepted the Plan, and (ii) all
rights and interests of holders of Equity Interests in each Debtor shall be
determined pursuant to section 1141(d)(1)(B) of the Bankruptcy Code. This Order
shall be a judicial determination, effective on the occurrence of the Effective
Date, of discharge and termination of all liabilities of and all Claims against,
and all Equity Interests in, the Debtor, except as otherwise specifically
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<PAGE>
provided in the Plan. On the Effective Date, as to every discharged debt, Claim
or Equity Interest is permanently enjoined and precluded from asserting against
the reorganized Debtor, or against its assets or properties or any transferee
thereof, any other or further Claim or Equity Interest based upon any document,
instrument or act, omission, transaction or other activity of any kind or nature
that occurred prior to the Effective Date, except as expressly set forth in the
Plan.
7. In accordance with section 1142 of the Bankruptcy Code, the Debtor, the
reorganized Debtor, and any other entity created or Person designated pursuant
to the Plan be, and they hereby are, authorized, empowered and directed to
issue, execute, deliver, file and record any document, and to take any action
necessary or appropriate to implement, effectuate and consummate the Plan and
any transactions contemplated thereby in accordance with their respective terms,
including the agreements with Fokker Aircraft U.S.A., Inc., whether or not any
such document is specifically referred to in the Plan, and without further
application to or order of this Court. Pursuant to section 1142(b) of the
Bankruptcy Code, but subject to the retained jurisdiction of the Court to
resolve disputes as provided in the next sentence, all Persons holding Claims or
Equity Interests which are dealt with under the Plan be, and they hereby are,
directed to execute, deliver, file or record any document, and to take any
action necessary to implement, effectuate and consummate
-13-
<PAGE>
the Plan in accordance with its terms, and all such Persons shall be bound by
the terms and provisions of all documents to be executed by them in connection
with the Plan, whether or not such documents actually have been executed by such
Persons. The Court retains jurisdiction to hear and determine any dispute
concerning the proposed application of section 1142 of the Bankruptcy Code and
of the preceding sentence. The foregoing shall not, however, in any manner
adversely affect or impair any of the rights of the parties to the Investment
Agreement or the Plan Debt Financing pursuant to, or release any such party from
any condition under, the agreements and instruments relating thereto.
8. All steps necessary (i) for the reorganized Debtor to be duly
incorporated and (ii) to effect the mergers, contributions of assets and
assumptions of liability as contemplated by the Plan be, and they hereby are,
authorized and approved.
9. Pursuant to the Plan, from and after the Effective Date, the reorganized
Debtor my use, operate and deal with their respective assets, and may conduct
and change their businesses, without any supervision by the Bankruptcy Court or
the Office of the United States Trustee, and free of any restrictions imposed on
the Debtors by the Bankruptcy Code or by the Court during these Chapter 11
cases.
10. All equity Interests in each Debtor be, and they hereby are, canceled
effective as of the Effective Date.
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<PAGE>
11. (a) Pursuant to the Plan, and in accordance with section 1142 of the
Bankruptcy Code, the Debtor is hereby authorized to take such corporate action
as may be necessary and appropriate to implement and effectuate consummation of
the Plan, each of the agreements and instruments referred to therein or
contemplated thereby (including all documents, instruments, certificates and
agreements to be entered into pursuant to the Plan by the Debtor or the
reorganized Debtor and any successors to the Debtor.
(b) This Order shall constitute all approvals and consents, including
without limitation, approvals of the boards of directors and shareholders of the
Debtor, if any, required by the laws of the State of Delaware (and the laws of
any other state) with respect to the implementation and consummation of the
Plan, including without limitation, the election of the Board of Directors of
the reorganized Debtor (which shall consist of the persons identified as such at
the Confirmation Hearing, the adoption of the Restated Certificate and By-Laws
of the reorganized Debtor, the adoption of any certificate of designation for
preferred stock to be issued pursuant to the Plan, the election of the officers
of the reorganized Debtor by the Plan, the adoption or all necessary and
appropriate resolutions consistent with the Plan, the mergers contemplated by
the Plan, and the execution, delivery and performance of any agreement. The
Secretary of State of the State of Delaware (and
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<PAGE>
any other state and any other governmental agency, board, bureau or office of
any of the foregoing or the United States or any other state) are authorized and
directed to accept for filing and to file any certificates or articles of
merger, the Merger Agreements, restated certificates of incorporation,
certificates of designation for preferred stock, or other instruments necessary
and to take any and all other actions necessary to give effect to the mergers
and such other transactions contemplated by the Plan.
This Confirmation Order constitutes a final and appealable order of this
Court and is entered on this the 13th day of October, l993 in Rutland, Vermont.
/s/ Francis G. Conrad
-------------------------------------
HON. FRANCIS G. CONRAD
JUDGE, UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
TENDERED BY:
ALAGIA, DAY, TRAUTWEIN & SMITH
BY /s/ BRUCE D. ATHERTON
---------------------------------
BRUCE D. ATHERTON
2000 WATERFRONT PLAZA
325 WEST MAIN STREET
LOUISVILLE, KENTUCKY 40202
(502) 585-4131
COUNSEL FOR DEBTOR, JET EXPRESS, INC.
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<PAGE>
12. The objection to confirmation of Allstate Financial Corporation is
overruled as moot as Allstate and the Debtor have agreed to an
administrative claim in the amount of $83,000, in full and complete
settlement of Allstate Financial Corporation's administrative claim and in
termination of the Account Receivable Factoring Agreement between Allstate
Financial Corporation and the Debtor. The administrative claim shall be
paid as follows:
a. $48,680, shall be paid by the Debtor to Allstate Financial
Corporation at or before 5:00 p.m. Eastern Standard Time October 14,
1993, by the Debtor; and
b. The Debtor shall pay the remaining $34,314 to Allstate Financial
Corporation on or before the First Distribution Date, as defined by
the Plan.
c. All payments to Allstate Financial Corporation shall be paid by wire
transfer on the dates specified above.
13. The objection to confirmation of Patterson, [ILLEGIBLE], Webb and Tyler is
overruled as moot, the Debtor having stated that said law firm shall be
paid in full on the First Distribution Date or according to such terms and
conditions as may be agreed to between the parties, as set forth in the
Plan.
14. The joint objection of Concord Asset Management, Inc., and [ILLEGIBLE],
Inc., is withdrawn, the Debtor, [ILLEGIBLE], and Concord having agreed to
resolution of the administrative claim of [ILLEGIBLE] and Concord upon the
terms set forth in the Court record, which shall be subject to written
stipulation between the parties.
<PAGE>
The terms of the agreement between the parties are so ordered.
16. The Agreements entered into between the Debtor and Fokker Aircraft USA,
Inc., authorized by order of this Court, dated September 30, 1993, are
approved as finally executed and shall remain legal, valid and binding of
the reorganized Debtor.
<PAGE>
AMENDMENT NO. 1
dated as of February 26, 1996
to
AIRCRAFT OPERATING LEASE AGREEMENT
No. 113
dated as of November 11, 1993
between
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee, as
Lessor
and
MIDWAY AIRLINES CORPORATION
as
Lessee
Aircraft: Fokker 100
Serial No./RN: 11475/N105ML
<PAGE>
THIS AMENDMENT No. 1 dated as of February 26, 1996 (this
"Amendment"), is between FIRST SECURITY BANK OF UTAH, N.A., a national banking
association existing pursuant to the laws of the United States, having its
principal place of business at 79 South Main Street, Salt Lake City, Utah
84130-0007, not in its individual capacity (except as expressly set forth in the
Lease) but solely as Owner Trustee under the Trust Agreement, ("Lessor") and
MIDWAY AIRLINES CORPORATION, a company incorporated under the laws of the State
of Delaware, having its principal place of business at 300 West Morgan Street,
Durham, North Carolina 27702 ("Lessee").
WHEREAS, Lessor and Lessee are parties to that certain Aircraft
Operating Lease Agreement No. 113, dated as of November 11, 1993, and recorded
by the Federal Aviation Administration on January 10, 1994, under conveyance
number CC006563 (as amended hereby, the "Lease"; capitalized terms used herein
and not otherwise defined herein shall have the meanings ascribed to them in the
Lease);
WHEREAS, debis AirFinance B.V. ("debis") is the beneficial owner of
the Aircraft;
WHEREAS, Lessee is in default under the Lease by reason of its
failure to make certain Rent payments due thereunder in December 1995 and
January and February 1996; and
WHEREAS, Lessor and Lessee desire to amend the Lease as hereinafter
set forth.
NOW THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Definitions.
(a) Section 1 of the Lease is hereby amended by deleting
sub-sections 1.11 and 1.51 thereof in their entirety and replacing them with the
following:
"1.11 Beneficiary shall mean American Aircraft Finance II B.V., which is
(i) a company incorporated under the laws of the Netherlands, (ii)
wholly owned by debis and (iii) the beneficiary under the Trust
Agreement, together with its successors and permitted assigns.
1.51 Other Aircraft Agreements shall mean all other aircraft operating
lease agreements relating to other aircraft so long as such other
aircraft are leased to Lessee by a lessor for the benefit, directly
or indirectly, of debis or any affiliate
<PAGE>
of debis. For purposes of this definition, affiliate shall mean any
corporation or other entity that, directly or indirectly, controls,
is controlled by or is under common control with debis."
(b) Section 1 of the Lease is hereby further amended by deleting
"Fokker" and "FAUSA" from the definition of Indemnitee (subsection 1.39 thereof)
and adding "debis" in their stead. In addition, the references to "Fokker" and
"FAUSA" in Section 11.2(c)(ii) of the Lease are hereby deleted and replaced with
"debis".
2. Inspection.
Section 7 of the Lease is hereby amended by adding a new sub-section
7.6 thereto as follows:
"7.6 Lessee hereby acknowledges that the inspection rights and rights to
information and notice pursuant to this Section 7 shall extend to
debis as well as Lessor. In addition, without in any way limiting
the rights contained elsewhere in the Lease, debis shall have the
right to have observers (who may or may not be employees of debis)
on site at Lessee's premises (provided such observers do not
unreasonably interfere with Lessee's business or operations) and,
provided the recipients of any financial and operational information
of Lessee (which recipients may include employees or other
representatives of debis or any of its affiliates, or agents,
attorneys or accountants of debis or any of its affiliates) keep
strictly confidential any such information, debis shall have the
right to inspect and review any internal financial and operational
information of Lessee as debis may reasonably request (provided such
request is made to Lessee's controller or to a vice president,
senior vice president or the president of Lessee) including, without
limitation, cash flow statements, financial books and records, and
any other records relating to the operation of Lessee's fleet.
Lessee covenants that it will fully cooperate with debis regarding
any inspection of Lessee's fleet and records pursuant to the terms
of the Lease."
3. Default by Lessee.
Section 15 of the Lease is hereby amended as follows:
2
<PAGE>
(a) Sub-section 15.1 is hereby amended by deleting paragraph (n)
thereof in its entirety and replacing it with the following:
"(n) if an event of default (however defined) occurs under (i) any
of the Other Aircraft Agreements, (ii) any other lease
agreements between Lessee and a lessor for the benefit,
directly or indirectly, of Fokker, FAUSA, Daimler-Benz
Aerospace A.G. or any affiliate of any of them, relating to
other aircraft ("Fokker Aircraft Agreements") or (iii) any
aircraft maintenance agreement or other agreement entered into
by Lessee in lieu of Reserve Rate payments ("Maintenance
Agreements"), which event permits acceleration or
termination; or"
(b) Sub-section 15.1 is further amended by deleting the period at
the end of paragraph (q) thereof and replacing it with a semicolon and the word
"or" and by adding new paragraphs (r), (s) and (t) thereto as follows:
"(r) if Lessee's financial performance deviates in any material
adverse way (as determined by debis in its sole, but
reasonable discretion) from the projections set forth on
Lessee's Business Plan for calendar year 1996 (attached hereto
as Exhibit A), taken as a whole, and such deviation is not the
result of a natural disaster which effectively makes it
impossible for Lessee to meet such projections;
(s) if, prior to satisfaction of Lessee's obligation to pay
Default Payments pursuant to Section 6 of this Amendment,
Lessee shall make (i) any payment of principal or interest on
any amounts owed by Lessee to Zell/Chilmark Fund, L.P.
("Zell") or any affiliate of Zell, (ii) any redemption of, or
any dividend or distribution with respect to, any shares of
Lessee owned by Zell or any affiliate of Zell, (iii) any
prepayment of principal or interest with respect to any other
subordinated debt owed by Lessee or (iv) any redemption of, or
any dividend or other distribution with respect to, any other
shares of Lessee; or
3
<PAGE>
(t) if Lessee shall fail to fulfill any of the obligations set
forth in paragraphs (c) or (d) of Section 6 of this
Amendment."
(c) Sub-section 15.2 is hereby amended by adding "(a), (n), (t)" to
clause (i) of paragraph (b) thereof following the word "paragraphs"; it being
understood that the effect of this amendment is to include payment defaults,
cross-defaults with Other Aircraft Agreements, Fokker Aircraft Agreements and
Maintenance Agreements, and failure to fulfill any of the obligations set forth
in paragraphs (c) or (d) of Section 6 of this Amendment as events giving rise to
automatic termination of the Lease without the necessity of any service of
notice thereof upon Lessee; provided, however, that such automatic termination
shall not apply with respect to defaults of the type referred to in paragraphs
(a) or (n) of sub-section 15.1 of the Lease prior to the date hereof or for
payment defaults for Rent Dates occurring in February and March 1996, for so
long as Lessee fulfills the obligations set forth in paragraphs (c) and (d) of
Section 6 of this Amendment.
4. Return of Aircraft.
Section 16 of the Lease is hereby amended by adding a new
sub-section 16.8 thereto as follows:
"16.8 Notwithstanding anything to the contrary contained in the Lease, on
the Expiry Date or upon earlier termination of the Term including,
without limitation, any termination of the Lease pursuant to Section
15 (unless a Casualty Occurrence shall have occurred with respect to
the Aircraft), Lessee shall immediately deliver possession of the
Aircraft to Lessor at Schiphol Airport, the Netherlands (or such
other location as Lessor may require) and hereby covenants that it
will not interpose any defense to any action commenced by Lessor to
regain possession of the Aircraft. The foregoing shall apply whether
or not Lessee is or shall subsequently become a debtor in a case
under Title 11, U.S.C., and in such event, Lessee covenants that it
will not oppose, and will join in, any application by Lessor seeking
to regain possession of the Aircraft."
5. Notice.
Section 19 of the Lease is hereby amended by deleting paragraph (d)
of sub-section 19.6 thereof in its entirety and replacing it with the following:
4
<PAGE>
"(1) to Lessee at:
Midway Airlines Corporation
300 W. Morgan Street
Durham, North Carolina 27702
Tel: (919) 956-4982
Fax: (919) 956-7314
Attention: President
(2) to Lessor at:
First Security Bank of Utah, N.A.
79 South Main Street
Salt Lake City, Utah 84130-0007
Tel: (801) 246-5630
Fax: (801) 246-5053
Attention: Corporate Trust Department
with a copy to debis at:
Evert van de Beekstraat 22,
NL-1118 CL Luchthaven Schiphol,
Amsterdam Airport Schiphol
Tel: 011 3120 316-1431
Fax: 011 3120 653-5419
or to such other address or telex or fax number as is notified by
either party to the other party to this Agreement."
6. Forbearance. Execution of this Amendment shall serve as Lessor's
agreement to forebear from exercising its rights (including, without limitation,
its rights under Section 15 of the Lease) with respect to:
(a) Lessee's failure to make payments of Rent or security deposit
amounts due under the Lease prior to the date of this Amendment and for the Rent
Date occurring in March 1996; and
(b) Lessee's failure to make payment of Reserve Rate constituting
Engine Maintenance Accruals due under Other Aircraft Agreements identified as
AOLAF 135, 524 and AOLAF 525 on account of Flight Hours and/or Cycles operated
prior to February 1, 1996;
provided, however, that Lessor's agreement to forbear shall be
effective for so long, and only so long, as
5
<PAGE>
Lessee otherwise complies with all the terms of the Lease, as amended, and
fulfills the obligations set forth in paragraphs (c) and (d) of this Section 6,
as follows:
(c) Lessee shall pay to Lessor the following amounts (which amounts
Lessee hereby agrees to pay):
(i) {***} on the Rent Date occurring in February 1996;
(ii) {***} on the Rent Date occurring in March 1996; and
(iii) Amounts identified on Exhibit B to this Amendment ("Default
Payments") on the Rent Date occurring in April 1996 and for
the next succeeding forty-seven (47) Rent Dates thereafter; it
being understood that Lessee shall pay such Default Payments
together with Rent and any other amounts otherwise due
pursuant to the Lease. Lessee may satisfy its obligations to
pay the Default Payments at any time by paying the portion of
all such Default Payments which constitutes principal,
together with the portion of such Default Payments which
constitutes interest accrued and unpaid as of the date of
payment, all as reflected on Exhibit B to this Amendment.
(d) On or before March 7, 1996, Lessee shall pay all unpaid Reserve
Rate owed with respect to Other Aircraft Agreements identified as AOLAF 135, 524
and 525, or shall enter into a maintenance agreement reasonably satisfactory to
debis providing for the maintenance of the engines of the Aircraft which are the
subject of such Other Aircraft Agreements.
Execution of this Amendment shall not constitute a waiver of any Rent payment
defaults or of any other defaults which may have occurred and be continuing or
which may occur in the future. Lessor's agreement to forbear shall terminate
automatically if Lessee fails to fulfill any of the obligations set forth in
paragraphs (c) or (d) of Section 6 of this Amendment or if any Event of Default
occurs or has occurred and is continuing under the Lease (other than an Event of
Default to which this forbearance agreement set forth in Section 6 of this
Amendment applies). For so long, and only so long as Lessor's agreement to
forbear has not terminated, and provided that the obligation set forth in
paragraph (d) of Section 6 of this Amendment has been fulfilled (i) Lessee shall
be entitled to exercise its rights and privileges under Sections 5.1.2(b),
5.1.3, 7.4.1 and 13.3 of the Lease and (ii) Lessor shall be deemed to have
elected not to apply the Deposit to sums due or to
6
<PAGE>
become due to Lessor pursuant to Section 1 of Appendix D of the Lease,
notwithstanding the occurrence and continuation of a Default or Event of Default
under the Lease.
7. Payments
Paragraph 4 of Exhibit D to the Lease is hereby amended by deleting
the first sentence thereof and replacing it with the following:
"All payments due hereunder shall be effected by Lessee to Lessor to
Generale Bank Nederland BV, in Amsterdam, in favor of American
Aircraft Finance II B.V., account number 64.26.09.659, or to such
other account as debis may designate in writing, and all such
payments shall be in Dollars and in immediately available funds, and
all such payments shall be initiated adequately in advance of the
due dates to ensure that Lessor receives credit for the full amount
of such payment on the due dates."
8. Governing Law. This Amendment shall be governed by and construed
in accordance with the internal laws of the State of New York and without regard
to any conflict of law rules. This Amendment is being delivered in the State of
New York.
9. Miscellaneous. Except as specifically amended or supplemented by
this Amendment, the Lease is hereby ratified, approved, confirmed and continued
in all respects and all provisions of the Lease as heretofore amended shall
remain in full force and effect. The parties hereto acknowledge and confirm that
the Lease is intended to be a true lease and not a financing arrangement. This
Amendment may be executed in any number of counterparts, and all of such
counterparts taken together shall be deemed and constitute one and the same
instrument.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee
By: /s/ [ILLEGIBLE]
---------------------------------
Title: Asst. Vice President
SIGNED on behalf of
MIDWAY AIRLINES CORPORATION
By:
---------------------------------
Title:
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee
By:
---------------------------------
Title:
SIGNED on behalf of
MIDWAY AIRLINES CORPORATION
By: /s/ Jonathan S. Waller
---------------------------------
Jonathan S. Waller
Title: SENIOR VICE PRESIDENT
GENERAL COUNSEL
8
<PAGE>
EXHIBIT A
1996 Business Plan
{***}(2 pages omitted)
<PAGE>
EXHIBIT B
Default Payments
{***}(2 pages omitted)
<PAGE>
113
AMENDMENT NO.2
dated as of January 31, 1997
to
AIRCRAFT OPERATING LEASE AGREEMENT
NO.113
dated as of November 11, 1993
between
FIRST SECURITY BANK, N.A., formerly known as
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee, as
Lessor
and
MIDWAY AIRLINES CORPORATION, as
Lessee
Aircraft: Fokker 100
Serial No./RN: 11475/N105ML
<PAGE>
113
THIS AMENDMENT NO.2 dated as of January 31, 1997 (this "Amendment"), is
between FIRST SECURITY BANK, N.A., formerly known as First Security Bank of
Utah, N.A., a national banking association existing pursuant to the laws of the
United States, having its principal place of business at 79 South Main Street,
Salt Lake City, Utah 84130-0007, not in its individual capacity (except as
expressly set forth in the Lease) but solely as Owner Trustee under the Trust
Agreement ("Lessor"), and MIDWAY AIRLINES CORPORATION, a company incorporated
under the laws of the State of Delaware, having its principal place of business
at 300 West Morgan Street, Durham, North Carolina 27701 ("Lessee").
WHEREAS, Lessor and Lessee are parties to that certain Aircraft Operating
Lease Agreement No. 113, dated as of November 11, 1993, (as amended from time to
time, the "Lease"; capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed to them in the Lease);
WHEREAS, Lessor and Lessee entered into Amendment No. 1 to the Lease,
dated as of February 26, 1996 ("Amendment No. 1");
WHEREAS, debis AirFinance B.V. ("debis AF") is the beneficial owner of the
Aircraft;
WHEREAS, debis AF, Lessee, and Lessor entered into a Deferral Agreement
dated as of October 25, 1996 ("Deferral Agreement"), which provided for the
deferral of certain payments due under the Lease, and amended the Lease in
certain other respects;
WHEREAS, debis AF and Lessee entered into an Amendment to Deferral
Agreements dated as of December 30, 1996, which modified the Deferral Agreement
in certain respects (the "Amendment to Deferral Agreements");
WHEREAS, Lessee has entered into an Agreement and Plan of Merger dated as
of January 17, 1997 (as amended, the "Merger Agreement") with GoodAero, Inc., a
Delaware corporation ("GoodAero") and Zell/Chilmark Fund, L.P., a Delaware
limited partnership, whereby it is proposed that GoodAero will be merged into
Lessee to effect a recapitalization of Lessee (the "Merger"), subject to certain
conditions precedent having been satisfied; and
WHEREAS, Lessor and Lessee desire to amend the Lease to become effective
upon the consummation of the Merger and to enter into further agreements as
hereinafter set forth.
NOW THEREFORE, for valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as follows:
1. Amendment of Lease. The Lease is hereby amended as follows:
(a) Section 1 of the Lease is amended by eliminating the period at
the end of Subsection 1.27 thereof, and by inserting in lieu thereof the
following clause:
<PAGE>
113
"or such earlier date as may be specified by Lessor pursuant to
notice given in accordance with, and subject to the terms of Section
16.9 hereof."
(b) Section 1.51 of the Lease is amended by deleting the period at
the end of the first sentence and by inserting the following in lieu thereof:
"or any successor or assign thereof.
(c) Section 6.4 of the Lease is amended as follows: (a) by deleting
subsection (i) thereof in its entirety and by inserting in lieu thereof the
following: "(i) any financial reports or projections supplied to the majority
shareholder of Lessee"; and (b) by deleting the words "upon Lessor requesting
the same" from subsection (ii) thereof.
(d) Section 11.1(a) of the Lease is amended by deleting the period
at the end thereof and by inserting the following clause:
provided, however, that the deductible may be $500,000 (Dollars Five
Hundred Thousand) for each accident, but only if Lessee procures and
maintains in favor of debis AirFinance B.V. for the benefit of the
Beneficiary and/or the Lessor under each of the Leases identified on
Schedule 16.9 hereof (as those terms are defined therein) an
irrevocable letter of credit (the "Letter of Credit") in the face
amount of $800,000 (Dollars Eight Hundred Thousand) issued by
Wachovia Bank or another banking institution reasonably acceptable
to debis AirFinance B.V. and in a form reasonably acceptable to
debis AirFinance B.V. containing the terms set forth in Schedule
11.1(a).1 of this Lease; provided, however, that Lessee may reduce
the amount of the Letter of Credit to $400,000 in any year where
Lessee's audited financial statements for the prior year show that
Lessee had net income (as determined in accordance with generally
accepted accounting principles ("Net Income")) greater than the
amount for such prior year identified as "Net Income (1)" on
Schedule 11.1(a).2, but less than the amount for such prior year
identified as "Net Income (2)" on Schedule 11.1(a).2; and Lessee
shall not be required to maintain the Letter of Credit in any year
where Lessee's audited financial statements for the prior year show
that Lessee had Net Income for such prior year greater than the
amount for such prior year identified as "Net Income (2)" on
Schedule 11.1(a).2; and provided, further, that notwithstanding any
reduction or cancellation of the Letter of Credit in accordance with
the terms hereof, Lessee shall be required to restore the Letter of
Credit in any year where Lessee's audited financial statements for
the immediately preceding year show that Lessee's Net Income was
less than the threshold set by Schedule 11.1(a).2 for such prior
year for reduction of the Letter of Credit or in any year in which
audited financials for Lessee for the immediately preceding year
have not been certified on or before April 15 following
-2-
<PAGE>
113
such preceding year. For purposes of determining the amount required
for the Letter of Credit in any year, reductions, if any, shall not
be permitted until 30 days after receipt by debis AirFinance B.V. of
the audited financial statements of Lessee for the prior year and,
in the event that the Letter of Credit is to be reinstated or
increased in any year as aforedescribed, such Letter of Credit shall
be required on or before April 15 of such year. Any failure by
Lessee to comply with the provisions of this Section 11.1(a) shall
be an Event of Default under Section 15.1(b) of the Lease.
(e) Section 14.1(b) of the Lease is amended by deleting the
semicolon at the end of such Section and by inserting in lieu thereof the
following clause:
"the failure with which to comply is likely to have a material
adverse effect on Lessee; provided, however, that such failure shall
have no adverse effect on the Aircraft or on the interests of Lessor
the Bank therein or in this Agreement or on the Insurances required
to be maintained pursuant to Article 11."
(f) Section 14.l(p) is amended by deleting the same in its entirety
and by inserting in lieu thereof the following:
"not become the surviving corporation of a merger with any other
entity, or itself consolidate with, or merge into, any other
corporation, or convey, transfer or lease substantially all of its
assets as entirety to any person, without the prior written consent
of Lessor (such consent not to be unreasonably withheld) and the
execution and delivery to Lessor of such agreements, certificates
and legal opinions as Lessor may reasonably request with respect
thereto;"
(g) Section 14.1(q) of the Lease is deleted in its entirety.
(h) Section 15.1(a) of the Lease is amended by deleting the same in
its entirety and by inserting in lieu thereof the following:
"if default shall be made by Lessee in the making of any Rent,
Reserve Rate, or Supplemental Rent payment within five (5) Business
Days after the date when such payment is due and payable under this
Lease."
(i) Section 15.1(e) of the Lease is deleted in its entirety and the
following is inserted in lieu thereof:
" if (i) if Lessee or any of its subsidiaries is in default under
any lease, hire-purchase, conditional sale or credit sale agreement
for equipment having a casualty value in excess of {***} and
such
-3-
<PAGE>
113
default is not cured or waived within the applicable grace period or
five (5) Business Days (whichever is greater); (ii) (regardless of
the amount of money involved), any event occurs which with or
without notice or lapse of time or both would constitute a default
under any agreement between Lessee and, or promissory note executed
by Lessee in favor of, (a) {***}; (b) Zell/Chilmark Fund, L.P.;
(c) {***}; (e) any affiliate of any of the foregoing; unless such
default or event of default is cured or waived within the applicable
grace period or five (5) Business Days (whichever is greater); or
(iii) any indebtedness owed by Lessee or any of its subsidiaries in
an amount in excess of {***} is not paid when due or becomes
due or capable of being declared due prior to the date when it would
otherwise become due provided, however, the failure of Lessee to pay
amounts {***}
(j) Section 15.1(n) is modified by inserting the following clause
after the word "affiliate": ", successor or assign".
(k) Sections 15.1(o), (p), (q), (r), (s) and (t) are deleted in
their entirety and the following new Sections 15.1(o) and (p) are inserted in
lieu thereof:
"(o) if, an Event of Default shall occur under and as defined in
that certain Promissory Note dated as of January 31, 1997 from the
Lessee to debis AirFinance B.V. or under, and as defined in that
certain Promissory Note dated as of January 31, 1997 from the Lessee
to DASA Aircraft Finance XVI, B.V. (each, a "Note" and collectively,
the "Notes");
(p) if, prior to satisfaction of Lessee's obligations pursuant to
the Notes, Lessee shall make (i) any payment of principal or
interest on any debt owed by Lessee to Zell/Chilmark Fund, L.P. or
to any holder of equity in Lessee representing the right to vote
twenty percent (20%) or more of the stock in Lessee on any matter
presented for vote to the shareholders of Lessee (an "Insider") or
any affiliate of an Insider; or (ii) any redemption of, or any
dividend or distribution with respect to, any shares of Lessee owned
by an Insider or any affiliate thereof."
(l) Section 15.2 is amended by deleting clause (i) of paragraph (b)
thereof in its entirety and inserting the following new clause (i) in lieu
thereof:
-4-
<PAGE>
113
"(i) serving notice of such termination on Lessee specifying the
occurrence giving rise to such Event of Default or Events of
Default, provided that such notice shall be deemed to have been
served without the necessity of actual service and this Lease shall
terminate automatically without the necessity of any service of
notice thereof upon Lessee upon the occurrence of any Event of
Default described in paragraphs (a), (f), (g), (h), (n) or (o) of
Section 15.1 of this Lease; provided, however, that actual service
of notice of such termination on Lessee shall be required where an
Event of Default described in paragraph (n) of Section 15.1 of the
Lease has occurred solely by reason of occurrence of an event of
default under an Other Aircraft Agreement or under a Fokker Aircraft
Agreement, which event of default does not, under the terms of such
Other Aircraft Agreement or Fokker Aircraft Agreement, result in
automatic termination of such Other Aircraft Agreement or such
Fokker Aircraft Agreement."
(m) Article 16 of the Lease is amended by adding a new Section 16.9
as follows:
"(a) Notwithstanding anything to the contrary contained in this
Lease, Lessor may terminate this Lease by giving not less than six
(6) months' prior written notice of the termination date to Lessee
provided that in no event may Lessor choose a termination date
earlier than September 15, 1998 ("Lessor's Termination Option") and
the termination date specified in such notice shall become the
Expiry Date; provided, however, that (subject to the following
sentence) Lessor shall not be entitled to exercise Lessor's
Termination Option with respect to this Lease where the same would
result in the termination of four (4) or more of the aircraft
operating lease agreements identified in Schedule 16.9 to the Lease
in any twelve (12) month period, taking into account the scheduled
or actual Expiry Date of each such aircraft operating lease
agreement. Nothing herein shall be construed to limit the Lessor's
rights upon the occurrence of any Default or Event of Default or
upon the termination of this Lease as a result thereof or upon the
expiration of any Lease in the absence of the exercise of Lessor's
Termination Option.
(b) Lessee shall in no event be liable for any costs, expenses,
liabilities, losses, damages or amounts incurred by Lessor which
arise solely from the Lessor exercising Lessor's Termination Option
hereunder such as the loss of any tax benefit, or fees or penalties
arising from the breakage of any contract or agreement. Except as
expressly provided in subsection (c) below, Lessor shall in no event
be liable for any costs, expenses, liabilities, losses, damages or
amounts
-5-
<PAGE>
113
incurred by Lessee as a result of Lessor exercising Lessor's
Termination Option in accordance with this Section 16.9.
(c) Notwithstanding the terms of clause (b) above, if Lessor
exercises Lessor's Termination Option hereunder in accordance with
this Article 16.9, then Lessee shall be responsible for performing
all of its obligations under and in accordance with the terms of
this Section 16, subject to the following:
(i) the Lessor shall pay or cause to be paid to Lessee for
Lessee's application against the "C Check" completed pursuant
to Appendix E, Item 1(e), an amount equal to the lesser of (x)
$100,000 or (y) an amount equal to the product of the full
cost of the "C Check" completed by Lessee pursuant to Appendix
E, Item 1(e) on the Aircraft multiplied by a fraction, the
numerator of which is the number of hours (including fractions
of an hour) remaining on the Aircraft until Lessee's next
scheduled "C Check" for the Aircraft (assuming Lessor had not
exercised Lessor's Termination Option hereunder) and the
denominator of which is 3000; and
(ii) for purposes of Section 7.4.1(b) and (c), any shop visit
required to meet the conditions of Appendix E shall be deemed
a "scheduled" shop visit."
(n) Section 18.6 of the Lease is amended (i) by deleting the firm of
"Winston & Strawn, Attn: R. Evan Smith, 175 Water Street, New York, NY 10038" as
agent for Lessee and by inserting in lieu thereof the new agent for Lessee as
follows: "Paul, Hastings, Janofsky & Walker, Attn: Jon Howitt, 399 Park Avenue,
New York, NY 10022; and (ii) by deleting the firm of "Haight, Gardner, Poor &
Havens, Attn: Bonny L.Y. Kwoh, 195 Broadway, New York, NY 10007" as agent for
Lessor and by inserting in lieu thereof the new agent for Lessor as follows:
"Hertzog, Calamari & Gleason, Attn: Carla Craig, 100 Park Avenue, New York, New
York 10017".
(o) Appendix B to the Lease is hereby amended as follows:
(i) The amount set forth as the "AGREED VALUE" is deleted in its
entirety and the amount of {***} is substituted therefor.
(ii) The Amount set forth as "RENT" is deleted in its entirety and
the amount {***} is substituted therefor.
-6-
<PAGE>
113
(p) Appendix D to the Lease is hereby amended by deleting Sections
2.2 through 2.7 in their entirety and by deleting Section 1 in its entirety and
inserting the following in lieu thereof:
"1. Deposit. Lessee has paid to Lessor the amount set forth on
Schedule B.1 as a Deposit for the Aircraft prior to January 31, 1997.
Lessor has applied such Deposit (plus all accrued interest thereon) to the
Default Payments (as defined in Section 6 of Amendment No.1 to this Lease)
and/or to Default Payments (as defined in Section 6 of Amendment No. 1 to
the Other Aircraft Agreements)."
(q) Appendix D is hereby amended by (a) deleting the first word of
Section 3.1 thereof and by inserting the following in lieu thereof:
"Lessee shall be relieved of its obligation to pay the Reserve Rate at any
time that the Aircraft Maintenance Agreement between Lessee and American
Airlines, Inc., dated as of November 1, 1993, or any subsequent aircraft
maintenance agreement between Lessee and any Authorized Maintenance
Performer, which in the reasonable opinion of Lessor, is in substance
substantially similar to such Aircraft Maintenance Agreement is in effect
with respect to the Aircraft. At any time that the above-referenced
Aircraft Maintenance Agreement, or such subsequent aircraft maintenance
agreement is not in effect, then Lessee shall, in"
and (b) by adding the following sentence after subsection (d) of Section 3.1
thereof:
"In the event that Lessee enters into any substitute maintenance agreement
in lieu of paying Engine Maintenance Accrual, such substitute agreement
shall be similar in substance to the Approved Maintenance Agreement (as
that term is defined in Amendment No. 2 and Consent, each dated as of May,
1996, with respect to Aircraft Operating Lease Agreements Nos. 524, 525,
and 135, each between Midway Airlines Corporation, as Lessor, and First
Security Bank of Utah, N.A., as Lessee (collectively, "Amendment No. 2");
and in such event Lessee shall pay to Lessor as Reserve Rate, on the date
when Reserve Rate is due, an amount calculated, for the Lease, in the same
manner as Reduced Engine Maintenance Accrual (as that term is defined in
Amendment No. 2)."
-7-
<PAGE>
113
(r) Schedule 16.9 attached to this Amendment is hereby attached to
the Lease as Schedule 16.9 thereto and is incorporated therein.
2. Waiver of Default. Lessor agrees that any Default or Event of Default
under Sections 15.1(a), 15.1(e), 15.1(g) or 15.1(r) of the Lease (prior to the
amendment of any such Sections hereunder) which occurred prior to the date of
this Amendment is hereby deemed to have been cured by Lessee and Lessor waives
any rights or remedies it may have had with respect to the occurrence of any
such Default or Event of Default.
3. Representations, Warranties and Covenants
The following shall be, as applicable, representations, warranties or
covenants of Lessee pursuant to Articles 13 and 14 of the Lease:
(a) Representations
(i) This Amendment and the Notes have been duly entered into and
delivered by Lessee, and each constitutes a valid, legal and binding obligation
of Lessee enforceable against Lessee in accordance with its terms.
(ii) As of the date of this Amendment, Lessee has entered, or
will contemporaneously herewith enter, into an agreement with {***} having
terms which are substantially in accordance with the terms set forth under
the heading {***} in Exhibit 6.02(k) to the Agreement and Plan of Merger
dated as of January 17, 1997 by and among GoodAero, Inc., James H. Goodnight,
John P. Sall, Midway Airlines Corporation and Zell/Chilmark Fund, L.P., as
amended, except to the extent otherwise specifically set forth in the letter
dated as of February 10, 1997, from Lessee to Lessor.
(b) Covenants
Lessee covenants that it will not make any prepayment in respect
of the Promissory Note dated February 7, 1997 in the amount of {***} to
provide for terms more favorable to the payee thereof (including, without
limitation, any increase in the interest rate or acceleration of payment).
4. Deferral Agreement. Lessor and Lessee agree that the Deferral Agreement
and the Amendment to Deferral Agreements are hereby declared null and void and
shall have no further force or effect with respect to the Lease.
5. Merger. Lessor hereby consents to the Merger.
6. Governing Law. This Amendment shall be governed by and construed in
accordance with the internal laws of the State of New York and without regard to
any conflict of law rules. This Amendment is being delivered in the State of New
York.
-8-
<PAGE>
113
7. Miscellaneous. Except as specifically amended or supplemented by this
Amendment, the Lease is hereby ratified, approved, confirmed and continued in
all respects and all provisions of the Lease as heretofore amended shall remain
in full force and effect. The parties hereto acknowledge and confirm that the
Lease is intended to be a true lease and not a financing arrangement. This
Amendment may be executed in any number of counterparts, and all of such
counterparts taken together shall be deemed and constitute one and the same
instrument.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on the
day and year first above written.
FIRST SECURITY BANK, N.A., formerly
known as First Security Bank of Utah, N.A.
not in its individual capacity but solely as
owner trustee
By: /s/ Greg A. Hawley
----------------------------------------
Name: Greg A. Hawley
Title: Vice President
MIDWAY AIRLINES CORPORATION
By: /s/ [ILLEGIBLE]
----------------------------------------
Name:
Title:
<PAGE>
113
Schedule 11.1(a).1
The Letter of Credit shall contain the following terms:
debis AirFinance B.V. shall be entitled to draw amounts under the Letter of
Credit upon notice to the issuing bank signed by debis AirFinance B.V. stating
that amounts are due under one or more of the following, and that such amounts
remain unpaid:
Promissory Note dated as of January 31, 1997 executed by Midway Airlines
Corporation in favor of debis AirFinance B.V.
Promissory Note dated as of January 31, 1997 executed by Midway Airlines
Corporation in favor of Daimler-Benz Aerospace A.G.
Aircraft Operating Lease Agreement No. 111 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly known as
First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 112 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly known as
First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 113 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly known as
First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 114 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly known as
First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 135 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly known as
First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 136 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly known as
First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 524 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly known as
First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 525 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly known as
First Security Bank of Utah, N.A.), as Lessor
<PAGE>
113
Aircraft Operating Lease Agreement No. 115-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
Aircraft Operating Lease Agreement No. 116-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
Aircraft Operating Lease Agreement No. 117-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
Aircraft Operating Lease Agreement No. 118-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
<PAGE>
Schedule 11.1(a).2
Midway Airlines
Net Income Thresholds for Reduction in Amount of Letter of Credit Pursuant to
Section 11.1(a)
US$ millions
Year 1997 1998 1999 2000 2001
Net Income(2) 12.0 18.0 25.2 32.8 41.0
Net Income(1) 8.0 12.0 16.8 21.8 27.3
Year 2002 2003 2004 2005 2006
Net Income(2) 49.1 57.7 67.8 67.8 67.8
Net Income(1) 32.8 38.5 45.2 45.2 45.2
Year 2007 2008 2009 2010 2011
Net Income(2) 67.8 67.8 67.8 67.8 67.8
Net Income(1) 45.2 45.2 45.2 45.2 45.2
Year 2012 2013 2014
Net Income(2) 67.8 67.8 67.8
Net Income(1) 45.2 45.2 45.2
Amount of
Letter of Credit
- ----------------
$800,000 If actual Net Income is less than or equal to Net Income(1)
$400,000 If actual Net Income is greater than Net Income(1) but less
than or equal to Net Income(2)
0 If actual Net Income is greater than Net Income(2)
<PAGE>
113
Schedule 16.9
1. Aircraft Operating Lease Agreement No. 111, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
2. Aircraft Operating Lease Agreement No. 112, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
3. Aircraft Operating Lease Agreement No. 113, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
4. Aircraft Operating Lease Agreement No. 114, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
5. Aircraft Operating Lease Agreement No. AOLAF-115-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
6. Aircraft Operating Lease Agreement No. AOLAF-116-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
7. Aircraft Operating Lease Agreement No. AOLAF-117-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
8. Aircraft Operating Lease Agreement No. AOLAF-118-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
9. Aircraft Operating Lease Agreement No. 135, dated as of July 20, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
10. Aircraft Operating Lease Agreement No. 136, dated as of December 15, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
11. Aircraft Operating Lease Agreement No. 524, dated as of August 1, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
12. Aircraft Operating Lease Agreement No.525, dated as of October 15, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
<PAGE>
113
Schedule B.1
Security Deposits Paid by Midway
Aircraft AOLAF Deposit
MSN No. Paid
-------- ----- -------
11321 525 {***}
-------------
11323 524 {***}
-------------
11329 135 {***}
-------------
11330 136 {***}
-------------
11444 111 {***}
-------------
11445 112 {***}
-------------
11475 113 {***}
-------------
11477 114 {***}
-------------
11450 115 {***}
-------------
11484 116 {***}
-------------
11485 117 {***}
-------------
11486 118 {***}
-------------
<PAGE>
EXHIBIT 10.6
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY {***}. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
F-100 LEASE #114
(TAIL # N106ML)
<PAGE>
THE SINGLE EXECUTED ORIGINAL OF THIS AGREEMENT MARKED "ORIGINAL" SHALL BE THE
"ORIGINAL" AND ALL OTHER COUNTERPARTS OF THIS AGREEMENT SHALL BE DUPLICATES AND
MARKED "DUPLICATE" OR "DUPLICATE ORIGINAL". TO THE EXTENT THAT THIS AGREEMENT
AND CERTIFICATE OF ACCEPTANCE RELATED THERETO CONSTITUTES CHATTEL PAPER, AS SUCH
TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE
JURISDICTION, NO SECURITY INTEREST MAY BE CREATED THROUGH TRANSFER OR POSSESSION
OF ANY COUNTERPART OTHER THAN THE "ORIGINAL".
LONG TERM LEASE
AIRCRAFT OPERATING LEASE AGREEMENT
No. AOLAF-114
Dated as of
November 11, 1993
between
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual
capacity but solely as trustee,
as
Lessor
and
MIDWAY AIRLINES CORPORATION
as
Lessee
Aircraft Fokker 100
Serial No 11477
Date November 11, 1993
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INDEX
ARTICLE Page
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1. Definitions ...................................................... 1
2. Agreement to Lease ............................................... 12
3. Term; Delivery; Acceptance; Delay ................................ 16
4. Registration and Title ........................................... 18
5. Possession and Use ............................................... 20
6. Charges, Method of Payment and Financial
Information ...................................................... 25
7. Maintenance ...................................................... 27
8. Taxes, Duties and Expenses ....................................... 32
9. Liens ............................................................ 36
10. Indemnification .................................................. 37
11. Insurance ........................................................ 39
12. Assignment and Subletting ........................................ 46
13. Disclaimer, Representations and Warranties ....................... 50
14. Covenants of Lessee .............................................. 55
15. Default by Lessee ................................................ 58
16. Return of Aircraft ............................................... 65
17. Casualty Occurrences ............................................. 67
18. Governing Law and Jurisdiction ................................... 70
19. Miscellaneous .................................................... 71
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APPENDICES
A. Description of Aircraft
B. Further Definitions and Values
C. Certificate of Acceptance
D. Charges
E. Operating Condition at Re-Delivery
F. Aircraft Documents
G. Legal Opinion
H. Certificate of Insurance
I. Broker's Letter of Undertaking
J. FAA Power of Attorney
K. Order of the Bankruptcy Court
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AIRCRAFT OPERATING LEASE AGREEMENT
No. AOLAF-114
THIS AIRCRAFT OPERATING AGREEMENT No. AOLAF-114 is made as of the 11th day
of November, 1993 between FIRST SECURITY BANK OF UTAH, N.A., a national banking
association existing pursuant to the laws of the United States, having its
principal place of business at 79 South Main Street, Salt Lake City, Utah 84130-
0007, not in its individual capacity (except as expressly herein set forth) but
solely as Owner Trustee under the Trust Agreement (as defined in Article 1
hereof) and its permitted successors and assigns (herein referred to as
"Lessor") and MIDWAY AIRLINES CORPORATION a company incorporated under the laws
of the State of Delaware, having its principal place of business at 5713 South
Central Avenue, Chicago, Illinois 60638 and its permitted successors and assigns
(herein referred to as "Lessee").
WHEREAS Lessor has the right to possess, use and lease the Aircraft; and
WHEREAS Lessee desires to lease the Aircraft from Lessor; and
WHEREAS Lessor is willing to lease the Aircraft to Lessee upon the terms
and conditions set out herein.
NOW THEREFORE, in consideration of the mutual promises herein contained,
Lessor and Lessee agree as follows:
1. DEFINITIONS
The following terms shall have the following respective meanings for all
purposes of this Agreement:
1.1 Air Authority shall mean the Federal Aviation Administration of the United
States Department of Transportation and any successor.
1.2 Aircraft shall mean the aircraft identified and described in Appendix A,
including any Engine, Part, or component thereof, and/or ancillary and
loose equipment or devices installed in or on the Aircraft at the Delivery
Date (or which having been removed therefrom remain the property of the
Lessor pursuant to this Agreement) and Aircraft Documents furnished
therewith under this Agreement, or any substitutions, renewals and
replacements from time to time made in or on the said Aircraft in
accordance with this Agreement,
<PAGE>
whether or not for the time being installed on or in the said Aircraft or
any other aircraft.
1.3 Aircraft Documents shall mean the items identified in Appendix F.
1.4 Airframe shall mean the Aircraft, excluding the Engines.
1.5 Appraisal Procedure shall mean the procedure for determining the FMV of
the Aircraft set forth Article 19.10.
1.6 Approved Maintenance Program shall mean the Maintenance Program approved
by Lessor pursuant to Article 2.2(iii) or such other Maintenance Program
as Lessor shall from time to time approve in writing.
1.7 Authorized Maintenance Performer shall mean Lessee, American Airlines,
Inc., U.S. Air, Aviall, Rolls Royce Canada or any Air Authority approved
original equipment manufacturer for the Aircraft or the Engines or any
Part or any other person approved by Lessor in accordance with the
provisions of Article 7.1.
1.8 Bank shall mean the financial institution(s) and/or other provider(s) of
finance from whom finance respecting the acquisition or continued
ownership of the Aircraft by Lessor is to be, or is for the time being,
obtained and/or in whose favor or for whose benefit security over, or
rights with respect to, the Aircraft is to be, or is for the time being,
granted by Lessor or at its request and shall include any financial
institution providing finance to the Head Lessor in respect of Head
Lessor's acquisition of the Aircraft by whatever means, including without
limitation by way of loan or by way of non-recourse sale of lease
receivables.
1.9 Bankruptcy Case shall mean the bankruptcy case of Jet Express, Inc., Case
No. 91-B-12287 (FGC) in the Bankruptcy Court.
1.10 Bankruptcy Court shall mean the United States Bankruptcy Court for the
Southern District of New York having jurisdiction over Lessee's Bankruptcy
Case.
1.11 Beneficiary shall mean, Fokker Aircraft B.V., beneficiary under the Trust
Agreement, and its successors and permitted assigns.
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1.12 Business Day shall mean a day (other than a Saturday or Sunday) on which
banks are open for business in New York.
1.13 Casualty Occurrence shall have the meaning set forth in Article 17.1.
1.14 Certificate of Acceptance shall mean the Certificate of Acceptance given
in the form of Exhibit C.
1.15 Credit and Security Agreement shall mean the Credit and Security Agreement
dated as of October 29, 1993 therein between FAUSA and Lessee.
1.16 Cycle shall mean one take-off and landing of the Aircraft.
1.17 Default shall mean an Event of Default or any event which, with the giving
of notice and/or lapse of time and/or the making of any relevant
determination, would constitute an Event of Default.
1.18 Delivery Date shall mean the date on which the Aircraft is delivered to
and accepted by the Lessee for the purposes of this Agreement.
1.19 Delivery Location shall mean Schiphol Airport, The Netherlands.
1.20 Dollars and $ shall mean the lawful currency of the United States of
America and in respect of all payments to be made under this Agreement in
Dollars shall mean funds which are for same day settlement in the New York
Clearing House Interbank Payments System (or such other US Dollar funds as
may at the relevant time be customary for the settlement of international
banking transactions denominated in United States Dollars).
1.21 Engine shall mean (i) any engine installed on or furnished with the
Aircraft on the Delivery Date, such Engines being identified as to
manufacturer and type in Appendix A and as to serial numbers in the
Certificate of Acceptance executed by Lessee on the Delivery Date and (ii)
any substitute or replacement engine title to which has, or should have,
transferred to and vested in Lessor in accordance with this Agreement, in
each case including all modules or Parts from time to time belonging to or
installed in that engine and irrespective of whether or not the same shall
for the time being be installed on the Aircraft or on any other
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aircraft. The term "Engine" shall exclude any properly replaced engine
title to which has, or should have, passed to Lessee pursuant to this
Agreement.
1.22 Equipment Change shall have the meaning set forth in Article 17.3(a).
1.23 Equity Commitment shall mean the Financing Agreement dated August 3, 1993
among Lessee, the Equity Investors, and the other parties listed therein,
as the same may be amended from time to time.
1.24 Equity Investors shall mean the parties to the Equity Commitment other
than Lessee, Smith Air Express, Inc., Montgomery Air Incorporated and Jet
Express Funding Corporation.
1.25 Event of Default shall mean any of the events specified in Article 15.1.
1.26 Expected Delivery Date shall mean January 15, 1994.
1.27 Expiry Date shall mean the day preceding the numerically corresponding day
120 (One Hundred Twenty) months after the Delivery Date.
1.28 Fair Market Rental Value shall be equal in amount to the value that would
be obtained in an arms'-length transaction between an informed and willing
lessee under no compulsion to lease and an informed and willing lessor
under no compulsion to lease, in accordance with a lease to a lessee
similarly situated with Lessee, for a term equal to the relevant period
and on conditions as herein provided, any such determination (made for
purposes of Article 15.3(b)) to be made on the basis of the then actual
condition of the Aircraft, to be determined pursuant to an Independent
Appraisal and to be the average of the two determinations obtained
thereunder.
1.29 FAUSA shall mean Fokker Aircraft U.S.A., Inc., a company incorporated
under the laws of the State of Delaware, with its principal office at
Alexandria, Virginia.
1.30 Federal Aviation Act shall mean the Federal Aviation Act of 1958, as
amended.
1.31 First Rent Date shall mean the Delivery Date.
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1.32 Flight Hour shall mean each hour or part thereof elapsing from the moment
at which the wheels of the Aircraft leave the ground on the take off of
the Aircraft until the wheels of the Aircraft touch the ground on the
landing of the Aircraft following such flight.
1.33 FMV shall have the meaning set forth in Appendix D.
1.34 Fokker shall mean Fokker Aircraft B.V., a Dutch corporation with its
principal office at Amsterdam Zuid-Oost, The Netherlands, together with
its successors.
1.35 Force Majeure in relation to the delivery of the Aircraft shall mean delay
or non-delivery due to or arising out of acts of God or public enemy,
civil war, insurrection or riot, fire, flood, explosion, earthquake,
accident, epidemic, quarantine restriction, any act of government,
governmental priority, allocation, regulation or order affecting directly
or indirectly, the Aircraft, Lessor or any materials or facilities, strike
or labor dispute causing cessation, slow-down or interruption of work,
inability after due and timely diligence to procure equipment, data or
materials from suppliers in a timely manner, or any other cause whether or
not mentioned above and whether or not similar to any of the foregoing to
the extent that such cause is beyond the control of Lessor or not
occasioned by Lessor's fault or negligence.
1.36 Governing Law shall mean the law of the state of New York.
1.37 Government Entity shall mean and include (i) any national or state
government, political subdivision thereof, or local jurisdiction therein;
(ii) any board, commission, department, division, organ, instrumentality,
court, or agency of any thereof, however constituted; and (iii) any
association, organization, or institution of which any thereof is a member
or to whose jurisdiction any thereof is subject or in whose activities any
thereof is a participant.
1.38 Head Lessor shall mean any person or persons to whom title to the Aircraft
is vested or transferred in accordance with Article 12.3(e).
1.39 Indemnitees shall mean Lessor (in its trust and individual capacities),
the Voting Trustee (in its
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trust and individual capacities), the Beneficiary, the Head Lessor, the
Bank, Fokker, FAUSA, including any of their respective successors and
assigns and their respective shareholders, subsidiaries, affiliates,
directors, officers, agents and employees.
1.40 Independent Appraisal shall mean a determination of Fair Market Rental
Value of the Aircraft by two independent aircraft appraisers, selected by
Lessor, the costs and expenses of the appraisal to be paid by Lessee.
1.41 Law shall mean and include (i) any law, statute, decree, constitution,
regulation, order or any directive of any Government Entity; (ii) any
treaty, pact, compact or other agreement to which any Government Entity is
a signatory or party; (iii) any judicial or administrative interpretation
or application of any thereof; and (iv) any amendment or revision of any
thereof.
1.42 Lessor or Lessee shall have the meanings respectively ascribed to them in
the first paragraph of this Agreement and shall include their respective
assignees or successors.
1.43 Lessor Liens shall mean:
(a) the Mortgage, the Security Assignment and any security interest
whatsoever from time to time created by or through Lessor and/or
Head Lessor in connection with the financing of the Aircraft;
(b) any other security interest in respect of the Aircraft which results
from acts of or claims against Lessor and/or Head Lessor not related
to the transactions contemplated by or permitted under this
Agreement; and
(c) liens in respect of the Aircraft for Lessor Taxes.
1.44 Lessor Taxes shall mean Taxes:
(a) imposed as a direct result of activities of a Tax Indemnitee in any
jurisdiction imposing a liability unrelated to that Tax Indemnitee's
dealings with Lessee, to the transactions contemplated by this
Agreement or the operation of the Aircraft by Lessee; or
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(b) imposed on or measured by net income, profits or gains, or capital
or net worth (excluding, however, in each case, Taxes that are, or
are in the nature of, license, sales, use, rental, value-added, or
property taxes) of a Tax Indemnitee, by (A) any Governmental Entity
by or in which that Tax Indemnitee would be subject to tax without
regard to the transactions contemplated by this Lease, except to the
extent that the Tax Indemnitee would be subject to such Tax if the
Tax Indemnitee's participation in the transactions contemplated by
this Agreement were the sole connection between the Tax Indemnitee
and the jurisdiction imposing the Tax, or (B) the Federal Government
of the United States of America (including, without limitation, any
withholding taxes imposed by such government); or
(c) imposed with respect to any period or event occurring prior to the
date of this Agreement or after the Expiry Date or earlier
termination of this Agreement in accordance with the terms hereof,
provided that such Tax is unrelated to a Tax Indemnitee's dealings
with Lessee or to the transactions contemplated by this Agreement;
or
(d) imposed as a result of any voluntary sale, assignment, transfer or
other disposition by the Lessor (including to the Head Lessor) or
any other Tax Indemnitee of any interest in the Aircraft or any part
thereof or this Agreement unless such transfer or disposition occurs
(1) in connection with a Tax Indemnitee's pursuing its remedies
while an Event of Default by Lessee is continuing or otherwise
resulting from an Event of Default, or (2) pursuant to Lessee's
exercise of its option to purchase the Aircraft under Article 19.10
of this Agreement.
1.45 Maintenance Program shall mean an Air Authority approved maintenance
program for the Aircraft encompassing scheduled maintenance (including
block maintenance), condition monitored maintenance, and on-condition
maintenance of Airframe, Engines and Parts, including but not limited to,
servicing, testing, preventive maintenance, repairs, structural,
inspections, system checks, overhauls, approved modifications, service
bulletins, engineering orders, airworthiness directives, corrosion
control, inspections and treatments.
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1.46 Major Checks shall mean any 12,000 hours Check, 24,000 hours Check or
Intersupplementary Check or segment thereof or any equivalent thereof with
more or less hours, however denominated, to the extent set out in the
Approved Maintenance Program from time to time.
1.47 Manufacturer shall mean Fokker.
1.48 Mortgage shall mean such mortgage or other security as from time to time
may be created over the Aircraft in favor of the Bank or over the
Beneficiary's interest in the Trust Agreement, in favor of the Bank.
1.49 Note shall mean the Secured Promissory Note executed and delivered to
FAUSA by the Lessee and secured by the Credit and Security Agreement.
1.50 Operative Documents shall mean this Agreement, the Support Services
Agreement, the Stock Option Agreement, the Credit and Security Agreement
and the Note.
1.51 Other Aircraft Agreements shall mean Aircraft Operating Lease Agreements
relating to other Fokker 100 aircraft so long as leased to Lessee by a
lessor for the benefit of Fokker, FAUSA or any affiliate thereof, as
Beneficiary.
1.52 Part shall mean, whether or not installed on the Aircraft:
(a) any component, furnishing or equipment (other than a complete
Engine) furnished with the Aircraft on the Delivery Date; and
(b) any other component, furnishing or equipment (other than a complete
Engine) title to which has, or should have; passed to Lessor
pursuant to this Agreement
but excludes any such items title to which has, or should have, passed to
(i) Lessee pursuant to this Agreement or (ii) any person pursuant to any
agreement relating to the financing of spare parts for the Aircraft,
including, but not limited to, FAUSA pursuant to the Credit and Security
Agreement and the Note.
1.53 Permitted Lien shall mean:
(a) liens of repairers, mechanics, material men, carriers,
hangarkeepers, employees or other
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similar liens arising in the ordinary course of business by statute
or by operation of law in respect of obligations which are either
not overdue or are being contested in good faith by appropriate
proceedings;
(b) any lien for Taxes of any kind either not assessed or, if assessed,
not yet due and payable or being contested in good faith by
appropriate proceedings, and any lien arising out of a judgment
against Lessee with respect to which at the time an appeal is being
prosecuted in good faith and with respect to which there shall have
been secured a stay of execution pending such appeal,
provided that in the case of this subclause (b):
(i) adequate reserves for the payment of such obligations have
been provided by Lessee;
(ii) such proceedings, or the continued existence of such lien, do
not give rise to any likelihood of the sale, forfeiture or
other loss of the Aircraft or any Engine or any Part or any
interest therein; and
(iii} any such lien does not arise as a result of any default on the
part of Lessee in respect of its obligations under this
Agreement;
(c) any Lessor Lien and the lien of this Agreement; and
(d) any lien for Lessor Taxes.
1.54 Redelivery Location shall mean Schiphol Airport, The Netherlands.
1.55 Rent Date shall mean the First Rent Date and the numerically corresponding
date of each and every subsequent month during the Term, or (if there is
no corresponding date in any month), the last day of such month.
1.56 Rental Adjustment Period shall mean the period from and including the
Delivery Date up to and including the day preceding the sixth Rent Date
after the Delivery Date and each subsequent period commencing on and
including the day after the immediately preceding Rental
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Adjustment Period and ending on and including the day preceding the sixth
Rent Date after the date on which that Rental Adjustment Period commenced.
1.57 Rental Period shall mean the period from and including any Rent Date to
and including the day preceding the next Rent Date.
1.58 Security Assignment shall mean an assignment or pledge in favor of the
Head Lessor or the Bank of the benefit of all or any part of Lessor's
rights hereunder.
1.59 Security Interest shall mean any mortgage, charge, pledge, lien,
assignment, hypothecation, right of set-off or any agreement or
arrangement having the effect of creating a security interest.
1.60 State of Incorporation shall mean the State of Delaware.
1.61 State of Registration shall mean United States of America.
1.62 Stock Option Agreement shall mean the Stock Option Agreement dated as of
October 1, 1993 among Lessee and FAUSA and any other party listed thereon.
1.63 Supplemental Rent shall mean Agreed Value and any other amount which by
the terms of this Agreement is payable by Lessee to Lessor other than Rent
and the Reserve Rate.
1.64 Support Services Agreement shall mean the Aircraft Support Services
Agreement No. ASSAF-110 between FAUSA and Lessee.
1.65 Taxes shall mean any and all present and future sales, use, property,
customs, value-added, turnover, stamp, interest equalization, income,
gross or net receipts, franchise, excise, net worth, capital or other
taxes, fees, withholdings, imposts, duties, levies, or other charges of
any nature, together with any penalties, fines, or interest thereon,
imposed, levied, or assessed by, or otherwise payable to, any Governmental
Entity and "Tax" shall be construed accordingly.
1.66 Tax Indemnitee shall mean each of the Lessor, Beneficiary, and the Head
Lessor, including any of their respective successors and assigns.
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1.67 Term shall bear the meaning ascribed to it in Article 3.4.
1.68 Trust Agreement shall mean the Trust Agreement dated as of November 1,
1993 between the Beneficiary and the Lessor in its individual capacity, as
the same may be amended from time to time.
1.69 Trust Estate shall mean the "Trust Estate" as defined in the Trust
Agreement.
1.70 Voting Trust Agreement shall mean the Voting Trust Agreement dated as of
November 1, 1993 between the Beneficiary and the Voting Trustee, as the
same may be amended from time to time.
1.71 Voting Trustee shall mean First Security Bank of Idaho, NA., a national
banking association, and its permitted successors and assigns.
1.72 The terms:
Agreed Value,
Assumed Rent,
Deposit,
Enumerated Financial Milestones
Escalated Rent,
Rent,
Reserve Rate,
shall have the meanings and values set forth in Appendix B.
1.73 References in this Agreement to:
(a) Articles or Appendices are, unless otherwise specified, references
to Articles of, and Appendices to, this Agreement and references to
this Agreement include its Appendices;
(b) any statute or other legislative provision shall be read to include
any statutory or legislative modification or re-enactment thereof,
or any substitution therefor;
(c) the Aircraft include any Part of the Aircraft, and, where the
context so admits, any of the Aircraft Documents and references to
any part of the Aircraft include any part of any Engine;
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(d) the word "person" or "persons" or to words importing persons
include, without limitation, individuals, firms, partnerships, joint
ventures, trusts, Government Entities, organizations, associations,
corporations, government agencies, committees, departments,
authorities and other bodies, corporate or incorporate, whether
having distinct legal personality or not, or any member of any of
the same;
(e) words importing the plural include the singular and vice versa;
(f) any agreement or instrument include such agreement or instrument as
it may from time to time be amended or supplemented; and
(g) headings in this Agreement are for ease of reference only.
2. AGREEMENT TO LEASE
2.1 Lessor will lease the Aircraft to Lessee and Lessee will take the Aircraft
on lease from Lessor in "As Is" condition in accordance with the terms and
conditions of this Agreement.
2.2 Lessor's obligation to deliver the Aircraft on the Delivery Date to Lessee
shall be subject to:
(i) the receipt by Lessor from Lessee on or prior to the Expected
Delivery Date of the following, all of which shall be in the English
language and be satisfactory in form and substance to Lessor:
(a) a final non-appealable order of the Bankruptcy Court in the
form set forth in Appendix K confirming the Plan of
Reorganization submitted to the Bankruptcy Court;
(b) copies of Lessee's certificate of incorporation and/or
memorandum and articles of association and/or by-laws and/or
other constitutional documents, certified to be true and up to
date copies by a duly authorized officer of Lessee;
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(c) copies of resolutions of Lessee's board of directors
authorizing Lessee to enter into and perform this Agreement,
the other Operative Documents and the transactions
contemplated hereby, certified to be true and in full force
and effect by a duly authorized officer of Lessee;
(d) evidence that each approval, license and consent which may be
required in relation to, or in connection with the performance
by Lessee of any of its obligations hereunder and the other
Operative Documents has been granted by or obtained from the
applicable Government Entity in the State of Registration;
(e) copies of Lessee's air transport license, certificate of
public convenience and necessity, and any other air operator
certificates and other licenses, certificates and permits
required by a Governmental Authority enabling Lessee to
operate as an air carrier, certified to be true copies and to
be in full force and effect by a duly authorized officer of
Lessee;
(f) evidence of appointment of Lessee's agent for service of
process in the State of New York;
(g) [intentionally omitted];
(h) the consent referred to in Article 15.5;
(i) a power of attorney in the form of Appendix J authorizing
Lessor and/or the Head Lessor/and/or the Bank to take action
at the Air Authority and a certified resolution authorizing
Same;
(j) such other documents as Lessor may reasonably request;
(ii) the receipt by Lessor from Lessee on or before the Delivery Date of:
(a) opinions satisfactory in form and substance to Lessor of
independent counsel practicing in the State of Registration as
instructed by Lessee, addressing the matters referred to in
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the form set out in Appendix G and dated the Delivery Date;
(b) all sums due to Lessor pursuant to this Agreement;
(c) a certificate of insurance in the form of Appendix H, a
broker's letter of undertaking in the form of Appendix I,
certificates of reinsurance if required by Lessor and other
evidence satisfactory to Lessor that Lessee is taking the
required steps to ensure due compliance with the provisions of
this Agreement as to Insurances with effect on and after the
Delivery Date;
(d) evidence that the representations and warranties of Lessee set
forth in Article 13.4 are true and correct;
(iii) Lessor having approved the Maintenance Program under which it is
proposed that the Aircraft will be maintained (which approval shall
be granted or withheld at Lessor's sole discretion);
(iv) Lessor being satisfied that adequate arrangements have been made for
the issue, forthwith following delivery of the Aircraft, of the
acknowledgments referred to in Article 12.3 in the event that a Head
Lessor and/or a Bank has been identified;
(v) evidence (including satisfactory opinions of Crowe & Dunlevy,
special Air Authority aviation counsel, as to Air Authority
registration and recordation matters) that on the Delivery Date the
Aircraft has been validly registered under the laws of the State of
Registration and that all filings, registrations, recordings and
other actions have been or will be undertaken which are necessary or
advisable to ensure the validity, effectiveness and enforceability
of this Agreement and to protect the property rights of Lessor and
Head Lessor in the Aircraft or any Part and any Security Interest of
the Bank therein;
(vi) Lessor being satisfied that no default shall have occurred under any
Other Aircraft Agreement or any other agreement between Lessor or
FAUSA and Lessee;
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(vii) each of the Operative Documents shall have been duly authorized,
executed and delivered by Lessee, shall be satisfactory in form and
substance to Lessor, and shall be in full force and effect; and
(viii) Lessor obtaining an export license for delivery of the Aircraft for
export to the Lessee on or before the Delivery Date if so required
by the Laws of The Netherlands.
2.3 The conditions specified in Article 2.2 are inserted for the sole benefit
of Lessor and may be waived or deferred in whole or in part and with or
without conditions by Lessor. If any of the said conditions are
outstanding on the Delivery Date and Lessor (in its absolute discretion)
nonetheless agrees to deliver the Aircraft to Lessee, Lessee shall ensure
that such outstanding conditions are fulfilled within fifteen (15) days
after the Delivery Date and Lessor shall be entitled to treat the failure
of Lessee to perform such outstanding conditions as an Event of Default.
2.4 The obligation of Lessee to accept delivery of the Aircraft from Lessor is
subject to the satisfaction of the following conditions precedent on or
before the Delivery Date:
(i) each of the Operative Documents to which Lessor or FAUSA is a
party shall have been duly authorized, executed and delivered by Lessor or
FAUSA and shall be in full force and effect, and executed counterparts
shall have been delivered to Lessee;
(ii) Lessee shall have received the following:
a. an incumbency certificate of each of Lessor and FAUSA as
to the persons authorized to execute and deliver the
Operative Documents to which each is a party and each
other document to be executed on behalf of Lessor and
FAUSA in connection with the transactions contemplated
by the Operative Documents, including the signatures of
such persons; and
b. such other documents and evidence with respect to Lessor
and FAUSA and the transactions contemplated by the
Operative Documents as Lessee may
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reasonably request in order to establish the
consummation of the transactions contemplated by the
Operative Documents to be performed by Lessor and FAUSA,
the taking of all corporate proceedings in connection
with such transactions and compliance with the
conditions set forth herein;
(iii) on the Delivery Date, the representations and warranties of
Lessor contained in Article 13.6 shall be true and accurate as though made
on and as of such date;
(iv) Lessee shall have received the favorable opinion, addressed to
it and reasonably satisfactory in form and substance to it, from Crowe &
Dunlevy, special Air Authority aviation counsel;
(v) the Aircraft shall meet the delivery conditions specified in
Article 3.6; and
(vi) Lessor submitting an export license for Delivery of the
Aircraft for export to the Lessee on or before the Delivery Date if so
required by the Law of The Netherlands.
3. TERM; DELIVERY; ACCEPTANCE; DELAY
3.1 Subject to Article 3.2 and 3.3, Lessor shall deliver and Lessee shall
accept the Aircraft and the delivery thereof on the Expected Delivery
Date.
3.2 Lessor may delay the delivery of, or fail to deliver the Aircraft for
reasons of Force Majeure. Lessor shall not be responsible for any losses,
or any loss of profit, arising from any such failure or delay and Lessee
shall not be entitled on the grounds of such delay to terminate this
Agreement or reject the Aircraft when tendered for delivery by Lessor,
subject always to Article 3.3. In the event of any such delay and subject
to Article 3.3, Lessor shall be entitled to specify from time to time such
date as shall then become the "Expected Delivery Date" for the purpose of
this Agreement.
3.3.1 If for any reason the Aircraft has not been delivered by Lessor by the
date falling three (3) months after the original Expected Delivery Date,
either party may
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terminate this Agreement. Upon any such termination by Lessee, unless the
Aircraft has not been delivered by Lessor due to Lessee's fault, Lessor
shall return the Deposit to Lessee. Otherwise, Lessor shall retain the
Deposit.
3.3.2 If the Aircraft has not been delivered by Lessor by the date falling one
(1) month after the Expected Delivery Date (or any day thereafter) due to
any failure of Lessee to meet the conditions specified in Article 2.2
(other than clauses (iv) and (v) in Article 2.2), Lessor may terminate
this Agreement and retain the Deposit.
3.4 The term of the lease shall commence on the Delivery Date and shall
continue until the Expiry Date unless earlier terminated or extended as
herein provided (such period being herein referred to as the "Term").
3.5 The Aircraft shall be delivered to and accepted by Lessee at the Delivery
Location or such other location as is mutually acceptable to the parties.
It shall be the responsibility of Lessee to obtain at its expense any and
all licenses, permits and approvals under the Law of The Netherlands or
the Air Authority which may be necessary to ferry the Aircraft from the
Netherlands (the "Ferry Permits"). Prior to or on the Delivery Date,
Lessor shall furnish to Lessee such evidence as may be reasonably
requested by Lessee of the obtaining of any export license insofar as it
may be required by the Law of The Netherlands and such data and
information as may be reasonably requested by Lessee in order to obtain
the Ferry Permits.
Notwithstanding the foregoing, Lessor shall, as agent for Lessee, apply
for the Ferry Permits and approvals, provided, however, that Lessor shall
have no responsibility for any failure to or delay in obtaining the Ferry
Permits. Acceptance by Lessee of the Aircraft by execution and delivery of
the Certificate of Acceptance shall be deemed to be evidence that Lessor
has performed all its obligations under this Article 3.5.
3.6 Prior to the Expected Delivery Date, Lessee shall be given an opportunity
to inspect the Aircraft at the Delivery Location. Lessee's right of
inspection shall include the right to participate in the acceptance flight
provided by Fokker for the purpose of
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demonstrating that the Aircraft is in good operating condition in a one to
two hour acceptance flight in accordance with the Manufacturer's Customer
Inspection Program and to verify that it generally accords with the
description set forth in Appendix A. Lessee may assign a maximum of two
(2) representatives to participate in the acceptance flight test as
observers. In the event that Lessee discovers and records any defect
and/or non-conformity with said description during any such inspection
and/or during such acceptance flight test, Lessor shall procure that such
defect and/or non-conformity is corrected as promptly as possible.
3.7 Lessee shall indemnify and hold harmless the Indemnitees from and against
any and all liabilities, damages, losses (including costs and expenses
incident thereto) arising by reason of death of or injury to any such
observer or any employee of Lessee, arising out of, or in any way
connected with the acceptance flight test and inspection of the Aircraft
upon delivery and redelivery of the Aircraft.
3.8 Lessee shall indicate and confirm its acceptance of the Aircraft by the
execution and delivery to Lessor of the Certificate of Acceptance.
4. REGISTRATION AND TITLE
4.1 It shall be the responsibility of Lessee, at its expense, to effect and
maintain registration of the Aircraft in the name of Lessor or Head
Lessor, as the case may be, under the Laws of the State of Registration
during the Term, such registration to reflect the interests of Lessor or
Head Lessor as the case may be, and to obtain and maintain all licenses,
permits and approvals, including, without limitation, a certificate of
airworthiness from the Air Authority, as may be requisite in connection
with operation of the Aircraft under this Agreement.
4.2 Lessee shall at its own expense and responsibility cause this Agreement to
be kept, filed and recorded at all times during the Term, in such office
or offices for the registration of the Aircraft in the State of
Registration and in such other offices (in the United States but not in
any jurisdiction outside of the United States unless directly required due
to Lessee's operation) as may be necessary, to protect Lessor's,
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Head Lessor's and the Bank's rights in any state in which the Aircraft may
operate including the State of Registration of the Aircraft and the State
of Incorporation or as Lessor may reasonably request to protect and
preserve Lessor's, Head Lessor's and the Bank's rights hereunder, and
shall on request furnish to Lessor an opinion of counsel or other evidence
satisfactory to Lessor of such filing and recording.
4.3 Title to and ownership of the Aircraft as between Lessor, Head Lessor and
Lessee shall at all times remain in Lessor or Head Lessor, as the case may
be, and Lessee shall have no right, title or interest in or to the
Aircraft or any part thereof except as expressly provided by this
Agreement. Lessee shall identify and specify the interest of Lessor, Head
Lessor and the Bank and shall affix or keep affixed (i) in a reasonably
prominent position on the flight-deck of the Aircraft and on each Engine a
metal name plate (having dimensions of not less than 10 cm x 7 cm) bearing
the inscription (in fireproof and legible characters) stating:
"NOTICE OF OWNERSHIP
THIS AIRCRAFT/ENGINE IS OWNED BY [__________________] AND
IS SUBJECT TO A FIRST PRIORITY MORTGAGE IN FAVOR OF
[_______________]"
The proper completion of the metal name plate shall be advised by Lessor
at its earliest convenience. Lessee shall not remove or deface evidence of
ownership of the Aircraft and shall not do or permit to be done or omitted
any act or thing which would jeopardize the rights of Lessor, Head Lessor
or the Bank in the Aircraft. Lessee will on all occasions when the
ownership of the Aircraft or any Part is relevant make clear to third
parties that title to the same is held by Lessor, Head Lessor or the Bank
as the case may be.
4.4 Lessee acknowledges that the Aircraft may from time to time be owned by
Head Lessor or the Bank and/or be subject to the Mortgage, which shall be
a first priority mortgage, and to the Security Assignment, in favor of
Head Lessor or the Bank. Lessee undertakes to Lessor (both for itself and
as agent for each of Head Lessor and the Bank) at Lessee's expense (except
for the expense of assignments pursuant to Article 12 after the first
refinancing and first assignment described in Article 8.2(a)(ii)) to, from
time to time, cause this
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Agreement, the Mortgage, the Security Assignment and such other documents
as may be necessary or advisable to give effect to the transactions
contemplated hereby or thereby, to be kept, recorded or filed in such
office or offices in the State of Incorporation and in the State of
Registration as may be necessary or advisable to protect and perfect the
interests of Lessor, Head Lessor and the Bank in the Aircraft, this
Agreement, the Mortgage and the security Assignment, and to do, from time
to time, all other things which the Bank, Head Lessor and/or Lessor may
reasonably require in order to protect and perfect their rights.
5. POSSESSION AND USE
5.1 Lessee shall not transfer possession of the Aircraft, the Engines or any
Part to any person or any legal entity or remove any Engine or Part from
the Airframe other than in accordance with the provisions of this Article
5 or of Article 12.1; provided, however, that so long as no Default shall
have occurred and be continuing, Lessee may, without the prior written
consent of Lessor deliver possession of the Aircraft, the Engines or Parts
to the manufacturer thereof for testing or other similar purposes, or to
an Authorized Maintenance Performer for service, repair, maintenance or
overhaul work on the Aircraft, the Engines or Parts, or for alterations,
modifications, or additions thereto, to the extent required or permitted
by the terms of Article 7.3.
5.1.1 Lessee will ensure that no Engine or Part installed on the Aircraft is at
any time removed from the Aircraft other than:
(a) if replaced as expressly permitted by this Agreement; or
(b) if the removal is of an obsolete item and is in accordance with the
Approved Maintenance Program; or
(c) (i) during the course of maintaining, servicing, repairing,
overhauling or testing that Engine or Part or the Aircraft, as
the case may be; or
(ii) as part of a normal engine or part rotation program; or
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(iii) for the purpose of making such modification to the Engine or
Part, or the Aircraft, as the case may be, as are permitted
under this Agreement,
and then in each case only if it is reinstalled or replaced by an engine
or part complying with Article 5.1.2(a) as soon as practicable and in any
event no later than the Expiry Date.
5.1.2 (a) Lessee will ensure that, except as permitted by this Agreement, no
engine or part is installed on the Aircraft unless:
(i) in the case of an engine, it is an engine of the same model
as, or an improved or advanced version of the Engine it
replaces, which is in similar or better operating condition,
and in the case only of a Casualty Occurrence, has
substantially similar hours available until the next scheduled
checks, inspections, overhauls and shop visits and has the
same or greater value and utility as the replaced Engine;
(ii) in the case of a part, it is in as good operating condition,
is of similar or a more advanced make and model and is of the
same interchangeable modification status as the replaced Part;
(iii) in the case of any part, it has become and remains the
property of Lessor free from Security Interests and on
installation on the Aircraft will without further act be
subject to this Agreement and the Mortgage; and
(iv) in each case, Lessee has full details as to its source and
maintenance records.
(b) Provided no Default has occurred and is continuing, Lessee shall be
entitled to install any engine or part on the Aircraft by way of
replacement notwithstanding Article 5.1.2(a) if:
(i) there is not available to Lessee at the time and in the place
that engine or part is required to be installed on the
Aircraft, a replacement engine or, as the case may be,
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part complying with the requirements of Article 5.1.2(a); and
(ii) it would result in an unreasonable disruption of the operation
of the Aircraft and/or the business of Lessee to ground the
Aircraft until an engine or part, as the case may be,
complying with Article 5.1.2(a) becomes available for
installation on the Aircraft; and
(iii) as soon as reasonably practicable after installation of the
same on the Aircraft, Lessee removes any such engine or part
and replaces it with the Engine or Part replaced by it or by
an engine or part, as the case may be, complying with Article
5.1.2(a).
5.1.3 Lessee will:
(a) ensure that any Engine or Part which is not installed on the
Aircraft (or any other aircraft as permitted by this Agreement) is,
except as expressly permitted by this Agreement, properly and safely
stored, and kept free from Security Interests;
(b) from time to time on request, notify Lessor in writing as to the
location of any engine and on request shall use its reasonable
efforts to procure that any person to whom possession of an Engine
is given acknowledges in writing to Lessor, in terms satisfactory to
Lessor, that it will respect the interest of the Bank as mortgagee
and Lessor (or, as the case may be, Head Lessor) as owner and lessor
of the Engine and will not seek to exercise any rights whatsoever in
relation to it;
(c) (notwithstanding the foregoing provisions of this Article 5.1.3), be
permitted, if no Default has occurred and is continuing, to install
any Engine or Part on an aircraft, or in the case of a Part, on an
engine:
(i) owned and operated by Lessee free from Security Interests; or
(ii) leased or hired to Lessee pursuant to a lease or conditional
sale agreement on a long-term
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basis and on terms whereby Lessee has full operational control
of that aircraft or engine; or
(iii) acquired by Lessee and/or financed or refinanced, and operated
by Lessee, on terms that ownership of that aircraft or engine,
as the case may be, pursuant to a lease or conditional sale
agreement, or a Security Interest therein, is vested in or
held by any other person;
provided that in the case of (ii) and (iii):
(1) the terms of any such lease, conditional sale agreement or Security
Interest will not have the effect of prejudicing the interests of
the Bank as mortgagee or Lessor (or, as the case may be, Head
Lessor) as owner and lessor of that Engine or Part; and
(2) the lessor under such lease, the seller under such conditional sale
agreement or the holder of such Security Interest, as the case may
be, has confirmed and acknowledged in writing to Lessor, in form and
substance satisfactory to Lessor, that it will respect the interest
of Lessor (or, as the case may be, Head Lessor) as owner and lessor
and the Bank as mortgagee of that Engine or Part and that it will
not seek to exercise any rights whatsoever in relation thereto; and,
to the extent such an acknowledgment has been given, Lessor hereby
agrees, for the benefit of the lessor, the seller, or secured party,
as the case may be, of any engine or part (other than an Engine or a
Part) leased to Lessee or owned by Lessee subject to a conditional
sale or other security agreement, that Lessor will not acquire or
claim, as against such lessor, seller or secured party, any right,
title or interest in any engine or engines owned by the lessor under
such lease or subject to a security interest in favor of the seller
or secured party under such conditional sale or other security
agreement as the result of such engine or engines being installed on
the Airframe at any time while such engine or engines are subject to
such lease or conditional sale or other security agreement.
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5.1.4 Lessee will not enter into nor permit any pooling agreement or arrangement
in respect of an Engine or Part without the prior written consent of
Lessor, which shall not be unreasonably withheld.
5.2 Lessee shall use the Aircraft solely in commercial or other operations for
which Lessee is duly authorized by the Laws of the State of Registration
and/or any jurisdiction to whose Laws Lessee's operation of the Aircraft
is subject and shall not use or permit the Aircraft to be used for any
purpose for which the Aircraft is not designed or reasonably suitable.
Lessee shall not use the Aircraft for the carriage of (i) whole animals
living or dead except in the cargo compartments according to the United
States Department of Transportation ("DOT") (or for international flights,
International Civil Aviation Organization ("ICAO")) regulations, and
except domestic pet animals carried in a suitable container to prevent the
escape of any liquid and to ensure the welfare of the animal; (ii) acids,
toxic chemicals, other corrosive materials, explosives, nuclear fuels,
wastes, or any nuclear assemblies or components, except as permitted for
passenger aircraft under the "Restriction of Goods" schedule issued by the
DOT (or for international flights, ICAO) from time to time and provided
that all the requirements for packaging or otherwise contained therein are
fulfilled; or (iii) any other goods, materials or items of cargo which
could reasonably be expected to cause damage to the Aircraft and which
would not be adequately covered by the insurance required by or obtained
pursuant to Article 11.
5.3 Lessee shall not permit the Aircraft to be maintained, used, or operated
in violation of any Law of any Government Entity having jurisdiction, or
contrary to any manufacturer's operating manuals and instructions, or in
violation of any airworthiness certificate, license or registration
relating to the Aircraft issued by any such Government Entity. In the
event that such Laws require alteration of the Aircraft, Lessee shall
conform therewith at its own expense and shall maintain the same in proper
condition for operation under such Laws. Lessee agrees not to operate the
Aircraft or to permit or suffer the Aircraft to be operated (i) contrary
to applicable Law, and/or (ii) within or into any geographic area unless
the Aircraft is covered by insurance as required by the provisions of
Article 11 or insurance or an indemnity in lieu of such insurance
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from the United States government against the risks and in the amounts
required by Article 11 covering such area, and/or (iii) contrary to the
terms of such insurance as required by the provisions of Article 11.
5.4 Throughout the Term and until re-delivery of the Aircraft to Lessor in
accordance with the provisions of this Agreement, the Aircraft and every
part thereof shall be in every respect at the sole risk of Lessee, who
shall bear all risks of loss, theft, damage or destruction to the Aircraft
from any cause whatsoever. Lessor shall not be liable for any liability,
claim, loss, damage or expense of any kind or nature caused directly or
indirectly by the Aircraft or any part thereof by any inadequacy thereof
for any purpose or any deficiency or defect therein, by the use or
performance thereof, by any repairs or servicing thereto or any delay in
providing or failure to provide any thereof, by any interruption or loss
of service or use thereof, or by any loss of business or other
consequential damage or any damage whatsoever and howsoever caused prior
to re-delivery of the Aircraft to Lessor.
5.5 Lessee shall ensure that such crew and engineers as are employed by it in
connection with the operation and maintenance of the Aircraft shall have
such qualifications and hold such licenses as are required by the Air
Authority and by all applicable Laws and regulations.
6. CHARGES, METHOD OF PAYMENT AND FINANCIAL INFORMATION
6.1 Lessee shall punctually pay to Lessor, when due, the Rent, Reserve Rate
and Supplemental Rent expressed to be payable by the Lessee to the Lessor
hereunder including the monies specified and calculated in accordance with
the provisions of Appendix D at the time and in the manner therein
specified, and shall punctually and duly observe and perform Lessee's
obligations under the said Appendix D which forms an integral part of this
Agreement. The time stipulated in this Agreement for all payments payable
by Lessee to Lessor and for the performance of Lessee's other obligations
under this Agreement shall be of the essence of this Agreement.
6.2 Lessee shall not be entitled to any abatement, compensation, reduction or
set-off against any
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installment of Rent, the Reserve Rate or Supplemental Rent, including but
not limited to, abatements, compensations, reductions or set offs, by
reason of any past, present or future claims of Lessee against Lessor or
any other person under this Agreement or otherwise.
6.3 Lessee's obligation to pay Rent and make other payments in accordance with
this Agreement, until Lessee shall have redelivered the Aircraft to Lessor
in accordance with Article 16 and shall have complied with its other
obligations hereunder, shall be absolute and unconditional irrespective of
any contingency whatsoever including (but not limited to) (i) any right of
set-off, counterclaim, recoupment, defence or other right which either
party may have against the other, (ii) any unavailability of the Aircraft
for any reason, including, but not limited to, any defect in the
airworthiness, merchantability, fitness for any purpose, condition,
design, or operation of any kind or nature of the Aircraft, or the
ineligibility of the Aircraft for any particular use or trade, or for
registration or documentation under the laws of any relevant jurisdiction,
or (save as herein provided) any Casualty Occurrence in respect of or any
damage to the Aircraft, (iii) any insolvency, bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution, liquidation or similar
proceedings by or against Lessor or Lessee, (iv) any invalidity or
unenforceability or lack of due authorization of, or other defect in this
Agreement, (v) any failure of Lessee to obtain any required license,
certificate, authorization or other approval of any Governmental Entity
having jurisdiction over the operation by Lessee of the Aircraft or the
operation by Lessee in any airport and (vi) any other cause which, but for
this provision, would or might have the effect of terminating, frustrating
or in any way affecting any obligation of Lessee hereunder, it being the
declared intention of the parties that the provisions of this Article and
the obligations of Lessee to pay the Rent, the Reserve Rate and
Supplemental Rent provided for by this Agreement shall survive any
frustration and that, save as expressly provided in this Agreement, no
monies payable hereunder by Lessee to Lessor shall in any event or
circumstance be repayable to Lessee.
6.4 Lessee agrees to furnish Lessor during the Term:
(i) any financial reports or projections supplied to the Equity
Investors;
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(ii) upon Lessor requesting the same a quarterly unaudited balance sheet
of Lessee prepared by it as of the close of the most recent previous
financial quarter, together with the related profit and loss
statement for such period;
(iii) within ninety (90) days after the close of each financial year of
Lessee, an audited balance sheet and profit and loss statement as of
the close of such financial year;
(iv) from time to time such other information as Lessor may reasonably
request, including, without limitation, information in respect of
the Equity Commitment and any other agreements relating to the
Equity Investors; and
(v) copies of all notices sent by Lessee to its shareholders or
creditors as a group in their respective capacities as such relating
to major business or financial developments of Lessee.
7. MAINTENANCE
7.1 Lessee, during the Term, at its own cost and expense shall:
(a) service, repair, maintain, overhaul, test, or cause the same to be
done to the Aircraft in accordance with the Approved Maintenance
Program so as to keep the Aircraft in as good operating condition as
when delivered to Lessee on the Delivery Date, ordinary wear and
tear excepted, and such operating condition as may be necessary to
enable the airworthiness certificate of the Aircraft to be
maintained in good standing at all times under applicable Law, and
Lessee shall at all times maintain current certificates of
airworthiness and Air Authority required records of maintenance in
respect of the Aircraft and produce copies thereof to Lessor upon
request;
(b) maintain in the English language all Aircraft Documents, records,
logs, and other materials required by applicable Laws and best
airline practice to be maintained in respect of the Aircraft
including engine trend monitoring data;
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(c) perform, or cause to be performed, all airworthiness directives and
mandatory notes and mandatory bulletins affecting the Aircraft
having a compliance date during the Term and issued by (a) the Air
Authority and/or (b) Fokker or any other manufacturer of any part of
the Aircraft (except that, in the event of a conflict, those
required by the Air Authority shall prevail);
(d) maintain the Aircraft in conformity with Air Authority Regulations
and such other rules and regulations of the Air Authority as may
from time to time be applicable to passenger category airline
aircraft;
(e) provide Lessor by telex or fax message with a monthly summation
(which may utilize Air Authority forms) of Flight Hours and Cycles
accumulated on the Airframe, Engines, A.P.U. and Landing Gear and
details of all modifications and material component changes within
five (5) days after the end of each month.
Such maintenance shall be performed by Lessee or by the Authorized
Maintenance Performer identified in Appendix B or such other person as
Lessor may from time to time approve in writing (such approval not to be
unreasonably withheld) which person shall thereupon become an Authorized
Maintenance Performer for the purposes of this Agreement.
7.2 Except as otherwise provided herein, Lessee, at its own cost and expense,
shall promptly replace all Engines or Parts which may from time to time
become worn out, lost, stolen, destroyed, seized, confiscated, damaged
beyond repair, or unserviceable with an engine or part meeting the
requirements of Article 5.1.2(a).
7.3 (a) Save as expressly herein provided the Aircraft shall not be
modified, altered, converted or added to (each such action in
relation to the Aircraft being herein referred to as an "Equipment
Change"), provided that Lessee may, at its own expense and subject
to the prior written approval of Lessor (such approval not to be
unreasonably withheld), make such Equipment Changes to the Aircraft
as Lessee may deem desirable in the proper conduct of its business,
provided that no such Equipment Change diminishes the value,
utility, condition or airworthiness of the
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Aircraft below the value, utility, condition and airworthiness
thereof immediately prior to such Equipment Change, assuming the
Aircraft was then in the condition required to be maintained by the
provisions of this Agreement.
(b) Title to all Parts incorporated or installed in or attached or added
to the Aircraft as the result of such Equipment Change shall,
without further act, vest in Lessor free and clear of all liens,
charges and encumbrances. Lessee shall at its own expense take all
such steps and execute, and procure the execution of, all such
instruments as Lessor may require and which are necessary to ensure
that title to any such replacement Part as aforesaid passes to
Lessor according to the Governing Law and the lex situs, provided,
however, that so long as a Default shall not have occurred and be
continuing, at any time during the Term, Lessee may remove any such
Part if (i) such Part is in addition to, and not in replacement of
or in substitution for, any Part originally incorporated or
installed in or attached to the Aircraft at the time of the delivery
thereof hereunder, (ii) such Part is not required to be incorporated
or installed in or attached or added to the Aircraft pursuant to the
provisions of Article 5.1 and (iii) such Part can be removed from
the Aircraft without diminishing or impairing the value, utility or
airworthiness which the Aircraft would have had at such time, had
such Equipment Change not occurred.
(c) Upon the removal by Lessee of any such Part as above provided, title
thereto shall, without further act, vest in Lessee and such Part
shall no longer be deemed a part of the Aircraft. Any Part not
removed by Lessee as above provided prior to the return of the
Aircraft to Lessor hereunder shall remain the property of Lessor
(save as the parties may otherwise agree in writing) provided that
Lessor may require Lessee, prior to the end of the Term, to remove
any Parts incorporated or installed in the Aircraft as a result of
an Equipment Change and to restore the Aircraft to its condition
prior to an Equipment Change.
7.4.1 Upon submission by Lessee to Lessor of invoices or receipts reasonably
satisfactory to Lessor evidencing
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the performance in accordance with the provisions of this Agreement by or
at the direction of Lessee of:
(a) with respect to the Airframe, the accomplishment of those items of
maintenance characterized as scheduled airframe heavy maintenance as
defined in the Approved Maintenance Program for 12,000 hours and
24,000 hours inspections or any equivalent thereof with more or less
hours ("Airframe Maintenance"), or
(b) with respect to any Engine, the performance of all scheduled shop
visit engine maintenance and repair, other than (i) repairs arising
as a result of foreign object damage or operational mishandling
and/or (ii) maintenance and repair of QEC (Quick Engine Change) kits
("Engine Maintenance"), or
(c) with respect to any nose or main landing gear ("Landing Gear"), the
performance of all scheduled shop visit nose and main landing gear
maintenance and repair, other than repairs arising as a result of
foreign object damage or operational mishandling ("Landing Gear
Maintenance"), or
(d) the Auxiliary Power Unit ("A.P.U."} the performance of all off
Aircraft shop A.P.U. maintenance and repair, other than repairs
arising as a result of foreign object damage or operational
mishandling ("A.P.U. Maintenance"),
Lessor shall, subject to Article 3.5 of Appendix D and provided that a
Default shall not have occurred and be continuing, release to Lessee, from
the relevant Maintenance Fund as defined in paragraph 3.2 of Appendix D, a
sum equal to the aggregate amount evidenced by such invoices or receipts
for such relevant maintenance, to the extent there are sufficient sums in
the relevant Maintenance Fund at the date of the start of the relevant
maintenance. Lessee agrees to use its reasonable efforts to ensure that
the relevant invoices or receipts are received by Lessor as promptly as
possible after completion of the relevant maintenance. All sums remaining
in any Maintenance Fund at the expiration or other termination of this
Agreement shall be retained by Lessor, except (i) upon payment in full of
Agreed Value and any other amounts due to Lessor or otherwise hereunder
after a Casualty Occurrence pursuant to Article 17.2(b), in which case all
sums
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remaining in any Maintenance Fund shall be paid to Lessee and (ii) under
the circumstances and to the extent described in Article 3.6 of Appendix
D.
7.4.2 Lessor shall be entitled to delay the release or payment of funds from any
Maintenance Fund (to the extent related to any disputed amounts) to Lessee
provided for by this Article 7 until such time as it shall in its opinion
be in a position to determine (which Lessor agrees to use reasonable
efforts to do as promptly as possible) the amount to be released or paid,
but in any event release all undisputed amounts from the relevant
Maintenance Fund (but where insufficient funds are in such maintenance
Fund the lesser pro rata portion of such funds which corresponds to the
undisputed amount) upon request unless a Default shall have occurred and
be continuing.
7.5.1 During the Term, Lessee shall furnish to Lessor such information
concerning the location, condition, use and operation of the Aircraft as
Lessor may reasonably request. The right of Lessor, or its designated
representatives, to inspect the Aircraft during any Major Checks performed
by or on behalf of Lessee during the Term, shall be absolute and Lessee
shall inform Lessor by providing sixty (60) days' written notice as to
time and location of all Major Checks. During such Major Checks, Lessee
agrees to provide sufficient manpower to allow Lessor, or its authorized
representatives, to inspect any area of the Aircraft which Lessor requests
to inspect and which would normally be required during such a Major Check,
provided that such inspection is to be made only at the time that Lessee
opens up such area in accordance with the Approved Maintenance Program.
Lessee also shall permit any persons designated by Lessor to visit and
inspect the Aircraft, its condition, use and operation, and the records
maintained in connection therewith.
7.5.2 Lessor shall have the right at any time on reasonable notice to inspect or
survey the Aircraft or any part thereof, or instruct a duly authorized
surveyor to carry out a survey on its behalf, to ascertain the condition
of the Aircraft or any part thereof and satisfy itself that the Aircraft
is being properly repaired and maintained in accordance with the terms of
this Agreement. The cost of any such inspection or
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survey shall be borne by Lessor unless an Event of Default has occurred
and is continuing.
7.5.3 Lessor shall have no duty to make any such inspection as is referred to in
Article 7.5.1 and 7.5.2 and shall not incur any liability or obligation by
reason of not making any such inspection. No exercise of such inspection
right shall unreasonably interfere with the normal operation or
maintenance of the Aircraft.
8. TAXES, DUTIES AND EXPENSES
8.1 Lessee agrees promptly to pay and indemnify and hold Lessor and Head
Lessor harmless against all Taxes (other than Lessor Taxes) levied or
imposed against or upon or otherwise payable by any Tax Indemnitee or
Lessee and relating to or attributable to Lessee, this Agreement, the
Aircraft and/or the importation, exportation, registration, ownership,
leasing, sub-leasing, delivery, possession, use, operation,
reregistration, repair, maintenance, overhaul, replacement, improvement,
modification, alteration, transportation, landing, storage, presence or
re-delivery of or addition to, the Aircraft or any Engine or any Part
thereof or any rent, receipts, insurance proceeds or income arising
therefrom, or any sum payable by Lessee to a Tax Indemnitee under this
Agreement or any other transactions or activities contemplated by this
Agreement. If Lessee is required by any applicable Law or regulation to
deliver or furnish any report or return in connection with any such Taxes,
Lessee shall complete the same in a manner satisfactory to the relevant
Tax Indemnitee and in particular shall state therein that Lessor or Head
Lessor, as the case may be, is the owner of the Aircraft and that the
Lessee is exclusively responsible for the use and operation of the
Aircraft and for any such Taxes and Lessee shall supply a copy of such
report or return to the relevant Tax Indemnitee.
All payments by Lessee hereunder to Lessor shall be free of withholdings
of any nature whatsoever (and at the time Lessee is required to make any
payment upon which any withholding is required, Lessee shall pay an
additional amount such that the net amount actually received by the Lessor
will, after such withholding, equal the full amount of the payment then
due) and shall be free of expense for collection or other charges. If
Lessee shall have paid any additional
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amount pursuant to the first sentence of this paragraph with respect to
Taxes not subject to indemnification pursuant to the provisions of this
Section 8.1, the Lessor for whose benefit such Taxes were paid shall
reimburse Lessee within 10 Business Days of written demand therefor for
the amount of such Taxes so paid by Lessee. For the purpose of Article
1.29 and Article 8, the terms, "Lessor" and "Head Lessor" shall include
each group of corporations (and each member thereof) that includes Lessor
or Head Lessor and for which consolidated, combined, unitary or other
group tax returns are filed.
8.2 Except as otherwise specifically provided herein, Lessee shall pay to
Lessor on or after Delivery Date (unless otherwise agreed to be financed
by Lessor) upon demand:
(a) all reasonable expenses paid to third parties (including legal,
printing and out-of-pocket expenses) incurred or payable by Lessor
(i) in connection with the negotiation, preparation and execution of
this Agreement and all related documents, including reasonable
out-of-pocket expenses in connection with this Agreement and (ii) in
connection with the events referred to in Article 2.7 of Appendix D
and (iii) related to any amendment to or extension of, or the
granting of any waiver or consent under, this Agreement;
(b) all reasonable expenses paid to third parties (including legal fees
and disbursements but excluding surveyor costs) payable or incurred
by Lessor in connection with, the enforcement of or preservation of
any rights of Lessor under this Agreement or otherwise in respect of
moneys owing under this Agreement by Lessee or in respect of any
breach of Lessee of any representation, warranty, covenant or
undertaking herein contained; and
(c) the ongoing annual fees and reasonable out-of-pocket expenses
related to this Agreement of the Owner Trustee and the Voting
Trustee.
8.3 Lessee shall pay all stamp, documentary, registration or other like duties
or taxes (including any such duties or taxes payable by a Tax Indemnitee
but excluding all Lessor Taxes) imposed on or in connection with this
Agreement and shall indemnify that Tax
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Indemnitee against any liability arising by reason of any delay or
omission by Lessee to pay such duties or taxes.
8.4 If and to the extent that any sum (the "indemnity sum") constituting
(directly or indirectly) an indemnity to one or more Tax Indemnitees paid
by Lessee to any person other than that Tax Indemnitee shall be treated as
taxable in the hands of the relevant Tax Indemnitee, Lessee shall pay to
the relevant Tax Indemnitee a sum as (after taking into account any
taxation suffered by the relevant Tax Indemnitee on the indemnity sum)
shall reimburse the relevant Tax Indemnitee for the net amount of any
Taxes suffered by them in respect of the indemnity sum (after taking into
account any current tax savings or other benefits to the relevant Tax
Indemnitee resulting from the payment or accrual of the indemnified
expense).
8.5 If and to the extent that any sums payable to a Tax Indemnitee by Lessee
under this Agreement by way of indemnity are insufficient, by reason of
any Taxes payable in respect of those sums, for that Tax Indemnitee to
discharge the corresponding liability to the relevant third party
(including any taxation authority), or to reimburse that Tax Indemnitee
for the cost incurred by it to a third party (including any taxation
authority), Lessee will pay to that Tax Indemnitee such sum as will after
the tax liability has been fully satisfied leave that Tax Indemnitee with
the same net amount (after taking into account any current tax savings or
other benefits to the that Tax Indemnitee resulting from the payment or
accrual of the indemnified expense) as it would have been entitled to
receive in the absence of that liability. For the purpose of computing the
amount of an indemnity payment pursuant to this Article 8.5 and the amount
of any payment to Lessee under Article 8, it shall be assumed that the
relevant Tax Indemnitee is subject to tax on the amount of each indemnity
it receives or accrues under this Agreement and can use any tax savings to
offset Taxes at the highest marginal statutory rates of tax applicable to
that Tax Indemnitee (as certified to Lessee by an officer of that Tax
Indemnitee) at the time such indemnity or tax savings is received or
accrued.
8.6 If, as a result of any indemnity paid by Lessee or any event giving rise
to an indemnity obligation of Lessee, a Tax Indemnitee at any time
realizes any tax savings,
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refunds or other reductions in taxes not previously taken into account in
computing the amount of the indemnity, that Tax Indemnitee shall promptly
pay to the Lessee the amount of such tax savings, refunds or other
reductions in taxes; provided, however, that no Tax Indemnitee will be
required to make any payment to Lessee pursuant to this Article 8.6 so
long as a Default shall be continuing or if Lessee shall not have
theretofore made all payments due to all Tax Indemnitees under this
Agreement, or to the extent that the amount of such payment would exceed
the amount of all prior payments by Lessee to the relevant Tax Indemnitee
pursuant to this Article 8 less the amount of all prior payments by the
relevant Tax Indemnitee to Lessee pursuant to this Article 8.6. The
relevant Tax Indemnitee shall estimate the amount of such tax savings,
refunds and other reductions in Taxes and shall use reasonable efforts to
take such actions in filing its tax returns and in dealing with taxing
authorities to seek and claim each such tax savings, refund and other
reduction in Taxes, but shall not be obligated to take any such action
that it determines in its sole discretion to involve the imposition or
risk of any material unindemnified cost or expense, and in no event will
any person have any right to inspect the books, records, tax returns or
other documents of any Tax Indemnitee, and the positions to be taken by
any Tax Indemnitee on or with respect to its tax returns and in any tax
proceedings shall be within their sole control.
8.7 Lessee's, and each Tax Indemnitee's obligations under this Article 8 shall
continue in full force and effect, notwithstanding the expiration or
earlier termination of the Term hereunder.
8.8 If Lessee disputes the payment of any Taxes payable by a Tax Indemnitee
for which Lessee is responsible under this Agreement, that Tax Indemnitee
will take such action as Lessee may reasonably request at Lessee's expense
to contest that payment but that Tax Indemnitee will not be obliged to
take any such action:
(a) which that Tax Indemnitee considers in good faith may result in the
imposition or risks of any material liability cost, or expense for
which that Tax Indemnitee is not indemnified to its satisfaction; or
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(b) which that Tax Indemnitee considers not to have a reasonable
prospect of success; or
(c) for which Lessee has not made adequate provision to the satisfaction
of that Tax Indemnitee in respect of the expense concerned.
8.9 Lessor covenants and agrees to deliver to Lessee, (a) within 30 days of
the signing of this Agreement (but in all events prior to the date of the
first payment of Rent to Lessor under this Agreement) and within 30 days
prior to January 1, 1996 and each January 1 falling every three years
thereafter (or at such other date as prescribed by United States Treasury
Regulations) as long as this Agreement has not been terminated, two
accurate and complete original copies of Internal Revenue Service Form
1001 (or any successor form), dated the date hereof or January 1, 1996 (or
such subsequent January 1 or other date) signed by Beneficiary, as
appropriate, and such other related forms (including any certificate with
respect thereto) as Lessee may reasonably request, or (b) within 30 days
of the signing of this Agreement (but in all events prior to the date of
the first payment of Rent to Lessor under this Agreement) and within 30
days prior to the beginning of each taxable year of Lessor beginning
subsequent to the date of this Agreement (or at such other date as
prescribed by United States Treasury Regulations), two accurate and
complete original copies of Internal Revenue Service Form 4224 (or any
successor form), signed by Beneficiary, dated as appropriate, and such
other related forms (including any certificate with respect thereto) as
Lessee may reasonably request. In addition, Lessor shall deliver to Lessee
two accurate and complete original copies of Form 1001 or Form 4224 signed
by Beneficiary, at any time that a change in circumstances renders the
previous form inaccurate in any material respect. Nothing in this Article
8.9 shall be construed as imposing on the Lessee any obligation
whatsoever, including, without limitation, to indemnify Lessor or any
other party for U.S. withholding taxes.
9. LIENS
9.1 Lessee, during the Term, shall not create or suffer to exist any lien,
attachment, mortgage or other encumbrance upon or against the Aircraft, or
any of its rights under this Agreement, other than the Mortgage,
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the Security Assignment and Permitted Liens. If at any time a lien,
attachment, mortgage, or other encumbrance except as permitted above shall
be created or suffered to exist by Lessee, or be levied upon the Aircraft
or any of its rights under this Agreement, Lessee shall forthwith notify
Lessor and cause the same forthwith to be discharged by bond or otherwise.
In the event Lessee shall fail to discharge any such lien, attachment,
mortgage or other encumbrance, Lessor, Head Lessor or the Bank shall be
entitled (but not bound) to discharge the same, in which event Lessee
shall pay to Lessor, on demand, the amount paid by Lessor and/or Head
Lessor and/or the Bank, together with Lessor's and/or Head Lessor's and/or
the Bank's losses, costs and expenses, including reasonable legal fees and
expenses.
10. INDEMNIFICATION
10.1 LESSEE SHALL RELEASE AND DEFEND, HOLD HARMLESS AND INDEMNIFY ANY AND/OR
ALL OF THE INDEMNITEES, FROM AND AGAINST ANY AND ALL CLAIMS, PROCEEDINGS,
SUITS, JUDGEMENTS, COSTS, EXPENSES, PENALTIES, FINES AND LIABILITIES,
DIRECT AND CONSEQUENTIAL DAMAGES AND LOSSES, INCLUDING WITHOUT LIMITATION
COSTS AND EXPENSES INCIDENTAL THERETO, OF WHATSOEVER KIND AND NATURE, AND
INCLUDING REASONABLE LEGAL FEES AND EXPENSES BUT EXCLUDING ANY TAXES,
INDEMNITY FOR WHICH IS ENCOMPASSED SOLELY IN ARTICLE 4.1 AND ARTICLE 8
(EACH A "CLAIM"), WHICH MAY BE SUFFERED BY, ASSERTED AGAINST, CHARGED TO
OR RECOVERABLE FROM, DIRECTLY OR INDIRECTLY, ANY AND/OR ALL OF THE
INDEMNITEES:
(A) RELATING TO, ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE
POSSESSION, DELIVERY, PERFORMANCE, MANAGEMENT, OWNERSHIP,
REGISTRATION, CONTROL, MAINTENANCE, CONDITION, SERVICE, REPAIR,
OVERHAUL, LEASING, USE, OPERATION OR RETURN OF THE AIRCRAFT, ANY
ENGINE OR ANY PART, OR THE PERFORMANCE OR NON- PERFORMANCE OF ANY
AND/OR ALL OF THE INDEMNITEES OF SERVICES OR DELIVERY OF ANY THINGS
IN CONNECTION WITH THE AIRCRAFT DURING THE TERM, OR OTHERWISE IN
CONNECTION WITH THIS AGREEMENT, WHETHER OR NOT ARISING IN TORT OR
OCCASIONED IN WHOLE OR IN PART BY THE FAULT OR NEGLIGENCE OF ANY
AND/OR ALL OF THE INDEMNITEES; OR
(B) AS A CONSEQUENCE OF ANY DESIGN, ARTICLE OR MATERIAL IN THE AIRCRAFT,
ANY ENGINE OR ANY PART OR ITS OPERATION OR USE CONSTITUTING AN
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INFRINGEMENT OF PATENT (TO THE EXTENT AND SCOPE AND SUBJECT TO THE
LIMITATIONS SET FORTH IN PART C OF EXHIBIT G OF THE SUPPORT SERVICES
AGREEMENT), COPYRIGHT, TRADEMARK, DESIGN OR OTHER PROPRIETARY RIGHT
OR A BREACH BY LESSEE OF ANY OBLIGATION OF CONFIDENTIALITY OWED TO
ANY PERSON;
EXCLUDING, HOWEVER, FROM THE FOREGOING ANY SUCH CLAIM TO THE EXTENT
THAT SUCH CLAIM RESULTS FROM THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF SUCH INDEMNITEE OR FROM ANY MISREPRESENTATION BY SUCH
INDEMNITEE CONTAINED IN THIS AGREEMENT OR ANY BREACH BY SUCH
INDEMNITEE OF ANY COVENANT SET FORTH IN THIS AGREEMENT.
10.2 The indemnities contained in this Article 10 shall continue in full force
and effect notwithstanding the expiration or other termination of this
Agreement or of the letting of the Aircraft hereunder.
10.3 The indemnities contained in this Article 10 are given to the Lessor for
itself and as agent and trustee on behalf of the other Indemnitees
10.4 Notwithstanding anything to the contrary contained herein, Lessee does not
release and does not agree to defend, hold harmless or indemnify under
this Agreement (and without limiting any obligations or indemnities
contained in any other agreement with Lessee) Fokker or any other
Indemnitee in its capacity as manufacturer or seller of the Aircraft from
or against (i) claims of third parties made directly against Fokker or
such Indemnitee, based on its product liability or its status as
manufacturer or Seller, or (ii) claims made against Fokker or such
Indemnitee based on the warranties or indemnities contained in the Product
Assurance Document which is Exhibit G of the Support Services Agreement,
or (iii) the matters described in Article 10.1(B).
10.5 If any Indemnitee has knowledge of the occurrence of any Claim, liability
or other matter for which it is or may be entitled to be indemnified
hereunder, it shall give prompt written notice thereof to the Lessee. Each
Indemnitee shall cooperate in good faith with Lessee and supply such
information as may reasonably be requested by Lessee to enable Lessee to
investigate, defend or contest any Claim, liability or other matter for
which Lessee may be required to indemnify an Indemnitee hereunder. In the
event that Lessee pays
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any amount to an Indemnitee pursuant to this Article 10, Lessee shall be
subrogated to all rights of the Indemnitee in respect of the Claim,
liability or other matter indemnified against giving rise to such payment.
Lessee or its insurers shall have the right, unless an Event of Default
shall have occurred and be continuing and such matter is not covered by
insurance to investigate or (provided that Lessee or its insurers shall
agree not to dispute liability hereunder or under any insurance policies
pursuant to which coverage is sought and provided that Lessee shall have
consulted with Lessor prior thereto), defend or compromise any Claim, and
Lessor shall cooperate with Lessee with respect thereto.
11. INSURANCE
11.1 On or before the Expected Delivery Date of the Aircraft and throughout the
Term, Lessee shall carry and maintain in full force and effect, at its own
cost and expense, in such forms, on such conditions and with such insurers
and, if requested, reinsurers and through such insurance and, if
requested, reinsurance brokers as are satisfactory to Lessor, the
following insurances with respect to the Aircraft, Engines and Parts
(herein referred to as "the Insurances"):
(a) All Risks Aircraft Hull insurance of the type usually insured
against by commercial airlines engaged in the same or similar
business and owning or operating similar aircraft (including Engines
and Parts while not installed on the Aircraft and including Extended
Coverage Endorsement (Aircraft Hull) AVN5l or equivalent on the
Agreed Value. The insurance may be subject to a deductible in
respect of losses other than total loss, arranged total loss or
constructive total loss of not more than $100,000.00 (Dollars One
Hundred Thousand) for each accident.
(b) If operated outside the United States and Canada, Aircraft Hull War
and Allied Perils insurance covering the risks excluded from the All
Risks Aircraft Hull insurance specified in paragraph (a) above by
the terms of the War, Hi- Jacking and Other Perils Exclusion Clause
AVN.48B except paragraph (b) thereof and shall include cover in
respect of confiscation, nationalization, seizure, restraint,
detention, appropriation for title or
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use by or under the order of any Government Entity of the State of
Registration.
(c) Comprehensive Airline Liability insurance (including without
limitation aircraft Third Party Liability, Passenger and Crew
Liability (including Baggage and Personal Effects)), Cargo
Liability, Mail Liability, Personal Injury Liability, Contractual
Liability, Hangar Keeper's Liability, Aircraft Products Liability
and General Third Party Liability of the types usually insured
against by commercial airlines engaged in the same or similar
business and owning or operating similar aircraft in an amount of
not less than $500,000,000.00 (Dollars Five Hundred Million)
Combined Single Limit any one occurrence each Aircraft but limited
in respect of Personal Injury to the equivalent of $25,000,000.00
(Dollars Twenty Five Million) any one offence and in the aggregate.
Such insurance shall include cover in respect of the risks excluded
by War, Hi- Jacking and Other Perils Exclusion Clause AVN.48B except
paragraph (b) thereof.
This insurance may be subject to deductibles in respect of
passengers baggage and personal effects of not more than $1,250.00
(Dollars One Thousand Two Hundred Fifty) any one claim and in
respect of cargo and mail of not more than $5,000.00 (Dollars Five
Thousand) any one claim. Such deductibles shall not apply to claims
arising from accidents to the carrying aircraft.
(d) All Risks insurance on Engines and Parts while any such items are
not installed on the Aircraft and in respect of which cover is not
provided under the All Risks Aircraft Hull insurance and/or Aircraft
Hull War and Allied Perils insurance (respectively specified in
paragraphs (a) and (b) above) of the type usually insured against by
commercial airlines engaged in the same or similar business and
owning or operating similar aircraft for not less than full
replacement value. If Engines and Parts are located outside the
United States and Canada, such insurance shall include War and
Allied Perils to the extent that such insurance is customarily
available in the
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international insurance market for this type of insurance.
This insurance may be subject to a deductible of not more than
$10,000.00 (Dollars Ten Thousand).
Lessor's current requirements as at the date of this Agreement as to the
Insurances are as specified in this Article and in Appendices H and I.
Lessor reserves the right to amend the insurance requirements of this
Article 11 to reflect changes in insurance practice.
If required by the first paragraph of Article 11.1, the Lessee shall
procure that the insurers effect reinsurances in the same form and
conditions through such reinsurance brokers and with such reinsurers and
for such proportions as are satisfactory to Lessor.
11.2 All Insurances to be carried in accordance with Article 11.1 above shall:
(a) in respect of All Risks Aircraft Hull insurance, Aircraft Hull War
and Allied Perils insurance and All Risks insurance on Engines and
Parts:
(i) name the Lessor, Head Lessor and the Bank and their respective
successors and assigns as additional assureds;
(ii) provide that all claims in respect of the Aircraft, Engines
and Parts shall be payable to Lessor or as it may direct, such
payee to be named Loss Payee; provided, that partial loss
amounts up to the Partial Loss Amount set forth in Appendix B
shall be payable to Lessee unless the insurers have been given
notice that a Default has occurred; and
(iii) if applicable, provide in respect of Hull All Risks and Hull
War and Allied Perils for a 50/50 Claims Settlement Clause in
the form of AVS.103;
(b) in respect of Comprehensive Airline Liability insurance:
(i) name the Lessor, its successors and assigns and its
shareholders, subsidiaries,
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directors, officers, agents, employees and the Indemnitees as
additional assureds; and
(ii) provide that the insurance shall operate in all respects as if
a separate policy had been issued covering each party insured
thereunder, but this provision shall not operate to include
any claim howsoever arising in respect of loss or damage to
the Aircraft, Engines and Parts insured under the All Risks
Hull, Hull War and Allied Perils or All Risks insurance of the
assured. Notwithstanding the foregoing the total liability of
insurers in respect of any and all assureds shall not exceed
the limits of liability stated in the policy;
(c) in respect of all Insurances:
(i) be effective worldwide except for territories approved in
writing by the Lessor;
(ii) provide that insurers waive all rights of subrogation against
the Lessor, its subcontractors, FAUSA, Fokker, the Head
Lessor, the Bank, and their respective officers, directors,
employees, servants, agents, successors and assigns;
(iii) provide that in the event that the Insurances are cancelled
(including cancellation for non-payment of premium) or are
materially changed such cancellation or change shall not be
effective as to the interest of the Lessor until thirty (30)
days (but seven (7) days or such lesser period as is
customarily available in accordance with policy conditions in
respect of war and allied perils) after confirmed receipt by
Lessor of written notice by insurers of such cancellation or
change;
(iv) provide that in respect of the interests of the Additional
Assureds, the Insurances shall not be invalidated by any act,
neglect, omission, misrepresentation or non-disclosure on the
part of the Lessee or any other party other than the
Additional Assured seeking to make a claim thereunder, and
shall insure each Additional Assured regardless of any
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breach or violation of any warranties, declarations or
conditions contained in such policies by the Lessee or any
other party other than the Additional Assured seeking to make
& claim thereunder;
(v) provide that the Additional Assureds shall have no
responsibility for premium and insurers shall waive any right
of set-off or counterclaim against the Additional Assureds
except in respect of outstanding premium in respect of the
Aircraft, Engines and Parts subject of a claim;
(vi) not provide for any deductible or self insurance other than
the deductibles allowed under the terms of Article 11.1 above;
(vii) be primary without right of contribution from any other
insurance carried by Lessor, Lessee or any other person; and
(viii) be denominated in Dollars.
11.3 If required by the first paragraph of Article 11.1, the re-insurance
policies shall:
(a) provide that cover shall be identical to the cover provided by the
original insurances and be subject to the same terms and conditions
as the original insurances;
(b) provide that so far as the respective interests of the Additional
Assureds are concerned the reinsurance shall not be invalidated by
any act, neglect, omission, misrepresentation or nondisclosure on
the part of the reinsured party;
(c) confirm the insurers' agreement to the provision of paragraph (d)
below;
(d) include a "cut-through" clause in the following terms or in such
other terms as may be satisfactory to Lessor:
"In respect of All Risks Aircraft Hull insurance, Aircraft Hull War
Risk and Allied Perils insurance as described in Article 11.1(a) and
(b) above and All Risks insurance on any Engine and Parts as
described in Article 11.1(d) above, the reinsurers
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and the reassured hereby agree that in the event of any claim
arising under the relevant reinsurances the reinsurers shall in lieu
of payment to the reassured, its successors in interest and assigns
pay to the Loss Payee specified in the primary insurances all sums
payable under or in connection with such reinsurances by virtue of
any reinsured loss of, or damage to, the Aircraft, Engines and
Parts, without any deduction or deductions whatsoever, other than
any outstanding premium in respect of the Aircraft, Engines or Parts
the subject of the claim, it being understood and agreed that any
such payment by the reinsurers shall fully discharge and release the
reinsurers from any and all further liability in connection
therewith.
In respect of Comprehensive Airline Liability insurance as described
in Article 11.1(c} above, the reinsurers and reassured hereby agree
that in the event of any claim arising under the relevant
reinsurances, the reinsurers shall in lieu of payment to the
reassured, its successors in interest and assigns pay to the person
or party who has sustained the relevant loss (or as reimbursement of
any payment made by any Additional Assureds) all sums payable under
such reinsurances by virtue of such reinsured loss, without any
deduction or deductions whatsoever, it being understood and agreed
that any such payment by the reinsurers shall fully discharge and
release the reinsurers from any and all further liability in
connection therewith"; and
(e) provide that the reinsurers and reassured agree that in the event
that the reassured, its successors in interest and assigns shall at
any time be or become insolvent or suspend business or file a
petition in bankruptcy or be adjudicated insolvent or bankrupt or
admit in writing its inability to pay its debts as they become due,
or make a general assignment for the benefit of creditors or that a
receiver or liquidator or assignee or trustee or state commissioner
of insurance be appointed in respect of the reassured its successors
in interest or assigns or any substantial part of its property for
the purpose of liquidation on account of insolvency, then the
reinsurers, in lieu of payment to the reassured, its successors in
interest or assigns, shall pay
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upon demand that portion of any loss due to the party entitled
thereto under the terms of the original insurance for which such
reinsurers would under the terms of the reinsurance be liable to pay
the reassured, its successors in interest or assigns, less any
amounts already paid, it being understood and agreed that any such
direct payment by reinsurers shall fully discharge and release the
reinsurers from any and all further liability for such payment made.
11.4 At least fifteen (15) Business Days prior to the Expected Delivery Date
or, in the event any Parts or Engines are delivered to Lessee prior to
such date, at least fifteen (15) Business Days prior to the date of
delivery of such Parts or Engines, and thereafter during the Term, at
least one month prior to the renewal date of any Insurance required or
maintained by Lessee under Article 11.1 but in no event less than once in
each 12 month period, Lessee shall furnish or cause to be furnished to
Lessor by the insurer or insurance broker and the reinsurance broker
1) a certificate of insurance describing in detail the insurance then
carried and maintained, and certifying that such insurance complies
with the terms of this Agreement, including:
(i) confirmation that the insurance/reinsurance has been placed
with the insurers/reinsurers required (giving the name of such
insurers/reinsurers), the insured/reinsured amount and the
period of the policy and
(ii) confirmation that all premiums due to insurers/reinsurers have
been paid,
and
2) a letter of undertaking from Lessee's brokers and, if required, from
the reinsurance brokers.
Such certificate(s) of insurance and letter(s) of undertaking shall
be substantially in the form as set out in Appendix H and Appendix
I, respectively.
In the event that Lessee shall fail to effect, maintain or cause to be
effected or maintained, insurance as required by this Article 11, Lessor,
Head Lessor or the
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Bank may at its option, but without any obligation to do so, and without
prejudice to Lessor's, Head Lessor's and the Bank's other rights or
remedies hereunder, maintain such insurance or provide such or a similar
insurance, and, in such event, Lessee shall, upon demand, promptly
reimburse to Lessor, Head Lessor or the Bank the cost thereof, including
interest thereon at the rate referred to in paragraph 6 of Appendix D.
11.5 In the event of any damage to the Aircraft, Engines or Parts during the
Term not constituting a Casualty Occurrence, Lessee shall, if so consented
to by Lessor (such consent not to be unreasonably withheld), repair, or
cause the same to be repaired by an Authorized Maintenance Performer at
its sole cost and expense. Except as otherwise provided in Section
11.2(a)(ii), Lessor and Lessee agree that all insurance proceeds payable
in connection with any such damage shall be payable directly to Lessor. In
such event any insurance proceeds received by Lessor shall be applied to
reimburse Lessee for such cost and expense. Any excess remaining shall,
unless a Default shall have occurred and be continuing, be paid over to
Lessee.
11.6 Not later than ten (10) days, prior to the Expected Delivery Date, Lessee
shall deliver to Lessor an irrevocable power of attorney, in form and
substance acceptable to Lessor, authorizing Lessor to initiate, process
and settle any insurance claim with respect to the Aircraft, Engines and
Parts together with an acknowledgment thereof from the insurers.
11.7 When used in this Article 11, the expression Additional Assured(s)
denotes:
(a) in relation to those insurances referred to in Article 11.2(a),
those persons referred to in sub-paragraph (i) of Article 11.2(a);
and
(b) in relation to those insurances referred to in Article 11.2(b),
those persons referred to in sub-paragraph (i) of Article 11.2(b).
12. ASSIGNMENT AND SUBLETTING
12.1 Lessee shall not assign any of its rights or obligations or delegate any
of its duties under this Agreement and, except as permitted by Article 5.1
above, Lessee shall not sublet or otherwise part with
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possession of the Aircraft or any Part thereof unless previously approved
by Lessor in writing (such consent not to be unreasonably withheld).
12.2 This Agreement, the Aircraft and Lessor's interest in each thereof is
freely assignable and alienable by Lessor upon written notice to Lessee in
accordance with Article 12.3, provided, however, that so long as the
Aircraft shall be leased to Lessee under this Lease, Lessor will not sell,
assign, convey or otherwise transfer absolutely (and not for security) any
of its right, title, or interest in and to this Agreement or the Aircraft
to any person unless Lessor and the proposed transferee (the "Transferee")
have complied with the following conditions:
(i) Lessor shall give Lessee written notice of such transfer
at least 3 Business Days before the date of such transfer,
specifying the name and address of the proposed Transferee;
(ii) the Transferee shall not be an airline or a commercial
air carrier or person controlling, controlled by or under common
control with an airline or a commercial air carrier which is in
direct competition with Lessee in the United States;
(iii) the Transferee shall qualify as a "citizen of the United
States" within the meaning of Section 101(16) of the Federal
Aviation Act by a Voting Trust Agreement or otherwise; and
(iv) on the transfer date the Lessor and the Transferee shall
enter into an agreement or agreements in which the Transferee
confirms that it shall be deemed a party to this Lease and agrees to
be bound by all the terms of, and to undertake all of the
obligations of, the Lessor contained in this Agreement and Lessee
shall receive an opinion of counsel to the Transferee stating, with
the customary assumptions and exceptions, that such agreement or
agreements has been duly authorized, executed and delivered and
constitute the legal, valid and binding obligations of the
Transferee enforceable in accordance with their terms and that the
entry into such agreement(s) does not violate any laws or agreements
applicable to such Transferee.
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The agreements, covenants, obligations and liabilities contained
herein, including but not limited to all obligations to pay Rent and
indemnify Lessor, are made for the benefit of Lessor, Beneficiary,
any assignee including the Head Lessor and/or the Bank as security
assignee, and their respective successors and assigns,
notwithstanding the possibility that any such person was not
originally a party to this Agreement or may, at the time any
enforcement is sought, no longer be a party to this Agreement.
Lessee shall comply with all reasonable requests of Lessor, its
successors and assigns respecting the assignment and Lessee's
acknowledgement of the assignee as Lessor. Notwithstanding anything
contained in this paragraph to the contrary, no assignment of
Lessor's interest in this Agreement or the Aircraft or Beneficiary's
interest in the Trust Estate shall alter the terms of this Agreement
in so far as the costs to Lessee of the performance of its
obligations to pay Rent, Reserve Rate, and Deposits hereunder and,
except as otherwise expressly provided in this Agreement, the rights
and liabilities of Lessee under this Agreement are concerned.
Lessee's rights under this Agreement shall not be subject or
subordinate to any Security Assignment or Mortgage executed by
Lessor or Beneficiary (which Security Assignment or Mortgage shall
be subject to this Agreement).
12.3 It is acknowledged and agreed that:
(a) Lessor has the right to assign all of its right, title and interest
in and to this Agreement and the Aircraft to the Head Lessor and/or
the Bank. In order to comply with its obligations in relation
thereto, Lessor will, upon such assignment, give Lessee a notice of
assignment and it is agreed that Lessee shall forthwith acknowledge
the same by executing and delivering to Lessor on behalf of Head
Lessor and/or the Bank a consent to assignment in form and substance
reasonably acceptable to Head Lessor and/or the Bank;
(b) Lessor may be required by Head Lessor and/or the Bank to assign to
Head Lessor and/or the Bank all of its rights, title and interest in
and to the Insurances (other than liability insurances). In order to
comply with its obligations in relation thereto, Lessor, upon
assignment of this Agreement pursuant to Article 12.3 (a), shall
give the
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insurers a notice of assignment of Insurances and the Lessee shall
procure that such insurers forthwith acknowledge the same by
executing and delivering to Lessor an acknowledgement in form and
substance acceptable to Head Lessor and/or the Bank;
(c) Lessor may from time to time require to amend, modify or replace the
security arrangements in respect of the financing or refinancing of
the Aircraft and Lessee agrees to cooperate with Lessor in
connection therewith and, in particular (but without limiting the
generality of the foregoing), to change the plates provided for in
Article 4.3 and to execute and deliver such other or further
acknowledgments of assignment or other documents and to do such
other things as Lessor may reasonably require to be executed and
delivered;
(d) Upon any financing or refinancing of the Aircraft as contemplated by
this Article 12.3, Lessee will promptly and duly execute and deliver
to Lessor, Head Lessor or the Bank such other documents and
assurances and take such further action as may from time to time be
reasonably requested in order more effectively to carry out the
intent and purpose of this Agreement, the Mortgage and the Security
Assignment. Lessee will procure on request of Lessor that the
independent counsel will confirm to the Head Lessor and the Bank
that the Head Lessor and the Bank may rely on the terms of the
opinion as set out in Appendix G as if the Head Lessor and the Bank
were each addressees of such opinion;
(e) Title to the Aircraft may be transferred by Lessor to the Head
Lessor to be indicated by Lessor or Beneficiary's interest in the
Trust Estate may be transferred by Beneficiary, in either case for
the purpose of enabling Lessor to raise finance in relation to the
Aircraft. In such event either a lease agreement shall be executed
in respect of the Aircraft between the Head Lessor and Lessor ("Head
Lease") in order to enable Lessor to continue to lease the Aircraft
to Lessee in accordance with this Agreement or Lessor may assign all
or part of its rights, title and interest in and to this Agreement
and the Aircraft to Head Lessor pursuant to Article 12.2 or
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Beneficiary may assign all of its right, title and interest in and
to the Trust Estate and Lessee agrees to cooperate with Lessor in
connection therewith and, in particular (but without limiting the
generality of the foregoing), to cooperate in the execution of any
documents, agreements and amendments to this Agreement that are
necessary in connection with such Head Lease or such assignment and
to do such other things as Lessor may require to be executed and
delivered so long as any such amendments to this Agreement do not
materially adversely affect Lessee; and
(f) Lessee shall not be liable to (1) any Transferee or (2) any
assignee, purchaser, or transferee of the beneficial interest of the
Trust Estate (a "Beneficiary Transferee") for any payment of Taxes
pursuant to this Agreement in excess of the amount that would have
been payable to the Lessor or the Beneficiary originally party
hereto, as the case may be, if that party had remained as the Lessor
or the Beneficiary, respectively.
13. DISCLAIMER, REPRESENTATIONS AND WARRANTIES
13.1 THE AIRCRAFT IS LEASED IN "AS-IS, WHERE-IS" CONDITION AND LESSEE EXPRESSLY
AGREES AND ACKNOWLEDGES THAT, SAVE AS EXPRESSLY STATED IN THIS AGREEMENT,
LESSOR WILL HAVE NO LIABILITY IN RELATION TO, AND LESSOR HAS NOT AND WILL
NOT BE DEEMED TO HAVE MADE OR GIVEN ANY WARRANTIES, GUARANTEES OR
REPRESENTATIONS, EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE, WITH
RESPECT TO, THE AIRCRAFT LEASED HEREUNDER INCLUDING BUT NOT LIMITED TO (1)
ANY WARRANTY AS TO THE AIRWORTHINESS, CONDITION, DESIGN, MERCHANTABILITY
OR FITNESS FOR USE OR OPERATION, (2) ANY WARRANTY ARISING FROM COURSE OF
PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE, (3) ANY OBLIGATION,
LIABILITY, RIGHT, CLAIM OR REMEDY IN TORT, WHETHER OR NOT ARISING FROM
LESSOR'S NEGLIGENCE, ACTUAL OR IMPUTED, AND (4) ANY OBLIGATION, LIABILITY,
RIGHT, CLAIM OR REMEDY FOR LOSS OF OR DAMAGE TO THE AIRCRAFT, FOR LOSS OF
USE, REVENUE OR PROFIT WITH RESPECT TO THE AIRCRAFT, FOR ANY LIABILITY OF
LESSEE TO ANY THIRD PARTY, OR FOR ANY OTHER DIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES; AND ALL SUCH WARRANTIES, GUARANTEES,
REPRESENTATIONS, OBLIGATIONS, LIABILITIES, RIGHTS, CLAIMS OR REMEDIES,
EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, ARE EXPRESSLY EXCLUDED.
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Nothing in this Agreement shall afford Lessor or any Indemnitee any wider
or greater exclusion of liability for death or bodily injury than would be
permitted by the Governing Law.
This paragraph shall not be modified except by a written agreement signed
on behalf of Lessor and Lessee by their respective duly authorized
representatives.
13.2 Lessor and Lessee agree that this Article 13 has been the subject of
discussion and negotiation and is fully understood by the parties, and
that the amount of the Rent and other mutual agreements of the parties set
forth in this Agreement were arrived at in consideration of the provisions
of this Article 13 specifically including the waiver by Lessee set forth
in Article 13.1.
13.3 So long as no Event of Default has occurred and is continuing Lessor
agrees to assign or otherwise make available to Lessee for the duration of
the Term such rights as Lessor may have under any warranty, express or
implied, with respect to the Aircraft made by the Manufacturer of the
Aircraft, any subcontractor or supplier thereof, or any other seller
thereof, to the extent that the same may be assigned or otherwise made
available to Lessee and without warranty by Lessor as to enforceability of
any of the rights so assigned.
To the extent that the same may not be assigned or otherwise made
available to Lessee, Lessor agrees to exert its reasonable efforts, at
Lessee's expense, to enforce such rights as Lessor may have with respect
thereto for the benefit of Lessee; provided however, that upon an Event of
Default all such rights shall immediately revert to Lessor including all
claims thereunder, whether or not perfected, unless such Event of Default
has forthwith been remedied by Lessee.
13.4 Lessee represents and warrants that:
(a) Lessee is a corporation organized and existing in good standing, in
accordance with the Laws of the State of Incorporation, and has the
corporate power and authority to carry on its business as presently
conducted and to perform its obligations under this Agreement, is an
"air carrier" within the meaning of the Federal Aviation Act
operating under a certificate of convenience and necessity issued
pursuant to Section 401 of such Act and is
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the holder of all necessary licenses issued by all Government
Entities having jurisdiction to authorize or permit Lessee to engage
in air transportation and to perform and comply with its obligations
hereunder;
(b) This Agreement has been duly authorized by all necessary corporate
action on the part of Lessee, and neither the execution and delivery
nor the consummation of the transactions contemplated hereby nor
compliance by Lessee with the provisions of this Agreement will
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;
(c) The execution and delivery by Lessee of this Agreement, and all of
the transactions by Lessee contemplated hereby, have received, and
Lessee has complied with, every necessary consent, approval, order,
or authorization of, or registration with, or the giving of prior
notice to, any Government Entity having jurisdiction with respect to
the execution and delivery of this Agreement or the validity and
enforceability of this Agreement or the satisfaction of all monetary
and other obligations hereunder;
(d) This Agreement has been duly entered into and delivered by Lessee
and constitutes the valid, legal and binding obligations of Lessee,
enforceable in accordance with their terms subject to principles of
equity, laws relating to bankruptcy, insolvency or liquidation or
any other laws or legal procedures generally affecting the
enforcement of creditor's rights or the rights of contracting
parties;
(e) It is not necessary or advisable under the Laws of the State of
Registration in order to ensure the validity, effectiveness and
enforceability of this Agreement, the Mortgage or the Security
Assignment or to protect the property rights of Lessor,
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Beneficiary, Head Lessor or the Bank in the Aircraft and under the
Mortgage and Security Assignment that this Agreement, the Mortgage,
the Security Assignment or any other instrument relating thereto be
filed, registered or recorded or that any other action be taken
under the Laws of the State of Incorporation and the State of
Registration to perfect the property rights of Lessor, Head Lessor
and the Bank in the Aircraft other than the filing of all such
instruments with the Air Authority, the filing of UCC-l financing
statements in relevant jurisdictions, and the Mortgage and Security
Assignment will have priority in all respects over the claims of all
creditors of Lessee in or against the Aircraft, except for Permitted
Liens;
(f) Under the Laws of the State of Incorporation and the State of
Registration Lessee will not be required to make any deduction or
withholding from any payment it may make under this Agreement. There
is no withholding or other tax to be deducted from any payment to be
made by Lessee under this Agreement;
(g) There are no suits or legal proceedings (including any
administrative proceeding) pending or threatened before any court or
administrative agency against Lessee which, if adversely determined,
would have a material adverse effect upon its financial condition or
business or its ability to perform its obligations hereunder;
(h) Each of the Equity Investors and Lessee has performed all of its
respective obligations under the Equity Commitment required to be
performed and the Equity Commitment remains in full force and effect
and has not been modified, supplemented or amended except as has
been disclosed in writing to Lessor;
(i) There has been no material adverse change in the financial position
of Lessee or the consolidated financial position of Lessee and its
subsidiaries from that set forth in the financial statements last
furnished pursuant to Article 6.4 and neither Lessee nor any of its
subsidiaries have any significant liabilities (contingent or
otherwise) which are not disclosed by, or reserved against in such
financial statements;
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(j) The chief executive office (as such term is used in Sections 9-103
and 9-401 of the Uniform Commercial Code) of Lessee is located at
Chicago, Illinois, and Lessee agrees to give at least 30 days' prior
notice to Lessor of any relocation of said chief executive office or
place where such records are kept and of any change in its name.
13.5 The representations and warranties in Article 13.4 (other than in clauses
(f), (g) and (i) shall be deemed to be repeated by Lessee on and as of
each Rent Date as if made with reference to the facts and circumstances
existing on each such date.
13.6 Lessor represents, warrants and covenants that:
(a) Lessor is a national banking association duly organized and validly
existing in good standing under the laws of the United States of
America, qualifies as a "citizen of the United States" within the
meaning of Section 101(16) of the Federal Aviation Act, and has the
corporate power and authority to carry on its business as presently
conducted and to perform its obligations under this Agreement; if at
any time Lessor shall have actual knowledge that it has ceased to
qualify as such a citizen, it will, if such citizenship is then
necessary to maintain the eligibility of the Aircraft for United
States registration, take such action as may be necessary to
maintain such United States registration;
(b) This Agreement has been duly authorized by all necessary corporate
action on the part of Lessor, has been duly entered into and
delivered by Lessor in accordance with the Trust Agreement and
constitutes the valid, legal and binding obligations of Lessor,
enforceable in accordance with their respective terms subject to
principles of equity, laws relating to bankruptcy, insolvency or
liquidation or any other laws or legal procedures generally
affecting the enforcement of creditor's rights or the rights of
contracting parties;
(c) Neither the execution and delivery nor the consummation of the
transactions contemplated hereby nor compliance by Lessor with the
provisions of this Agreement will result in any breach of, or
constitute any default under, any
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indenture or any 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; and
(d) Except for the Ferry Permits described in Article 3.5, the
registration of the Aircraft and the issuance of the licenses
described in Article 4.1, neither the execution and delivery nor the
consummation of the transactions contemplated hereby nor compliance
by Lessor with the provisions of this Agreement requires the consent
or approval of, the giving of notice to, or the registration with,
or the taking of any other action in respect of any Government
Entity.
The representations and warranties contained in clauses (a), (b) and (c)
of this Article 13.6 are made by Lessor in its individual capacity.
13.7 Lessor undertakes that, so long as no Event of Default shall have occurred
and be continuing, Lessor will not interfere with the peaceful and quiet
use and enjoyment of the Aircraft by Lessee in accordance with the terms
of this Agreement.
14. COVENANTS OF LESSEE
14.1 Lessee hereby covenants with Lessor that from the Delivery Date and during
the Term and until redelivery of the Aircraft to Lessor in accordance with
Article 16 it will:
(a) remain in and continue to operate as an air carrier holding a valid
certificate of convenience and necessity issued pursuant to Section
401 of the Federal Aviation Act to preserve its corporate existence,
to satisfy its debts and obligations as they fall due;
(b) comply with all Laws and regulations for the time being in force in
the State of Incorporation, the State of Registration and in any
country to, from, in or over which the Aircraft is flown;
(c) (i) at its own expense from time to time do and perform such other
and further acts and execute and deliver any and all further
instruments as may be required by Law (in the United States but not
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in any jurisdiction outside the United States unless directly
required due to Lessee's operation), and (ii) at Lessor's expense
(insofar as not covered in Article 8.2(a)) from time to time do and
perform such other and further acts and execute and deliver any and
all further instruments as may be reasonably requested by Lessor to
establish, maintain and protect the respective rights and remedies
of Lessor, Head Lessor and the Bank and to carry out and give effect
to the intents and purposes of this Agreement and the parties;
(d) notify Lessor immediately of the occurrence of any Default;
(e) obtain and maintain all necessary government and other certificates,
consents, licenses, permits and authorizations and take all action
which may be necessary for the continued due performance of Lessee's
obligations under this Agreement and for the use and operation of
the Aircraft;
(f) not do or permit to be done any act or thing which might impair the
respective interests of Lessor, Head Lessor and the Bank in the
Aircraft, or the registration of the Aircraft;
(g) notify Lessor as soon as practicable after becoming aware of any
loss, theft, damage or destruction of or to the Aircraft or any part
thereof if the potential cost of repair or replacement may exceed
$100,000.00 (Dollars One Hundred Thousand);
(h) not do anything which may subject the Aircraft or any part thereof
to penalty, forfeiture, seizure, arrest, impounding, detention,
confiscation, taking in execution, appropriation or destruction nor
abandon the Aircraft or any part thereof;
(i) not represent or hold out Lessor, Head Lessor or the Bank as
carrying goods or passengers on the Aircraft or as being in any way
connected or associated with any operation or carriage (whether for
hire or reward or gratuitously) which Lessee may undertake;
(j) not pledge the credit of Lessor, Head Lessor or the Bank for any
maintenance, overhauls,
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replacements, repairs or modifications to the Aircraft;
(k) keep Lessor and the insurers, as referred to in Article 11, informed
as to current serial numbers of the Engines and any engine installed
on the Aircraft in accordance with the provisions of this Agreement,
and the location of any Engine for the time being not installed on
the Aircraft; and shall notify such insurers of any renewal,
replacement or substitution, or the location of any Engine not
installed on the Aircraft;
(l) discharge all fees, charges and expenses payable to any third party
in relation to the use or operation of the Aircraft or any premises
where the Aircraft is situated;
(m) in the event of any forfeiture, impounding or detention of the
Aircraft or any part thereof not constituting a Casualty Occurrence,
use all reasonable endeavors to procure the immediate release
therefrom of the same;
(n) keep accurate, complete and current records of all flights made by
the Aircraft. Such records shall be kept in such manner as the Air
Authority may from time to time require and in accordance with the
Approved Maintenance Program. Lessee shall permit Lessor or its
authorized representatives to examine such records upon giving
reasonable notice not involving delay to the Aircraft;
(o) on request, provide Lessor with evidence satisfactory to Lessor that
all Taxes and charges incurred by Lessee with respect to the
Aircraft, including without limitation any payments due to any
relevant air traffic control authorities and airport authorities,
have been paid and discharged in full;
(p) not consolidate with, or merge into, any other corporation, convey,
transfer or lease substantially all of its assets as an entirety to
any person or acquire the shares of or make any investment in any
firm, corporation or person without the prior written consent of
Lessor (such consent not to be unreasonably withheld) and the
execution and delivery to Lessor of such
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agreements, certificates and legal opinions as Lessor may request
with respect thereto; and
(q) prior to the payment in full of all deferred amounts of Rent,
Reserve Rate or Deposits under this Agreement and all Other Aircraft
Agreements (such event being referred to as the "Enumerated
Milestone"), obtain the prior written consent of Lessor (such
consent not to be unreasonably withheld) to any commitment of Lessee
to any person where such commitment has a value in excess of
$500,000.00 (Dollars Five Hundred Thousand)
15. DEFAULT BY LESSEE
15.1 Each of the following events shall constitute an "Event of Default":
(a) if default shall be made by Lessee in the making of any Rent,
Reserve Rate and/or Agreed Value payment when due and payable under
this Agreement or of any other Supplemental Rent payment within 5
Business Days after the date when such other Supplemental Rent is
due and payable under this Agreement; or
(b) (i) if default shall be made by Lessee at any time in the
procurement or maintenance of any insurance coverage prescribed
herein or (ii) any insurance which may be maintained by Lessor, Head
Lessor or the Bank under Article 11.4 is cancelled or terminated or
notice of cancellation is given; or
(c) if default shall be made by Lessee in the observance or performance
of any of the other obligations of Lessee contained in this
Agreement and, if such default is in the opinion of Lessor capable
of remedy, such default shall continue for a period of fifteen (15)
Business Days after notice from Lessor to Lessee specifying the
default and requiring that the same be remedied; or
(d) if any representation or warranty made (or deemed to be repeated) by
Lessee in or pursuant to this Agreement or in any document or
certificate or statement referred to in or delivered under this
Agreement is or proves to have been incorrect in
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any material respect when made or deemed to be repeated and such
incorrectness, if capable of being cured, shall continue for fifteen
(15) Business Days after notice from Lessor specifying such
incorrectness; or
(e) if any borrowed money of Lessee or any of its subsidiaries is not
paid when due, or by reason of breach or default under the terms of
any instrument evidencing or guaranteeing the same on the part of
Lessee or any of its subsidiaries any borrowed money of Lessee or
any of its subsidiaries becomes due or capable of being declared due
prior to the date when it would otherwise have become due, or the
security for any such borrowed money or any guarantee in respect
thereof becomes enforceable, or Lessee is in default under any
lease, hire-purchase, conditional sale or credit sale agreement
(including without limitation any other agreement between Lessor,
its associates, subsidiaries or affiliates and Lessee) for equipment
having a casualty value in excess of $100,000; or
(f) if an encumbrancer takes possession or a receiver, administrator,
administrative receiver, trustee, liquidator or similar officer is
appointed of the whole or any part of the assets, rights or revenues
of Lessee or any of its subsidiaries or a distress, execution,
sequestration or other process is levied or enforced upon or sued
out against any of the assets, rights or revenues of Lessee or any
of its subsidiaries and is not discharged within fourteen days, or
Lessee applies for or consents to the appointment of a receiver,
administrator, administrative receiver, trustee, liquidator or
similar officer for it or for all or any part of its assets, rights
or revenues; or
(g) if Lessee or any of its subsidiaries suspends payment of its debts,
or is unable or admits its inability to pay its debts as they fall
due, or shall be adjudicated or found, or becomes, bankrupt or
insolvent, or proposes or enters into any composition or other
arrangement for the benefit of its creditors generally, or Lessee or
any of its subsidiaries shall, by voluntary petition, answer or
consent, seek relief under the provisions of any bankruptcy,
insolvency or other similar law providing for the reorganization,
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liquidation, administration, dissolution or winding-up of
corporations, or providing for an agreement, composition, extension
or adjustment with its creditors; or
(h) if a petition against Lessee in a proceeding under applicable
bankruptcy or other insolvency laws shall be filed and shall not be
withdrawn or dismissed within 30 days thereafter, or if any order
shall be made by any competent court or resolution passed by Lessee
or any of its subsidiaries or their respective board of management
or supervisory board, whichever is competent to pass such resolution
for the winding-up or dissolution of Lessee or any of its
subsidiaries or for the appointment of a liquidator, trustee or
conservator, save for winding-up or dissolution for the purposes of
amalgamation or reorganization (not involving or arising out of
insolvency) the terms of which shall have received the prior written
approval of Lessor; or
(i) if Lessee or any of its subsidiaries disposes of all or a material
part of its assets, whether by one or a series of transactions,
related or not, other than for the purpose of a reconstruction or
amalgamation the terms of which have received the previous consent
in writing of Lessor; or
(j) if any action shall be taken by Lessee which shall impair the title
or ownership of Lessor (or Head Lessor), or the Security Interest of
the Bank, in the Aircraft or this Agreement is or becomes wholly or
partly invalid, ineffective or unenforceable by reason of any act or
omission of Lessee; or
(k) if any consent, authorization, license, certificate or approval of
or registration with or declaration to any Government Entity in
connection with this Agreement including, without limitation:
(i) any Certificate of Public Convenience and Necessity; or
(ii) required by Lessee or as a condition precedent required by
Lessor pursuant to Article 2.3 to authorize, or in connection
with, the execution, delivery, validity, enforceability or
admissibility in evidence
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of this Agreement or the performance by Lessee of its
obligations under this Agreement; or
(iii) the registration of the Aircraft; or
(iv) any airline license or air transport license;
is changed such that it materially impairs the ability of Lessee to
perform its obligations hereunder, or is withheld, or is revoked,
suspended, cancelled, withdrawn, terminated or not renewed, or
otherwise ceases to be in full force; or
(m) if any circumstances analogous to any of the circumstances described
in paragraphs (f), (g) or (h) above arise under the Law of any
applicable jurisdiction; or
(n) if an event of default (however defined) occurs under any Operative
Document or any Other Aircraft Agreement which event permits
acceleration or termination; or
(o) any advance pursuant to the Equity Commitment has not been made when
due; or
(p) the Enumerated Milestone as defined in Article 14.1(q) is not
fulfilled by the last date on which a deferral is to be paid and
such failure continues for a period of five (5) days; or
(q) an event of default by or relating to Lessee shall occur under, and
as a result a termination shall occur under, any agreements for
gates, hangars or other facilities at Midway Airport, Chicago,
Illinois or any other airport that are material to Lessee's
operations including any agreements relating to the provision by
American Airlines, Inc. (or any affiliate) of services to Lessee.
15.2 If one or more Events of Default shall have occurred and be continuing, at
Lessor's option and subject to any mandatory requirement of Law:
(a) For Lessee's account Lessor may do anything that may reasonably be
required to cure any Event of Default and recover from Lessee all
costs
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including legal expenses incurred in so doing, and/or
(b) Lessor may accept such Event of Default as a repudiation of this
Agreement and terminate the lease of the Aircraft to Lessee
hereunder by:
(i) serving notice of such termination on Lessee specifying the
occurrence giving rise to such Event of Default or Events of
Default, provided that such notice shall be deemed to have
been served without the necessity of actual service upon the
occurrence of any Event of Default described in paragraphs
(f), (g) and (h) of Article 15.1.
Thereafter (if the Term shall have commenced) Lessee shall
redeliver possession of the Aircraft to Lessor at Schiphol
Airport, The Netherlands (or such other location as Lessor may
require); or (at Lessor's election)
(ii) taking possession of the Aircraft for which purpose Lessor by
its servants or agents may enter upon Lessee's premises where
the Aircraft may be located, or cause the same to be
redelivered to Lessor at Schiphol Airport, The Netherlands,
(or such other location as Lessor may require Lessee to
assemble and deliver the Aircraft to Lessor, and Lessor shall
be entitled to act as attorney for Lessee in causing such
redelivery and shall have all the powers and authorizations
legally necessary for taking such action. In the event of
exercise by Lessor of its powers under this sub-paragraph (ii)
such termination shall be deemed to take effect on such taking
of possession by Lessor or such redelivery of the Aircraft to
Lessor at the said airport; and/or
(c) Lessor may proceed by appropriate court action or actions to enforce
performance of Article 15.2(b) or to recover damages for the breach
thereof; and/or
(d) all rights of Lessee hereunder shall, in the event the Term shall be
terminated pursuant to Article 15.2(b) henceforth absolutely cease
and terminate but without prejudice to Lessee's obligations
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under this Agreement all of which shall continue in full force and
effect except for obligations to pay Rent and Reserve Rate after the
Aircraft is returned to Lessor, and is in the condition required by
Article 16; and Lessee shall take all steps necessary to effect
deregistration of the Aircraft in the State of Registration and
Lessor shall be entitled to sell or otherwise deal with the Aircraft
as if this Agreement had never been made. Without prejudice to the
foregoing, Lessee hereby appoints Lessor as its attorney to do any
act or thing required in connection with such deregistration of the
Aircraft.
15.3 If an Event of Default occurs, Lessor shall have the right to demand that:
(a) Lessee pay all amounts which may be then due and unpaid hereunder,
and
(b) at Lessor's option whether or not Lessor shall have exercised, or
shall thereafter at any time exercise, any of its rights under
Article 15.2, by thirty (30) days written notice to Lessee from
Lessor specifying a payment date, Lessee pay Lessor, and Lessee
shall pay Lessor, on the payment date specified in such notice, as
liquidated damages for loss of bargain and not as a penalty (in lieu
of the Rent due for the Aircraft covered by such notice for the
period commencing after the date specified for payment in such
notice), any unpaid Rent for the Aircraft (prorated in the case of
Rent on a daily basis) to and including the payment date specified
in such notice, plus the amount, if any, by which the aggregate Rent
for the Aircraft for the remainder of the Term for the Aircraft,
discounted periodically (equal to installment frequency) to present
worth at the interest rate of six percent (6%) per annum, exceeds
the Fair Market Rental Value of the Aircraft for the remainder of
the Term, after discounting such Fair Market Rental Value
periodically (equal to installment frequency) to present worth as of
the payment date specified in such notice at the interest rate of
six percent (6%) per annum.
Lessee shall fully indemnify Lessor on its own behalf and on behalf of the
Head Lessor and the Bank on demand
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against any loss (including loss of profit), damage, expense (including
without limitation attorneys' fees), cost or liability which Lessor, Head
Lessor or the Bank may sustain or incur as a consequence of the occurrence
of any Event of Default and/or termination of the letting of the Aircraft
pursuant to this Agreement, including but not limited to (i) any loss of
profit suffered by Lessor and/or the Head Lessor because of Lessor's
inability to place the Aircraft on lease with another lessee on terms as
favorable to Lessor as the terms of this Agreement or because whatever
use, if any, to which Lessor is able to put the Aircraft upon its return
to Lessor, or the funds arising upon a sale or other disposal thereof, is
not as profitable to Lessor as letting the Aircraft in accordance with the
terms of this Agreement would have been to the extent the foregoing loss
of profit shall not be recovered under Article 15.3(b), (ii) any amount of
interest, fees or other sums whatsoever paid or payable on account of
funds borrowed in order to carry any unpaid amount, (iii) any loss,
premium, penalty or expense which may be incurred repaying funds raised to
finance the Aircraft or in unwinding any swap, forward interest rate
agreement or other financial instrument relating in whole to Lessor's
financing of the Aircraft and/or the Aircraft under the Other Aircraft
Agreement, and (iv) any loss, cost, expense or liability sustained or
incurred by Lessor owing to Lessee's failure to redeliver the Aircraft in
the condition required by this Agreement.
15.4 No remedy referred to in this Article 15 is exclusive, but each remedy
shall be cumulative and in addition to any other remedy referred to herein
or otherwise available to Lessor. The exercise by Lessor of any of its
remedies hereunder shall not preclude or estop the exercise or beginning
of exercise by Lessor of any or more of such other remedies.
No express or implied waiver by Lessor of any Event of Default, or failure
or delay of Lessor in exercising any right hereunder shall operate as
waiver thereof unless an express waiver is executed and delivered to
Lessee.
15.5 Prior to the Expected Delivery Date Lessee shall deliver to Lessor a duly
authorized consent, undated and in form and substance acceptable to
Lessor, addressed to the Federal Aviation Administration consenting to the
release of this Agreement in
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connection with the termination of this Agreement pursuant to the terms
hereof and, if so requested by Lessor, the deregistration of the Aircraft
from the register of civil aviation in the State of Registration.
16. RETURN OF AIRCRAFT
16.1 On the Expiry Date or upon earlier termination of the Term (unless a
Casualty Occurrence shall have occurred with respect to the Aircraft),
Lessee shall, at its own expense, redeliver the Aircraft to Lessor at the
Re-Delivery Location or such other airport as is mutually acceptable to
the parties, in a condition complying with the provisions of Appendix E,
free and clear of all liens and encumbrances (including Permitted Liens
other than Lessor Liens) and thereupon cause the Aircraft to be removed
from the Register of Civil Aircraft in the State of Registration and
Lessee shall return the Aircraft to Lessor together with the Aircraft
Documents and all equipment and records supplied pursuant to this
Agreement when the Aircraft was delivered to Lessee hereunder.
16.2 Immediately prior to such redelivery of the Aircraft, Lessee, at its own
expense, shall make the Aircraft, Aircraft Documents and other records
available to Lessor for inspection ("Final Inspection") in order to verify
that the condition of the Aircraft complies with the provisions of this
Agreement. Such inspection shall not unreasonably interfere with the
operation of the Aircraft. The period will be long enough for the Final
Inspection to permit the conduct by Lessor of the following:
(a) Inspection of the Aircraft Documents;
(b) Inspection of the Aircraft structure and Parts;
(c) Inspection of the Engines and Auxiliary Power Unit ("A.P.U."),
including without limitation, a boroscope inspection or any other
equivalent inspection method supported by Rolls Royce, inspection of
the compressor and turbine area, and, if reasonably requested based
on evidence that it is required, the Engine and A.P.U. condition
runs confirming release of each Engine and A.P.U. for its remaining
operational life;
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(d) A one-hour to two-hour test flight with Lessor's representatives on
board as observers and, if any non compliance is found, a subsequent
test flight to check compliance after rectification.
16.3 To the extent that, upon such Final Inspection, the condition of the
Aircraft and Aircraft Documents does not comply with the provisions of
this Agreement, Lessee, at its own expense, shall cause such
non-compliance to be promptly rectified and to the extent such
rectification extends beyond the Expiry Date, the Term shall, at Lessor's
sole option, be deemed to be automatically extended and the provisions of
this Agreement shall remain in full force and effect until such
rectification has been accomplished. During such extension of the Term the
Lessee shall be liable to pay Rent at a daily pro rata rate equal to the
Rent payable during the last Rental Period of the Term.
16.4 Upon redelivery Lessee shall provide to Lessor all necessary assistance to
enable Lessor to obtain any required documents in relation to the export
of the Aircraft from the State of Registration, and if different, from the
State of Incorporation (including a valid and subsisting export license
for the Aircraft), and shall reassign to Lessor, at the expense of Lessee,
the benefit of any indemnity or warranty which has been assigned to Lessee
pursuant to Article 13.3 above to the extent such indemnity or warranty is
assignable.
16.5 Prior to the Expiry Date or upon any earlier termination of the Term and
upon Lessor's request, Lessee will provide Lessor or its agent reasonable
access to the Approved Maintenance Program and the Aircraft Documents in
order to facilitate the Aircraft's integration into any subsequent
operator's fleet.
Lessee will, if requested by Lessor to do so, upon return of the Aircraft
deliver to Lessor a certified true current and complete copy of the
Approved Maintenance Program. Lessor agrees that it will not disclose the
contents of the Approved Maintenance Program to any person or entity
except to the extent necessary to monitor Lessee's compliance with this
Agreement and/or to bridge the maintenance program for the Aircraft from
the Approved Maintenance Program to another program.
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16.6 Upon redelivery of the Aircraft to Lessor, an adjustment shall be made in
respect of fuel on board on the Delivery Date and on redelivery at the
price then prevailing at the Redelivery Location.
16.7 If Lessor shall request that Lessee paint the Aircraft any other basic
color as contemplated by Section 1(h) of Appendix E, Lessor agrees that it
shall bear the cost and expense of the difference between white paint and
such other basic color.
17. CASUALTY OCCURRENCES
17.1 In this Agreement "Casualty Occurrence" shall mean any of the following
events with respect to the Aircraft, the Airframe or an Engine:
(a) the actual, agreed, constructive, arranged or compromised total loss
or destruction of the Aircraft, the Airframe or an Engine, or damage
to the Aircraft, Airframe or Engine rendering repair impracticable
or uneconomical, or the Aircraft, Airframe or Engine being rendered
permanently unfit for normal use;
(b) requisition of title or other compulsory acquisition, requisition,
capture, seizure, deprivation, confiscation or detention for any
reason of the Aircraft, the Airframe or an Engine by any Government
Entity of the State of Registration or by any other government or
other competent authority, whether de jure or de facto, but
excluding requisition for use or hire not involving requisition of
title by any Governmental Entity for a temporary period ending on
the date fifteen (15) days (or one hundred eighty (180) days if the
requisition for use or hire is by the United States) after such
requisition, or the Expiry Date, whichever first occurs; and
(c) the hijacking, theft, disappearance, condemnation, confiscation or
seizure of the Aircraft, the Airframe or an Engine other than in the
circumstances referred to in (b) above which deprives Lessee of the
use thereof for more than fifteen (15) consecutive days.
17.2 (a) In the event of a Casualty Occurrence with respect to the Aircraft
or Airframe prior to the Delivery
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Date, this Agreement shall immediately terminate with respect to
such Aircraft and neither party shall have any further obligation or
liability hereunder, save that Lessor shall return to Lessee the
Deposit or such part thereof as Lessor shall have received from
Lessee and Lessee shall remain liable to reimburse Lessor for any
amounts specified in Article 8.2(a).
(b) In the event of a Casualty Occurrence with respect to the Aircraft
or Airframe after delivery to Lessee hereunder, Lessee shall pay the
Agreed Value and, if applicable, the Additional Amount pursuant to
Appendix D, Article 2.6, to Lessor on or prior to the earlier of (i)
45 days after the Casualty Occurrence and (ii) the Business Day
after the date of receipt of the insurance proceeds in respect of
the Casualty Occurrence and, provided all other amounts which are
then due and payable by Lessee under this Agreement have been paid
in full to Lessor, Lessee's obligation hereunder for payment of Rent
shall cease as from the date on which Lessor receives payment in
full of the Agreed Value. Rent paid in advance for any days which
occur after such Agreed Value and Additional Amount, if any, is paid
shall be repaid to Lessee, so long as no Default has occurred and is
continuing, on a pro rata basis for each day beyond such date of
payment of Agreed Value. Any excess insurance proceeds from the
insurance obtained by Lessee pursuant to Article 11 remaining after
payment of the foregoing amounts shall, unless a Default shall have
occurred and be continuing, be paid over to Lessee.
(c) Subject to the rights of any insurers and reinsurers or other third
party, upon irrevocable payment in full to Lessor of the Agreed
Value and all other amounts which may be or become payable to Lessor
under this Agreement, Lessor will without recourse or warranty
(except as to Lessor's Liens) and without further act, be deemed to
have transferred to Lessee all of Lessor's rights to any Engines and
Parts not installed when the Casualty Occurrence occurred, all on an
as-is where-is basis, and will at Lessee's expense, execute and
deliver such bills of sale and other documents and instruments as
Lessee may reasonably request to evidence (on the public record or
otherwise) the transfer and the vesting of
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Lessor's rights in such Engines and Parts in Lessee, free and clear
of all rights of Lessor and Lessor Liens.
17.3 Upon the Casualty Occurrence with respect to any Engine not involving a
Casualty Occurrence of the Aircraft, Lessee shall give Lessor prompt
written notice thereof and Lessee shall replace such Engine as soon as
reasonably possible with a replacement Engine in accordance with Article
5.1.2(a). Such replacement shall be deemed an "Engine" as defined herein.
Lessee agrees to take such action as Lessor may reasonably request in
order that any such replacement engine shall be duly and properly titled
in Lessor or the Bank and leased hereunder and subject to the Mortgage to
the same extent as the Engine replaced thereby. Lessee's obligation to pay
the Rent hereunder shall continue in full force and effect, but Lessee
shall be entitled to be reimbursed by Lessor the amount of insurance or
condemnation proceeds, if any, received by Lessor with respect to such
replaced Engine.
17.4 In the event of requisition for hire of the Aircraft or any part thereof
not constituting a Casualty Occurrence, then, subject to the proviso
herein contained, the Rent and other charges payable under this Agreement
shall not be suspended or abated either in whole or in part, and Lessee
shall not be released from any of its other obligations (as to payment,
indemnity or otherwise) hereunder (other than operational obligations with
which Lessee is unable to comply solely by virtue of such confiscation or
requisition). If Lessee shall duly comply with all its obligations under
this Agreement, Lessee shall during the Term be entitled to any hire paid
by the requisitioning or confiscating authority and Lessee shall, as soon
as practicable after the end of any requisition or confiscation, cause the
Aircraft to be put into the condition required by this Agreement. Lessor
shall be entitled to all compensation payable by the requisitioning or
confiscating authority in respect of any change in the structure, state or
condition of the Aircraft arising during the period of requisition or
confiscation, and Lessor shall apply such compensation in reimbursing
Lessee for the cost of complying with its obligations as aforesaid, but so
that, if any Default has occurred and is continuing, Lessor shall be
entitled to apply such compensation in or towards settlement of any
amounts owing by Lessee under this Agreement PROVIDED ALWAYS that if
following
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such requisition or confiscation the Aircraft is treated as an agreed,
constructive, arranged or compromised total loss by the insurers, then the
provisions of Article 17.1 shall apply with effect from the date on which
the insurer so determines.
18. GOVERNING LAW AND JURISDICTION
18.1 This Agreement and further agreements resulting herefrom shall be governed
by and construed in accordance with the internal Laws of the State of New
York and without regard to any conflict of law rules. This Agreement is
being delivered in the State of New York.
18.2 Lessor and Lessee hereby irrevocably agree to submit to the non-exclusive
jurisdiction of, and to waive any objection to the laying of venue in, the
County of New York and that any suit, action or proceedings (collectively,
"Proceedings") may be brought by Lessor in any court of the State of New
York or any U.S. Federal court located in New York County, New York.
18.3 Nothing contained in this Article 19 shall limit the right of either party
to this Agreement to take Proceedings against the other in any other court
of competent jurisdiction, nor shall the taking of Proceedings in one or
more jurisdictions preclude the taking of Proceedings in any other
jurisdiction, whether concurrently or not.
18.4 Promptly after service of any process the Lessor or Lessee shall despatch
a copy thereof to Lessee or Lessor, as the case may be, by registered
mail, postage prepaid but failure of Lessee or Lessor, as the case may be,
to receive such copy shall not invalidate the service of such process.
18.5 To the extent that the parties may in any jurisdiction claim for their or
their assets immunity from suit, execution, attachment (whether in aid of
execution, before judgment or otherwise) or other legal process and to the
extent that in any such jurisdiction there may be attributed to themselves
or their assets such immunity (whether or not claimed) the parties hereby
irrevocably agree not to claim and hereby irrevocably waive any immunity
to the fullest extent permitted by the laws of such jurisdiction with the
intent, inter alia, that the foregoing waiver shall have effect for
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the purposes of the Foreign Sovereign Immunities Act of 1976 of the United
States of America.
18.6 Lessee and Lessor shall each at all times maintain an agent for service of
process in the New York, New York. For Lessee, such agent shall be Winston
& Strawn, Attn: R. Evan Smith, 175 Water Street, New York, NY 10038. For
Lessor, such agent shall be Haight, Gardner, Poor & Havens, Attn: John F.
Pritchard, 195 Broadway, New York, NY 10007. Any writ, judgment or other
notice of legal process shall be sufficiently served on Lessee or Lessor
if delivered to such agent at its address for the time being. Each of
Lessee and Lessor undertakes that if it shall revoke the authority of its
above agent or if for any reason any such agent no longer serves as agent
to receive service of process, Lessee or Lessor, as the case may be, shall
promptly appoint another such agent and advise Lessor or Lessee, as the
case may be, thereof.
19. MISCELLANEOUS
19.1 The rights of each of Lessor and Lessee under this Agreement are
cumulative, may be exercised as often as it considers appropriate and are
in addition to its rights under general law. The rights of Lessor against
the Lessee or in relation to the Aircraft (whether arising under this
Agreement or the general law) shall not, as against or in favor of Lessor,
be capable of being waived or varied otherwise than by an express waiver
or variation in writing; and in particular any failure to exercise or
delay in exercising any of such rights shall not operate as a waiver or
variation of any other such right; and defective or partial exercise of
any such rights shall not preclude any other or further exercise of that
or any other such right; and no act or course of conduct or negotiation on
Lessor's part or on Lessor's behalf shall in any way preclude Lessor from
exercising any such right or constitute a suspension or any variation of
any such right.
19.2 Save where expressly provided in this Agreement, any certificate or
determination by Lessor as to any rate of interest or as to any other
amount payable under this Agreement shall, in the absence of manifest
error, be conclusive and binding on Lessee.
19.3 If any sum paid or recovered in respect of the liabilities of Lessee under
this Agreement is less than
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the amount then due, Lessor may apply such sum to rental, interest, fees
or any other amount due under this Agreement in such proportions and order
and generally in such manner as Lessor shall determine.
19.4 The terms and conditions of this Agreement shall not be varied otherwise
than by an instrument in writing executed by or on behalf of Lessor and
Lessee.
19.5 If any of the provisions of this Agreement becomes invalid, illegal or
unenforceable in any respect under any law, the validity, legality and
enforceability of the remaining provisions shall not in any way be
affected or impaired.
19.6 Every notice, request, demand or other communication under this Agreement
shall:
(a) be in English;
(b) be in writing and made by mail or by fax or telex transmission or by
reputable courier service;
(c) be deemed to have been received, subject as otherwise provided in
this Agreement, in the case of a telex transmission, at the time of
dispatch with confirmed answerback of the addressee appearing at the
beginning and the end of the communication, in the case of a fax
transmission, at the time safe receipt is confirmed by the addressee
provided that if the date of dispatch is not a business day in the
country of the addressee any telex or fax transmission shall be
deemed to have been received at the opening of business on the next
such business day, in the case of a letter five days after being
deposited in the mail first class postage prepaid and in the case of
a courier three days after being sent; and
(d) be sent:
(1) to Lessee at:
Midway Airlines Corporation
5713 South Central Avenue
Chicago, Illinois 60638
Tel: (312) 838-2060
Fax: (312) 838-2069
Attention: President
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(2) to Lessor at:
First Security Bank of Utah, N.A.
79 South Main Street
Salt Lake City, Utah 84130-0007
Tel: (801) 246-5630
Fax: (801) 246-5053
Attention: Corporate Trust Department
with a copy to FAUSA at:
1199 N. Fairfax Street, Suite 500
Alexandria, VA 22314
Telex: 899462 FAUSA ALE
Fax: (703) 683-2233
Attention: The President.
or to such other address or telex or fax number as is notified by either
party to the other party to this Agreement.
19.7 This Agreement may be executed in any number of counterparts and all of
such counterparts taken together shall be deemed to constitute one and the
same instrument.
19.8 This Agreement is the sole and entire agreement between Lessor and Lessee
in relation to the leasing of the Aircraft, and supersedes all previous
agreements in relation to such leasing. Each of Lessee and Lessor
represents for itself that no broker has been retained by it in connection
with this Agreement or the other Operative Documents.
19.9 This Agreement is intended by the parties to be a lease between Lessor and
Lessee. Any waivers, consents, deferrals of the payment of Rent or Reserve
Rates are not intended to be an agreement by Lessor to make any capital
contribution to the business of Lessee or to share in or have liability
for any of Lessee's losses, profits, liabilities or obligations. Nothing
contained in this Agreement or performed by Lessor in connection herewith
and any other agreement between Lessor and Lessee whether now existing or
entered into in the future shall make Lessor a partner or a joint venturer
of Lessee and shall not for any purpose be construed as a joint-venture
between the parties hereto.
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<PAGE>
19.10 [Intentionally Omitted]
19.11 Section 1110: Lessee acknowledges that Lessor would not have entered into
this Agreement unless it had available to it the benefits of a lessor
under Section 1110 of Title 11 of the United States Code. Lessee and
Lessor hereby state that this Agreement is intended to be a true lease for
U.S. Internal Revenue Code purposes. Lessee covenants and agrees with
Lessor that to better ensure the availability of such benefits, Lessee
shall support any motion, petition or application filed by Lessor with any
bankruptcy court having jurisdiction over Lessee, whereby Lessor seeks
recovery of possession of the Aircraft under said Section 1110 and shall
not in any way oppose such action by Lessor unless Lessee shall have
complied with the requirements of said Section 1110 to be fulfilled in
order to entitle Lessee to continued use and possession of the Aircraft
hereunder. In the event said Section 1110 is amended, or if it is repealed
and another statute is enacted in lieu thereof, Lessor and Lessee agree to
amend this Agreement and take such other action not inconsistent with this
Agreement as Lessor reasonably deems necessary so as to afford to Lessor
the rights and benefits as such amended or substituted statute confers
upon owners and lessors of aircraft similarly situated to Lessor.
19.12 First Security Bank of Utah, N.A. ("FSBU") is entering into this Agreement
solely as trustee under the Trust Agreement and not in its individual
capacity and in no case whatsoever shall FSBU (or any entity acting as
successor trustee under the Trust Agreement) be personally liable on, or
for any loss in respect of, any of the statements, representations,
warranties, agreements or obligations of Lessor hereunder as to all of
which the other party hereto agrees to look solely to the Trust Estate,
except for any loss caused by FSBU's own willful misconduct or gross
negligence. FSBU warrants that the Aircraft shall be free of liens
attributable to FSBU in its individual capacity which do not arise from
its actions as lessor under this Agreement and that it shall be personally
liable to Lessee for any Claim against Lessee in respect of any
statements, representations, warranties, agreements or obligations
contained herein which are expressly made in its individual capacity.
19.13 As between Lessor and Lessee, if Lessee fails to make any payment of Rent
or Reserve Rate required to be made
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by it hereunder or fails to perform or comply with any of its agreements
contained herein, Lessor may itself make such payment or perform or comply
with such agreement, and the amount of such payment and the amount of the
reasonable and properly documented expenses of Lessor incurred in
connection with such payment or the performance of or compliance with such
agreement, as the case may be, together with interest thereon at the
interest rate defined in Appendix D, Article 6, shall be deemed
Supplemental Rent, payable by Lessee upon demand.
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IN WITNESS whereof the parties have executed this Agreement the day and
year first herein written.
SIGNED on behalf of SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A. MIDWAY AIRLINES
not in its individual capacity, CORPORATION
except as expressly set forth herein,
but solely as owner trustee
By: /s/Greg A. Hawley By:
-------------------------- --------------------------
Greg A. Hawley
Its: Assistant Vice President Its: _________________________
<PAGE>
IN WITNESS whereof the parties have executed this Agreement the day and
year first herein written.
SIGNED on behalf of SIGNED on behalf of
FIRST SECURITY BANK MIDWAY AIRLINES CORPORATION
OF UTAH, N.A.
not in its individual
capacity, except as
expressly set forth
herein, but solely
as owner trustee
By: By: /s/[SIGNATURE ILLEGIBLE]
-------------------------- --------------------------
Its: _________________________ Its: VP
<PAGE>
APPENDIX A
DESCRIPTION OF AIRCRAFT
Number of
Manufacturer Model Serial No. Engines Engines
- ------------ ----- ---------- ------- -------
Fokker 100 11477 Rolls Royce Two
Tay MK 650-15
1. On the Delivery Date the Aircraft shall be new and shall comply with
the detailed description contained in this Appendix A, as may be amended from
time to time, and which is attached hereto as Appendix A-1.
2. The Aircraft at delivery will have an FAA Type Certificate and a
Netherlands Certificate of Airworthiness for Export, which will make the
Aircraft eligible for an FAA Standard Airworthiness Certificate. The Aircraft
shall at delivery also meet FAR 121 requirements promulgated or in effect and
known to Lessor or Manufacturer on June 27, 1993.
<PAGE>
APPENDIX A-1
AIRCRAFT CONFIGURATION
relating to Fokker 100 aircraft
This Appendix A-1 consists of the following parts:
- Part A: Type Specification.
- Part B: Specification items for Fokker 100
aircraft in addition to the Type
Specification.
- Part C: Seller Furnished Equipment.
Page: 1
<PAGE>
APPENDIX A-1, Part A
PART A: TYPE SPECIFICATION
Type Specification as per printed copy supplied by Lessor to Lessee.
Reference document : TD F28:PL-004
Date of issue : February 1, 1983
Date of latest amendment : July 1, 1991
Engine specification : Rolls-Royce Tay Mk650-15 as affected by
72-00 in Part B
Page: 2
<PAGE>
APPENDIX A-1, Part B
PART B: SPECIFICATION ITEMS FOR FOKKER 100 AIRCRAFT--
IN ADDITION TO THE TYPE SPECIFICATION
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
02 GENERAL REQUIREMENTS
02-20.02 FAA Certification 0
The aircraft is configured in accordance
with the FAA requirements originating from
the FAA Type Certification. Operational
requirements, possibly requested by local
airworthiness authorities are not included.
02-20.10 FAR 121 Requirements TBD
To comply with FAR 121 requirements the
following changes will be made to the
aircraft:
- Certificate holder (ref. 25-19)
- Medical kit (ref. 25-60)
- Second megaphone (ref. 25-33)
- 3 additional smoke hoods (ref. 35-30)
- Life vests for crew (ref. 25-60)
- Red anti-collision lights (ref. 33-42)
- Seat cushions as flotation devices
(ref. 25-21)
- Placards and markings to comply with FAA
requirements (ref. 11-30)
- At least 50% of aisle seats will have
movable arm rests (ref. 25-21).
02-51.10 Exterior Finish 0
The exterior decorative paint scheme shall
be as specified by customer. Wings will
be white.
Page: 3
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
02-81.01 SFE i.l.o. BFE 0
All Systems and Components as listed in the
Type Specification as Buyer Furnished Equipment
(BFE) shall be supplied as Seller Furnished
Equipment (SFE). In addition to this all
equipment related to the Specification items
in Part B shall also be Seller Furnished Equipment.
03 STRUCTURAL DESIGN CRITERIA
03-20.01 Increased Design Weights 0
The aircraft shall be certified for operation
with the following design weights:
Maximum Take-off Weight 98,000 lbs.
Maximum Zero Fuel Weight 81,000 lbs.
Maximum Landing Weight 88,000 lbs.
Maximum Taxi Weight 98,500 lbs.
11 PLACARDS AND MARKINGS
11-20.10 Exterior Placards and Markings 0
Exterior placards and markings shall be in
English Units of measurement.
11-30.10 Interior Placards and Markings 0
Interior placards and markings shall be
adapted for FAA/FAR requirements, and
shall be in English Units of measurement
Page: 4
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
23 COMMUNICATIONS
23-11.01 HF Communication System Provisions 31
The aircraft shall have full provisions for
a single Collins HF Communication system according
to ARINC 719 characteristics.
To arrive at an operational system, the
following equipment has to be added to the
Specification:
- (01) Transceiver, Collins HFS 700
- (01) Antenna tuner, Collins 490S-1
- (01) Control Panel, Gables
23-32.01 Passenger Entertainment System 22
Installation of a pre-recorded announcement
and boarding music system. The system comprises
a Matsushita RDAX 7201 recorder system.
23-33.10 Portable Communications TBD
Installation of one additional megaphone in
the rear of the passenger compartment, in the
left-hand rear stowage.
24 ELECTRICAL POWER
24-55.10 Razor Outlets in Lavatories 0
Installation of 110 V AC razor power outlets
in the aft lavatories (i.l.o. the 220 V AC supply).
Page: 5
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
25 EQUIPMENT/FURNISHINGS
25-19.10 Certificate Holder Negl.
A certificate holder shall be installed in the
flight compartment on the cockpit door.
25-20.10 Passenger Compartment Lay-out TBD
The Passenger compartment lay-out shall be as
per attached Fokker drawing F100-04-145, sheet 2,
issue B. This lay-out features:
- 100 passengers at 34 (33) inch seat-pitch
- One Half-size Galley 1 (see attached drawing)
- One Full-size Galley 2 (see attached drawing)
- Two Lavatories
- Stowage compartment in forward cabin
- Wardrobe in forward cabin
- 4 Cabin Attendant seats
In the layout, a 13-inch passage-way at the
triple seat side, and a 10-inch passageway at the
double seat side, near the overwing emergency
exits are anticipated to comply with the FAR
regulations. This results in 5 triple seats at 33
inch pitch. It is the Customer's responsibility
to get approval for this layout from the FAA.
Color and materials for seat covers, curtain,
carpet and entrance floor will be as specified
by customer.
25-21.11 Dual Aft Facing Cabin Attendant Seat 29
Installation of a rear facing double cabin
attendant seat in the entrance against forward
wardrobe/stowage wall, on floor hardpoints and
a third top-point, i.l.o. the standard single
seat.
Page: 6
<PAGE>
[GRAPHIC DESCRIPTION]
The passenger compartment layout per attached Fokker drawing F100-04-145,
sheet 2, issue B.
The Layout features
- 100 passengers at 34(33) inch seat pitch
- One half-size galley
- One full size galley
- two lavatories
- stowage compartment in forward compartment
- Wardrobe in forward cabin
- 4 cabin Attendants
<PAGE>
FOKKER
GALLEYS 100
================================================================================
[GRAPHIC DESCRIPTION]
Fokker drawing of half-size galley and full-size galley.
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
25-21.10 Passenger seats 803
(Delta to
standard)
The passenger seats will be Flight Equipment
FEEL Space Gen III, with leather seat covers.
Due to leather covering, cushion material has to
be changed for fire blocking requirements. Seats
shall have cushions to be used as flotation
devices. Seats will be modified with movable
armrests on aisle side, except near the overwing
emergency exits. The leather seat covers are
priced separately in Specification Change Notice
JE1 25-21.10. Price is US$ 30,000.- per aircraft
(price level Sept. 93), to be paid on or before
delivery of the aircraft.
25-23.01 Window Blinds 57
Installation of a rolling blind in each
window of the passenger compartment.
25-29 Aft Trolley Stowage / Wardrobe 53
The standard wardrobes in the rear of the
aircraft cabin (forward of the lavatories)
shall be made suitable for stowage of one
half size trolley (one on each side) and a
standard container unit.
The stowage shall be closed by means of a door.
A folding panel shall allow the use of the
compartment as wardrobe.
25-31 Curtain between Galley 1 and 2 4
A curtain will be installed between Galley 1
and 2 to be able to close the Galley area from
the passenger entrance and aisle.
Page: 7
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
26-60.10 Emergency Equipment TBD
Emergency equipment and locations shall be
as per attached drawing. In addition to the
standard aircraft the following equipment has
been added:
- Second megaphone
(p/n S243, Ovenaire-Audio-Carpenter)
- Crash axe (p/n 42D8331, Van Dusen)
- Medical kit (p/n TBD)
- Crew life vests (p/n S21850-7300, Switlik)
- Passenger flotation cushions
- Escape slide for forward opening
passenger door
- Additional flashlight for additional
cabin attendant seat in front cabin
- 3 Smokehoods located near the
portable fire extinguishers
(p/n 119003, Puritan Bennett)
25-61.01 Crash Axe 2
A crash axe shall be installed in the flight
compartment. The axe shall be located on the RH
aft wall, with the blade housed in a protective
cover.
25-63.01 Emergency Locator Transmitter 7
An emergency locator transmitter shall be
installed, comprising the following components:
- Emergency locator transmitter,
located in the ceiling at the rear
of the passenger compartment;
- Antenna, mounted on the upper fuselage;
- Test switch, located on the overhead
panel in the flight compartment.
Page: 8
<PAGE>
[GRAPHIC DESCRIPTION]
Layout of emergency equipment and locations.
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
26 FIRE PROTECTION
26-12.01 Audible Fire Warning Horn 4
Installation of a warning horn in the nose
landing gear bay for audible APU fire warning
during APU ground operation.
The function of the warning horn will be
inhibited during an APU fire warning test.
28 FUEL
28-40.10 Fuel Quantity Indication 0
Fuel quantity indication in the flight
compartment and on the fueling control panel
shall be in pounds (lbs.). (Installation of
alternate part number for combined processor
totalizer). Fuel related data on FMS shall
be in pounds (lbs.).
Fuel flow display in the MFDS shall be in
pounds per hour (lbs/hr.).
Magnetic fuel level indicators will be adapted
to read in pounds (lbs.) or U.S. Gallons.
31 INDICATING/RECORDING SYSTEMS
31-00.10 Instrument Calibration 0
Instrument calibration shall be in English units:
- Degrees F i.l.o. Degrees C
- lbs i.l.o. kg
- inches Hg i.l.o. mbar
- feet i.l.o. m
Page: 9
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
33 LIGHTS
33-28.01 Galley Area Light 2
A light shall be installed int he ceiling
between galley 1 and 2, and shall be controlled
by a switch located on galley 1.
33-42.10 Anti-Collision Lights 0
Two anti-collision lights with red lens i.l.o.
the standard clear lens shall be installed.
33-46.01 Logo Lights 11
Light fixtures will be installed on the inboard
side of the outboard flap track fairings, to
illuminate both sides of the vertical stabilizer.
33-47.01 Strobe Lights 18
Installation of high intensity recognition in
each wing tip and in the tail cone.
34 NAVIGATION
34-16.01 Windshear 2
Windshear detection, alerting and recovery
guidance shall be incorporated. The Flight
Management System shall provide the detection
function. The GPWS and EFIS shall provide
warning, whereas the recovery guidance/automatic
recovery (when selected), is provided by AFCAS.
In combination with the windshear detection
a speedbrake auto retract logic has to be
installed.
Page: 10
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
34-26.01 Flight Director Presentation - V-bars 0
This provides V-bar Flight Director
presentation instead of the standard
crossbar presentation.
34-28.01 Dual IRS 29
Installation of a dual Inertial Reference
System (IRS) i.l.o. the standard installed
triple Attitude Heading and Reference System
(AHRS). This will comprise the following
Seller Furnished Equipment:
- (02) IRS unit Honeywell
- (01) Mode selector panel Honeywell
- (01) Inertial System Display Unit Honeywell
34-46.10 TCAS II System 66
In combination with the dual ATC S-mode
system in 34-54.10, a Bendix TCAS II system
shall be installed, comprising the following
(Seller Furnished) equipment:
- One TCAS II processor in Avionics bay.
- Two TCAS omni-directional antennas,
on top and bottom of fuselage.
- Combined ATC/TCAS control panel.
- EFIS control panels with TCAS button.
TCAS information shall be displayed on EFIS:
Traffic alerts on Navigation Display,
resolution alerts and vertical escape
guidance on the Primary Flight Displays.
Page: 11
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
34-54.10 Dual Air Traffic Control System (ATC) (See 34-46.10)
Installation of a dual ATC system with
S-mode i.l.o. the baseline single system.
This will comprise the following Seller
Furnished equipment:
- Two Bendix ARINC 700 mode-S ATC
transponders, located in the aft
rack of the avionics bay (Bendix ATC
needed due to Bendix TCAS).
- Three additional antennas, one
located on the bottom of the fuselage
and two on the top of the fuselage.
- Two program integrating panels, located
in the avionics bay, to provide the
aircraft identification code to the
S-mode transponders.
34-61.10 FMS Airline Option 0
The so-called Airline option in the FMS
will be as developed for US customers. This
option deviates from the standard on the
following points:
- Altitude constraints in climb can not
be cleared by dialing FMP altitude above
constraint altitude.
- Deletion of pilot defined waypoints upon
landing.
- Engine Out Acceleration Altitude (EO
ACCEL ALT) default set at 800 ft AFL
instead of 1000 ft.
- FUEL CONSUMPTION can only be altered
by password input.
- No holding fuel (FINAL/TIME) and no
route reserve % (RTE RES) on CDU, only
dedicated total reserve fuel (RTE RES
FUEL). Default is changeable, but is
set at 3.3 klbs.
Page: 12
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
38 WATER/WASTE
38-12.02 Water Heater 13
Installation of a water faucet with two
"PUSH" switches for hot/cold (red/blue)
water. The faucet opens when actuated and
automatically closes after approx. 5 seconds.
To provide warm water to the faucet, a heater
is installed in each toilet.
The installation comprises the following Seller
Furnished units:
- (02) Heater Inventum
- (02) Faucet Adams Rite
49 AIRBORNE AUXILIARY POWER
49-10.01 APU TBD
An Auxiliary Power Unit (APU) GTCP36-150 RR
with increased starting and loading
capabilities will be installed instead of
the GTCP36-150R.
52 DOORS
52-13.01 Forward Opening Passenger Door 29
A forward opening passenger door shall be
installed instead of the downward opening
door with integral airstair. In addition, an
escape slide plus cover will be installed.
Page: 13
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
52-31.01 Enlarged Cargo Compartment Doors 560
The aircraft will be equipped with enlarged,
upward opening cargo doors, i.l.o. the
standard downward opening doors.
52-70.01 Avionics Bay Access Hatch Warning 2
Two micro switches shall be installed on
each of the two avionics hatches to detect
an unlocked (or open) condition. Separate
warnings, one for each hatch, shall be
supplied to the flight warning computer and
displayed on the Multi-Function Display System
(MFDS).
53 FUSELAGE
53-73.01 Scuff Plate Service/Emergency Door 9
A corrosion resistant steel scuff plate shall
be installed around the lower end of the
forward S/E door opening. The scuff plate
shall be easily removable.
53-73.02 Scuff Plate Forward Opening Passenger Door 11
A corrosion resistant steel scuff plate
shall be installed around the lower end of the
opening of the forward opening passenger door.
The scuff plate shall be easily removable.
53.73.03 Scuff Plates Enlarged Cargo Doors 53
A corrosion resistant steel scuff plate shall
be installed around the lower end of each cargo
compartment door opening. The scuff plates shall
be easily removable.
Page: 14
<PAGE>
APPENDIX A-1, Part B
- --------------------------------------------------------------------------------
ATA CHAPTER DESCRIPTION WEIGHT
IN LBS.
- --------------------------------------------------------------------------------
72 ENGINES
72-00.01 Engine Installation 302
Installation of two Rolls-Royce Tay
Mk650-15 turbofan engines, i.l.o. the
standard Tay Mk 620-15 engines.
Page: 15
<PAGE>
APPENDIX A-1, Part C
PART C: SELLER FURNISHED EQUIPMENT
(Type Specification Equipment plus adaptions for
Additional Specification items in Part B)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
ATA DESCRIPTION QTY. PART NUMBER VENDOR
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
23 COMMUNICATIONS
23-12 VHF Transceiver ARINC 700 2 622-5219-003 Collins
23-31 Amplifier type PAU-700 1 662-5342-001 Collins
23-32 Passenger entertainment 1 RDAX 7201 Matsushita
Tape reproducer
23-32 Control Panel 1 RDAX 7211 Matsushita
23-33 Megaphone 2 S243 Ovenaire-Audio-
Carpenter
23-71 Cockpit Voice Recorder 1 93A100-80 Fairchild
type A-100A
23-71 Microphone monitor 1 93A151-20 Fairchild
25 EQUIPMENT & FURNISHING
25-21 Passenger Seats, Triple 15 D3111F814-10 Flight Equipment
1 D3111F802-10 Flight Equipment
1 D3111F806-10 Flight Equipment
1 D3111F812-10 Flight Equipment
1 D3111F904-10 Flight Equipment
1 D3111F904-10 Flight Equipment
25-21 Passenger Seats, Double 15 D2111F623-10 Flight Equipment
1 D2111F611-10 Flight Equipment
1 D2111F615-10 Flight Equipment
1 D2111F621-10 Flight Equipment
1 D2111F667-10 Flight Equipment
1 D2111F667-10 Flight Equipment
</TABLE>
Page: 16
<PAGE>
APPENDIX A-1, Part C
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
ATA DESCRIPTION QTY. PART NUMBER VENDOR
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
25-21 Seatbelt 100 500810HT14B3AD- American Safely
500810HT14B34-2258
25-31 Galley 1 1 1001X01A00000 Sell
25-31 Container 1 DLH306-16 Driessen
25-31 Coffee-maker 2 50405-200 Nordskog
25-31 Trolley, half-size (KSSU) 3 DLHS73-043 Driessen
25-32 Galley 2 1 1001X02A00000 Sell
25-32 Hot/Cold jug 3 DLH141-066 Driessen
25-32 Oven 3 8054-01-0000 Sell
25-32 Oven Control Panel 3 7110-26-0000 Sell
25-32 Trolley, full-size (KSSU) 3 DLH621-37 Driessen
25-61 Crash Axe 1 42D8331 Van Dusen
25-63 Emergency Locator 1 DMELT8-1 Dorne & Margolin
Transmitter
31 INSTRUMENTS
31-31 Flight Data Recorder 1 17M800-261 Fairchild
34 NAVIGATION
34-28 Inertial Reference Unit 2 HG1050ADO5 Honeywell
34-28 Mode Selector Unit 1 CG1288AC01 Honeywell
34-28 Inertial System Display Unit 1 CG1135AC02 Honeywell
</TABLE>
Page: 17
<PAGE>
APPENDIX A-1, Part C
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
ATA DESCRIPTION QTY. PART NUMBER VENDOR
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
34-32 Receiver, ILS, ARINC 700 2 622-5221-002 Collins
34-41 Weather Radar Transceiver 1 622-5132-104 Collins
34-41 Weather radar control panel 1 622-5129-106 Collins
34-41 Weather Radar Antenna 1 622-5137-201 Collins
34-41 Antenna Pedestal 1 622-5135-202 Collins
34-42 Radio Altimeter Transceiver 2 F6170 TRT
Type AHV530 - Arinc 700
34-42 Radio Altimeter Antenna 4 S67-2002-19 Sensor Systems
34-43 Ground Prox Warning Comp 1 965-0676-003 Sundstrand
Type Mk V
34-46 TCAS II Processor 1 066-50000-8102 Bendix
34-51 VOR Receiver, ARINC 700 2 622-5220-002 Collins
34-52 DME Interrogator, ARINC 700 2 622-4540--001 Collins
34-53 ADF Receiver, ARINC 700 1 622-5222-002 Collins
34-54 ATC Transponder Mode-S 2 066-01127-1101 Bendix
</TABLE>
Page: 18
<PAGE>
APPENDIX B
FURTHER DEFINITIONS AND VALUES
AGREED VALUE : {***} for the first
year of the Term through and
including the first
anniversary date of the
Delivery Date, and for each
subsequent year the Agreed
Value shall be:
Second Year: ${***}
Third Year: ${***}
Fourth Year: ${***}
Fifth Year: ${***}
Sixth Year: ${***}
Seventh Year: ${***}
Eighth Year: ${***}
Ninth Year: ${***}
Tenth Year: ${***}
provided that the Agreed Value
for any of the above years may
be adjusted up to FMV (but
never in excess of {***}
if Lessor provides to Lessee
an independent appraisal (at
Lessor's cost) prior to the
beginning of any such year.
If Lessee does not agree to
such appraised value, Lessee
may follow the Appraisal
Procedure by giving Lessor
written notice of election to
so proceed within 20 days of
receipt of Lessor's independent
appraisal.
ASSUMED RENT : (a) {***} for the
Aircraft during year one
up to and including year
three of the Term; and
<PAGE>
: (b) {***} for the
Aircraft during year four
up to and including year
ten of the Term
DEPOSIT : {***}.
ENUMERATED FINANCIAL
MILESTONES : (1) all deferred amounts of
Rent, Reserve Rate and
Deposits under this Agreement
and all Other Aircraft
Agreements have been paid in
full; and (2) Lessor shall
have received evidence
satisfactory to it that Lessee
has had a net income of
$5,000,000 (Dollars Five
Million) as determined in
accordance with generally
accepted United States
accounting principles
consistently applied for each
of three consecutive fiscal
years.
ESCALATED RENT : the Assumed Rent for the
Aircraft adjusted in
accordance with the provisions
of Appendix D Paragraph 2.2.
PARTIAL LOSS AMOUNT : $250,000, provided, however,
that if the Enumerated
Financial Milestones have been
achieved, then $500,000.
RENT : the Escalated Rent for the
Aircraft, (adjusted in
accordance with the provisions
of Appendix D Paragraphs 2.3,
2.6, 2.7 and 2.8).
-2-
<PAGE>
RESERVE RATE : (a) {***} for the
months one up to and
including twelve of the
Term;
(b) {***} for
the months thirteen up to
and including twenty four
of the Term; and
(c) {***} for the
months twenty five up to
and including one hundred
twenty of the Term.
-3-
<PAGE>
APPENDIX C
CERTIFICATE OF ACCEPTANCE
This Certificate of Acceptance is delivered, on and as of the date set forth
below, by Midway Airlines Corporation (herein referred to as "Lessee") to First
Security Bank of Utah, N.A., not in its individual capacity but solely as
trustee, (herein referred to as "Lessor") pursuant to that Aircraft Operating
Lease Agreement dated as of November 1, 1993 between Lessor and Lessee (herein
referred to as the "Agreement"):
1. Details of Acceptance
Lessee hereby indicates and confirms to Lessor, its successors and
assigns, that the Lessee has at ______ o'clock on this _____ day of
________ 199__ at ________ Airport, _________ accepted the following, in
accordance with the provisions of the Agreement:
(a) Fokker 100 airframe, Manufacturer's serial Number 11477
(b) Rolls Royce Tay Mk 650-15 Engines (each of which engines has 750 or
more rated takeoff horsepower)
Engine Number Manufacturer's S/N
1. ______
2. ______
(c) Fuel Status: ______ kilos; ______ litres
(d) Loose Equipment Check List: as per list signed by Lessor and Lessee
and attached.
2. Confirmation of Undertakings
The terms used in this Certificate shall have the meanings given to such
terms in the Agreement.
The Lessee confirms that today being the Delivery Date as defined in the
Agreement:
(i) the Aircraft is duly accepted by the Lessee in accordance with and
subject to the provisions of the Agreement and the execution and
delivery of this Certificate constitutes the acceptance of the
Aircraft by the Lessee for all purposes of the Agreement.
<PAGE>
DELIVERY BY LESSEE TO LESSOR OF THIS CERTIFICATE OF ACCEPTANCE SHALL
CONSTITUTE CONCLUSIVE PROOF AS BETWEEN LESSOR AND LESSEE THAT ON THE
DELIVERY DATE LESSEE'S TECHNICAL EXPERTS EXAMINED AND INVESTIGATED
THE AIRCRAFT AND EVERY PART THEREOF AND THAT THE AIRCRAFT AND EVERY
PART THEREOF CORRESPOND TO THE DESCRIPTION SPECIFIED IN APPENDIX A
TO THE AGREEMENT AND ARE AIRWORTHY AND IN GOOD WORKING ORDER AND
REPAIR, WITHOUT DEFECT WHETHER OR NOT DISCOVERABLE AS AT THE
DELIVERY DATE AND IN EVERY WAY SATISFACTORY TO LESSEE;
(ii) the Lessee is obliged to pay to the Lessor the amount provided for
in the Agreement with respect to the Aircraft;
(iii) the Aircraft is insured in accordance with the Agreement;
(iv) the representations and warranties contained in Article 13 of the
Agreement remain, and if made at the date of this Certificate of
Acceptance, would be, true and correct in all respects;
(v) there have been affixed to the Aircraft and the Engines the fire
resistant notices required by Article 4.3 of the Agreement;
(vi) the Lessee has no right of set-off, deduction, withholding or
counterclaim against the Lessor whatsoever; and
(vii) no Default is subsisting.
IN WITNESS WHEREOF, Lessee has caused this Certificate of Acceptance to be
executed in its name, by its duly authorized officer(s) or representative(s),
pursuant to due corporate authority, all as of the date written in Paragraph l
above.
MIDWAY AIRLINES CORPORATION
By: ________________________
Title: _____________________
-2-
<PAGE>
APPENDIX D
CHARGES
1. Deposit
Lessor has received payment of {***} for the
Aircraft before the date of this Agreement.
Lessee shall pay the balance of the Deposit to Lessor in thirty four (34)
consecutive equal monthly installments for the first time on or before the first
Business Day ninety days after the date of the start of revenue operation by
Lessee and thereafter each time on the corresponding day in following calendar
month and, if that is not a Business Day, then on the last Business Day
preceding such numerically corresponding day.
The Deposit shall be held by Lessor during the Term as security for the full and
punctual performance of all of Lessee's obligations to Lessor under this
Agreement. Lessor may, but shall not be obliged to, apply the Deposit in whole
or in part for the payment of any rent, maintenance accruals, indemnities,
attorneys fees and other expenses, insurance and other casualty payments and any
other amount owing from time to time by Lessee hereunder or any other Operative
Document, between Beneficiary or its affiliate companies, and Lessee, or for the
payment of any loss or damage suffered by Lessor as a result of any Event of
Default or utilize the Deposit in whole or in part to perform any of Lessee's
obligations under this Agreement or otherwise remedy any other Event of Default,
including, without limitation, in the redelivery condition for the Aircraft
without prejudice to any other remedy of Lessor. In any such event Lessee shall
on demand restore the Deposit to the full amount provided for herein by payment
to Lessor of an amount in cash equal to the amount applied or utilized. Lessee
shall not attempt to subject the Deposit to any other lien, security interest,
charge or other encumbrance or assign any interest therein to any other person
and, to the extent of its interest therein, if any, Lessee hereby grants to
Lessor a security interest in the Deposit and assigns and transfers to Lessor
any and all of Lessee's right, title and interest therein, if any, as security
as provided above, and Lessor shall be entitled to the remedy of offset against
and application of the Deposit, without any notice to or demand against Lessee,
all of which are hereby waived. Lessee further agrees that the Deposit may be,
without derogating from the terms of this Agreement, be assigned as security to
<PAGE>
the Bank or transferred to any other transferee of Lessor. Should any Event of
Default hereunder occur, the Deposit shall automatically be applied to any sum
due to Lessor or as a prepayment of any sum to become payable to Lessor, unless
Lessor thereafter elects otherwise by notice to Lessee.
Any remaining Deposit shall be repaid by Lessor to Lessee ten (10) days
following the Expiry Date or other date after redelivery of the Aircraft in
accordance with this Agreement. In the event there is a dispute as to whether
Lessee is entitled to a return of any portion of the Deposit, Lessor shall so
return the undisputed amount of the Deposit. Upon a repayment of such Deposit or
portion thereof, Lessor's security interest in and assignment of such Deposit or
portion thereof being repaid shall be deemed released.
Lessor's obligations in respect of the return of the Deposit shall be those of
debtor of Lessee, not of a trustee or other fiduciary.
The Deposit shall bear interest on the amounts then held at a rate of interest
per annum yielding $10,500 (Dollars Ten Thousand Five Hundred) per year payable
annually commencing on the first anniversary of the Delivery Date, and on each
anniversary thereafter unless the Deposit and interest thereon shall have been
applied pursuant to this Agreement. Any reference to the Deposit in this
Agreement shall include the interest accumulated thereon and not paid to Lessee.
2. Rent
2.1 For the purposes of the calculation and payment of Rent, the Term
shall be divided into two sets of periods ("Rental Periods" and
"Rental Adjustment Periods").
Rent shall be due and payable on each Rent Date. If such date is not
a Business Day then Rent shall be due and payable on the last
Business Day preceding such date.
2.2 The Escalated Rent shall be calculated by increasing the Assumed
Rent with a fixed escalation factor of one half of one percent
(0.5%) per month or a pro rata portion thereof as from the month of
September, 1993 up to and
-2-
<PAGE>
including the month of delivery of the Aircraft under the One Year
Lease.
2.3.1 The Rent payable in respect of the Rental Periods One (1) up to and
including Thirty Six (36) is based on an assumed three-years US
Treasury Bond Rate of Four point Ten percent (4.10%) per annum. To
the extent that the actual US Treasury Bond Rate varies from 4.10%
per annum on the delivery of the Aircraft, the Rent will be adjusted
up or down with $16,500.00 (Dollars Sixteen Thousand Five Hundred)
per month for each one percent of variation (or pro rated in the
case the variation is less than one Percent (1%)). The amount of
$16,500.00 (Dollars Sixteen Thousand Five Hundred) shall have been,
upon delivery of the Aircraft, adjusted with the escalation factor
mentioned in 2.2 of this Appendix D.
2.3.2 The Rent payable in respect of the Rental Period Thirty Seven (37)
up to and including One Hundred Twenty (120) shall be adjusted
upward or downward calculated as follows:
E + ((L - Y) x N), where
E is the Escalated Rent, and
Y is Three point Twenty Five percent (3.25%)
L means the arithmetic mean expressed as a number (i.e., 40 per
cent is 40 and not 0.4) of the rates of interest per cent per
annum (rounded if not already such a multiple, to the nearest
whole multiple of 1/16th of one per cent.) at which, at or
about 11.00 a.m. (London time) on the day two Business Days
before the beginning of the Rental Adjustment Period in which
such Rental Period falls, deposits in Dollars are offered for
the duration of such Rental Adjustment Period on the REUTERS
"LIBO" page (or such other page as may replace it from time to
time) ("LIBOR"), and
N is $15,318.00 if such Rental Period falls in the seventh
Rental Adjustment Period;
-3-
<PAGE>
is $14,927.00 if such Rental Period falls in the eighth
Rental Adjustment Period;
is $14,527.00 if such Rental Period falls in the ninth
Rental Adjustment Period;
is $14,119.00 if such Rental Period falls in the tenth
Rental Adjustment Period;
is $13,702.00 if such Rental Period falls in the eleventh
Rental Adjustment Period;
is $13,277.00 if such Rental Period falls in the twelfth
Rental Adjustment Period;
is $12,842.00 if such Rental Period falls in the
thirteenth Rental Adjustment Period;
is $12,399.00 if such Rental Period falls in the
fourteenth Rental Adjustment Period;
is $11,945.00 if such Rental Period falls in the fifteenth
Rental Adjustment Period;
is $11,482.00 if such Rental Period falls in the sixteenth
Rental Adjustment Period;
is $11,010.00 if such Rental Period falls in the
seventeenth Rental Adjustment Period;
is $10,527.00 if such Rental Period falls in the
eighteenth Rental Adjustment Period;
is $10,034.00 if such Rental Period falls in the
nineteenth Rental Adjustment Period;
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is $9,530.00 if such Rental Period falls in the twentieth
Rental Adjustment Period;
Such N-amounts shall - upon delivery of the Aircraft - be adjusted
with the escalation factor mentioned in Article 2.2. of this
Appendix D.
2.3.3 The monthly Escalated Rent shall also be adjusted upward by an
amount equal to $875 (Dollars Eight Hundred Seventy Five) per month
which shall be payable to Lessor by check annually commencing on the
first anniversary of the Delivery Date, and on each anniversary
thereafter. Lessee may elect to authorize Lessor in writing to
set-off amounts payable pursuant to this Article 2.3.3 against
interest on the Deposit which is payable by Lessor pursuant to
Article 1 of this Appendix D irrespective of whether or not an Event
of Default shall have occurred and be continuing.
2.4 Any notice with respect to rental adjustments given by Lessor shall
set out the basis of calculation of "L" and of the Rent specified
therein and shall, save in the case of manifest error, be
conclusive.
2.5 [INTENTIONALLY DELETED]
2.6 To finance the payments required to be paid by Lessee under Article
8.2(a) (i), the Escalated Rent shall also be adjusted upward in an
amount (the "Adjustment Amount") of $1,551 (Dollars One Thousand
Five Hundred Fifty One) for each Rent Date through and including the
forty eighth Rent Date. If a Casualty Occurrence occurs on or prior
to such forty eighth Rent Date, an amount (the "Additional Amount")
in Dollars equal to the present value (discounted at the interest
rate of six point one percent (6.1%)), of all unpaid Adjustment
Amounts through the Rent Date on or immediately preceding the date
of the Casualty Occurrence shall be due and payable, with interest
thereon at six point one percent (6.1%), on the date on which Agreed
Value is payable pursuant to Article 17.2(b).
2.7 Lessee shall pay to Lessor all reasonable expenses paid to third
parties (including legal, printing and out-of-pocket expenses)
incurred or payable by
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Lessor in connection with the negotiation, preparation and execution
of the first refinancing of the Aircraft and this Agreement by the
initial Lessor and its Beneficiary with a Bank and the related first
assignment by Lessor (in its trust capacity) or its Beneficiary to
another Lessor or Beneficiary with a related Bank financing,
subject, however, that Lessee's obligation to pay such expenses is
limited to $150,000 (Dollars One Hundred Fifty Thousand) for such
first refinancing of the Aircraft and if such first refinancing
transaction includes the first refinancing of aircraft which are the
subject of Other Aircraft Agreements, then Lessee's obligation to
pay such expenses pursuant to this Article 2.7 and Article 2.7 of
Appendix D in each applicable Other Aircraft Agreement, in the
aggregate shall be limited to the foregoing $150,000 plus (x)
$100,000 (Dollars One Hundred Thousand) for a first refinancing
transaction involving one additional aircraft; and (y) $50,000
(Dollars Fifty Thousand) per each further additional aircraft.
Lessor hereby agrees to finance the payments required to be paid by
Lessee under this Article 2.7 as follows: The Escalated Rent shall
be adjusted upward for each Rent Date commencing on the Rent Date
next succeeding the date of the first refinancing described in this
Article 2.7 in an amount equal to the expenses referred to herein
(subject to the maximum amounts referred to herein) plus the product
of such expenses multiplied by an interest rate (the "Aircraft
Refinancing Interest Rate") agreed to by Lessee and Beneficiary and
calculated on an accrual basis using the same method applied by the
Beneficiary in obtaining the monthly Escalated Rent amount set forth
in Article 2.6 above, the sum thereof divided by the total number of
aircraft which are the subject of the first refinancing described
herein (such quotient, the "Aircraft Refinancing Amount") and
further divided by the lesser of forty eight (48) or the total
number of remaining Rent Dates to occur during the Term (each such
amount an "Aircraft Refinancing Installment"). Such amount shall be
payable on each Rent Date commencing on the Rent Date next
succeeding the date of the first refinancing described in this
Article 2.7. If a Casualty Occurrence occurs prior to the payment in
full of the Aircraft Refinancing Amount, an amount (in Dollars)
equal
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to the present value (discounted at the Aircraft Refinancing
Interest Rate) of all unpaid Aircraft Refinancing Amount through the
Rent Date on or immediately preceding the date of the Casualty
Occurrence shall be due and payable, with interest thereon at the
Aircraft Refinancing Interest Rate, on the date on which Agreed
Value is payable pursuant to Article 17.2(b).
3. Reserve Rate
3.1 In addition to installments of Rent, Lessee shall pay to Lessor the
Reserve Rate as follows:
(a) by way of an Airframe maintenance accrual, the sum of
{***} for the months one up to and including
twelve of the Term, {***} for the months
thirteen up to and including twenty four of the Term and
{***} for the months twenty five up to and
including one hundred twenty of the Term for each Flight Hour
the Aircraft is operated during the Term ("Airframe
Maintenance Accrual"), and
(b) by way of an Engine maintenance accrual, in respect of each
Engine the sum of {***} for the months
one up to and including twelve of the Term,
{***} for the months thirteen up to and including twenty four
of the Term and {***} for the months twenty
five up to and including one hundred twenty of the Term for
each Flight Hour operated by each Engine during the Term
("Engine Maintenance Accrual"), and
(c) by way of a landing gear maintenance accrual, the sum of
{***} for the months one up to and
including twelve of the Term, {***} for
the months thirteen up to and including twenty four of the
Term and {***} for the months twenty
five up to and including one hundred twenty of the Term for
each Cycle operated by the landing gear during the Term
("Landing Gear Maintenance Accrual"), and
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(d) by way of an A.P.U. maintenance accrual, the sum of
{***} for the months one up to and including twelve of
the Term, {***} for the months thirteen up
to and including twenty four of the Term and {***}
for the months twenty five up to and including one
hundred twenty of the Term for each Flight Hour operated by
the A.P.U. during the Term ("A.P.U. Maintenance Accrual").
The Airframe, Engine, Landing Gear and A.P.U. Maintenance Accruals
accruing in any Rental Period shall be paid by Lessee to Lessor not
later than ten (10) days after the end of the calendar month in
which such Rental Period shall end. Concurrently with the payment
thereof, Lessee shall report to Lessor (in accordance with Article
7.1 (e)) the number of Flight Hours and Cycles accumulated in
respect of the period for which payment is being made.
The Reserve Rate will be subject to adjustment every six (6) months
during the Term by reference for 65% to the Employment and Earnings
Index for U.S.A. labor cost average hourly earnings of production
(Aircraft Equipment) SIC 3728, table C-2 and for 35% to the Producer
Price Index for U.S.A. material cost commodity groupings (Machinery
and Equipment) Code 11/table 6. In addition the Engine Maintenance
Accrual will be subject to adjustment every six (6) months during
the Term having regard to the Engine Manufacturer recommendations,
industry experience and any change in the operational environment of
the Aircraft.
Any Reserve Rate shall, if requested by either Lessor or (unless an
Event of Default shall have occurred and be continuing) Lessee, be
adjusted to take into account any changes in the maintenance
intervals upon which Reserve Rates are based.
3.2 Maintenance Accruals as defined in paragraph 3.1 above and received
by Lessor shall respectively be credited to funds (collectively
"Maintenance Funds") to be known as the "Airframe Maintenance Fund",
the "Engine Maintenance Fund, the "Landing Gear Maintenance Fund"
and the "A.P.U. Maintenance Fund" which funds shall reduce as monies
are
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released to Lessee therefrom in accordance with Article 7.4.1.
3.3 [INTENTIONALLY DELETED]
3.4 The Reserve Rates shall accrue interest at the applicable six (6)
months US Dollar LIBOR rate minus point twenty five percent (.25%)
per annum, which interest shall be added to the relevant Maintenance
Fund.
3.5 If the Enumerated Financial Milestones have been achieved, then
Lessee's obligation to continue to pay Reserve Rates hereunder shall
be stayed, provided, however, that in connection with the release of
monies to Lessee from the Maintenance Fund pursuant to Article 7.4.1
occurring thereafter, prior to the release of monies, Lessee shall
provide Lessor with evidence, reasonably satisfactory to Lessor,
that Lessee has retained accumulated net earnings (as determined in
accordance with generally accepted United States accounting
principles consistently applied) of not less than $15,000,000
(Dollars Fifteen Million), and provided, further, that if such
evidence cannot be provided or is not reasonably satisfactory to
Lessor, Lessee's obligation to pay Reserve Rates shall recommence
pursuant to the terms hereof and no monies shall be released from
the Maintenance Fund until such time as it shall have been restored
to the level at which it would have been had this paragraph not been
in effect.
If Lessee has achieved the payment in full of all deferred amounts
as set forth in clause (1) of the definition of Enumerated Financial
Milestones, Lessee may, at its election, pay to Lessor the amount
which is necessary to cause monies standing in the Maintenance Fund
to equal $1,500,000 (Dollars One Million Five Hundred Thousand) and
thereafter Lessee shall have no further obligation to make Reserve
Rate payments hereunder, provided, however, that thereafter no funds
shall be released to Lessee from the Maintenance Fund pursuant to
Article 7.4.1. It is understood, for the avoidance of doubt, that
the foregoing terms of this Article 3.5 shall not affect Lessee's or
Lessor's obligations under Article 3.6 of this Appendix D.
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3.6 On the Expiry Date, if there is any Excess (as defined below) in any
Maintenance Fund, such Excess Shall, unless a Default shall have
occurred and be continuing (in which case only after termination,
return of the Aircraft and payment of all amounts due following
exercise of remedies under Article 15), be paid to Lessee, and on
such date, if there is any Shortfall (as defined below) in any
Maintenance Fund, Lessee shall pay such Shortfall to Lessor.
"Excess" in any Maintenance Fund on the Expiry Date shall mean any
positive difference obtained by subtracting (x) from (y) for the
Airframe, Engines, Landing Gears or A.P.U., as the case may be; (x)
shall mean the product of (I) the then market cost from the original
equipment manufacturer and corrected for the experience of all
United States based operators of Fokker 100 aircraft for the
relevant item:
with respect to the Aircraft, to perform a scheduled airframe
heavy maintenance as defined in the Maintenance Program for
12,000 hours and 24,000 hours inspections or any equivalent
thereof with more or less hours ("Airframe Maintenance"), or
with respect to any Engine, to perform a scheduled shop visit
engine maintenance and repair, other than (i) repairs arising
as a result of foreign object damage or operations mishandling
and/or (ii) maintenance and repair of QEC (Quick Engine
Change) kits ("Engine Maintenance"), or
with respect to any nose or main landing gear to perform a
schedule shop visit nose and main landing gear maintenance and
repair, other than repairs arising as a result of foreign
object damage or operational mishandling ("Landing Gear
Maintenance"), or
with respect to Auxiliary Power Unit ("A.P.U.") to perform an
off Aircraft shop A.P.U. maintenance and repair, other than
repairs arising as a result of foreign object damage or
operational mishandling ("A.P.U. Maintenance"), and
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<PAGE>
(II) a fraction of which (a) the numerator shall be the difference
between the actual number of hours or cycles (as to landing gear),
as the case may be, of operation remaining on the Airframe, Engine,
Landing Gear or A.P.U., as the case may be, to the next such
Airframe Maintenance, Engine Maintenance, Landing Gear Maintenance
or A.P.U. Maintenance, as the case may be, and the total number of
hours or cycles, as the case may be, of operation allowable between
such Maintenance and (b) the denominator shall be the total number
of hours or cycles, as the case may be, of operation allowable
between such Maintenance.
(y) shall mean the actual dollar amount remaining in the respective
Maintenance Fund.
"Shortfall" in any Maintenance Fund on the Expiry Date shall mean
any negative difference obtained by subtracting (x) above from (y)
above.
4. Payments
All payments due hereunder shall be effected by Lessee to Lessor by
transfer to Chemical Bank in New York, New York, in favor of the
Beneficiary, account number 544-0-46295, Ref. Aircraft MSN 11477,
AOLAF-114, in Dollars and in immediately available funds, and all such
payments shall be initiated adequately in advance of the due dates to
ensure that Lessor receives credit for the full amount of such payment on
the due dates. All such payments shall be made in full without any
deduction or withholding (whether in respect of set-off, counterclaim,
duties, taxes, charges or otherwise howsoever) unless Lessee is prohibited
by Law from doing so, in which event Lessee shall (a) ensure that the
deduction or withholding does not exceed the minimum amount legally
required; (b) forthwith pay to Lessor such additional amount as shall
result in the net amount received by Lessor being equal to the amount
which would have been received by Lessor had such a deduction or
withholding not been made; (c) pay to the relevant taxation or other
authorities within the period for payment permitted by applicable Law the
full amount of the deduction or withholding; and (d) upon request in
writing from Lessor to Lessee furnish to Lessor, within the period for
payment permitted by applicable Law, an official receipt of the relevant
taxation or other authorities involved for all amounts deducted or
withheld as aforesaid.
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<PAGE>
5. Currencies
If under any applicable Law, whether as a result of judgment against
Lessee or the liquidation of Lessee or for any other reason, any payment
under or in connection with this Agreement is made or recovered in a
currency other than United States Dollars then, to the extent that the
payment (when converted to United States Dollars at the rate of exchange
on the date of payment or, in the case of the liquidation, the latest date
for the determination of liability permitted by the applicable Law) falls
short of the amount unpaid under this Agreement, Lessee shall, as a
separate and independent obligation, fully indemnify Lessor against the
amount of the short fall; for the purposes of this paragraph, "rate of
exchange" means the rate at which Lessor is able on the relevant date to
purchase United States Dollars in London with that other currency.
6. Default Interest
If any amount payable pursuant to this Agreement is not paid by Lessee on
the due date, Lessee shall pay to Lessor interest (after as well as before
judgment) on such amount, at the rate of LIBOR (as defined in Article
2.3.2 of this Appendix D, but for the duration of six months and as
applicable two Business Days before the Default), plus four per cent (4%)
per annum from the due date to the date of payment in full by Lessee to
Lessor, but in the event such rate shall be in excess of the highest rate
permitted by applicable law, then it shall mean the highest rate allowed
by applicable law. All amounts of interest payable hereunder shall be
calculated on the basis of the actual number of days elapsed and a 360 day
year.
7. Set-off
At any time after a Default shall have occurred and be continuing, Lessor
shall be entitled to set-off or withhold from any amount due and payable
to Lessee under this Agreement or any other Operative Document, or any
amount standing to the credit of Lessee on any account, in or towards the
satisfaction of any amounts from time to time due and payable by Lessee
under this Agreement or any other Operative Document or any liability or
obligation of Lessee under this Agreement or any other Operative Document,
and shall be entitled to do so notwithstanding that any such amount or
amounts may not be expressed in the same currency.
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9. Time at which payments are due
Supplemental Rent shall be due and payable on demand unless otherwise
expressly stated herein.
9. Purchase Option
Lessor grants to Lessee the right to purchase and to take delivery of the
Aircraft on the Expiry Date of this Agreement for a price equal to the
greater of the fair market value (as deferred to the penultimate sentence
of this paragraph, "FMV") of the Aircraft on the Expiry Date and
{***}. If Lessee elects to exercise its
right to purchase the Aircraft, Lessee shall do so by giving to Lessor
written notice of such election at least two hundred seventy (270) days
prior to the Expiry Date. The FMV of the Aircraft on the Expiry Date shall
be established by an independent internationally reputed aircraft
appraiser appointed by mutual agreement of Lessor and Lessee within one
(1) month of the date of receipt by Lessor of Lessee's notice of election
to purchase. If Lessor and Lessee shall be unable to agree on such
aircraft appraiser, FMV shall be established by a mutually agreed
appraisal prepared and delivered by two independent internationally
reputed aircraft appraisers, one of which shall be chosen by Lessor and
one by Lessee. If such appraisers shall be unable to agree on FMV, FMV
shall be equal to the average of the fair market values established by
such appraisers. Any appraisal shall meet internationally accepted
standards and shall be binding upon Lessee and Lessor. The appraisal
procedure outlined in this Article 9 shall be referred to herein as the
"Appraisal Procedure". The FMV shall be equal in amount to the value that
would be obtained as of the Expiry Date in an arms'-length transaction
between an informed and willing purchaser under no compulsion to buy and
an informed and willing seller under no compulsion to sell with the
Aircraft assumed to be in the condition required upon the return thereof
at the end of the Term in accordance with Article 16 without considering
the encumbrance of this Agreement. All costs and expenses of the FMV
appraisal shall be shared equally by Lessor and Lessee.
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APPENDIX E
OPERATING CONDITION AT RE-DELIVERY
Upon redelivery of the Aircraft to Lessor, the Aircraft shall, subject to
ordinary wear and tear generally:
1. General Condition
(a) Be clean by airline standards;
(b) Have installed the Engines, and other equipment, Parts and
accessories and loose equipment as would remain installed in such
Aircraft, and shall be in a condition suitable for operation in
commercial service;
(c) Have in existence a valid Certificate of Airworthiness with respect
to the Aircraft issued by the Air Authority of the State of
Registration with a validity of at least nine (9) months after the
date of redelivery of the Aircraft to Lessor;
(d) Comply with the manufacturer's original specifications therefor;
(e) Have undergone, immediately prior to redelivery, a 3000 Check or any
subsequent higher inspection, if due within 3000 hrs, in accordance
with the Approved Maintenance Program, shall be free of any waivers,
and all deferred maintenance, if any, shall have been accomplished;
each engine and A.P.U. shall have had an inspection in accordance
with Article 16 confirming release for its remaining operational
life;
(f) All outstanding airworthiness directives and mandatory orders
affecting such model of Aircraft issued by the Air Authority which
require compliance during the Term shall have been accomplished;
(g) Have installed all applicable vendors' and manufacturers' service
bulletin kits theretofore received by Lessee free of charge that are
appropriate for the Aircraft and to the extent not installed, such
kits shall be furnished free of charge to Lessor;
(h) Stripped of all Lessee's paint scheme and repainted through an
Authorized Maintenance Performer with Manufacturer approved paints
in white or any other basic color requested by Lessor; and
<PAGE>
(i) Have been inspected and treated with respect to corrosion as defined
in the Approved Maintenance Program.
2. Airframe and major components
The Airframe and major components shall have not less than the following
hours/cycles/months expected life remaining to the next Major Check and/or
overhaul:
-Airframe : 3000 hours and 12 months to
next Major Check;
-Engine : half life on average to next
Engine shop visit but in no
event less than 3000 hours;
-Main Landing Gear : 3000 cycles to next overhaul;
-Nose Landing Gear : 3000 cycles to next overhaul,.
*The records as to remaining engine life shall be certified by Lessee in
writing to Lessor upon redelivery of the Aircraft to Lessor.
3. Components
(a) Each life-limited Part shall have not less than 3000 (Three
Thousand) flight hours or cycles of the total approved life
remaining to the scheduled replacement, in accordance with the
Approved Maintenance Program;
(b) Each hard-time controlled component shall have not less than 3000
(Three Thousand) Flight Hours or 3000 (Three Thousand) Cycles or 12
(twelve) months whatever is applicable, remaining to the next
scheduled overhaul/inspection, in accordance with the Approved
Maintenance Program;
(c) "On-condition" and "Condition Monitored" components shall be
serviceable;
(d) The A.P.U. shall be serviceable.
4. Fuselage, Windows and Doors
(a) Fuselage shall be free of major dents and abrasions, scab patches
and loose or pulled or missing rivets;
(b) Windows shall be free of delamination, blemishes, crazing and shall
be properly sealed;
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(c) Doors shall be free moving, correctly rigged and be fitted with
serviceable seals.
5. Wings and Empennage
(a) All leading edges shall be free from damage;
(b) All unpainted cowlings, fairings and other surfaces shall be
polished;
(c) Wings shall be free of fuel leaks.
6. Interior
(a) Ceilings, sidewalls and bulkhead panels shall be clean and free of
cracks and stains;
(b) All carpets and seat covers shall be in good condition, clean and
stain free and meet Air Authority fire resistance regulations;
(c) All seats shall be serviceable, in good condition and repainted as
necessary;
(d} All signs and decals shall be clean and legible;
(e) All emergency equipment having a calendar life shall have a minimum
of one year or one hundred per cent of its total approved life,
whichever is less, remaining.
7. Cockpit
(a) All decals shall be clean, secure and legible;
(b) All fairing panels shall be free of stains and cracks, shall be
clean, secure and repainted as necessary;
(c) Floor coverings shall be clean and effectively sealed;
(d) Seat covers shall be in good condition, clean and shall conform to
Air Authority fire resistance regulations;
(e) Seats shall be fully serviceable and shall be repainted as
necessary.
8. Cargo Compartments
(a) All panels shall be in good condition;
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(b) All nets shall be in good condition.
9. Landing Gear and Wheel Wells
(a) Shall be clean, free of leaks and repaired as necessary;
(b) All decals shall be clean, secure and legible.
10. Corrosion
(a) Entire fuselage shall be substantially free from corrosion and shall
be adequately treated and an approved corrosion prevention program
shall be in operation;
(b) Fuel tanks shall be free from contamination and corrosion and a tank
treatment program shall be in operation.
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APPENDIX F
AIRCRAFT DOCUMENTS
FOKKER 100 AIRCRAFT
Aircraft Documents shall include the documents referred to in Table I ("Aircraft
Documentation"), Section (D), Exhibit (D) of the Support Services Agreement No.
ASSAF-110 between FAUSA and Lessee.
Aircraft Documents shall also include all logs, certificates and data, and
inspection, modification and overhaul records, relating to the Aircraft and
required to be maintained by the Air Authority and/or by the Approved
Maintenance Program.
Upon Expiry Date or upon earlier termination of the Agreement all Aircraft
Documents shall be redelivered by Lessee to Lessor complete and fully updated
simultaneously with the redelivery of the Aircraft.
<PAGE>
APPENDIX G
LEGAL OPINION
[Certain provisions of this opinion may be given by different law firms or
individuals: revision required if the Bank is a party]
[Closing Date]
[___________________]
1199 N. Fairfax Street
Alexandria, VA 22314
Dear Sirs:
We have acted as counsel to Midway Airlines Corporation, a Delaware corporation
("Lessee"), in connection with the execution and delivery by Lessee of the
Aircraft Operating Lease Agreement AOLAF-114, dated as of November 11, 1993
between First Security Bank of Utah, N.A., not in its individual capacity but
solely as trustee ("Lessor") and Lessee (the "Agreement"). Except as otherwise
herein defined, the terms used in this opinion letter have the same meanings as
the terms used in the Agreement.
We have examined the Agreement and the other Operative Documents. We have also
examined the original, or photostatic or certified copies of such agreements and
records of Lessee and of public officials, orders and certificates of regulatory
bodies and courts of competent jurisdiction and such other documents as we have
deemed relevant and necessary. We have relied upon the accuracy of the factual
information set forth in all such documents.
In our examination we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as photostatic or certified
copies and the authenticity of the originals of such latter documents.
Based upon our examination, we are of the opinion that:
1. Lessee is a corporation duly incorporated and organized and validly
existing in good standing under the laws of the State of Delaware, and has
all requisite corporate power and authority to carry on its business as
presently conducted and to execute and deliver, and to incur and perform
its obligations under the Agreement and the other Operative Documents and,
to the best of our knowledge, no steps have been taken or are being taken
to appoint a receiver or liquidator over, or to wind up, Lessee.
<PAGE>
2. The execution, delivery and performance by Lessee of the Agreement and the
other Operative Documents and the compliance by Lessee with the terms and
provisions thereof have been duly authorized by all necessary corporate
action, do not require any approval of stockholders of Lessee, and will
not violate any provision of law or any governmental rule or regulation or
any judgment, decree, or order binding on Lessee, or of the Certificate of
Incorporation or By-laws of Lessee.
3. Lessee is not in violation of any provision of its Amended and Second
Restated Certificate of Incorporation as that document may be further
amended and/or restated (hereafter referred to as the Certificate of
Incorporation), or By-laws, and to the best of our knowledge, is not in
violation of any provision of any agreement, instrument or document to
which it is a party or by which it is bound, nor has there occurred and is
continuing any event which, under the provision of any such agreement,
instrument, instrument or document, which the lapse of time or giving of
notice, or both, would constitute a default by Lessee. Lessee is not in
violation of any law, rule or regulation, or any order, injunction or
decree of any court or administrative body applicable to it, which
violation could materially and adversely affect its business, property or
assets, operations or condition, financial or otherwise.
4. The Agreement and the other Operative Documents have been duly executed
and delivered by Lessee and constitute the legal, valid and binding
obligations of Lessee, enforceable in accordance with their respective
terms, except as may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights
generally (including, without limitation, laws regarding fraudulent
conveyance and equitable subordination) and by general principles of
equity (regardless of whether enforcement is sought in a proceeding in
equity or at law), and (ii) applicable laws which may affect certain of
the remedies provided in the Agreement and the other Operative Documents
but which do not, in our opinion, make the remedies provided therein
inadequate for the practical realization of the benefits afforded thereby.
5. No consent, approval or authorization of, nor registration, qualification,
designation, declaration of filing with, any governmental authority in the
United States of America or any political subdivision or instrumentality
therein or thereof is required in connection with the execution, delivery
or performance by lessee of the Agreement and the other Operative
Documents, or any other document or
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instrument contemplated thereby, except for (i) the registration of the
Aircraft in Lessor's name with the Federal Aviation Administration (the
"FAA") pursuant to the Federal Aviation Act of 1958, as amended (the
"Act"), the Equipment Lease, and the Credit and Security Agreement; the
filing of the Agreement for recordation with the FAA pursuant to, and in
accordance with, the Act; and (iii) the filing of financing statements
with respect to the interest created by the Agreement under the Uniform
Commercial Code with the Secretary of the State of the State of Illinois.
6. No other filing or recording of any document is necessary under the laws
of the United States or [ ] in order to perfect Lessor's title
to the Aircraft under the Agreement and Aircraft Equipment under the
Equipment Lease and to perfect Lessor's security interest in the
Collateral under the Credit and Security Agreement as against Lessee and
any third parties within the United States.
7. No United States Federal withholding taxes will be applicable to the
rentals and other payments made by Lessee under the Agreement and the
other Operative Documents.
8. No tax will be imposed by any state of the United States of America or any
political subdivision thereof on Lessor's interest in the Aircraft solely
by virtue of the execution, delivery and performance of the Agreement and
the other Operative Documents.
9. In any action to enforce the Agreement commenced in courts of the state of
New York or a United States District Court located in New York, such
courts would give effect to the choice of the parties thereto of New York
law as the governing law thereof.
10. The obligations of the Lessee for the payment of money under the Agreement
and the other Operative Documents rank at least equally and ratably (pari
pasu) with respect to priority and security with all other unsecured
obligations of the Lessee.
11. No claims of creditors and/or possessory liens will rank ahead of the
respective rights and interests of the Lessor, Head Lessor and the Bank in
the Aircraft.
We are members of the bar of the state of New York and [_______] and we
are not, and do not purport to be, experts in the laws of any other
jurisdiction other than the Federal laws of the United States of America.
The opinions set forth in this opinion letter are limited solely to the
laws of the
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State of New York, the Uniform Commercial Code, as applicable in the State
of Illinois, the corporate law of the State of Delaware and the United
States of America.
Very truly yours,
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APPENDIX H
CERTIFICATE OF INSURANCE
To: (Lessor)
CERTIFICATE OF INSURANCE
THIS IS TO CERTIFY that we in our capacity as insurance brokers have effected
insurance (reinsurance) on behalf of:
ASSURED ______
(REASSURED) _____
as herein described in respect of:
AIRCRAFT: FOKKER 100 REGISTRATION ______
Subject to policy terms, conditions, limitations and exclusions the insurance
covers:
1) HULL ALL RISKS of loss or damage to the Aircraft for an Agreed Value
of US$______ (United States Dollars ______).
This policy includes Excluded Coverage Endorsement (Aircraft Hull)
AVN51 or equivalent.
This insurance is subject to a deductible (other than total loss,
arranged total loss or constructive total loss) of US$______ (United
States Dollars ______) any one accident.
The geographical limits of the insurance are worldwide and the
insurance is in force during the period ______.
2) If operated outside the United States and Canada, HULL WAR and
ALLIED PERILS insurance for the Aircraft for an Agreed Value of
US$______ (United States Dollars ______) covering the risks excluded
from the Hull All Risks insurance by the terms of the War, Hijacking
and Other Perils Exclusion Clause AVN.48B except paragraph (b)
thereof and includes cover in respect of confiscation,
nationalization, seizure, restraint, detention, appropriation for
title or use by or under the order of the Government or public or
local authority of the State of Registration.
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This insurance is not subject to a deductible.
(The insurance for the Aircraft also covers other aircraft of the
Assured's fleet and is subject to an overall limit in respect of all
aircraft insured of ______ in the aggregate.)
The geographical limits of the insurance are worldwide and the
insurance is in force during the period ______
3) Comprehensive Airline Liability including aircraft Third Party
Liability, Passenger and Crew Liability (including Baggage and
Personal Effects), Cargo Liability, Mail Liability, Personal Injury
Liability Contractual Liability, Hangar Keeper's Liability, Aircraft
Products Liability and General Third Party Liability for a combined
single limit of US$______ (United States Dollars ______) any one
occurrence each aircraft but limited in respect of Personal Injury
(as covered by Personal Injury Extension clause AVN.60) to the
equivalent of US$25,000,000.00 (United States Dollars Twenty Five
Million) any one offence and in the aggregate.
This insurance is subject to the War, Hijacking and Other Perils
Exclusion AVN.48B with paragraphs (a) and (c) through (g) deleted
subject to Extended Coverage Endorsement (Aircraft Liabilities)
AVN52C.
This insurance is subject to deductibles in respect of Baggage and
Personal Effects of US$1,250.00 (United States Dollars One Thousand
Two Hundred Fifty) any one claim and in respect of Cargo and Mail
Liability of US$5,000.00 (United States Dollars Five Thousand) any
one claim. Such deductibles do not apply to claims arising from
accidents to the carrying aircraft.
The geographical limits of this insurance are worldwide and the
insurance is in force during the period ______.
4) ALL RISKS INSURANCE in respect of any Engine and Parts while any
such items are not installed on the Aircraft and in respect of which
cover is not provided under the Hull All Risks insurance 1) above
for not less than the full replacement value and/or the Hull War and
Allied Perils Insurance 2) above including cover in respect of War
and Allied Perils except that War cover is provided only in respect
of Marine and Air Transits.
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This insurance is subject to a limit of US$______ (United States
Dollars ______).
This insurance is subject to a deductible of US$______ (United
States Dollars ______) any one accident.
The geographical limits of the insurance are worldwide and the
insurance is in force during the period ______.
THE INSURERS (REINSURERS) have been advised that Lessor has entered
into a lease agreement with Lessee in respect of the Aircraft and
insurers (reinsurers) have agreed to endorse the insurances as
follows:
A) In respect of All Risks Aircraft Hull insurance, Aircraft Hull
War and Allied Perils insurance and All Risks insurance on
Engines and Parts to:
(i) name the Lessor, Head Lessor and the Bank and their
respective successors and assigns as Additional
Assureds;
(ii) provide that all claims in respect of the Aircraft,
Engines and Parts shall be payable to Lessor or as it
may direct, such payee to be named Loss Payee; provided
that partial loss amounts up to $250,000 shall be
payable to Lessee unless the insurers have been given
notice that a Default has occurred;
(iii) if applicable, provide in respect of Hull All Risks and
Hull War and Allied Perils for a 50/50 Claims Settlement
Clause in the form of AVS.103.
B) In respect of Comprehensive Airline Liability insurance to:
(i) name the Lessor, its successors and assigns and its
shareholders, subsidiaries, directors, officers, agents,
employees and the Indemnitees as Additional Assureds.
(ii) provide that the insurance shall operate in all respects
as if a separate policy had been issued covering each
party insured hereunder, but this provision shall not
operate to include any claim howsoever arising in
respect of loss or damage to the Aircraft, Engines and
Parts insured under the All Risks
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Hull, Hull War and Allied Perils or All Risks insurance
of the Assured.
Notwithstanding the foregoing the total liability of
insurers in respect of any and all Assureds shall not
exceed the limits of liability stated in the policy.
C) In respect of all insurances to:
(i) be effective worldwide except for territories approved
in writing by the Lessor.
(ii) provide that insurers waive all rights of subrogation
against the Lessor, its subcontractors, FAUSA, Fokker
Aircraft B.V., the Head Lessor, the Bank, and their
respective officers, directors, employees, servants,
agents, successors and assigns.
(iii) provide that in the event that the insurances are
cancelled (including cancellation for non payment of
premium) or are materially changed such cancellation or
change shall not be effective as to the interest of the
Additional Assureds until thirty (30) days (but seven
(7) days or such lesser period as is customarily
available in accordance with policy conditions in
respect of war and allied perils) after confirmed
receipt by Lessor of written notice by insurers of such
cancellation or change.
(iv) provide that in respect of the interest of the
Additional Assureds the insurances shall not be
invalidated by any act, neglect, omission,
misrepresentation or non-disclosure on the part of the
Lessee or any other party other than the Additional
Assured seeking to make a claim thereunder and shall
insure Lessor, and each Additional Assured regardless of
any breach or violation of any warranties, declarations
or conditions contained in such policies by the Lessee
or any other party other than the Additional Assured
seeking to make a claim thereunder.
(v) provide that the Additional Assureds shall have no
responsibility for premiums and Insurers shall waive any
right of set-off or
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<PAGE>
counter claim against the Additional Assureds except in
respect of outstanding premium in respect of the
Aircraft, Engines and Parts subject of a claim.
(vi) not provide for any deductible or self-insurance other
than the deductible allowed above.
(vii) be primary without right of contribution from any other
insurance carried by Lessor, Lessee or any other party.
D) if required, in respect of reinsurance to:
(i) provide that cover shall be identical to the cover
provided by the original insurances and be subject to
the same terms and conditions as the original
insurances.
(ii) provide that so far as the respective interests of the
Additional Assureds are concerned the reinsurance shall
not be invalidated by any act, neglect, omission.
misrepresentation or non-disclosure on the part of the
reinsured party.
(iii) provide that in respect of All Risks Aircraft Hull
insurance, Aircraft Hull War Risk and Allied Perils
insurance as described above and All Risks insurance on
any Engine and Parts as described above, the reinsurers
and the reassured hereby agree that in the event of any
claim arising under the relevant reinsurances the
reinsurers shall in lieu of payment to the reassured,
its successors in interest and assigns pay to the Loss
Payee specified in the primary insurances all sums
payable under or in connection with such reinsurances by
virtue of any reinsured loss of, or damage to, the
Aircraft, Engines or Parts, without any deduction or
deductions whatsoever, other than any outstanding
premium in respect of the Aircraft, Engines or Parts the
subject of the claim, it being understood and agreed
that any such payment by the reinsurers shall fully
discharge and release the reinsurers from any and all
further liability in connection therewith.
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(iv) provide that in respect of Comprehensive Airline
Liability insurance as described above, the reinsurers
and reassured hereby agree that in the event of any
claim arising under the relevant reinsurances, the
reinsurers shall in lieu of payment to the reassured,
its successors in interest and assigns pay to the person
or party who has sustained the relevant loss (or as
reimbursement of any payment made by any Additional
Assured) all sums payable under such reinsurances by
virtue of such reinsured loss, without any deduction or
deductions whatsoever, it being understood and agreed
that any such payment by the reinsurers shall fully
discharge and release the reinsurers from any and all
further liability in connection therewith;
(v) provide that the reinsurers and reassured agree that in
the event that the reassured, its successors in interest
and assigns shall at any time be or become insolvent or
suspend business or file a petition in bankruptcy or be
adjudicated insolvent or bankrupt or admit in writing
its inability to pay its debts as they become due, or
make a general assignment for the benefit of creditors
or that a receiver or liquidator or assignee or trustee
or state commissioner of insurance be appointed in
respect of the reassured its successors in interest or
assigns or any substantial part of its property for the
purpose of liquidation on account of insolvency, then
the reinsurers, in lieu of payment to the reassured its
successors in interest or assigns, shall pay upon demand
that portion of any loss due to the party entitled
thereto under the terms of the original insurance for
which such reinsurers would under the terms of the
reinsurance be liable to pay the reassured, its
successors in interest or assigns, less any amounts
already paid, it being understood and agreed that any
such direct payment by reinsurers shall fully discharge
and release the reinsurers from any and all further
liability for such payment made.
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APPENDIX I
To: (Lessor)
BROKER'S LETTER OF UNDERTAXING
We confirm that insurances (reinsurances) are in effect on and in respect of
aircraft FOKKER 100 REGISTRATION _______ for the period and in respect of the
risks as set out in the attached Certificate of Insurance.
We undertake to hold the insurance (reinsurance) slips or contracts and the
policies or any policies substituted therefore and the benefit of the insurance
(reinsurances) to the extent of your interest therein, to your order.
We further undertake:
1. to pay to the loss payee as stated in the Certificate of Insurance
(Reinsurance) without set off or deduction of any kind any and all
proceeds of the insurance (reinsurance) collected by us from the insurers
(reinsurers) in respect of loss or damage to the Aircraft, Parts, Engines,
components and equipment except for any outstanding premiums due in
respect of the Aircraft and the Parts, Engines, components and equipment.
2. to advise you promptly upon our becoming aware of:
(i) any change or alteration made or proposed to be made to the
insurances (reinsurances) which would be adverse to your interest.
(ii) any act or omission or any event which in our opinion may invalidate
or render unenforceable in whole or in part the insurance
(reinsurance) as far as your interest is concerned.
3. to advise you immediately:
(i) upon our receiving or becoming aware of any notice of cancellation
(including for non payment of premium) or material change given by
insurers (reinsurers) or the Assured.
(ii) if we have not received renewal instructions fifteen (15) business
days prior to the renewal date of the insurances (reinsurances) and
in the event of our receiving instructions to renew to advise you
promptly of the details thereof.
<PAGE>
(iii) upon our ceasing to be insurance brokers to the Assured (Reassured).
The above undertakings are given:
a) subject to our lien, if any, on the policies referred to above for
premiums due under such policies in respect of the aircraft and
subject to the insurers' right of cancellation on default in payment
of such premiums, but we undertake to advise you immediately if any
such premiums are not paid to us in due time in accordance with our
accounting procedures with the assured and insurers and to give you
a reasonable opportunity of paying such amounts of such premiums
outstanding before notification of non-payment of premiums to
insurers (reinsurers)
b) subject to our continuing appointment for the time being as
insurance brokers to Assured (Reassured)
All notices or advises given in accordance with the above undertakings shall be
communicated by telefacsimile or telex to the addressee at the above address.
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APPENDIX J
FAA POWER OF ATTORNEY
This POWER OF ATTORNEY in favor of LESSOR [HEAD LESSOR] ("Lessor") dated
_____________, 199__ from MIDWAY AIRLINES CORPORATION ("Lessee") [is consented
to by BANK ("Bank")].
RECITALS:
A. Lessor and Lessee have entered into an Aircraft Operating Lease Agreement
(AOLAF No 114) dated as of November 11, 1993 (the "Lease Agreement") with
respect to the Fokker 100 aircraft, serial no. 11477, U.S. registration
no. _______ (the "Aircraft").
B. Capitalized terms used herein and not otherwise defined shall have the
respective meanings ascribed to such terms in the Lease Agreement.
NOW, THEREFORE, for good and valuable consideration, the adequacy of which
is hereby acknowledged, it is hereby agreed as follows:
Lessee hereby irrevocably constitutes and appoints Lessor, with full power
of substitution, for and in the name and on behalf of Lessee, as the act and
deed or otherwise of Lessee:
to direct, authorize and instruct the insurer or insurance broker with
respect to the Aircraft, as if Lessor were policy holder, pursuant to
Article 11.6 of the Lease Agreement, in order to initiate, process and
settle any insurance claim with respect to the Aircraft, Engines or Parts;
to execute, sign, deliver, authorize and file such instruments legally
necessary for any and all actions necessary to take possession and effect
redelivery of the Aircraft, Engines or Parts upon termination of the Lease
Agreement due to an Event of Default;
to execute, sign, deliver and file all such instruments requested by
Lessor [Head Lessor] that may be required to deregister the Aircraft from
the FAA, or to terminate the Lease for the Aircraft that is recorded at
the FAA, or that may be deemed proper in or in connection with all or any
of the purposes aforesaid, and to appoint substitutes or agents to take
any such action on its behalf.
<PAGE>
Lessee hereby ratifies and confirms and agrees to ratify and confirm any
direction, authorization and instruction of Lessor [Head Lessor] taken pursuant
to this Power of Attorney.
This Power of Attorney shall expire on _______ ___, 200__ [11 years from
the Delivery Date of the Aircraft] or earlier termination of the Lease.
IN WITNESS WHEREOF, Lessee has duly caused this Power of Attorney to be
executed on the date first set forth above.
MIDWAY AIRLINES CORPORATION
By: ______________________
Name:
Title:
Consented and Agreed:
[BANK]
By: ____________________
Name:
Title:
[CERTIFIED RESOLUTIONS OF LESSEE AUTHORIZING THIS
POWER OF ATTORNEY TO BE ATTACHED]
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<PAGE>
APPENDIX K
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- -----------------------------------x
In Re :
: Chapter 11 Case
JET EXPRESS, INC., : Case No. 91 B 12287 (FGC)
:
Debtor. :
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ORDER OF CONFIRMATION
Jet Express, Inc., the debtor in this Chapter 11 case (the "Debtor"),
having filed with the Court the Debtor's Plan of Reorganization under Chapter 11
of the United States Bankruptcy Code, dated on or about August 10, 1993, (the
"Plan"; capitalized terms used in this Order and not otherwise defined shall
have the respective meanings ascribed to such terms in the Plan); and the
Debtor's Disclosure Statement, dated September 18, 1993 (the "Disclosure
Statement"), having been filed with and approved by this Court pursuant to this
Court's order (the "Disclosure Statement Order") as containing "adequate
information" pursuant to section 1125 of title 11, United States Code (the
"Bankruptcy Code"); and copies of (a) the Plan, (b) the Disclosure Statement and
(c) the appropriate ballot(s) (for those Creditors entitled to vote on the
Plan), having been transmitted to all Creditors entitled to receive the same
pursuant to the Disclosure Statement Order, the United States Trustee, and those
parties who have filed notices of appearance in the Debtor's Chapter 11 case
pursuant to Bankruptcy Rule 2002, the Securities and Exchange Commission, the
District Director of Internal Revenue for the district in which this Chapter 11
case is pending. and the United
<PAGE>
States Attorney for the Southern District of New York, all in accordance with
the Disclosure Statement Order; and the Disclosure Statement Order having fixed
(a) on or before October 8, 1993, as the last date and time by which all
objections must be properly completed, executed, marked and received by the
Debtor at one of the addresses specified for that purpose in the Disclosure
Statement and in the Published Notice described in the Disclosure Statement
Order, in order to be considered as acceptances or rejections of the Plan; and
This Court having set a confirmation hearing on the Plan of Reorganization
filed by Jet Express, Inc., the Debtor in the above captioned case (the
"Debtor") for the 13th day of October, 1993, at 11:00 a.m., to be heard before
this Court at the United States Bankruptcy Court, 67 Merchants Row, Opera House,
2nd Floor, Rutland, Vermont, and this Court having fixed October 8, 1993, as the
date for the filing of any objections to confirmation of the Plan, and an
objection having been filed by Allstate Financial Corporation, and this Court
having heard the evidence of the Debtor in accordance with 11 U.S.C. section
1129 and finding that the objection of Allstate Financial Corporation is denied
as moot, and being otherwise sufficiently advised;
The Court makes the following Findings of Fact and Conclusions of Law
setting forth the reasons for the Court's issuance of this Order confirming the
Plan, overruling the outstanding Objections, and granting the other relief
provided
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for herein:
THE COURT HEREBY FINDS THAT:
1. The Plan of Reorganization proposed by the Debtor, is found to be fair
and equitable and in the best interest of the Debtor and the creditors.
2. The impaired classes entitled to vote upon the Plan of Reorganization,
being Classes B-l, C-l, and C-2, as defined by the Plan of Reorganization, have
voted in favor of the Plan of Reorganization and have accepted the Plan of
Reorganization in conformity with 11 U.S.C. section 1129(7).
3. The Plan complies with the applicable provisions of the Bankruptcy Code
as required by section 1129(a)(l) thereof.
4. The Debtor, as proponent of the Plan, has complied with the applicable
provisions of the Bankruptcy Code as required by section 1129(a)(2) thereof.
5. The Plan has been proposed in good faith and not by any means forbidden
by law as required by section 1129(a)(3) of the Bankruptcy Code.
6. Any payment made or to be made by the Debtor, or by a person issuing
securities or acquiring property under the Plan, for services or for costs and
expenses in or in connection with these Chapter 11 cases, or in connection with
the Plan and incident to these Chapter 11 cases, shall be subject to the
approval of the Court as reasonable as required by section 1129(a)(4) of the
Bankruptcy Code.
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7. At the Confirmation Hearing or in the Disclosure Statement, the Debtor
has disclosed the identity and affiliations of the individuals proposed to
serve, after the Effective Date of the Plan, as directors and officers of the
reorganized Debtor. The continuance or appointment of such individuals as
directors and to such offices is consistent with the interests of Creditors and
Equity Interest Holders and with public policy, and the Debtor has disclosed the
identity of any insider that will be employed or retained by the reorganized
Debtor, and the nature of any compensation for such insider, all as required by
section 1129(a)(5) of the Bankruptcy Code.
8. The Plan has not been accepted by each holder of a Claim or Equity
Interest of every class that is impaired under the Plan; however, each non-
accepting holder of a Claim or Equity Interest of each such class will receive
or retain under the Plan on account of such Claim or Equity Interest property of
a value, as of the Effective Date, that is not less than the amount that such
holder would so receive or retain if each Debtor were liquidated under Chapter 7
of the Bankruptcy Code on such date as required by section 1129(a)(7)(A)
thereof. With respect to any Equity Interest, the Plan is in compliance with
section 1129(a) (7).
9. Except to the extent that the holder of a particular Claim has agreed
to a different treatment of such Claim (including, without limitation, such
agreements relating to
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certain deferrals of rent and certain claims incurred in the ordinary course of
the Debtor's business), the Plan complies with section 1129(a)(9) of the
Bankruptcy Code.
10. In view of the foregoing, the Court finds that the Plan is feasible
and that confirmation and consummation of the Plan is not likely to be followed
by the liquidation, or the need for further financial reorganization of the
reorganized Debtor, all as required by section 1129(a)(11) of the Bankruptcy
Code.
11. All fees payable under 28 U.S.C. SECTION 1930 have been paid, or
the Plan provides for the payment of all such fees on the Effective Date as
required by section 1129(a)(12) of the Bankruptcy Code.
12. The Plan does not discriminate unfairly, and is fair and equitable,
with respect to each Class of Claims or Equity Interests that is impaired
under, and has not accepted, the Plan, as required by section 1129(b)(1) of
the Bankruptcy Code.
13. Holders of Equity Interests will not receive or retain any property
under the Plan on account of such Equity Interests and are deemed to have
rejected the Plan. Such holders would not receive or retain any property on
account of such Equity Interests if each Debtor were liquidated under Chapter
7 of the Bankruptcy Code on the Effective Date.
14. There is no class of Claims or Equity Interests junior to Class C-2.
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15. It appears that the Debtor will satisfy each and every condition
precedent to the effectiveness of the Plan set forth in the Plan.
16. After the Effective Date, the reorganized Debtor shall continue to
engage in business and the Plan does not provide for the liquidation of all or
substantially all of the property of the Debtor's estates.
17. The Debtor has made a careful review of its executory contracts and
unexpired leases, and it is a reasonable exercise of the Debtor's business
judgment for it to reject all such executory contracts and unexpired leases
other than the "Assumed Agreements" referred to in the Plan, i.e., those
executory contracts and unexpired leases that have either already been assumed
pursuant to an order of the court or are the subject of a pending motion to
assume. The assumption on the Effective Date pursuant to section 365 of the
Bankruptcy Code of the agreements identified in the Plan, including those
agreements entered into with Fokker Aircraft U.S.A., Inc., pursuant to a prior
Order of this Court, is the result of the exercise of sound business judgment by
the Debtor, and is in the best interest of the Debtor, its respective bankruptcy
estates, and its creditors.
Therefore, THIS COURT HEREBY CONCLUDES, as a matter of law, that:
1. This is a core proceeding within the meaning of 28 U.S.C. section 1157.
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2. The Court shall confirm a plan if it satisfies all the requirements of
section 1129 of the Bankruptcy Code.
3. Notice and distribution of the Plan and the Disclosure Statement were
appropriate and complied with the applicable provisions of the Bankruptcy Code
and the Bankruptcy Rules. The opportunity for a hearing on these matters was
full and adequate.
4. The Plan complies with the applicable provisions of the Bankruptcy Code
as required by section 1129(a) (1) thereof, and the Debtor, as proponent of the
Plan, has complied with the applicable provisions of the Bankruptcy Code as
required by section 1129(a)(2) thereof.
5. The Plan has been proposed in good faith and not by any means forbidden
by law as required by section 1129(a) (3) of the Bankruptcy Code.
6. The Plan is feasible and provides adequate means for implementation of
the Plan.
7. The Plan of Reorganization proposed by the Debtor is hereby confirmed
according to the terms and conditions set forth therein and the Debtor is hereby
authorized to take any and all actions set forth in the Plan of Reorganization.
8. The Debtor shall file a final accounting under its Plan of
Reorganization on or before the 31st day of March, 1994.
9. The United States Bankruptcy Court for the Southern District of New
York shall retain exclusive jurisdiction
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over all matters arising under, or arising in, or related to the Debtor's
Chapter 11 case or the Debtor's Plan of Reorganization, as confirmed, to the
full extent permitted by 28 U.S.C. section 1334, to hear, and to the full extent
permitted under 28 U.S.C. section 157, to determine, all proceedings in respect
thereof, including, but not limited to, proceedings to supervise the Plan of
Reorganization. Specifically, without limitation, and if applicable law
provides, the Bankruptcy Court shall have jurisdiction:
(a) to hear any and all objections or settlements relating to the
allowance of claims;
(b) to hear any and all applications for payment of fees to
attorneys or other professionals pursuant to sections 5330 or 503 of the
Bankruptcy Code, or for payment of any other fees or expenses authorized to be
paid or reimbursed by the Debtor under the Bankruptcy Code, and any and all
objections thereto;
(c) to hear any and all pending applications for rejection, the
assumption or the assumption and assignment, as the case may be, of unexpired
leases and executory contracts to which the Debtor is a party or with respect to
which they may be liable, and any and all claims arising therefrom;
(d) to hear any and all motions, applications, adversary proceedings
and contested or litigated matters properly before the Bankruptcy Court;
(e) to approve modifications of or amendments to the Plan of
Reorganization;
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<PAGE>
(f) to hear disputes regarding the implementation or consummation of
the Plan of Reorganization;
(g) to hear all controversies, disputes, settlements and suits which
may arise in connection with the interpretation or enforcement of this Plan of
Reorganization, the orders of this Court, or in connection with the enforcement
of remedies under this Plan of Reorganization;
(h) to hear during the time period the Chapter 11 case is open, all
controversies, disputes and issues dealing with the discharge of the Debtor or
the dischargeability of any claims;
(i) to approve compromises, settlements, or adjudications of any
objections to claims;
(j) to estimate disputed, contingent and unliquidated claims for
purposes of distribution under the Plan of Reorganization;
(k) to correct any defect, cure any omission, or reconcile any
inconsistency in the Plan of Reorganization;
(l) to resolve issues of disputes relating to the division, title,
sale or liquidation of the assets of the Debtor;
(m) to enter a final decree closing this case; and
(n) to hear and determine such other matters as may arise in
connection with this Plan or Reorganization or the Confirmation Order.
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<PAGE>
10. The Debtor and the United States of America, through its Department of
Treasury-Internal Revenue Service, having stipulated that this Confirmation
Order and the Bar Date of October 15, 1993, which has been ordered by this
Court, shall not be effective as to the claims of the United States of America
regarding pre-petition and post-petition taxes alleged to be due and payable,
that this Court shall retain jurisdiction over any claim of the United States of
America and any objections which may be made by the Debtor thereto.
Now, upon the motion of the Debtor and after due deliberation, the Court
hereby ORDERS, ADJUDGES AND DECREES THAT:
1. The Plan be, and it hereby is, confirmed.
2. The Debtor is hereby authorized to assume all executory contracts and
unexpired leases that are the subject of a motion to assume pending on the date
hereof, either without amendment, or with such amendments thereto as shall be
agreed upon between the Debtor party thereto and the non-Debtor parties thereto,
and to reject all executory contracts and unexpired leases that are not assumed
Agreements under the Plan. The agreements identified in the Plan, shall be and
hereby are assumed pursuant to section 365 of the Bankruptcy Code, effective as
of the Effective Date.
3. In accordance with this Court's Interim Order dated September 30, 1993
permitting Debtor to obtain Credit on a superpriority basis (the "Interim
Order") the Interim Order is
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hereby made final.
4. In accordance with section 1141 of the Bankruptcy Code, the Plan and
its provisions shall be binding upon the Debtor and its successors (including
the reorganized Debtor) and any other entity created pursuant to the Plan, any
Person or entity issuing securities under the Plan, any Person or entity
acquiring or receiving property under the Plan, any lessor or lessee of property
to or from the Debtor, and any holder of a Claim against or Equity Interest in
the Debtor, whether or not the Claim or Equity Interest of such Creditor or
Equity Interest Holder is impaired under the Plan and whether or not such
Creditor or Equity Interest Holder has filed, or is deemed to have filed, a
proof of Claim or Equity Interest, or has accepted or rejected the Plan.
5. In accordance with section 1141 of the Bankruptcy Code, and except for
any security interests provided under the Plan or contemplated by the Financing
Transaction, any property transferred or otherwise dealt with in the Plan shall
be free and clear of all Claims against and Equity Interests in the Debtor, and
all such property of the Debtor's estate shall, on the Effective Date, vest in
those entities as designated in and provided for by the Plan. Pending the
occurrence of the Effective Date, all such property shall remain property of
Debtor's bankruptcy estate, and such bankruptcy estate shall continue until the
occurrence of the Effective Date.
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6. In accordance with the Plan and section 1141 of the Bankruptcy Code,
except as otherwise specifically provided in the Plan, upon the occurrence of
the Effective Date the consideration distributed under the Plan shall be in
exchange for and in complete satisfaction, discharge, release, and
termination of, all Claims of any nature whatsoever against any Debtor or any
of its assets or properties and all Equity Interests in any Debtor; and
except as otherwise provided herein or in the Plan, upon the Effective Date
(i) the Debtor shall be discharged and released pursuant to section
1141(d)(1)(A) of the Bankruptcy Code from any and all Claims, including but
not limited to demands and liabilities that arose before the Effective Date,
all Stockholder Actions as they relate to such Debtor, all debts of the kind
specified in section 502(g), 502(h) or 502(i) of the Bankruptcy Code, whether
or not (a) a proof of claim based upon such debt is filed or deemed filed
under section 501 of the Bankruptcy Code; (b) a Claim based upon such debt is
allowed under section 502 of the Bankruptcy Code; or (c) the holder of a
Claim based upon such debt has accepted the Plan, and (ii) all rights and
interests of holders of Equity Interests in each Debtor shall be determined
pursuant to section 1141(d)(1)(B) of the Bankruptcy Code. This Order shall be
a judicial determination, effective on the occurrence of the Effective Date,
of discharge and termination of all liabilities of and all Claims against,
and all Equity Interests in, the Debtor, except as otherwise specifically
-12-
<PAGE>
provided in the Plan. On the Effective Date, as to every discharged debt, Claim
or Equity Interest is permanently enjoined and precluded from asserting against
the reorganized Debtor, or against its assets or properties or any transferee
thereof, any other or further Claim or Equity Interest based upon any document,
instrument or act, omission, transaction or other activity of any kind or nature
that occurred prior to the Effective Date, except as expressly set forth in the
Plan.
7. In accordance with section 1142 of the Bankruptcy Code, the Debtor, the
reorganized Debtor, and any other entity created or Person designated pursuant
to the Plan be, and they hereby are, authorized, empowered and directed to
issue, execute, deliver, file and record any document, and to take any action
necessary or appropriate to implement, effectuate and consummate the Plan and
any transactions contemplated thereby in accordance with their respective terms,
including the agreements with Fokker Aircraft U.S.A., Inc., whether or not any
such document is specifically referred to in the Plan, and without further
application to or order of this Court. Pursuant to section 1142(b) of the
Bankruptcy Code, but subject to the retained jurisdiction of the Court to
resolve disputes as provided in the next sentence, all Persons holding Claims or
Equity Interests which are dealt with under the Plan be, and they hereby are,
directed to execute, deliver, file or record any document, and to take any
action necessary to implement, effectuate and consummate
-13-
<PAGE>
the Plan in accordance with its terms, and all such Persons shall be bound by
the terms and provisions of all documents to be executed by them in connection
with the Plan, whether or not such documents actually have been executed by such
Persons. The Court retains jurisdiction to hear and determine any dispute
concerning the proposed application of section 1142 of the Bankruptcy Code and
of the preceding sentence. The foregoing shall not, however, in any manner
adversely affect or impair any of the rights of the parties to the Investment
Agreement or the Plan Debt Financing pursuant to, or release any such party from
any condition under, the agreements and instruments relating thereto.
8. All steps necessary (i) for the reorganized Debtor to be duly
incorporated and (ii) to effect the mergers, contributions of assets and
assumptions of liability as contemplated by the Plan be, and they hereby are,
authorized and approved.
9. Pursuant to the Plan, from and after the Effective Date, the
reorganized Debtor my use, operate and deal with their respective assets, and
may conduct and change their businesses, without any supervision by the
Bankruptcy Court or the Office of the United States Trustee, and free of any
restrictions imposed on the Debtors by the Bankruptcy Code or by the Court
during these Chapter 11 cases.
10. All equity Interests in each Debtor be, and they hereby are, canceled
effective as of the Effective Date.
-14-
<PAGE>
11. (a) Pursuant to the Plan, and in accordance with section 1142 of the
Bankruptcy Code, the Debtor is hereby authorized to take such corporate action
as may be necessary and appropriate to implement and effectuate consummation of
the Plan, each of the agreements and instrument, referred to therein or
contemplated thereby (including all documents, instruments, certificates and
agreements to be entered into pursuant to the Plan by the Debtor or the
reorganized Debtor and any successors to the Debtor.
(b) This Order shall constitute all approvals and consents,
including without limitation, approvals of the boards of directors and
shareholders of the Debtor, if any, required by the laws of the State of
Delaware (and the laws of any other state) with respect to the implementation
and consummation of the Plan, including without limitation, the election of the
Board of Directors of the reorganized Debtor (which shall consist of the persons
identified as such at the Confirmation Hearing, the adoption of the Restated
Certificate and By-laws of the reorganized Debtor, the adoption of any
certificate of designation for preferred stock to be issued pursuant to the
Plan, the election of the officers of the reorganized Debtor by the Plan, the
adoption of all necessary and appropriate resolutions consistent with the Plan,
the mergers contemplated by the Plan, and the execution, delivery and
performance of any agreement. The Secretary of State of the State of Delaware
(and
-15-
<PAGE>
any other state and any other governmental agency, board, bureau or office of
any of the foregoing or the United States or any other state) are authorized and
directed to accept for filing and to file any certificates or articles of
merger, the Merger Agreements, restated certificates of incorporation,
certificates of designation for preferred stock, or other instruments necessary
and to take any and all other actions necessary to give effect to the mergers
and such other transactions contemplated by the Plan.
This Confirmation Order constitutes a final and appealable order of this
Court and is entered on this the 13th day of October, 1993 in Rutland, Vermont.
/s/Francis G. Conrad
-------------------------------------
HON. FRANCIS G. CONRAD
JUDGE, UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
TENDERED BY:
ALAGIA, DAY, TRAUTWEIN & SMITH
BY /s/Bruce D. Atherton
------------------------------
BRUCE D. ATHERTON
2000 WATERFRONT PLAZA
325 WEST MAIN STREET
LOUISVILLE, KENTUCKY 40202
(502) 585-4131
COUNSEL FOR DEBTOR, JET EXPRESS, INC.
-16-
<PAGE>
12. The objection to confirmation of Allstate Financial Corporation is
overruled as moot as Allstate and the Debtor have agreed to an
administrative claim in the amount of $83,000, in full and complete
settlement of Allstate Financial Corporation's administrative claim and in
termination of the Account Receivable Factoring Agreement between Allstate
Financial Corporation and the Debtor. The administrative claim shall be
paid as follows:
a. $48,680, shall be paid by the Debtor to Allstate Financial
Corporation at or before 5:00 p.m. Eastern Standard Time October 14,
1993, by the Debtor; and
b. The Debtor shall pay the remaining $34,314 to Allstate Financial
Corporation on or before the First Distribution Date, as defined by
the Plan.
c. All payments to Allstate Financial Corporation shall be paid by wire
transfer on the dates specified above.
13. The objection to confirmation of Patterson, [ILLEGIBLE], Webb and Tyler is
overruled as moot, the Debtor having stated that said law firm shall be
paid in full on the First Distribution Date or according to such terms and
conditions as may be agreed to between the parties, as set forth in the
Plan.
14. The joint objection of Concord Asset Management, Inc., and [ILLEGIBLE],
Inc., is withdrawn, the Debtor, [ILLEGIBLE], and Concord having agreed to
resolution of the administrative claim of [ILLEGIBLE] and Concord upon the
terms set forth in the Court record, which shall be subject to written
stipulation between the parties.
<PAGE>
The terms of the agreement between the parties are so ordered.
16. The Agreements entered into between the Debtor and Fokker Aircraft USA,
Inc., authorized by order of this Court, dated September 30, 1993, are
approved as finally executed and shall remain legal, valid and binding of
the reorganized Debtor.
<PAGE>
AMENDMENT NO. 1
dated as of February 26, 1996
to
AIRCRAFT OPERATING LEASE AGREEMENT
No. 114
dated as of November 11, 1993
between
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee, as
Lessor
and
MIDWAY AIRLINES CORPORATION
as
Lessee
Aircraft: Fokker 100
Serial No./RN: 11477/N106ML
<PAGE>
THIS AMENDMENT No. 1 dated as of February 26, 1996 (this "Amendment"), is
between FIRST SECURITY BANK OF UTAH, N.A., a national banking association
existing pursuant to the laws of the United States, having its principal place
of business at 79 South Main Street, Salt Lake City, Utah 84130-0007, not in its
individual capacity (except as expressly set forth in the Lease) but solely as
Owner Trustee under the Trust Agreement, ("Lessor") and MIDWAY AIRLINES
CORPORATION, a company incorporated under the laws of the State of Delaware,
having its principal place of business at 300 West Morgan Street, Durham, North
Carolina 27702 ("Lessee").
WHEREAS, Lessor and Lessee are parties to that certain Aircraft Operating
Lease Agreement No. 114, dated as of November 11, 1993, and recorded by the
Federal Aviation Administration on January 24, 1994 under conveyance number
AA50718 (as amended hereby, the "Lease"; capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to them in the Lease);
WHEREAS, debis AirFinance B.V. ("debis") is the beneficial owner of the
Aircraft;
WHEREAS, Lessee is in default under the Lease by reason of its failure to
make certain Rent payments due thereunder in January and February 1996; and
WHEREAS, Lessor and Lessee desire to amend the Lease as hereinafter set
forth.
NOW THEREFORE, for valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as follows:
1. Definitions.
(a) Section 1 of the Lease is hereby amended by deleting sub-sections 1.11
and 1.51 thereof in their entirety and replacing them with the following:
"1.11 Beneficiary shall mean debis AirFinance B.V., beneficiary under the Trust
Agreement, and its successors and permitted assigns.
1.51 Other Aircraft Agreements shall mean all other aircraft operating lease
agreements relating to other aircraft so long as such other aircraft are
leased to Lessee by a lessor for the benefit, directly or indirectly, of
debis or any affiliate of debis. For purposes of this definition,
affiliate shall mean any corporation or other entity that, directly or
indirectly, controls, is
<PAGE>
controlled by or is under common control with debis."
(b) Section 1 of the Lease is hereby further amended by deleting "Fokker"
and "FAUSA" from the definition of Indemnitee (subsection 1.39 thereof) and
adding "debis" in their stead. In addition, the references to "Fokker" and
"FAUSA" in Section 11.2(c)(ii) of the Lease are hereby deleted and replaced
with "debis".
2. Inspection.
Section 7 of the Lease is hereby amended by adding a new sub-section
7.6 thereto as follows:
"7.6 Lessee hereby acknowledges that the inspection rights and rights to
information and notice pursuant to this Section 7 shall extend to debis as
well as Lessor. In addition, without in any way limiting the rights
contained elsewhere in the Lease, debis shall have the right to have
observers (who may or may not be employees of debis) on site at Lessee's
premises (provided such observers do not unreasonably interfere with
Lessee's business or operations) and, provided the recipients of any
financial and operational information of Lessee (which recipients may
include employees or other representatives of debis or any of its
affiliates, or agents, attorneys or accountants of debis or any of its
affiliates) keep strictly confidential any such information, debis shall
have the right to inspect and review any internal financial and
operational information of Lessee as debis may reasonably request
(provided such request is made to Lessee's controller or to a vice
president, senior vice president or the president of Lessee) including,
without limitation, cash flow statements, financial books and records, and
any other records relating to the operation of Lessee's fleet. Lessee
covenants that it will fully cooperate with debis regarding any inspection
of Lessee's fleet and records pursuant to the terms of the Lease."
3. Default by Lessee.
Section 15 of the Lease is hereby amended as follows:
(a) Sub-section 15.1 is hereby amended by deleting paragraph (n) thereof
in its entirety and replacing it with the following:
2
<PAGE>
"(n) if an event of default (however defined) occurs under (i) any of the
Other Aircraft Agreements, (ii) any other lease agreements between
Lessee and a lessor for the benefit, directly or indirectly, of
Fokker, FAUSA, Daimler- Benz Aerospace A.G. or any affiliate of any
of them, relating to other aircraft ("Fokker Aircraft Agreements")
or (iii) any aircraft maintenance agreement or other agreement
entered into by Lessee in lieu of Reserve Rate payments
("Maintenance Agreements") which event permits acceleration or
termination; or"
(b) Sub-section 15.1 is further amended by deleting the period at the end
of paragraph (q) thereof and replacing it with a semicolon and the word "or" and
by adding new paragraphs (r), (s) and (t) thereto as follows:
"(r) if Lessee's financial performance deviates in any material adverse
way (as determined by debis in its sole, but reasonable discretion)
from the projections set forth on Lessee's Business Plan for
calendar year 1996 (attached hereto as Exhibit A), taken as a whole,
and such deviation is not the result of a natural disaster which
effectively makes it impossible for Lessee to meet such projections;
or
(s) if, prior to satisfaction of Lessee's obligation to pay Default
Payments pursuant to Section 6 of this Amendment, Lessee shall make
(i) any payment of principal or interest on any amounts owed by
Lessee to Zell/Chilmark Fund, L.P. ("Zell") or any affiliate of
Zell, (ii) any redemption of, or any dividend or distribution with
respect to, any shares of Lessee owned by Zell or any affiliate of
Zell, (iii) any prepayment of principal or interest with respect to
any other subordinated debt owed by Lessee or (iv) any redemption
of, or any dividend or other distribution with respect to, any other
shares of Lessee; or
(t) if Lessee shall fail to fulfill any of the obligations set forth in
paragraphs (c) or (d) of Section 6 of this Amendment."
3
<PAGE>
(c) Sub-section 15.2 is hereby amended by adding "(a), (n), (t)" to clause
(i) of paragraph (b) thereof following the word "paragraphs"; it being
understood that the effect of this amendment is to include payment defaults,
cross-defaults with Other Aircraft Agreements, Fokker Aircraft Agreements and
Maintenance Agreements, and failure to fulfill any of the obligations set forth
in paragraphs (c) or (d) of Section 6 of this Amendment as events giving rise to
automatic termination of the Lease without the necessity of any service of
notice thereof upon Lessee; provided, however, that such automatic termination
shall not apply with respect to defaults of the type referred to in paragraphs
(a) or (n) of sub-section 15.1 of the Lease prior to the date hereof or for
payment defaults for Rent Dates occurring in March and April 1996, for so long
as Lessee fulfills the obligations set forth in paragraphs (c) and (d) of
Section 6 of this Amendment.
4. Return of Aircraft.
Section 16 of the Lease is hereby amended by adding a new sub-section 16.8
thereto as follows:
"16.8 Notwithstanding anything to the contrary contained in the Lease, on the
Expiry Date or upon earlier termination of the Term including, without
limitation, any termination of the Lease pursuant to Section 15 (unless a
Casualty Occurrence shall have occurred with respect to the Aircraft),
Lessee shall immediately deliver possession of the Aircraft to Lessor at
Schiphol Airport, the Netherlands (or such other location as Lessor may
require) and hereby covenants that it will not interpose any defense to
any action commenced by Lessor to regain possession of the Aircraft. The
foregoing shall apply whether or not Lessee is or shall subsequently
become a debtor in a case under Title 11, U.S.C., and in such event,
Lessee covenants that it will not oppose, and will join in, any
application by Lessor seeking to regain possession of the Aircraft."
5. Notice.
Section 19 of the Lease is hereby amended by deleting paragraph (d) of
sub-section 19.6 thereof in its entirety and replacing it with the following:
4
<PAGE>
"(1) to Lessee at:
Midway Airlines Corporation
300 W. Morgan Street
Durham, North Carolina 27702
Tel: (919) 956-4982
Fax: (919) 956-7314
Attention: President
(2) to Lessor at:
First Security Bank of Utah, N.A.
79 South Main Street
Salt Lake City, Utah 84130-0007
Tel: (801) 246-5630
Fax: (801) 246-5053
Attention: Corporate Trust Department
with a copy to debis at:
Evert van de Beekstraat 22,
NL-1118 CL Luchthaven Schiphol,
Amsterdam Airport Schiphol
Tel: 011 3120 316-1431
Fax: 011 3120 653-5419
or to such other address or telex or fax number as is notified by either
party to the other party to this Agreement."
6. Forbearance. Execution of this Amendment shall serve as Lessor's
agreement to forebear from exercising its rights (including, without limitation,
its rights under Section 15 of the Lease) with respect to:
(a) Lessee's failure to make payments of Rent or security deposit amounts
due under the Lease prior to the date of this Amendment and for Rent Dates
occurring in March and April 1996; and
(b) Lessee's failure to make payment of Reserve Rate constituting Engine
Maintenance Accruals due under Other Aircraft Agreements identified as AOLAF
135, 524 and AOLAF 525 on account of Flight Hours and/or Cycles operated prior
to February 1, 1996;
provided, however, that Lessor's agreement to forbear shall be effective
for so long, and only so long, as
5
<PAGE>
Lessee otherwise complies with all the terms of the Lease, as amended, and
fulfills the obligations set forth in paragraphs (c) and (d) of this Section 6,
as follows:
(c) Lessee shall pay to Lessor the following amounts (which amounts Lessee
hereby agrees to pay):
(i) {***} on the Rent Date occurring in February 1996;
(ii) {***} on the Rent Date occurring in March 1996;
(iii) {***} on the Rent Date occurring in April 1996; and
(iv) Amounts identified on Exhibit B to this Amendment ("Default
Payments") on the Rent Date occurring in May 1996 and for the next
succeeding forty-seven (47) Rent Dates thereafter; it being
understood that Lessee shall pay such Default Payments together with
Rent and any other amounts otherwise due pursuant to the Lease.
Lessee may satisfy its obligations to pay the Default Payments at
any time by paying the portion of all such Default Payments which
constitutes principal, together with the portion of such Default
Payments which constitutes interest accrued and unpaid as of the
date of payment, all as reflected on Exhibit B to this Amendment.
(d) On or before March 7, 1997, Lessee shall pay all unpaid Reserve Rate
owed with respect to Other Aircraft Agreements identified as AOLAF 135, 524 and
525, or shall enter into a maintenance agreement reasonably satisfactory to
debis providing for the maintenance of the engines of the Aircraft which are the
subject of such Other Aircraft Agreements.
Execution of this Amendment shall not constitute a waiver of any Rent payment
defaults or of any other defaults which may have occurred and be continuing or
which may occur in the future. Lessor's agreement to forbear shall terminate
automatically if Lessee fails to fulfill any of the obligations set forth in
paragraphs (c) or (d) of Section 6 of this Amendment or if any Event of Default
occurs or has occurred and is continuing under the Lease (other than an Event of
Default to which this forbearance agreement set forth in Section 6 of this
Amendment applies). For so long, and only so long as Lessor's agreement to
forbear has not terminated, and provided that the obligation set forth in
paragraph (d) of Section 6 of this Amendment has been fulfilled (i) Lessee shall
be entitled to exercise its rights and privileges under Sections 5.1.2(b),
5.1.3, 7.4.1
6
<PAGE>
and 13.3 of the Lease and (ii) Lessor shall be deemed to have elected not to
apply the Deposit to sums due or to become due to Lessor pursuant to Section 1
of Appendix D of the Lease, notwithstanding the occurrence and continuation of a
Default or Event of Default under the Lease.
7. Payments
Paragraph 4 of Exhibit D to the Lease is hereby amended by deleting the
first sentence thereof and replacing it with the following:
"All payments due hereunder shall be effected by Lessee to Lessor to Bank
of New York, in New York, New York, ABA # 021-000-018, Account No.
802-6002-533 in favor of Rabobank Nederland, New York Branch, Account No.
14102, in favor of debis AirFinance B.V., or to such other account as
debis may designate in writing, and all such payments shall be in Dollars
and in immediately available funds, and all such payments shall be
initiated adequately in advance of the due dates to ensure that Lessor
receives credit for the full amount of such payment on the due dates."
8. Governing Law. This Amendment shall be governed by and construed in
accordance with the internal laws of the State of New York and without regard to
any conflict of law rules. This Amendment is being delivered in the State of New
York.
9. Miscellaneous. Except as specifically amended or supplemented by this
Amendment, the Lease is hereby ratified, approved, confirmed and continued in
all respects and all provisions of the Lease as heretofore amended shall remain
in full force and effect. The parties hereto acknowledge and confirm that the
Lease is intended to be a true lease and not a financing arrangement. This
Amendment may be executed in any number of counterparts, and all of such
counterparts taken together shall be deemed and constitute one and the same
instrument.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective officers thereunto duly authorized as of the
day and year first above written.
SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee
By: /s/[SIGNATURE ILLEGIBLE]
------------------------------
Title: Asst. Vice President
SIGNED on behalf of
MIDWAY AIRLINES CORPORATION
By:
------------------------------
Title:
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective officers thereunto duly authorized as of the
day and year first above written.
SIGNED on behalf of
FIRST SECURITY BANK OP UTAH, N.A.,
not in its individual capacity
but solely as owner trustee
By:
------------------------------
Title:
SIGNED on behalf of
MIDWAY AIRLINES CORPORATION
By: /s/Jonathan S. Waller
------------------------------
Title: JONATHAN S. WALLER
SENIOR VICE PRESIDENT
GENERAL COUNSEL
8
<PAGE>
EXHIBIT A
{***} (2 pages omitted)
<PAGE>
EXHIBIT B
{***} (2 pages omitted)
<PAGE>
114
AMENDMENT NO. 2
dated as of January 31, 1997
to
AIRCRAFT OPERATING LEASE AGREEMENT
NO. 114
dated as of November 11, 1993
between
FIRST SECURITY BANK, N.A., formerly known as
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee, as
Lessor
and
MIDWAY AIRLINES CORPORATION, as
Lessee
Aircraft: Fokker 100
Serial No. IRN: 11477/N106ML
<PAGE>
114
THIS AMENDMENT NO. 2 dated as of January 31, 1997 (this "Amendment"), is
between FIRST SECURITY BANK, N.A., formerly known as First Security Bank of
Utah, N.A., a national banking association existing pursuant to the laws of the
United States, having its principal place of business at 79 South Main Street,
Salt Lake City, Utah 84130-0007, not in its individual capacity (except as
expressly set forth in the Lease) but solely as Owner Trustee under the Trust
Agreement ("Lessor"), and MIDWAY AIRLINES CORPORATION, a company incorporated
under the laws of the State of Delaware, having its principal place of business
at 300 West Morgan Street, Durham, North Carolina 27701 ("Lessee").
WHEREAS, Lessor and Lessee are parties to that certain Aircraft Operating
Lease Agreement No. 114, dated as of November 11, 1993, (as amended from time to
time, the "Lease"; capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed to them in the Lease);
WHEREAS, Lessor and Lessee entered into Amendment No. 1 to the Lease,
dated as of February 26, 1996 ("Amendment No. 1");
WHEREAS, debis AirFinance B.V. ("debis AF") is the beneficial owner of the
Aircraft;
WHEREAS, debis AF, Lessee, and Lessor entered into a Deferral Agreement
dated as of October 25, 1996 ("Deferral Agreement"), which provided for the
deferral of certain payments due under the Lease, and amended the Lease in
certain other respects;
WHEREAS, debis AF and Lessee entered into an Amendment to Deferral
Agreements dated as of December 30, 1996, which modified the Deferral Agreement
in certain respects (the "Amendment to Deferral Agreements");
WHEREAS, Lessee has entered into an Agreement and Plan of Merger dated as
of January 17, 1997 (as amended, the "Merger Agreement") with GoodAero, Inc., a
Delaware corporation ("GoodAero") and Zell/Chilmark Fund, L.P., a Delaware
limited partnership, whereby it is proposed that GoodAero will be merged into
Lessee to effect a recapitalization of Lessee (the "Merger"), subject to certain
conditions precedent having been satisfied; and
WHEREAS, Lessor and Lessee desire to amend the Lease to become effective
upon the consummation of the Merger and to enter into further agreements as
hereinafter set forth.
NOW THEREFORE, for valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as follows:
1. Amendment of Lease. The Lease is hereby amended as follows:
(a) Section 1 of the Lease is amended by eliminating the period at
the end of Subsection 1.27 thereof, and by inserting in lieu thereof the
following clause:
<PAGE>
114
"or such earlier date as may be specified by Lessor pursuant to notice given in
accordance with, and subject to the terms of Section 16.9 hereof."
(b) Section 1.51 of the Lease is amended by deleting the period at
the end of the first sentence and by inserting the following in lieu thereof:
"or any successor or assign thereof.
(c) Section 6.4 of the Lease is amended as follows: (a) by deleting
subsection (i) thereof in its entirety and by inserting in lieu thereof the
following: "(i) any financial reports or projections supplied to the majority
shareholder of Lessee"; and (b) by deleting the words "upon Lessor requesting
the same" from subsection (ii) thereof.
(d) Section 11.1(a) of the Lease is amended by deleting the period
at the end thereof and by inserting the following clause:
provided, however, that the deductible may be $500,000 (Dollars Five
Hundred Thousand) for each accident, but only if Lessee procures and
maintains in favor of debis AirFinance B.V. for the benefit of the
Beneficiary and/or the Lessor under each of the Leases identified on
Schedule 16.9 hereof (as those terms are defined therein) an
irrevocable letter of credit (the "Letter of Credit") in the face
amount of $800,000 (Dollars Eight Hundred Thousand) issued by
Wachovia Bank or another banking institution reasonably acceptable
to debis AirFinance B.V. and in a form reasonably acceptable to
debis AirFinance B.V. containing the terms set forth in Schedule
11.1(a).1 of this Lease; provided, however, that Lessee may reduce
the amount of the Letter of Credit to $400,000 in any year where
Lessee's audited financial statements for the prior year show that
Lessee had net income (as determined in accordance with generally
accepted accounting principles ("Net Income")) greater than the
amount for such prior year identified as "Net Income (1)" on
Schedule 11.1(a).2, but less than the amount for such prior year
identified as "Net Income (2)" on Schedule 11.1(a).2; and Lessee
shall not be required to maintain the Letter of Credit in any year
where Lessee's audited financial statements for the prior year show
that Lessee had Net Income for such prior year greater than the
amount for such prior year identified as "Net Income (2)" on
Schedule 11.1(a).2; and provided, further, that notwithstanding any
reduction or cancellation of the Letter of Credit in accordance with
the terms hereof, Lessee shall be required to restore the Letter of
Credit in any year where Lessee's audited financial statements for
the immediately preceding year show that Lessee's Net Income was
less than the threshold set by Schedule 11.1(a).2 for such prior
year for reduction of the Letter of Credit or in any year in which
audited financials for Lessee for the immediately preceding year
have not been certified on or before April 15 following
-2-
<PAGE>
114
such preceding year. For purposes of determining the amount required
for the Letter of Credit in any year, reduction, if any, shall not
be permitted until 30 days after receipt by debis AirFinance B.V. of
the audited financial statements of Lessee for the prior year and,
in the event that the Letter of Credit is to be reinstated or
increased in any year as aforedescribed, such Letter of Credit shall
be required on or before April 15 of such year. Any failure by
Lessee to comply with the provisions of this Section 11.1(a) shall
be an Event of Default under Section 15.1(b) of the Lease.
(e) Section 14.1(b) of the Lease is amended by deleting the
semicolon at the end of such Section and by inserting in lieu thereof the
following clause:
"the failure with which to comply is likely to have a material
adverse effect on Lessee; provided, however, that such failure shall
have no adverse effect on the Aircraft or on the interests of Lessor
the Bank therein or in this Agreement or on the Insurances required
to be maintained pursuant to Article 11."
(f) Section 14.1(p) is amended by deleting the same in its entirety
and by inserting in lieu thereof the following:
"not become the surviving corporation of a merger with any other
entity, or itself consolidate with, or merge into, any other
corporation, or convey, transfer or lease substantially all of its
assets as entirety to any person, without the prior written consent
of Lessor (such consent not to be unreasonably withheld) and the
execution and delivery to Lessor of such agreements, certificates
and legal opinions as Lessor may reasonably request with respect
thereto;"
(g) Section 14.1(q) of the Lease is deleted in its entirety.
(h) Section 15.1(a) of the Lease is amended by deleting the same in
its entirety and by inserting in lieu thereof the following:
"if default shall be made by Lessee in the making of any Rent,
Reserve Rate, or Supplemental Rent payment within five (5) Business
Days after the date when such payment is due and payable under this
Lease."
(i) Section 15.1(e) of the Lease is deleted in its entirety and the
following is inserted in lieu thereof:
"if (i) if Lessee or any of its subsidiaries is in default under any
lease, hire-purchase, conditional sale or credit sale agreement for
equipment having a casualty value in excess of {***} and such
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<PAGE>
114
default is not cured or waived within the applicable grace period or
five (5) Business Days (whichever is greater); (ii) (regardless of
the amount of money involved), any event occurs which with or
without notice or lapse of time or both would constitute a default
under any agreement between Lessee and, or promissory note executed
by Lessee in favor of, {***}; (b) Zell/Chilmark Fund, L.P.; {***};
(e) any affiliate of any of the foregoing; unless such
default or event of default is cured or waived within the applicable
grace period or five (5) Business Days (whichever is greater); or
(iii) any indebtedness owed by Lessee or any of its subsidiaries in
an amount in excess of {***} is not paid when due or becomes
due or capable of being declared due prior to the date when it would
otherwise become due provided, however, the failure of Lessee to pay
amounts {***} Event of Default hereunder."
(j) Section 15.1(n) is modified by inserting the following clause
alter the word "affiliate": ", successor or assign".
(k) Sections 15.1(o), (p), (q), (r), (s) and (t) are deleted in
their entirety and the following new Sections 15.1(o) and (p) are inserted in
lieu thereof:
"(o) if, an Event of Default shall occur under and as defined in
that certain Promissory Note dated as of January 31, 1997 from the
Lessee to debis AirFinance B.V. or under, and as defined in that
certain Promissory Note dated as of January 31, 1997 from the Lessee
to DASA Aircraft Finance XVI, B.V. (each, a "Note" and collectively,
the "Notes");
(p) if, prior to satisfaction of Lessee's obligations pursuant to
the Notes, Lessee shall make (i) any payment of principal or
interest on any debt owed by Lessee to Zell/Chilmark Fund, L.P. or
to any holder of equity in Lessee representing the right to vote
twenty percent (20%) or more of the stock in Lessee on any matter
presented for vote to the shareholders of Lessee (an "Insider") or
any affiliate of an Insider; or (ii) any redemption of, or any
dividend or distribution with respect to, any shares of Lessee owned
by an Insider or any affiliate thereof."
(l) Section 15.2 is amended by deleting clause (i) of paragraph (b)
thereof in its entirety and inserting the following new clause (i) in lieu
thereof:
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<PAGE>
114
"(i) serving notice of such termination on Lessee specifying the
occurrence giving rise to such Event of Default or Events of
Default, provided that such notice shall be deemed to have been
served without the necessity of actual service and this Lease shall
terminate automatically without the necessity of any service of
notice thereof upon Lessee upon the occurrence of any Event of
Default described in paragraphs (a), (f), (g), (h), (n) or (o) of
Section 15.1 of this Lease; provided, however, that actual service
of notice of such termination on Lessee shall be required where an
Event of Default described in paragraph (n) of Section 15.1 of the
Lease has occurred solely by reason of occurrence of an event of
default under an Other Aircraft Agreement or under a Fokker Aircraft
Agreement, which event of default does not, under the terms of such
Other Aircraft Agreement or Fokker Aircraft Agreement, result in
automatic termination of such Other Aircraft Agreement or such
Fokker Aircraft Agreement."
(m) Article 16 of the Lease is amended by adding a new Section 16.9
as follows:
"(a) Notwithstanding anything to the contrary contained in this
Lease, Lessor may terminate this Lease by giving not less than six
(6) months' prior written notice of the termination date to Lessee
provided that in no event may Lessor choose a termination date
earlier than September 15, 1998 ("Lessor's Termination Option") and
the termination date specified in such notice shall become the
Expiry Date; provided, however, that (subject to the following
sentence) Lessor shall not be entitled to exercise Lessor's
Termination Option with respect to this Lease where the same would
result in the termination of four (4) or more of the aircraft
operating lease agreements identified in Schedule 16.9 to the Lease
in any twelve (12) month period, taking into account the scheduled
or actual Expiry Date of each such aircraft operating lease
agreement. Nothing herein shall be construed to limit the Lessor's
rights upon the occurrence of any Default or Event of Default or
upon the termination of this Lease as a result thereof or upon the
expiration of any Lease in the absence of the exercise of Lessor's
Termination Option.
(b) Lessee shall in no event be liable for any costs, expenses,
liabilities, losses, damages or amounts incurred by Lessor which
arise solely from the Lessor exercising Lessor's Termination Option
hereunder such as the loss of any tax benefit, or fees or penalties
arising from the breakage of any contract or agreement. Except as
expressly provided in subsection (c) below, Lessor shall in no event
be liable for any costs, expenses, liabilities, losses, damages or
amounts
-5-
<PAGE>
114
incurred by Lessee as a result of Lessor exercising Lessor's
Termination Option in accordance with this Section 16.9.
(c) Notwithstanding the terms of clause (b) above, if Lessor
exercises Lessor's Termination Option hereunder in accordance with
this Article 16.9, then Lessee shall be responsible for performing
all of its obligations under and in accordance with the terms of
this Section 16, subject to the following:
(i) the Lessor shall pay or cause to be paid to Lessee for
Lessee's application against the "C Check" completed pursuant
to Appendix E, Item 1(e), an amount equal to the lesser of (x)
$100,000 or (y) an amount equal to the product of the full
cost of the "C Check" completed by Lessee pursuant to Appendix
E, Item 1(e) on the Aircraft multiplied by a fraction, the
numerator of which is the number of hours (including fractions
of an hour) remaining on the Aircraft until Lessee's next
scheduled "C Check" for the Aircraft (assuming Lessor had not
exercised Lessor's Termination Option hereunder) and the
denominator of which is 3000; and
(ii) for purposes of Section 7.4.1(b) and (c), any shop visit
required to meet the conditions of Appendix E shall be deemed
a "scheduled" shop visit."
(n) Section 18.6 of the Lease is amended (i) by deleting the firm of
"Winston & Strawn, Attn: R. Evan Smith, 175 Water Street, New York, NY 10038" as
agent for Lessee and by inserting in lieu thereof the new agent for Lessee as
follows: "Paul, Hastings, Janofsky & Walker, Attn: Jon Howitt, 399 Park Avenue,
New York, NY 10022; and (ii) by deleting the firm of "Haight, Gardner, Poor &
Havens, Attn: Bonny L.Y. Kwoh, 195 Broadway, New York, NY 10007" as agent for
Lessor and by inserting in lieu thereof the new agent for Lessor as follows:
"Hertzog, Calamari & Gleason, Attn: Carla Craig, 100 Park Avenue, New York, New
York 10017".
(o) Appendix B to the Lease is hereby amended as follows:
(i) The amount set forth as the "AGREED VALUE" is deleted in its
entirety and the amount of {***} is substituted therefor.
(ii) The Amount set forth as "RENT" is deleted in its entirety and
the amount of {***} is substituted therefor.
-6-
<PAGE>
114
(p) Appendix D to the Lease is hereby amended by deleting Sections
2.2 through 2.7 in their entirety and by deleting Section 1 in its entirety and
inserting the following in lieu thereof:
"1. Deposit. Lessee has paid to Lessor the amount set forth on
Schedule B.1 as a Deposit for the Aircraft prior to January 31,
1997. Lessor has applied such Deposit (plus all accrued interest
thereon) to the Default Payments (as defined in Section 6 of
Amendment No. 1 to this Lease) and/or to Default Payments (as
defined in Section 6 of Amendment No. 1 to the Other Aircraft
Agreements)."
(q) Appendix D is hereby amended by (a) deleting the first
word of Section 3.1 thereof and by inserting the following in lieu thereof:
"Lessee shall be relieved of its obligation to pay the Reserve Rate
at any time that the Aircraft Maintenance Agreement between Lessee
and American Airlines, Inc., dated as of November 1, 1993, or any
subsequent aircraft maintenance agreement between Lessee and any
Authorized Maintenance Performer, which in the reasonable opinion of
Lessor, is in substance substantially similar to such Aircraft
Maintenance Agreement is in effect with respect to the Aircraft. At
any time that the above-referenced Aircraft Maintenance Agreement,
or such subsequent aircraft maintenance agreement is not in effect,
then Lessee shall, in"
and (b) by adding the following sentence after subsection (d) of Section 3.1
thereof:
"In the event that Lessee enters into any substitute maintenance
agreement in lieu of paying Engine Maintenance Accrual, such
substitute agreement shall be similar in substance to the Approved
Maintenance Agreement (as that term is defined in Amendment No. 2
and Consent, each dated as of May, 1996, with respect to Aircraft
Operating Lease Agreements Nos. 524, 525, and 135, each between
Midway Airlines Corporation, as Lessor, and First Security Bank of
Utah, N.A., as Lessee (collectively, "Amendment No. 2"); and in such
event Lessee shall pay to Lessor as Reserve Rate, on the date when
Reserve Rate is due, an amount calculated, for the Lease, in the
same manner as Reduced Engine Maintenance Accrual (as that term is
defined in Amendment No. 2)."
-7-
<PAGE>
114
(r) Schedule 16.9 attached to this Amendment is hereby attached to
the Lease as Schedule 16.9 thereto and is incorporated therein.
2. Waiver of Default. Lessor agrees that any Default or Event of Default
under Sections 15.1(a), 15.1(e), 15.1(g) or 15.1(r) of the Lease (prior to the
amendment of any such Sections hereunder) which occurred prior to the date of
this Amendment is hereby deemed to have been cured by Lessee and Lessor waives
any rights or remedies it may have had with respect to the occurrence of any
such Default or Event of Default.
3. Representations, Warranties and Covenants
The following shall be, as applicable, representations, warranties or
covenants of Lessee pursuant to Articles 13 and 14 of the Lease:
(a) Representations
(i) This Amendment and the Notes have been duly entered into and
delivered by Lessee, and each constitutes a valid, legal and binding obligation
of Lessee enforceable against Lessee in accordance with its terms.
(ii) As of the date of this Amendment, Lessee has entered, or
will contemporaneously herewith enter, into an agreement with {***} having
terms which are substantially in accordance with the terms set forth under
the heading {***} in Exhibit 6.02(k) to the Agreement and Plan of Merger
dated as of January 17, 1997 by and among GoodAero, Inc., James H. Goodnight,
John P. Sall, Midway Airlines Corporation and Zell/Chilmark Fund, L.P., as
amended, except to the extent otherwise specifically set forth in the letter
dated as of February 10, 1997, from Lessee to Lessor.
(b) Covenants
Lessee covenants that it will not make any prepayment in respect
of the Promissory Note dated February 7, 1997 in the amount of {***} or amend
the {***} to provide for terms more favorable to the payee thereof
(including, without limitation, any increase in the interest rate or
acceleration of payment).
4. Deferral Agreement. Lessor and Lessee agree that the Deferral Agreement
and the Amendment to Deferral Agreements are hereby declared null and void and
shall have no further force or effect with respect to the Lease.
5. Merger. Lessor hereby consents to the Merger.
6. Governing Law. This Amendment shall be governed by and construed in
accordance with the internal laws of the State of New York and without regard to
any conflict of law rules. This Amendment is being delivered in the State of New
York.
-8-
<PAGE>
114
7. Miscellaneous. Except as specifically amended or supplemented by this
Amendment, the Lease is hereby ratified, approved, confirmed and continued in
all respects and all provisions of the Lease as heretofore amended shall remain
In full force and effect. The parties hereto acknowledge and confirm that the
Lease is intended to be a true lease and not a financing arrangement. This
Amendment may be executed in any number of counterparts, and all of such
counterparts taken together shall be deemed and constitute one and the same
instrument.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on the
day and year first above written.
FIRST SECURITY BANK, N.A., formerly
known as First Security Bank of Utah, N.A.
not in its individual capacity but solely as
owner trustee
By: /s/Greg A. Hawley
------------------------------
Name: Greg A. Hawley
----------------------------
Title: Vice President
---------------------------
MIDWAY AIRLINES CORPORATION
By: /s/J.S. Waller
------------------------------
Name:
----------------------------
Title:
---------------------------
<PAGE>
114
Schedule 11.1(a).1
The Letter of Credit shall contain the following terms:
debis AirFinance B.V. shall be entitled to draw amounts under the Letter of
Credit upon notice to the issuing bank signed by debis AirFinance B.V. stating
that amounts are due under one or more of the following, and that such amounts
remain unpaid:
Promissory Note dated as of January 31, 1997 executed by Midway Airlines
Corporation in favor of debis AirFinance B.Y.
Promissory Note dated as of January 31, 1997 executed by Midway Airlines
Corporation in favor of Daimler-Benz Aerospace A.G.
Aircraft Operating Lease Agreement No. 111 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly known as
First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 112 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly known as
First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 113 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly known as
First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 114 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly known as
First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 135 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly known as
First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 136 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly known as
First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 524 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly known as
First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 525 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly known as
First Security Bank of Utah, N.A.), as Lessor
<PAGE>
114
Aircraft Operating Lease Agreement No. 115-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
Aircraft Operating Lease Agreement No. 116-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
Aircraft Operating Lease Agreement No. 117-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
Aircraft Operating Lease Agreement No. 118-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Fin, Inc., as Lessor
<PAGE>
114
Schedule 11.1(a).2
Midway Airlines
Net Income Thresholds for Reduction in Amount of Letter of Credit Pursuant to
Section 11.1(a)
US$ millions
Year 1997 1998 1999 2000 2001
Net Income(2) 12.0 18.0 25.2 32.8 41.0
Net Income(1) 8.0 12.0 16.8 21.8 27.3
Year 2002 2003 2004 2005 2006
Net Income(2) 49.1 57.7 67.8 67.8 67.8
Net Income(1) 32.8 38.5 45.2 45.2 45.2
Year 2007 2008 2009 2010 2011
Net Income(2) 67.8 67.8 67.8 67.8 67.8
Net Income(1) 45.2 45.2 45.2 45.2 45.2
Year 2012 2013 2014
Net Income(2) 67.8 67.8 67.8
Net Income(1) 45.2 45.2 45.2
Amount of
Letter of Credit
$800,000 If actual Net Income is less than or equal to Net Income(1)
$400,000 If actual Net Income is greater than Net Income(1) but less
than or equal to Net Income(2)
0 If actual Net Income is greater than Net Income(2)
<PAGE>
114
Schedule 16.9
1. Aircraft Operating Lease Agreement No. 111, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
2. Aircraft Operating Lease Agreement No. 112, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
3. Aircraft Operating Lease Agreement No. 113, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
4. Aircraft Operating Lease Agreement No. 114, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
5. Aircraft Operating Lease Agreement No. AOLAF-115-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
6. Aircraft Operating Lease Agreement No. AOLAF-116-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
7. Aircraft Operating Lease Agreement No. AOLAF-117-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
8. Aircraft Operating Lease Agreement No. AOLAF-118-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
9. Aircraft Operating Lease Agreement No. 135, dated as of July 20, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
10. Aircraft Operating Lease Agreement No. 136, dated as of December 15, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
11. Aircraft Operating Lease Agreement No. 524, dated as of August 1, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
12. Aircraft Operating Lease Agreement No. 525, dated as of October 15, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
<PAGE>
114
Schedule B.1
Security Deposits Paid by Midway
Aircraft AOLAF Deposit
MSN No. Paid
--- --- ----
11321 525 {***}
-----------
11323 524 {***}
-----------
11329 135 {***}
-----------
11330 136 {***}
-----------
11444 111 {***}
-----------
11445 112 {***}
-----------
11475 113 {***}
-----------
11477 114 {***}
-----------
11450 115 {***}
-----------
11484 116 {***}
-----------
11485 117 {***}
-----------
11486 118 {***}
-----------
<PAGE>
EXHIBIT 10.7
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY {***}. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
F-100 LEASE #115-A
(TAIL # N107ML)
<PAGE>
EXECUTION COPY
THE SINGLE EXECUTED ORIGINAL OF THIS LEASE MARKED "ORIGINAL" SHALL BE THE
"ORIGINAL" AND ALL OTHER COUNTERPARTS OF THIS LEASE SHALL BE DUPLICATES AND
MARKED "DUPLICATE" OR "DUPLICATE ORIGINAL". TO THE EXTENT THAT THIS LEASE AND
CERTIFICATE OF ACCEPTANCE RELATED THERETO CONSTITUTES CHATTEL PAPER, AS SUCH
TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE
JURISDICTION, NO SECURITY INTEREST MAY BE CREATED THROUGH TRANSFER OR
POSSESSION OF ANY COUNTERPART OTHER THAN THE "ORIGINAL".
AIRCRAFT OPERATING LEASE AGREEMENT NO. AOLAF-115-A
Dated as of
July 10, 1995
between
WINGS AIRCRAFT FINANCE, INC.
as
Lessor
and
MIDWAY AIRLINES CORPORATION
as
Lessee
--------------------------------------------------
Leveraged Lease Financing of
One Fokker 100 Aircraft
Manufacturer's Serial No. 11450
U.S. Registration Mark N107ML
================================================================================
<PAGE>
INDEX
ARTICLE PAGE
- ------- ----
1. Definitions ..................................................... 2
2. Agreement to Lease .............................................. 12
3. Term; Delivery; Acceptance ...................................... 16
4. Registration and Title .......................................... 17
5. Possession and Use .............................................. 19
6. Charges, Method of Payment and Financial Information ............ 25
7. Maintenance ..................................................... 27
8. Taxes, Duties and Expenses ...................................... 32
8A. Special Indemnity ............................................... 39
9. Liens ........................................................... 57
10. Indemnification ................................................. 57
11. Insurance ....................................................... 60
12. Assignment and Subletting ....................................... 68
13. Disclaimer, Representations and Warranties ...................... 71
14. Covenants of Lessee ............................................. 77
15. Default by Lessee ............................................... 80
16. Return of Aircraft .............................................. 86
17. Casualty Occurrences ............................................ 89
18. Governing Law and Jurisdiction .................................. 92
19. Miscellaneous ................................................... 94
- i -
<PAGE>
APPENDICES
A. Description of Aircraft
B. Further Definitions and Values
C. Certificate of Acceptance
D. Charges
E. Operating Condition at Re-Delivery
F. Aircraft Documents
G. FAA Power of Attorney
- ii -
<PAGE>
AIRCRAFT OPERATING LEASE AGREEMENT NO. AOLAF-115-A
THIS AIRCRAFT OPERATING LEASE AGREEMENT NO. AOLAF-115-A (this
"Lease") is made as of July 10, 1995 between WINGS AIRCRAFT FINANCE, INC., a
company incorporated under the laws of the State of Delaware, having its
principal place of business at 1199 N. Fairfax St., Alexandria, Virginia 22314
and its permitted successors and assigns (herein referred to as "Lessor") and
MIDWAY AIRLINES CORPORATION, a company incorporated under the laws of the State
of Delaware, having its principal place of business at 5713 South Central
Avenue, Chicago, Illinois 60638 and its permitted successors and assigns (herein
referred to as "Lessee").
W I T N E S S E T H:
WHEREAS, Lessee entered into an Aircraft Operating Lease Agreement
No. AOLAF-115 dated November 11, 1993 (the "Original Lease") between First
Security Bank of Utah, National Association, not in its individual capacity, but
solely as owner trustee and lessor ("Original Lessor") and Lessee as lessee with
respect to the Aircraft (as hereinafter defined);
WHEREAS, the Original Lease has been terminated pursuant to the
Termination Agreement dated as of the date hereof (the "Termination Agreement")
among Original Lessor, Lessee and Fokker (as hereinafter defined);
WHEREAS, Lessor has entered into a Lease Agreement (Trust No. 115-A)
dated as of the date hereof (the "Head Lease") with First Security Bank of Utah,
National Association, not in its individual capacity, but solely as owner
trustee pursuant to the Trust Agreement (Trust No. 115-A) dated as of the date
hereof between First Security Bank of Utah, National Association in its
individual capacity and CIBC Inc. as owner participant;
WHEREAS, Lessor has the right to possess, use and lease the
Aircraft;
WHEREAS, Lessee desires to lease the Aircraft from Lessor; and
WHEREAS, Lessor is willing to lease the Aircraft to Lessee upon the
terms and conditions set out herein.
NOW THEREFORE, in consideration of the mutual promises herein
contained, Lessor and Lessee agree as follows:
<PAGE>
1. DEFINITIONS
The following terms shall have the following respective meanings for all
purposes of this Lease:
"Air Authority" shall mean the Federal Aviation Administration of
the United States Department of Transportation and any successor.
"Aircraft" shall mean the aircraft identified and described in
Appendix A, including any Engine, Part, or component thereof, and/or
ancillary and loose equipment or devices installed in or on the Aircraft
at the Original Delivery Date (or which having been removed therefrom
remain the property of Lessor pursuant to this Lease) and Aircraft
Documents furnished therewith under this Lease, or any substitutions,
renewals and replacements from time to time made in or on the said
Aircraft in accordance with this Lease, whether or not for the time being
installed on or in the said Aircraft or any other aircraft.
"Aircraft Documents" shall mean the items identified in Appendix F.
"Aircraft Maintenance Agreement" shall mean the Aircraft Maintenance
Agreement between Lessee and American Airlines, Inc., dated as of November
1, 1993, or any subsequent aircraft maintenance agreement between Lessee
and any Authorized Maintenance Performer which, in the reasonable opinion
of Lessor, is in substance substantially similar thereto.
"Airframe" shall mean the Aircraft, excluding the Engines.
"Appraisal Procedure" shall mean the procedure for determining the
FMV of the Aircraft set forth in Paragraph 9 of Appendix D.
"Approved Maintenance Program" shall mean the Maintenance Program in
effect on the Delivery Date with respect to the Aircraft or such other
Maintenance Program as Lessor shall from time to time approve in writing,
such approval not to be unreasonably withheld.
"Authorized Maintenance Performer" shall mean Lessee, American
Airlines, Inc., U.S. Air, Aviall, Rolls Royce Canada or any Air Authority
approved provider.
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<PAGE>
"Business Day" shall mean a day (other than a Saturday or Sunday) on
which banks are open for business in New York.
"Casualty Occurrence" shall have the meaning set forth in Article
17.1.
"Certificate of Acceptance" shall mean the Certificate of Acceptance
given in the form of Appendix C.
"Certificated Air Carrier" shall mean any person (except the United
States Government) that is a citizen of the United States of America (as
defined in Section 40102 of Title 49 of the United States Code) holding an
air carrier operating certificate issued by the Secretary of
Transportation pursuant to Chapter 447 of Title 49 of the United States
Code (or any predecessor thereof) for aircraft capable of carrying ten or
more individuals or 6,000 pounds or more cargo, which is also certificated
so as to entitle Lessor, as lessor, to the benefits of Section 1110 of
Title 11 of the United States Code with respect to the Aircraft.
"Credit and Security Agreement" shall mean the Credit and Security
Agreement dated as of October 29, 1993 therein between FAUSA and Lessee.
"Cycle" shall mean one take-off and landing of the Aircraft.
"Default" shall mean an Event of Default or any event which, with
the giving of notice and/or lapse of time and/or the making of any
relevant determination, would constitute an Event of Default.
"Delivery Date" shall mean the date on which the Aircraft is
delivered to and accepted by Lessee for the purposes of this Lease.
"Delivery Location" shall mean the location of the Aircraft set
forth in the Certificate of Acceptance.
"Dollars and $" shall mean the lawful currency of the United States
of America and in respect of all payments to be made under this Lease in
Dollars shall mean funds which are for same day settlement in the New York
Clearing House Interbank Payments System (or such other US Dollar funds as
may at the relevant time be customary for the settlement of international
banking transactions denominated in United States Dollars).
-3-
<PAGE>
"Engine" shall mean (i) any engine installed on or furnished with
the Aircraft on the Original Delivery Date, such Engines being identified
as to manufacturer and type in Appendix A and as to serial numbers in the
Certificate of Acceptance executed by Lessee on the Delivery Date and (ii)
any substitute or replacement engine title to which has, or should have,
transferred to and vested in Lessor in accordance with this Lease, in each
case including all modules or Parts from time to time belonging to or
installed in that engine and irrespective of whether or not the same shall
for the time being be installed on the Aircraft or on any other aircraft.
The term "Engine" shall exclude any properly replaced engine title to
which has, or should have, passed to Lessee pursuant to this Lease.
"Equipment Change" shall have the meaning set forth in Article
7.3(a).
"Event of Default" shall mean any of the events specified in Article
15.1.
"Expiry Date" shall mean January 21, 2013.
"Fair Market Rental Value" shall be equal in amount to the value
that would be obtained in an arms'-length transaction between an informed
and willing lessee under no compulsion to lease and an informed and
willing lessor under no compulsion to lease, in accordance with a lease to
a lessee similarly situated with Lessee, for a term equal to the relevant
period and on conditions as herein provided, any such determination (made
for purposes of Article 15.3(b)) to be made on the basis of the then
actual condition of the Aircraft, to be determined pursuant to an
Independent Appraisal and to be the average of the two determinations
obtained thereunder.
"FAUSA" shall mean Fokker Aircraft U.S.A., Inc., a company
incorporated under the laws of the State of Delaware, with its principal
office at Alexandria, Virginia.
"Federal Aviation Act" shall mean Title 49 of the United States Code
as amended from time to time, or any similar legislation of the United
States of America enacted in substitution or replacement therefor.
"First Rent Date" shall mean July 22, 1996.
"Flight Hour" shall mean each hour or part thereof elapsing from the
moment at which the wheels of the Aircraft leave the ground on the take
off of the Aircraft until the
-4-
<PAGE>
wheels of the Aircraft touch the ground on the landing of the Aircraft
following such flight.
"FMV" shall have the meaning set forth in Appendix D.
"Fokker" shall mean Fokker Aircraft B.V., a Dutch corporation with
its principal office at Amsterdam-Zuidoost, The Netherlands, together with
its successors.
"Governing Law" shall mean the law of the state of New York.
"Government Entity" shall mean and include (i) any national or state
government, political subdivision thereof, or local jurisdiction therein;
(ii) any board, commission, department, division, organ, instrumentality,
court, or agency of any thereof, however constituted; and (iii) any
association, organization, or institution of which any thereof is a member
or to whose jurisdiction any thereof is subject or in whose activities any
thereof is a participant.
"Head Lease" shall have the meaning set forth in the third "Whereas"
clause of this Lease as the Head Lease may be amended, modified or
supplemented from time to time in accordance with the terms thereof or any
such other lease created over the Aircraft in accordance with the terms
thereof.
"Head Lessor" shall mean First Security Bank of Utah, National
Association, not in its individual capacity, but solely as owner trustee
pursuant to the Trust Agreement (Trust No. 115-A) dated as of the date
hereof between First Security Bank of Utah, National Association in its
individual capacity and CIBC Inc. as Owner Participant, and its successors
and permitted assigns.
"Indemnitees" shall mean Lessor and each of its permitted successors
and assigns and each of their respective shareholders, subsidiaries,
affiliates, directors, officers, agents and employees.
"Indenture" shall mean the Trust Indenture and Security Agreement
(Trust No. 115-A) dated as of July 10, 1995, between Indenture Trustee and
First Security Bank of Utah, National Association, as owner trustee, as it
may be amended, modified or supplemented from time to time, or any such
security agreement created over the Aircraft in accordance with the terms
thereof.
-5-
<PAGE>
"Indenture Trustee" shall mean Shawmut Bank Connecticut, National
Association, not in its individual capacity but solely as indenture
trustee pursuant to the Indenture, and its successors and permitted
assigns.
"Independent Appraisal" shall mean a determination of Fair Market
Rental Value of the Aircraft by two independent aircraft appraisers,
selected by Lessor, the costs and expenses of the appraisal to be paid by
Lessee.
"Law" shall mean and include (i) any law, statute, decree,
constitution, regulation, order or any directive of any Government Entity;
(ii) any treaty, pact, compact or other agreement to which any Government
Entity is a signatory or party; (iii) any judicial or administrative
interpretation or application of any thereof; and (iv) any amendment or
revision of any thereof.
"Lessor or Lessee" shall have the meanings respectively ascribed to
them in the first paragraph of this Lease and shall include their
respective assignees or successors.
"Lessor Liens" shall mean:
(a) the Indenture, the Security Assignment, the Head Lease and any
security or leasehold interest whatsoever from time to time
created by or through Lessor, Head Lessor, Owner Participant
or Loan Participant or any of their respective affiliates in
connection with the financing of the Aircraft;
(b) any other security interest or other lien in respect of the
Aircraft or this Lease which results from acts or omissions to
act of or claims against Lessor, Head Lessor, Owner
Participant or Loan Participant or any of their respective
affiliates not related to the transactions contemplated by or
permitted under this Lease;
(c) liens in respect of the Aircraft for Lessor Taxes; and
(d) Lessor's Liens (as such term is defined in the Head Lease).
-6-
<PAGE>
"Lessor Taxes" shall mean Taxes:
(a) imposed as a direct result of activities of a Tax Indemnitee
in any jurisdiction imposing a liability unrelated to that Tax
Indemnitee's dealings with Lessee, to the transactions
contemplated by this Lease or the operation of the Aircraft by
Lessee; or
(b) imposed on or measured by net income, profits or gains, or
capital or net worth (excluding, however, in each case, Taxes
that are, or are in the nature of, license, sales, use,
rental, value-added, or property taxes) of a Tax Indemnitee,
by (A) any Governmental Entity by or in which that Tax
Indemnitee would be subject to tax without regard to the
transactions contemplated by this Lease or (B) the Federal
Government of the United States of America (including, without
limitation, any withholding taxes imposed by such government);
or
(c) imposed with respect to any period or event occurring prior to
the date of this Lease or after the Expiry Date or earlier
termination of this Lease in accordance with the terms hereof,
provided that such Tax is unrelated to a Tax Indemnitee's
dealings with Lessee or to the transactions contemplated by
this Lease; or
(d) imposed as a result of any voluntary sale, assignment,
transfer or other disposition by Lessor (including to Head
Lessor) or any other Tax Indemnitee of any interest in the
Aircraft or any part thereof or this Lease unless such
transfer or disposition occurs (1) in connection with a Tax
Indemnitee's pursuing its remedies while an Event of Default
by Lessee is continuing or otherwise resulting from an Event
of Default, or (2) pursuant to Lessee's exercise of any of its
options to purchase the Aircraft (it being understood and
agreed that Lessor and Lessee will cooperate with each other
to minimize any Taxes resulting from any sale pursuant to this
clause (2)).
"Loan Participant" shall mean Kreditanstalt fur Wiederaufbau,
together with its successors and permitted assigns.
-7- No. AOLAF-115-A
<PAGE>
"Maintenance Program" shall mean an Air Authority approved
maintenance program for the Aircraft encompassing scheduled maintenance
(including block maintenance), condition monitored maintenance, and
on-condition maintenance of Airframe, Engines and Parts, including but not
limited to, servicing, testing, preventive maintenance, repairs,
structural, inspections, system checks, overhauls, approved modifications,
service bulletins, engineering orders, airworthiness directives, corrosion
control, inspections and treatments.
"Major Checks" shall mean any 12,000 hours check, 24,000 hours check
or intersupplementary check or segment thereof or any equivalent thereof
with more or less hours, however denominated, to the extent set out in the
Approved Maintenance Program from time to time.
"Manufacturer" shall mean Fokker.
"Note" shall mean the Secured Promissory Note dated as of July 1,
1994, executed and delivered to FAUSA by Lessee and secured by the Credit
and Security Agreement.
"Original Delivery Date" shall mean July 22, 1994.
"Other Aircraft Agreements" shall mean Aircraft Operating Lease
Agreements relating to other Fokker-manufactured aircraft leased to Lessee
by Lessor or a lessor related to, or acting for the benefit of Wings
Aircraft Finance, Inc. or any affiliate thereof, the Credit and Security
Agreement, the Note, the Support Services Agreement, the Termination
Agreement or any other agreement between Lessee and Lessor or any
affiliate of Wings Aircraft Finance, Inc.; provided that, for the purpose
of this definition, the word "affiliate" shall mean any corporation or
other entity that, directly or indirectly, controls, is controlled by, or
is under common control with, Wings Aircraft Finance, Inc.
"Owner Participant" shall mean CIBC Inc., a corporation organized
and existing under the laws of the State of Delaware, together with its
permitted successors and assigns.
"Part" shall mean, whether or not installed on the Aircraft:
(a) any component, furnishing or equipment (other than a complete
Engine) furnished with the Aircraft on the Original Delivery
Date; and
-8- No. AOLAF-l15-A
<PAGE>
b) any other component, furnishing or equipment (other than a
complete Engine) title to which has, or should have, passed to
Lessor pursuant to this Lease
but excludes any such items title to which has, or should have,
passed to (i) Lessee pursuant to this Lease or (ii) any person
pursuant to any agreement relating to the financing of spare parts
for the Aircraft, including, but not limited to, FAUSA pursuant to
the Credit and Security Agreement and the Note.
"Participation Agreement" shall mean that Participation Agreement
(Trust No. 115-A) dated as of July 10, 1995, among Lessor, Owner
Participant, Owner Trustee, Indenture Trustee and Loan Participant, as it
may be amended, modified or supplemented from time to time in accordance
with the terms thereof.
"Permitted Lien" shall mean:
(a) liens of repairers, mechanics, material men, carriers,
hangarkeepers, employees or other similar liens arising in the
ordinary course of business by statute or by operation of law
in respect of obligations which are either not overdue or are
being contested in good faith by appropriate proceedings;
(b) any lien for Taxes of any kind either not assessed or, if
assessed, not yet due and payable or being contested in good
faith by appropriate proceedings; and
(c) any lien arising out of a judgment against Lessee with respect
to which at the time an appeal is being prosecuted in good
faith and with respect to which there shall have been secured
a stay of execution pending such appeal,
provided that in the case of these subclauses (a), (b) and (c):
(i) adequate reserves for the payment of such obligations
have been provided by Lessee;
(ii) such proceedings, or the continued existence of such
lien, do not give rise to any likelihood of the sale,
forfeiture or other
-9-
<PAGE>
loss of the Aircraft or any Engine or any Part or any
interest therein; and
(iii) any such lien does not arise as a result of any default
on the part of Lessee in respect of its obligations
under this Lease;
(d) any Lessor Lien and the lien of this Lease; and
(e) any lien for Lessor Taxes.
"Redelivery Location" shall mean Schiphol Airport, The Netherlands.
"Rent Date" shall mean the First Rent Date and the numerically
corresponding date of each and every subsequent month during the Term, or
(if there is no corresponding date in any month), the last day of such
month.
"Rental Period" shall mean the period from and including any Rent
Date to and including the day preceding the next Rent Date.
"Replacement Engine" shall have the meaning set forth in Article
5.1.2(a)(i)
"Security Assignment" shall mean the Assignment of Sublease (Trust
No. 115-A) dated as of July 10, 1995 between Lessor, as assignor, and Head
Lessor, as assignee.
"Security Interest" shall mean any mortgage, charge, pledge, lien,
assignment, hypothecation, right of set-off or any agreement or
arrangement having the effect of creating a security interest.
"State of Incorporation" shall mean the State of Delaware.
"State of Registration" shall mean United States of America.
"Supplemental Rent" shall mean Agreed Value and any other amount
which by the terms of this Lease is payable by Lessee to Lessor other than
Rent and the Reserve Rate.
"Support Services Agreement" shall mean the Aircraft Support
Services and Product Assurances Agreement No. ASSAF-110 dated October 1,
1993 between FAUSA and Lessee.
-10-
<PAGE>
"Taxes" shall mean any and all present and future sales, use,
property, customs, value-added, turnover, stamp, interest equalization,
income, gross or net receipts, franchise, excise, net worth, capital or
other taxes, fees, withholdings, imposts, duties, levies, or other charges
of any nature, together with any penalties, fines, or interest thereon,
imposed, levied, or assessed by, or otherwise payable to, any Governmental
Entity and "Tax" shall be construed accordingly.
"Tax Indemnitee" shall mean each of Lessor and each of its permitted
successors and assigns and each shareholder, subsidiary and affiliate of
each of the foregoing.
"Term" shall bear the meaning ascribed to it in Article 3.4.
"Termination Agreement" shall mean the Lease Termination Agreement
(AOLAF- ) dated as of July 10, 1995 between Fokker, Lessee and the Owner
Trustee named therein, as it may be amended, modified or supplemented from
time to time, in accordance with its terms.
1.2 The terms:
Agreed Value,
Deposit,
Rent,
Reserve Rate, and
Transaction Expenses
shall have the meanings and values set forth in Appendix B.
1.3 References in this Lease to:
(a) Articles or Appendices are, unless otherwise specified,
references to Articles of, and Appendices to, this Lease and
references to this Lease include its Appendices;
(b) any statute or other legislative provision shall be read to
include any statutory or legislative modification or
re-enactment thereof, or any substitution therefor;
(c) the Aircraft include any Part of the Aircraft, and, where the
context so admits, any of the Aircraft Documents and
references to any part of the Aircraft include any part of any
Engine;
-11- No. AOLAF-l15-A
<PAGE>
(d) the word "person" or "persons" or to words importing persons
include, without limitation, individuals, firms, partnerships,
joint ventures, trusts, Government Entities, organizations,
associations, corporations, government agencies, committees,
departments, authorities and other bodies, corporate or
incorporate, whether having distinct legal personality or not,
or any member of any of the same;
(e) words importing the plural include the singular and vice
versa;
(f) any agreement or instrument include such agreement or
instrument as it may from time to time be amended or
supplemented; and
(g) headings in this Lease are for ease of reference only.
2. AGREEMENT TO LEASE
2.1 Lessor will lease the Aircraft to Lessee and Lessee will take the
Aircraft on lease from Lessor in "As Is" condition in accordance
with the terms and conditions of this Lease.
2.2 Lessor's obligation to deliver the Aircraft on the Delivery Date to
Lessee shall be subject to:
(i) the receipt by Lessor from Lessee on or prior to the Delivery
Date of the following, all of which shall be in the English
language and be satisfactory in form and substance to Lessor:
(a) [intentionally omitted];
(b) copies of Lessee's certificate of incorporation and/or
memorandum and articles of association and/or by-laws
and/or other constitutional documents, certified to be
true and up to date copies by a duly authorized officer
of Lessee;
(c) copies of resolutions of Lessee's board of directors
authorizing Lessee to enter into and perform this Lease
and the transactions contemplated hereby, certified to
be true and
-12-
<PAGE>
in full force and effect by a duly authorized officer of
Lessee;
(d) evidence that each approval, license and consent which
may be required in relation to, or in connection with
the performance by Lessee of any of its obligations
hereunder has been granted by or obtained from the
applicable Government Entity in the State of
Registration;
(e) [intentionally omitted];
(f) evidence of appointment of Lessee's agent for service of
process in the State of New York;
(g) [intentionally omitted];
(h) [intentionally omitted];
(i) a power of attorney in the form of Appendix G
authorizing Lessor to take action at the Air Authority
and a certified resolution authorizing same;
(j) such other documents as Lessor may reasonably request;
(ii) the receipt by Lessor from Lessee on or before the Delivery
Date of:
(a) an opinion satisfactory in form and substance to Lessor
of counsel to Lessee, addressed to Lessor, Head Lessor,
Indenture Trustee, Owner Participant and Loan
Participant;
(b) [intentionally omitted];
(c) a certificate of insurance, a broker's letter of
undertaking and other evidence satisfactory to Lessor
that Lessee is taking the required steps to ensure due
compliance with the provisions of this Lease as to
Insurances with effect on and after the Delivery Date;
(d) evidence that the representations and warranties of
Lessee set forth in Article 13.4 are true and correct;
-13-
<PAGE>
(iii) receipt by Lessor of a certificate of an officer of Lessee
certifying that the Aircraft Maintenance Agreement is in full
force and effect with respect to the Aircraft;
(iv) receipt by Lessor of the executed Consent to the Security
Assignment (Trust No. 115-A) in the form attached to the
Security Assignment as Exhibit A thereto;
(v) evidence (including satisfactory opinions of Crowe & Dunlevy,
special Air Authority aviation counsel, as to Air Authority
registration and recordation matters) that on the Delivery
Date the Aircraft has been validly registered under the laws
of the State of Registration and that all filings,
registrations, recordings and other actions have been or will
be undertaken which are necessary or advisable to ensure the
validity, effectiveness and enforceability of this Lease and
the Head Lease and to protect the property rights of Lessor
and Head Lessor in the Aircraft or any Part and the Security
Interest of Indenture Trustee therein;
(vi) Lessor being satisfied that no default shall have occurred
under any Other Aircraft Agreement or any other agreement
between Fokker or FAUSA and Lessee;
(vii) this Lease and the Termination Agreement shall have been duly
executed and delivered by Lessee and shall be in full force
and effect, and an executed counterpart of each shall have
been delivered to Lessor; and
(viii) the Assignment of Support Services Agreement (Trust No. 115-A)
dated as of July 10, 1995 between Lessee and Head Lessor
shall have been duly executed and delivered by Lessee and
shall be in full force and effect, and an executed counterpart
of each shall have been delivered to Lessor.
2.3 The conditions specified in Article 2.2 are inserted for the sole
benefit of Lessor and may be waived or deferred in whole or in part
and with or without conditions by Lessor. If any of the said
conditions are outstanding on the Delivery Date and Lessor (in its
absolute discretion) nonetheless agrees to deliver the
-14-
<PAGE>
Aircraft to Lessee, Lessee shall ensure that such outstanding
conditions are fulfilled within fifteen (15) days after the Delivery
Date and Lessor shall be entitled to treat the failure of Lessee to
perform such outstanding conditions as an Event of Default.
2.4 The obligation of Lessee to accept delivery of the Aircraft from
Lessor is subject to the satisfaction of the following conditions
precedent on or before the Delivery Date:
(i) this Lease and the Termination Agreement shall have been
duly authorized, executed and delivered by Lessor and shall be in
full force and effect, and an executed counterpart shall have been
delivered to Lessee;
(ii) Lessee shall have received the following:
a. an incumbency certificate of Lessor as to the
persons authorized to execute and deliver this
Lease, including the signatures of such persons;
and
b. such other documents and evidence with respect to
Lessor as Lessee may reasonably request in order
to establish the taking of all corporate
proceedings in connection with such transactions
and compliance with the conditions set forth
herein;
(iii) on the Delivery Date, the representations and warranties
of Lessor contained in Article 13.6 shall be true and accurate as
though made on and as of such date;
(iv) Lessee shall have received the favorable opinion,
addressed to it and reasonably satisfactory in form and substance to
it, from Crowe & Dunlevy, special Air Authority aviation counsel;
(v) the Aircraft shall meet the delivery conditions specified
in Article 3.6;
(vi) Lessee shall have received the favorable opinion,
addressed to it and reasonably satisfactory in form and substance to
it, from Haight, Gardner, Poor & Havens, special counsel to Lessor
and Fokker;
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<PAGE>
(vii) Lessee shall have received certified execution copies of
a. the Tax Indemnity Agreement (Trust No. 115-A)
dated as of July 10, 1995 between Lessor and Owner
Participant;
b. Sections 7(b) and 7A and the definition of
"Lessor's Lien" in the Participation Agreement
(Trust No. 115-A) among Lessor, Head Lessor, Owner
Participant and the other parties thereto; and
c. Section 7(c)(x) and the provisions relating
thereto in the Lease Agreement dated as of July
10, 1995 (Trust No. 115-A) between Lessor and Head
Lessor; and
d. Lessee shall have received letters of quiet
enjoyment from Head Lessor and Indenture Trustee
in form and substance satisfactory to it.
3. TERM; DELIVERY; ACCEPTANCE
3.1.1 Lessor shall deliver and Lessee shall accept the Aircraft and the
delivery thereof on the Delivery Date.
3.1.2 [Intentionally omitted].
3.2 [Intentionally omitted].
3.3.1 [Intentionally omitted].
3.3.2 [Intentionally omitted].
3.4 The term of the lease shall commence on the Delivery Date and shall
continue until the Expiry Date unless earlier terminated or extended
as herein provided (such period being herein referred to as the
"Term").
3.5 The Aircraft shall be delivered to and accepted by Lessee at the
Delivery Location or such other location as is mutually acceptable
to the parties.
Acceptance by Lessee of the Aircraft by execution and delivery of
the Certificate of Acceptance shall be
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<PAGE>
deemed to be evidence that Lessor has performed all its obligations
under this Article 3.5.
3.6 [Intentionally omitted].
3.7 Lessee shall indemnify and hold harmless the Indemnitees from and
against any and all liabilities, damages, losses (including costs
and expenses incident thereto) arising by reason of death of or
injury to any such observer or any employee of Lessee, arising out
of, or in any way connected with the inspection of the Aircraft upon
redelivery of the Aircraft.
3.8 Lessee shall indicate and confirm its acceptance of the Aircraft
by the execution and delivery to Lessor of the Certificate of
Acceptance.
4. REGISTRATION AND TITLE
4.1 It shall be the responsibility of Lessee, at its expense, to
cooperate with Lessor and Head Lessor to effect and maintain
registration of the Aircraft in the name of Head Lessor under the
Laws of the State of Registration during the Term, such registration
to reflect the interests of Lessor, Head Lessor and Indenture
Trustee, and to obtain and maintain all licenses, permits and
approvals, including, without limitation, a certificate of
airworthiness from the Air Authority, as may be requisite in
connection with operation of the Aircraft under this Lease.
4.2 Lessee shall at its own expense and responsibility cause this Lease
to be kept, filed and recorded at all times during the Term, in such
office or offices for the registration of the Aircraft in the State
of Registration and in such other offices (in the United States but
not in any jurisdiction outside of the United States unless directly
required due to Lessee's operation) as may be necessary, to protect
Lessor's, Head Lessor's and Indenture Trustee's rights hereunder and
under the Head Lease and the Indenture in any state in which the
Aircraft may operate including the State of Registration of the
Aircraft and the State of Incorporation or as Lessor may reasonably
request to protect and preserve Lessor's, Head Lessor's and
Indenture Trustee's rights hereunder and under the Head Lease and
the Indenture and shall on request furnish to Lessor an opinion of
counsel or other evidence satisfactory to Lessor of such filing and
recording.
-17-
<PAGE>
4.3 Title to and ownership of the Aircraft shall at all times remain in
Head Lessor, and Lessee shall have no right, title or interest in or
to the Aircraft or any part thereof except as expressly provided by
this Lease. Lessee shall identify and specify the interest of Head
Lessor and Indenture Trustee and shall affix or keep affixed (i) in
a reasonably prominent position on the flight-deck of the Aircraft
and on each Engine a metal name plate (having dimensions of not less
than 10 cm x 7 cm) bearing the inscription (in fireproof and legible
characters) stating:
"NOTICE OF OWNERSHIP
THIS AIRCRAFT/ENGINE IS OWNED BY FIRST SECURITY BANK OF UTAH, NATIONAL
ASSOCIATION, NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS OWNER TRUSTEE
AND HEAD LESSOR AND IS SUBJECT TO A FIRST PRIORITY MORTGAGE IN FAVOR OF
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION"
The proper completion of the metal name plate shall be advised by
Lessor at its earliest convenience. Lessee shall not remove or
deface evidence of ownership of the Aircraft and shall not do or
permit to be done or omitted any act or thing which would jeopardize
the rights of Lessor, Head Lessor or Indenture Trustee in the
Aircraft. Lessee will on all occasions when the ownership of the
Aircraft or any Part is relevant make clear to third parties that
title to the same is held by Head Lessor.
4.4 Lessee acknowledges that the Aircraft is owned by Head Lessor and is
subject to the Indenture, which is a first priority Security
Interest, and that Lessor's interest in this Lease is subject to the
Security Assignment in favor of Head Lessor. Lessee undertakes to
Lessor (both for itself and as agent for each of Head Lessor and
Indenture Trustee) at Lessee's expense (except for the expense of
assignments pursuant to Article 12) to, from time to time, cooperate
with Lessor or Head Lessor to, cause this Lease, the Indenture, the
Security Assignment and such other documents as may be necessary or
advisable to give effect to the transactions contemplated hereby or
thereby, to be kept, recorded or filed in such office or offices in
the State of Incorporation and in the State of Registration as may
be necessary or advisable to protect and perfect the interests of
Lessor, Head Lessor and Indenture Trustee in the Aircraft, this
Lease, the Head Lease, the Indenture and the Security
-18- No. AOLAF-11S-A
<PAGE>
Assignment, and to do, from time to time, all other things which
Indenture Trustee, Head Lessor and/or Lessor may reasonably require
in order to protect and perfect their rights.
4.5 Lessor agrees that during the Term it shall not permit the
registration of the Aircraft to be changed to any registration other
than under the Laws of the State of Registration except as may be
required in connection with the sublease of the Aircraft by Lessee
pursuant to Article 12.1.
5. POSSESSION AND USE
5.1 Lessee shall not transfer possession of the Aircraft, the Engines or
any Part to any person or any legal entity or remove any Engine or
Part from the Airframe other than in accordance with the provisions
of this Article 5 or of Article 12.1; provided, however, that so
long as no Default shall have occurred and be continuing, Lessee
may, without the prior written consent of Lessor deliver possession
of the Aircraft, the Engines or Parts to the manufacturer thereof
for testing or other similar purposes, or to an Authorized
Maintenance Performer for service, repair, maintenance or overhaul
work on the Aircraft, the Engines or Parts, or for alterations,
modifications, or additions thereto, to the extent required or
permitted by the terms of Article 7.3.
5.1.1 Lessee will ensure that no Engine or Part installed on the Aircraft
is at any time removed from the Aircraft other than:
(a) if replaced as expressly permitted by this Lease; or
(b) if the removal is of an Obsolete Part (as defined in Article
7.3(b)) and is in accordance with the Approved Maintenance
Program; or
(c) (i) during the course of maintaining, servicing, repairing,
overhauling or testing that Engine or Part or the
Aircraft, as the case may be; or
(ii) as part of a normal engine or part rotation program; or
-19- No. AOLAF-l15-A
<PAGE>
(iii) for the purpose of making such modification to the
Engine or Part, or the Aircraft, as the case may be, as
are permitted under this Lease,
and then in each case only if it is reinstalled or replaced by an
engine or part complying with Article 5.1.2(a) as soon as
practicable (or in the case of Article 5.1.1(c)(ii) in the ordinary
course of such program) and in any event no later than the Expiry
Date except, in the case of Obsolete Parts, as provided in Article
7.3(b).
5.1.2 (a) Lessee will ensure that, except as permitted by this Lease, no
engine or part is installed on the Aircraft unless:
(i) in the case of an engine, it is an engine of the same
make and model as, or an improved or advanced version of
the Engine it replaces, which is in similar or better
operating condition, and in the case only of a Casualty
Occurrence, has substantially similar hours available
until the next scheduled checks, inspections, overhauls
and shop visits and has the same or greater value and
utility as the replaced Engine (assuming the Engine
being replaced was of a value and utility and in at
least the condition and repair required by the terms of
this Lease) and shall be suitable for use on the
Airframe and compatible with each other Engine or engine
then on the Aircraft (a "Replacement Engine"). At
Lessee's election, Lessee may cause an Engine to be
replaced under this Lease with a Replacement Engine by
compliance with the provisions of Article 17.3 with
regard thereto;
(ii) in the case of a part, it is in as good operating
condition, is of similar or a more advanced make and
model and is of the same interchangeable modification
status as the replaced Part;
(iii) in the case of any part, it has become and remains the
property of Head Lessor free from Security Interests and
on installation on the Aircraft will, without further
act, be
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<PAGE>
subject to this Lease, the Head Lease and the Indenture;
and
(iv) in each case, Lessee has full details as to its source
and maintenance records.
(b) Provided no Default has occurred and is continuing, Lessee
shall be entitled to install any engine or part on the
Aircraft by way of replacement notwithstanding Article
5.1.2(a) if:
(i) there is not available to Lessee at the time and in the
place that 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 Article
5.1.2(a); and
(ii) it would result in an unreasonable disruption of the
operation of the Aircraft and/or the business of Lessee
to ground the Aircraft until an engine or part, as the
case may be, complying with Article 5.1.2(a) becomes
available for installation on the Aircraft; and
(iii) as soon as reasonably practicable after installation of
the same on the Aircraft, Lessee removes any such engine
or part and replaces it with the Engine or Part replaced
by it or by an engine or part, as the case may be,
complying with Article 5.1.2(a).
5.1.3 Lessee will:
(a) ensure that any Engine or Part which is not installed on the
Aircraft (or any other aircraft as permitted by this Lease)
is, except as expressly permitted by this Lease, properly and
safely stored, and kept free from Security Interests;
(b) from time to time on request, notify Lessor in writing as to
the location of any Engine and on request shall use its
reasonable efforts to procure that any person to whom
possession of an Engine is given acknowledges in writing to
Lessor, in terms satisfactory to Lessor, that it will respect
the interests of Head Lessor as owner, Indenture Trustee as
mortgagee and Lessor as
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lessor of the Engine and will not seek to exercise any rights
whatsoever in relation to it;
(c) (notwithstanding the foregoing provisions of this Article
5.1.3), be permitted, if no Default has occurred and is
continuing, to install any Engine or Part on an aircraft, or
in the case of a Part, on an engine:
(i) owned and operated by Lessee free from Security
Interests; or
(ii) leased or hired to Lessee pursuant to a lease or
conditional sale agreement on a long-term basis and on
terms whereby Lessee has full operational control of
that aircraft or engine; or
(iii) acquired by Lessee and/or financed or refinanced, and
operated by Lessee, on terms that ownership of that
aircraft or engine, as the case may be, pursuant to a
lease or conditional sale agreement, or a Security
Interest therein, is vested in or held by any other
person;
provided that in the case of (ii) and (iii):
(1) the terms of any such lease, conditional sale agreement or
Security Interest will not have the effect of prejudicing the
interests of Indenture Trustee as mortgagee or Head Lessor as
owner or Lessor as lessor of that Engine or Part; and
(2) the lessor under such lease, the seller under such conditional
sale agreement or the holder of such Security Interest, as the
case may be, has confirmed and acknowledged in writing to
Lessor, in form and substance satisfactory to Lessor, or has
otherwise agreed in writing, that it will respect the
interests of Head Lessor as owner, Indenture Trustee as
mortgagee and Lessor as lessor (without regard to whether such
writing identifies Head Lessor, Indenture Trustee and Lessor
by name) of that Engine or Part and that it will not seek to
exercise any rights whatsoever in relation thereto; and, to
the extent such an acknowledgment has been given, Lessor
hereby agrees, for the benefit of the lessor, the seller, or
secured party, as the case may be, of any engine or part
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(other than an Engine or a Part) leased to Lessee or owned by
Lessee subject to a conditional sale or other security
agreement, that Lessor will not acquire or claim, as against
such lessor, seller or secured party, any right, title or
interest in any engine or engines owned by the lessor under
such lease or subject to a security interest in favor of the
seller or secured party under such conditional sale or other
security agreement as the result of such engine or engines
being installed on the Airframe at any time while such engine
or engines are subject to such lease or conditional sale or
other security agreement.
5.1.4 Lessee will not enter into nor permit any pooling agreement or
arrangement in respect of an Engine or Part without the prior
written consent of Lessor, which shall not be unreasonably withheld.
5.2 Lessee shall use the Aircraft solely in commercial or other
operations for which Lessee is duly authorized by the Laws of the
State of Registration and/or any jurisdiction to whose Laws Lessee's
operation of the Aircraft is subject and shall not use or permit the
Aircraft to be used for any purpose for which the Aircraft is not
designed or reasonably suitable.
Lessee shall not use the Aircraft for the carriage of (i) whole
animals living or dead except in the cargo compartments according to
the United States Department of Transportation ("DOT") (or for
international flights, International Civil Aviation Organization
("ICAO")) regulations, and except domestic pet animals carried in a
suitable container to prevent the escape of any liquid and to ensure
the welfare of the animal; (ii) acids, toxic chemicals, other
corrosive materials, explosives, nuclear fuels, wastes, or any
nuclear assemblies or components, except as permitted for passenger
aircraft under the "Restriction of Goods" schedule issued by the DOT
(or for international flights, ICAO) from time to time and provided
that all the requirements for packaging or otherwise contained
therein are fulfilled; or (iii) any other goods, materials or items
of cargo which could reasonably be expected to cause damage to the
Aircraft and which would not be adequately covered by the insurance
required by or obtained pursuant to Article 11.
5.3 Lessee shall not permit the Aircraft to be maintained, used, or
operated in violation of any Law of any
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Government Entity having jurisdiction, or contrary to any
manufacturer's operating manuals and instructions, or in violation
of any airworthiness certificate, license or registration relating
to the Aircraft issued by any such Government Entity, unless the
validity thereof is being contested by Lessee in good faith and by
appropriate proceedings (but only so long as such proceedings do not
(i) involve any risk of the sale, forfeiture or loss of any interest
therein, (ii) otherwise adversely affect Lessor, Head Lessor,
Indenture Trustee, Owner Participant or Loan Participant or (iii)
involve any risk of criminal liability or any unindemnified material
risk of civil liability to Lessor, the Indenture Trustee, Owner
Participant or Loan Participant) provided, that Lessee shall give
prior written notice to Lessor of any such contest and provide
Lessor with any information Lessor may reasonably request with
respect to such contest. In the event that such Laws require
alteration of the Aircraft during the Term of this Lease, Lessee
shall conform therewith at its own expense and shall maintain the
same in proper condition for operation under such Laws. Lessee
agrees not to operate the Aircraft or to permit or suffer the
Aircraft to be operated (i) contrary to applicable Law, and/or (ii)
within or into any geographic area unless the Aircraft is covered by
insurance as required by the provisions of Article 11 or insurance
or an indemnity in lieu of such insurance from the United States
government against the risks and in the amounts required by Article
11 covering such area, and/or (iii) contrary to the terms of such
insurance as required by the provisions of Article 11.
5.4 Throughout the Term and until re-delivery of the Aircraft to Lessor
in accordance with the provisions of this Lease, the Aircraft and
every part thereof shall be in every respect at the sole risk of
Lessee, who shall bear all risks of loss, theft, damage or
destruction to the Aircraft from any cause whatsoever. Lessor shall
not be liable for any liability, claim, loss, damage or expense of
any kind or nature caused directly or indirectly by the Aircraft or
any part thereof by any inadequacy thereof for any purpose or any
deficiency or defect therein, by the use or performance thereof, by
any repairs or servicing thereto or any delay in providing or
failure to provide any thereof, by any interruption or loss of
service or use thereof, or by any loss of business or other
consequential damage or any damage whatsoever and
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howsoever caused prior to re-delivery of the Aircraft to Lessor.
5.5 Lessee shall ensure that such crew and engineers as are employed by
it in connection with the operation and maintenance of the Aircraft
shall have such qualifications and hold such licenses as are
required by the Air Authority and by all applicable Laws and
regulations.
5.6 Lessee shall use, operate and maintain the Aircraft in at least as
good a manner and with at least as much care as used by Lessee with
respect to aircraft of the same type owned, leased or operated by
Lessee, and Lessee shall not discriminate against the Aircraft (as
compared to other aircraft of the same type owned, leased or
operated by Lessee) in the use, operation or maintenance of the
Aircraft, other than withdrawal of the Aircraft from use and
operation for return in accordance with this Lease.
6. CHARGES, METHOD OF PAYMENT AND FINANCIAL INFORMATION
6.1 Lessee shall punctually pay to Lessor, when due, the Rent and
Supplemental Rent expressed to be payable by Lessee to Lessor
hereunder including the monies specified and calculated in
accordance with the provisions of Appendix D at the time and in the
manner therein specified, and shall punctually and duly observe and
perform Lessee's obligations under the said Appendix D which forms
an integral part of this Lease. The time stipulated in this Lease
for all payments payable by Lessee to Lessor and for the performance
of Lessee's other obligations under this Lease shall be of the
essence of this Lease.
6.2 Lessee shall not be entitled to any abatement, compensation,
reduction or set-off against any installment of Rent or Supplemental
Rent, including but not limited to, abatements, compensations,
reductions or set offs, by reason of any past, present or future
claims of Lessee against Lessor or any other person under this Lease
or otherwise.
6.3 Lessee's obligation to pay Rent and make other payments in
accordance with this Lease, until Lessee shall have redelivered the
Aircraft to Lessor in accordance with Article 16 and shall have
complied with its other obligations hereunder, shall be absolute and
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unconditional irrespective of any contingency whatsoever including
(but not limited to) (i) any right of set-off, counterclaim,
recoupment, defence or other right which either party may have
against the other, (ii) any unavailability of the Aircraft for any
reason, including, but not limited to, any defect in the
airworthiness, merchantability, fitness for any purpose, condition,
design, or operation of any kind or nature of the Aircraft, or the
ineligibility of the Aircraft for any particular use or trade, or
for registration or documentation under the laws of any relevant
jurisdiction, or (save as herein provided) any Casualty Occurrence
in respect of or any damage to the Aircraft, (iii) any insolvency,
bankruptcy, reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceedings by or against Lessor
or Lessee, (iv) any invalidity or unenforceability or lack of due
authorization of, or other defect in this Lease, (v) any failure of
Lessee to obtain any required license, certificate, authorization or
other approval of any Government Entity having jurisdiction over the
operation by Lessee of the Aircraft or the operation by Lessee in
any airport and (vi) any other cause which, but for this provision,
would or might have the effect of terminating, frustrating or in any
way affecting any obligation of Lessee hereunder, it being the
declared intention of the parties that the provisions of this
Article and the obligations of Lessee to pay the Rent and
Supplemental Rent provided for by this Lease shall survive any
frustration and that, save as expressly provided in this Lease, no
monies payable hereunder by Lessee to Lessor shall in any event or
circumstance be repayable to Lessee. Nothing in this Article 6.3
shall preclude Lessee from exercising its right to pursue a claim
for damages or specific performance or other judicial remedy against
Lessor and/or any Indemnitees.
6.4 Lessee agrees to furnish Lessor during the Term:
(i) [intentionally omitted);
(ii) upon Lessor requesting the same a quarterly unaudited balance
sheet of Lessee prepared by it as of the close of the most
recent previous financial quarter, together with the related
profit and loss statement for such period;
(iii) within ninety (90) days after the close of each financial year
of Lessee, an audited balance sheet
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and profit and loss statement as of the close of such
financial year;
(iv) from time to time such other non-confidential information as
Lessor may reasonably request; and
(v) copies of all notices sent by Lessee (A) to its shareholders
or creditors as a group in their respective capacities as such
relating to major business or financial developments of
Lessee, or (B) to the Securities Exchange Commission in
connection with or following a public offering of the equity
shares of Lessee.
7. MAINTENANCE
7.1 Lessee, during the Term, at its own cost and expense shall:
(a) service, repair, maintain, overhaul, test, or cause the same
to be done to the Aircraft in accordance with the Approved
Maintenance Program so as to keep the Aircraft in as good
operating condition as when delivered to Lessee on the
Original Delivery Date, ordinary wear and tear excepted, and
such operating condition as may be necessary to enable the
airworthiness certificate of the Aircraft to be maintained in
good standing at all times under applicable Law; and Lessee
shall at all times maintain current certificates of
airworthiness and Air Authority required records of
maintenance in respect of the Aircraft and produce copies
thereof to Lessor upon request, except in each case if Fokker
100 aircraft with similar engines are grounded by the Air
Authority;
(b) maintain in the English language all Aircraft Documents,
records, logs, and other materials required by applicable Laws
and best airline practice to be maintained in respect of the
Aircraft including engine trend monitoring data;
(c) perform, or cause to be performed, all airworthiness
directives and mandatory notes and mandatory bulletins
affecting the Aircraft having a compliance date during the
Term and issued by (a) the Air Authority and/or (b) Fokker or
any other manufacturer of any part of the Aircraft
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(except that, in the event of a conflict, those required by
the Air Authority shall prevail);
(d) maintain the Aircraft in conformity with Air Authority
Regulations and such other rules and regulations of the Air
Authority as may from time to time be applicable to passenger
category airline aircraft;
(e) provide Lessor by telex or fax message or by personal delivery
to a technical representative of Manufacturer, if any, with a
monthly summation (which may utilize Air Authority forms) of
Flight Hours and Cycles accumulated on the Airframe and
Engines, and, commencing upon the month following the date
(and so long as) Lessee is required to pay the Reserve Rate
hereunder, Auxiliary Power Unit ("A.P.U.") and Landing Gear
and details of all modifications and material component
changes within ten (10) days after the end of each month.
Such maintenance shall be performed by Lessee or by the Authorized
Maintenance Performer pursuant to the Aircraft Maintenance
Agreement or by any other Authorized Maintenance Performer, for the
purposes of this Lease.
7.2 Except as otherwise provided herein, Lessee, at its own cost and
expense, shall promptly replace all Engines or Parts which may from
time to time become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair, or unserviceable with an engine
or part meeting the requirements of Article 5.1.2(a).
7.3 (a) Save as expressly herein provided the Aircraft shall not be
modified, altered, converted or added to (each such action in
relation to the Aircraft being herein referred to as an
"Equipment Change"), provided that Lessee may, at its own
expense, make such Equipment Changes to the Aircraft as Lessee
may deem desirable in the proper conduct of its business,
provided that no such Equipment Change diminishes the value,
utility, condition or airworthiness of the Aircraft below the
value, utility, condition and airworthiness thereof
immediately prior to such Equipment Change, assuming the
Aircraft was then in the condition required to be maintained
by the provisions of this Lease.
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(b) Title to all Parts incorporated or installed in or attached or
added to the Aircraft as the result of such Equipment Change
shall, without further act, vest in Head Lessor free and clear
of all liens, charges and encumbrances. Lessee shall at its
own expense take all such steps and execute, and procure the
execution of, all such instruments as Lessor may require and
which are necessary to ensure that title to any such
replacement Part as aforesaid passes to Head Lessor according
to the Governing Law and the lex situs, provided, however,
that so long as a Default shall not have occurred and be
continuing, at any time during the Term, Lessee may remove any
such Part if (A)(i) such Part is in addition to, and not in
replacement of or in substitution for, any Part originally
incorporated or installed in or attached to the Aircraft at
the time of the Original Delivery Date, (ii) such Part is not
required to be incorporated or installed in or attached or
added to the Aircraft pursuant to the provisions of Article
7.1 and (iii) such Part can be removed from the Aircraft
without diminishing or impairing the value, utility,
airworthiness, condition or remaining useful life which the
Aircraft would have had at such time, had such Equipment
Change not occurred; or (B) such Part is deemed by Lessee to
be obsolete or no longer suitable or appropriate for use in
the Airframe or Engines (an "Obsolete Part") and its removal
shall not materially decrease the value or adversely affect
the utility or remaining useful life of the Airframe or
Engine, or impair the condition or airworthiness thereof below
the value, utility or remaining useful life, condition or
airworthiness thereof immediately prior to such removal
(assuming the Aircraft was then in the condition required to
be maintained by the terms of the Lease), except that the
value (but not the utility, remaining useful life, condition
or airworthiness) of the Airframe or the Engines may be
reduced, to the extent resulting from the removal of Obsolete
Parts, if the aggregate original cost of all Obsolete Parts
removed from such Aircraft and not replaced shall not exceed
$350,000.
(c) Upon the removal by Lessee of any such Part as above provided,
title thereto shall, without further act, vest in Lessee and
such Part shall no
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longer be deemed a part of the Aircraft. Any Part not removed
by Lessee as above provided prior to the return of the
Aircraft to Lessor hereunder shall remain the property of Head
Lessor (save as the parties may otherwise agree in writing)
provided that Lessor may require Lessee, prior to the end of
the Term, to remove any Parts incorporated or installed in the
Aircraft as a result of an Equipment Change and to restore the
Aircraft to its condition prior to an Equipment Change.
7.4.1 Upon submission by Lessee to Lessor of invoices or receipts
reasonably satisfactory to Lessor evidencing the performance in
accordance with the provisions of this Agreement by or at the
direction of Lessee of:
(a) with respect to the Airframe, the accomplishment of those
items of maintenance characterized as scheduled airframe heavy
maintenance as defined in the Approved Maintenance Program for
12,000 hours and 24,000 hours inspections or any equivalent
thereof with more or less hours ("Airframe Maintenance"), or
(b) with respect to any Engine or the replacement thereof, the
performance of all scheduled shop visit engine maintenance and
repair, other than (i) repairs arising as a result of foreign
object damage or operational mishandling and/or (ii)
maintenance and repair of QEC (Quick Engine Change) kits
("Engine Maintenance"), or
(c) with respect to any nose or main landing gear ("Landing
Gear"), the performance of all scheduled shop visit nose and
main landing gear maintenance and repair, other than repairs
arising as a result of foreign object damage or operational
mishandling ("Landing Gear Maintenance"), or
(d) with respect to the A.P.U., the performance of all off
Aircraft shop A.P.U. maintenance and repair, other than
repairs arising as a result of foreign object damage or
operational mishandling ("A.P.U. Maintenance"),
Lessor shall, subject to Article 3.5 of Appendix D and provided that
a Default shall not have occurred and be continuing, release to
Lessee, from the relevant Maintenance Fund as defined in paragraph
3.2 of
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<PAGE>
Appendix D, a sum equal to the aggregate amount evidenced by such
invoices or receipts for such relevant maintenance, to the extent
there are sufficient sums in the relevant Maintenance Fund at the
date of the start of the relevant maintenance. Lessee agrees to use
its reasonable efforts to ensure that the relevant invoices or
receipts are received by Lessor as promptly as possible after
completion of the relevant maintenance. All sums remaining in any
Maintenance Fund at the expiration or other termination of this
Agreement shall be retained by Lessor, except (i) upon payment in
full of Agreed Value and any other amounts due to Lessor or
otherwise hereunder after a Casualty Occurrence pursuant to Article
17.2(b), in which case all sums remaining in any Maintenance Fund
shall be paid to Lessee and (ii) under the circumstances and to the
extent described in Paragraphs 3.6 and 9 of Appendix D. For the
avoidance of doubt, Lessor shall not refuse to release monies from
the Maintenance Fund on the ground that maintenance was required due
to operational mishandling, provided that Lessee can demonstrate
that Lessee complied with the original equipment manufacturer's
written instructions.
7.4.2 Lessor shall be entitled to delay the release or payment of funds
from any Maintenance Fund (to the extent related to any disputed
amounts) to Lessee provided for by this Article 7 until such time as
it shall in its opinion be in a position to determine (which Lessor
agrees to use reasonable efforts to do as promptly as possible) the
amount to be released or paid, but in any event release all
undisputed amounts from the relevant Maintenance Fund (but where
insufficient funds are in such maintenance Fund the lesser pro rata
portion of such funds which corresponds to the undisputed amount)
upon request unless a Default shall have occurred and be continuing.
7.5.1 During the Term, Lessee shall furnish to Lessor such information
concerning the location, condition, use and operation of the
Aircraft as Lessor may reasonably request. The right of Lessor, or
its designated representatives, to inspect the Aircraft during any
Major Checks performed by or on behalf of Lessee during the Term,
shall be absolute and Lessee shall inform Lessor by providing thirty
(30) days' written notice as to time and location of all Major
Checks. During such Major Checks, Lessee agrees to provide
sufficient manpower to allow Lessor, or its authorized
representatives (at Lessor's cost and expense), to
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inspect any area of the Aircraft which Lessor requests to inspect
and which would normally be required during such a Major Check,
provided that such inspection is to be made only at the time that
Lessee opens up such area in accordance with the Approved
Maintenance Program.
Lessee also shall permit any persons designated by Lessor to visit
and inspect the Aircraft, its condition, use and operation, and the
records maintained in connection therewith.
7.5.2 Lessor shall have the right at any time on reasonable notice to
inspect or survey the Aircraft or any part thereof, or instruct a
duly authorized surveyor to carry out a survey on its behalf, to
ascertain the condition of the Aircraft or any part thereof and
satisfy itself that the Aircraft is being properly repaired and
maintained in accordance with the terms of this Lease. The cost of
any such inspection or survey shall be borne by Lessor unless an
Event of Default has occurred and is continuing.
7.5.3 Lessor shall have no duty to make any such inspection as is referred
to in Article 7.5.1 and 7.5.2 and shall not incur any liability or
obligation by reason of not making any such inspection. Except in
connection with any Event of Default hereunder no exercise of any
inspection right under Articles 7.5.1, 7.5.2 or any other provision
of this Lease shall interfere with the normal operation or
maintenance of the Aircraft or the business of Lessee and shall be
conducted during normal maintenance business hours. In connection
with any such inspection, Lessee shall allow Lessor or any persons
designated by Lessor to copy, at Lessor's cost and expense, any
Aircraft Documents or other records relating to maintenance and
operation of the Aircraft. Lessee shall not be liable for the use of
any such Aircraft Documents or other records by Lessor or any other
person or entity which use is unrelated to Lessee's compliance with
the terms of this lease.
8. TAXES, DUTIES AND EXPENSES
8.1 Lessee agrees promptly to pay and indemnify and hold Lessor harmless
against all Taxes (other than Lessor Taxes) levied or imposed
against or upon or otherwise payable by any Tax Indemnitee or Lessee
and relating to or attributable to Lessee, this Lease, the Aircraft
and/or the importation, exportation, registration,
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ownership, leasing, sub-leasing, delivery, possession, use,
operation, reregistration, repair, maintenance, overhaul,
replacement, improvement, modification, alteration, transportation,
landing, storage, presence or re-delivery of or addition to, the
Aircraft or any Engine or any Part thereof or any rent, receipts,
insurance proceeds or income arising therefrom, or any sum payable
by Lessee to a Tax Indemnitee under this Lease or any other
transactions or activities contemplated by this Lease, provided,
however, that Lessee shall have no indemnity liability under this
Article 8.1 or under Article 8A.1(c) to Lessor for any of the
following Taxes:
(a) any Tax imposed on or payable by Lessor with respect to any
sale, assignment, transfer or other disposition by Lessor of
any interest in the Aircraft or any part thereof or this
Lease, other than any such sale, assignment, transfer or other
disposition (i) that is pursuant to an exercise of remedies
after the occurrence and during the continuance of an Event of
Default or (ii) that is a result of a Casualty Occurrence or
(iii) that is a result of the exercise by Lessee of any of its
options to purchase the Aircraft or (iv) that occurs as a
result of any substitution, replacement or pooling of the
Aircraft, any Engine or any Part by a Lessee Related Person;
(b) any Tax to the extent imposed on Lessor as a result of a
failure of Lessor to comply with any certification,
information, documentation, reporting or other similar
procedure that is required by law (including any applicable
statute, income tax convention, regulation or ruling) as a
condition precedent to the allowance of any reduction in the
rate of such Tax or any exemption or other relief from such
Tax; provided that (i) Lessor is otherwise eligible for such
relief or exemption from such Tax, (ii) Lessor's compliance
with such requirement would not create a material risk of
adverse tax consequences to Lessor for which it is not
indemnified to its reasonable satisfaction and (iii) in the
case of a Tax other than United States Federal income tax or
income tax withholding Lessee shall have notified such Lessor
of such requirement by timely written notice;
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(c) any Tax to the extent resulting from one or more transactions
or activities of Lessor in the jurisdiction imposing the Tax
if those transactions or activities are unrelated to the
transactions described in this Lease or the Other Aircraft
Agreements;
(d) any Tax imposed on or payable by or required to be withheld
from any payment to any assignee or other transferee of any
interest of Lessor in the Aircraft or this Lease (or imposed
on or payable by or required to be withheld from any payment
to any subsequent assignee or other transferee) to the extent
that the amount of such Tax exceeds the amount of such Tax
that would have been imposed on or payable by or required to
be withheld from any payment to Lessor (determined at the time
of transfer) and would have been indemnified by Lessee
pursuant to this Article 8 or Article 8A.1(c) (determined at
the time of transfer); provided that the exclusion described
in this clause (d) shall not apply to any assignee or other
transferee that is a corporation incorporated under the law of
a state of the United States or a partnership each partner of
which is such a corporation, or (provided that Lessor gives
Lessee prior written notice of such transfer) to any assignee
or other transferee that acquires its interest as a result of
the exercise of remedies after the occurrence and during the
continuance of an Event of Default;
(e) any Tax to the extent arising out of or caused by, or to the
extent such Tax would not have been incurred but for, (i) any
act or omission of Lessor if such act or omission is not
permitted by this Lease or the Other Aircraft Agreements or
(ii) the willful misconduct or gross negligence of Lessor or
(iii) the inaccuracy or breach of any representation,
warranty, covenant or agreement by Lessor in this Lease except
to the extent that such act, omission, inaccurate
representation or breach is attributable to an act, omission,
inaccurate representation or breach by Lessee;
(f) any Tax to the extent resulting from any amendment to any Head
Lease Operative Document to which Lessee is not a party unless
(i) Lessee shall have given its prior written consent to such
amendment or (ii) such amendment consists of a change in the
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"Basic Rent" schedule of the Head Lease resulting from a
suspension or reduction of Lessee's payments of Rent under
this Lease that continues for a period of more than 60 days,
or (iii) such amendment is required by applicable Law relating
to the Aircraft or any part thereof or relating to Lessee;
(g) any Tax imposed on or payable by Lessor to the extent
indemnified pursuant to Article 8A hereof;
(h) any Tax imposed on or payable by Lessor to the extent arising
out of or caused by, or to the extent such Tax would not have
been incurred but for, the existence of any Lessor's Lien;
(i) half of any sales tax payable in connection with the purchase
of the Aircraft by Lessee pursuant to Lessee's exercise of a
purchase option described in Paragraph 9 of Appendix D of this
Lease (it being understood and agreed that each of Lessee and
Lessor shall pay half of any sales tax payable with respect to
Lessee's purchase of the Aircraft pursuant to Lessee's
exercise of such a purchase option); or
(j) half of any sales or use tax payable in connection with the
transfers of the Aircraft and the lease and sublease of the
Aircraft on the Delivery Date (it being understood and agreed
that each of Lessee and Lessor shall pay half of any sales or
use tax payable with respect to such sales, lease and sublease
of the Aircraft on the Delivery Date).
If Lessee is required by any applicable Law or regulation to deliver
or furnish any report or return in connection with any such Taxes
(other than Lessor Taxes), Lessee shall complete the same in a
manner reasonably satisfactory to the relevant Tax Indemnitee and in
particular no such report or return shall contain any statement that
is inconsistent with Head Lessor's being the owner of the Aircraft,
and Lessee shall supply a copy of such report or return to the
relevant Tax Indemnitee promptly upon receipt of a request therefor
from such Tax Indemnitee.
All payments by Lessee hereunder to Lessor shall be free of
withholdings of any nature whatsoever (and at the time Lessee is
required to make any payment upon
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which any withholding is required, Lessee shall pay an additional
amount such that the net amount actually received by Lessor will,
after such withholding, equal the full amount of the payment then
due) and shall be free of expense for collection or other charges.
If Lessee shall have paid any additional amount pursuant to the
first sentence of this paragraph with respect to Taxes not subject
to indemnification pursuant to the provisions of this Section 8.1,
Lessor shall reimburse Lessee within 10 Business Days of written
demand therefor for the amount of such Taxes so paid by Lessee. For
the purpose of this Article 8 and Article 8A, the term "Lessor"
shall include each group of corporations (and each member thereof
that is a corporation organized under the laws of the United States
or any state thereof) that includes Lessor and for which
consolidated, combined, unitary or other group tax returns are
filed.
8.2 Except as otherwise specifically provided herein, Lessee shall pay
to Lessor on or after Delivery Date (unless otherwise agreed to be
financed by Lessor) upon demand:
(a) all reasonable expenses paid to third parties (including
reasonable legal, printing and out-of-pocket expenses)
incurred or payable by Lessor, FAUSA and Fokker related to any
amendment to or extension of, or the granting of any waiver or
consent under, this Lease in each case requested or caused by
Lessee;
(b) the Transaction Expenses;
(c) all reasonable expenses paid to third parties (including
reasonable legal fees and disbursements but excluding
surveyor costs) payable or incurred by Lessor in connection
with the enforcement of or preservation of any rights of
Lessor under this Lease or otherwise in respect of moneys
owing under this Lease by Lessee or in respect of any
breach by Lessee of any representation, warranty, covenant
or undertaking herein contained; and
(d) the ongoing annual fees and reasonable out-of-pocket expenses
(other than those incurred in connection with any of the
events described in Articles 12.3(c) or 12.3(d) and those
incurred pursuant to a change in such trustees which was
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not requested by Lessee) related to the Head Lease of Owner
Trustee and Indenture Trustee.
8.3 Lessee shall pay all stamp, documentary, registration or other like
duties or taxes (including any such duties or taxes payable by a Tax
Indemnitee but excluding all Lessor Taxes) imposed on or in
connection with this Lease and shall indemnify each Tax Indemnitee
against any liability arising by reason of any delay or omission by
Lessee to pay such duties or taxes.
8.4 If and to the extent that any sum (the "indemnity sum") constituting
(directly or indirectly) an indemnity to one or more Tax Indemnitees
paid by Lessee to any person other than that Tax Indemnitee shall be
treated as taxable in the hands of the relevant Tax Indemnitee,
Lessee shall pay to the relevant Tax Indemnitee such sum as (after
taking into account any taxation suffered by the relevant Tax
Indemnitee on the indemnity sum) shall reimburse the relevant Tax
Indemnitee for the net amount of any Taxes suffered by them in
respect of the indemnity sum (after taking into account any current
tax savings or other benefits to the relevant Tax Indemnitee
resulting from the payment or accrual of the indemnified expense).
8.5 If and to the extent that any sums payable to a Tax Indemnitee by
Lessee under this Lease by way of indemnity are insufficient, by
reason of any Taxes payable in respect of those sums, for that Tax
Indemnitee to discharge the corresponding liability to the relevant
third party (including any taxation authority), or to reimburse that
Tax Indemnitee for the cost incurred by it to a third party
(including any taxation authority), Lessee will pay to that Tax
Indemnitee such sum as will after the tax liability has been fully
satisfied leave that Tax Indemnitee with the same net amount (after
taking into account any current tax savings or other benefits to the
that Tax Indemnitee resulting from the payment or accrual of the
indemnified expense) as it would have been entitled to receive in
the absence of that liability. For the purpose of computing the
amount of an indemnity payment pursuant to this Article 8.5 and the
amount of any payment to Lessee under Article 8, it shall be assumed
that the relevant Tax Indemnitee is subject to tax on the amount of
each indemnity it receives or accrues under this Lease and can use
any tax savings to offset Taxes at the highest marginal statutory
rates of tax applicable to that Tax Indemnitee (as certified to
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Lessee by an officer of that Tax Indemnitee) at the time such
indemnity or tax savings is received or accrued.
8.6 If, as a result of any indemnity paid by Lessee or any event giving
rise to an indemnity obligation of Lessee, a Tax Indemnitee at any
time realizes any tax savings, refunds or other reductions in taxes
not previously taken into account in computing the amount of an
indemnity, that Tax Indemnitee shall promptly pay to Lessee the
amount of such Tax savings, refunds or other reductions in Taxes;
provided, however, that no Tax Indemnitee will be required to make
any payment to Lessee pursuant to this Article 8.6 so long as a
Default shall be continuing or if Lessee shall not have theretofore
made all payments due to all Tax Indemnitees under this Lease, or to
the extent that the amount of such payment would exceed the amount
of all prior payments by Lessee to the relevant Tax Indemnitee
pursuant to this Article 8 less the amount of all prior payments by
the relevant Tax Indemnitee to Lessee pursuant to this Article 8.6.
The relevant Tax Indemnitee shall estimate the amount of such Tax
savings, refunds and other reductions in Taxes and shall use
reasonable efforts to take such actions in filing its tax returns
and in dealing with taxing authorities to seek and claim each such
Tax savings, refund and other reduction in Taxes, but shall not be
obligated to take any such action that it determines in its sole
discretion to involve the imposition or risk of any material
unindemnified cost or expense, and in no event will any person have
any right to inspect the books, records, tax returns or other
documents of any Tax Indemnitee, and the positions to be taken by
any Tax Indemnitee on or with respect to its tax returns and in any
tax proceedings shall be within its sole control.
8.7 Lessee's, and each Tax Indemnitee's obligations under this Article 8
shall continue in full force and effect, notwithstanding the
expiration or earlier termination of the Term hereunder.
8.8 If Lessee disputes the payment or imposition of any Taxes payable by
a Tax Indemnitee for which Lessee is responsible under this Lease,
that Tax Indemnitee will take such action as Lessee may reasonably
request at Lessee's expense to contest that payment or imposition
but that Tax Indemnitee will not be obliged to take any such action:
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(a) which that Tax Indemnitee considers in good faith may result
in the imposition of any material liability, cost, or expense
for which that Tax Indemnitee is not indemnified to its
reasonable satisfaction; or
(b) which that Tax Indemnitee considers not to have a reasonable
prospect of success, unless Lessee delivers to that Tax
Indemnitee a written opinion of independent tax counsel
selected by Lessee and reasonably acceptable to Lessor to the
effect that there is a Reasonable Basis for taking such
action; or
(c) for which Lessee has not made adequate provision to the
reasonable satisfaction of that Tax Indemnitee in respect of
the liability, cost or expense concerned.
8.9 If Lessor determines that any Indemnified Tax is required to be
withheld from any amount payable or creditable to or for the account
of any holder of a Loan Certificate, Lessor shall give prompt
written notice thereof to Lessee and if requested by Lessee by
written notice given within 10 Business Days after Lessee's receipt
of Lessor's written notice, Lessor shall exercise its rights under
Section 7A(b)(xi) of the Participation Agreement in the manner
requested by Lessee, provided that Lessor shall not be required to
take any action pursuant to this Article 8.9 that might reasonably
be expected to involve Lessor in any unlawful activity or might
reasonably be expected to subject Lessor or any Affiliate of Lessor
to any expense deemed material by Lessor unless Lessor is
indemnified therefor to its reasonable satisfaction.
8A. SPECIAL INDEMNITY
8A.1 Indemnity.
(a) Inclusions. Except to the extent provided in Article 8A.2(a),
if Lessor is required by any tax authority to include in its
income for income tax purposes, or Lessor receives an opinion
of Lessor's tax counsel that Lessor does not have a Reasonable
Basis to exclude from its income for income tax purposes, any
amount relating to the Aircraft or any part thereof or the
Lease or any of the transactions, activities or payments
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described in or contemplated by the Lease, other than (i)
Rent, (ii) Reserve Rate, (iii) Supplemental Rent, (iv) any
proceeds derived from a sale of the Aircraft resulting from
the exercise by Lessee of a purchase option pursuant to
Paragraph 9 of Appendix D of this Lease, (v) any payment
calculated by reference to Agreed Value, (vi) any amount
specifically identified in the Lease as interest, (vii) any
payment calculated on an After-Tax Basis, (viii) any payment
pursuant to the terms of the Operating Lease Operative
Documents, (ix) any other amount to the extent offset by
deductions that would not have been currently available but
for the event which gave rise to the amount included in
Lessor's income and that are of the same character as such
income inclusion and are allowed in the same taxable year of
Lessor in which such amounts are included in Lessor's income,
or the Deposit described in Appendix D of this Lease or any
interest thereon (herein called an "Inclusion"), Lessee shall
pay to Lessor an amount which, on an After-Tax Basis, shall be
equal to the amount of additional taxes on or measured by
gross or net income (plus any and all fines, penalties,
additions to tax and interest calculated by reference thereto)
payable by Lessor as a result of such Inclusion.
(b) Pass-through of Tax Indemnity Agreement indemnities. Except to
the extent provided in Article 8A.2(b), if Lessor is required
to pay to Owner Participant any amount (herein called a "TIA
Liability") pursuant to the Tax Indemnity Agreement (Trust No.
115-A) dated as of July 10, 1995 between Lessor and Owner
Participant, Lessee shall pay to Lessor an amount which, on an
After-Tax Basis, shall be equal to that TIA Liability.
(c) Pass-through of Participation Agreement general tax indemnity
liability. Except to the extent provided in Article 8A.2(c),
if Lessor is required to pay any amount pursuant to Section 7A
of the Participation Agreement (herein called a "Head Lease
General Tax Indemnity Liability") and if the Tax that is the
subject of such Head Lease General Tax Indemnity Liability is
a Specified Tax, Lessee shall pay to Lessor an amount which,
on an After-Tax Basis, shall be equal to that Head Lease
General Tax Indemnity.
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(d) Minimum indemnity. The amount of any indemnity payable by
Lessee to Lessor pursuant to this Article 8A shall in all
events be an amount sufficient to restore Lessor to the
position Lessor would be in if the Inclusion or TIA Liability
or Head Lease General Tax Indemnity Liability that gave rise
to Lessee's liability under this Article 8A had not occurred.
8A.2 Exceptions.
(a) Exceptions to indemnity for Inclusions. Lessee shall not be
required to indemnify Lessor pursuant to Article 8A.1(a) for
Taxes to the extent arising from any of the following
Inclusions:
(i) any Inclusion caused by an event that occurs after the
expiration or earlier termination of this Lease, the
payment by Lessee of all Rent and other amounts due
pursuant to the Operating Lease Operative Documents, and
(if required by the terms of this Lease) the return of
the Aircraft to Lessor in accordance with the terms of
this Lease, provided that the exclusion set forth in
this Article 8A.2(a)(i) shall not apply to any
Inclusion to the extent such Inclusion is a result of
one or more events occurring or circumstances existing
prior to or concurrently with the expiration or earlier
termination of this Lease or to any payment or amount
payable by Lessee pursuant to this Lease or any other
Operating Lease Operative Document, or
(ii) any Inclusion that would not have occurred but for a
sale, assignment, transfer or other disposition by
Lessor of any interest in the Aircraft or this Lease,
either voluntarily or by reason of bankruptcy or similar
proceedings for the relief of debtors in which Lessor is
the debtor, unless in either case such disposition
occurs in connection with or as a result of (A) an Event
of Default, (B) a Casualty Occurrence, (C) any
substitution, replacement or pooling of the Aircraft or
any part thereof, (D) any maintenance, repair,
improvement, modification or alteration of, or addition
to, the Aircraft or any part thereof, or
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unless in either case such disposition is required by
applicable Law, or
(iii) any Inclusion that would not have occurred but for (A)
the refinancing of the Loan Certificates or (B) the
gross negligence or willful misconduct of Lessor, or
(iv) any Inclusion that would not have occurred but for the
timing of the recognition of income under Section 467 of
the Code unless such Inclusion would not have occurred
but for (A) any payment of Rent on a date prior to the
date on which such payment is scheduled to be due, (B)
any payment by Lessee of any expenses of any Tax
Indemnitee, or (C) the acquisition by Lessee or another
Lessee Related Person of any interest in the Loan
Certificates or any other evidence of indebtedness
issued by the Head Lessor to refund or refinance the
Loan Certificates in accordance with the Head Lease
Operative Documents, or
(v) any Inclusion that would not have occurred but for any
change in or addition to the Internal Revenue Code of
1986, any other statute relating to Federal income
taxes, any treaty, any regulation, revenue ruling,
revenue procedure or other administrative
interpretation, or any executive order that is enacted,
promulgated or issued after the Delivery Date, provided
that the exclusion in this clause (v) shall not apply to
any Inclusion resulting from (A) any alteration,
improvement, modification, pooling, repair, addition,
replacement or substitution of or to the Aircraft or any
part thereof, (B) any payment by Lessee of any expenses
of any Tax Indemnitee, or (C) the acquisition by Lessee
or another Lessee Related Person of any interest in the
Loan Certificates or any other evidence of indebtedness
issued by the Head Lessor to refund or refinance the
Loan Certificates in accordance with the Head Lease
Operative Documents, or
(vi) any Inclusion that would not have occurred but for an
event or occurrence as a result of which Lessee is
required to pay and shall
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have paid in full an amount calculated by reference to
Agreed Value.
(b) Exceptions to indemnity for TIA Liability. Lessee shall not be
required to indemnify Lessor pursuant to Article 8A.1(b) for
any TIA Liability that is not a result of an Operating Lease
Indemnification Event or that would not have been incurred but
for any of the following:
(i) the gross negligence or willful misconduct of Lessor, or
(ii) Lessor claiming deductions for depreciation of the
Aircraft for Federal, state or local income tax
purposes, or
(iii) Lessor (or any Affiliate of Lessor) claiming to be the
owner of the Aircraft for U.S. tax purposes, or
(iv) Lessor (or any Affiliate of Lessor) claiming deductions
for interest on the Loan Certificates for Federal, state
or local income tax purposes, or
(v) Lessor acquiring any interest in the Loan Certificates,
or
(vi) Lessor supplying to the Appraiser inaccurate information
unless such information was obtained from Lessee, or
(vii) the timing of the recognition of income under Section
467 of the Code unless such Inclusion would not have
occurred but for (A) any payment of Rent on a date prior
to the date on which such payment is scheduled to be
due, (B) any payment by Lessee of any expenses of any
Tax Indemnitee; or (C) the acquisition by Lessee or
another Lessee Related Person of any interest in the
Loan Certificates or any other evidence of indebtedness
issued by the Head Lessor to refund or refinance the
Loan Certificates in accordance with the Head Lease
Operative Documents, or
(viii) the failure of the Head Lease to be a "true lease" for
Federal income tax purposes or the failure of Owner
Participant to be the owner
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of the Aircraft (including any such failure resulting
from the existence of any of Lessee's rights under the
Operating Lease Operative Documents), unless such
failure is caused by an Operating Lease Indemnification
Event, or
(ix) any change in or addition to the Code, any other statute
relating to Federal income taxes, any treaty, any
regulation, revenue ruling, revenue procedure or other
administrative interpretation, or any executive order
that is enacted, promulgated or issued after the
Delivery Date, provided, however, that the exclusion in
this clause (ix) shall not apply to any Inclusion
resulting from (A) any alteration, modification,
pooling, repair, addition, replacement or substitution
of or to the Aircraft or any Engine, (B) any payment by
Lessee of any expenses of any Tax Indemnitee, or (C) the
acquisition by Lessee or another Lessee Related Person
of any interest in the Loan Certificates or any other
evidence of indebtedness issued by the Head Lessor to
refund or refinance the Loan Certificates in accordance
with the Head Lease Operative Documents, or
(x) Owner Participant's having an adjusted basis with
respect to the Aircraft that is less than Lessor's Cost
except to the extent resulting from an Operating Lease
Indemnification Event, or
(xi) any event or occurrence as a result of which Lessee is
required to pay and shall have paid in full an amount
calculated by reference to Agreed Value;
(xii) any inaccuracy in the Appraisal unless caused by the
inaccuracy of Lessee's representation in Article 8A.10,
or
(xiii) any disposition of Lessor's interest in the Aircraft or
the Operating Lease Operative Documents either
voluntarily or by reason of Lessor's bankruptcy or
similar proceedings for the protection of debtors in
which Lessor is a debtor, provided that the exclusion in
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this clause (xiii) shall not apply to (A) a disposition
pursuant to the exercise of remedies after the
occurrence and during the continuance of an Event of
Default, (B) a disposition resulting from a Casualty
Occurrence or (C) a disposition resulting from a
substitution, replacement or pooling of the Aircraft,
any Engine or any part of either thereof by Lessee or
any other Lessee Related Person.
(xiv) any amendment or modification of any of the Head Lease
Operative Documents approved by Lessor and to which
Lessee has not consented in writing unless (A) Lessee
shall have given its prior written consent to such
amendment or (B) such amendment consists of a change in
the "Basic Rent" schedule of the Head Lease resulting
from a suspension or reduction of Lessee's payments of
Rent under this Lease that continues for a period of
more than 60 days, or (C) such amendment is required by
applicable Law relating to the Aircraft or any part
thereof or relating to Lessee;
(xv) the treatment of the Aircraft as "tax-exempt use
property" by reason of Lessor's status as a "tax-exempt
entity" within the meaning of Section 168(h) of the
Code;
(xvi) any failure of the Aircraft to be registered with the
United States Federal Aviation Administration or any
successor thereto by reason of the status or citizenship
of Lessor;
(xvii) any breach of Lessor's obligations relating to the
Lessee's contest rights pursuant to Article 8A.6 hereof
to the extent such failure legally precludes Lessee from
contesting, or causing a contest of, an indemnified
claim;
(xviii) the reporting by the Owner Participant of an Inclusion
on any of its Federal income tax returns, unless Lessee
has received a copy of the opinion of independent tax
counsel described in Section 3.1 of the Tax Indemnity
Agreement with respect to such Inclusion;
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(xix) the inaccuracy of the representation in Section 2(f) of
the Tax Indemnity Agreement;
(xx) the refinancing of the Loan Certificates other than a
refinancing requested by Lessee; or
(xxi) the existence of the Assignment of Termination Agreement
dated as of July 10, 1995 from Fokker Aircraft B.V. to
Kreditanstalt fur Wiederaufbau.
(c) Exceptions to indemnity for Head Lease general tax indemnity
liability. Lessee shall not be required to indemnify Lessor pursuant
to Article 8A.1(c) for any Head Lease General Tax Indemnity
Liability that would not have been incurred but for any of the
following:
(i) an event that occurs after the expiration or earlier
termination of this Lease, the payment by Lessee of all Rent
and other amounts due pursuant to this Lease and the other
Operating Lease Operative Documents and (if required by the
terms of this Lease) the return of the Aircraft to Lessor in
accordance with the terms of this Lease, provided that the
exclusion set forth in this Article 8A.2(c)(i) shall not
apply to any Head Lease General Tax Indemnity Liability to the
extent such Head Lease General Tax Indemnity Liability is a
result of one or more events occurring or circumstances
existing prior to or concurrently with the expiration or
earlier termination of this Lease or to any payment or amount
payable by Lessee pursuant to this Lease or any other
Operating Lease Operative Document, or
(ii) a sale, assignment, transfer or other disposition by Lessor of
any interest in this Lease either voluntarily or by reason of
bankruptcy or similar proceedings for the relief of debtors in
which Lessor is the debtor, unless in either case such
disposition occurs in connection with or as a result of an
Event of Default, a Casualty Occurrence, a substitution,
replacement or pooling of the Aircraft or any part thereof,
the exercise by Lessee of any option to
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terminate the Lease or to purchase the Aircraft or any act or
omission of Lessee, or unless in either case such disposition
is required by Applicable Law, or
(iii) the gross negligence or willful misconduct of Lessor, or
8A.3 Time of Payment by Lessee.
Any payment due under this Article 8A to Lessor shall be paid by
Lessee within 15 Business Days after receipt of a written demand
therefor from Lessor, provided that Lessee shall not be required to
make any such payment before the date that is two Business Days
prior to the date on which Lessor's related income tax payment, TIA
Liability or Head Lease General Tax Indemnity payment is due. If
Lessor is required to pay an indemnity pursuant to the Tax Indemnity
Agreement, Lessor agrees to elect, pursuant to Section 3.3 of the
Tax Indemnity Agreement, the form of indemnity payment requested by
Lessee in writing provided that Lessor receives Lessee's written
request at least two Business Days before the last day for making
such election.
8A.4 Tax Savings; Contest.
The provisions of Articles 8.6 (relating to tax savings) and 8.8
(relating to contesting Taxes) of this Lease shall apply, mutatis
mutandis, to the indemnity for Inclusions described in Article
8A.1(a) hereof.
8A.5 Payments From Head Lease Tax Indemnitees.
If any Head Lease Tax Indemnitee shall pay any amount to Lessor
pursuant to Section 7A(b), 7A(e), 7A(g) or 7A(h) of the
Participation Agreement or pursuant to Section 3.2 or 4 of the Tax
Indemnity Agreement, for which Lessee has previously paid an
indemnity to Lessor pursuant to Article 8A.1 hereof, Lessor shall
pay such amount to Lessee within 15 Business Days after Lessor
receives such amount.
8A.6 Contest.
If Lessor receives a written claim for an indemnity pursuant to
Section 7A of the Participation Agreement or pursuant to the Tax
Indemnity Agreement for which Lessee would be required to pay Lessor
an indemnity
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pursuant to this Article 8A, Lessor shall promptly notify Lessee
thereof in writing. If requested by Lessee by written notice
received by Lessor at least four Business Days before the latest
date on which Lessor may request or initiate a contest pursuant to
Section 7A(g) of the Participation Agreement or Section 4 of the Tax
Indemnity Agreement, Lessor shall exercise its rights under Section
7A(g) of the Participation Agreement or under Section 4 of the Tax
Indemnity Agreement, as the case may be, in the manner requested by
Lessee, provided that in no event shall Lessor be required to
initiate or continue (or required to request any other Person to
initiate or continue) a contest of any such claim unless:
(a) no Major Default or Event of Default shall have occurred and
be continuing unless Lessee shall have provided security
reasonably satisfactory to Lessor securing Lessee's
performance of its obligations under this Article 8A;
(b) Lessee shall have agreed to pay on an After-Tax Basis all
reasonable costs and expenses that Lessor incurs in connection
with contesting such claim and all amounts that Lessor is
required to pay from time to time pursuant to Section
7A(g)(iv)(B) of the Participation Agreement or Section 4(d) of
the Tax Indemnity Agreement, as the case may be;
(c) the action to be taken will not result in a material danger of
sale, forfeiture or loss of the Aircraft or any part thereof
or any interest therein or the creation of a Lien (other than
a Permitted Lien) on the Aircraft, the Trust Estate or the
Trust Indenture Estate unless Lessee shall have adequately
bonded or otherwise made provision to protect the interests of
Lessor and the Owner Participant in a manner reasonably
satisfactory to Lessor and the Owner Participant;
(d) if such contest shall require payment of the Tax claimed,
Lessee shall have advanced on an interest-free basis the
amount thereof (including any interest, penalties and
additions to tax with respect thereto) for the period during
which such contest is continuing and shall have agreed to
indemnify such Lessor and (in the case of a contest pursuant
to Section 4 of the Tax Indemnity Agreement) the Owner
Participant or (in the case
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of a contest pursuant to Section 7A of the Participation
Agreement) each Head Lease Tax Indemnitee for any adverse tax
consequences of such interest-free loan;
(e) Lessee shall have acknowledged its obligation to indemnify
Lessor should the contested claim prove to be correct except
to the extent that the Final Determination demonstrates that
Lessee would not be so obligated absent such acknowledgment;
(f) in the case of a Tax Indemnitee Controlled Contest pursuant to
Section 7A(g) of the Participation Agreement or any contest
pursuant to Section 4 of the Tax Indemnity Agreement, Lessor
and the relevant Head Lease Tax Indemnitee shall have
received, at Lessee's expense, a written opinion of
independent tax counsel selected by Lessee and reasonably
acceptable to Lessor and such Head Lease Tax Indemnitee to the
effect that there is a Reasonable Basis for such contest;
(g) in the case of a Tax Indemnitee Controlled Contest pursuant to
Section 7A of the Participation Agreement, the amount of the
indemnity that would be payable by Lessor pursuant to Section
7A if such claim is not contested or if a contest of such
claim is unsuccessful (plus the aggregate amount of the
indemnities that would be payable by Lessor pursuant to
Section 7A if all related claims that have been or could be
raised with respect to any other period are not contested)
would exceed $ 10,000; and
(h) in the case of a contest pursuant to Section 4 of the Tax
Indemnity Agreement, the amount of the indemnity that would be
payable by Lessor pursuant to the Tax Indemnity Agreement if
such claim is not contested or if a contest of such claim is
unsuccessful (plus the aggregate amount of the indemnities
that would be payable by Lessor pursuant to the Tax Indemnity
Agreement if all related claims that have been or could be
raised with respect to any other period are not contested)
would exceed $ 50,000.
8A.7 Verification
If requested by Lessee in writing within ten Business Days after
receipt of a Lessor demand for an indemnity,
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Lessor shall exercise its rights under Section 7A(j) of the
Participation Agreement or under Section 3.8 of the Tax Indemnity
Agreement, as the case may be, provided that Lessee shall have
agreed to pay, and shall be paying currently, on an After-Tax Basis
any and all amounts payable by Lessor under Section 7A(j) of the
Participation Agreement or under Section 3.8 of the Tax Indemnity
Agreement, as the case may be.
8A.8 Documents and Other Information
(a) Lessee shall provide or cause to be provided to Lessor, upon
request, all documents and other information that Lessor is
required to provide to any Head Lease Tax Indemnitee pursuant
to the Head Lease Operative Documents and that is within the
control of any Lessee Related Person.
(b) Lessee shall prepare or cause to be prepared, and shall timely
file or cause to be timely filed, all returns, reports,
statements and other documents that Lessor is required to
prepare and/or file pursuant to Section 7A(i) of the
Participation Agreement; provided that Lessor shall have
furnished or caused to be furnished to Lessee any information
that is reasonably requested by Lessee, that is not within the
control of a Lessee Related Person, that is within the control
of Lessor or of a Head Lease Tax Indemnitee and that is
reasonably necessary to enable Lessee to prepare and file such
report, return or statement.
(c) Lessee shall timely pay or cause to be timely paid directly to
the appropriate taxing authority all amounts that Lessor is
required to pay directly to such taxing authority pursuant to
Section 7A(f) of the Participation Agreement to the extent
that Lessee is liable for such amount pursuant to this Article
8.
8A.9 Certain Definitions
As used in this Lease:
(a) "Affiliate" means, with respect to any Person, any other
Person (other than an individual) directly or indirectly
controlling, controlled by, or under direct or indirect common
control with such Person; or if such Person is a partnership,
any general partner of such Person or Person
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controlling such general partner. A Person shall be deemed to
control another Person if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the
management and policies of such other Person, whether through
the ownership of voting securities, by contract or otherwise.
(b) "After-Tax Basis" has the meaning explained as follows: If
Lessee is required to pay a specified amount on an After-Tax
Basis to or for the benefit of any Person, the Lessee must pay
the sum of (i) the specified amount plus (ii) the net amount
of all Taxes (taking into account any current deduction or
other income tax benefit actually realized by such Person
resulting from the payment or accrual of the cost, expense or
tax for which the specified amount is payable) required to be
paid by such Person with respect to the receipt or accrual of
the specified amount and the additional amounts described in
this clause (ii) (calculated by assuming, in the case of any
payment to or for the benefit of the Owner Participant or any
related tax indemnitee, that such Person is subject to United
States Federal income tax at the highest marginal statutory
rate imposed on corporations for the relevant period, and is
subject to United States state and local income taxes and
foreign income taxes at the actual rates applicable to such
Person for the relevant period, with respect to the receipt or
accrual of such amount by such Person. If Lessee shall have
paid or reimbursed any Person pursuant to the Operating Lease
Operative Documents for any expense on an After-Tax Basis (an
"After-Tax Basis Payment") and such Person (or a member of a
group of corporations that includes such Person and for which
consolidated, combined or unitary tax returns are filed) shall
actually realize any tax savings attributable to such expense,
such Person shall pay to Lessee an amount equal to the sum of
(x) the amount of such tax savings plus (y) the amount of any
further tax savings realized by such Person (or by a member of
such group of corporations) as a result of such payment,
provided that the amount paid to Lessee pursuant to this
sentence shall not exceed the amount of Lessee's underlying
After-Tax Basis Payment, and provided further that if any such
tax savings are subsequently disallowed or reduced, such lost
tax
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savings shall be deemed to be a Tax for which Lessee is
required to indemnify Lessor pursuant to Article 8, without
regard to any exclusion of Lessor Taxes.
(c) "Appraisal" means the opinion provided by BK Associates
concerning the Aircraft pursuant to the Participation
Agreement.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Final Determination" means (A) a decision, judgment, decree
or other order by any court of competent jurisdiction, which
decision, judgment, decree or other order has become final and
unappealable (or, if appealable to the U.S. Supreme Court, the
relevant Tax Indemnitee has not consented to such appeal), (B)
a closing agreement or any other binding settlement agreement
entered into with the consent of Lessee in connection with an
administrative or judicial proceeding which is not subject to
further appeal, or (C) the expiration of the time for
instituting a claim for refund, or if such claim for refund is
filed, the expiration of the time for instituting suit with
respect thereto.
(f) "Head Lease Operative Documents" means each of the
Participation Agreement, the Lease, each Lease Supplement, the
Tax Indemnity Agreement, the Support Services Agreement, the
Support Services Agreement Assignment, the Indenture, each
Indenture Supplement, the Trust Agreement, the Initial
Sublease, each other Qualified Sublease, the Sublease
Certificate of Acceptance, the Sublease Assignment, the
Consent to Assignment, the Consent and Agreement, the Loan
Certificates outstanding at the time of reference, the
Guaranties, the FAA Bill of Sale, the Warranty Bill of Sale,
the DASA Confirmation, the Fokker Confirmation and the
Assumption Agreement (as each of the foregoing is defined in
Schedule Z to the Participation Agreement), each as amended,
modified or supplemented from time to time in accordance with
its terms.
(g) "Head Lease Tax Indemnitee" means any of the following: (i)
the Owner Participant, the Head Lessor (in its individual
capacity and as Owner
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Trustee), the Trust Estate, the Indenture Trustee (in its
individual capacity and as the Indenture Trustee), the Loan
Participant, the Trust Indenture Estate (as each of the
foregoing is defined in Schedule Z to the Participation
Agreement), (ii) each successor or permitted assignee of each
entity described in subdivision (i) above, (iii) each
Affiliate of each entity described in subdivisions (i) and
(ii) above, and (iv) each director, officer, employee and
agent (in their respective representative capacities) of each
entity described in subdivisions (i), (ii) and (iii) above;
(h) "Lessee Related Person" means any of the following: Lessee,
any sublessee or sub-sublessee of Lessee, any other Person
(other than a Lessor Related Person) in possession or use of
the Aircraft or any part thereof through Lessee, and any
Affiliate, successor or assign of any of the foregoing.
(i) "Lessor Related Person" means any of the following: Lessor,
each successor or permitted assignee of Lessor and each
Affiliate of each of the foregoing.
(j) "Loan Certificates" means the loan certificates issued
pursuant to the Indenture.
(k) "Major Default" means a Default described in Article 15.1(a),
15.1(f) or 15.1(h) of this Lease.
(l) "Operating Lease Indemnification Event" means any of the
following:
(i) any act or omission of Lessee or any other Lessee
Related Person other than a Required Act or Omission or
a Permitted Act,
(ii) any breach or inaccuracy of any representation, warranty
or covenant of Lessee in this Lease or in the Lease
Termination Agreement dated as of July 10, 1995 among
Fokker Aircraft B.V., Lessee and First Security Bank of
Utah, National Association, as owner trustee,
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(iii) any destruction, theft, confiscation or requisition of
title, to the Aircraft or any part thereof,
(iv) any warranty or similar payment received or receivable
by Lessee or another Lessee Related Person with respect
to the Aircraft, any Engine or any part thereof and not
paid or payable to, and retained by Owner Participant,
Owner Trustee or Lessor,
(v) any alteration, modification, improvement, addition,
repair, maintenance, replacement, substitution or
pooling of or to the Aircraft, any Engine or any part of
any thereof by Lessee or any other Lessee Related
Person.
(m) "Operating Lease Operative Documents" means this Lease and (to
the extent relating to the Aircraft) the Credit and Security
Agreement, the Note, the Support Services Agreement, the
Termination Agreement and each other agreement between Lessee
and Lessor (or any affiliate of Lessor) relating to the lease
of the Aircraft by Lessor (or any affiliate of Lessor) to
Lessee, each as amended, modified or supplemented from time to
time in accordance with its terms.
(n) "Permitted Act" means the execution and delivery of the
Operating Lease Operative Documents and any act that is
expressly permitted by Paragraph 9 of Appendix D of this
Lease.
(o) "Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust,
unincorporated organization or Government Entity.
(p) "Reasonable Basis" for a position exists if tax counsel may
properly advise reporting such a position on a tax return in
accordance with Formal Opinion 85-352 issued by the Standing
Committee on Ethics and Professional Responsibility of the
American Bar Association.
(q) "Required Act or Omission" means any act or omission that is
expressly required by any of the Operating Lease Operative
Documents.
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(r) "Specified Tax" means any Tax imposed on, payable by or
asserted against any Head Lease Tax Indemnitee arising from,
as a result of, with respect to or in connection with any of
the following or any combination of the following:
(i) any act or omission of Lessee or any other Lessee
Related Person or any failure of Lessee or any other
Lessee Person to act when required to act,
(ii) any breach or inaccuracy of any representation, warranty
or covenant of Lessee in the Lease or the Lease
Termination Agreement,
(iii) any loss, damage, destruction, casualty, forfeiture,
theft, governmental taking, confiscation, requisition,
seizure or condemnation of the Aircraft or any part
thereof,
(iv) any alteration, modification, improvement, addition,
repair, maintenance, testing, servicing, replacement,
substitution or pooling of or to the Aircraft, any
Engine or any part of any thereof by Lessee or any other
Lessee Related Person,
(v) the location, use, insuring, possession, leasing,
subleasing, sub-subleasing, storage, operation, basing
or presence of the Aircraft or any part thereof by
Lessor under this Lease or by Lessee or any other Lessee
Related Person,
(vi) the situs of organization, any place of business or any
activity or transaction of Lessee or any other Lessee
Related Person in the jurisdiction imposing the tax,
(vii) any amount paid or payable pursuant to the Loan
Certificates or the Indenture to the extent such Tax
would not have been imposed but for a change after the
Delivery Date in the income tax convention between the
United States and Germany as in effect on the Delivery
Date,
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(viii) any amount paid or payable pursuant to the Head Lease
(to the extent resulting from the location or use of the
Aircraft or any part thereof) or this Lease,
(ix) the return, redelivery, importation or exportation
resulting from the use of the Aircraft by Lessee or any
other Lessee Related Person, abandonment or other
disposition of the Aircraft or any part thereof by
Lessee or any other Lessee Related Person,
(x) the enforcement of rights under the Head Lease Operative
Documents or the Operating Lease Operative Documents, in
each case after the occurrence and during the
continuance of an Event of Default under this Lease,
(xi) the occurrence of an Event of Default or a Casualty
Occurrence,
(xii) the imposition of any Lien (other than a Lessor Lien) on
the Aircraft or any part thereof,
(xiii) the existence, presence, execution, delivery, filing,
recording, amendment or enforcement of the Operating
Lease Operative Documents,
(xiv) any other transaction by, activity of, or event or
occurrence with respect to Lessee or any other Lessee
Related Person pursuant to this Lease.
8A.10. Representation and Warranty of Lessee
Lessee hereby represents and warrants that (a) all airworthiness
directives affecting the Aircraft have been complied with; (b) no
accident involving the Aircraft, or other damage to the Aircraft,
has occurred that would affect the market value of the Aircraft; and
(c) the Aircraft has been maintained in accordance with a
maintenance program approved by the U.S. Federal Aviation
Administration and in accordance with accepted industry standards.
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9. LIENS
9.1 Lessee, during the Term, shall not create or suffer to exist any
lien, attachment, mortgage or other encumbrance upon or against the
Aircraft, or any of its rights under this Lease, other than
Permitted Liens. If at any time a lien, attachment, mortgage, or
other encumbrance except as permitted above shall be created or
suffered to exist by Lessee, or be levied upon the Aircraft or any
of its rights under this Lease, Lessee shall forthwith notify Lessor
and cause the same forthwith to be discharged by bond or otherwise.
In the event Lessee shall fail to discharge any such lien,
attachment, mortgage or other encumbrance, Lessor, Head Lessor or
Indenture Trustee shall be entitled (but not bound) to discharge the
same, in which event Lessee shall pay to Lessor, on demand, the
amount paid by Lessor and/or Head Lessor and/or Indenture Trustee,
together with Lessor's and/or Head Lessor's and/or Indenture
Trustee's losses, costs and expenses, including reasonable legal
fees and expenses.
10. INDEMNIFICATION
10.1 LESSEE SHALL RELEASE AND DEFEND, HOLD HARMLESS AND INDEMNIFY ANY
AND/OR ALL OF THE INDEMNITEES, FROM AND AGAINST ANY AND ALL CLAIMS,
PROCEEDINGS, SUITS, JUDGEMENTS, COSTS, EXPENSES, PENALTIES, FINES
AND LIABILITIES, DIRECT AND CONSEQUENTIAL DAMAGES AND LOSSES,
INCLUDING WITHOUT LIMITATION COSTS AND EXPENSES INCIDENTAL THERETO,
OF WHATSOEVER KIND AND NATURE, AND INCLUDING REASONABLE LEGAL FEES
AND EXPENSES BUT EXCLUDING ANY TAXES, INDEMNITY FOR WHICH IS
ENCOMPASSED SOLELY IN ARTICLE 4.1 AND ARTICLE 8 AND ARTICLE BA (EACH
A "CLAIM") ATTRIBUTABLE TO LESSEE'S ACTS OR OMISSIONS TO ACT (WHERE
LESSEE IS SO OBLIGATED) OCCURRING DURING THE TERM, WHICH MAY BE
SUFFERED BY, ASSERTED AGAINST, CHARGED TO OR RECOVERABLE FROM,
DIRECTLY OR INDIRECTLY, ANY AND/OR ALL OF THE INDEMNITEES:
(A) RELATING TO, ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE
POSSESSION, DELIVERY, PERFORMANCE, MANAGEMENT, CONTROL,
MAINTENANCE, CONDITION, SERVICE, REPAIR, OVERHAUL, LEASING,
USE, OPERATION OR RETURN OF THE AIRCRAFT, ANY ENGINE OR ANY
PART, OR THE PERFORMANCE OR NONPERFORMANCE OF ANY AND/OR ALL
OF THE INDEMNITEES OF SERVICES OR DELIVERY OF ANY THINGS IN
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CONNECTION WITH THE AIRCRAFT DURING THE TERM, OR OTHERWISE IN
CONNECTION WITH THIS LEASE, WHETHER OR NOT ARISING IN TORT OR
OCCASIONED IN WHOLE OR IN PART BY THE FAULT OR NEGLIGENCE OF
ANY AND/OR ALL OF THE INDEMNITEES; OR
(B) AS A CONSEQUENCE OF ANY DESIGN, ARTICLE OR MATERIAL IN THE
AIRCRAFT, ANY ENGINE OR ANY PART OR ITS OPERATION OR USE
CONSTITUTING AN INFRINGEMENT OF PATENT (TO THE EXTENT AND
SCOPE AND SUBJECT TO THE LIMITATIONS SET FORTH IN PART C OF
EXHIBIT G OF THE SUPPORT SERVICES AGREEMENT), COPYRIGHT,
TRADEMARK, DESIGN OR OTHER PROPRIETARY RIGHT OR A BREACH BY
LESSEE OF ANY OBLIGATION OF CONFIDENTIALITY OWED TO ANY
PERSON; OR
(C) PURSUANT TO SECTION 7(b) (EXCLUDING SUBCLAUSE (iv) THEREOF) OF
THE PARTICIPATION AGREEMENT;
EXCLUDING, HOWEVER, FROM THE FOREGOING ANY SUCH CLAIM TO THE
EXTENT THAT SUCH CLAIM RESULTS FROM A LESSOR LIEN OR THE
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE OR
FROM ANY MISREPRESENTATION BY SUCH INDEMNITEE CONTAINED IN
THIS LEASE OR ANY BREACH BY SUCH INDEMNITEE OF ANY COVENANT
SET FORTH IN THIS LEASE.
10.2 The indemnities contained in this Article 10 shall continue in full
force and effect notwithstanding the expiration or other termination
of this Lease or of the letting of the Aircraft hereunder.
10.3 The indemnities contained in this Article 10 are given to Lessor for
itself and as agent and trustee on behalf of the other Indemnitees.
10.4 Notwithstanding anything to the contrary contained herein, Lessee
does not release and does not agree to defend, hold harmless or
indemnify under this Lease (and without limiting any obligations or
indemnities contained in any other agreement with Lessee) Fokker or
any other Indemnitee in its capacity as manufacturer or seller of
the Aircraft from or against (i) claims of third parties made
directly against Fokker or such Indemnitee, based on its product
liability or its status as manufacturer or Seller, or (ii) claims
made against Fokker or such Indemnitee based on the warranties or
indemnities contained in the Product Assurance Document which is
Exhibit G of the Support
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Services Agreement, or (iii) the matters described in Article
10.1(B).
10.5 If any Indemnitee has knowledge of the occurrence of any Claim,
liability or other matter for which it is or may be entitled to be
indemnified hereunder, it shall give prompt written notice thereof
to Lessee. Each Indemnitee shall cooperate in good faith with Lessee
and supply such information as may reasonably be requested by Lessee
to enable Lessee to investigate, defend or contest any Claim,
liability or other matter for which Lessee may be required to
indemnify an Indemnitee hereunder. In the event that Lessee pays any
amount to an Indemnitee pursuant to this Article 10, Lessee shall be
subrogated to all rights of the Indemnitee in respect of the Claim,
liability or other matter indemnified against giving rise to such
payment. Lessee or its insurers shall have the right, unless an
Event of Default shall have occurred and be continuing and such
matter is not covered by insurance, to investigate or (provided that
Lessee or its insurers shall agree not to dispute liability
hereunder or under any insurance policies pursuant to which coverage
is sought and provided that Lessee shall have consulted with Lessor
prior thereto), defend or compromise any Claim, and Lessor shall
cooperate with Lessee with respect thereto.
10.6 With respect to any Claims that Lessee is required to indemnify an
Indemnitee against pursuant to Article 10.1(c), the Indemnitee
agrees to give such further assurance or agreements and to cooperate
with Lessee to permit Lessee to pursue any and all contest rights
that such Indemnitee may have under the Participation Agreement and
agrees that if the assignment to Lessee of the Indemnitee's contest
rights under the Participation Agreement is not permitted under the
Participation Agreement, the Indemnitee will exercise its contest
rights with respect to such Claim pursuant to instructions from
Lessee, at Lessee's cost and expense, provided, however, that Lessee
shall have indemnified Lessor, to Lessor's satisfaction, against all
material liabilities of Lessor in connection with such contest not
otherwise indemnified in Article 10.1 and such contest could not in
the good faith opinion of the Indemnitee entail any material risk of
criminal liability; provided, however that Lessor shall not be
required to permit Lessee to exercise such contest rights so long as
there is continuing an Event of Default hereunder.
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In the event that Lessee shall have paid an indemnity to or on
behalf of an Indemnitee pursuant to this Article 10.6, then within
ten days of the receipt by an Indemnitee from any person with
respect to which such Indemnitee has an indemnification obligation
under the Participation Agreement of any payment constituting a
refund with respect to the indemnity, such Indemnitee shall pay to
Lessee an amount that, on a net after tax basis, shall be equal to
such payment (but in no event more than such payment together with
interest received by such Indemnitee thereon).
11. INSURANCE
11.1 On or before the Delivery Date of the Aircraft and throughout the
Term, Lessee shall carry and maintain in full force and effect, at
its own cost and expense, in such forms, on such conditions and with
such insurers and, if requested, reinsurers and through such
insurance and, if requested, reinsurance brokers as are satisfactory
to Lessor, the following insurances with respect to the Aircraft,
Engines and Parts (herein referred to as "the Insurances"):
(a) All Risks Aircraft Hull insurance of the type usually insured
against by commercial airlines engaged in the same or similar
business and owning or operating similar aircraft (including
Engines and Parts while not installed on the Aircraft and
including Extended Coverage Endorsement (Aircraft Hull) AVN51
or equivalent on the Agreed Value. The insurance may be
subject to a deductible in respect of losses other than total
loss, arranged total loss or constructive total loss of not
more than $100,000.00 (Dollars One Hundred Thousand) for each
accident subject, however, that (i) such deductible may be
adjusted during the ten (10) year period from the Original
Delivery Date only with the consent of Lessor (such consent
not to be unreasonably withheld) and (ii) thereafter may be
adjusted to such deductible amount as is customary for
commercial airlines engaged in the same or similar business in
the United States and operating similar aircraft (but not
necessarily Fokker-manufactured) and having a similar claims
history and credit standing.
(b) If operated outside the United States and Canada, Aircraft
Hull War and Allied Perils insurance
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covering the risks excluded from the All Risks Aircraft Hull
insurance specified in paragraph (a) above by the terms of the
War, Hi-Jacking and Other Perils Exclusion Clause AVN.48B
except paragraph (b) thereof and shall include cover in
respect of confiscation, nationalization, seizure, restraint,
detention, appropriation for title or use by or under the
order of any Government Entity of the State of Registration.
(c) Comprehensive Airline Liability insurance (including without
limitation aircraft Third Party Liability, Passenger and Crew
Liability (including Baggage and Personal Effects)), Cargo
Liability, Mail Liability, Personal Injury Liability,
Contractual Liability, Hangar Keeper's Liability, Aircraft
Products Liability and General Third Party Liability of the
types usually insured against by commercial airlines engaged
in the same or similar business and owning or operating
similar aircraft (but not necessarily Fokker-manufactured) in
an amount of not less than $500,000,000.00 (Dollars Five
Hundred Million) Combined Single Limit any one occurrence each
Aircraft but limited in respect of Personal Injury to the
equivalent of $25,000,000.00 (Dollars Twenty Five Million) any
one offence and in the aggregate.
Such insurance shall include cover in respect of the risks
excluded by War, Hi-Jacking and Other Perils Exclusion Clause
AVN.48B except paragraph (b) thereof.
This insurance may be subject to deductibles in respect of
passengers baggage and personal effects of not more than
$1,250.00 (Dollars One Thousand Two Hundred Fifty) any one
claim and in respect of cargo and mail of not more than
$5,000.00 (Dollars Five Thousand) any one claim subject,
however to adjustment of such deductible amount as is
customary in the aviation insurance market for commercial
airlines engaged in the same or similar business in the United
States and operating similar aircraft and having a similar
claims history and credit standing. Such deductibles shall not
apply to claims arising from accidents to the carrying
aircraft.
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(d) All Risks insurance on Engines and Parts while any such items
are not installed on the Aircraft and in respect of which
cover is not provided under the All Risks Aircraft Hull
insurance and/or Aircraft Hull War and Allied Perils insurance
(respectively specified in paragraphs (a) and (b) above) of
the type usually insured against by commercial airlines
engaged in the same or similar business and owning or
operating similar aircraft for not less than full replacement
value. If Engines and Parts are located outside the United
States and Canada, such insurance shall include War and Allied
Perils to the extent that such insurance is customarily
available in the international insurance market for this type
of insurance.
This insurance may be subject to a deductible of not more than
$10,000.00 (Dollars Ten Thousand), subject, however, to
adjustment of such deductible amount as is customary in the
aviation insurance market for commercial airlines engaged in
the same or similar business in the United States and
operating similar (but not necessarily Fokker-manufactured)
aircraft and having a similar claims history and credit
standing.
The Lessor will accept a United States government indemnity in lieu
of the foregoing or otherwise required under this Article 11.
Lessor's current requirements as at the date of this Lease as to the
Insurances are as specified in this Article. Lessor reserves the
right to amend, and will cooperate with Lessee reasonably to amend,
the insurance requirements of this Article 11 to reflect changes in
insurance practice subject, however to such amendments being
customary for and applicable to airlines engaged in the same or
similar business in the United States and similar aircraft and
having a similar claims history and credit standing.
If required by the first paragraph of Article 11.1, Lessee shall
procure that the insurers effect reinsurances in the same form and
conditions through such reinsurance brokers and with such reinsurers
and for such proportions as are satisfactory to Lessor.
11.2 All Insurances to be carried in accordance with Article 11.1 above
shall:
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(a) in respect of All Risks Aircraft Hull insurance, Aircraft Hull
War and Allied Perils insurance and All Risks insurance on
Engines and Parts:
(i) name Lessor, Head Lessor in its individual capacity and
as owner of the Aircraft, the Indenture Trustee in its
individual and its trust capacity, Owner Participant and
Loan Participant, and each of their respective
affiliates, successors and assigns, along with the
respective directors, officers and employees of each of
the foregoing (collectively, the "Additional Assureds");
(ii) provide that all claims in respect of the Aircraft,
Engines and Parts shall be payable to Indenture Trustee
for so long as the lien of the Indenture is in effect,
and thereafter to Head Lessor for so long as the Head
Lease is in effect, and thereafter to Lessor or as it
may direct, such payee to be named Loss Payee; provided,
that partial loss amounts shall be paid by the insurers
directly to repairers of the Aircraft, Engines or Parts
or to Lessee solely as reimbursement for repairs for
which Lessee has paid unless the insurers have been
given notice that a Default has occurred; and
(iii) if applicable, provide in respect of Hull All Risks and
Hull War and Allied Perils for a 50/50 Claims Settlement
Clause in the form of AVS.103;
(b) in respect of Comprehensive Airline Liability insurance:
(i) name the Additional Assureds as additional assureds; and
(ii) provide that the insurance shall operate in all respects
as if a separate policy had been issued covering each
party insured thereunder, but this provision shall not
operate to include any claim howsoever arising in
respect of loss or damage to the Aircraft, Engines and
Parts insured under the All Risks Hull, Hull War and
Allied Perils or All Risks insurance of the assured.
Notwithstanding the foregoing the total
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liability of insurers in respect of any and all assureds
shall not exceed the limits of liability stated in the
policy;
(c) in respect of all Insurances:
(i) be effective worldwide except for territories approved
in writing by Lessor;
(ii) provide that insurers waive all rights of subrogation
against the Additional Assureds;
(iii) provide that in the event that the Insurances are
cancelled (including cancellation for non-payment of
premium) or are materially changed such cancellation or
change shall not be effective as to the interests of the
Additional Assureds until thirty (30) days (but seven
(7) days or such lesser period as is customarily
available in accordance with policy conditions in
respect of war and allied perils) after confirmed
receipt by the Additional Assureds of written notice by
insurers of such cancellation or change;
(iv) provide that in respect of the interests of the
Additional Assureds, the Insurances shall not be
invalidated by any act, neglect, omission,
misrepresentation or non-disclosure on the part of
Lessee or any other party other than the Additional
Assured seeking to make a claim thereunder, and shall
insure each Additional Assured regardless of any breach
or violation of any warranties, declarations or
conditions contained in such policies by Lessee or any
other party other than the Additional Assured seeking to
make a claim thereunder;
(v) provide that the Additional Assureds shall have no
responsibility for premium and insurers shall waive any
right of set-off or counterclaim against the Additional
Assureds except in respect of outstanding premium in
respect of the Aircraft, Engines and Parts subject of a
claim;
(vi) not provide for any deductible or self insurance other
than the deductibles allowed under the terms of Article
11.1 above;
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(vii) be primary without right of contribution from any other
insurance carried by Lessor, Lessee or any other person;
and
(viii) be denominated in Dollars.
11.3 If required by the first paragraph of Article 11.1, the re-insurance
policies shall:
(a) provide that cover shall be identical to the cover provided by
the original insurances and be subject to the same terms and
conditions as the original insurances;
(b) provide that so far as the respective interests of the
Additional Assureds are concerned the reinsurance shall not be
invalidated by any act, neglect, omission, misrepresentation
or nondisclosure on the part of the reinsured party;
(c) confirm the insurers' agreement to the provision of paragraph
(d) below;
(d) include a "cut-through" clause in the following terms or in
such other terms as may be satisfactory to Lessor:
"In respect of All Risks Aircraft Hull insurance, Aircraft
Hull War Risk and Allied Perils insurance as described in
Article 11.1(a) and (b) above and All Risks insurance on any
Engine and Parts as described in Article 11.1(d) above, the
reinsurers and the reassured hereby agree that in the event of
any claim arising under the relevant reinsurances the
reinsurers shall in lieu of payment to the reassured, its
successors in interest and assigns pay to the Loss Payee
specified in the primary insurances all sums payable under or
in connection with such reinsurances by virtue of any
reinsured loss of, or damage to, the Aircraft, Engines and
Parts, without any deduction or deductions whatsoever, other
than any outstanding premium in respect of the Aircraft,
Engines or Parts the subject of the claim, it being understood
and agreed that any such payment by the reinsurers shall fully
discharge and release the reinsurers from any and all further
liability in connection therewith.
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In respect of Comprehensive Airline Liability insurance as
described in Article 11.1(c) above, the reinsurers and
reassured hereby agree that in the event of any claim arising
under the relevant reinsurances, the reinsurers shall in lieu
of payment to the reassured, its successors in interest and
assigns pay to the person or party who has sustained the
relevant loss (or as reimbursement of any payment made by any
Additional Assureds) all sums payable under such reinsurances
by virtue of such reinsured loss, without any deduction or
deductions whatsoever, it being understood and agreed that any
such payment by the reinsurers shall fully discharge and
release the reinsurers from any and all further liability in
connection therewith"; and
(e) provide that the reinsurers and reassured agree that in the
event that the reassured, its successors in interest and
assigns shall at any time be or become insolvent or suspend
business or file a petition in bankruptcy or be adjudicated
insolvent or bankrupt or admit in writing its inability to pay
its debts as they become due, or make a general assignment for
the benefit of creditors or that a receiver or liquidator or
assignee or trustee or state commissioner of insurance be
appointed in respect of the reassured its successors in
interest or assigns or any substantial part of its property
for the purpose of liquidation on account of insolvency, then
the reinsurers, in lieu of payment to the reassured, its
successors in interest or assigns, shall pay upon demand that
portion of any loss due to the party entitled thereto under
the terms of the original insurance for which such reinsurers
would under the terms of the reinsurance be liable to pay the
reassured, its successors in interest or assigns, less any
amounts already paid, it being understood and agreed that any
such direct payment by reinsurers shall fully discharge and
release the reinsurers from any and all further liability for
such payment made.
11.4 Prior to the Delivery Date and thereafter during the Term, at least
five (5) Business Days prior to the renewal date of any Insurance
required or maintained by Lessee under Article 11.1 but in no event
less than once in each 12 month period, Lessee shall furnish or
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cause to be furnished to Lessor by the insurer or insurance broker
and the reinsurance broker
1) a certificate of insurance describing in detail the insurance
then carried and maintained, and certifying that such
insurance complies with the terms of this Lease, including:
(i) confirmation that the insurance/reinsurance has been
placed with the insurers/reinsurers required (giving the
name of such insurers/reinsurers), the insured/reinsured
amount and the period of the policy and
(ii) confirmation that all premiums due to
insurers/reinsurers have been paid,
and
2) a letter of undertaking from Lessee's brokers and, if
required, from the reinsurance brokers.
Such certificate(s) of insurance and letter(s) of undertaking
shall be substantially in the form as delivered on the
Delivery Date.
In the event that Lessee shall fail to effect, maintain or cause to
be effected or maintained, insurance as required by this Article 11,
Lessor, Head Lessor or Indenture Trustee may at its option, but
without any obligation to do so, and without prejudice to Lessor's,
Head Lessor's and Indenture Trustee's other rights or remedies
hereunder, maintain such insurance or provide such or a similar
insurance, and, in such event, Lessee shall, upon demand, promptly
reimburse to Lessor, Head Lessor or Indenture Trustee the cost
thereof, including interest thereon at the rate referred to in
Paragraph 6 of Appendix D.
11.5 In the event of any damage to the Aircraft, Engines or Parts during
the Term not constituting a Casualty Occurrence, Lessee shall
repair, or cause the same to be repaired by an Authorized
Maintenance Performer at its sole cost and expense. Lessor and
Lessee agree that all insurance proceeds payable in connection with
any such damage shall be payable as provided in Section 11.2(a)
(ii). Any excess remaining shall, unless a Default shall have
occurred and be continuing, be paid over to Lessee.
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11.6 Lessee may carry insurance with respect to its interest in the
Aircraft in excess of the Agreed Value, provided that such insurance
coverage shall not prejudice the ability of Head Lessor or Lessor to
obtain insurance of their respective interests in the Aircraft.
11.7 [Intentionally omitted)
12. ASSIGNMENT AND SUBLETTING
12.1 Lessee shall not assign any of its rights or obligations or delegate
any of its duties under this Lease and, except as permitted by
Article 5.1 above or Paragraph 10 of Appendix D, Lessee shall not
sublet or otherwise part with possession of the Aircraft or any Part
thereof unless previously approved by Lessor in writing (such
consent not to be unreasonably withheld).
12.2 This Lease, the Aircraft and Lessor's interest in each thereof is
freely assignable and alienable by Lessor upon written notice to
Lessee in accordance with Article 12.3, provided, however, that so
long as the Aircraft shall be leased to Lessee under this Lease,
Lessor will not sell, assign, convey or otherwise transfer
absolutely (and not for security) any of its right, title, or
interest in and to this Lease or the Aircraft to any person unless
Lessor and the proposed transferee (the "Transferee") have complied
with the following conditions:
(i) Lessor shall give Lessee written notice of such
transfer at least 10 Business Days before the date of such
transfer, specifying the name and address of the proposed
Transferee;
(ii) the Transferee shall not be an airline or a
commercial air carrier or person controlling, controlled by or
under common control with an airline or a commercial air
carrier which is in direct competition with Lessee in the
United States;
(iii) the Transferee shall qualify as a "citizen of the
United States" within the meaning of Section 40102 (a) (15) of
the Federal Aviation Act by a Voting Trust Agreement or
otherwise; and
(iv) on the transfer date Lessor and the Transferee
shall enter into an agreement or
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agreements in which the Transferee confirms that it shall be
deemed a party to this Lease and agrees to be bound by all the
terms of, and to undertake all of the obligations of, Lessor
contained in this Lease, and shall deliver a certificate of
quiet enjoyment to Lessee in form and substance reasonably
acceptable to it and Lessee shall receive an opinion of
counsel to the Transferee stating, with the customary
assumptions and exceptions, that such agreement or agreements
has been duly authorized, executed and delivered and
constitute the legal, valid and binding obligations of the
Transferee enforceable in accordance with their terms and that
the entry into such agreement(s) does not violate any laws or
agreements applicable to such Transferee.
The agreements, covenants, obligations and liabilities contained
herein, including but not limited to all obligations to pay Rent and
indemnify Lessor, are made for the benefit of Lessor and its
respective successors and assigns, notwithstanding the possibility
that any such person was not originally a party to this Lease or
may, at the time any enforcement is sought, no longer be a party to
this Lease. Lessee shall comply, at Lessor's cost and expenses, with
all reasonable requests of Lessor, its successors and assigns
respecting the assignment and Lessee's acknowledgement of the
assignee as Lessor. Notwithstanding anything contained in this
paragraph to the contrary, no assignment of Lessor's interest in
this Lease or the Aircraft shall alter the terms of this Lease in so
far as the costs to Lessee of the performance of its obligations to
pay Rent, Reserve Rate and Deposits hereunder and, except as
otherwise expressly provided in this Lease, the rights and
liabilities of Lessee under this Lease are concerned. Lessee's
rights under this Lease shall not be subject or subordinate to the
Head Lease, the Security Assignment or the Indenture. The rights of
Head Lessor and Indenture Trustee under the Head Lease, the Security
Assignment and the Indenture, as the case may be, shall be subject
to Lessee's rights under Section 13.7 of this Lease.
12.3 It is acknowledged and agreed that:
(a) As at the date of the Certificate of Acceptance, ownership of
the Aircraft has been transferred to Head Lessor, Head Lessor
has leased the Aircraft to Lessor under the Head Lease and,
subject to the
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terms of the Head Lease, Lessor has subleased the Aircraft to
Lessee under this Lease.
(b) Lessor has assigned all of its right, title and interest in
and to this Lease to Head Lessor and Head Lessor has assigned
all its right, title and interest in and to this Lease and
granted a Security Interest in the Aircraft to Indenture
Trustee.
(c) Lessor may from time to time require to amend, modify or
replace the security arrangements in respect of the financing
or refinancing of the Aircraft and Lessee agrees to cooperate
with Lessor in connection therewith at the cost and expense of
Lessor and, in particular (but without limiting the generality
of the foregoing), to change the plates provided for in
Article 4.3 and to execute and deliver such other or further
acknowledgments of assignment or other documents and to do
such other things as Lessor may reasonably require to be
executed and delivered;
(d) Upon any financing or refinancing of the Aircraft as
contemplated by this Article 12.3 or otherwise at the cost and
expense of Lessor, Lessee will promptly and duly execute and
deliver to Lessor and such persons as Lessor shall designate,
such other documents and assurances and take such further
action as may from time to time be reasonably requested in
order more effectively to carry out the intent and purpose of
this Lease, the Head Lease, the Indenture, the Security
Assignment and any other documents relating to such financing
or refinancing;
(e) [Intentionally omitted]; and
(f) Lessee shall not be liable to any Transferee for any payment
of Taxes or other amounts pursuant to this Lease or otherwise
be subject to any liabilities in excess of the amount that
would have been payable to, or beyond the scope of the
liabilities to, as the case may be, Lessor originally party
hereto, if that party had remained as Lessor.
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13. DISCLAIMER, REPRESENTATIONS AND WARRANTIES
13.1 NEITHER LESSOR, NOR HEAD LESSOR, NOR OWNER PARTICIPANT NOR INDENTURE
TRUSTEE NOR LOAN PARTICIPANT IS A MANUFACTURER OF THE AIRCRAFT OR
OTHER AIRCRAFT OR A DEALER IN SIMILAR AIRCRAFT AND HAS NOT INSPECTED
THE AIRCRAFT PRIOR TO DELIVERY TO AND ACCEPTANCE BY LESSEE. LESSEE
(I) ACKNOWLEDGES AND AGREES THAT THE AIRCRAFT IS BEING DELIVERED BY
LESSOR TO LESSEE "AS IS" AND "WHERE IS" AND THAT NO CONDITION,
WARRANTY OR REPRESENTATION OF ANY KIND WHATSOEVER HAS BEEN OR IS
GIVEN BY OR IS TO BE IMPLIED ON THE PART OF LESSOR OR ON THE PART OF
HEAD LESSOR OR OWNER PARTICIPANT OR INDENTURE TRUSTEE OR LOAN
PARTICIPANT IN RELATION TO THE AIRCRAFT, AND (II) HEREBY WAIVES AS
BETWEEN ITSELF AND LESSOR OR ON THE PART OF HEAD LESSOR OR OWNER
PARTICIPANT OR INDENTURE TRUSTEE OR LOAN PARTICIPANT ALL ITS RIGHTS,
EXPRESS OR IMPLIED (WHETHER STATUTORY OR OTHERWISE), TO MAKE CLAIMS
IN RESPECT OF THE AIRCRAFT RELATING TO THE TITLE, AIRWORTHINESS,
VALUE, CONDITION, DESIGN, OPERATION, CONFORMITY TO SAMPLES OR
MODELS, COMPLIANCE WITH SPECIFICATIONS, MERCHANTABILITY OR FITNESS
OR SUITABILITY FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT OR
ANY PART THEREOF, QUALITY OF THE MATERIAL OR WORKMANSHIP, ABSENCE OF
LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, ABSENCE OF ANY
INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, ABSENCE OF ANY
OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN TORT, BASED ON
STRICT LIABILITY OR NEGLIGENCE, ACTUAL OR IMPUTED, AND LESSEE HEREBY
WAIVES ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR
IMPLIED, WITH RESPECT TO THE AIRCRAFT, IT BEING UNDERSTOOD THAT ALL
SUCH RISKS, AS BETWEEN LESSEE AND LESSOR OR ON THE PART OF HEAD
LESSOR OR OWNER PARTICIPANT OR INDENTURE TRUSTEE OR LOAN
PARTICIPANT, ARE TO BE BORNE BY LESSEE.
Nothing in this Lease shall afford Lessor or any Indemnitee any
wider or greater exclusion of liability for death or bodily injury
than would be permitted by the Governing Law.
This paragraph shall not be modified except by a written agreement
signed on behalf of Lessor and Lessee by their respective duly
authorized representatives.
13.2 Lessor and Lessee agree that this Article 13 has been the subject of
discussion and negotiation and is fully understood by the parties,
and that the amount of the Rent and other mutual agreements of the
parties set
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forth in this Lease were arrived at in consideration of the
provisions of this Article 13 specifically including the waiver by
Lessee set forth in Article 13.1.
13.3.1 So long as no Event of Default has occurred and is continuing Lessor
agrees to assign or otherwise make available to Lessee for the
duration of the Term such rights as Lessor may have under any
warranty, express or implied, with respect to the Aircraft made by
the Manufacturer of the Aircraft, any subcontractor or supplier
thereof, or any other seller thereof, to the extent that the same
may be assigned or otherwise made available to Lessee and without
warranty by Lessor as to enforceability of any of the rights so
assigned.
To the extent that the same may not be assigned or otherwise made
available to Lessee, Lessor agrees to exert its reasonable efforts,
at Lessee's expense, to enforce such rights as Lessor may have with
respect thereto for the benefit of Lessee; provided however, that
upon an Event of Default all such rights shall immediately revert to
Lessor including all claims thereunder, whether or not perfected,
unless such Event of Default has forthwith been remedied by Lessee.
13.3.2 [Intentionally omitted]
13.4 Lessee represents and warrants that:
(a) Lessee is a corporation organized and existing in good
standing, in accordance with the Laws of the State of
Incorporation, and has the corporate power and authority to
carry on its business as presently conducted and to perform
its obligations under this Lease, is a Certificated Air
Carrier and is the holder of all necessary licenses issued by
all Government Entities having jurisdiction to authorize or
permit Lessee to engage in air transportation and to perform
and comply with its obligations hereunder;
(b) This Lease has been duly authorized by all necessary corporate
action on the part of Lessee, and neither the execution and
delivery nor the consummation of the transactions contemplated
hereby nor compliance by Lessee with the provisions of this
Lease will contravene any Law applicable to Lessee or result
in any breach of, or constitute any default under, or result
in the
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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;
(c) The execution and delivery by Lessee of this Lease, and all of
the transactions by Lessee contemplated hereby, have received,
and Lessee has complied with, every necessary consent,
approval, order, or authorization of, or registration with, or
the giving of prior notice to, any Government Entity having
jurisdiction with respect to the execution and delivery of
this Lease or the validity and enforceability of this Lease or
the satisfaction of all monetary and other obligations
hereunder;
(d) This Lease has been duly entered into and delivered by Lessee
and constitutes the valid, legal and binding obligations of
Lessee, enforceable in accordance with their terms subject to
principles of equity, laws relating to bankruptcy, insolvency
or liquidation or any other laws or legal procedures generally
affecting the enforcement of creditor's rights or the rights
of contracting parties;
(e) It is not necessary or advisable under the Laws of the State
of Registration in order to ensure the validity, effectiveness
and enforceability of this Lease, the Head Lease, the
Indenture or the Security Assignment or to protect the
property rights of Lessor, Head Lessor, or Indenture Trustee
in the Aircraft and under the Head Lease the Indenture and the
Security Assignment that this Lease, the Head Lease, the
Indenture, the Security Assignment or any other instrument
relating thereto be filed, registered or recorded or that any
other action be taken under the Laws of the States of Illinois
or North Carolina and the State of Registration to perfect the
property rights of Lessor, Head Lessor and Indenture Trustee
in the Aircraft other than the filing of all such instruments
with the Air Authority, the filing of UCC-1 financing
statements in relevant jurisdictions and possession of an
original
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version of this Lease, if deemed to be chattel paper, and the
Indenture and Security Assignment will have priority in all
respects over the claims of all creditors of Lessee in or
against the Aircraft;
(f) Under the Laws of the State of Incorporation and the State of
Registration Lessee will not be required to make any deduction
or withholding from any payment it may make under this Lease.
There is no withholding or other tax to be deducted from any
payment to be made by Lessee under this Lease;
(g) There are no suits or legal proceedings (including any
administrative proceeding) pending or threatened before any
court or administrative agency against Lessee which, if
adversely determined, would have a material adverse effect
upon its financial condition or business or its ability to
perform its obligations hereunder;
(h) [Intentionally omitted);
(i) There has been no material adverse change in the financial
position of Lessee or the consolidated financial position of
Lessee and its subsidiaries from that set forth in the
financial statements last furnished pursuant to Article 6.4
and neither Lessee nor any of its subsidiaries have any
significant liabilities (contingent or otherwise) which are
not disclosed by, or reserved against in such financial
statements;
(j) The chief executive office (as such term is used in Sections
9-103 and 9-401 of the Uniform Commercial Code) of Lessee is
located at Chicago, Illinois, and, commencing August 21, 1995,
shall be located in Durham, North Carolina and Lessee agrees
to give at least 30 days' prior notice to Lessor of any
relocation of said chief executive office or place where such
records are kept and of any change in its name.
13.5 The representations and warranties in Article 13.4 (other than in
clauses (f), (g) and (i)) shall be deemed to be repeated by Lessee
on and as of each Rent Date as if made with reference to the facts
and circumstances existing on each such date.
13.6 Lessor represents, warrants and covenants that:
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(a) Lessor is a corporation organized and existing in good
standing, in accordance with the Laws of the State of Delaware
and has the corporate power and authority to carry on its
business as presently conducted and to perform its obligations
under this Lease;
(b) This Lease has been duly authorized by all necessary corporate
action on the part of Lessor, has been duly entered into and
delivered by Lessor and constitutes the valid, legal and
binding obligations of Lessor, enforceable in accordance with
their respective terms subject to principles of equity, laws
relating to bankruptcy, insolvency or liquidation or any other
laws or legal procedures generally affecting the enforcement
of creditor's rights or the rights of contracting parties;
(c) Neither the execution and delivery nor the consummation of the
transactions contemplated hereby nor compliance by Lessor with
the provisions of this Lease will result in any breach of, or
constitute any default under, any indenture or any 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; and
(d) Except for the registration of the Aircraft, neither the
execution and delivery nor the consummation of the
transactions contemplated hereby nor compliance by Lessor with
the provisions of this Lease requires the consent or approval
of, the giving of notice to, or the registration with, or the
taking of any other action in respect of any Government
Entity.
13.7 Lessor undertakes that, so long as no Event of Default shall have
occurred and be continuing, Lessor will not interfere with the
peaceful and quiet use and enjoyment of the Aircraft by Lessee in
accordance with the terms of this Lease. Lessor shall procure from
Head Lessor and Indenture Trustee a letter confirming that neither
Head Lessor nor Indenture Trustee shall take or cause to be taken
any action interfering with Lessee's quiet enjoyment and use and
possession of the Aircraft, provided, that no Event of Default shall
have occurred and be continuing. Lessee hereby agrees that if an
event of default under the Head Lease shall have
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occurred and be continuing, Lessee shall, at the reasonable cost and
expense of Lessee, enter into a lease with Head Lessor, such lease
to be upon terms and conditions substantially similar to those of
this Lease, and such lease shall be assigned to Indenture Trustee
under the Indenture with such changes as appropriate to reflect the
change in relationship between Lessee and the parties to the
Participation Agreement (other than the Lessor) resulting from the
Lessor no longer being interposed between the Lessee and such
parties.
13.8 On the Delivery Date, Head Lessor shall have received full legal and
beneficial title to the Aircraft from Lessor, Lessor shall have the
right to sublease the Aircraft hereunder and the Aircraft shall be
free of Lessor's Lien except for the lien of the Indenture, the
Security Assignment and the Head Lease, and Lessor covenants that
Lessor shall not create, incur, assume or suffer to exist any
Lessor's Lien (except the Indenture, the Security Assignment and the
Head Lease) on the Aircraft or any part thereof and agrees at its
own cost and expense, promptly to take such action as may be
necessary duly to discharge any such Lessor's Lien provided,
however, without limiting Lessor's liability under Article 13.7,
that Lessor may in good faith by appropriate proceedings contest
claims or charges resulting in any such Lessor's Lien as long as
such contest does not involve any material danger of the sale,
forfeiture or loss (or loss of use) of the Aircraft or any interest
therein and will indemnify and hold harmless Lessee against any and
all Claims, of whatever kind and nature, incurred by or asserted
against Lessee as a consequence of any such Lessor's Lien.
13.9 Lessor will not enter into any waiver, amendment or other
modification of the Tax Indemnity Agreement, Sections 7A or 7(b)(i),
(ii) or (iii) of the Participation Agreement or the Head Lease
definitions used therein that would increase Lessee's liabilities or
decrease its rights hereunder without Lessee's consent. Promptly
upon the execution and delivery of any amendment, modification,
supplement or waiver to the Tax Indemnity Agreement or Sections 7(b)
or 7A of the Head Lease, Lessor shall deliver true and accurate
copies thereof to Lessee. Lessor shall immediately notify Lessee of
the existence of any "Event of Default" or "Default" under the Head
Lease (that does not result from an Event of Default or Default
under
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this Lease) and shall promptly notify Lessee when the Head Lease is
no longer in effect.
14. COVENANTS OF LESSEE
14.1 Lessee hereby covenants with Lessor that from the Delivery Date and
during the Term and until redelivery of the Aircraft to Lessor in
accordance with Article 16 it will:
(a) remain in and continue to operate as a Certificated Air
Carrier holding a valid certificate of convenience and
necessity issued pursuant to the Federal Aviation Act and,
except as permitted in Section 14.1(p) hereof, preserve its
corporate existence;
(b) comply with all Laws and regulations for the time being in
force in the State of Incorporation, the State of Registration
and in any country to, from, in or over which the Aircraft is
flown, the failure with which to comply is likely to have a
material adverse effect on Lessee, provided, however, that
such failure shall have no adverse effect on the Aircraft or
the interests of Lessor, Head Lessor or Indenture Trustee
therein or the Insurance required to be maintained pursuant to
Article 11;
(c) (i) at its own expense from time to time do and perform such
other and further acts and execute and deliver any and all
further instruments as may be required by Law (in the United
States but not in any jurisdiction outside the United States
unless directly required due to Lessee's operation), and (ii)
at Lessor's expense (insofar as not covered in Article 8.2(a))
from time to time do and perform such other and further acts
and execute and deliver any and all further instruments as may
be reasonably requested by Lessor to establish, maintain and
protect the respective rights and remedies of Lessor, Head
Lessor and Indenture Trustee and to carry out and give effect
to the intents and purposes of this Lease and the Head Lease;
(d) notify Lessor immediately of any Default;
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(e) obtain and maintain all necessary government and other
certificates, consents, licenses, permits and authorizations
and take all action which may be necessary for the continued
due performance of Lessee's obligations under this Lease and
for the use and operation of the Aircraft;
(f) not do or permit to be done any act or thing which might
impair the respective interests of Lessor, Head Lessor and
Indenture Trustee in the Aircraft, or the registration of the
Aircraft;
(g) notify Lessor as soon as practicable after becoming aware of
any loss, theft, damage or destruction of or to the Aircraft
or any part thereof if the potential cost of repair or
replacement is likely to exceed $250,000.00 (Dollars Two
Hundred Fifty Thousand);
(h) not do anything which is likely to subject the Aircraft or any
part thereof to penalty, forfeiture, seizure, arrest,
impounding, detention, confiscation, taking in execution or
appropriation or destruction, nor abandon the Aircraft or any
part thereof;
(i) not represent or hold out Lessor, Head Lessor or Indenture
Trustee as carrying goods or passengers on the Aircraft or as
being in any way connected or associated with any operation or
carriage (whether for hire or reward or gratuitously) which
Lessee may undertake;
(j) not pledge the credit of Lessor, Head Lessor or Indenture
Trustee for any maintenance, overhauls, replacements, repairs
or modifications to the Aircraft;
(k) keep Lessor and the insurers, as referred to in Article 11,
informed as to current serial numbers of the Engines and any
engine installed on the Aircraft in accordance with the
provisions of this Lease, and the location of any Engine for
the time being not installed on the Aircraft; and shall notify
such insurers of any renewal, replacement or substitution, or
the location of any Engine not installed on the Aircraft;
(l) discharge all fees, charges and expenses payable to any third
party in relation to the use or
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operation of the Aircraft or any premises where the Aircraft
is situated;
(m) in the event of any forfeiture, impounding or detention of the
Aircraft or any part thereof not constituting a Casualty
Occurrence, use all reasonable endeavors to procure the
immediate release therefrom of the same;
(n) keep accurate, complete and current records of all flights
made by the Aircraft. Such records shall be kept in such
manner as the Air Authority may from time to time require and
in accordance with the Approved Maintenance Program. Lessee
shall permit Lessor or any person designated by Lessor to
examine such records upon giving reasonable notice not
involving delay to the Aircraft and subject to the terms of
Article 7.5.3, at the expense of Lessor or such person, to
copy such records;
(o) on request, provide Lessor with evidence satisfactory to
Lessor that all Taxes and charges incurred by Lessee with
respect to the Aircraft, including without limitation any
payments due to any relevant air traffic control authorities
and airport authorities, have been paid and discharged in full
or duly provided for;
(p) not consolidate with, or merge into, any other corporation,
convey, transfer or lease substantially all of its assets as
an entirety to any person without the prior written consent of
Lessor (such consent not to be unreasonably withheld) and the
execution and delivery to Lessor of such agreements,
certificates and legal opinions as Lessor may request with
respect thereto; and
(q) provide to Lessor immediate written notice of any termination
or expiration of the Aircraft Maintenance Agreement, and a
copy of any subsequent Aircraft Maintenance Agreement entered
into by Lessee.
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15. DEFAULT BY LESSEE
15.1 Each of the following events shall constitute an "Event of
Default":
(a) if default shall be made by Lessee in the making of payment of
any Rent, Reserve Rate, Agreed Value, and/or of any other
Supplemental Rent, within 5 Business Days after the date when
due and payable under this Lease; or
(b) (i) if default shall be made by Lessee at any time in the
procurement or maintenance of any insurance coverage
prescribed herein or (ii) any insurance which may be
maintained by Lessor, Head Lessor or Indenture Trustee under
Article 11.4 is cancelled or terminated or notice of
cancellation is given; or
(c) if default shall be made by Lessee in the observance or
performance of any of the other obligations of Lessee
contained in this Lease and, if such default is in the opinion
of Lessor capable of remedy, such default shall continue for a
period of fifteen (15) Business Days after notice from Lessor
to Lessee specifying the default and requiring that the same
be remedied; or
(d) if any representation or warranty made (or deemed to be
repeated) by Lessee in or pursuant to this Lease or in any
document or certificate or statement referred to in or
delivered under this Lease is or proves to have been incorrect
in any material respect when made or deemed to be repeated and
such incorrectness, if capable of being cured, shall continue
for fifteen (15) Business Days after written notice from
Lessor specifying such incorrectness; or
(e) if any borrowed money having an outstanding principal amount
in excess of $4,000,000.00 (Dollars Four Million) of Lessee or
any of its subsidiaries is not paid when due, or by reason of
breach or default under the terms of any instrument evidencing
or guaranteeing the same on the part of Lessee or any of its
subsidiaries any borrowed money having an outstanding
principal amount in excess of $4,000,000.00 (Dollars Four
Million) of Lessee or any of its subsidiaries
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becomes due or capable of being declared due prior to the date
when it would otherwise have become due, or the security for
any such borrowed money or any guarantee in respect thereof
becomes enforceable; or
(f) if an encumbrancer takes possession or a receiver,
administrator, administrative receiver, trustee, liquidator or
similar officer is appointed of the whole or any substantial
part of the assets, rights or revenues of Lessee or any of its
subsidiaries or a distress, execution, sequestration or other
process is levied or enforced upon or sued out against all or
a substantial part of the assets, rights or revenues of Lessee
or any of its subsidiaries and is not discharged within
fourteen days, or Lessee applies for or consents to the
appointment of a receiver, administrator, administrative
receiver, trustee, liquidator or similar officer for it or for
all or any part of its assets, rights or revenues; or
(g) if Lessee or any of its subsidiaries suspends payment of its
debts, or is unable or admits its inability to pay its debts
as they fall due, or shall be adjudicated or found, or
becomes, bankrupt or insolvent, or proposes or enters into any
composition or other arrangement for the benefit of its
creditors generally, or Lessee or any of its subsidiaries
shall, by voluntary petition, answer or consent, seek relief
under the provisions of any bankruptcy, insolvency or other
similar law providing for the reorganization, liquidation,
administration, dissolution or winding-up of corporations, or
providing for an agreement, composition, extension or
adjustment with its creditors; or
(h) if a petition against Lessee in a proceeding under applicable
bankruptcy or other insolvency laws shall be filed and shall
not be withdrawn or dismissed within 30 days thereafter, or if
any order shall be made by any competent court or resolution
passed by Lessee or any of its subsidiaries or their
respective board of management or supervisory board, whichever
is competent to pass such resolution for the winding-up or
dissolution of Lessee or any of its subsidiaries or for the
appointment of a liquidator, trustee or conservator, save for
winding-up or
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dissolution for the purposes of amalgamation or reorganization
(not involving or arising out of insolvency) the terms of
which shall have received the prior written approval of
Lessor; or
(i) if Lessee or any of its subsidiaries disposes of all or a
material part of its assets, whether by one or a series of
transactions, related or not, other than for the purpose of a
reconstruction or amalgamation the terms of which have
received the previous consent in writing of Lessor; or
(j) if any action shall be taken by Lessee which shall impair the
rights, title or ownership of Lessor or Head Lessor or the
Security Interest of Indenture Trustee, in the Aircraft or
this Lease, or this Lease is or becomes wholly or partly
invalid, ineffective or unenforceable by reason of any act or
omission of Lessee; or
(k) if any consent, authorization, license, certificate or
approval of or registration with or declaration to any
Government Entity in connection with this Lease including,
without limitation:
(i) Lessee's air carrier operating certificate issued
pursuant to Chapter 447 of the Federal Aviation Act; or
(ii) required by Lessee or as a condition precedent required
by Lessor pursuant to Article 2.3 to authorize, or in
connection with, the execution, delivery, validity,
enforceability or admissibility in evidence of this
Lease or the performance by Lessee of its obligations
under this Lease; or
(iii) the registration of the Aircraft; or
(iv) any airline license or air transport license;
is changed such that it materially impairs the ability of
Lessee to perform its obligations hereunder, or is withheld,
or is revoked, suspended, cancelled, withdrawn, terminated or
not renewed, or otherwise ceases to be in full force; or
(m) if any circumstances analogous to any of the circumstances
described in paragraphs (f), (g) or
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(h) above arise under the Law of any applicable jurisdiction;
(n) for so long as Wings Aircraft Finance, Inc. or any other
affiliate or subsidiary of Fokker is the Lessor hereunder or
retains the entire beneficial interest in the ownership of the
Aircraft, if an event of default (however defined) occurs
under any Other Aircraft Agreement which event permits
acceleration or termination;
(o) [intentionally omitted],
(p) [intentionally omitted]; or
(q) [intentionally omitted]
15.2 If one or more Events of Default shall have occurred and be
continuing, at Lessor's option and subject to any mandatory
requirement of Law:
(a) For Lessee's account Lessor may do anything that may
reasonably be required to cure any Event of Default and
recover from Lessee all costs including legal expenses
incurred in so doing, and/or
(b) Lessor may accept such Event of Default as a repudiation of
this Lease and terminate the lease of the Aircraft to Lessee
hereunder by:
(i) serving notice of such termination on Lessee specifying
the occurrence giving rise to such Event of Default or
Events of Default, provided that such notice shall be
deemed to have been served without the necessity of
actual service upon the occurrence of any Event of
Default described in paragraph (f), (g), (h) or (m) of
Article 15.1.
Thereafter (if the Term shall have commenced) Lessee
shall redeliver possession of the Aircraft to Lessor at
the Redelivery Location (or such other location as
Lessor may require); or
(ii) at Lessor's election, taking possession of the Aircraft
for which purpose Lessor by its servants or agents may
enter upon Lessee's premises where the Aircraft may be
located,
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or cause the same to be redelivered to Lessor at the
Redelivery Location (or such other location as Lessor
may require Lessee to assemble and deliver the Aircraft
to Lessor, and Lessor shall be entitled to act as
attorney for Lessee in causing such redelivery and shall
have all the powers and authorizations legally necessary
for taking such action. In the event of exercise by
Lessor of its powers under this sub-paragraph (ii) such
termination shall be deemed to take effect on such
taking of possession by Lessor or such redelivery of the
Aircraft to Lessor at the said airport; and/or
(c) Lessor may proceed by appropriate court action or actions to
enforce performance of Article 15.2(b) or to recover damages
for the breach thereof; and/or
(d) all rights of Lessee hereunder shall, in the event the Term
shall be terminated pursuant to Article 15.2(b) henceforth
absolutely cease and terminate but without prejudice to
Lessee's obligations under this Lease all of which shall
continue in full force and effect except for obligations to
pay Rent and Reserve Rate after the Aircraft is returned to
Lessor, and is in the condition required by Article 16; and
Lessee shall cooperate in taking all steps necessary to effect
deregistration of the Aircraft in the State of Registration
and Lessor shall be entitled to sell or otherwise deal with
the Aircraft as if this Lease had never been made. Without
prejudice to the foregoing, Lessee hereby appoints Lessor as
its attorney to do any act or thing required in connection
with such deregistration of the Aircraft.
15.3 If an Event of Default occurs, Lessor shall have the right to demand
that:
(a) Lessee pay all amounts which may be then due and unpaid
hereunder, and
(b) at Lessor's option whether or not Lessor shall have exercised,
or shall thereafter at any time exercise, any of its rights
under Article 15.2, by thirty (30) days written notice to
Lessee from Lessor specifying a payment date, Lessee pay
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Lessor, and Lessee shall pay Lessor, on the payment date
specified in such notice, as liquidated damages for loss of
bargain and not as a penalty (in lieu of the Rent due for the
Aircraft covered by such notice for the period commencing
after the date specified for payment in such notice), any
unpaid Rent for the Aircraft (prorated in the case of Rent on
a daily basis) to and including the payment date specified in
such notice, plus the amount, if any, by which the aggregate
Rent for the Aircraft for the remainder of the Term for the
Aircraft, discounted periodically (equal to installment
frequency) to present worth at the interest rate of six and a
half percent (6.5%) per annum, exceeds the Fair Market Rental
Value of the Aircraft for the remainder of the Term, after
discounting such Fair Market Rental Value periodically (equal
to installment frequency) to present worth as of the payment
date specified in such notice at the interest rate of six and
a half percent (6.5%) per annum.
Lessee shall fully indemnify Lessor on its own behalf and on behalf
of Head Lessor and Indenture Trustee on demand and on an After-Tax
Basis against any loss (including loss of profit)1 damage, expense
(including without limitation attorneys' fees), cost or liability
which Lessor, Head Lessor or Indenture Trustee may sustain or incur
as a consequence of the occurrence of any Event of Default and/or
termination of the letting of the Aircraft pursuant to this Lease,
including but not limited to (i) any loss of profit suffered by
Lessor and/or Head Lessor because of Lessor's inability to place the
Aircraft on lease with another lessee on terms as favorable to
Lessor as the terms of this Lease or because whatever use, if any,
to which Lessor is able to put the Aircraft upon its return to
Lessor, or the funds arising upon a sale or other disposal thereof,
is not as profitable to Lessor as letting the Aircraft in accordance
with the terms of this Lease would have been to the extent the
foregoing loss of profit shall not be recovered under Article
15.3(b), (ii) any amount of interest, fees or other sums whatsoever
paid or payable on account of funds borrowed in order to carry any
unpaid amount, (iii) any loss, premium, penalty or expense which may
be incurred repaying funds raised to finance the Aircraft or in
unwinding any swap, forward interest rate agreement or other
financial instrument relating in whole to
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Lessor's financing of the Aircraft and/or the Aircraft under the
Other Aircraft Agreements, and (iv) any loss, cost, expense or
liability sustained or incurred by Lessor owing to Lessee's failure
to re-deliver the Aircraft in the condition required by this Lease.
15.4 No remedy referred to in this Article 15 is exclusive, but each
remedy shall be cumulative and in addition to any other remedy
referred to herein or otherwise available to Lessor. The exercise by
Lessor of any of its remedies hereunder shall not preclude or estop
the exercise or beginning of exercise by Lessor of any or more of
such other remedies.
No express or implied waiver by Lessor of any Event of Default, or
failure or delay of Lessor in exercising any right hereunder shall
operate as waiver thereof unless an express waiver is executed and
delivered to Lessee.
15.5 Prior to the Delivery Date Lessee shall deliver to Lessor a duly
authorized consent, undated and in form and substance acceptable to
Lessor, addressed to the Federal Aviation Administration consenting
to the release of this Lease in connection with the termination of
this Lease pursuant to the terms hereof and, if so requested by
Lessor, the deregistration of the Aircraft from the register of
civil aviation in the State of Registration.
16. RETURN OF AIRCRAFT
16.1 On the Expiry Date or upon earlier termination of the Term (unless a
Casualty Occurrence shall have occurred with respect to the
Aircraft), Lessee shall, at its own expense, redeliver the Aircraft
to Lessor at the Redelivery Location or such other airport as is
mutually acceptable to the parties, in a condition complying with
the provisions of Appendix E, free and clear of all liens and
encumbrances (including Permitted Liens other than Lessor Liens) and
upon request of Lessor cooperate in causing the Aircraft to be
removed from the register of civil aviation in the State of
Registration and Lessee shall return the Aircraft to Lessor together
with the Aircraft Documents supplied pursuant to this Lease when the
Aircraft was delivered to Lessee on the Original Delivery Date as
the same may be modified, supplemented or amended during the Term.
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16.2 Immediately prior to such redelivery of the Aircraft, Lessee, at its
own expense, shall make the Aircraft, Aircraft Documents and other
records available to Lessor for inspection ("Final Inspection") in
order to verify that the condition of the Aircraft complies with the
provisions of this Lease. Such inspection shall not unreasonably
interfere with the operation of the Aircraft. The period will be
long enough for the Final Inspection to permit the conduct by Lessor
of the following:
(a) Inspection of the Aircraft Documents;
(b) Inspection of the Aircraft structure and Parts;
(c) Inspection of the Engines and A.P.U., including without
limitation, a borescope inspection or any other equivalent
inspection method supported by Rolls Royce, inspection of the-
compressor and turbine area, and, if reasonably requested
based on evidence that it is required, the Engine and A.P.U.
condition runs confirming release of each Engine and A.P.U for
its remaining operational life;
(d) A one-hour to two-hour test flight with Lessor's
representatives on board as observers and, if any non
compliance is found, a subsequent test flight to check
compliance after rectification.
16.3 To the extent that, upon such Final Inspection, the condition of the
Aircraft and Aircraft Documents does not comply with the provisions
of this Lease, Lessee, at its own expense, shall cause such
non-compliance to be promptly rectified and to the extent such
rectification extends beyond the Expiry Date, the Term shall, at
Lessor's sole option, be deemed to be automatically extended and the
provisions of this Lease shall remain in full force and effect until
such rectification has been accomplished. During such extension of
the Term Lessee shall be liable to pay Rent at a daily pro rata rate
equal to the Rent payable during the last Rental Period of the Term.
16.4 Upon redelivery Lessee shall provide to Lessor all necessary
assistance to enable Lessor to obtain any required documents in
relation to the export of the Aircraft from the State of
Registration, and if different, from the State of Incorporation
(including a valid and subsisting export license for the Aircraft),
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and shall reassign to Lessor, at the expense of Lessee, the benefit
of any indemnity or warranty which has been assigned to Lessee
pursuant to Article 13.3 above to the extent such indemnity or
warranty is assignable.
16.5 Prior to the Expiry Date or upon any earlier termination of the Term
and upon Lessor's request, Lessee will provide Lessor or its agent
reasonable access to and Lessor may make and retain copies of the
Approved Maintenance Program and the Aircraft Documents in order to
facilitate the Aircraft's integration into any subsequent operator's
fleet.
Lessor agrees that it will not disclose the contents of the Approved
Maintenance Program to any person or entity except to the extent
necessary to monitor Lessee's compliance with this Lease and/or to
bridge the maintenance program for the Aircraft from the Approved
Maintenance Program to another program.
16.6 Upon redelivery of the Aircraft to Lessor, an adjustment shall be
made in respect of fuel on board on the Original Delivery Date and
on redelivery at the price then prevailing at the Redelivery
Location.
16.7 If Lessor shall request that Lessee paint the Aircraft any other
basic color as contemplated by Section 1(h) of Appendix E, Lessor
agrees that it shall bear the cost and expense of the difference
between white paint and such other basic color.
16.8 Upon written request of Lessor given to Lessee not later than thirty
(30) days prior to the Expiry Date or termination of the Lease,
Lessee, at the Expiry Date or upon termination of the Lease, will
provide, or will cause to be provided, up to thirty (30) days'
storage of the Aircraft at Lessee's premises, at Lessor's cost and
expense. Lessee shall cause the Aircraft to be delivered to such
designated location at Lessor's cost and expense. During such period
of storage, Lessee will arrange for insurance and maintenance at
Lessor's cost and expense. Lessee shall allow Lessor or any person
designated by Lessor, including the authorized representatives of
any prospective purchaser or user of the Aircraft, to inspect the
same at all reasonable times.
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17. CASUALTY OCCURRENCES
17.1 In this Lease "Casualty Occurrence" shall mean any of the following
events with respect to the Aircraft, the Airframe or an Engine:
(a) the actual, agreed, constructive, arranged or compromised
total loss or destruction of the Aircraft, the Airframe or an
Engine, or damage to the Aircraft, Airframe or Engine
rendering repair impracticable or uneconomical, or the
Aircraft, Airframe or Engine being rendered permanently unfit
for normal use;
(b) requisition of title or other compulsory acquisition,
requisition, capture, seizure, deprivation, confiscation or
detention for any reason of the Aircraft, the Airframe or an
Engine by any Government Entity of the State of Registration
or by any other government or other competent authority,
whether de jure or de facto, but excluding requisition for use
or hire not involving requisition of title by any Governmental
Entity for a temporary period ending on the date ninety (90)
days (or the Expiry Date if the requisition for use or hire is
by the United States) after such requisition, or the Expiry
Date, whichever first occurs;
(c) the hijacking, theft, disappearance, condemnation,
confiscation or seizure of the Aircraft, the Airframe or an
Engine other than in the circumstances referred to in (b)
above which deprives Lessee of the use thereof for more than
ninety (90) consecutive days.
17.2 (a) In the event of a Casualty Occurrence with respect to the
Aircraft or Airframe prior to the Delivery Date, this Lease
shall immediately terminate with respect to such Aircraft and
neither party shall have any further obligation or liability
hereunder, save that Lessor shall return to Lessee the Deposit
or such part thereof as Lessor shall have received from Lessee
and Lessee shall remain liable to reimburse Lessor for any
amounts specified in Article 8.2(a).
(b) In the event of a Casualty Occurrence with respect to the
Aircraft or Airframe after delivery to Lessee hereunder,
Lessee shall pay the Agreed
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Value to Lessor on or prior to the earlier of (i) 45 days
after the Casualty Occurrence and (ii) the Business Day after
the date of receipt of the insurance proceeds in respect of
the Casualty Occurrence and, provided all other amounts which
are then due and payable by Lessee under this Lease have been
paid in full to Lessor, Lessee's obligation hereunder for
payment of Rent shall cease as from the date on which Lessor
receives payment in full of the Agreed Value. Rent paid in
advance for any days which occur after such Agreed Value is
paid shall be repaid to Lessee on a pro rata basis for each
day beyond such date of payment of Agreed Value. Any insurance
proceeds in excess of Agreed Value obtained by Lessee pursuant
to Article 11 for its own account, remaining after payment of
the foregoing amounts shall, unless an Event of Default under
Section 14(n) shall have occurred and be continuing, be paid
over to Lessee.
(c) Subject to the rights of any insurers and reinsurers or other
third party, upon irrevocable payment in full to Lessor of the
Agreed Value and all other amounts which may be or become
payable to Lessor under this Lease, Lessor will cause, title
to the Aircraft to be conveyed from Head Lessor to it, without
recourse or warranty (except as to title and Lessor's Liens)
and without further act, Lessor will convey title to Lessee.
Lessor will or will cause Head Lessor to transfer to Lessee
all of Head Lessor's rights to any Engines and Parts not
installed when the Casualty Occurrence occurred, all on an
as-is where-is basis, and will at Lessee's expense, execute
and deliver or cause to be executed and delivered such bills
of sale and other documents and instruments as Lessee may
reasonably request to evidence (on the public record or
otherwise) the transfer and the vesting of Lessor's rights in
such Engines and Parts in Lessee, free and clear of all rights
of Lessor and Lessor Liens.
17.3 Upon the Casualty Occurrence with respect to any Engine not
involving a Casualty Occurrence of the Aircraft, Lessee shall give
Lessor prompt written notice thereof and Lessee shall replace such
Engine as soon as reasonably possible, but in no event later than
ninety (90) days after such Casualty Occurrence, with a replacement
Engine in accordance with Article 5.1.2(a).
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Such replacement shall be deemed an "Engine" as defined herein.
Lessee agrees to take such action as Lessor may reasonably request
in order that any such replacement engine shall be duly and properly
titled in Head Lessor, leased hereunder and subject to the Security
Interest of the Indenture to the same extent as the Engine replaced
thereby. In such case or in the case of the installation of a
Replacement Engine in accordance with 5.1.2(a), the following
conditions shall be satisfied at no cost or expense to Lessor and
Lessor agrees to cooperate with Lessee to the extent necessary to
enable it to satisfy such conditions in a timely manner:
(i) the following documents shall be duly authorized,
executed and delivered by the respective party or parties
thereto and shall be in full force and effect, and an executed
counterpart of each shall be delivered to Lessor:
(A) a full warranty bill of sale in favor of Head
Lessor, in form and substance reasonably satisfactory to
Lessor, with respect to the Replacement Engine;
(B) a supplement to this Lease, in form and substance
reasonably satisfactory to Lessor, covering the
Replacement Engine (and releasing such replaced Engine
from this Lease) which shall have been duly filed (or a
short form thereof) for recordation with the Aviation
Authority;
(C) a certificate from a duly qualified independent
engineer, which engineer shall be reasonably
satisfactory to Lessor, confirming the operating
condition, value and utility of the Replacement Engine
satisfies the terms of Article 5.1.2(a) (i)
(D) evidence of compliance with the insurance provisions
of Article 11 with respect to such Replacement Engine as
Lessor may reasonably request; and
(E) an opinion of counsel (and such other evidence of
title as Lessor may reasonably request) to the effect
that, such conveyance, is effective to transfer to Head
Lessor title to such Replacement Engine and that it will
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be leased hereunder to the same extent as the Engine
replaced thereby.
Lessor will cause title to the Engine being replaced to be
transferred to Lessee or its designee without recourse or warranty
(except as to title and the absence of Lessor's Liens). Lessee's
obligation to pay the Rent hereunder shall continue in full force
and effect, but Lessee shall be entitled to be reimbursed by Lessor
the amount of insurance or condemnation proceeds, if any, received
by Lessor with respect to such replaced Engine.
17.4 In the event of requisition for hire of the Aircraft or any part
thereof not constituting a Casualty Occurrence, then, subject to the
proviso herein contained, the Rent and other charges payable under
this Lease shall not be suspended or abated either in whole or in
part, and Lessee shall not be released from any of its other
obligations (as to payment, indemnity or otherwise) hereunder (other
than operational obligations with which Lessee is unable to comply
solely by virtue of such confiscation or requisition). If Lessee
shall duly comply with all its obligations under this Lease, Lessee
shall during the Term be entitled to any hire paid by the
requisitioning or confiscating authority and Lessee shall, as soon
as practicable after the end of any requisition or confiscation,
cause the Aircraft to be put into the condition required by this
Lease. Lessor shall be entitled to all compensation payable by the
requisitioning or confiscating authority in respect of any change in
the structure, state or condition of the Aircraft arising during the
period of requisition or confiscation, and Lessor shall apply such
compensation in reimbursing Lessee for the cost of complying with
its obligations as aforesaid, but if any Default has occurred and is
continuing, Lessor shall be entitled to apply such compensation in
or towards settlement of any amounts owing by Lessee under this
Lease PROVIDED ALWAYS that if following such requisition or
confiscation the Aircraft is treated as an agreed, constructive,
arranged or compromised total loss by the insurers, then the
provisions of Article 17.1 shall apply with effect from the date on
which the insurer so determines.
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18. GOVERNING LAW AND JURISDICTION
18.1 This Lease and further agreements resulting herefrom shall be
governed by and construed in accordance with the internal Laws of
the State of New York and without regard to any conflict of law
rules. This Lease is being delivered in the State of New York.
18.2 Lessor and Lessee hereby irrevocably agree to submit to the
non-exclusive jurisdiction of, and to waive any objection to the
laying of venue in, the County of New York and that any suit, action
or proceedings (collectively, "Proceedings") may be brought by
Lessor in any court of the State of New York or any U.S. Federal
court located in New York County, New York.
18.3 Nothing contained in this Article 18 shall limit the right of either
party to this Lease to take Proceedings against the other in any
other court of competent jurisdiction, nor shall the taking of
Proceedings in one or more jurisdictions preclude the taking of
Proceedings in any other jurisdiction, whether concurrently or not.
18.4 Promptly after service of any process Lessor or Lessee shall
despatch a copy thereof to Lessee or Lessor, as the case may be, by
registered mail, postage prepaid but failure of Lessee or Lessor, as
the case may be, to receive such copy shall not invalidate the
service of such process.
18.5 To the extent that the parties may in any jurisdiction claim for
their or their assets immunity from suit, execution, attachment
(whether in aid of execution, before judgment or otherwise) or other
legal process and to the extent that in any such jurisdiction there
may be attributed to themselves or their assets such immunity
(whether or not claimed) the parties hereby irrevocably agree not to
claim and hereby irrevocably waive any immunity to the fullest
extent permitted by the laws of such jurisdiction with the intent,
inter alia, that the foregoing waiver shall have effect for the
purposes of the Foreign Sovereign Immunities Act of 1976 of the
United States of America.
18.6 Lessee and Lessor shall each at all times maintain an agent for
service of process in the New York, New York. For Lessee, such agent
shall be Paul, Hastings, Janofsky & Walker, Attn: John Howitt, 399
Park Avenue, New York, New York 10022-4697. For Lessor, such agent
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shall be Haight, Gardner, Poor & Havens, Attn: Bonny L.Y. Kwoh, 195
Broadway, New York, NY 10007. Any writ, judgment or other notice of
legal process shall be sufficiently served on Lessee or Lessor if
delivered to such agent at its address for the time being. Each of
Lessee and Lessor undertakes that if it shall revoke the authority
of its above agent or if for any reason any such agent no longer
serves as agent to receive service of process, Lessee or Lessor, as
the case may be, shall promptly appoint another such agent and
advise Lessor or Lessee, as the case may be, thereof.
19. MISCELLANEOUS
19.1 The rights of each of Lessor and Lessee under this Lease are
cumulative, may be exercised as often as it considers appropriate
and are in addition to its rights under general law. The rights of
Lessor against Lessee or in relation to the Aircraft (whether
arising under this Lease or the general law) shall not, as against
or in favor of Lessor, be capable of being waived or varied
otherwise than by an express waiver or variation in writing; and in
particular any failure to exercise or delay in exercising any of
such rights shall not operate as a waiver or variation of any other
such right; and defective or partial exercise of any such rights
shall not preclude any other or further exercise of that or any
other such right; and no act or course of conduct or negotiation on
Lessor's part or on Lessor's behalf shall in any way preclude Lessor
from exercising any such right or constitute a suspension or any
variation of any such right.
19.2 Save where expressly provided in this Lease, any certificate or
determination by Lessor as to any rate of interest or as to any
other amount payable under this Lease shall, in the absence of
manifest error, be conclusive and binding on Lessee.
19.3 If any sum paid or recovered in respect of the liabilities of Lessee
under this Lease is less than the amount then due, Lessor may apply
such sum to rental, interest, fees or any other amount due under
this Lease in such proportions and order and generally in such
manner as Lessor shall determine.
19.4 The terms and conditions of this Lease shall not be varied otherwise
than by an instrument in writing executed by or on behalf of Lessor
and Lessee.
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19.5 If any of the provisions of this Lease becomes invalid, illegal or
unenforceable in any respect under any law, the validity, legality
and enforceability of the remaining provisions shall not in any way
be affected or impaired.
19.6 Every notice, request, demand or other communication under this
Lease shall:
(a) be in English;
(b) be in writing and made by mail or by fax or telex transmission
or by reputable courier service;
(c) be deemed to have been received, subject as otherwise provided
in this Lease, in the case of a telex transmission, at the
time of dispatch with confirmed answerback of the addressee
appearing at the beginning and the end of the communication,
in the case of a fax transmission, at the time safe receipt is
confirmed by the addressee provided that if the date of
dispatch is not a business day in the country of the addressee
any telex or fax transmission shall be deemed to have been
received at the opening of business on the next such business
day, in the case of a letter five days after being deposited
in the mail first class postage prepaid and in the case of a
courier three days after being sent; and
(d) be sent:
(1) to Lessee at:
Prior to August 21, 1995:
Midway Airlines Corporation
5713 South Central Avenue
Chicago, Illinois 60638
Fax: (312) 838-2069
Attention: President
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Following August 21, 1995:
300 West Morgan St.
Durham, North Carolina 27702
Attention: President
Fax: (919) 956-7314
(2) to Lessor at:
Wings Aircraft Finance, Inc.
1199 N. Fairfax Street
Suite 500
Alexandria, VA 22314
Fax: (703) 683-2233
Attention: Secretary
or to such other address or telex or fax number as is notified by
either party to the other party to this Lease.
19.7 This Lease may be executed in any number of counterparts and all of
such counterparts taken together shall be deemed to constitute one
and the same instrument.
19.8 This Lease is the sole and entire agreement between Lessor and
Lessee in relation to the leasing of the Aircraft, and supersedes
all previous agreements in relation to such leasing. Each of Lessee
and Lessor represents for itself that no broker has been retained by
it in connection with this Lease.
19.9 This Lease is intended by the parties to be a lease between Lessor
and Lessee. Any waivers, consents, or deferrals of the payment of
Rent and Reserve Rate are not intended to be an agreement by Lessor
to make any capital contribution to the business of Lessee or to
share in or have liability for any of Lessee's losses, profits,
liabilities or obligations. Nothing contained in this Lease or
performed by Lessor in connection herewith and any other agreement
between Lessor and Lessee whether now existing or entered into in
the future shall make Lessor a partner or a joint venturer of Lessee
and shall not for any purpose be construed as a joint-venture
between the parties hereto.
19.10 [Intentionally omitted).
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19.11 Section 1110: Lessee acknowledges that Lessor would not have entered
into this Lease unless it had available to it the benefits of a
lessor under Section 1110 of Title 11 of the United States Code.
Lessee and Lessor hereby state that this Lease is intended to be a
true lease for U.S. Internal Revenue Code purposes. Lessee covenants
and agrees with Lessor that to better ensure the availability of
such benefits, Lessee shall support any motion, petition or
application filed by Lessor with any bankruptcy court having
jurisdiction over Lessee, whereby Lessor seeks recovery of
possession of the Aircraft under said Section 1110 and shall not in
any way oppose such action by Lessor unless Lessee shall have
complied with the requirements of said Section 1110 to be fulfilled
in order to entitle Lessee to continued use and possession of the
Aircraft hereunder. In the event said Section 1110 is amended, or if
it is repealed and another statute is enacted in lieu thereof,
Lessor and Lessee agree to amend this Lease and take such other
action not inconsistent with this Lease as Lessor reasonably deems
necessary so as to afford to Lessor the rights and benefits as such
amended or substituted statute confers upon owners and lessors of
aircraft similarly situated to Lessor.
19.12 [Intentionally omitted]
19.13 As between Lessor and Lessee, if Lessee fails to make any payment of
Rent or Reserve Rate required to be made by it hereunder or fails to
perform or comply with any of its agreements contained herein,
Lessor may itself make such payment or perform or comply with such
agreement, and the amount of such payment and the amount of the
reasonable and properly documented expenses of Lessor incurred in
connection with such payment or the performance of or compliance
with such agreement, as the case may be, together with interest
thereon at the interest rate defined in Appendix D, Paragraph 6,
shall be deemed Supplemental Rent, payable by Lessee upon demand.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS whereof the parties have executed this Lease the day and
year first herein written.
SIGNED on behalf of SIGNED on behalf of
WINGS AIRCRAFT FINANCE, INC. MIDWAY AIRLINES CORPORATION
By: /s/ Dennis de Fory By: /s/ Brian Olds
------------------------------- ---------------------------------
Name: Dennis de Fory Name: Brian Olds
Title: Authorized representative Title: Executive Vice President
<PAGE>
APPENDIX A
DESCRIPTION OF AIRCRAFT
Engine
Manufacturer Model Serial No. Engines Serial No.
- ------------ ----- ---------- ------- ----------
Fokker F28 11450 Two Rolls
MK0100 Royce Tay 17329
MK 650-15 17354
FAA Registration No.
- --------------------
N1O7ML
<PAGE>
APPENDIX B
FURTHER DEFINITIONS AND VALUES
AGREED VALUE : Shall mean, during any year, the amount set forth
opposite such year in Annex 1 to this Appendix B, which
amounts may be adjusted from time to time to reflect
adjustments of the Stipulated Loss Values (as defined in
the Head Lease) in accordance with the Head Lease.
DEPOSIT : {***} and the Additional Deposit described in
Appendix D, if applicable.
RENT : {***} per month, as such amount may be increased
pursuant to Paragraphs 2.2 and 2.3 of Appendix D.
RESERVE RATE : (a) {***} for the months one up to and including
twelve of the Term;
(b) {***} for the months thirteen up to and
including the Expiry Date.
TRANSACTION
EXPENSES : {***}, which, notwithstanding any other provision
in this Lease shall not be paid in cash but shall be
amortized pursuant to Section 2.3 of Appendix D.
<PAGE>
Annex I to Appendix B
Agreed Values
{***} (5 pages omitted)
Date Agreed Value
<PAGE>
APPENDIX C
CERTIFICATE OF ACCEPTANCE
This Certificate of Acceptance is delivered, on and as of the date set forth
below, by Midway Airlines Corporation (herein referred to as "Lessee") to Wings
Aircraft Finance, Inc., (herein referred to as "Lessor") pursuant to that
Aircraft Operating Lease Agreement No. AOLAF-115-A dated as of July 10, 1995
between Lessor and Lessee (herein referred to as the "Lease"):
1. Details of Acceptance
Lessee hereby indicates and confirms to Lessor, its successors and
assigns, that Lessee has at ______ o'clock on this ______ day of _______
199 at _________________________ accepted the following, in accordance
with the provisions of the Lease:
(a) Fokker 100 airframe, Manufacturer's serial Number 11450
(b) Rolls Royce Tay Mk 650-15 Engines (each of which engines has 750 or
more rated takeoff horsepower)
Engine Number Manufacturer's S/N
1. 17329
2. 17354
2. Confirmation of Undertakings
The terms used in this Certificate shall have the meanings given to such
terms in the Lease.
Lessee confirms that today being the Delivery Date as defined in the
Lease:
(i) the Aircraft is duly accepted by Lessee in accordance with and
subject to the provisions of the Lease and the execution and
delivery of this Certificate constitutes the acceptance of the
Aircraft by Lessee for all purposes of the Lease.
DELIVERY BY LESSEE TO LESSOR OF THIS CERTIFICATE OF ACCEPTANCE SHALL
CONSTITUTE CONCLUSIVE PROOF AS BETWEEN LESSOR AND LESSEE THAT ON THE
DELIVERY DATE LESSEE'S TECHNICAL EXPERTS EXAMINED AND INVESTIGATED
THE
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<PAGE>
AIRCRAFT AND EVERY PART THEREOF AND THAT THE AIRCRAFT AND EVERY PART
THEREOF ARE AIRWORTHY AND IN GOOD WORKING ORDER AND REPAIR, WITHOUT
DEFECT WHETHER OR NOT DISCOVERABLE AS AT THE DELIVERY DATE AND IN
EVERY WAY SATISFACTORY TO LESSEE;
(ii) Lessee is obliged to pay to Lessor the amount provided for in the
Lease with respect to the Aircraft;
(iii) the Aircraft is insured in accordance with the Lease;
(iv) the representations and warranties contained in Article 13 of the
Lease remain, and if made at the date of this Certificate of
Acceptance, would be, true and correct in all respects;
(v) there have been affixed to the Aircraft and the Engines the fire
resistant notices required by Article 4.3 of the Lease;
(vi) Lessee has no right of set-off, deduction, withholding or
counterclaim against Lessor whatsoever; and
(vii) no Default is subsisting.
IN WITNESS WHEREOF, Lessee has caused this Certificate of Acceptance to be
executed in its name, by its duly authorized officer(s) or representative(s),
pursuant to due corporate authority, all as of the date written in Paragraph 1
above.
MIDWAY AIRLINES CORPORATION
By:________________________________
Title:_____________________________
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<PAGE>
APPENDIX D
CHARGES
1. Deposit
Lessee has paid to Lessor {***}
as a Deposit for the Aircraft on or prior to the date hereof.
Lessee shall pay the balance of the Deposit to Lessor in consecutive
monthly installments of {***} each, beginning on August 22, 1995,
and on each corresponding day of the month subsequent thereto until the
full Deposit amount as set forth in Appendix B has been paid.
Lessor acknowledges that Lessee has paid the Additional Deposit (as
defined in the Termination Agreement) to Fokker pursuant to the
Termination Agreement and that upon the terms set forth therein, such
Additional Deposit shall be transferred by Fokker to Lessor to be held
as a part of the Deposits under the Lease. Lessor agrees that upon such
transfer, such Additional Deposit shall constitute a part of the
Deposits, the disposition of which shall be subject to the terms and
conditions of the Lease in respect of the Deposits except as expressly
set forth in this Appendix D. The Deposit shall be held by Lessor
during the Term as security for the full and punctual performance of
all of Lessee's obligations to Lessor under this Lease. Lessor may, but
shall not be obliged to, apply the Deposit in whole or in part for the
payment of any Rent, Reserve Rate, indemnities, attorneys' fees and
other expenses, insurance and other casualty payments and any other
amount owing from time to time by Lessee hereunder or, to the extent
provided in Article 15.1(n), under any Other Aircraft Agreement, or for
the payment of any loss or damage suffered by Lessor as a result of any
Event of Default or to perform any of Lessee's obligations under this
Lease or otherwise remedy any other Event of Default, including,
without limitation, in the redelivery condition for the Aircraft
without prejudice to any other remedy of Lessor. In any such event
Lessee shall on demand restore the Deposit to the full amount provided
for herein by payment to Lessor of an amount in cash equal to the
amount applied or utilized. Lessee shall not attempt to subject the
Deposit to any other lien, security interest, charge or other
encumbrance or assign any interest therein to any other person and, to
the extent of its interest therein, if any, Lessee hereby grants to
Lessor a security interest in the Deposit and assigns and transfers
<PAGE>
to Lessor any and all of Lessee's right, title and interest therein, if
any, as security as provided above, and Lessor shall be entitled to the
remedy of offset against and application of the Deposit, without any
notice to or demand against Lessee, all of which are hereby waived.
Should any Event of Default hereunder occur, the Deposit shall
automatically be applied to any sum due to Lessor or as a prepayment of
any sum to become payable to Lessor, unless Lessor thereafter elects
otherwise by notice to Lessee.
Any remaining Deposit shall be repaid by Lessor to Lessee ten (10) days
following the Expiry Date or other date after redelivery of the
Aircraft in full compliance with all the requirements of Section 16 and
otherwise in accordance with this Lease or upon payment of the Agreed
Value and all other amounts owed under this Lease, so long as no Event
of Default under Section 15.1(n) shall have occurred and be continuing.
In the event there is a dispute as to whether Lessee is entitled to a
return of any portion of the Deposit, Lessor shall so return the
undisputed amount of the Deposit. Upon a repayment of such Deposit or
portion thereof, Lessor's security interest in such Deposit or portion
thereof being repaid shall be deemed released.
Lessor's obligations in respect of the return of the Deposit shall be
those of debtor of Lessee, not of a trustee or other fiduciary.
The Deposit (other than the Additional Deposit) shall bear interest on
the amounts then held at a rate of interest per annum yielding
$10,500.00 (Dollars Ten Thousand Five Hundred) per year payable
annually commencing on the first anniversary of the Original Delivery
Date, and on each anniversary thereafter unless the Deposit and
interest thereon shall have been applied pursuant to this Lease. Any
reference to the Deposit in this Lease shall include the interest
accumulated thereon and not paid to Lessee.
The Additional Deposit shall include the interest to be accrued under
the Termination Agreement for the period prior to, and shall bear
interest on the amount thereof from, the date such Additional Deposit
is transferred to Lessor to such date as the Additional Deposit may be
returned to Lessee under the Lease at a rate of per annum equal to
LIBOR for the applicable six month period as determined from time to
time. For purposes of this Agreement, six month LIBOR shall have the
definition given thereto in Paragraph 6 of this Appendix D. Such
interest shall accrue and subject to the terms of this Paragraph 1, be
paid to Lessee upon the repayment to Lessee of the Additional Deposit
pursuant to
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<PAGE>
the third clause of this Paragraph 1 or the next following clause. Any
reference to the Additional Deposit in this Agreement shall include the
interest accumulated thereon and not paid to Lessee.
Notwithstanding the terms of the third clause of this Paragraph 1,
provided that no Default as set forth in Article 15.1 (a), (b), (f), (g),
(h) or (m) and is continuing, any remaining Additional Deposit shall be
repaid by Lessor to Lessee on the fourth anniversary of the Original
Delivery Date.
2. Rent
2.1 Rent shall be due and payable on each Rent Date. If such date is not
a Business Day then Rent shall be due and payable on the last
Business Day preceding such date.
2.2 The monthly Rent shall also be adjusted upward by an amount equal to
$875.00 (Dollars Eight Hundred Seventy Five) per month which shall
be payable to Lessor by check annually commencing on the first
anniversary of the Original Delivery Date, and on each anniversary
thereafter. Lessee may elect to authorize Lessor in writing to
set-off amounts payable pursuant to this Article 2.2 against
interest on the Deposit which is payable by Lessor pursuant to
Paragraph 1 of this Appendix D whether or not an Event of Default
shall have occurred and be continuing, and whether or not Lessor
exercises its right to terminate this Lease after such Event of
Default.
2.3 The monthly Rent shall also be adjusted upward by an amount (the
"Transaction Expense Amount") of $907.00 (Dollars Nine Hundred
Seven) per month which shall be payable on each Rent Date. If
Lessee exercises the right to purchase the Aircraft on the Option
Exercise Date (as defined in Paragraph 9 of this Appendix D), an
amount (the "Additional Amount") in Dollars shall be due and
payable on the Option Exercise Date, such Additional Amount to be
equal to the present value as at the Option Exercise Date
(discounted at the interest rate of six and a half percent (6.5%)
per annum) of all unpaid Transaction Expense Amounts that would
have been payable during the period from the Option Exercise Date
to the Expiry Date
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<PAGE>
had Lessee not exercised the right to purchase the Aircraft.
3. Reserve Rate
3.1 Lessee shall be relieved of its obligation to pay the Reserve Rate
at any time that the Aircraft Maintenance Agreement is in effect
with respect to the Aircraft. At any time that the Aircraft
Maintenance Agreement is not in effect, then Lessee shall, in
addition to installments of Rent, pay to Lessor the Reserve Rate as
follows:
(a) by way of an Airframe maintenance accrual, the sum of {***}
for the months one up to and including twelve of the Term
and {***} for the months thirteen up to and including the
Expiry Date for each Flight Hour the Aircraft is operated
during the Term ("Airframe Maintenance Accrual"), and
(b) by way of an Engine maintenance accrual, in respect of each
Engine the sum of {***} for the months one up to and
including twelve of the Term, and {***} for the months
thirteen up to and including the Expiry Date for each
Flight Hour operated by each Engine during the Term
("Engine Maintenance Accrual"), and
(c) by way of a landing gear maintenance accrual, the sum of
{***} for the months one up to and including twelve of the
Term, and {***} for the months thirteen up to and including
the Expiry Date for each Cycle operated by the landing gear
during the Term ("Landing Gear Maintenance Accrual"), and
(d) by way of an A.P.U. maintenance accrual, the sum of {***}
for the months one up to and including twelve of the Term,
and {***} for the months thirteen up to and including the
Expiry Date for each Flight Hour operated by the A.P.U.
during the Term ("A.P.U. Maintenance Accrual").
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<PAGE>
The Airframe, Engine, Landing Gear and A.P.U. Maintenance Accruals
accruing in any Rental Period shall be paid by Lessee to Lessor not
later than ten (10) days after the end of the calendar month in
which such Rental Period shall end. Concurrently with the payment
thereof, Lessee shall report to Lessor (in accordance with Article
7.1 (e)) the number of Flight Hours and Cycles accumulated in
respect of the period for which payment is being made.
The Reserve Rate will be subject to adjustment every twelve (12)
months during the Term by reference for 65% to the Employment and
Earnings Index for U.S.A. labor cost average hourly earnings of
production (Aircraft Equipment) SIC 3728, table C-2 and for 35% to
the Producer Price Index for U.S.A. material cost commodity
groupings (Machinery and Equipment) Code 11/table 6. In addition the
Engine Maintenance Accrual will be subject to adjustment every
twelve (12) months during the Term having regard to the Engine
Manufacturer recommendations, industry experience and any change in
the operational environment of the Aircraft.
Any Reserve Rate shall, if requested by either Lessor or (unless an
Event of Default shall have occurred and be continuing) Lessee, be
adjusted to take into account any changes in the maintenance
intervals upon which Reserve Rates are based.
3.2 Maintenance Accruals as defined in paragraph 3.1 above and received
by Lessor shall respectively be credited to funds (collectively
"Maintenance Funds") to be known as the "Airframe Maintenance Fund",
the "Engine Maintenance Fund", the "Landing Gear Maintenance Fund"
and the "A.P.U Maintenance Fund" which funds shall reduce as monies
are released to Lessee therefrom in accordance with Article 7.4.1.
3.3 [Intentionally deleted]
3.4 The Reserve Rates shall accrue interest at the applicable six (6)
months US Dollar LIBOR rate (as defined in Paragraph 6 of this
Appendix D) minus point twenty five percent (.25%) per annum, which
interest shall be added to the relevant Maintenance Fund.
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<PAGE>
3.5 If Lessee would otherwise be required to pay the Reserve Rate
hereunder and if Lessee has improved its retained accumulated net
earnings (as determined in accordance with generally accepted United
States accounting principles consistently applied) by an amount
exceeding $9,000,000 (Dollars Nine Million) from the level of such
earnings as at February 28, 1995, then Lessee's obligation to
continue to pay Reserve Rates hereunder shall be stayed, provided,
however, that in connection with the release of monies to Lessee
from the Maintenance Fund pursuant to Article 7.4.1, prior to the
release of monies, if Lessee cannot provide Lessor with evidence,
reasonably satisfactory to Lessor, that Lessee continues to have
such level of retained earnings, Lessee's obligation to pay Reserve
Rates shall recommence pursuant to the terms hereof and no monies
shall be released from the Maintenance Fund until such time as it
shall have been restored to the level at which it would have been
had this paragraph not been in effect.
Lessee hereby represents that its retained accumulated net earnings
(as determined in accordance with generally accepted United States
accounting principles consistently applied) as at February 28, 1995
was negative (-) $15,270,000, subject to final year-end audit
adjustment.
If Lessee would otherwise be required to pay Reserve Rate hereunder,
Lessee may, at its election, pay to Lessor the amount which is
necessary to cause monies standing in the Maintenance Fund to equal
$1,500,000.00 (Dollars One Million Five Hundred Thousand) and
thereafter Lessee shall have no further obligation to make Reserve
Rate payments hereunder, provided, however, that thereafter no funds
shall be released to Lessee from the Maintenance Fund pursuant to
Article 7.4.1. It is understood, for the avoidance of doubt, that
the foregoing terms of this Article 3.5 shall not affect Lessee's or
Lessor's obligations under Article 3.6 of this Appendix D.
3.6 On the Expiry Date, if there is any Excess (as defined below) in any
Maintenance Fund, such Excess shall, unless a Default shall have
occurred and be continuing (in which case only after
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<PAGE>
termination, return of the Aircraft and payment of all amounts due
following exercise of remedies under Article 15), be paid to Lessee,
and on such date, if there is any Shortfall (as defined below),
Lessee shall pay such Shortfall to Lessor.
"Excess" in any Maintenance Fund on the Expiry Date shall mean any
positive difference obtained by subtracting (x) from (y) for the
Airframe, Engines, Landing Gears or A.P.U., as the case may be; (x)
shall mean the product of (I) the then market cost from an
independent Authorized Maintenance Performer in the United States
mutually agreed upon by Lessor and Lessee and corrected for the
experience of all United States based operators of Fokker 100
aircraft for the relevant item:
with respect to the Aircraft, to perform a scheduled airframe
heavy maintenance as defined in the Maintenance Program for
12,000 hours and 24,000 hours inspections or any equivalent
thereof with more or less hours ("Airframe Maintenance"), or
with respect to any Engine, to perform a scheduled shop visit
engine maintenance and repair, other than (i) repairs arising
as a result of foreign object damage or operations mishandling
and/or (ii) maintenance and repair of QEC (Quick Engine
Change) kits ("Engine Maintenance"), or
with respect to any nose or main landing gear to perform a
schedule shop visit nose and main landing gear maintenance and
repair, other than repairs arising as a result of foreign
object damage or operational mishandling ("Landing Gear
Maintenance"), or
with respect to Auxiliary Power Unit ("A.P.U.") to perform an
off Aircraft shop A.P.U. maintenance and repair, other than
repairs arising as a result of foreign object damage or
operational mishandling ("A.P.U. Maintenance"), and
(II) a fraction of which (a) the numerator shall be the difference
between the actual number of hours or cycles (as to landing gear),
as the case
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<PAGE>
may be, of operation remaining on the Airframe, Engine, Landing Gear
or A.P.U., as the case may be, to the next such Airframe
Maintenance, Engine Maintenance, Landing Gear Maintenance or A.P.U.
Maintenance, as the case may be, and the total number of hours or
cycles, as the case may be, of operation allowable between such
Maintenance and (b) the denominator shall be the total number of
hours or cycles, as the case may be, of operation allowable between
such Maintenance.
(y) shall mean the actual dollar amount remaining in the respective
Maintenance Fund.
"Shortfall" in any Maintenance Fund on the Expiry Date shall mean
any negative difference obtained by subtracting (x) above from (y)
above, it being understood that Lessee shall not be relieved from
its obligation to pay the Shortfall notwithstanding the waiver by
Lessor at any time during the Term of Lessee's obligation to pay the
Reserve Rate.
4. Payments
All payments due hereunder shall be effected by Lessee to Lessor by
transfer to Lessor's account at Chemical Bank, New York, New York, Account
No. 400-056-011, Ref. Aircraft MSN 11450, AOLAF-115-A, in Dollars and in
immediately available funds, and all such payments shall be initiated
adequately in advance of the due dates to ensure that Lessor receives
credit for the full amount of such payment on the due dates. All such
payments shall be made in full without any deduction or withholding
(whether in respect of set-off, counterclaim, duties, taxes, charges or
otherwise howsoever) unless Lessee is prohibited by Law from doing so, in
which event Lessee shall (a) ensure that the deduction or withholding does
not exceed the minimum amount legally required; (b) and if the withholding
is a Tax for which Lessee is required to indemnify Lessor pursuant to
Article 8 of this Lease or is a wire transfer charge or other charge for
which Lessee is responsible under this Lease, forthwith pay to Lessor on
an After-Tax Basis such additional amount as shall result in the net
amount received by Lessor being equal to the amount which would have been
received by Lessor had such a deduction or withholding not been made; (c)
pay to the relevant taxation or other authorities within the period for
payment permitted by applicable Law the full amount of the deduction or
withholding with respect to any tax; and (d) upon request in writing from
Lessor to Lessee
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<PAGE>
furnish to Lessor, within the period for payment permitted by applicable
Law, an official receipt of the relevant taxation or other authorities
involved for all amounts deducted or withheld as aforesaid.
5. Currencies
If under any applicable Law, whether as a result of judgment against
Lessee or the liquidation of Lessee or for any other reason, any payment
under or in connection with this Lease is made or recovered in a currency
other than United States Dollars then, to the extent that the payment
(when converted to United States Dollars at the rate of exchange on the
date of payment or, in the case of the liquidation, the latest date for
the determination of liability permitted by the applicable Law) falls
short of the amount unpaid under this Lease, Lessee shall, as a separate
and independent obligation, fully indemnify Lessor against the amount of
the short fall; for the purposes of this paragraph, "rate of exchange"
means the rate at which Lessor is able on the relevant date to purchase
United States Dollars in London with that other currency.
6. Default Interest
If any amount payable pursuant to this Lease is not paid by Lessee on the
due date, Lessee shall pay to Lessor interest (after as well as before
judgment) on such amount, at the rate of LIBOR, which shall equal the
arithmetic mean expressed as a number (i.e., 40 per cent is 40 and not
0.4) of the rates of interest per cent per annum (rounded if not already
such a multiple, to the nearest whole multiple of 1/16th of one per cent)
at which, at or about 11.00 a.m. (London time) on the day two Business
Days before the Default, deposits in Dollars are offered for the duration
of six months on the REUTERS "LIBO" page (or such other page as may
replace it from time to time) ("LIBOR") plus four per cent (4%) per annum
from the due date to the date of payment in full by Lessee to Lessor, but
in the event such rate shall be in excess of the highest rate permitted by
applicable Law, then it shall mean the highest rate allowed by applicable
Law. All amounts of interest payable hereunder shall be calculated on the
basis of the actual number of days elapsed and a 360 day year.
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<PAGE>
7. Set-off
At any time after a Default shall have occurred and be continuing, Lessor
shall be entitled to set-off or withhold from any amount due and payable
to Lessee under this Lease or, to the extent provided in Article 15.1(n),
any Other Aircraft Agreement, in or towards the satisfaction of any
amounts from time to time due and payable by Lessee under this Lease or,
to the extent provided in Article 15.1(n), any Other Aircraft Agreement or
any liability or obligation of Lessee under this Lease or, to the extent
provided in Article 15.1(n), any Other Aircraft Agreement, and shall be
entitled to do so notwithstanding that any such amount or amounts may not
be expressed in the same currency.
8. Time at which payments are due
Supplemental Rent shall be due and payable on demand unless otherwise
expressly stated herein.
9. Purchase Option
Lessor grants to Lessee the right to purchase and to take delivery of the
Aircraft (a) on January 2, 2010 (the "Option Exercise Date") for a price
equal to the greater of the FMV of the Aircraft on such date (as
determined by the Appraisal Procedure described in this Paragraph) and
{***}; or (b) on the Expiry Date for a price to the greater of the
FMV of the Aircraft on the Expiry Date (as determined by the appraisal
procedure described in this paragraph) and {***}. If Lessee elects to
exercise its right to purchase the Aircraft, provided no Event of
Default shall have occurred and be continuing, Lessee shall do so by
giving to Lessor written notice of such election, which election shall
be irrevocable, at least two hundred seventy (270) days prior to the
Option Exercise Date or Expiry Date, as the case may be. On the Option
Exercise Date or the Expiry Date, as the case may be, if Lessee has given
notice pursuant to the preceding sentence, Lessee shall pay, in addition
to the amount set forth in clause (a) or (b) above as appropriate, all
Rent (if any) due and owing on such date and any other amounts due and
owing by Lessee under this Lease, including, but not limited to, any
Additional Amount pursuant to Paragraph 2.3 of this Appendix D and, upon
receipt of all of the foregoing amounts then due and owing, Lessor shall
pay to Lessee any Rent paid in advance for the period after such date,
the Deposits and any remaining
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Maintenance Funds and shall transfer, or cause to be transferred, title
without recourse or warranty (except as to the absence of Lessor's Liens)
to the Aircraft to Lessee or its designee. Lessor and Lessee shall also
share equally all costs associated with the exercise of Lessee's right to
purchase the Aircraft. The FMV of the Aircraft on the Option Exercise Date
and (so long as the Head Lease shall not be in effect) on the Expiry Date
shall be established by mutual agreement between Lessor and Lessee and if
no agreement can be reached as to the FMV of the Aircraft, a determination
of such value by a qualified aircraft appraiser mutually satisfactory to
Lessor and Lessee no later than forty-five days prior to the date relevant
to such determination. If Lessor and Lessee are unable to select such an
appraiser by the fifteenth day prior to the date relevant to such
determination, then such value of the Aircraft shall be determined as
follows: two qualified aircraft appraisers, one chosen by Lessor and one
by Lessee, shall mutually agree thereupon, but if either party shall fail
to choose an appraiser within fifteen days after notice from the other
party of the selection of its appraiser, then the appraisal by such
appointed appraiser shall be the value applicable to the Aircraft. If the
two appraisers cannot agree within fifteen days after both shall have been
appointed, then a third appraiser shall be selected by the two appraisers
or, failing agreement as to such third appraiser within ten days after
both shall have been appointed, by the American Arbitration Association.
The third appraiser shall select the appraisal which such appraiser
believes to be closest to the FMV of the Aircraft and such amount shall be
the FMV. The decision of the third appraiser shall be given within ten
days of its appointment. The foregoing procedures in respect of obtaining
the FMV of the Aircraft by one or more appraisers shall be herein called
the "Appraisal Procedure". The FMV of the Aircraft (so long as the Head
Lease shall be in effect) on the Expiry Date shall be established by the
appraisal procedure set forth in the Head Lease, whereby if the FMV of the
Aircraft is not established by mutual agreement between the Head Lessor
and Lessor, the FMV of the Aircraft will be a determination obtained in
accordance with the Appraisal Procedure with Head Lessor and Lessor
participating therein at the direction of the Lessee in lieu of Lessor.
Lessor hereby agrees that in connection with such Appraisal Procedure,
Lessee may choose any qualified aircraft appraisers to be appointed and
may otherwise participate in the Appraisal Procedure and the determination
of the FMV of the Aircraft. The FMV shall be equal in amount to the value
that would be obtained in an arm's-length transaction between an informed
and willing buyer-user under no
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<PAGE>
compulsion to buy, and an informed and willing seller, under no compulsion
to sell, evaluating the Aircraft based on the assumption that it is in the
condition required to be maintained for operating service by the terms of
the Lease. All costs and expenses of the Appraisal Procedure shall be
shared equally by Lessor and Lessee. Subject to Paragraph 7 of this
Appendix D, any amounts remaining in the Maintenance Funds shall be paid
to Lessee concurrently with its payment of the purchase price of the
Aircraft pursuant to this Paragraph 9. Lessor represents and warrants to
Lessee that Lessor has the right under the Head Lease to grant the
foregoing options to Lessee and to cause title to the Aircraft to be
transferred to Lessee upon exercise thereof as provided above and the
Appraisal Procedure is the same as the "Appraisal Procedure" in the Head
Lease and that Lessor will not amend such "Appraisal Procedure" in the
Head Lease without Lessee's prior written consent (such consent not to be
unreasonably withheld).
10. Wet Leasing and Subleasing
So long as no Event of Default shall have occurred and be continuing,
without the prior written consent of Lessor, Lessee may wet lease the
Aircraft including the Engines (the term "wet lease" meaning an agreement
whereby Lessee or Sublessee at all times retains operational control of
the cockpit and the Aircraft), provided, that Lessee's obligations under
this Lease shall continue in full force and effect during the period of
such wet lease and none of the Aircraft nor the Airframe nor any Engine
will be used "predominantly outside the United States" within the meaning
of Section 168(g) of the Code (as Code is defined in Article 8A) during
the period from the Delivery Date to the last day of the year in which the
seventh anniversary of the Delivery Date occurs.
So long as no Event of Default shall have occurred and be continuing, if
Wings Aircraft Finance, Inc. or any other affiliate or subsidiary of
Fokker is not either (x) the Lessor under the Lease or (y) holder of the
entire beneficial interest in the ownership of the Aircraft, Lessee may
sublease the Aircraft including the Engines, provided, that the following
conditions are met, in form and substance satisfactory to the then Lessor
under the Lease:
(a) Lessee (x) shall have a credit rating of "BB" as determined by
Standard & Poors Corporation or "Ba2" as determined by Moody's
Investors Service or an equivalent rating as determined by a
nationally recognized rating agency reasonably acceptable to
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<PAGE>
Lessor (or equivalent private rating), or if the proposed sublessee
meets such a credit rating standard and the sublease is assigned to
Lessor and (y) shall be a person that is a citizen of the United
States of America as defined in Section 40102 (a) (15) of Title 49
of the United States Code (or any similar legislation of the United
States of America enacted in substitution or replacement therefor)
holding an air carrier operating certificate issued by the Secretary
of Transportation pursuant to Chapter 447 of Title 49 of the United
States Code (or any predecessor or successor legislation therefor)
for aircraft capable of carrying ten or more individuals or 6,000
pounds or more cargo which is also certificated so as to entitle
Lessor to the benefits of Section 1110 of Title 11 of the United
States Code with respect to the Aircraft;
(b) the proposed sublessee is not subject to a proceeding or final order
under applicable bankruptcy, insolvency or reorganization laws on
the date the proposed sublease is entered into;
(c) the proposed sublessee is a person (x) (except the United States
government) that is a citizen of the United States of America as
defined in Section 40102 (a)(15) of Title 49 of the United States
Code (or any similar legislation of the United States of America
enacted in substitution or replacement therefor) holding an air
carrier operating certificate issued by the Secretary of
Transportation pursuant to Chapter 447 of Title 49 of the United
States Code (or any predecessor or successor legislation therefor)
for aircraft capable of carrying ten or more individuals or 6,000
pounds or more cargo which is also certificated so as to entitle
Lessor to the benefits of Section 1110 of Title 11 of the United
States Code with respect to the Aircraft; or (y) which holds a duly
issued air carrier operating certificate issued by the jurisdiction
of its domicile and principal place of business;
(d) the proposed sublessee is an air carrier domiciled and principally
located in any of the United States, Canada, a member state of the
European Union, Switzerland, Norway or Japan or other country
reasonably acceptable to Lessor, provided, that (x) the United
States and The Netherlands maintain diplomatic relations with such
country on the date of such determination and (y) there are no
economic sanctions imposed against such country by the government of
the
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<PAGE>
United States or the United Nations or the European Union such that
persons in the United States or member states of such organizations
are prohibited or strongly discouraged from doing business in or
with such country and (x) such country is not engaged in armed
conflict with the armed forces of the United States or a member of
the European Union;
(e) such proposed sublease shall not (w) be for a term, including any
renewal options thereunder that extends beyond the Expiry Date, (x)
provide a sublessee with a purchase option for the Aircraft, (y)
permit any sub-subleasing of the Aircraft by the proposed sublessee,
and (z) permit a proposed sublessee the rights of quiet enjoyment in
the Aircraft; and
(f) such proposed sublease shall (x) contain a waiver of sovereign
immunity by the proposed sublessee, (y) be on terms and conditions
which are not inconsistent with the rights of Lessee under the Lease
and (z) be expressly subject and subordinate to all of the terms of
the Lease, the Head Lease and the Indenture.
For such sublease, Lessor, shall receive, in form and substance reasonably
satisfactory to Lessor,
(a) a certificate of insurance signed by an insurance broker to the
effect that the Aircraft shall be, upon such sublease, insured in
accordance with the requirements of the Lease;
(b) evidence that all filings, registrations and applications and the
receipt of all consents, necessary or advisable in connection with
the sublease of the Aircraft, the recognition of Lessor's rights in
the Aircraft, the recognition of Head Lessor's title in the
Aircraft, and the continued status of the Indenture as a first
priority Lien on the Aircraft have been made or given;
(c) assurances that such sublease will not result in the imposition of,
or increase in the amount of, any Taxes, expense, claim, loss or
damage for which Lessee is not required to indemnify Lessor pursuant
to the Lease; and
(d) assurances of the payment by Lessee or the sublessee of all related
costs and expenses (including, without limitation, the reasonable
costs and disbursements of counsel to Lessor relating to such
sublease.
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<PAGE>
Prior to the delivery of the Aircraft under the sublease, Lessor, shall
have received, in form and substance reasonably satisfactory to Lessor,
opinions of counsel to Lessee or the sublessee with respect to the
jurisdiction in which such sublessee is domiciled and principally located,
to the effect that
(a) the terms (including the governing law, service of process and
submission to jurisdiction provisions thereof) of the Lease, the
Head Lease and the Indenture are legal, valid, binding and
enforceable under the laws of such jurisdiction (subject to
customary, exceptions as to enforceability and the effectiveness of
certain remedial provisions which exceptions do not affect the
practical realization of benefits intended to be provided by such
documents);
(b) it is not necessary for Lessor, Indenture Trustee or any Participant
to qualify to do business in such jurisdiction solely as a result of
such sublease;
(c) the courts of such jurisdiction would give effect to Lessor's
leasehold interest in the Aircraft, Head Lessor's title to the
Aircraft and insofar as the laws of such jurisdiction are concerned
Head Lessor will continue to be recognized as the owner of the
Aircraft;
(d) the lien of the Indenture will continue to be a first priority, duly
perfected lien on the Aircraft after giving effect to such sublease;
(e) the courts of such jurisdiction would provide at least substantially
equivalent protection to Lessor, Head Lessor, the Owner Participant,
the Loan Participant and Indenture Trustee as provided under United
States and applicable state law in respect of the transactions
contemplated by such sublease, including, without limitation, the
remedies provided under the Indenture, the Head Lease, the Lease and
the sublease (subject to customary exceptions as to enforceability
and the effectiveness of certain remedial provisions which do not
affect the practical realization of benefits intended to be provided
by such documents);
(f) any import permit necessary to take the Aircraft into such country
has been obtained;
(g) there is no tort liability of the owner, lessor or mortgagee of an
aircraft not in possession thereof
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<PAGE>
under the laws of such jurisdiction more onerous than under the laws
of the United States;
(h) all filings, registrations and declarations that are necessary or
advisable in connection with such sublease have been duly made and
are effective;
(i) the courts of such jurisdiction would give effect to the waiver of
sovereign immunity given by the sublessee;
(j) the courts of such jurisdiction would give effect to the sublease
being subject and subordinate to the Lease, the Head Lease and the
Indenture; and
(k) that there exist no possessory rights in favor of the sublessee
which upon Lessee's bankruptcy or other default under the Lease
would prevent the return of the Aircraft in accordance with the
terms of the Lease or inhibit Lessor's rights therein.
If, in connection with a sublease, the proposed sublessee requests that
the registration of the Aircraft be changed from that of the State of
Registration, such change of registration shall be subject to the prior
written consent of Lessor.
11. Excess Insurance
For so long as the Agreed Value exceeds {***}, Lessor shall reimburse
Lessee for Lessee's incremental cost of the premium relating to All Risks
Aircraft Hull insurance, or, if applicable, Aircraft Hull War and Allied
Perils insurance with respect to the amount of such excess.
At any time that the Agreed Value is less than {***} and the Agreed
Value is or was changed to reflect adjustments in the Stipulated Loss
Values (as defined in the Head Lease) due to the issuance of loan
certificates pursuant to the Indenture, Lessor shall reimburse Lessee
for Lessee's incremental cost of the premium relating to All Risk Hull
insurance or, if applicable, Aircraft Hull War and Allied Perils
insurance, attributable to such change in the Agreed Value.
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<PAGE>
12. Maximum Takeoff Weight
Lessee agrees that, upon the written request of Lessor, Lessee will
undertake as soon as reasonably practicable and within its normal
maintenance schedule to perform or to supervise the performance by outside
contractors approved by Lessor of such alterations to the Aircraft as are
necessary to permit the Aircraft to be operated at a maximum takeoff
weight ("MTOW") of 101,000 pounds, with the Manufacturer to be responsible
for obtaining Air Authority certification of operation as MTOW 101,000
pounds.
13. Supplement to Article 8A.5
If any Head Lease Tax Indemnitee shall pay any amount to Lessor pursuant
to Section 7A(n) of the Participation Agreement for which Lessee has
previously paid an indemnity to Lessor pursuant to Article 8A.1 hereof,
Lessor shall pay such amount to Lessee within 15 Business Days after
Lessor receives such amount.
14. Supplement to Article 8A.9(r)
Article 8A.9(r) (relating to the definition of "Specified Tax") shall be
modified by inserting at the end of clause (i) the phrase "under this
Lease or under applicable Law" and by changing the words "Closing Date" to
"Delivery Date" in clause (vii).
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<PAGE>
APPENDIX E
OPERATING CONDITION AT REDELIVERY
Upon redelivery of the Aircraft to Lessor, the Aircraft shall, subject to
ordinary wear and tear generally:
1. General Condition
(a) Be clean by airline standards;
(b) Have installed the Engines, and other equipment, Parts and
accessories and loose equipment as would remain installed in such
Aircraft, and shall be in a condition suitable for operation in
commercial service;
(c) Have in existence a valid Certificate of Airworthiness with respect
to the Aircraft issued by the Air Authority of the State of
Registration with a validity of at least nine (9) months after the
date of redelivery of the Aircraft to Lessor;
(d) Comply with the manufacturer's original specifications therefor,
set forth in Annex 1 to this Appendix E;
(e) Have undergone, immediately prior to rede1ivery, a 3000 check or any
subsequent higher inspection, if due within 3000 hrs, in accordance
with the Approved Maintenance Program, shall be free of any waivers,
and all deferred maintenance, if any, shall have been accomplished;
each engine and A.P.U. shall have had an inspection in accordance
with Article 16 confirming release for its remaining operational
life;
(f) All outstanding airworthiness directives and mandatory orders
affecting such model of Aircraft issued by the Air Authority which
require compliance during the Term shall have been accomplished;
(g) Have installed all applicable vendors' and manufacturers' service
bulletin kits theretofore received by Lessee free of charge that are
appropriate for the Aircraft and to the extent not installed, such
kits shall be furnished free of charge to Lessor;
(h) Stripped of all Lessee's paint scheme and repainted through an
Authorized Maintenance Performer with Manufacturer approved paints
in white or any other basic color requested by Lessor; and
<PAGE>
(i) Have been inspected and treated with respect to corrosion as defined
in the Approved Maintenance Program.
2. Airframe and major components
The Airframe and major components shall have not less than the following
hours/cycles/months expected life remaining to the next Major Check and/or
overhaul:
-Airframe : 3000 hours and 12 months to
next Major Check;
-Engine : half life on average to next
Engine shop visit but in no
event less than 3000 hours;
-Main Landing Gear : 3000 cycles to next overhaul;
-Nose Landing Gear : 3000 cycles to next overhaul;
*The records as to remaining engine life shall be certified by Lessee in
writing to Lessor upon redelivery of the Aircraft to Lessor.
3. Components
(a) Each life-limited Part shall have not less than 3000 (Three
Thousand) flight hours or cycles of the total approved life
remaining to the scheduled replacement, in accordance with the
Approved Maintenance Program;
(b) Each hard-time controlled component shall have not less than 3000
(Three Thousand) Flight Hours or 3000 (Three Thousand) Cycles or 12
(twelve) months whatever is applicable, remaining to the next
scheduled overhaul/inspection, in accordance with the Approved
Maintenance Program;
(c) "On-condition" and "Condition Monitored" components shall be
serviceable;
(d) The A.P.U. shall be serviceable.
4. Fuselage, Windows and Doors
(a) Fuselage shall be free of major dents and abrasions, scab patches
and loose or pulled or missing rivets;
(b) Windows shall be free of delamination, blemishes, crazing and shall
be properly sealed;
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<PAGE>
(c) Doors shall be free moving, correctly rigged and be fitted with
serviceable seals.
5. Wings and Empennage
(a) All leading edges shall be free from damage;
(b) All unpainted cowlings, fairings and other surfaces shall be
polished;
(c) Wings shall be free of fuel leaks.
6. Interior
(a) Ceilings, sidewalls and bulkhead panels shall be clean and free
of cracks and stains;
(b) All carpets and seat covers shall be in good condition, clean and
stain free and meet Air Authority fire resistance regulations;
(c} All seats shall be serviceable, in good condition and repainted
as necessary;
(d) All signs and decals shall be clean and legible;
(e) All emergency equipment having a calendar life shall have a minimum
of one year or one hundred per cent of its total approved life,
whichever is less, remaining.
7. Cockpit
(a) All decals shall be clean, secure and legible;
(b) All fairing panels shall be free of stains and cracks, shall be
clean, secure and repainted as necessary;
(c) Floor coverings shall be clean and effectively sealed;
(d) Seat covers shall be in good condition, clean and shall conform to
Air Authority fire resistance regulations;
(e) Seats shall be fully serviceable and shall be repainted as
necessary.
8. Cargo Compartments
(a) All panels shall be in good condition;
(b) All nets shall be in good condition.
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<PAGE>
9. Landing Gear and Wheel Wells
(a) Shall be clean, free of leaks and repaired as necessary;
(b) All decals shall be clean, secure and legible.
10. Corrosion
(a) Entire fuselage shall be substantially free from corrosion and shall
be adequately treated and an approved corrosion prevention program
shall be in operation;
(b) Fuel tanks shall be free from contamination and corrosion and a tank
treatment program shall be in operation.
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<PAGE>
APPENDIX F
AIRCRAFT DOCUMENTS
FOKKER 100 AIRCRAFT
Aircraft Documents shall include the documents referred to in Table I ("Aircraft
Documentation"), Section (D), Exhibit (D) of the Support Services Agreement No.
ASSAF-110 between FAUSA and Lessee.
Aircraft Documents shall also include all logs, certificates and data, and
inspection, modification and overhaul records, relating to the Aircraft and
required to be maintained by the Air Authority and/or by the Approved
Maintenance Program.
Upon Expiry Date or upon earlier termination of the Lease all Aircraft Documents
shall be redelivered by Lessee to Lessor complete and fully updated
simultaneously with the redelivery of the Aircraft.
<PAGE>
APPENDIX G
FAA POWER OF ATTORNEY
This POWER OF ATTORNEY in favor of WINGS AIRCRAFT FINANCE, INC.
("Lessor") dated _____________, 199_ from MIDWAY AIRLINES CORPORATION
("Lessee").
RECITALS:
A. Lessor and Lessee have entered into an Aircraft Operating Lease
Agreement No. AOLAF-115-A dated as of ____________ 1995 (the
"Lease Agreement") with respect to the Fokker 100 aircraft,
serial no. 11450, U.S. registration no. N107ML (the "Aircraft").
B. Capitalized terms used herein and not otherwise defined shall
have the respective meanings ascribed to such terms in the Lease
Agreement.
NOW, THEREFORE, for good and valuable consideration, the adequacy of
which is hereby acknowledged, it is hereby agreed as follows:
Lessee hereby irrevocably constitutes and appoints Lessor, with full
power of substitution, for and in the name and on behalf of Lessee, as the act
and deed or otherwise of Lessee:
to execute, sign, deliver, authorize and file such instruments
legally necessary for any and all actions necessary to take
possession and effect redelivery of the Aircraft, Engines or Parts
upon termination of the Lease Agreement due to an Event of Default;
to execute, sign, deliver and file all such instruments requested by
Lessor that may be required to deregister the Aircraft from the FAA,
or to terminate the Lease for the Aircraft that is recorded at the
FAA, or that may be deemed proper in or in connection with all or
any of the purposes aforesaid, and to appoint substitutes or agents
to take any such action on its behalf; provided, however, that such
power shall not be exercisable by or on behalf of Lessor until an
Event of Default shall have occurred and is continuing.
Lessee hereby ratifies and confirms and agrees to ratify and confirm
any direction, authorization and instruction of Lessor taken pursuant to this
Power of Attorney.
<PAGE>
This Power of Attorney shall expire on the date one year following
the Expiry Date, or earlier upon termination of the Lease.
IN WITNESS WHEREOF, Lessee has duly caused this Power of Attorney
to be executed on the date first set forth above.
MIDWAY AIRLINES CORPORATION
By: _______________________________________
Name:
Title:
[CERTIFIED RESOLUTIONS OF LESSEE AUTHORIZING THIS
POWER OF ATTORNEY TO BE ATTACHED)
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<PAGE>
THE SINGLE EXECUTED ORIGINAL OF THIS AGREEMENT MARKED "ORIGINAL" SHALL BE THE
"ORIGINAL" AND ALL OTHER COUNTERPARTS OF THIS AGREEMENT SHALL BE DUPLICATES AND
MARKED "DUPLICATE" OR "DUPLICATE ORIGINAL". TO THE EXTENT THAT THIS AGREEMENT
AND CERTIFICATE OF ACCEPTANCE RELATED THERETO CONSTITUTES CHATTEL PAPER, AS SUCH
TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE
JURISDICTION, NO SECURITY INTEREST MAY BE CREATED THROUGH TRANSFER OR POSSESSION
OF ANY COUNTERPART OTHER THAN THE "ORIGINAL".
NINE YEAR LEASE
AIRCRAFT OPERATING LEASE AGREEMENT
No. AOLAF - 111
Dated as of
November 11, 1993
between
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual
capacity but solely as trustee,
as
Lessor
and
MIDWAY AIRLINES CORPORATION
as
Lessee
Aircraft : Fokker 100
Serial No : 11444
Date : November 11, 1993
<PAGE>
THE SINGLE EXECUTED ORIGINAL OF THIS AMENDMENT MARKED "ORIGINAL" SHALL BE THE
"ORIGINAL" AND ALL OTHER COUNTERPARTS OF THIS AMENDMENT SHALL BE DUPLICATED AND
MARKED "DUPLICATE" OR "DUPLICATE ORIGINAL". TO THE EXTENT THAT THIS AMENDMENT
AND THE LEASE RELATED THERETO CONSTITUTE CHATTEL PAPER, AS SUCH TERM IS DEFINED
IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION, NO
SECURITY INTEREST MAY BE CREATED THROUGH TRANSFER OR POSSESSION OF ANY
COUNTERPART OTHER THAN THE "ORIGINAL".
AMENDMENT No. 1
dated as of February , 1996
to
AIRCRAFT OPERATING LEASE AGREEMENT
dated as of July 10, 1995
between
WINGS AIRCRAFT FINANCE, INC.
as
Lessor
and
MIDWAY AIRLINES CORPORATION
as
Lessee
----------------------------------------------------
One Fokker 100 Aircraft
Manufacturer's Serial No. 11450
Registration Mark N107ML
<PAGE>
AMENDMENT NO. 1 dated as of February , 1996 to Aircraft Operating
Lease Agreement No. AOLAF-115-A between WINGS AIRCRAFT FINANCE, INC., a Delaware
corporation ("Lessor") and MIDWAY AIRLINES CORPORATION, a Delaware corporation
("Lessee")
WHEREAS
A. Lessee and Lessor are parties to that certain Aircraft Operating
Lease Agreement No. AOLAF-115-A dated as of July 10, 1995 relating to One Fokker
F28 MK 0100 Aircraft described therein which Lease was recorded with the Federal
Aviation Administration on , 1995 under conveyance
number (the "Lease"). Capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to them in the Lease.
B. Lessee is in default under the Lease by reason of its failure to
make certain Deposit payments and Termination Payments (as defined in the
Termination Agreement) in December 1995 and January 1996.
C. Lessee and Lessor desire to amend the Lease as hereinafter set
forth and to agree to certain other terms as set forth herein.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Amendment.
1.1 Article 7 of the Lease is hereby amended by adding a new Article
7.6 thereto as follows:
"7.6 Without in any way limiting the rights contained elsewhere in the
Lease, Lessor shall have the right to have observers (who may or may
not be employees of Lessor) on site at Lessee's premises (provided
such observers do not unreasonably interfere with Lessee's business
or operations) and provided the recipients of any financial and
operational information of Lessee (which recipients may include
employees or other representatives of Lessor or any of its
affiliates, agents, attorneys or accountants of Lessor or its
affiliates) keep strictly confidential any such information, Lessor
shall have the right to inspect and review any internal financial
and operational information of Lessee as Lessor may reasonably
request (provided such request is made to Lessee's controller, or to
a vice president, senior vice president or the president of Lessee)
including, without limitation, cash flow statements, financial books
<PAGE>
and records, and any other records relating to the operation of
Lessee's fleet. Lessee covenants that it will fully cooperate with
Lessor regarding any inspection of Lessee's fleet and records
pursuant to this Lease."
1.2 Article 15.1(n) of the Lease is hereby amended by deleting it in
its entirety and replacing it with the following:
"(n) if an event of default (however defined) occurs under (i) any of the
Other Aircraft Agreements, (ii) any other lease agreements between
Lessee and a lessor for the benefit, directly or indirectly, of
debis AirFinance B.V. or Daimler-Benz Aerospace A.G. relating to
other aircraft ("DASA Aircraft Agreements"), or (iii) any Aircraft
Maintenance Agreement entered into by Lessee in lieu of Reserve Rate
payments, which event permits acceleration or termination;"
1.3 Article 15.1(o) of the Lease is hereby amended by deleting it in
its entirety and replacing it with the following:
"(o) if Lessee's financial performance deviates in any material adverse
way (as determined by Lessor in its sole but reasonable discretion)
from the projections set forth in Lessee's business plan for
calendar year 1996 (attached hereto as Exhibit A), taken as a whole,
and such deviation is not the result of a natural disaster which
effectively makes it impossible for Lessee to meet such
projections;"
1.4 Article 15.1(p) of the Lease is hereby amended by deleting it in
its entirety and replacing it with the following:
"(p) if, prior to the satisfaction of Lessee's obligations to pay
Deferred Deposit Payments or Deferred Rent (as defined in Section 2
of the Amendment No. 1 to this Lease) Lessee shall make (i) any
payment of principal or interest on any amounts owed by Lessee to
Zell/Chilmark Fund, L.P. ("Zell") or any affiliate of Zell, (ii) any
redemption of, or any dividend or distribution with respect to, any
shares of Lessee owned by Zell or any affiliate of Zell, (iii) any
prepayment of principal or interest with respect to any other
subordinated debt owed by Lessee or (iv) any redemption of, or any
dividend or other distribution with respect to, any other shares of
Lessee; or"
1.5 Article 15.1(q) of the Lease is hereby amended by deleting it in
its entirety and replacing it with the following:
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<PAGE>
"(q) if Lessee shall fail to make any of the payments which it is
required to make pursuant to Section 2 of Amendment No. 1 to this
Lease."
1.6 Article 15.2(b)(i) of the Lease is hereby amended by adding
"(a), (n), (q)" following the word "paragraph" and by adding to such Article the
following additional clause:
"provided, however, that such automatic termination shall not apply with
respect to defaults of the type referred to in Articles 15.1(a) or (n) of
the Lease prior to the date of Amendment No. 1 to this Lease or for
payment defaults for Rent Dates occurring in February or March 1996, for
so long as Lessee makes the payments specified in Section 2 of Amendment
No. 1 to this Lease;"
it being understood that the effect of this amendment is to include payment
defaults, cross-defaults with Other Aircraft Agreements and DASA Aircraft
Agreements, and failure to make any of the payments specified in Section 2 of
Amendment No. 1 to this Lease as events giving rise to automatic termination of
the Lease, as amended, without the necessity of any service of notice thereof
upon Lessee.
1.7 Article 16 of the Lease is hereby amended by adding a new
Article 16.9 as follows.
"16.9 Notwithstanding anything to the contrary contained in this Lease,
Lessee covenants that, upon earlier termination of the Lease
pursuant to Article 15, Lessee will not interpose any defense to, or
otherwise oppose, any action commenced by Lessor to regain
possession of the Aircraft and Lessee shall join in any application
by Lessor seeking to regain possession of the Aircraft if so
required by Lessor. This covenant shall apply whether or not Lessee
is or shall subsequently become a debtor in a case under Title 11 of
the United States Code and in such event Lessee covenants that it
will not oppose and will join in any application by Lessor seeking
to regain possession of the Aircraft."
2. Forbearance.
Execution of this Amendment shall serve as Lessor's agreement to
forbear from exercising its remedies under Article 15 of the Lease with respect
to Lessee's failure to make (i) installment payments of the Deposit due under
Appendix D to the Lease and Termination Payments (as defined in the Termination
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<PAGE>
Agreement) due in December 1995 and January 1996 and (ii) installment payments
of the Deposit and Termination Payments due on February 22 and March 22, 1996,
for so long, and only so long, as Lessee otherwise complies with all of the
terms of the Lease, as amended hereby, and the Termination Agreement, as
amended, and pays Lessor the following:
(a) all amounts payable as set forth in Amendment No. 1 to the
Termination Agreement dated as of the date of this Amendment;
(b) The amounts set forth in Exhibit A to this Amendment
("Deferred Deposit Payments") on April 22, 1996 and for the
next succeeding forty eight (48) Rent Dates on which Rent is
due; and
(c) The amounts set forth in Exhibit B to this Amendment
("Deferred Rent") on August 22, 1997 and for the next
succeeding Rent Dates on which Rent is due as set forth in
such Exhibit B.
Lessee may satisfy its obligations to pay the Deferred Deposit Payments and the
Deferred Rent at any time by paying the portion of all such amounts which
constitutes principal, together with the portion of such amounts which
constitutes interest accrued and unpaid as of the date of payment all as
reflected on Exhibits A or B to this Amendment. Each such Deferred Deposit
Payment and Deferred Rent payment on and after the dates set forth in clauses
(b) and (c) above, as the case may be, (i) shall constitute a portion of Deposit
and Rent, as the case may be, (ii) shall be made together with such installment
of Deposit and/or Rent as shall be otherwise due on each such Rent Date as
provided in Exhibit D of the Lease and (iii) shall be made in accordance with
the terms and conditions of the Lease.
Execution of this Amendment shall not constitute a waiver of the
Deposit payment defaults or of any other Events of Default which may have
occurred and be continuing or which may occur in the future. Lessor's agreement
to forbear shall terminate automatically if Lessee fails to make any payments
specified in this Section 2 or if any Event of Default occurs or has occurred
and is continuing (other than with respect to an Event of Default to which this
forbearance agreement set forth in this Section 2 applies). For so long, and
only so long as Lessor's agreement to forbear has not terminated (i) Lessee
shall be entitled to exercise its rights and privileges under Articles 5.1.2(b),
5.1.3, 7.4.1 and 13.3.1 of the Lease and (ii) Lessor shall be deemed to have
elected not to apply the Deposit to sums due or to be come due to Lessor
pursuant to Section 1 of Appendix D of the Lease, notwithstanding the occurrence
and continuation
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<PAGE>
of a Default or Event of Default under the Lease.
3. Governing Law.
This Amendment shall be governed by and construed in accordance with
the internal laws of the State of New York and without regard to any conflict of
law rules. This Amendment is being delivered in the State of New York. The terms
and conditions of Article 18 of the Lease are incorporated herein by reference
as applicable to this Amendment.
4. Miscellaneous.
Except as specifically amended or supplemented by this Amendment,
the Lease is hereby ratified, approved, confirmed and continued in all respects
and all provisions of the Lease shall remain in full force and effect. This
Amendment may be executed in any number of counterparts and all of such
counterparts taken together shall be deemed and constitute one and the same
instrument.
(Remainder of Page Intentionally Left Blank]
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
WINGS AIRCRAFT FINANCE, INC.
By:
----------------------------------------
Title:
MIDWAY AIRLINES CORPORATION
By: /s/ Jonathan S. Waller
---------------------------------------
Title:
JONATHAN S. WALLER
SENIOR VICE PRESIDENT
GENERAL COUNSEL
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<PAGE>
of a Default or Event of Default under the Lease.
3. Governing Law.
This Amendment shall be governed by and construed in accordance with
the internal laws of the State of New York and without regard to any conflict of
law rules. This Amendment is being delivered in the State of New York. The terms
and conditions of Article 18 of the Lease are incorporated herein by reference
as applicable to this Amendment.
4. Miscellaneous.
Except as specifically amended or supplemented by this Amendment,
the Lease is hereby ratified, approved, confirmed and continued in all respects
and all provisions of the Lease shall remain in full force and effect. This
Amendment may be executed in any number of counterparts and all of such
counterparts taken together shall be deemed and constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
WINGS AIRCRAFT FINANCE, INC.
By: /s/ E.A. Wagner
----------------------------------------
Title: President
MIDWAY AIRLINES CORPORATION
By:
----------------------------------------
Title:
-5-
<PAGE>
Summary of
Exhibits AB
{***} (5 pages omitted)
<PAGE>
AMENDMENT NO. 2
dated as of January 3l, 1997
to
AIRCRAFT OPERATING LEASE AGREEMENT
NO. 115-A
dated as of July 10, 1995
between
WINGS AIRCRAFT FINANCE, INC., as
Lessor
and
MIDWAY AIRLINES CORPORATION, as
Lessee
Aircraft: Fokker 100
Serial No./RN: 11450/N107ML
<PAGE>
THIS AMENDMENT NO. 2 dated as of January 31, 1997 (this
"Amendment"), is between WINGS AIRCRAFT FINANCE, INC., a company incorporated
under the laws of the State of Delaware, having its principal place of business
at 119 N. Fairfax Street, Alexandria, Virginia 22314 ("Lessor") and MIDWAY
AIRLINES CORPORATION, a company incorporated under the laws of the State of
Delaware, having its principal place of business at 300 West Morgan Street,
Durham, North Carolina 27701 ("Lessee");
WHEREAS, Lessor and Lessee are parties to that certain Aircraft
Operating Lease Agreement No. AOLAF-115-A, dated as of July 10, 1995 (as amended
from time to time, the "Lease". Capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the Lease);
WHEREAS, Lessor and Lessee entered into Amendment No. 1 to the Lease
dated as of February, 1996 ("Amendment No. 1");
WHEREAS, Lessor and Lessee entered into a Deferral Agreement dated
as of October 25, 1996 ("Deferral Agreement"), which provided for the deferral
of certain payments due under the Lease, and amended the Lease in certain other
respects;
WHEREAS, Lessor and Lessee entered into an Amendment to Deferral
Agreements dated as of December 30, 1996, which modified the Deferral Agreement
in certain respects (the "Amendment to Deferral Agreements");
WHEREAS, Lessee has entered into an Agreement and Plan of Merger
dated as of January 17, 1997 (as amended, the "Merger Agreement") with GoodAero,
Inc., a Delaware corporation ("GoodAero") and Zell/Chilmark Fund, L.P., a
Delaware limited partnership, whereby it is proposed that GoodAero will be
merged into Lessee to effect a recapitalization of Lessee (the "Merger"),
subject to certain conditions precedent having been satisfied; and
WHEREAS, Lessor and Lessee desire to amend the Lease to become
effective upon the consummation of the Merger and to enter into further
agreements as hereinafter set forth.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Amendment of Lease. The Lease is hereby amended as follows:
(a) Section 1 of the Lease is amended by eliminating the
period at the end of the definition of "Expiry Date" and by inserting in lieu
thereof the following clause:
"or such earlier date as may be specified by lessor pursuant
to notice given in accordance with, and subject to the terms
of Section 16.10 hereof."
<PAGE>
(b) Section 1 of the Lease is further amended by deleting the
period at the end of the definition of "Other Aircraft Agreements" and by
inserting the following in lieu thereof: "or any successor or assign thereof."
(c) Section 6.4 of the Lease is amended as follows: (a) by
deleting subsection (i) thereof in its entirety and by inserting in lieu thereof
the following: "(i) any financial reports or projections supplied to the
majority shareholder of Lessee"; and (b) by deleting the words "upon Lessor
requesting the same" from subsection (ii) thereof.
(d) Section 11.1(a) of the Lease is amended by deleting the
period at the end thereof and by inserting the following clause:
provided, however, that the deductible may be $500,000
(Dollars Five Hundred Thousand) for each accident, but only if
Lessee procures and maintains in favor of debis AirFinance
B.V. ("Beneficiary") for the benefit of the Beneficiary and/or
the Lessor under each of the Leases identified on Schedule
16.10 hereof (as those terms are defined therein) an
irrevocable letter of credit (the "Letter of Credit") in the
face amount of $800,000 (Dollars Eight Hundred Thousand)
issued by Wachovia Bank or another banking institution
reasonably acceptable to Beneficiary and in a form reasonably
acceptable to Beneficiary containing the terms set forth in
Schedule 11.1(a).1 of this Lease; provided, however, that
Lessee may reduce the amount of the Letter of Credit to
$400,000 in any year where Lessee's audited financial
statements for the prior year show that Lessee had net income
(as determined in accordance with generally accepted
accounting principles ("Net Income")) greater than the amount
for such prior year identified as "Net Income (1)" on Schedule
11.1(a).2, but less than the amount for such prior year
identified as "Net Income (2)" on Schedule 11.1(a).2; and
Lessee shall not be required to maintain the Letter of Credit
in any year where Lessee's audited financial statements for
the prior year show that Lessee had Net Income for such prior
year greater than the amount for such prior year identified as
"Net Income (2)" on Schedule 11.1(a).2; and provided, further,
that notwithstanding any reduction or cancellation of the
Letter of Credit in accordance with the terms hereof, Lessee
shall be required to restore the Letter of Credit in any year
where Lessee's audited financial statements for the
immediately preceding year show that Lessee's Net Income was
less than the threshold set by Schedule 11.1(a).2 for such
prior year for reduction of the Letter of Credit or in any
year in which audited financials for Lessee for the
immediately preceding year have not been certified on or
before April 15 of that year. For purposes of determining the
amount required for the Letter of Credit in any year,
reductions, if any, shall not be permitted until 30 days after
receipt by Beneficiary of the audited financial statements of
Lessee for the prior year and, in the event that the Letter of
Credit is to be reinstated or
-2-
<PAGE>
increased in any year as aforedescribed, such Letter of Credit
shall be required on or before April 15 of such year. Any
failure by Lessee to comply with the provisions of this
Section 11.1(a) shall be an Event of Default under Section
15.1(b) of the Lease.
(e) Intentionally Omitted.
(f) Section 14.1(p) is amended by deleting the same in its
entirety and by inserting in lieu thereof the following:
"not become the surviving corporation of a merger with any
other entity, or itself consolidate with, or merge into, any
other corporation, or convey, transfer or lease substantially
all of its assets as entirety to any person, without the prior
written consent of Lessor (such consent not to be unreasonably
withheld) and the execution and delivery to Lessor of such
agreements, certificates and legal opinions as Lessor may
reasonably request with respect thereto;"
(g) Intentionally Omitted.
(h) Intentionally Omitted.
(i) Section 15.1(e) of the Lease is deleted in its entirety and the
following is inserted in lieu thereof:
"if (i) if Lessee or any of its subsidiaries is in default
under any lease, hire-purchase, conditional sale or credit
sale agreement for equipment having a casualty value in excess
of {***} and such default is not cured or waived within
the applicable grace period or five (5) Business Days
(whichever is greater); (ii) (regardless of the amount of
money involved), any event occurs which with or without notice
or lapse of time or both would constitute a default under any
agreement between Lessee and, or promissory note executed by
Lessee in favor of, (a) {***}; (b) Zell/Chilmark Fund,
L.P.; (C) {***}; (d){***}; (e) any affiliate of any of
the foregoing; unless such default or event of default is
cured or waived within the applicable grace period or five (5)
Business Days (whichever is greater); or (iii) any
indebtedness owed by Lessee or any of its subsidiaries in an
amount in excess of {***} is not paid when due or becomes
due or capable of being declared due prior to the date when it
would otherwise become due; provided, however, the failure of
Lessee to pay amounts approximating {***}
-3-
<PAGE>
{***}, shall not be deemed a Default or an Event of Default
hereunder."
(j) Section 15.1(n) is modified by inserting the following after the
words "Daimler-Benz Aerospace A.G.": "or any affiliate, successor or assign of
either of them."
(k) Sections 15.1(o), (p) and (q) are deleted in their entirety and
the following new Sections 15.1(o) and (p) are inserted in lieu thereof:
"(o) if, an Event of Default shall occur under and as defined
in that certain Promissory Note dated as of January 31, 1997
from the Lessee to debis AirFinance B.V. or under, and as
defined in that certain Promissory Note dated as of January
31, 1997 from the Lessee to DASA Aircraft Finance XVI, B.V.
(each, a "Note" and collectively, the "Notes");
(p) if, prior to satisfaction of Lessee's obligations pursuant
to the Notes, Lessee shall make (i) any payment of principal
or interest on any debt owed by Lessee to Zell/Chilmark Fund,
L.P. or to any holder of equity in Lessee representing the
right to vote twenty percent (20%) or more of the stock in
Lessee on any matter presented for vote to the shareholders of
Lessee (an "Insider") or any affiliate of an Insider; or (ii)
any redemption of, or any dividend or distribution with
respect to, any shares of Lessee owned by an Insider or any
affiliate thereof."
(l) Section 15.2 is amended by deleting clause (i) of paragraph (b)
thereof in its entirety and inserting the following new clause (i) in lieu
thereof:
"(i) serving notice of such termination on Lessee specifying
the occurrence giving rise to such Event of Default or Events
of Default, provided that such notice shall be deemed to have
been served without the necessity of actual service and this
Lease shall terminate automatically without the necessity of
any service of notice thereof upon Lessee upon the occurrence
of any Event of Default described in paragraphs (a), (f), (g),
(h), (n) or (o) of Section 15.1 of this Lease; provided,
however, that actual service of notice of such termination on
Lessee shall be required where an Event of Default described
in paragraph (n) of Section 15.1 of the Lease has occurred
solely by reason of occurrence of an event of default under an
Other Aircraft Agreement or under a DASA Aircraft Agreement,
which event of default does not, under the terms of such Other
Aircraft Agreement or DASA Aircraft Agreement, result in
automatic termination of such Other Aircraft Agreement or such
DASA Aircraft Agreement."
-4-
<PAGE>
(m) Article 16 of the Lease is amended by adding a new Section
16.10 as follows:
"(a) Notwithstanding anything to the contrary contained in
this Lease, Lessor may terminate this Lease by giving not less
than six (6) months' prior written notice of the termination
date to Lessee provided that in no event may Lessor choose a
termination date earlier than September 15, 1998 ("Lessor's
Termination Option") and the termination date specified in
such notice shall become the Expiry Date; provided, however,
that (subject to the following sentence) Lessor shall not be
entitled to exercise Lessor's Termination Option with respect
to this Lease where the same would result in the termination
of four (4) or more of the aircraft operating lease agreements
identified in Schedule 16.10 to the Lease in any twelve (12)
month period, taking into account the scheduled or actual
Expiry Date of each such aircraft operating lease agreement.
Nothing herein shall be construed to limit the Lessor's rights
upon the occurrence of any Default or Event of Default or upon
the termination of this Lease as a result thereof or upon the
expiration of any Lease in the absence of the exercise of
Lessor's Termination Option.
(b) Lessee shall in no event be liable for any costs,
expenses, liabilities, losses, damages or amounts incurred by
Lessor or Head Lessor which arise solely from the Lessor
exercising Lessor's Termination Option hereunder such as the
loss of any tax benefit, or fees or penalties arising from the
breakage of any contract or agreement. Except as expressly
provided in subsection (c) below, Lessor shall in no event be
liable for any costs, expenses, liabilities, losses, damages
or amounts incurred by Lessee as a result of Lessor exercising
Lessor's Termination Option in accordance with this Section
16.10.
(c) Notwithstanding the terms of clause (b) above, if Lessor
exercises Lessor's Termination Option hereunder in accordance
with this Section 16.10, then Lessee shall be responsible for
performing all of its obligations under and in accordance with
the terms of this Article 16, subject to the following:
(i) the Lessor shall pay or cause to be paid to Lessee
for Lessee's application against the "C Check" completed
pursuant to Appendix E, Item 1(e), an amount equal to the
lesser of (x) $100,000, or (y) an amount equal to the product
of the full cost of the "C Check" completed by Lessee pursuant
to Appendix E, Item 1(e) on the Aircraft multiplied by a
fraction, the numerator of which is the number of hours
(including fractions of an hour) remaining on the Aircraft
until Lessee's next scheduled "C Check" for the Aircraft
-5-
<PAGE>
(assuming Lessor had not exercised Lessor's Termination Option
hereunder) and the denominator of which is 3000; and
(ii) for purposes of Section 7.4.1(b) and (c), any shop
visit required to meet the conditions of Appendix E shall be
deemed a "scheduled" shop visit."
(n) Section 18.6 of the Lease is amended by deleting the firm
of "Haight, Gardner, Poor & Havens, Attn: Bonny L.Y. Kwoh, 195
Broadway, New York, NY 10007" as agent for Lessor and by
inserting in lieu thereof the new agent for Lessor as follows:
"Hertzog, Calamari & Gleason, Attn: Carla Craig, 100 Park
Avenue, New York, New York 10017".
(o) Appendix B to the Lease is hereby amended as follows:
(i) The amount set forth as the "DEPOSIT" is deleted in
its entirety and the amount set forth on Schedule B.1 hereto
is substituted therefor.
(ii) The Amount set forth as "RENT" is deleted in its
entirety and the amount of {***}.
(p) Appendix D to the Lease is hereby amended by deleting
Sections 2.2 and 2.3 in their entirety and by deleting the
first and second paragraphs of Section 1 in their entirety and
inserting the following in lieu thereof:
"1. Deposit. Lessee has paid to Lessor the amount set
forth on Schedule B.1 as a Deposit for the Aircraft on or
prior to January 31, 1997."
(q) Schedule 16.10 attached to this Amendment is hereby
attached to the Lease as Schedule 16.10 thereto and is
incorporated therein.
2. Waiver of Default. Lessor agrees that any Default or Event of
Default under Sections 15.1(a), 15.1(e), 15.1(g) or 15.1(o) of the Lease (prior
to the amendment of any such Sections hereunder) which occurred prior to the
date of this Amendment is hereby deemed to have been cured by Lessee and Lessor
waives any rights or remedies it may have had with respect to the occurrence of
any such Default or Event of Default.
-6-
<PAGE>
3. Representations Warranties and Covenants
The following shall be, as applicable, representations, warranties
or covenants of Lessee pursuant to Articles 13 and 14 of the Lease:
(a) Representations
(i) This Amendment and the Notes have been duly entered into
and delivered by Lessee, and each constitutes a valid, legal and binding
obligation of Lessee enforceable against Lessee in accordance with its terms.
(ii) As of the date of this Amendment, Lessee has entered, or
will contemporaneously herewith enter, into an agreement with {***} having
terms which are substantially in accordance with the terms set forth under
the heading {***} in Exhibit 6.02(k) to the Agreement and Plan of Merger
dated as of January l7, 1997 by and among GoodAero, Inc., James H. Goodnight,
John P. Sall, Midway Airlines Corporation and Zell/Chilmark Fund, L.P., as
amended, except to the extent otherwise specifically set forth in the letter
dated as of February 10, 197, from Lessee to Lessor.
(b) Covenants
Lessee covenants that it will not make any prepayment in
respect of the Promissory Note dated February 7, 1997 in the amount of
{***}, or amend the {***}, to provide for terms more favorable to
the payee thereof (including, without limitation, any increase in the interest
rate or acceleration of payment).
4. Reconciliation
Lessee acknowledges that the principal amount of the DASA Note
(which is the sum of all deferred payments as of February 10, 1997 under the
leases and lease termination agreements relating to the Fokker-100 aircraft
leased by Lessee having manufacturers' serial numbers 11450, 11484, 1185 and
11486), and the amount of the Deposit, have each been determined based solely
upon information supplied by Lessee. Lessee agrees that, in the event that
Lessor obtains access to information which in Lessor's opinion indicates that
the amount of the DASA Note or the amount of the Deposit is incorrect (the
"Information"), Lessee will, at Lessor's request, work in good faith with Lessor
to reconcile any discrepancy, provided that Lessor provides the Information to
Lessee. Upon the reconciliation of such discrepancy and the cancellation of the
existing DASA Note, Lessee will execute in favor of DASA, a new, replacement
DASA Note issued by Lessee in the reconciled amount and Lessor and Lessee will
execute an amendment to this Lease setting forth the reconciled amount of the
Deposit. The failure of Lessor and Lessee to reach final agreement upon a
reconciled amount of the DASA Note and/or the amount of the Deposit shall in no
event constitute a Default or an Event of Default by Lessee under the Lease and
Lessor's sole and exclusive remedy for Lessee's breach of its obligations
hereunder shall be the right to pursue money damages against Lessee, which right
to pursue such money damages is hereby acknowledged by Lessee.
-7-
<PAGE>
5. Deferral Agreement. Lessor and Lessee agree that the Deferral
Agreement and the Amendment to Deferral Agreements are hereby declared null and
void and shall have no further force or effect with respect to the Lease.
6. Merger. Lessor hereby consents to the Merger.
7. Governing Law. This Amendment shall be governed by and construed
in accordance with the internal laws of the State of New York and without regard
to any conflict of law rules. This Amendment is being delivered in the State of
New York.
8. Miscellaneous. Except as specifically amended or supplemented by
this Amendment, the Lease is hereby ratified, approved, confirmed and continued
in all respects and all provisions of the Lease as heretofore amended shall
remain in full force and effect. The parties hereto acknowledge and confirm that
the Lease is intended to be a true lease and not a financing arrangement. This
Amendment may be executed in any number of counterparts, and all of such
counterparts taken together shall be deemed and constitute one and the same
instrument.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
on the day and year first above written.
WINGS AIRCRAFT FINANCE, INC.
By: /s/ [ILLEGIBLE]
--------------------------------
Name:
-------------------------------
Title: President
MIDWAY AIRLINES CORPORATION
By: /s/ [ILLEGIBLE]
--------------------------------
Name:
-------------------------------
Title:
------------------------------
<PAGE>
Schedule 11.1(a).l
The Letter of Credit shall contain the following terms:
The Beneficiary shall be entitled to draw amounts under the Letter of Credit
upon notice to the issuing bank signed by Beneficiary stating that amounts are
due under one or more of the following, and that such amounts remain unpaid:
Promissory Note dated as of January 31, 1997 executed by Midway
Airlines Corporation in favor of debis AirFinance B.V.
Promissory Note dated as of January 31, 1997 executed by Midway
Airlines Corporation in favor of Daimler-Benz Aerospace A.G.
Aircraft Operating Lease Agreement No. 111 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 112 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 113 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 114 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 135 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 136 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 524 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 525 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 115-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
<PAGE>
Aircraft Operating Lease Agreement No. 116-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
Aircraft Operating Lease Agreement No. 117-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
Aircraft Operating Lease Agreement No. 118-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
<PAGE>
Schedule 11.l(a).2
Midway Airlines
Net Income Thresholds for Reduction in Amount of Letter of Credit Pursuant to
Section 11.1(a)
US$ millions
Year 1997 1998 1999 2000 2001
Net Income(2) 12.0 18.0 25.2 32.8 41.0
Net Income(1) 8.0 12.0 16.8 21.8 27.3
Year 2002 2003 2004 2005 2006
Net Income(2) 49.1 57.7 67.8 67.8 67.8
Net Income(1) 32.8 38.5 45.2 45.2 45.2
Year 2007 2008 2009 2010 2011
Net Income(2) 67.8 67.8 67.8 67.8 67.8
Net Income(1) 45.2 45.2 45.2 45.2 45.2
Year 2012 2013 2014
Net Income(2) 67.8 67.8 67.8
Net Income(1) 45.2 45.2 45.2
Amount of
Letter of Credit
$800,000 If actual Net Income is less than or equal to Net Income(1)
$400,000 If actual Net Income is greater than Net Income(1) but less
than or equal to Net Income(2)
0 If actual Net Income is greater than Net Income(2)
<PAGE>
Schedule 16.10
1. Aircraft Operating Lease Agreement No. 111, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
2. Aircraft Operating Lease Agreement No. 112, dated as of November 11,1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
3. Aircraft Operating Lease Agreement No. 113, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
4. Aircraft Operating Lease Agreement No. 114, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
5. Aircraft Operating Lease Agreement No. AOLAF-115-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
6. Aircraft Operating Lease Agreement No. AOLAF-116-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
7. Aircraft Operating Lease Agreement No. AOLAF-117-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
8. Aircraft Operating Lease Agreement No. AOLAF-118-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
9. Aircraft Operating Lease Agreement No. 135, dated as of July 20, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
10. Aircraft Operating Lease Agreement No. 136, dated as of December 15, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
11. Aircraft Operating Lease Agreement No. 524, dated as of August 1, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
12. Aircraft Operating Lease Agreement No. 525, dated as of October 15, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
<PAGE>
Schedule B.1
Security Deposits Paid by Midway
Aircraft AOLAF Deposit
MSN No. Paid
11321 525 {***}
-----------
11323 524 {***}
-----------
11329 135 {***}
-----------
11330 136 {***}
-----------
11444 111 {***}
-----------
11445 112 {***}
-----------
11475 113 {***}
-----------
11477 114 {***}
-----------
11450 115 {***}
-----------
11484 116 {***}
-----------
11485 117 {***}
-----------
11486 118 {***}
-----------
<PAGE>
EXHIBIT 10.8
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY {***}. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
F-100 LEASE #116-A
(TAIL # N108ML)
<PAGE>
EXECUTION COPY
THE SINGLE EXECUTED ORIGINAL OF THIS LEASE MARKED "ORIGINAL" SHALL BE THE
"ORIGINAL" AND ALL OTHER COUNTERPARTS OF THIS LEASE SHALL BE DUPLICATES AND
MARKED "DUPLICATE" OR "DUPLICATE ORIGINAL". TO THE EXTENT THAT THIS LEASE AND
CERTIFICATE OF ACCEPTANCE RELATED THERETO CONSTITUTES CHATTEL PAPER, AS SUCH
TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE
JURISDICTION, NO SECURITY INTEREST MAY BE CREATED THROUGH TRANSFER OR POSSESSION
OF ANY COUNTERPART OTHER THAN THE "ORIGINAL".
AIRCRAFT OPERATING LEASE AGREEMENT NO. AOLAF-116-A
Dated as of
July 10, 1995
between
WINGS AIRCRAFT FINANCE, INC.
as
Lessor
and
MIDWAY AIRLINES CORPORATION
as
Lessee
--------------------------------
Leveraged Lease Financing of
One Fokker 100 Aircraft
Manufacturer's Serial No. 11484
U.S. Registration Mark N108ML
================================================================================
<PAGE>
INDEX
ARTICLE PAGE
- ------- ----
1. Definitions...........................................................2
2. Agreement to Lease...................................................12
3. Term; Delivery; Acceptance...........................................16
4. Registration and Title...............................................17
5. Possession and Use...................................................19
6. Charges, Method of Payment and Financial Information.................25
7. Maintenance..........................................................27
8. Taxes, Duties and Expenses...........................................32
8A. Special Indemnity....................................................39
9. Liens................................................................57
10. Indemnification......................................................57
11. Insurance............................................................60
12. Assignment and Subletting............................................68
13. Disclaimer, Representations and Warranties .........................71
14. Covenants of Lessee..................................................77
15. Default by Lessee....................................................80
16. Return of Aircraft...................................................86
17. Casualty Occurrences.................................................89
18. Governing Law and Jurisdiction.......................................92
19. Miscellaneous........................................................94
-i-
<PAGE>
APPENDICES
A. Description of Aircraft
B. Further Definitions and Values
C. Certificate of Acceptance
D. Charges
E. Operating Condition at Re-Delivery
F. Aircraft Documents
G. FAA Power of Attorney
-ii-
<PAGE>
AIRCRAFT OPERATING LEASE AGREEMENT NO. AOLAF-116-A
THIS AIRCRAFT OPERATING LEASE AGREEMENT NO. AOLAF-116-A (this
"Lease") is made as of July 10, 1995 between WINGS AIRCRAFT FINANCE, INC., a
company incorporated under the laws of the State of Delaware, having its
principal place of business at 1199 N. Fairfax St., Alexandria, Virginia 22314
and its permitted successors and assigns (herein referred to as "Lessor") and
MIDWAY AIRLINES CORPORATION, a company incorporated under the laws of the State
of Delaware, having its principal place of business at 5713 South Central
Avenue, Chicago, Illinois 60638 and its permitted successors and assigns (herein
referred to as "Lessee").
W I T N E S S E T H:
WHEREAS, Lessee entered into an Aircraft Operating Lease Agreement
No. AOLAF-116 dated November 11, 1993 (the "Original Lease") between First
Security Bank of Utah, National Association, not in its individual capacity, but
solely as owner trustee and lessor ("Original Lessor") and Lessee as lessee with
respect to the Aircraft (as hereinafter defined);
WHEREAS, the Original Lease has been terminated pursuant to the
Termination Agreement dated as of the date hereof (the "Termination Agreement")
among Original Lessor, Lessee and Fokker (as hereinafter defined);
WHEREAS, Lessor has entered into a Lease Agreement (Trust No. 116-A)
dated as of the date hereof (the "Head Lease") with First Security Bank of Utah,
National Association, not in its individual capacity, but solely as owner
trustee pursuant to the Trust Agreement (Trust No. 116-A) dated as of the date
hereof between First Security Bank of Utah, National Association in its
individual capacity and CIBC Inc. as owner participant;
WHEREAS, Lessor has the right to possess, use and lease the
Aircraft;
WHEREAS, Lessee desires to lease the Aircraft from Lessor; and
WHEREAS, Lessor is willing to lease the Aircraft to Lessee upon the
terms and conditions set out herein.
NOW THEREFORE, in consideration of the mutual promises herein
contained, Lessor and Lessee agree as follows:
<PAGE>
1. DEFINITIONS
The following terms shall have the following respective meanings for all
purposes of this Lease:
"Air Authority" shall mean the Federal Aviation Administration of
the United States Department of Transportation and any successor.
"Aircraft" shall mean the aircraft identified and described in
Appendix A, including any Engine, Part, or component thereof, and/or
ancillary and loose equipment or devices installed in or on the Aircraft
at the Original Delivery Date (or which having been removed therefrom
remain the property of Lessor pursuant to this Lease) and Aircraft
Documents furnished therewith under this Lease, or any substitutions,
renewals and replacements from time to time made in or on the said
Aircraft in accordance with this Lease, whether or not for the time being
installed on or in the said Aircraft or any other aircraft.
"Aircraft Documents" shall mean the items identified in Appendix F.
"Aircraft Maintenance Agreement" shall mean the Aircraft Maintenance
Agreement between Lessee and American Airlines, Inc., dated as of November
1, 1993, or any subsequent aircraft maintenance agreement between Lessee
and any Authorized Maintenance Performer which, in the reasonable opinion
of Lessor, is in substance substantially similar thereto.
"Airframe" shall mean the Aircraft, excluding the Engines.
"Appraisal Procedure" shall mean the procedure for determining the
FMV of the Aircraft set forth in Paragraph 9 of Appendix D.
"Approved Maintenance Program" shall mean the Maintenance Program in
effect on the Delivery Date with respect to the Aircraft or such other
Maintenance Program as Lessor shall from time to time approve in writing,
such approval not to be unreasonably withheld.
"Authorized Maintenance Performer" shall mean Lessee, American
Airlines, Inc., U.S. Air, Aviall, Rolls Royce Canada or any Air Authority
approved provider.
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<PAGE>
"Business Day" shall mean a day (other than a Saturday or Sunday) on
which banks are open for business in New York.
"Casualty Occurrence" shall have the meaning set forth in Article
17.1.
"Certificate of Acceptance" shall mean the Certificate of Acceptance
given in the form of Appendix C.
"Certificated Air Carrier" shall mean any person (except the United
States Government) that is a citizen of the United States of America (as
defined in Section 40102 of Title 49 of the United States Code) holding an
air carrier operating certificate issued by the Secretary of
Transportation pursuant to Chapter 447 of Title 49 of the United States
Code (or any predecessor thereof) for aircraft capable of carrying ten or
more individuals or 6,000 pounds or more cargo, which is also certificated
so as to entitle Lessor, as lessor, to the benefits of Section 1110 of
Title 11 of the United States Code with respect to the Aircraft.
"Credit and Security Agreement" shall mean the Credit and Security
Agreement dated as of October 29, 1993 therein between FAUSA and Lessee.
"Cycle" shall mean one take-off and landing of the Aircraft.
"Default" shall mean an Event of Default or any event which, with
the giving of notice and/or lapse of time and/or the making of any
relevant determination, would constitute an Event of Default.
"Delivery Date" shall mean the date on which the Aircraft is
delivered to and accepted by Lessee for the purposes of this Lease.
"Delivery Location" shall mean the location of the Aircraft set
forth in the Certificate of Acceptance.
"Dollars and $" shall mean the lawful currency of the United States
of America and in respect of all payments to be made under this Lease in
Dollars shall mean funds which are for same day settlement in the New York
Clearing House Interbank Payments System (or such other US Dollar funds as
may at the relevant time be customary for the settlement of international
banking transactions denominated in United States Dollars).
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<PAGE>
"Engine" shall mean (i) any engine installed on or furnished with
the Aircraft on the Original Delivery Date, such Engines being identified
as to manufacturer and type in Appendix A and as to serial numbers in the
Certificate of Acceptance executed by Lessee on the Delivery Date and (ii)
any substitute or replacement engine title to which has, or should have,
transferred to and vested in Lessor in accordance with this Lease, in each
case including all modules or Parts from time to time belonging to or
installed in that engine and irrespective of whether or not the same shall
for the time being be installed on the Aircraft or on any other aircraft.
The term "Engine" shall exclude any properly replaced engine title to
which has, or should have, passed to Lessee pursuant to this Lease.
"Equipment Change" shall have the meaning set forth in Article
7.3(a).
"Event of Default" shall mean any of the events specified in Article
15.1.
"Expiry Date" shall mean January 21, 2013.
"Fair Market Rental Value" shall be equal in amount to the value
that would be obtained in an arms'-length transaction between an informed
and willing lessee under no compulsion to lease and an informed and
willing lessor under no compulsion to lease, in accordance with a lease to
a lessee similarly situated with Lessee, for a term equal to the relevant
period and on conditions as herein provided, any such determination (made
for purposes of Article 15.3(b)) to be made on the basis of the then
actual condition of the Aircraft, to be determined pursuant to an
Independent Appraisal and to be the average of the two determinations
obtained thereunder.
"FAUSA" shall mean Fokker Aircraft U.S.A., Inc., a company
incorporated under the laws of the State of Delaware, with its principal
office at Alexandria, Virginia.
"Federal Aviation Act" shall mean Title 49 of the United States Code
as amended from time to time, or any similar legislation of the United
States of America enacted in substitution or replacement therefor.
"First Rent Date" shall mean November 4, 1996.
"Flight Hour" shall mean each hour or part thereof elapsing from the
moment at which the wheels of the Aircraft leave the ground on the take
off of the Aircraft until the
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<PAGE>
wheels of the Aircraft touch the ground on the landing of the Aircraft
following such flight.
"FMV" shall have the meaning set forth in Appendix D.
"Fokker" shall mean Fokker Aircraft B.V., a Dutch corporation with
its principal office at Amsterdam-Zuidoost, The Netherlands, together with
its successors.
"Governing Law" shall mean the law of the state of New York.
"Government Entity" shall mean and include (i) any national or state
government, political subdivision thereof, or local jurisdiction therein;
(ii) any board, commission, department, division, organ, instrumentality,
court, or agency of any thereof, however constituted; and (iii) any
association, organization, or institution of which any thereof is a member
or to whose jurisdiction any thereof is subject or in whose activities any
thereof is a participant.
"Head Lease" shall have the meaning set forth in the third "Whereas"
clause of this Lease as the Head Lease may be amended, modified or
supplemented from time to time in accordance with the terms thereof or any
such other lease created over the Aircraft in accordance with the terms
thereof.
"Head Lessor" shall mean First Security Bank of Utah, National
Association, not in its individual capacity, but solely as owner trustee
pursuant to the Trust Agreement (Trust No. 116-A) dated as of the date
hereof between First Security Bank of Utah, National Association in its
individual capacity and CIBC Inc. as Owner Participant, and its successors
and permitted assigns.
"Indemnitees" shall mean Lessor and each of its permitted successors
and assigns and each of their respective shareholders, subsidiaries,
affiliates, directors, officers, agents and employees.
"Indenture" shall mean the Trust Indenture and Security Agreement
(Trust No. 116-A) dated as of July 10, 1995, between Indenture Trustee and
First Security Bank of Utah, National Association, as owner trustee, as it
may be amended, modified or supplemented from time to time, or any such
security agreement created over the Aircraft in accordance with the terms
thereof.
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<PAGE>
"Indenture Trustee" shall mean Shawmut Bank Connecticut, National
Association, not in its individual capacity but solely as indenture
trustee pursuant to the Indenture, and its successors and permitted
assigns.
"Independent Appraisal" shall mean a determination of Fair Market
Rental Value of the Aircraft by two independent aircraft appraisers,
selected by Lessor, the costs and expenses of the appraisal to be paid by
Lessee.
"Law" shall mean and include (i) any law, statute, decree,
constitution, regulation, order or any directive of any Government Entity;
(ii) any treaty, pact, compact or other agreement to which any Government
Entity is a signatory or party; (iii) any judicial or administrative
interpretation or application of any thereof; and (iv) any amendment or
revision of any thereof.
"Lessor or Lessee" shall have the meanings respectively ascribed to
them in the first paragraph of this Lease and shall include their
respective assignees or successors.
"Lessor Liens" shall mean:
(a) the Indenture, the Security Assignment, the Head Lease and any
security or leasehold interest whatsoever from time to time
created by or through Lessor, Head Lessor, Owner Participant
or Loan Participant or any of their respective affiliates in
connection with the financing of the Aircraft;
(b) any other security interest or other lien in respect of the
Aircraft or this Lease which results from acts or omissions to
act of or claims against Lessor, Head Lessor, Owner
Participant or Loan Participant or any of their respective
affiliates not related to the transactions contemplated by or
permitted under this Lease;
(c) liens in respect of the Aircraft for Lessor Taxes; and
(d) Lessor's Liens (as such term is defined in the Head Lease).
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<PAGE>
"Lessor Taxes" shall mean Taxes:
(a) imposed as a direct result of activities of a Tax Indemnitee
in any jurisdiction imposing a liability unrelated to that Tax
Indemnitee's dealings with Lessee, to the transactions
contemplated by this Lease or the operation of the Aircraft by
Lessee; or
(b) imposed on or measured by net income, profits or gains, or
capital or net worth (excluding, however, in each case, Taxes
that are, or are in the nature of, license, sales, use,
rental, value-added, or property taxes) of a Tax Indemnitee,
by (A) any Governmental Entity by or in which that Tax
Indemnitee would be subject to tax without regard to the
transactions contemplated by this Lease or (B) the Federal
Government of the United States of America (including, without
limitation, any withholding taxes imposed by such government);
or
(c) imposed with respect to any period or event occurring prior to
the date of this Lease or after the Expiry Date or earlier
termination of this Lease in accordance with the terms hereof,
provided that such Tax is unrelated to a Tax Indemnitee's
dealings with Lessee or to the transactions contemplated by
this Lease; or
(d) imposed as a result of any voluntary sale, assignment,
transfer or other disposition by Lessor (including to Head
Lessor) or any other Tax Indemnitee of any interest in the
Aircraft or any part thereof or this Lease unless such
transfer or disposition occurs (1) in connection with a Tax
Indemnitee's pursuing its remedies while an Event of Default
by Lessee is continuing or otherwise resulting from an Event
of Default, or (2) pursuant to Lessee's exercise of any of its
options to purchase the Aircraft (it being understood and
agreed that Lessor and Lessee will cooperate with each other
to minimize any Taxes resulting from any sale pursuant to this
clause (2)).
"Loan Participant" shall mean Kreditanstalt fur Wiederaufbau,
together with its successors and permitted assigns.
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<PAGE>
"Maintenance Program" shall mean an Air Authority approved
maintenance program for the Aircraft encompassing scheduled maintenance
(including block maintenance), condition monitored maintenance, and
on-condition maintenance of Airframe, Engines and Parts, including but not
limited to, servicing, testing, preventive maintenance, repairs,
structural, inspections, system checks, overhauls, approved modifications,
service bulletins, engineering orders, airworthiness directives, corrosion
control, inspections and treatments.
"Major Checks" shall mean any 12,000 hours check, 24,000 hours check
or intersupplementary check or segment thereof or any equivalent thereof
with more or less hours, however denominated, to the extent set out in the
Approved Maintenance Program from time to time.
"Manufacturer" shall mean Fokker.
"Note" shall mean the Secured Promissory Note dated as of July 1,
1994, executed and delivered to FAUSA by Lessee and secured by the Credit
and Security Agreement.
"Original Delivery Date" shall mean July 22, 1994.
"Other Aircraft Agreements" shall mean Aircraft Operating Lease
Agreements relating to other Fokker-manufactured aircraft leased to Lessee
by Lessor or a lessor related to, or acting for the benefit of Wings
Aircraft Finance, Inc. or any affiliate thereof, the Credit and Security
Agreement, the Note, the Support Services Agreement, the Termination
Agreement or any other agreement between Lessee and Lessor or any
affiliate of Wings Aircraft Finance, Inc.; provided that, for the purpose
of this definition, the word "affiliate" shall mean any corporation or
other entity that, directly or indirectly, controls, is controlled by, or
is under common control with, Wings Aircraft Finance, Inc.
"Owner Participant" shall mean CIBC Inc., a corporation organized
and existing under the laws of the State of Delaware, together with its
permitted successors and assigns.
"Part" shall mean, whether or not installed on the Aircraft:
(a) any component, furnishing or equipment (other than a complete
Engine) furnished with the Aircraft on the Original Delivery
Date; and
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<PAGE>
(b) any other component, furnishing or equipment (other than a
complete Engine) title to which has, or should have, passed to
Lessor pursuant to this Lease
but excludes any such items title to which has, or should have,
passed to (i) Lessee pursuant to this Lease or (ii) any person
pursuant to any agreement relating to the financing of spare parts
for the Aircraft, including, but not limited to, FAUSA pursuant to
the Credit and Security Agreement and the Note.
"Participation Agreement" shall mean that Participation Agreement
(Trust No. 116-A) dated as of July 10, 1995, among Lessor, Owner
Participant, Owner Trustee, Indenture Trustee and Loan Participant, as it
may be amended, modified or supplemented from time to time in accordance
with the terms thereof.
"Permitted Lien" shall mean:
(a) liens of repairers, mechanics, material men, carriers,
hangarkeepers, employees or other similar liens arising in the
ordinary course of business by statute or by operation of law
in respect of obligations which are either not overdue or are
being contested in good faith by appropriate proceedings;
(b) any lien for Taxes of any kind either not assessed or, if
assessed, not yet due and payable or being contested in good
faith by appropriate proceedings; and
(c) any lien arising out of a judgment against Lessee with respect
to which at the time an appeal is being prosecuted in good
faith and with respect to which there shall have been secured
a stay of execution pending such appeal,
provided that in the case of these subclauses (a), (b) and (c):
(i) adequate reserves for the payment of such obligations
have been provided by Lessee;
(ii) such proceedings, or the continued existence of such
lien, do not give rise to any likelihood of the sale,
forfeiture or other
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<PAGE>
loss of the Aircraft or any Engine or any Part or any
interest therein; and
(iii) any such lien does not arise as a result of any default
on the part of Lessee in respect of its obligations
under this Lease;
(d) any Lessor Lien and the lien of this Lease; and
(e) any lien for Lessor Taxes.
"Redelivery Location" shall mean Schiphol Airport, The Netherlands.
"Rent Date" shall mean the First Rent Date and the numerically
corresponding date of each and every subsequent month during the Term, or
(if there is no corresponding date in any month), the last day of such
month.
"Rental Period" shall mean the period from and including any Rent
Date to and including the day preceding the next Rent Date.
"Replacement Engine" shall have the meaning set forth in Article
5.1.2(a)(i).
"Security Assignment" shall mean the Assignment of Sublease (Trust
No. 116-A) dated as of July 10, 1995 between Lessor, as assignor, and Head
Lessor, as assignee.
"Security Interest" shall mean any mortgage, charge, pledge, lien,
assignment, hypothecation, right of set-off or any agreement or
arrangement having the effect of creating a security interest.
"State of Incorporation" shall mean the State of Delaware.
"State of Registration" shall mean United States of America.
"Supplemental Rent" shall mean Agreed Value and any other amount
which by the terms of this Lease is payable by Lessee to Lessor other than
Rent and the Reserve Rate.
"Support Services Agreement" shall mean the Aircraft Support
Services and Product Assurances Agreement No. ASSAF-110 dated October 1,
1993 between FAUSA and Lessee.
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<PAGE>
"Taxes" shall mean any and all present and future sales, use,
property, customs, value-added, turnover, stamp, interest equalization,
income, gross or net receipts, franchise, excise, net worth, capital or
other taxes, fees, withholdings, imposts, duties, levies, or other charges
of any nature, together with any penalties, fines, or interest thereon,
imposed, levied, or assessed by, or otherwise payable to, any Governmental
Entity and "Tax" shall be construed accordingly.
"Tax Indemnitee" shall mean each of Lessor and each of its permitted
successors and assigns and each shareholder, subsidiary and affiliate of
each of the foregoing.
"Term" shall bear the meaning ascribed to it in Article 3.4.
"Termination Agreement" shall mean the Lease Termination Agreement
(AOLAF- ) dated as of July 10, 1995 between Fokker, Lessee and the Owner
Trustee named therein, as it may be amended, modified or supplemented from
time to time, in accordance with its terms.
1.2 The terms:
Agreed Value,
Deposit,
Rent,
Reserve Rate, and
Transaction Expenses
shall have the meanings and values set forth in Appendix B.
1.3 References in this Lease to:
(a) Articles or Appendices are, unless otherwise specified,
references to Articles of, and Appendices to, this Lease and
references to this Lease include its Appendices;
(b) any statute or other legislative provision shall be read to
include any statutory or legislative modification or
re-enactment thereof, or any substitution therefor;
(c) the Aircraft include any Part of the Aircraft, and, where the
context so admits, any of the Aircraft Documents and
references to any part of the Aircraft include any part of any
Engine;
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<PAGE>
(d) the word "person" or "persons" or to words importing persons
include, without limitation, individuals, firms, partnerships,
joint ventures, trusts, Government Entities, organizations,
associations, corporations, government agencies, committees,
departments, authorities and other bodies, corporate or
incorporate, whether having distinct legal personality or not,
or any member of any of the same;
(e) words importing the plural include the singular and vice
versa;
(f) any agreement or instrument include such agreement or
instrument as it may from time to time be amended or
supplemented; and
(g) headings in this Lease are for ease of reference only.
2. AGREEMENT TO LEASE
2.1 Lessor will lease the Aircraft to Lessee and Lessee will take the
Aircraft on lease from Lessor in "As Is" condition in accordance
with the terms and conditions of this Lease.
2.2 Lessor's obligation to deliver the Aircraft on the Delivery Date to
Lessee shall be subject to:
(i) the receipt by Lessor from Lessee on or prior to the Delivery
Date of the following, all of which shall be in the English
language and be satisfactory in form and substance to Lessor:
(a) [intentionally omitted];
(b) copies of Lessee's certificate of incorporation and/or
memorandum and articles of association and/or by-laws
and/or other constitutional documents, certified to be
true and up to date copies by a duly authorized officer
of Lessee;
(c) copies of resolutions of Lessee's board of directors
authorizing Lessee to enter into and perform this Lease
and the transactions contemplated hereby, certified to
be true and
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<PAGE>
in full force and effect by a duly authorized officer of
Lessee;
(d) evidence that each approval, license and consent which
may be required in relation to, or in connection with
the performance by Lessee of any of its obligations
hereunder has been granted by or obtained from the
applicable Government Entity in the State of
Registration;
(e) [intentionally omitted];
(f) evidence of appointment of Lessee's agent for service of
process in the State of New York;
(g) [intentionally omitted];
(h) [intentionally omitted];
(i) a power of attorney in the form of Appendix G
authorizing Lessor to take action at the Air Authority
and a certified resolution authorizing same;
(j) such other documents as Lessor may reasonably request;
(ii) the receipt by Lessor from Lessee on or before the Delivery
Date of:
(a) an opinion satisfactory in form and substance to Lessor
of counsel to Lessee, addressed to Lessor, Head Lessor,
Indenture Trustee, Owner Participant and Loan
Participant;
(b) [intentionally omitted];
(c) a certificate of insurance, a broker's letter of
undertaking and other evidence satisfactory to Lessor
that Lessee is taking the required steps to ensure due
compliance with the provisions of this Lease as to
Insurances with effect on and after the Delivery Date;
(d) evidence that the representations and warranties of
Lessee set forth in Article 13.4 are true and correct;
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<PAGE>
(iii) receipt by Lessor of a certificate of an officer of Lessee
certifying that the Aircraft Maintenance Agreement is in full
force and effect with respect to the Aircraft;
(iv) receipt by Lessor of the executed Consent to the Security
Assignment (Trust No. 116-A) in the form attached to the
Security Assignment as Exhibit A thereto;
(v) evidence (including satisfactory opinions of Crowe & Dunlevy,
special Air Authority aviation counsel, as to Air Authority
registration and recordation matters) that on the Delivery
Date the Aircraft has been validly registered under the laws
of the State of Registration and that all filings,
registrations, recordings and other actions have been or will
be undertaken which are necessary or advisable to ensure the
validity, effectiveness and enforceability of this Lease and
the Head Lease and to protect the property rights of Lessor
and Head Lessor in the Aircraft or any Part and the Security
Interest of Indenture Trustee therein;
(vi) Lessor being satisfied that no default shall have occurred
under any Other Aircraft Agreement or any other agreement
between Fokker or FAUSA and Lessee;
(vii) this Lease and the Termination Agreement shall have been duly
executed and delivered by Lessee and shall be in full force
and effect, and an executed counterpart of each shall have
been delivered to Lessor; and
(viii) the Assignment of Support Services Agreement (Trust No.
116-A) dated as of July 10, 1995 between Lessee and Head
Lessor shall have been duly executed and delivered by Lessee
and shall be in full force and effect, and an executed
counterpart of each shall have been delivered to Lessor.
2.3 The conditions specified in Article 2.2 are inserted for the sole
benefit of Lessor and may be waived or deferred in whole or in part
and with or without conditions by Lessor. If any of the said
conditions are outstanding on the Delivery Date and Lessor (in its
absolute discretion) nonetheless agrees to deliver the
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Aircraft to Lessee, Lessee shall ensure that such outstanding
conditions are fulfilled within fifteen (15) days after the Delivery
Date and Lessor shall be entitled to treat the failure of Lessee to
perform such outstanding conditions as an Event of Default.
2.4 The obligation of Lessee to accept delivery of the Aircraft from
Lessor is subject to the satisfaction of the following conditions
precedent on or before the Delivery Date:
(i) this Lease and the Termination Agreement shall have been
duly authorized, executed and delivered by Lessor and shall be in
full force and effect, and an executed counterpart shall have been
delivered to Lessee;
(ii) Lessee shall have received the following:
a. an incumbency certificate of Lessor as to the
persons authorized to execute and deliver this
Lease, including the signatures of such persons;
and
b. such other documents and evidence with respect to
Lessor as Lessee may reasonably request in order
to establish the taking of all corporate
proceedings in connection with such transactions
and compliance with the conditions set forth
herein;
(iii) on the Delivery Date, the representations and warranties
of Lessor contained in Article 13.6 shall be true and accurate as
though made on and as of such date;
(iv) Lessee shall have received the favorable opinion,
addressed to it and reasonably satisfactory in form and substance to
it, from Crowe & Dunlevy, special Air Authority aviation counsel;
(v) the Aircraft shall meet the delivery conditions specified
in Article 3.6;
(vi) Lessee shall have received the favorable opinion,
addressed to it and reasonably satisfactory in form and substance to
it, from Haight, Gardner, Poor & Havens, special counsel to Lessor
and Fokker;
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(vii) Lessee shall have received certified execution copies of
a. the Tax Indemnity Agreement (Trust No. 116-A)
dated as of July 10, 1995 between Lessor and Owner
Participant;
b. Sections 7(b) and 7A and the definition of
"Lessor's Lien" in the Participation Agreement
(Trust No. 116-A) among Lessor, Head Lessor, Owner
Participant and the other parties thereto; and
c. Section 7(c)(x) and the provisions relating
thereto in the Lease Agreement dated as of July
10, 1995 (Trust No. 116-A) between Lessor and Head
Lessor; and
d. Lessee shall have received letters of quiet
enjoyment from Head Lessor and Indenture Trustee
in form and substance satisfactory to it.
3. TERM; DELIVERY; ACCEPTANCE
3.1.1 Lessor shall deliver and Lessee shall accept the Aircraft and the
delivery thereof on the Delivery Date.
3.1.2 [Intentionally omitted].
3.2 [Intentionally omitted].
3.3.1 [Intentionally omitted].
3.3.2 [Intentionally omitted].
3.4 The term of the lease shall commence on the Delivery Date and shall
continue until the Expiry Date unless earlier terminated or extended
as herein provided (such period being herein referred to as the
"Term").
3.5 The Aircraft shall be delivered to and accepted by Lessee at the
Delivery Location or such other location as is mutually acceptable
to the parties.
Acceptance by Lessee of the Aircraft by execution and delivery of
the Certificate of Acceptance shall be
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deemed to be evidence that Lessor has performed all its obligations
under this Article 3.5.
3.6 [Intentionally omitted].
3.7 Lessee shall indemnify and hold harmless the Indemnitees from and
against any and all liabilities, damages, losses (including costs
and expenses incident thereto) arising by reason of death of or
injury to any such observer or any employee of Lessee, arising out
of, or in any way connected with the inspection of the Aircraft upon
redelivery of the Aircraft.
3.8 Lessee shall indicate and confirm its acceptance of the Aircraft by
the execution and delivery to Lessor of the Certificate of
Acceptance.
4. REGISTRATION AND TITLE
4.1 It shall be the responsibility of Lessee, at its expense, to
cooperate with Lessor and Head Lessor. to effect and maintain
registration of the Aircraft in the name of Head Lessor under the
Laws of the State of Registration during the Term, such registration
to reflect the interests of Lessor, Head Lessor and Indenture
Trustee, and to obtain and maintain all licenses, permits and
approvals, including, without limitation, a certificate of
airworthiness from the Air Authority, as may be requisite in
connection with operation of the Aircraft under this Lease.
4.2 Lessee shall at its own expense and responsibility cause this Lease
to be kept, filed and recorded at all times during the Term, in such
office or offices for the registration of the Aircraft in the State
of Registration and in such other offices (in the United States but
not in any jurisdiction outside of the United States unless directly
required due to Lessee's operation) as may be necessary, to protect
Lessor's, Head Lessor's and Indenture Trustee's rights hereunder and
under the Head Lease and the Indenture in any state in which the
Aircraft may operate including the State of Registration of the
Aircraft and the State of Incorporation or as Lessor may reasonably
request to protect and preserve Lessor's, Head Lessor's and
Indenture Trustee's rights hereunder and under the Head Lease and
the Indenture and shall on request furnish to Lessor an opinion of
counsel or other evidence satisfactory to Lessor of such filing and
recording.
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4.3 Title to and ownership of the Aircraft shall at all times remain in
Head Lessor, and Lessee shall have no right, title or interest in or
to the Aircraft or any part thereof except as expressly provided by
this Lease. Lessee shall identify and specify the interest of Head
Lessor and Indenture Trustee and shall affix or keep affixed (i) in
a reasonably prominent position on the flight-deck of the Aircraft
and on each Engine a metal name plate (having dimensions of not less
than 10 cm x 7 cm) bearing the inscription (in fireproof and legible
characters) stating:
"NOTICE OF OWNERSHIP
THIS AIRCRAFT/ENGINE IS OWNED BY FIRST SECURITY BANK OF UTAH, NATIONAL
ASSOCIATION, NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS OWNER TRUSTEE
AND HEAD LESSOR AND IS SUBJECT TO A FIRST PRIORITY MORTGAGE IN FAVOR OF
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION"
The proper completion of the metal name plate shall be advised by
Lessor at its earliest convenience. Lessee shall not remove or
deface evidence of ownership of the Aircraft and shall not do or
permit to be done or omitted any act or thing which would jeopardize
the rights of Lessor, Head Lessor or Indenture Trustee in the
Aircraft. Lessee will on all occasions when the ownership of the
Aircraft or any Part is relevant make clear to third parties that
title to the same is held by Head Lessor.
4.4 Lessee acknowledges that the Aircraft is owned by Head Lessor and is
subject to the Indenture, which is a first priority Security
Interest, and that Lessor's interest in this Lease is subject to the
Security Assignment in favor of Head Lessor. Lessee undertakes to
Lessor (both for itself and as agent for each of Head Lessor and
Indenture Trustee) at Lessee's expense (except for the expense of
assignments pursuant to Article 12) to, from time to time, cooperate
with Lessor or Head Lessor to, cause this Lease, the Indenture, the
Security Assignment and such other documents as may be necessary or
advisable to give effect to the transactions contemplated hereby or
thereby, to be kept, recorded or filed in such office or offices in
the State of Incorporation and in the State of Registration as may
be necessary or advisable to protect and perfect the interests of
Lessor, Head Lessor and Indenture Trustee in the Aircraft, this
Lease, the Head Lease, the Indenture and the Security
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Assignment, and to do, from time to time, all other things which
Indenture Trustee, Head Lessor and/or Lessor may reasonably require
in order to protect and perfect their rights.
4.5 Lessor agrees that during the Term it shall not permit the
registration of the Aircraft to be changed to any registration other
than under the Laws of the State of Registration except as may be
required in connection with the sublease of the Aircraft by Lessee
pursuant to Article 12.1.
5. POSSESSION AND USE
5.1 Lessee shall not transfer possession of the Aircraft, the Engines or
any Part to any person or any legal entity or remove any Engine or
Part from the Airframe other than in accordance with the provisions
of this Article 5 or of Article 12.1; provided, however, that so
long as no Default shall have occurred and be continuing, Lessee
may, without the prior written consent of Lessor deliver possession
of the Aircraft, the Engines or Parts to the manufacturer thereof
for testing or other similar purposes, or to an Authorized
Maintenance Performer for service, repair, maintenance or overhaul
work on the Aircraft, the Engines or Parts, or for alterations,
modifications, or additions thereto, to the extent required or
permitted by the terms of Article 7.3.
5.1.1 Lessee will ensure that no Engine or Part installed on the Aircraft
is at any time removed from the Aircraft other than:
(a) if replaced as expressly permitted by this Lease; or
(b) if the removal is of an Obsolete Part (as defined in Article
7.3(b)) and is in accordance with the Approved Maintenance
Program; or
(c) (i) during the course of maintaining, servicing, repairing,
overhauling or testing that Engine or Part or the
Aircraft, as the case may be; or
(ii) as part of a normal engine or part rotation program; or
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(iii) for the purpose of making such modification to the
Engine or Part, or the Aircraft, as the case may be, as
are permitted under this Lease,
and then in each case only if it is reinstalled or replaced by an
engine or part complying with Article 5.1.2(a) as soon as
practicable (or in the case of Article 5.1.1(c)(ii) in the ordinary
course of such program) and in any event no later than the Expiry
Date except, in the case of Obsolete Parts, as provided in Article
7.3(b).
5.1.2 (a) Lessee will ensure that, except as permitted by this Lease, no
engine or part is installed on the Aircraft unless:
(i) in the case of an engine, it is an engine of the same
make and model as, or an improved or advanced version of
the Engine it replaces, which is in similar or better
operating condition, and in the case only of a Casualty
Occurrence, has substantially similar hours available
until the next scheduled checks, inspections, overhauls
and shop visits and has the same or greater value and
utility as the replaced Engine (assuming the Engine
being replaced was of a value and utility and in at
least the condition and repair required by the terms of
this Lease) and shall be suitable for use on the
Airframe and compatible with each other Engine or engine
then on the Aircraft (a "Replacement Engine"). At
Lessee's election, Lessee may cause an Engine to be
replaced under this Lease with a Replacement Engine by
compliance with the provisions of Article 17.3 with
regard thereto;
(ii) in the case of a part, it is in as good operating
condition, is of similar or a more advanced make and
model and is of the same interchangeable modification
status as the replaced Part;
(iii) in the case of any part, it has become and remains the
property of Head Lessor free from Security Interests and
on installation on the Aircraft will, without further
act, be
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subject to this Lease, the Head Lease and the Indenture;
and
(iv) in each case, Lessee has full details as to its source
and maintenance records.
(b) Provided no Default has occurred and is continuing, Lessee
shall be entitled to install any engine or part on the
Aircraft by way of replacement notwithstanding Article
5.1.2(a) if:
(i) there is not available to Lessee at the time and in the
place that 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 Article
5.1.2(a); and
(ii) it would result in an unreasonable disruption of the
operation of the Aircraft and/or the business of Lessee
to ground the Aircraft until an engine or part, as the
case may be, complying with Article 5.1.2(a) becomes
available for installation on the Aircraft; and
(iii) as soon as reasonably practicable after installation of
the same on the Aircraft, Lessee removes any such engine
or part and replaces it with the Engine or Part replaced
by it or by an engine or part, as the case may be,
complying with Article 5.1.2(a).
5.1.3 Lessee will:
(a) ensure that any Engine or Part which is not installed on the
Aircraft (or any other aircraft as permitted by this Lease)
is, except as expressly permitted by this Lease, properly and
safely stored, and kept free from Security Interests;
(b) from time to time on request, notify Lessor in writing as to
the location of any Engine and on request shall use its
reasonable efforts to procure that any person to whom
possession of an Engine is given acknowledges in writing to
Lessor, in terms satisfactory to Lessor, that it will respect
the interests of Head Lessor as owner, Indenture Trustee as
mortgagee and Lessor as
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lessor of the Engine and will not seek to exercise any rights
whatsoever in relation to it;
(c) (notwithstanding the foregoing provisions of this Article
5.1.3), be permitted, if no Default has occurred and is
continuing, to install any Engine or Part on an aircraft, or
in the case of a Part, on an engine:
(i) owned and operated by Lessee free from Security
Interests; or
(ii) leased or hired to Lessee pursuant to a lease or
conditional sale agreement on a long-term basis and on
terms whereby Lessee has full operational control of
that aircraft or engine; or
(iii) acquired by Lessee and/or financed or refinanced, and
operated by Lessee, on terms that ownership of that
aircraft or engine, as the case may be, pursuant to a
lease or conditional sale agreement, or a Security
Interest therein, is vested in or held by any other
person;
provided that in the case of (ii) and (iii):
(1) the terms of any such lease, conditional sale agreement or
Security Interest will not have the effect of prejudicing the
interests of Indenture Trustee as mortgagee or Head Lessor as
owner or Lessor as lessor of that Engine or Part; and
(2) the lessor under such lease, the seller under such conditional
sale agreement or the holder of such Security Interest, as the
case may be, has confirmed and acknowledged in writing to
Lessor, in form and substance satisfactory to Lessor, or has
otherwise agreed in writing, that it will respect the
interests of Head Lessor as owner, Indenture Trustee as
mortgagee and Lessor as lessor (without regard to whether such
writing identifies Head Lessor, Indenture Trustee and Lessor
by name) of that Engine or Part and that it will not seek to
exercise any rights whatsoever in relation thereto; and, to
the extent such an acknowledgment has been given, Lessor
hereby agrees, for the benefit of the lessor, the seller, or
secured party, as the case may be, of any engine or part
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(other than an Engine or a Part) leased to Lessee or owned by
Lessee subject to a conditional sale or other security
agreement, that Lessor will not acquire or claim, as against
such lessor, seller or secured party, any right, title or
interest in any engine or engines owned by the lessor under
such lease or subject to a security interest in favor of the
seller or secured party under such conditional sale or other
security agreement as the result of such engine or engines
being installed on the Airframe at any time while such engine
or engines are subject to such lease or conditional sale or
other security agreement.
5.1.4 Lessee will not enter into nor permit any pooling agreement or
arrangement in respect of an Engine or Part without the prior
written consent of Lessor, which shall not be unreasonably withheld.
5.2 Lessee shall use the Aircraft solely in commercial or other
operations for which Lessee is duly authorized by the Laws of the
State of Registration and/or any jurisdiction to whose Laws Lessee's
operation of the Aircraft is subject and shall not use or permit the
Aircraft to be used for any purpose for which the Aircraft is not
designed or reasonably suitable.
Lessee shall not use the Aircraft for the carriage of (i) whole
animals living or dead except in the cargo compartments according to
the United States Department of Transportation ("DOT") (or for
international flights, International Civil Aviation Organization
("ICAO")) regulations, and except domestic pet animals carried in a
suitable container to prevent the escape of any liquid and to ensure
the welfare of the animal; (ii) acids, toxic chemicals, other
corrosive materials, explosives, nuclear fuels, wastes, or any
nuclear assemblies or components, except as permitted for passenger
aircraft under the "Restriction of Goods" schedule issued by the DOT
(or for international flights, ICAO) from time to time and provided
that all the requirements for packaging or otherwise contained
therein are fulfilled; or (iii) any other goods, materials or items
of cargo which could reasonably be expected to cause damage to the
Aircraft and which would not be adequately covered by the insurance
required by or obtained pursuant to Article 11.
5.3 Lessee shall not permit the Aircraft to be maintained, used, or
operated in violation of any Law of any
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Government Entity having jurisdiction, or contrary to any
manufacturer's operating manuals and instructions, or in violation
of any airworthiness certificate, license or registration relating
to the Aircraft issued by any such Government Entity, unless the
validity thereof is being contested by Lessee in good faith and by
appropriate proceedings (but only so long as such proceedings do not
(i) involve any risk of the sale, forfeiture or loss of any interest
therein, (ii) otherwise adversely affect Lessor, Head Lessor,
Indenture Trustee, Owner Participant or Loan Participant or (iii)
involve any risk of criminal liability or any unindemnified material
risk of civil liability to Lessor, the Indenture Trustee, Owner
Participant or Loan Participant) provided, that Lessee shall give
prior written notice to Lessor of any such contest and provide
Lessor with any information Lessor may reasonably request with
respect to such contest. In the event that such Laws require
alteration of the Aircraft during the Term of this Lease, Lessee
shall conform therewith at its own expense and shall maintain the
same in proper condition for operation under such Laws. Lessee
agrees not to operate the Aircraft or to permit or suffer the
Aircraft to be operated (i) contrary to applicable Law, and/or (ii)
within or into any geographic area unless the Aircraft is covered by
insurance as required by the provisions of Article 11 or insurance
or an indemnity in lieu of such insurance from the United States
government against the risks and in the amounts required by Article
11 covering such area, and/or (iii) contrary to the terms of such
insurance as required by the provisions of Article 11.
5.4 Throughout the Term and until re-delivery of the Aircraft to Lessor
in accordance with the provisions of this Lease, the Aircraft and
every part thereof shall be in every respect at the sole risk of
Lessee, who shall bear all risks of loss, theft, damage or
destruction to the Aircraft from any cause whatsoever. Lessor shall
not be liable for any liability, claim, loss, damage or expense of
any kind or nature caused directly or indirectly by the Aircraft or
any part thereof by any inadequacy thereof for any purpose or any
deficiency or defect therein, by the use or performance thereof, by
any repairs or servicing thereto or any delay in providing or
failure to provide any thereof, by any interruption or loss of
service or use thereof, or by any loss of business or other
consequential damage or any damage whatsoever and
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howsoever caused prior to re-delivery of the Aircraft to Lessor.
5.5 Lessee shall ensure that such crew and engineers as are employed by
it in connection with the operation and maintenance of the Aircraft
shall have such qualifications and hold such licenses as are
required by the Air Authority and by all applicable Laws and
regulations.
5.6 Lessee shall use, operate and maintain the Aircraft in at least as
good a manner and with at least as much care as used by Lessee with
respect to aircraft of the same type owned, leased or operated by
Lessee, and Lessee shall not discriminate against the Aircraft (as
compared to other aircraft of the same type owned, leased or
operated by Lessee) in the use, operation or maintenance of the
Aircraft, other than withdrawal of the Aircraft from use and
operation for return in accordance with this Lease.
6. CHARGES, METHOD OF PAYMENT AND FINANCIAL INFORMATION
6.1 Lessee shall punctually pay to Lessor, when due, the Rent and
Supplemental Rent expressed to be payable by Lessee to Lessor
hereunder including the monies specified and calculated in
accordance with the provisions of Appendix D at the time and in the
manner therein specified, and shall punctually and duly observe and
perform Lessee's obligations under the said Appendix D which forms
an integral part of this Lease. The time stipulated in this Lease
for all payments payable by Lessee to Lessor and for the performance
of Lessee's other obligations under this Lease shall be of the
essence of this Lease.
6.2 Lessee shall not be entitled to any abatement, compensation,
reduction or set-off against any installment of Rent or Supplemental
Rent, including but not limited to, abatements, compensations,
reductions or set offs, by reason of any past, present or future
claims of Lessee against Lessor or any other person under this Lease
or otherwise.
6.3 Lessee's obligation to pay Rent and make other payments in
accordance with this Lease, until Lessee shall have redelivered the
Aircraft to Lessor in accordance with Article 16 and shall have
complied with its other obligations hereunder, shall be absolute and
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unconditional irrespective of any contingency whatsoever including
(but not limited to) (i) any right of set-off, counterclaim,
recoupment, defence or other right which either party may have
against the other, (ii) any unavailability of the Aircraft for any
reason, including, but not limited to, any defect in the
airworthiness, merchantability, fitness for any purpose, condition,
design, or operation of any kind or nature of the Aircraft, or the
ineligibility of the Aircraft for any particular use or trade, or
for registration or documentation under the laws of any relevant
jurisdiction, or (save as herein provided) any Casualty Occurrence
in respect of or any damage to the Aircraft, (iii) any insolvency,
bankruptcy, reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceedings by or against Lessor
or Lessee, (iv) any invalidity or unenforceability or lack of due
authorization of, or other defect in this Lease, (v) any failure of
Lessee to obtain any required license, certificate, authorization or
other approval of any Government Entity having jurisdiction over the
operation by Lessee of the Aircraft or the operation by Lessee in
any airport and (vi) any other cause which, but for this provision,
would or might have the effect of terminating, frustrating or in any
way affecting any obligation of Lessee hereunder, it being the
declared intention of the parties that the provisions of this
Article and the obligations of Lessee to pay the Rent and
Supplemental Rent provided for by this Lease shall survive any
frustration and that, save as expressly provided in this Lease, no
monies payable hereunder by Lessee to Lessor shall in any event or
circumstance be repayable to Lessee. Nothing in this Article 6.3
shall preclude Lessee from exercising its right to pursue a claim
for damages or specific performance or other judicial remedy against
Lessor and/or any Indemnitees.
6.4 Lessee agrees to furnish Lessor during the Term:
(i) [intentionally omitted];
(ii) upon Lessor requesting the same a quarterly unaudited balance
sheet of Lessee prepared by it as of the close of the most
recent previous financial quarter, together with the related
profit and loss statement for such period;
(iii) within ninety (90) days after the close of each financial year
of Lessee, an audited balance sheet
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and profit and loss statement as of the close of such
financial year;
(iv) from time to time such other non-confidential information as
Lessor may reasonably request; and
(v) copies of all notices sent by Lessee (A) to its shareholders
or creditors as a group in their respective capacities as such
relating to major business or financial developments of
Lessee, or (B) to the Securities Exchange Commission in
connection with or following a public offering of the equity
shares of Lessee.
7. MAINTENANCE
7.1 Lessee, during the Term, at its own cost and expense shall:
(a) service, repair, maintain, overhaul, test, or cause the same
to be done to the Aircraft in accordance with the Approved
Maintenance Program so as to keep the Aircraft in as good
operating condition as when delivered to Lessee on the
Original Delivery Date, ordinary wear and tear excepted, and
such operating condition as may be necessary to enable the
airworthiness certificate of the Aircraft to be maintained in
good standing at all times under applicable Law; and Lessee
shall at all times maintain current certificates of
airworthiness and Air Authority required records of
maintenance in respect of the Aircraft and produce copies
thereof to Lessor upon request, except in each case if Fokker
100 aircraft with similar engines are grounded by the Air
Authority;
(b) maintain in the English language all Aircraft Documents,
records, logs, and other materials required by applicable Laws
and best airline practice to be maintained in respect of the
Aircraft including engine trend monitoring data;
(c) perform, or cause to be performed, all airworthiness
directives and mandatory notes and mandatory bulletins
affecting the Aircraft having a compliance date during the
Term and issued by (a) the Air Authority and/or (b) Fokker or
any other manufacturer of any part of the Aircraft
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(except that, in the event of a conflict, those required by
the Air Authority shall prevail);
(d) maintain the Aircraft in conformity with Air Authority
Regulations and such other rules and regulations of the Air
Authority as may from time to time be applicable to passenger
category airline aircraft;
(e) provide Lessor by telex or fax message or by personal delivery
to a technical representative of Manufacturer, if any, with a
monthly summation (which may utilize Air Authority forms) of
Flight Hours and Cycles accumulated on the Airframe and
Engines, and, commencing upon the month following the date
(and so long as) Lessee is required to pay the Reserve Rate
hereunder, Auxiliary Power Unit ("A.P.U.") and Landing Gear
and details of all modifications and material component
changes within ten (10) days after the end of each month.
Such maintenance shall be performed by Lessee or by the Authorized
Maintenance Performer pursuant to the Aircraft Maintenance Agreement
or by any other Authorized Maintenance Performer, for the purposes
of this Lease.
7.2 Except as otherwise provided herein, Lessee, at its own cost and
expense, shall promptly replace all Engines or Parts which may from
time to time become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair, or unserviceable with an engine
or part meeting the requirements of Article 5.1.2(a).
7.3 (a) Save as expressly herein provided the Aircraft shall not be
modified, altered, converted or added to (each such action in
relation to the Aircraft being herein referred to as an
"Equipment Change"), provided that Lessee may, at its own
expense, make such Equipment Changes to the Aircraft as Lessee
may deem desirable in the proper conduct of its business,
provided that no such Equipment Change diminishes the value,
utility, condition or airworthiness of the Aircraft below the
value, utility, condition and airworthiness thereof
immediately prior to such Equipment Change, assuming the
Aircraft was then in the condition required to be maintained
by the provisions of this Lease.
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(b) Title to all Parts incorporated or installed in or attached or
added to the Aircraft as the result of such Equipment Change
shall, without further act, vest in Head Lessor free and clear
of all liens, charges and encumbrances. Lessee shall at its
own expense take all such steps and execute, and procure the
execution of, all such instruments as Lessor may require and
which are necessary to ensure that title to any such
replacement Part as aforesaid passes to Head Lessor according
to the Governing Law and the lex situs, provided, however,
that so long as a Default shall not have occurred and be
continuing, at any time during the Term, Lessee may remove any
such Part if (A) (i) such Part is in addition to, and not in
replacement of or in substitution for, any Part originally
incorporated or installed in or attached to the Aircraft at
the time of the Original Delivery Date, (ii) such Part is not
required to be incorporated or installed in or attached or
added to the Aircraft pursuant to the provisions of Article
7.1 and (iii) such Part can be removed from the Aircraft
without diminishing or impairing the value, utility,
airworthiness, condition or remaining useful life which the
Aircraft would have had at such time, had such Equipment
Change not occurred; or (B) such Part is deemed by Lessee to
be obsolete or no longer suitable or appropriate for use in
the Airframe or Engines (an "Obsolete Part") and its removal
shall not materially decrease the value or adversely affect
the utility or remaining useful life of the Airframe or
Engine, or impair the condition or airworthiness thereof below
the value, utility or remaining useful life, condition or
airworthiness thereof immediately prior to such removal
(assuming the Aircraft was then in the condition required to
be maintained by the terms of the Lease), except that the
value (but not the utility, remaining useful life, condition
or airworthiness) of the Airframe or the Engines may be
reduced, to the extent resulting from the removal of Obsolete
Parts, if the aggregate original cost of all Obsolete Parts
removed from such Aircraft and not replaced shall not exceed
$350,000.
(c) Upon the removal by Lessee of any such Part as above provided,
title thereto shall, without further act, vest in Lessee and
such Part shall no
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longer be deemed a part of the Aircraft. Any Part not removed
by Lessee as above provided prior to the return of the
Aircraft to Lessor hereunder shall remain the property of Head
Lessor (save as the parties may otherwise agree in writing)
provided that Lessor may require Lessee, prior to the end of
the Term, to remove any Parts incorporated or installed in the
Aircraft as a result of an Equipment Change and to restore the
Aircraft to its condition prior to an Equipment Change.
7.4.1 Upon submission by Lessee to Lessor of invoices or receipts
reasonably satisfactory to Lessor evidencing the performance in
accordance with the provisions of this Agreement by or at the
direction of Lessee of:
(a) with respect to the Airframe, the accomplishment of those
items of maintenance characterized as scheduled airframe heavy
maintenance as defined in the Approved Maintenance Program for
12,000 hours and 24,000 hours inspections or any equivalent
thereof with more or less hours ("Airframe Maintenance"), or
(b) with respect to any Engine or the replacement thereof, the
performance of all scheduled shop visit engine maintenance and
repair, other than (i) repairs arising as a result of foreign
object damage or operational mishandling and/or (ii)
maintenance and repair of QEC (Quick Engine Change) kits
("Engine Maintenance"), or
(c) with respect to any nose or main landing gear ("Landing
Gear"), the performance of all scheduled shop visit nose and
main landing gear maintenance and repair, other than repairs
arising as a result of foreign object damage or operational
mishandling ("Landing Gear Maintenance"), or
(d) with respect to the A.P.U., the performance of all off
Aircraft shop A.P.U. maintenance and repair, other than
repairs arising as a result of foreign object damage or
operational mishandling ("A.P.U. Maintenance"),
Lessor shall, subject to Article 3.5 of Appendix D and provided that
a Default shall not have occurred and be continuing, release to
Lessee, from the relevant Maintenance Fund as defined in paragraph
3.2 of
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Appendix D, a sum equal to the aggregate amount evidenced by such
invoices or receipts for such relevant maintenance, to the extent
there are sufficient sums in the relevant Maintenance Fund at the
date of the start of the relevant maintenance. Lessee agrees to use
its reasonable efforts to ensure that the relevant invoices or
receipts are received by Lessor as promptly as possible after
completion of the relevant maintenance. All sums remaining in any
Maintenance Fund at the expiration or other termination of this
Agreement shall be retained by Lessor, except (i) upon payment in
full of Agreed Value and any other amounts due to Lessor or
otherwise hereunder after a Casualty Occurrence pursuant to Article
17.2(b), in which case all sums remaining in any Maintenance Fund
shall be paid to Lessee and (ii) under the circumstances and to the
extent described in Paragraphs 3.6 and 9 of Appendix D. For the
avoidance of doubt, Lessor shall not refuse to release monies from
the Maintenance Fund on the ground that maintenance was required due
to operational mishandling, provided that Lessee can demonstrate
that Lessee complied with the original equipment manufacturer's
written instructions.
7.4.2 Lessor shall be entitled to delay the release or payment of funds
from any Maintenance Fund (to the extent related to any disputed
amounts) to Lessee provided for by this Article 7 until such time as
it shall in its opinion be in a position to determine (which Lessor
agrees to use reasonable efforts to do as promptly as possible) the
amount to be released or paid, but in any event release all
undisputed amounts from the relevant Maintenance Fund (but where
insufficient funds are in such maintenance Fund the lesser pro rata
portion of such funds which corresponds to the undisputed amount)
upon request unless a Default shall have occurred and be continuing.
7.5.1 During the Term, Lessee shall furnish to Lessor such information
concerning the location, condition, use and operation of the
Aircraft as Lessor may reasonably request. The right of Lessor, or
its designated representatives, to inspect the Aircraft during any
Major Checks performed by or on behalf of Lessee during the Term,
shall be absolute and Lessee shall inform Lessor by providing thirty
(30) days' written notice as to time and location of all Major
Checks. During such Major Checks, Lessee agrees to provide
sufficient manpower to allow Lessor, or its authorized
representatives (at Lessor's cost and expense), to
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inspect any area of the Aircraft which Lessor requests to inspect
and which would normally be required during such a Major Check,
provided that such inspection is to be made only at the time that
Lessee opens up such area in accordance with the Approved
Maintenance Program.
Lessee also shall permit any persons designated by Lessor to visit
and inspect the Aircraft, its condition, use and operation, and the
records maintained in connection therewith.
7.5.2 Lessor shall have the right at any time on reasonable notice to
inspect or survey the Aircraft or any part thereof, or instruct a
duly authorized surveyor to carry out a survey on its behalf, to
ascertain the condition of the Aircraft or any part thereof and
satisfy itself that the Aircraft is being properly repaired and
maintained in accordance with the terms of this Lease. The cost of
any such inspection or survey shall be borne by Lessor unless an
Event of Default has occurred and is continuing.
7.5.3 Lessor shall have no duty to make any such inspection as is referred
to in Article 7.5.1 and 7.5.2 and shall not incur any liability or
obligation by reason of not making any such inspection. Except in
connection with any Event of Default hereunder no exercise of any
inspection right under Articles 7.5.1, 7.5.2 or any other provision
of this Lease shall interfere with the normal operation or
maintenance of the Aircraft or the business of Lessee and shall be
conducted during normal maintenance business hours. In connection
with any such inspection, Lessee shall allow Lessor or any persons
designated by Lessor to copy, at Lessor's cost and expense, any
Aircraft Documents or other records relating to maintenance and
operation of the Aircraft. Lessee shall not be liable for the use of
any such Aircraft Documents or other records by Lessor or any other
person or entity which use is unrelated to Lessee's compliance with
the terms of this Lease.
8. TAXES, DUTIES AND EXPENSES
8.1 Lessee agrees promptly to pay and indemnify and hold Lessor harmless
against all Taxes (other than Lessor Taxes) levied or imposed
against or upon or otherwise payable by any Tax Indemnitee or Lessee
and relating to or attributable to Lessee, this Lease, the Aircraft
and/or the importation, exportation, registration,
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ownership, leasing, sub-leasing, delivery, possession, use,
operation, reregistration, repair, maintenance, overhaul,
replacement, improvement, modification, alteration, transportation,
landing, storage, presence or re-delivery of or addition to, the
Aircraft or any Engine or any Part thereof or any rent, receipts,
insurance proceeds or income arising therefrom, or any sum payable
by Lessee to a Tax Indemnitee under this Lease or any other
transactions or activities contemplated by this Lease, provided,
however, that Lessee shall have no indemnity liability under this
Article 8.1 or under Article 8A.1(c) to Lessor for any of the
following Taxes:
(a) any Tax imposed on or payable by Lessor with respect to any
sale, assignment, transfer or other disposition by Lessor of
any interest in the Aircraft or any part thereof or this
Lease, other than any such sale, assignment, transfer or other
disposition (i) that is pursuant to an exercise of remedies
after the occurrence and during the continuance of an Event of
Default or (ii) that is a result of a Casualty Occurrence or
(iii) that is a result of the exercise by Lessee of any of its
options to purchase the Aircraft or (iv) that occurs as a
result of any substitution, replacement or pooling of the
Aircraft, any Engine or any Part by a Lessee Related Person;
(b) any Tax to the extent imposed on Lessor as a result of a
failure of Lessor to comply with any certification,
information, documentation, reporting or other similar
procedure that is required by law (including any applicable
statute, income tax convention, regulation or ruling) as a
condition precedent to the allowance of any reduction in the
rate of such Tax or any exemption or other relief from such
Tax; provided that (i) Lessor is otherwise eligible for such
relief or exemption from such Tax, (ii) Lessor's compliance
with such requirement would not create a material risk of
adverse tax consequences to Lessor for which it is not
indemnified to its reasonable satisfaction and (iii) in the
case of a Tax other than United States Federal income tax or
income tax withholding Lessee shall have notified such Lessor
of such requirement by timely written notice;
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(c) any Tax to the extent resulting from one or more transactions
or activities of Lessor in the jurisdiction imposing the Tax
if those transactions or activities are unrelated to the
transactions described in this Lease or the Other Aircraft
Agreements;
(d) any Tax imposed on or payable by or required to be withheld
from any payment to any assignee or other transferee of any
interest of Lessor in the Aircraft or this Lease (or imposed
on or payable by or required to be withheld from any payment
to any subsequent assignee or other transferee) to the extent
that the amount of such Tax exceeds the amount of such Tax
that would have been imposed on or payable by or required to
be withheld from any payment to Lessor (determined at the time
of transfer) and would have been indemnified by Lessee
pursuant to this Article 8 or Article 8A.1(c) (determined at
the time of transfer); provided that the exclusion described
in this clause (d) shall not apply to any assignee or other
transferee that is a corporation incorporated under the law of
a state of the United States or a partnership each partner of
which is such a corporation, or (provided that Lessor gives
Lessee prior written notice of such transfer) to any assignee
or other transferee that acquires its interest as a result of
the exercise of remedies after the occurrence and during the
continuance of an Event of Default;
(e) any Tax to the extent arising out of or caused by, or to the
extent such Tax would not have been incurred but for, (i) any
act or omission of Lessor if such act or omission is not
permitted by this Lease or the Other Aircraft Agreements or
(ii) the willful misconduct or gross negligence of Lessor or
(iii) the inaccuracy or breach of any representation,
warranty, covenant or agreement by Lessor in this Lease except
to the extent that such act, omission, inaccurate
representation or breach is attributable to an act, omission,
inaccurate representation or breach by Lessee;
(f) any Tax to the extent resulting from any amendment to any Head
Lease Operative Document to which Lessee is not a party unless
(i) Lessee shall have given its prior written consent to such
amendment or (ii) such amendment consists of a change in the
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"Basic Rent" schedule of the Head Lease resulting from a
suspension or reduction of Lessee's payments of Rent under
this Lease that continues for a period of more than 60 days,
or (iii) such amendment is required by applicable Law relating
to the Aircraft or any part thereof or relating to Lessee;
(g) any Tax imposed on or payable by Lessor to the extent
indemnified pursuant to Article 8A hereof;
(h) any Tax imposed on or payable by Lessor to the extent arising
out of or caused by, or to the extent such Tax would not have
been incurred but for, the existence of any Lessor's Lien;
(i) half of any sales tax payable in connection with the purchase
of the Aircraft by Lessee pursuant to Lessee's exercise of a
purchase option described in Paragraph 9 of Appendix D of this
Lease (it being understood and agreed that each of Lessee and
Lessor shall pay half of any sales tax payable with respect to
Lessee's purchase of the Aircraft pursuant to Lessee's
exercise of such a purchase option); or
(j) half of any sales or use tax payable in connection with the
transfers of the Aircraft and the lease and sublease of the
Aircraft on the Delivery Date (it being understood and agreed
that each of Lessee and Lessor shall pay half of any sales or
use tax payable with respect to such sales, lease and sublease
of the Aircraft on the Delivery Date).
If Lessee is required by any applicable Law or regulation to deliver
or furnish any report or return in connection with any such Taxes
(other than Lessor Taxes), Lessee shall complete the same in a
manner reasonably satisfactory to the relevant Tax Indemnitee and in
particular no such report or return shall contain any statement that
is inconsistent with Head Lessor's being the owner of the Aircraft,
and Lessee shall supply a copy of such report or return to the
relevant Tax Indemnitee promptly upon receipt of a request therefor
from such Tax Indemnitee.
All payments by Lessee hereunder to Lessor shall be free of
withholdings of any nature whatsoever (and at the time Lessee is
required to make any payment upon
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which any withholding is required, Lessee shall pay an additional
amount such that the net amount actually received by Lessor will,
after such withholding, equal the full amount of the payment then
due) and shall be free of expense for collection or other charges.
If Lessee shall have paid any additional amount pursuant to the
first sentence of this paragraph with respect to Taxes not subject
to indemnification pursuant to the provisions of this Section 8.1,
Lessor shall reimburse Lessee within 10 Business Days of written
demand therefor for the amount of such Taxes so paid by Lessee. For
the purpose of this Article 8 and Article 8A, the term "Lessor"
shall include each group of corporations (and each member thereof
that is a corporation organized under the laws of the United States
or any state thereof) that includes Lessor and for which
consolidated, combined, unitary or other group tax returns are
filed.
8.2 Except as otherwise specifically provided herein, Lessee shall pay
to Lessor on or after Delivery Date (unless otherwise agreed to be
financed by Lessor) upon demand:
(a) all reasonable expenses paid to third parties (including
reasonable legal, printing and out-of-pocket expenses)
incurred or payable by Lessor, FAUSA and Fokker related to any
amendment to or extension of, or the granting of any waiver or
consent under, this Lease in each case requested or caused by
Lessee;
(b) the Transaction Expenses;
(c) all reasonable expenses paid to third parties (including
reasonable legal fees and disbursements but excluding surveyor
costs) payable or incurred by Lessor in connection with the
enforcement of or preservation of any rights of Lessor under
this Lease or otherwise in respect of moneys owing under this
Lease by Lessee or in respect of any breach by Lessee of any
representation, warranty, covenant or undertaking herein
contained; and
(d) the ongoing annual fees and reasonable out-of-pocket expenses
(other than those incurred in connection with any of the
events described in Articles 12.3(c) or 12.3(d) and those
incurred pursuant to a change in such trustees which was
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not requested by Lessee) related to the Head Lease of Owner
Trustee and Indenture Trustee.
8.3 Lessee shall pay all stamp, documentary, registration or other like
duties or taxes (including any such duties or taxes payable by a Tax
Indemnitee but excluding all Lessor Taxes) imposed on or in
connection with this Lease and shall indemnify each Tax Indemnitee
against any liability arising by reason of any delay or omission by
Lessee to pay such duties or taxes.
8.4 If and to the extent that any sum (the "indemnity sum") constituting
(directly or indirectly) an indemnity to one or more Tax Indemnitees
paid by Lessee to any person other than that Tax Indemnitee shall be
treated as taxable in the hands of the relevant Tax Indemnitee,
Lessee shall pay to the relevant Tax Indemnitee such sum as (after
taking into account any taxation suffered by the relevant Tax
Indemnitee on the indemnity sum) shall reimburse the relevant Tax
Indemnitee for the net amount of any Taxes suffered by them in
respect of the indemnity sum (after taking into account any current
tax savings or other benefits to the relevant Tax Indemnitee
resulting from the payment or accrual of the indemnified expense).
8.5 If and to the extent that any sums payable to a Tax Indemnitee by
Lessee under this Lease by way of indemnity are insufficient, by
reason of any Taxes payable in respect of those sums, for that Tax
Indemnitee to discharge the corresponding liability to the relevant
third party (including any taxation authority), or to reimburse that
Tax Indemnitee for the cost incurred by it to a third party
(including any taxation authority), Lessee will pay to that Tax
Indemnitee such sum as will after the tax liability has been fully
satisfied leave that Tax Indemnitee with the same net amount (after
taking into account any current tax savings or other benefits to the
that Tax Indemnitee resulting from the payment or accrual of the
indemnified expense) as it would have been entitled to receive in
the absence of that liability. For the purpose of computing the
amount of an indemnity payment pursuant to this Article 8.5 and the
amount of any payment to Lessee under Article 8, it shall be assumed
that the relevant Tax Indemnitee is subject to tax on the amount of
each indemnity it receives or accrues under this Lease and can use
any tax savings to offset Taxes at the highest marginal statutory
rates of tax applicable to that Tax Indemnitee (as certified to
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Lessee by an officer of that Tax Indemnitee) at the time such
indemnity or tax savings is received or accrued.
8.6 If, as a result of any indemnity paid by Lessee or any event giving
rise to an indemnity obligation of Lessee, a Tax Indemnitee at any
time realizes any tax savings, refunds or other reductions in taxes
not previously taken into account in computing the amount of an
indemnity, that Tax Indemnitee shall promptly pay to Lessee the
amount of such Tax savings, refunds or other reductions in Taxes;
provided, however, that no Tax Indemnitee will be required to make
any payment to Lessee pursuant to this Article 8.6 so long as a
Default shall be continuing or if Lessee shall not have theretofore
made all payments due to all Tax Indemnitees under this Lease, or to
the extent that the amount of such payment would exceed the amount
of all prior payments by Lessee to the relevant Tax Indemnitee
pursuant to this Article 8 less the amount of all prior payments by
the relevant Tax Indemnitee to Lessee pursuant to this Article 8.6.
The relevant Tax Indemnitee shall estimate the amount of such Tax
savings, refunds and other reductions in Taxes and shall use
reasonable efforts to take such actions in filing its tax returns
and in dealing with taxing authorities to seek and claim each such
Tax savings, refund and other reduction in Taxes, but shall not be
obligated to take any such action that it determines in its sole
discretion to involve the imposition or risk of any material
unindemnified cost or expense, and in no event will any person have
any right to inspect the books, records, tax returns or other
documents of any Tax Indemnitee, and the positions to be taken by
any Tax Indemnitee on or with respect to its tax returns and in any
tax proceedings shall be within its sole control.
8.7 Lessee's, and each Tax Indemnitee's obligations under this Article 8
shall continue in full force and effect, notwithstanding the
expiration or earlier termination of the Term hereunder.
8.8 If Lessee disputes the payment or imposition of any Taxes payable by
a Tax Indemnitee for which Lessee is responsible under this Lease,
that Tax Indemnitee will take such action as Lessee may reasonably
request at Lessee's expense to contest that payment or imposition
but that Tax Indemnitee will not be obliged to take any such action:
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(a) which that Tax Indemnitee considers in good faith may result
in the imposition of any material liability, cost, or expense
for which that Tax Indemnitee is not indemnified to its
reasonable satisfaction; or
(b) which that Tax Indemnitee considers not to have a reasonable
prospect of success, unless Lessee delivers to that Tax
Indemnitee a written opinion of independent tax counsel
selected by Lessee and reasonably acceptable to Lessor to the
effect that there is a Reasonable Basis for taking such
action; or
(c) for which Lessee has not made adequate provision to the
reasonable satisfaction of that Tax Indemnitee in respect of
the liability, cost or expense concerned.
8.9 If Lessor determines that any Indemnified Tax is required to be
withheld from any amount payable or creditable to or for the account
of any holder of a Loan Certificate, Lessor shall give prompt
written notice thereof to Lessee and if requested by Lessee by
written notice given within 10 Business Days after Lessee's receipt
of Lessor's written notice, Lessor shall exercise its rights under
Section 7A(b)(xi) of the Participation Agreement in the manner
requested by Lessee, provided that Lessor shall not be required to
take any action pursuant to this Article 8.9 that might reasonably
be expected to involve Lessor in any unlawful activity or might
reasonably be expected to subject Lessor or any Affiliate of Lessor
to any expense deemed material by Lessor unless Lessor is
indemnified therefor to its reasonable satisfaction.
8A. SPECIAL INDEMNITY
8A.1 Indemnity.
(a) Inclusions. Except to the extent provided in Article 8A.2(a),
if Lessor is required by any tax authority to include in its
income for income tax purposes, or Lessor receives an opinion
of Lessor's tax counsel that Lessor does not have a Reasonable
Basis to exclude from its income for income tax purposes, any
amount relating to the Aircraft or any part thereof or the
Lease or any of the transactions, activities or payments
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described in or contemplated by the Lease, other than (i)
Rent, (ii) Reserve Rate, (iii) Supplemental Rent, (iv) any
proceeds derived from a sale of the Aircraft resulting from
the exercise by Lessee of a purchase option pursuant to
Paragraph 9 of Appendix D of this Lease, (v) any payment
calculated by reference to Agreed Value, (vi) any amount
specifically identified in the Lease as interest, (vii) any
payment calculated on an After-Tax Basis, (viii) any payment
pursuant to the terms of the Operating Lease Operative
Documents, (ix) any other amount to the extent offset by
deductions that would not have been currently available but
for the event which gave rise to the amount included in
Lessor's income and that are of the same character as such
income inclusion and are allowed in the same taxable year of
Lessor in which such amounts are included in Lessor's income,
or the Deposit described in Appendix D of this Lease or any
interest thereon (herein called an "Inclusion"), Lessee shall
pay to Lessor an amount which, on an After-Tax Basis, shall be
equal to the amount of additional taxes on or measured by
gross or net income (plus any and all fines, penalties,
additions to tax and interest calculated by reference thereto)
payable by Lessor as a result of such Inclusion.
(b) Pass-through of Tax Indemnity Agreement indemnities. Except to
the extent provided in Article 8A.2(b), if Lessor is required
to pay to Owner Participant any amount (herein called a "TIA
Liability") pursuant to the Tax Indemnity Agreement (Trust No.
116-A) dated as of July 10, 1995 between Lessor and Owner
Participant, Lessee shall pay to Lessor an amount which, on an
After-Tax Basis, shall be equal to that TIA Liability.
(c) Pass-through of Participation Agreement general tax indemnity
liability. Except to the extent provided in Article 8A.2(c),
if Lessor is required to pay any amount pursuant to Section 7A
of the Participation Agreement (herein called a "Head Lease
General Tax Indemnity Liability") and if the Tax that is the
subject of such Head Lease General Tax Indemnity Liability is
a Specified Tax, Lessee shall pay to Lessor an amount which,
on an After-Tax Basis, shall be equal to that Head Lease
General Tax Indemnity.
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(d) Minimum indemnity. The amount of any indemnity payable by
Lessee to Lessor pursuant to this Article 8A shall in all
events be an amount sufficient to restore Lessor to the
position Lessor would be in if the Inclusion or TIA Liability
or Head Lease General Tax Indemnity Liability that gave rise
to Lessee's liability under this Article 8A had not occurred.
8A.2 Exceptions.
(a) Exceptions to indemnity for Inclusions. Lessee shall not be
required to indemnify Lessor pursuant to Article 8A.1(a) for
Taxes to the extent arising from any of the following
Inclusions:
(i) any Inclusion caused by an event that occurs after the
expiration or earlier termination of this Lease, the
payment by Lessee of all Rent and other amounts due
pursuant to the Operating Lease Operative Documents, and
(if required by the terms of this Lease) the return of
the Aircraft to Lessor in accordance with the terms of
this Lease, provided that the exclusion set forth in
this Article 8A.2(a)(i) shall not apply to any Inclusion
to the extent such Inclusion is a result of one or more
events occurring or circumstances existing prior to or
concurrently with the expiration or earlier termination
of this Lease or to any payment or amount payable by
Lessee pursuant to this Lease or any other Operating
Lease Operative Document, or
(ii) any Inclusion that would not have occurred but for a
sale, assignment, transfer or other disposition by
Lessor of any interest in the Aircraft or this Lease,
either voluntarily or by reason of bankruptcy or similar
proceedings for the relief of debtors in which Lessor is
the debtor, unless in either case such disposition
occurs in connection with or as a result of (A) an Event
of Default, (B) a Casualty Occurrence, (C) any
substitution, replacement or pooling of the Aircraft or
any part thereof, (D) any maintenance, repair,
improvement, modification or alteration of, or addition
to, the Aircraft or any part thereof, or
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unless in either case such disposition is required by
applicable Law, or
(iii) any Inclusion that would not have occurred but for (A)
the refinancing of the Loan Certificates or (B) the
gross negligence or willful misconduct of Lessor, or
(iv) any Inclusion that would not have occurred but for the
timing of the recognition of income under Section 467 of
the Code unless such Inclusion would not have occurred
but for (A) any payment of Rent on a date prior to the
date on which such payment is scheduled to be due, (B)
any payment by Lessee of any expenses of any Tax
Indemnitee, or (C) the acquisition by Lessee or another
Lessee Related Person of any interest in the Loan
Certificates or any other evidence of indebtedness
issued by the Head Lessor to refund or refinance the
Loan Certificates in accordance with the Head Lease
Operative Documents, or
(v) any Inclusion that would not have occurred but for any
change in or addition to the Internal Revenue Code of
1986, any other statute relating to Federal income
taxes, any treaty, any regulation, revenue ruling,
revenue procedure or other administrative
interpretation, or any executive order that is enacted,
promulgated or issued after the Delivery Date, provided
that the exclusion in this clause (v) shall not apply to
any Inclusion resulting from (A) any alteration,
improvement, modification, pooling, repair, addition,
replacement or substitution of or to the Aircraft or any
part thereof, (B) any payment by Lessee of any expenses
of any Tax Indemnitee, or (C) the acquisition by Lessee
or another Lessee Related Person of any interest in the
Loan Certificates or any other evidence of indebtedness
issued by the Head Lessor to refund or refinance the
Loan Certificates in accordance with the Head Lease
Operative Documents, or
(vi) any Inclusion that would not have occurred but for an
event or occurrence as a result of which Lessee is
required to pay and shall
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have paid in full an amount calculated by reference to
Agreed Value.
(b) Exceptions to indemnity for TIA Liability. Lessee shall not be
required to indemnify Lessor pursuant to Article 8A.1(b) for
any TIA Liability that is not a result of an Operating Lease
Indemnification Event or that would not have been incurred but
for any of the following:
(i) the gross negligence or willful misconduct of Lessor, or
(ii) Lessor claiming deductions for depreciation of the
Aircraft for Federal, state or local income tax
purposes, or
(iii) Lessor (or any Affiliate of Lessor) claiming to be the
owner of the Aircraft for U.S. tax purposes, or
(iv) Lessor (or any Affiliate of Lessor) claiming deductions
for interest on the Loan Certificates for Federal, state
or local income tax purposes, or
(v) Lessor acquiring any interest in the Loan Certificates,
or
(vi) Lessor supplying to the Appraiser inaccurate information
unless such information was obtained from Lessee, or
(vii) the timing of the recognition of income under Section
467 of the Code unless such Inclusion would not have
occurred but for (A) any payment of Rent on a date prior
to the date on which such payment is scheduled to be
due, (B) any payment by Lessee of any expenses of any
Tax Indemnitee, or (C) the acquisition by Lessee or
another Lessee Related Person of any interest in the
Loan Certificates or any other evidence of indebtedness
issued by the Head Lessor to refund or refinance the
Loan Certificates in accordance with the Head Lease
Operative Documents, or
(viii) the failure of the Head Lease to be a "true lease" for
Federal income tax purposes or the failure of Owner
Participant to be the owner
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of the Aircraft (including any such failure resulting
from the existence of any of Lessee's rights under the
Operating Lease Operative Documents), unless such
failure is caused by an Operating Lease Indemnification
Event, or
(ix) any change in or addition to the Code, any other statute
relating to Federal income taxes, any treaty, any
regulation, revenue ruling, revenue procedure or other
administrative interpretation, or any executive order
that is enacted, promulgated or issued after the
Delivery Date, provided, however, that the exclusion in
this clause (ix) shall not apply to any Inclusion
resulting from (A) any alteration, modification,
pooling, repair, addition, replacement or substitution
of or to the Aircraft or any Engine, (B) any payment by
Lessee of any expenses of any Tax Indemnitee, or (C) the
acquisition by Lessee or another Lessee Related Person
of any interest in the Loan Certificates or any other
evidence of indebtedness issued by the Head Lessor to
refund or refinance the Loan Certificates in accordance
with the Head Lease Operative Documents, or
(x) Owner Participant's having an adjusted basis with
respect to the Aircraft that is less than Lessor's Cost
except to the extent resulting from an Operating Lease
Indemnification Event, or
(xi) any event or occurrence as a result of which Lessee is
required to pay and shall have paid in full an amount
calculated by reference to Agreed Value;
(xii) any inaccuracy in the Appraisal unless caused by the
inaccuracy of Lessee's representation in Article 8A.10,
or
(xiii) any disposition of Lessor's interest in the Aircraft or
the Operating Lease Operative Documents either
voluntarily or by reason of Lessor's bankruptcy or
similar proceedings for the protection of debtors in
which Lessor is a debtor, provided that the exclusion in
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this clause (xiii) shall not apply to (A) a disposition
pursuant to the exercise of remedies after the
occurrence and during the continuance of an Event of
Default, (B) a disposition resulting from a Casualty
Occurrence or (C) a disposition resulting from a
substitution, replacement or pooling of the Aircraft,
any Engine or any part of either thereof by Lessee or
any other Lessee Related Person.
(xiv) any amendment or modification of any of the Head Lease
Operative Documents approved by Lessor and to which
Lessee has not consented in writing unless (A) Lessee
shall have given its prior written consent to such
amendment or (B) such amendment consists of a change in
the "Basic Rent" schedule of the Head Lease resulting
from a suspension or reduction of Lessee's payments of
Rent under this Lease that continues for a period of
more than 60 days, or (C) such amendment is required by
applicable Law relating to the Aircraft or any part
thereof or relating to Lessee;
(xv) the treatment of the Aircraft as "tax-exempt use
property" by reason of Lessor's status as a "tax-exempt
entity" within the meaning of Section 168(h) of the
Code;
(xvi) any failure of the Aircraft to be registered with the
United States Federal Aviation Administration or any
successor thereto by reason of the status or citizenship
of Lessor;
(xvii) any breach of Lessor's obligations relating to the
Lessee's contest rights pursuant to Article 8A.6 hereof
to the extent such failure legally precludes Lessee from
contesting, or causing a contest of, an indemnified
claim;
(xviii) the reporting by the Owner Participant of an Inclusion
on any of its Federal income tax returns, unless Lessee
has received a copy of the opinion of independent tax
counsel described in Section 3.1 of the Tax Indemnity
Agreement with respect to such Inclusion;
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(xix) the inaccuracy of the representation in Section 2(f) of
the Tax Indemnity Agreement;
(xx) the refinancing of the Loan Certificates other than a
refinancing requested by Lessee; or
(xxi) the existence of the Assignment of Termination Agreement
dated as of July 10, 1995 from Fokker Aircraft B.V. to
Kreditanstalt fur Wiederaufbau.
(c) Exceptions to indemnity for Head Lease general tax indemnity
liability. Lessee shall not be required to indemnify Lessor
pursuant to Article 8A.1(c) for any Head Lease General Tax
Indemnity Liability that would not have been incurred but for
any of the following:
(i) an event that occurs after the expiration or earlier
termination of this Lease, the payment by Lessee of all
Rent and other amounts due pursuant to this Lease and
the other Operating Lease Operative Documents and (if
required by the terms of this Lease) the return of the
Aircraft to Lessor in accordance with the terms of this
Lease, provided that the exclusion set forth in this
Article 8A.2(c)(i) shall not apply to any Head Lease
General Tax Indemnity Liability to the extent such Head
Lease General Tax Indemnity Liability is a result of one
or more events occurring or circumstances existing prior
to or concurrently with the expiration or earlier
termination of this Lease or to any payment or amount
payable by Lessee pursuant to this Lease or any other
Operating Lease Operative Document, or
(ii) a sale, assignment, transfer or other disposition by
Lessor of any interest in this Lease either voluntarily
or by reason of bankruptcy or similar proceedings for
the relief of debtors in which Lessor is the debtor,
unless in either case such disposition occurs in
connection with or as a result of an Event of Default, a
Casualty Occurrence, a substitution, replacement or
pooling of the Aircraft or any part thereof, the
exercise by Lessee of any option to
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terminate the Lease or to purchase the Aircraft or any
act or omission of Lessee, or unless in either case such
disposition is required by Applicable Law, or
(iii) the gross negligence or willful misconduct of Lessor, or
8A.3 Time of Payment by Lessee.
Any payment due under this Article 8A to Lessor shall be paid by
Lessee within 15 Business Days after receipt of a written demand
therefor from Lessor, provided that Lessee shall not be required to
make any such payment before the date that is two Business Days
prior to the date on which Lessor's related income tax payment, TIA
Liability or Head Lease General Tax Indemnity payment is due. If
Lessor is required to pay an indemnity pursuant to the Tax Indemnity
Agreement, Lessor agrees to elect, pursuant to Section 3.3 of the
Tax Indemnity Agreement, the form of indemnity payment requested by
Lessee in writing provided that Lessor receives Lessee's written
request at least two Business Days before the last day for making
such election.
8A.4 Tax Savings; Contest.
The provisions of Articles 8.6 (relating to tax savings) and 8.8
(relating to contesting Taxes) of this Lease shall apply, mutatis
mutandis, to the indemnity for Inclusions described in Article
8A.1(a) hereof.
8A.5 Payments From Head Lease Tax Indemnitees.
If any Head Lease Tax Indemnitee shall pay any amount to Lessor
pursuant to Section 7A(b), 7A(e), 7A(g) or 7A(h) of the
Participation Agreement or pursuant to Section 3.2 or 4 of the Tax
Indemnity Agreement, for which Lessee has previously paid an
indemnity to Lessor pursuant to Article 8A.1 hereof, Lessor shall
pay such amount to Lessee within 15 Business Days after Lessor
receives such amount.
8A.6 Contest.
If Lessor receives a written claim for an indemnity pursuant to
Section 7A of the Participation Agreement or pursuant to the Tax
Indemnity Agreement for which Lessee would be required to pay Lessor
an indemnity
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pursuant to this Article 8A, Lessor shall promptly notify Lessee
thereof in writing. If requested by Lessee by written notice
received by Lessor at least four Business Days before the latest
date on which Lessor may request or initiate a contest pursuant to
Section 7A(g) of the Participation Agreement or Section 4 of the Tax
Indemnity Agreement, Lessor shall exercise its rights under Section
7A(g) of the Participation Agreement or under Section 4 of the Tax
Indemnity Agreement, as the case may be, in the manner requested by
Lessee, provided that in no event shall Lessor be required to
initiate or continue (or required to request any other Person to
initiate or continue) a contest of any such claim unless:
(a) no Major Default or Event of Default shall have occurred and
be continuing unless Lessee shall have provided security
reasonably satisfactory to Lessor securing Lessee's
performance of its obligations under this Article 8A;
(b) Lessee shall have agreed to pay on an After-Tax Basis all
reasonable costs and expenses that Lessor incurs in connection
with contesting such claim and all amounts that Lessor is
required to pay from time to time pursuant to Section
7A(g)(iv)(B) of the Participation Agreement or Section 4(d) of
the Tax Indemnity Agreement, as the case may be;
(c) the action to be taken will not result in a material danger of
sale, forfeiture or loss of the Aircraft or any part thereof
or any interest therein or the creation of a Lien (other than
a Permitted Lien) on the Aircraft, the Trust Estate or the
Trust Indenture Estate unless Lessee shall have adequately
bonded or otherwise made provision to protect the interests of
Lessor and the Owner Participant in a manner reasonably
satisfactory to Lessor and the Owner Participant;
(d) if such contest shall require payment of the Tax claimed,
Lessee shall have advanced on an interest-free basis the
amount thereof (including any interest, penalties and
additions to tax with respect thereto) for the period during
which such contest is continuing and shall have agreed to
indemnify such Lessor and (in the case of a contest pursuant
to Section 4 of the Tax Indemnity Agreement) the Owner
Participant or (in the case
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of a contest pursuant to Section 7A of the Participation
Agreement) each Head Lease Tax Indemnitee for any adverse tax
consequences of such interest-free loan;
(e) Lessee shall have acknowledged its obligation to indemnify
Lessor should the contested claim prove to be correct except
to the extent that the Final Determination demonstrates that
Lessee would not be so obligated absent such acknowledgment;
(f) in the case of a Tax Indemnitee Controlled Contest pursuant to
Section 7A(g) of the Participation Agreement or any contest
pursuant to Section 4 of the Tax Indemnity Agreement, Lessor
and the relevant Head Lease Tax Indemnitee shall have
received, at Lessee's expense, a written opinion of
independent tax counsel selected by Lessee and reasonably
acceptable to Lessor and such Head Lease Tax Indemnitee to the
effect that there is a Reasonable Basis for such contest;
(g) in the case of a Tax Indemnitee Controlled Contest pursuant to
Section 7A of the Participation Agreement, the amount of the
indemnity that would be payable by Lessor pursuant to Section
7A if such claim is not contested or if a contest of such
claim is unsuccessful (plus the aggregate amount of the
indemnities that would be payable by Lessor pursuant to
Section 7A if all related claims that have been or could be
raised with respect to any other period are not contested)
would exceed $10,000; and
(h) in the case of a contest pursuant to Section 4 of the Tax
Indemnity Agreement, the amount of the indemnity that would be
payable by Lessor pursuant to the Tax Indemnity Agreement if
such claim is not contested or if a contest of such claim is
unsuccessful (plus the aggregate amount of the indemnities
that would be payable by Lessor pursuant to the Tax Indemnity
Agreement if all related claims that have been or could be
raised with respect to any other period are not contested)
would exceed $50,000.
8A.7 Verification
If requested by Lessee in writing within ten Business Days after
receipt of a Lessor demand for an indemnity,
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Lessor shall exercise its rights under Section 7A(j) of the
Participation Agreement or under Section 3.8 of the Tax Indemnity
Agreement, as the case may be, provided that Lessee shall have
agreed to pay, and shall be paying currently, on an After-Tax Basis
any and all amounts payable by Lessor under Section 7A(j) of the
Participation Agreement or under Section 3.8 of the Tax Indemnity
Agreement, as the case may be.
8A.8 Documents and Other Information
(a) Lessee shall provide or cause to be provided to Lessor, upon
request, all documents and other information that Lessor is
required to provide to any Head Lease Tax Indemnitee pursuant
to the Head Lease Operative Documents and that is within the
control of any Lessee Related Person.
(b) Lessee shall prepare or cause to be prepared, and shall timely
file or cause to be timely filed, all returns, reports,
statements and other documents that Lessor is required to
prepare and/or file pursuant to Section 7A(i) of the
Participation Agreement; provided that Lessor shall have
furnished or caused to be furnished to Lessee any information
that is reasonably requested by Lessee, that is not within the
control of a Lessee Related Person, that is within the control
of Lessor or of a Head Lease Tax Indemnitee and that is
reasonably necessary to enable Lessee to prepare and file such
report, return or statement.
(c) Lessee shall timely pay or cause to be timely paid directly to
the appropriate taxing authority all amounts that Lessor is
required to. pay directly to such taxing authority pursuant to
Section 7A(f) of the Participation Agreement to the extent
that Lessee is liable for such amount pursuant to this Article
8.
8A.9 Certain Definitions
As used in this Lease:
(a) "Affiliate" means, with respect to any Person, any other
Person (other than an individual) directly or indirectly
controlling, controlled by, or under direct or indirect common
control with such Person; or if such Person is a partnership,
any general partner of such Person or Person
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controlling such general partner. A Person shall be deemed to
control another Person if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the
management and policies of such other Person, whether through
the ownership of voting securities, by contract or otherwise.
(b) "After-Tax Basis" has the meaning explained as follows: If
Lessee is required to pay a specified amount on an After-Tax
Basis to or for the benefit of any Person, the Lessee must pay
the sum of (i) the specified amount plus (ii) the net amount
of all Taxes (taking into account any current deduction or
other income tax benefit actually realized by such Person
resulting from the payment or accrual of the cost, expense or
tax for which the specified amount is payable) required to be
paid by such Person with respect to the receipt or accrual of
the specified amount and the additional amounts described in
this clause (ii) (calculated by assuming, in the case of any
payment to or for the benefit of the Owner Participant or any
related tax indemnitee, that such Person is subject to United
States Federal income tax at the highest marginal statutory
rate imposed on corporations for the relevant period, and is
subject to United States state and local income taxes and
foreign income taxes at the actual rates applicable to such
Person for the relevant period, with respect to the receipt or
accrual of such amount by such Person. If Lessee shall have
paid or reimbursed any Person pursuant to the Operating Lease
Operative Documents for any expense on an After-Tax Basis (an
"After-Tax Basis Payment") and such Person (or a member of a
group of corporations that includes such Person and for which
consolidated, combined or unitary tax returns are filed) shall
actually realize any tax savings attributable to such expense,
such Person shall pay to Lessee an amount equal to the sum of
(x) the amount of such tax savings plus (y) the amount of any
further tax savings realized by such Person (or by a member of
such group of corporations) as a result of such payment,
provided that the amount paid to Lessee pursuant to this
sentence shall not exceed the amount of Lessee's underlying
After-Tax Basis Payment, and provided further that if any such
tax savings are subsequently disallowed or reduced, such lost
tax
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savings shall be deemed to be a Tax for which Lessee is
required to indemnify Lessor pursuant to Article 8, without
regard to any exclusion of Lessor Taxes.
(c) "Appraisal" means the opinion provided by BK Associates
concerning the Aircraft pursuant to the Participation
Agreement.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Final Determination" means (A) a decision, judgment, decree
or other order by any court of competent jurisdiction, which
decision, judgment, decree or other order has become final and
unappealable (or, if appealable to the U.S. Supreme Court, the
relevant Tax Indemnitee has not consented to such appeal), (B)
a closing agreement or any other binding settlement agreement
entered into with the consent of Lessee in connection with an
administrative or judicial proceeding which is not subject to
further appeal, or (C) the expiration of the time for
instituting a claim for refund, or if such claim for refund is
filed, the expiration of the time for instituting suit with
respect thereto.
(f) "Head Lease Operative Documents" means each of the
Participation Agreement, the Lease, each Lease Supplement, the
Tax Indemnity Agreement, the Support Services Agreement, the
Support Services Agreement Assignment, the Indenture, each
Indenture Supplement, the Trust Agreement, the Initial
Sublease, each other Qualified Sublease, the Sublease
Certificate of Acceptance, the Sublease Assignment, the
Consent to Assignment, the Consent and Agreement, the Loan
Certificates outstanding at the time of reference, the
Guaranties, the FAA Bill of Sale, the Warranty Bill of Sale,
the DASA Confirmation, the Fokker Confirmation and the
Assumption Agreement (as each of the foregoing is defined in
Schedule Z to the Participation Agreement), each as amended,
modified or supplemented from time to time in accordance with
its terms.
(g) "Head Lease Tax Indemnitee" means any of the following: (i)
the Owner Participant, the Head Lessor (in its individual
capacity and as Owner
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Trustee), the Trust Estate, the Indenture Trustee (in its
individual capacity and as the Indenture Trustee), the Loan
Participant, the Trust Indenture Estate (as each of the
foregoing is defined in Schedule Z to the Participation
Agreement), (ii) each successor or permitted assignee of each
entity described in subdivision (i) above, (iii) each
Affiliate of each entity described in subdivisions (i) and
(ii) above, and (iv) each director, officer, employee and
agent (in their respective representative capacities) of each
entity described in subdivisions (i), (ii) and (iii) above;
(h) "Lessee Related Person" means any of the following: Lessee,
any sublessee or sub-sublessee of Lessee, any other Person
(other than a Lessor Related Person) in possession or use of
the Aircraft or any part thereof through Lessee, and any
Affiliate, successor or assign of any of the foregoing.
(i) "Lessor Related Person" means any of the following: Lessor,
each successor or permitted assignee of Lessor and each
Affiliate of each of the foregoing.
(j) "Loan Certificates" means the loan certificates issued
pursuant to the Indenture.
(k) "Major Default" means a Default described in Article 15.1(a),
15.1(f) or 15.1(h) of this Lease.
(1) "Operating Lease Indemnification Event" means any of the
following:
(i) any act or omission of Lessee or any other Lessee
Related Person other than a Required Act or Omission or
a Permitted Act,
(ii) any breach or inaccuracy of any representation, warranty
or covenant of Lessee in this Lease or in the Lease
Termination Agreement dated as of July 10, 1995 among
Fokker Aircraft B.V., Lessee and First Security Bank of
Utah, National Association, as owner trustee,
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(iii) any destruction, theft, confiscation or requisition of
title to the Aircraft or any part thereof,
(iv) any warranty or similar payment received or receivable
by Lessee or another Lessee Related Person with respect
to the Aircraft, any Engine or any part thereof and not
paid or payable to, and retained by Owner Participant,
Owner Trustee or Lessor,
(v) any alteration, modification, improvement, addition,
repair, maintenance, replacement, substitution or
pooling of or to the Aircraft, any Engine or any part of
any thereof by Lessee or any other Lessee Related
Person.
(m) "Operating Lease Operative Documents" means this Lease and (to
the extent relating to the Aircraft) the Credit and Security
Agreement, the Note, the Support Services Agreement, the
Termination Agreement and each other agreement between Lessee
and Lessor (or any affiliate of Lessor) relating to the lease
of the Aircraft by Lessor (or any affiliate of Lessor) to
Lessee, each as amended, modified or supplemented from time to
time in accordance with its terms.
(n) "Permitted Act" means the execution and delivery of the
Operating Lease Operative Documents and any act that is
expressly permitted by Paragraph 9 of Appendix D of this
Lease.
(o) "Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust,
unincorporated organization or Government Entity.
(p) "Reasonable Basis" for a position exists if tax counsel may
properly advise reporting such a position on a tax return in
accordance with Formal Opinion 85-352 issued by the Standing
Committee on Ethics and Professional Responsibility of the
American Bar Association.
(q) "Required Act or Omission" means any act or omission that is
expressly required by any of the Operating Lease Operative
Documents.
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(r) "Specified Tax" means any Tax imposed on, payable by or
asserted against any Head Lease Tax Indemnitee arising from,
as a result of, with respect to or in connection with any of
the following or any combination of the following:
(i) any act or omission of Lessee or any other Lessee
Related Person or any failure of Lessee or any other
Lessee Person to act when required to act,
(ii) any breach or inaccuracy of any representation, warranty
or covenant of Lessee in the Lease or the Lease
Termination Agreement,
(iii) any loss, damage, destruction, casualty, forfeiture,
theft, governmental taking, confiscation, requisition,
seizure or condemnation of the Aircraft or any part
thereof,
(iv) any alteration, modification, improvement, addition,
repair, maintenance, testing, servicing, replacement,
substitution or pooling of or to the Aircraft, any
Engine or any part of any thereof by Lessee or any other
Lessee Related Person,
(v) the location, use, insuring, possession, leasing,
subleasing, sub-subleasing, storage, operation, basing
or presence of the Aircraft or any part thereof by
Lessor under this Lease or by Lessee or any other Lessee
Related Person,
(vi) the situs of organization, any place of business or any
activity or transaction of Lessee or any other Lessee
Related Person in the jurisdiction imposing the tax,
(vii) any amount paid or payable pursuant to the Loan
Certificates or the Indenture to the extent such Tax
would not have been imposed but for a change after the
Delivery Date in the income tax convention between the
United States and Germany as in effect on the Delivery
Date,
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(viii) any amount paid or payable pursuant to the Head Lease
(to the extent resulting from the location or use of the
Aircraft or any part thereof) or this Lease,
(ix) the return, redelivery, importation or exportation
resulting from the use of the Aircraft by Lessee or any
other Lessee Related Person, abandonment or other
disposition of the Aircraft or any part thereof by
Lessee or any other Lessee Related Person,
(x) the enforcement of rights under the Head Lease Operative
Documents or the Operating Lease Operative Documents, in
each case after the occurrence and during the
continuance of an Event of Default under this Lease,
(xi) the occurrence of an Event of Default or a Casualty
Occurrence,
(xii) the imposition of any Lien (other than a Lessor Lien) on
the Aircraft or any part thereof,
(xiii) the existence, presence, execution, delivery, filing,
recording, amendment or enforcement of the Operating
Lease Operative Documents,
(xiv) any other transaction by, activity of, or event or
occurrence with respect to Lessee or any other Lessee
Related Person pursuant to this Lease.
8A.10. Representation and Warranty of Lessee
Lessee hereby represents and warrants that (a) all airworthiness
directives affecting the Aircraft have been complied with; (b) no
accident involving the Aircraft, or other damage to the Aircraft,
has occurred that would affect the market value of the Aircraft; and
(c) the Aircraft has been maintained in accordance with a
maintenance program approved by the U.S. Federal Aviation
Administration and in accordance with accepted industry standards.
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9. LIENS
9.1 Lessee, during the Term, shall not create or suffer to exist any
lien, attachment, mortgage or other encumbrance upon or against the
Aircraft, or any of its rights under this Lease, other than
Permitted Liens. If at any time a lien, attachment, mortgage, or
other encumbrance except as permitted above shall be created or
suffered to exist by Lessee, or be levied upon the Aircraft or any
of its rights under this Lease, Lessee shall forthwith notify Lessor
and cause the same forthwith to be discharged by bond or otherwise.
In the event Lessee shall fail to discharge any such lien,
attachment, mortgage or other encumbrance, Lessor, Head Lessor or
Indenture Trustee shall be entitled (but not bound) to discharge the
same, in which event Lessee shall pay to Lessor, on demand, the
amount paid by Lessor and/or Head Lessor and/or Indenture Trustee,
together with Lessor's and/or Head Lessor's and/or Indenture
Trustee's losses, costs and expenses, including reasonable legal
fees and expenses.
10. INDEMNIFICATION
10.1 LESSEE SHALL RELEASE AND DEFEND, HOLD HARMLESS AND INDEMNIFY ANY
AND/OR ALL OF THE INDEMNITEES, FROM AND AGAINST ANY AND ALL CLAIMS,
PROCEEDINGS, SUITS, JUDGEMENTS, COSTS, EXPENSES, PENALTIES, FINES
AND LIABILITIES, DIRECT AND CONSEQUENTIAL DAMAGES AND LOSSES,
INCLUDING WITHOUT LIMITATION COSTS AND EXPENSES INCIDENTAL THERETO,
OF WHATSOEVER KIND AND NATURE, AND INCLUDING REASONABLE LEGAL FEES
AND EXPENSES BUT EXCLUDING ANY TAXES, INDEMNITY FOR WHICH IS
ENCOMPASSED SOLELY IN ARTICLE 4.1 AND ARTICLE 8 AND ARTICLE 8A (EACH
A "CLAIM") ATTRIBUTABLE TO LESSEE'S ACTS OR OMISSIONS TO ACT (WHERE
LESSEE IS SO OBLIGATED) OCCURRING DURING THE TERM, WHICH MAY BE
SUFFERED BY, ASSERTED AGAINST, CHARGED TO OR RECOVERABLE FROM,
DIRECTLY OR INDIRECTLY, ANY AND/OR ALL OF THE INDEMNITEES:
(A) RELATING TO, ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE
POSSESSION, DELIVERY, PERFORMANCE, MANAGEMENT, CONTROL,
MAINTENANCE, CONDITION, SERVICE, REPAIR, OVERHAUL, LEASING,
USE, OPERATION OR RETURN OF THE AIRCRAFT, ANY ENGINE OR ANY
PART, OR THE PERFORMANCE OR NON-PERFORMANCE OF ANY AND/OR ALL
OF THE INDEMNITEES OF SERVICES OR DELIVERY OF ANY THINGS IN
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CONNECTION WITH THE AIRCRAFT DURING THE TERM, OR OTHERWISE IN
CONNECTION WITH THIS LEASE, WHETHER OR NOT ARISING IN TORT OR
OCCASIONED IN WHOLE OR IN PART BY THE FAULT OR NEGLIGENCE OF
ANY AND/OR ALL OF THE INDEMNITEES; OR
(B) AS A CONSEQUENCE OF ANY DESIGN, ARTICLE OR MATERIAL IN THE
AIRCRAFT, ANY ENGINE OR ANY PART OR ITS OPERATION OR USE
CONSTITUTING AN INFRINGEMENT OF PATENT (TO THE EXTENT AND
SCOPE AND SUBJECT TO THE LIMITATIONS SET FORTH IN PART C OF
EXHIBIT G OF THE SUPPORT SERVICES AGREEMENT), COPYRIGHT,
TRADEMARK, DESIGN OR OTHER PROPRIETARY RIGHT OR A BREACH BY
LESSEE OF ANY OBLIGATION OF CONFIDENTIALITY OWED TO ANY
PERSON; OR
(C) PURSUANT TO SECTION 7(b) (EXCLUDING SUBCLAUSE (iv) THEREOF) OF
THE PARTICIPATION AGREEMENT;
EXCLUDING, HOWEVER, FROM THE FOREGOING ANY SUCH CLAIM TO THE
EXTENT THAT SUCH CLAIM RESULTS FROM A LESSOR LIEN OR THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE OR FROM
ANY MISREPRESENTATION BY SUCH INDEMNITEE CONTAINED IN THIS
LEASE OR ANY BREACH BY SUCH INDEMNITEE OF ANY COVENANT SET
FORTH IN THIS LEASE.
10.2 The indemnities contained in this Article 10 shall continue in full
force and effect notwithstanding the expiration or other termination
of this Lease or of the letting of the Aircraft hereunder.
10.3 The indemnities contained in this Article 10 are given to Lessor for
itself and as agent and trustee on behalf of the other Indemnitees.
10.4 Notwithstanding anything to the contrary contained herein, Lessee
does not release and does not agree to defend, hold harmless or
indemnify under this Lease (and without limiting any obligations or
indemnities contained in any other agreement with Lessee) Fokker or
any other Indemnitee in its capacity as manufacturer or seller of
the Aircraft from or against (i) claims of third parties made
directly against Fokker or such Indemnitee, based on its product
liability or its status as manufacturer or Seller, or (ii) claims
made against Fokker or such Indemnitee based on the warranties or
indemnities contained in the Product Assurance Document which is
Exhibit G of the Support
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Services Agreement, or (iii) the matters described in Article
10.1(B).
10.5 If any Indemnitee has knowledge of the occurrence of any Claim,
liability or other matter for which it is or may be entitled to be
indemnified hereunder, it shall give prompt written notice thereof
to Lessee. Each Indemnitee shall cooperate in good faith with Lessee
and supply such information as may reasonably be requested by Lessee
to enable Lessee to investigate, defend or contest any Claim,
liability or other matter for which Lessee may be required to
indemnify an Indemnitee hereunder. In the event that Lessee pays any
amount to an Indemnitee pursuant to this Article 10, Lessee shall be
subrogated to all rights of the Indemnitee in respect of the Claim,
liability or other matter indemnified against giving rise to such
payment. Lessee or its insurers shall have the right, unless an
Event of Default shall have occurred and be continuing and such
matter is not covered by insurance, to investigate or (provided that
Lessee or its insurers shall agree not to dispute liability
hereunder or under any insurance policies pursuant to which coverage
is sought and provided that Lessee shall have consulted with Lessor
prior thereto), defend or compromise any Claim, and Lessor shall
cooperate with Lessee with respect thereto.
10.6 With respect to any Claims that Lessee is required to indemnify an
Indemnitee against pursuant to Article 10.1(c), the Indemnitee
agrees to give such further assurance or agreements and to cooperate
with Lessee to permit Lessee to pursue any and all contest rights
that such Indemnitee may have under the Participation Agreement and
agrees that if the assignment to Lessee of the Indemnitee's contest
rights under the Participation Agreement is not permitted under the
Participation Agreement, the Indemnitee will exercise its contest
rights with respect to such Claim pursuant to instructions from
Lessee, at Lessee's cost and expense, provided, however, that Lessee
shall have indemnified Lessor, to Lessor's satisfaction, against all
material liabilities of Lessor in connection with such contest not
otherwise indemnified in Article 10.1 and such contest could not in
the good faith opinion of the Indemnitee entail any material risk of
criminal liability; provided, however that Lessor shall not be
required to permit Lessee to exercise such contest rights so long as
there is continuing an Event of Default hereunder.
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In the event that Lessee shall have paid an indemnity to or on
behalf of an Indemnitee pursuant to this Article 10.6, then within
ten days of the receipt by an Indemnitee from any person with
respect to which such Indemnitee has an indemnification obligation
under the Participation Agreement of any payment constituting a
refund with respect to the indemnity, such Indemnitee shall pay to
Lessee an amount that, on a net after tax basis, shall be equal to
such payment (but in no event more than such payment together with
interest received by such Indemnitee thereon).
11. INSURANCE
11.1 On or before the Delivery Date of the Aircraft and throughout the
Term, Lessee shall carry and maintain in full force and effect, at
its own cost and expense, in such forms, on such conditions and with
such insurers and, if requested, reinsurers and through such
insurance and, if requested, reinsurance brokers as are satisfactory
to Lessor, the following insurances with respect to the Aircraft,
Engines and Parts (herein referred to as "the Insurances"):
(a) All Risks Aircraft Hull insurance of the type usually insured
against by commercial airlines engaged in the same or similar
business and owning or operating similar aircraft (including
Engines and Parts while not installed on the Aircraft and
including Extended Coverage Endorsement (Aircraft Hull) AVN51
or equivalent on the Agreed Value. The insurance may be
subject to a deductible in respect of losses other than total
loss, arranged total loss or constructive total loss of not
more than $100,000.00 (Dollars One Hundred Thousand) for each
accident subject, however, that (i) such deductible may be
adjusted during the ten (10) year period from the Original
Delivery Date only with the consent of Lessor (such consent
not to be unreasonably withheld) and (ii) thereafter may be
adjusted to such deductible amount as is customary for
commercial airlines engaged in the same or similar business in
the United States and operating similar aircraft (but not
necessarily Fokker-manufactured) and having a similar claims
history and credit standing.
(b) If operated outside the United States and Canada, Aircraft
Hull War and Allied Perils insurance
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covering the risks excluded from the All Risks Aircraft Hull
insurance specified in paragraph (a) above by the terms of the
War, Hi-Jacking and Other Perils Exclusion Clause AVN.48B
except paragraph (b) thereof and shall include cover in
respect of confiscation, nationalization, seizure, restraint,
detention, appropriation for title or use by or under the
order of any Government Entity of the State of Registration.
(c) Comprehensive Airline Liability insurance (including without
limitation aircraft Third Party Liability, Passenger and Crew
Liability (including Baggage and Personal Effects)), Cargo
Liability, Mail Liability, Personal Injury Liability,
Contractual Liability, Hangar Keeper's Liability, Aircraft
Products Liability and General Third Party Liability of the
types usually insured against by commercial airlines engaged
in the same or similar business and owning or operating
similar aircraft (but not necessarily Fokker-manufactured) in
an amount of not less than $500,000,000.00 (Dollars Five
Hundred Million) Combined Single Limit any one occurrence each
Aircraft but limited in respect of Personal Injury to the
equivalent of $25,000,000.00 (Dollars Twenty Five Million) any
one offence and in the aggregate.
Such insurance shall include cover in respect of the risks
excluded by War, Hi-Jacking and Other Perils Exclusion Clause
AVN.48B except paragraph (b) thereof.
This insurance may be subject to deductibles in respect of
passengers baggage and personal effects of not more than
$1,250.00 (Dollars One Thousand Two Hundred Fifty) any one
claim and in respect of cargo and mail of not more than
$5,000.00 (Dollars Five Thousand) any one claim subject,
however to adjustment of such deductible amount as is
customary in the aviation insurance market for commercial
airlines engaged in the same or similar business in the United
States and operating similar aircraft and having a similar
claims history and credit standing. Such deductibles shall not
apply to claims arising from accidents to the carrying
aircraft.
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(d) All Risks insurance on Engines and Parts while any such items
are not installed on the Aircraft and in respect of which
cover is not provided under the All Risks Aircraft Hull
insurance and/or Aircraft Hull War and Allied Perils insurance
(respectively specified in paragraphs (a) and (b) above) of
the type usually insured against by commercial airlines
engaged in the same or similar business and owning or
operating similar aircraft for not less than full replacement
value. If Engines and Parts are located outside the United
States and Canada, such insurance shall include War and Allied
Perils to the extent that such insurance is customarily
available in the international insurance market for this type
of insurance.
This insurance may be subject to a deductible of not more than
$10,000.00 (Dollars Ten Thousand), subject, however, to
adjustment of such deductible amount as is customary in the
aviation insurance market for commercial airlines engaged in
the same or similar business in the United States and
operating similar (but not necessarily Fokker-manufactured)
aircraft and having a similar claims history and credit
standing.
The Lessor will accept a United States government indemnity in lieu
of the foregoing or otherwise required under this Article 11.
Lessor's current requirements as at the date of this Lease as to the
Insurances are as specified in this Article. Lessor reserves the
right to amend, and will cooperate with Lessee reasonably to amend,
the insurance requirements of this Article 11 to reflect changes in
insurance practice subject, however to such amendments being
customary for and applicable to airlines engaged in the same or
similar business in the United States and similar aircraft and
having a similar claims history and credit standing.
If required by the first paragraph of Article 11.1, Lessee shall
procure that the insurers effect reinsurances in the same form and
conditions through such reinsurance brokers and with such reinsurers
and for such proportions as are satisfactory to Lessor.
11.2 All Insurances to be carried in accordance with Article 11.1 above
shall:
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(a) in respect of All Risks Aircraft Hull insurance, Aircraft Hull
War and Allied Perils insurance and All Risks insurance on
Engines and Parts:
(i) name Lessor, Head Lessor in its individual capacity and
as owner of the Aircraft, the Indenture Trustee in its
individual and its trust capacity, Owner Participant and
Loan Participant, and each of their respective
affiliates, successors and assigns, along with the
respective directors, officers and employees of each of
the foregoing (collectively, the "Additional Assureds");
(ii) provide that all claims in respect of the Aircraft,
Engines and Parts shall be payable to Indenture Trustee
for so long as the lien of the Indenture is in effect,
and thereafter to Head Lessor for so long as the Head
Lease is in effect, and thereafter to Lessor or as it
may direct, such payee to be named Loss Payee; provided,
that partial loss amounts shall be paid by the insurers
directly to repairers of the Aircraft, Engines or Parts
or to Lessee solely as reimbursement for repairs for
which Lessee has paid unless the insurers have been
given notice that a Default has occurred; and
(iii) if applicable, provide in respect of Hull All Risks and
Hull War and Allied Perils for a 50/50 Claims Settlement
Clause in the form of AVS.103;
(b) in respect of Comprehensive Airline Liability insurance:
(i) name the Additional Assureds as additional assureds; and
(ii) provide that the insurance shall operate in all respects
as if a separate policy had been issued covering each
party insured thereunder, but this provision shall not
operate to include any claim howsoever arising in
respect of loss or damage to the Aircraft, Engines and
Parts insured under the All Risks Hull, Hull War and
Allied Perils or All Risks insurance of the assured.
Notwithstanding the foregoing the total
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liability of insurers in respect of any and all assureds
shall not exceed the limits of liability stated in the
policy;
(c) in respect of all Insurances:
(i) be effective worldwide except for territories approved
in writing by Lessor;
(ii) provide that insurers waive all rights of subrogation
against the Additional Assureds;
(iii) provide that in the event that the Insurances are
cancelled (including cancellation for non-payment of
premium) or are materially changed such cancellation or
change shall not be effective as to the interests of the
Additional Assureds until thirty (30) days (but seven
(7) days or such lesser period as is customarily
available in accordance with policy conditions in
respect of war and allied perils) after confirmed
receipt by the Additional Assureds of written notice by
insurers of such cancellation or change;
(iv) provide that in respect of the interests of the
Additional Assureds, the Insurances shall not be
invalidated by any act, neglect, omission,
misrepresentation or non-disclosure on the part of
Lessee or any other party other than the Additional
Assured seeking to make a claim thereunder, and shall
insure each Additional Assured regardless of any breach
or violation of any warranties, declarations or
conditions contained in such policies by Lessee or any
other party other than the Additional Assured seeking to
make a claim thereunder;
(v) provide that the Additional Assureds shall have no
responsibility for premium and insurers shall waive any
right of set-off or counterclaim against the Additional
Assureds except in respect of outstanding premium in
respect of the Aircraft, Engines and Parts subject of a
claim;
(vi) not provide for any deductible or self insurance other
than the deductibles allowed under the terms of Article
11.1 above;
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(vii) be primary without right of contribution from any other
insurance carried by Lessor, Lessee or any other person;
and
(viii) be denominated in Dollars.
11.3 If required by the first paragraph of Article 11.1, the re-insurance
policies shall:
(a) provide that cover shall be identical to the cover provided by
the original insurances and be subject to the same terms and
conditions as the original insurances;
(b) provide that so far as the respective interests of the
Additional Assureds are concerned the reinsurance shall not be
invalidated by any act, neglect, omission, misrepresentation
or non-disclosure on the part of the reinsured party;
(c) confirm the insurers' agreement to the provision of paragraph
(d) below;
(d) include a "cut-through" clause in the following terms or in
such other terms as may be satisfactory to Lessor:
"In respect of All Risks Aircraft Hull insurance, Aircraft
Hull War Risk and Allied Perils insurance as described in
Article 11.1(a) and (b) above and All Risks insurance on any
Engine and Parts as described in Article 11.1(d) above, the
reinsurers and the reassured hereby agree that in the event of
any claim arising under the relevant reinsurances the
reinsurers shall in lieu of payment to the reassured, its
successors in interest and assigns pay to the Loss Payee
specified in the primary insurances all sums payable under or
in connection with such reinsurances by virtue of any
reinsured loss of, or damage to, the Aircraft, Engines and
Parts, without any deduction or deductions whatsoever, other
than any outstanding premium in respect of the Aircraft,
Engines or Parts the subject of the claim, it being understood
and agreed that any such payment by the reinsurers shall fully
discharge and release the reinsurers from any and all further
liability in connection therewith.
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In respect of Comprehensive Airline Liability insurance as
described in Article 11.1(c) above, the reinsurers and
reassured hereby agree that in the event of any claim arising
under the relevant reinsurances, the reinsurers shall in lieu
of payment to the reassured, its successors in interest and
assigns pay to the person or party who has sustained the
relevant loss (or as reimbursement of any payment made by any
Additional Assureds) all sums payable under such reinsurances
by virtue of such reinsured loss, without any deduction or
deductions whatsoever, it being understood and agreed that any
such payment by the reinsurers shall fully discharge and
release the reinsurers from any and all further liability in
connection therewith"; and
(e) provide that the reinsurers and reassured agree that in the
event that the reassured, its successors in interest and
assigns shall at any time be or become insolvent or suspend
business or file a petition in bankruptcy or be adjudicated
insolvent or bankrupt or admit in writing its inability to pay
its debts as they become due, or make a general assignment for
the benefit of creditors or that a receiver or liquidator or
assignee or trustee or state commissioner of insurance be
appointed in respect of the reassured its successors in
interest or assigns or any substantial part of its property
for the purpose of liquidation on account of insolvency, then
the reinsurers, in lieu of payment to the reassured, its
successors in interest or assigns, shall pay upon demand that
portion of any loss due to the party entitled thereto under
the terms of the original insurance for which such reinsurers
would under the terms of the reinsurance be liable to pay the
reassured, its successors in interest or assigns, less any
amounts already paid, it being understood and agreed that any
such direct payment by reinsurers shall fully discharge and
release the reinsurers from any and all further liability for
such payment made.
11.4 Prior to the Delivery Date and thereafter during the Term, at least
five (5) Business Days prior to the renewal date of any Insurance
required or maintained by Lessee under Article 11.1 but in no event
less than once in each 12 month period, Lessee shall furnish or
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cause to be furnished to Lessor by the insurer or insurance broker
and the reinsurance broker
1) a certificate of insurance describing in detail the insurance
then carried and maintained, and certifying that such
insurance complies with the terms of this Lease, including:
(i) confirmation that the insurance/reinsurance has been
placed with the insurers/reinsurers required (giving the
name of such insurers/reinsurers), the insured/reinsured
amount and the period of the policy and
(ii) confirmation that all premiums due to
insurers/reinsurers have been paid,
and
2) a letter of undertaking from Lessee's brokers and, if
required, from the reinsurance brokers.
Such certificate(s) of insurance and letter(s) of undertaking
shall be substantially in the form as delivered on the
Delivery Date.
In the event that Lessee shall fail to effect, maintain or cause to
be effected or maintained, insurance as required by this Article 11,
Lessor, Head Lessor or Indenture Trustee may at its option, but
without any obligation to do so, and without prejudice to Lessor's,
Head Lessor's and Indenture Trustee's other rights or remedies
hereunder, maintain such insurance or provide such or a similar
insurance, and, in such event, Lessee shall, upon demand, promptly
reimburse to Lessor, Head Lessor or Indenture Trustee the cost
thereof, including interest thereon at the rate referred to in
Paragraph 6 of Appendix D.
11.5 In the event of any damage to the Aircraft, Engines or Parts during
the Term not constituting a Casualty Occurrence, Lessee shall
repair, or cause the same to be repaired by an Authorized
Maintenance Performer at its sole cost and expense. Lessor and
Lessee agree that all insurance proceeds payable in connection with
any such damage shall be payable as provided in Section 11.2(a)(ii).
Any excess remaining shall, unless a Default shall have occurred and
be continuing, be paid over to Lessee.
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11.6 Lessee may carry insurance with respect to its interest in the
Aircraft in excess of the Agreed Value, provided that such insurance
coverage shall not prejudice the ability of Head Lessor or Lessor to
obtain insurance of their respective interests in the Aircraft.
11.7 [Intentionally omitted].
12. ASSIGNMENT AND SUBLETTING
12.1 Lessee shall not assign any of its rights or obligations or delegate
any of its duties under this Lease and, except as permitted by
Article 5.1 above or Paragraph 10 of Appendix D, Lessee shall not
sublet or otherwise part with possession of the Aircraft or any Part
thereof unless previously approved by Lessor in writing (such
consent not to be unreasonably withheld).
12.2 This Lease, the Aircraft and Lessor's interest in each thereof is
freely assignable and alienable by Lessor upon written notice to
Lessee in accordance with Article 12.3, provided, however, that so
long as the Aircraft shall be leased to Lessee under this Lease,
Lessor will not sell, assign, convey or otherwise transfer
absolutely (and not for security) any of its right, title, or
interest in and to this Lease or the Aircraft to any person unless
Lessor and the proposed transferee (the "Transferee") have complied
with the following conditions:
(i) Lessor shall give Lessee written notice of such
transfer at least 10 Business Days before the date of such
transfer, specifying the name and address of the proposed
Transferee;
(ii) the Transferee shall not be an airline or a
commercial air carrier or person controlling, controlled by or
under common control with an airline or a commercial air
carrier which is in direct competition with Lessee in the
United States;
(iii) the Transferee shall qualify as a "citizen of the
United States" within the meaning of Section 40102(a)(15) of
the Federal Aviation Act by a Voting Trust Agreement or
otherwise; and
(iv) on the transfer date Lessor and the Transferee
shall enter into an agreement or
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agreements in which the Transferee confirms that it shall be
deemed a party to this Lease and agrees to be bound by all the
terms of, and to undertake all of the obligations of, Lessor
contained in this Lease, and shall deliver a certificate of
quiet enjoyment to Lessee in form and substance reasonably
acceptable to it and Lessee shall receive an opinion of
counsel to the Transferee stating, with the customary
assumptions and exceptions, that such agreement or agreements
has been duly authorized, executed and delivered and
constitute the legal, valid and binding obligations of the
Transferee enforceable in accordance with their terms and that
the entry into such agreement(s) does not violate any laws or
agreements applicable to such Transferee.
The agreements, covenants, obligations and liabilities contained
herein, including but not limited to all obligations to pay Rent and
indemnify Lessor, are made for the benefit of Lessor and its
respective successors and assigns, notwithstanding the possibility
that any such person was not originally a party to this Lease or
may, at the time any enforcement is sought, no longer be a party to
this Lease. Lessee shall comply, at Lessor's cost and expenses, with
all reasonable requests of Lessor, its successors and assigns
respecting the assignment and Lessee's acknowledgement of the
assignee as Lessor. Notwithstanding anything contained in this
paragraph to the contrary, no assignment of Lessor's interest in
this Lease or the Aircraft shall alter the terms of this Lease in so
far as the costs to Lessee of the performance of its obligations to
pay Rent, Reserve Rate and Deposits hereunder and, except as
otherwise expressly provided in this Lease, the rights and
liabilities of Lessee under this Lease are concerned. Lessee's
rights under this Lease shall not be subject or subordinate to the
Head Lease, the Security Assignment or the Indenture. The rights of
Head Lessor and Indenture Trustee under the Head Lease, the Security
Assignment and the Indenture, as the case may be, shall be subject
to Lessee's rights under Section 13.7 of this Lease.
12.3 It is acknowledged and agreed that:
(a) As at the date of the Certificate of Acceptance, ownership of
the Aircraft has been transferred to Head Lessor, Head Lessor
has leased the Aircraft to Lessor under the Head Lease and,
subject to the
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terms of the Head Lease, Lessor has subleased the Aircraft to
Lessee under this Lease.
(b) Lessor has assigned all of its right, title and interest in
and to this Lease to Head Lessor and Head Lessor has assigned
all its right, title and interest in and to this Lease and
granted a Security Interest in the Aircraft to Indenture
Trustee.
(c) Lessor may from time to time require to amend, modify or
replace the security arrangements in respect of the financing
or refinancing of the Aircraft and Lessee agrees to cooperate
with Lessor in connection therewith at the cost and expense of
Lessor and, in particular (but without limiting the generality
of the foregoing), to change the plates provided for in
Article 4.3 and to execute and deliver such other or further
acknowledgments of assignment or other documents and to do
such other things as Lessor may reasonably require to be
executed and delivered;
(d) Upon any financing or refinancing of the Aircraft as
contemplated by this Article 12.3 or otherwise at the cost and
expense of Lessor, Lessee will promptly and duly execute and
deliver to Lessor and such persons as Lessor shall designate,
such other documents and assurances and take such further
action as may from time to time be reasonably requested in
order more effectively to carry out the intent and purpose of
this Lease, the Head Lease, the Indenture, the Security
Assignment and any other documents relating to such financing
or refinancing;
(e) [Intentionally omitted]; and
(f) Lessee shall not be liable to any Transferee for any payment
of Taxes or other amounts pursuant to this Lease or otherwise
be subject to any liabilities in excess of the amount that
would have been payable to, or beyond the scope of the
liabilities to, as the case may be, Lessor originally party
hereto, if that party had remained as Lessor.
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13. DISCLAIMER, REPRESENTATIONS AND WARRANTIES
13.1 NEITHER LESSOR, NOR HEAD LESSOR, NOR OWNER PARTICIPANT NOR INDENTURE
TRUSTEE NOR LOAN PARTICIPANT IS A MANUFACTURER OF THE AIRCRAFT OR
OTHER AIRCRAFT OR A DEALER IN SIMILAR AIRCRAFT AND HAS NOT INSPECTED
THE AIRCRAFT PRIOR TO DELIVERY TO AND ACCEPTANCE BY LESSEE. LESSEE
(I) ACKNOWLEDGES AND AGREES THAT THE AIRCRAFT IS BEING DELIVERED BY
LESSOR TO LESSEE "AS IS" AND "WHERE IS" AND THAT NO CONDITION,
WARRANTY OR REPRESENTATION OF ANY KIND WHATSOEVER HAS BEEN OR IS
GIVEN BY OR IS TO BE IMPLIED ON THE PART OF LESSOR OR ON THE PART OF
HEAD LESSOR OR OWNER PARTICIPANT OR INDENTURE TRUSTEE OR LOAN
PARTICIPANT IN RELATION TO THE AIRCRAFT, AND (II) HEREBY WAIVES AS
BETWEEN ITSELF AND LESSOR OR ON THE PART OF HEAD LESSOR OR OWNER
PARTICIPANT OR INDENTURE TRUSTEE OR LOAN PARTICIPANT ALL ITS RIGHTS,
EXPRESS OR IMPLIED (WHETHER STATUTORY OR OTHERWISE), TO MAKE CLAIMS
IN RESPECT OF THE AIRCRAFT RELATING TO THE TITLE, AIRWORTHINESS,
VALUE, CONDITION, DESIGN, OPERATION, CONFORMITY TO SAMPLES OR
MODELS, COMPLIANCE WITH SPECIFICATIONS, MERCHANTABILITY OR FITNESS
OR SUITABILITY FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT OR
ANY PART THEREOF, QUALITY OF THE MATERIAL OR WORKMANSHIP, ABSENCE OF
LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, ABSENCE OF ANY
INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, ABSENCE OF ANY
OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN TORT, BASED ON
STRICT LIABILITY OR NEGLIGENCE, ACTUAL OR IMPUTED, AND LESSEE HEREBY
WAIVES ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR
IMPLIED, WITH RESPECT TO THE AIRCRAFT, IT BEING UNDERSTOOD THAT ALL
SUCH RISKS, AS BETWEEN LESSEE AND LESSOR OR ON THE PART OF HEAD
LESSOR OR OWNER PARTICIPANT OR INDENTURE TRUSTEE OR LOAN
PARTICIPANT, ARE TO BE BORNE BY LESSEE.
Nothing in this Lease shall afford Lessor or any Indemnitee any
wider or greater exclusion of liability for death or bodily injury
than would be permitted by the Governing Law.
This paragraph shall not be modified except by a written agreement
signed on behalf of Lessor and Lessee by their respective duly
authorized representatives.
13.2 Lessor and Lessee agree that this Article 13 has been the subject of
discussion and negotiation and is fully understood by the parties,
and that the amount of the Rent and other mutual agreements of the
parties set
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forth in this Lease were arrived at in consideration of the
provisions of this Article 13 specifically including the waiver by
Lessee set forth in Article 13.1.
13.3.1 So long as no Event of Default has occurred and is continuing Lessor
agrees to assign or otherwise make available to Lessee for the
duration of the Term such rights as Lessor may have under any
warranty, express or implied, with respect to the Aircraft made by
the Manufacturer of the Aircraft, any subcontractor or supplier
thereof, or any other seller thereof, to the extent that the same
may be assigned or otherwise made available to Lessee and without
warranty by Lessor as to enforceability of any of the rights so
assigned.
To the extent that the same may not be assigned or otherwise made
available to Lessee, Lessor agrees to exert its reasonable efforts,
at Lessee's expense, to enforce such rights as Lessor may have with
respect thereto for the benefit of Lessee; provided however, that
upon an Event of Default all such rights shall immediately revert to
Lessor including all claims thereunder, whether or not perfected,
unless such Event of Default has forthwith been remedied by Lessee.
13.3.2 [Intentionally omitted].
13.4 Lessee represents and warrants that:
(a) Lessee is a corporation organized and existing in good
standing, in accordance with the Laws of the State of
Incorporation, and has the corporate power and authority to
carry on its business as presently conducted and to perform
its obligations under this Lease, is a Certificated Air
Carrier and is the holder of all necessary licenses issued by
all Government Entities having jurisdiction to authorize or
permit Lessee to engage in air transportation and to perform
and comply with its obligations hereunder;
(b) This Lease has been duly authorized by all necessary corporate
action on the part of Lessee, and neither the execution and
delivery nor the consummation of the transactions contemplated
hereby nor compliance by Lessee with the provisions of this
Lease will contravene any Law applicable to Lessee or result
in any breach of, or constitute any default under, or result
in the
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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;
(c) The execution and delivery by Lessee of this Lease, and all of
the transactions by Lessee contemplated hereby, have received,
and Lessee has complied with, every necessary consent,
approval, order, or authorization of, or registration with, or
the giving of prior notice to, any Government Entity having
jurisdiction with respect to the execution and delivery of
this Lease or the validity and enforceability of this Lease or
the satisfaction of all monetary and other obligations
hereunder;
(d) This Lease has been duly entered into and delivered by Lessee
and constitutes the valid, legal and binding obligations of
Lessee, enforceable in accordance with their terms subject to
principles of equity, laws relating to bankruptcy, insolvency
or liquidation or any other laws or legal procedures generally
affecting the enforcement of creditor's rights or the rights
of contracting parties;
(e) It is not necessary or advisable under the Laws of the State
of Registration in order to ensure the validity, effectiveness
and enforceability of this Lease, the Head Lease, the
Indenture or the Security Assignment or to protect the
property rights of Lessor, Head Lessor, or Indenture Trustee
in the Aircraft and under the Head Lease, the Indenture and
the Security Assignment that this Lease, the Head Lease, the
Indenture, the Security Assignment or any other instrument
relating thereto be filed, registered or recorded or that any
other action be taken under the Laws of the States of Illinois
or North Carolina and the State of Registration to perfect the
property rights of Lessor, Head Lessor and Indenture Trustee
in the Aircraft other than the filing of all such instruments
with the Air Authority, the filing of UCC-1 financing
statements in relevant jurisdictions and possession of an
original
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version of this Lease, if deemed to be chattel paper, and the
Indenture and Security Assignment will have priority in all
respects over the claims of all creditors of Lessee in or
against the Aircraft;
(f) Under the Laws of the State of Incorporation and the State of
Registration Lessee will not be required to make any deduction
or withholding from any payment it may make under this Lease.
There is no withholding or other tax to be deducted from any
payment to be made by Lessee under this Lease;
(g) There are no suits or legal proceedings (including any
administrative proceeding) pending or threatened before any
court or administrative agency against Lessee which, if
adversely determined, would have a material adverse effect
upon its financial condition or business or its ability to
perform its obligations hereunder;
(h) [Intentionally omitted];
(i) There has been no material adverse change in the financial
position of Lessee or the consolidated financial position of
Lessee and its subsidiaries from that set forth in the
financial statements last furnished pursuant to Article 6.4
and neither Lessee nor any of its subsidiaries have any
significant liabilities (contingent or otherwise) which are
not disclosed by, or reserved against in such financial
statements;
(j) The chief executive office (as such term is used in Sections
9-103 and 9-401 of the Uniform Commercial Code) of Lessee is
located at Chicago, Illinois, and, commencing August 21, 1995,
shall be located in Durham, North Carolina and Lessee agrees
to give at least 30 days' prior notice to Lessor of any
relocation of said chief executive office or place where such
records are kept and of any change in its name.
13.5 The representations and warranties in Article 13.4 (other than in
clauses (f), (g) and (i)) shall be deemed to be repeated by Lessee
on and as of each Rent Date as if made with reference to the facts
and circumstances existing on each such date.
13.6 Lessor represents, warrants and covenants that:
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(a) Lessor is a corporation organized and existing in good
standing, in accordance with the Laws of the State of Delaware
and has the corporate power and authority to carry on its
business as presently conducted and to perform its obligations
under this Lease;
(b) This Lease has been duly authorized by all necessary corporate
action on the part of Lessor, has been duly entered into and
delivered by Lessor and constitutes the valid, legal and
binding obligations of Lessor, enforceable in accordance with
their respective terms subject to principles of equity, laws
relating to bankruptcy, insolvency or liquidation or any other
laws or legal procedures generally affecting the enforcement
of creditor's rights or the rights of contracting parties;
(c) Neither the execution and delivery nor the consummation of the
transactions contemplated hereby nor compliance by Lessor with
the provisions of this Lease will result in any breach of, or
constitute any default under, any indenture or any 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; and
(d) Except for the registration of the Aircraft, neither the
execution and delivery nor the consummation of the
transactions contemplated hereby nor compliance by Lessor with
the provisions of this Lease requires the consent or approval
of, the giving of notice to, or the registration with, or the
taking of any other action in respect of any Government
Entity.
13.7 Lessor undertakes that, so long as no Event of Default shall have
occurred and be continuing, Lessor will not interfere with the
peaceful and quiet use and enjoyment of the Aircraft by Lessee in
accordance with the terms of this Lease. Lessor shall procure from
Head Lessor and Indenture Trustee a letter confirming that neither
Head Lessor nor Indenture Trustee shall take or cause to be taken
any action interfering with Lessee's quiet enjoyment and use and
possession of the Aircraft, provided, that no Event of Default shall
have occurred and be continuing. Lessee hereby agrees that if an
event of default under the Head Lease shall have
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occurred and be continuing, Lessee shall, at the reasonable cost and
expense of Lessee, enter into a lease with Head Lessor, such lease
to be upon terms and conditions substantially similar to those of
this Lease, and such lease shall be assigned to Indenture Trustee
under the Indenture with such changes as appropriate to reflect the
change in relationship between Lessee and the parties to the
Participation Agreement (other than the Lessor) resulting from the
Lessor no longer being interposed between the Lessee and such
parties.
13.8 On the Delivery Date, Head Lessor shall have received full legal and
beneficial title to the Aircraft from Lessor, Lessor shall have the
right to sublease the Aircraft hereunder and the Aircraft shall be
free of Lessor's Lien except for the lien of the Indenture, the
Security Assignment and the Head Lease, and Lessor covenants that
Lessor shall not create, incur, assume or suffer to exist any
Lessor's Lien (except the Indenture, the Security Assignment and the
Head Lease) on the Aircraft or any part thereof and agrees at its
own cost and expense, promptly to take such action as may be
necessary duly to discharge any such Lessor's Lien provided,
however, without limiting Lessor's liability under Article 13.7,
that Lessor may in good faith by appropriate proceedings contest
claims or charges resulting in any such Lessor's Lien as long as
such contest does not involve any material danger of the sale,
forfeiture or loss (or loss of use) of the Aircraft or any interest
therein and will indemnify and hold harmless Lessee against any and
all Claims, of whatever kind and nature, incurred by or asserted
against Lessee as a consequence of any such Lessor's Lien.
13.9 Lessor will not enter into any waiver, amendment or other
modification of the Tax Indemnity Agreement, Sections 7A or 7(b)(i),
(ii) or (iii) of the Participation Agreement or the Head Lease
definitions used therein that would increase Lessee's liabilities or
decrease its rights hereunder without Lessee's consent. Promptly
upon the execution and delivery of any amendment, modification,
supplement or waiver to the Tax Indemnity Agreement or Sections 7(b)
or 7A of the Head Lease, Lessor shall deliver true and accurate
copies thereof to Lessee. Lessor shall immediately notify Lessee of
the existence of any "Event of Default" or "Default" under the Head
Lease (that does not result from an Event of Default or Default
under
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this Lease) and shall promptly notify Lessee when the Head Lease is
no longer in effect.
14. COVENANTS OF LESSEE
14.1 Lessee hereby covenants with Lessor that from the Delivery Date and
during the Term and until redelivery of the Aircraft to Lessor in
accordance with Article 16 it will:
(a) remain in and continue to operate as a Certificated Air
Carrier holding a valid certificate of convenience and
necessity issued pursuant to the Federal Aviation Act and,
except as permitted in Section 14.1(p) hereof, preserve its
corporate existence;
(b) comply with all Laws and regulations for the time being in
force in the State of Incorporation, the State of Registration
and in any country to, from, in or over which the Aircraft is
flown, the failure with which to comply is likely to have a
material adverse effect on Lessee, provided, however, that
such failure shall have no adverse effect on the Aircraft or
the interests of Lessor, Head Lessor or Indenture Trustee
therein or the Insurance required to be maintained pursuant to
Article 11;
(c) (i) at its own expense from time to time do and perform such
other and further acts and execute and deliver any and all
further instruments as may be required by Law (in the United
States but not in any jurisdiction outside the United States
unless directly required due to Lessee's operation), and (ii)
at Lessor's expense (insofar as not covered in Article 8.2(a))
from time to time do and perform such other and further acts
and execute and deliver any and all further instruments as may
be reasonably requested by Lessor to establish, maintain and
protect the respective rights and remedies of Lessor, Head
Lessor and Indenture Trustee and to carry out and give effect
to the intents and purposes of this Lease and the Head Lease;
(d) notify Lessor immediately of any Default;
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(e) obtain and maintain all necessary government and other
certificates, consents, licenses, permits and authorizations
and take all action which may be necessary for the continued
due performance of Lessee's obligations under this Lease and
for the use and operation of the Aircraft;
(f) not do or permit to be done any act or thing which might
impair the respective interests of Lessor, Head Lessor and
Indenture Trustee in the Aircraft, or the registration of the
Aircraft;
(g) notify Lessor as soon as practicable after becoming aware of
any loss, theft, damage or destruction of or to the Aircraft
or any part thereof if the potential cost of repair or
replacement is likely to exceed $250,000.00 (Dollars Two
Hundred Fifty Thousand);
(h) not do anything which is likely to subject the Aircraft or any
part thereof to penalty, forfeiture, seizure, arrest,
impounding, detention, confiscation, taking in execution or
appropriation or destruction, nor abandon the Aircraft or any
part thereof;
(i) not represent or hold out Lessor, Head Lessor or Indenture
Trustee as carrying goods or passengers on the Aircraft or as
being in any way connected or associated with any operation or
carriage (whether for hire or reward or gratuitously) which
Lessee may undertake;
(j) not pledge the credit of Lessor, Head Lessor or Indenture
Trustee for any maintenance, overhauls, replacements, repairs
or modifications to the Aircraft;
(k) keep Lessor and the insurers, as referred to in Article 11,
informed as to current serial numbers of the Engines and any
engine installed on the Aircraft in accordance with the
provisions of this Lease, and the location of any Engine for
the time being not installed on the Aircraft; and shall notify
such insurers of any renewal, replacement or substitution, or
the location of any Engine not installed on the Aircraft;
(l) discharge all fees, charges and expenses payable to any third
party in relation to the use or
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operation of the Aircraft or any premises where the Aircraft
is situated;
(m) in the event of any forfeiture, impounding or detention of the
Aircraft or any part thereof not constituting a Casualty
Occurrence, use all reasonable endeavors to procure the
immediate release therefrom of the same;
(n) keep accurate, complete and current records of all flights
made by the Aircraft. Such records shall be kept in such
manner as the Air Authority may from time to time require and
in accordance with the Approved Maintenance Program. Lessee
shall permit Lessor or any person designated by Lessor to
examine such records upon giving reasonable notice not
involving delay to the Aircraft and subject to the terms of
Article 7.5.3, at the expense of Lessor or such person, to
copy such records;
(o) on request, provide Lessor with evidence satisfactory to
Lessor that all Taxes and charges incurred by Lessee with
respect to the Aircraft, including without limitation any
payments due to any relevant air traffic control authorities
and airport authorities, have been paid and discharged in full
or duly provided for;
(p) not consolidate with, or merge into, any other corporation,
convey, transfer or lease substantially all of its assets as
an entirety to any person without the prior written consent of
Lessor (such consent not to be unreasonably withheld) and the
execution and delivery to Lessor of such agreements,
certificates and legal opinions as Lessor may request with
respect thereto; and
(q) provide to Lessor immediate written notice of any termination
or expiration of the Aircraft Maintenance Agreement, and a
copy of any subsequent Aircraft Maintenance Agreement entered
into by Lessee.
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15. DEFAULT BY LESSEE
15.1 Each of the following events shall constitute an "Event of Default":
(a) if default shall be made by Lessee in the making of payment of
any Rent, Reserve Rate, Agreed Value, and/or of any other
Supplemental Rent, within 5 Business Days after the date when
due and payable under this Lease; or
(b) (i) if default shall be made by Lessee at any time in the
procurement or maintenance of any insurance coverage
prescribed herein or (ii) any insurance which may be
maintained by Lessor, Head Lessor or Indenture Trustee under
Article 11.4 is cancelled or terminated or notice of
cancellation is given; or
(c) if default shall be made by Lessee in the observance or
performance of any of the other obligations of Lessee
contained in this Lease and, if such default is in the opinion
of Lessor capable of remedy, such default shall continue for a
period of fifteen (15) Business Days after notice from Lessor
to Lessee specifying the default and requiring that the same
be remedied; or
(d) if any representation or warranty made (or deemed to be
repeated) by Lessee in or pursuant to this Lease or in any
document or certificate or statement referred to in or
delivered under this Lease is or proves to have been incorrect
in any material respect when made or deemed to be repeated and
such incorrectness, if capable of being cured, shall continue
for fifteen (15) Business Days after written notice from
Lessor specifying such incorrectness; or
(e) if any borrowed money having an outstanding principal amount
in excess of $4,000,000.00 (Dollars Four Million) of Lessee or
any of its subsidiaries is not paid when due, or by reason of
breach or default under the terms of any instrument evidencing
or guaranteeing the same on the part of Lessee or any of its
subsidiaries any borrowed money having an outstanding
principal amount in excess of $4,000,000.00 (Dollars Four
Million) of Lessee or any of its subsidiaries
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becomes due or capable of being declared due prior to the date
when it would otherwise have become due, or the security for
any such borrowed money or any guarantee in respect thereof
becomes enforceable; or
(f) if an encumbrancer takes possession or a receiver,
administrator, administrative receiver, trustee, liquidator or
similar officer is appointed of the whole or any substantial
part of the assets, rights or revenues of Lessee or any of its
subsidiaries or a distress, execution, sequestration or other
process is levied or enforced upon or sued out against all or
a substantial part of the assets, rights or revenues of Lessee
or any of its subsidiaries and is not discharged within
fourteen days, or Lessee applies for or consents to the
appointment of a receiver, administrator, administrative
receiver, trustee, liquidator or similar officer for it or for
all or any part of its assets, rights or revenues; or
(g) if Lessee or any of its subsidiaries suspends payment of its
debts, or is unable or admits its inability to pay its debts
as they fall due, or shall be adjudicated or found, or
becomes, bankrupt or insolvent, or proposes or enters into any
composition or other arrangement for the benefit of its
creditors generally, or Lessee or any of its subsidiaries
shall, by voluntary petition, answer or consent, seek relief
under the provisions of any bankruptcy, insolvency or other
similar law providing for the reorganization, liquidation,
administration, dissolution or winding-up of corporations, or
providing for an agreement, composition, extension or
adjustment with its creditors; or
(h) if a petition against Lessee in a proceeding under applicable
bankruptcy or other insolvency laws shall be filed and shall
not be withdrawn or dismissed within 30 days thereafter, or if
any order shall be made by any competent court or resolution
passed by Lessee or any of its subsidiaries or their
respective board of management or supervisory board, whichever
is competent to pass such resolution for the winding-up or
dissolution of Lessee or any of its subsidiaries or for the
appointment of a liquidator, trustee or conservator, save for
winding-up or
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dissolution for the purposes of amalgamation or reorganization
(not involving or arising out of insolvency) the terms of
which shall have received the prior written approval of
Lessor; or
(i) if Lessee or any of its subsidiaries disposes of all or a
material part of its assets, whether by one or a series of
transactions, related or not, other than for the purpose of a
reconstruction or amalgamation the terms of which have
received the previous consent in writing of Lessor; or
(j) if any action shall be taken by Lessee which shall impair the
rights, title or ownership of Lessor or Head Lessor or the
Security Interest of Indenture Trustee, in the Aircraft or
this Lease, or this Lease is or becomes wholly or partly
invalid, ineffective or unenforceable by reason of any act or
omission of Lessee; or
(k) if any consent, authorization, license, certificate or
approval of or registration with or declaration to any
Government Entity in connection with this Lease including,
without limitation:
(i) Lessee's air carrier operating certificate issued
pursuant to Chapter 447 of the Federal Aviation Act; or
(ii) required by Lessee or as a condition precedent required
by Lessor pursuant to Article 2.3 to authorize, or in
connection with, the execution, delivery, validity,
enforceability or admissibility in evidence of this
Lease or the performance by Lessee of its obligations
under this Lease; or
(iii) the registration of the Aircraft; or
(iv) any airline license or air transport license;
is changed such that it materially impairs the ability of
Lessee to perform its obligations hereunder, or is withheld,
or is revoked, suspended, cancelled, withdrawn, terminated or
not renewed, or otherwise ceases to be in full force; or
(m) if any circumstances analogous to any of the circumstances
described in paragraphs (f), (g) or
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(h) above arise under the Law of any applicable jurisdiction;
(n) for so long as Wings Aircraft Finance, Inc. or any other
affiliate or subsidiary of Fokker is the Lessor hereunder or
retains the entire beneficial interest in the ownership of the
Aircraft, if an event of default (however defined) occurs
under any Other Aircraft Agreement which event permits
acceleration or termination;
(o) [intentionally omitted],
(p) [intentionally omitted]; or
(q) [intentionally omitted].
15.2 If one or more Events of Default shall have occurred and be
continuing, at Lessor's option and subject to any mandatory
requirement of Law:
(a) For Lessee's account Lessor may do anything that may
reasonably be required to cure any Event of Default and
recover from Lessee all costs including legal expenses
incurred in so doing, and/or
(b) Lessor may accept such Event of Default as a repudiation of
this Lease and terminate the lease of the Aircraft to Lessee
hereunder by:
(i) serving notice of such termination on Lessee specifying
the occurrence giving rise to such Event of Default or
Events of Default, provided that such notice shall be
deemed to have been served without the necessity of
actual service upon the occurrence of any Event of
Default described in paragraph (f), (g), (h) or (m) of
Article 15.1.
Thereafter (if the Term shall have commenced) Lessee
shall redeliver possession of the Aircraft to Lessor at
the Redelivery Location (or such other location as
Lessor may require); or
(ii) at Lessor's election, taking possession of the Aircraft
for which purpose Lessor by its servants or agents may
enter upon Lessee's premises where the Aircraft may be
located,
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or cause the same to be redelivered to Lessor at the
Redelivery Location (or such other location as Lessor
may require Lessee to assemble and deliver the Aircraft
to Lessor, and Lessor shall be entitled to act as
attorney for Lessee in causing such redelivery and shall
have all the powers and authorizations legally necessary
for taking such action. In the event of exercise by
Lessor of its powers under this sub-paragraph (ii) such
termination shall be deemed to take effect on such
taking of possession by Lessor or such redelivery of the
Aircraft to Lessor at the said airport; and/or
(c) Lessor may proceed by appropriate court action or actions to
enforce performance of Article 15.2(b) or to recover damages
for the breach thereof; and/or
(d) all rights of Lessee hereunder shall, in the event the Term
shall be terminated pursuant to Article 15.2(b) henceforth
absolutely cease and terminate but without prejudice to
Lessee's obligations under this Lease all of which shall
continue in full force and effect except for obligations to
pay Rent and Reserve Rate after the Aircraft is returned to
Lessor, and is in the condition required by Article 16; and
Lessee shall cooperate in taking all steps necessary to effect
deregistration of the Aircraft in the State of Registration
and Lessor shall be entitled to sell or otherwise deal with
the Aircraft as if this Lease had never been made. Without
prejudice to the foregoing, Lessee hereby appoints Lessor as
its attorney to do any act or thing required in connection
with such deregistration of the Aircraft.
15.3 If an Event of Default occurs, Lessor shall have the right to demand
that:
(a) Lessee pay all amounts which may be then due and unpaid
hereunder, and
(b) at Lessor's option whether or not Lessor shall have exercised,
or shall thereafter at any time exercise, any of its rights
under Article 15.2, by thirty (30) days written notice to
Lessee from Lessor specifying a payment date, Lessee pay
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Lessor, and Lessee shall pay Lessor, on the payment date
specified in such notice, as liquidated damages for loss of
bargain and not as a penalty (in lieu of the Rent due for the
Aircraft covered by such notice for the period commencing
after the date specified for payment in such notice), any
unpaid Rent for the Aircraft (prorated in the case of Rent on
a daily basis) to and including the payment date specified in
such notice, plus the amount, if any, by which the aggregate
Rent for the Aircraft for the remainder of the Term for the
Aircraft, discounted periodically (equal to installment
frequency) to present worth at the interest rate of six and a
half percent (6.5%) per annum, exceeds the Fair Market Rental
Value of the Aircraft for the remainder of the Term, after
discounting such Fair Market Rental Value periodically (equal
to installment frequency) to present worth as of the payment
date specified in such notice at the interest rate of six and
a half percent (6.5%) per annum.
Lessee shall fully indemnify Lessor on its own behalf and on behalf
of Head Lessor and Indenture Trustee on demand and on an After-Tax
Basis against any loss (including loss of profit), damage, expense
(including without limitation attorneys' fees), cost or liability
which Lessor, Head Lessor or Indenture Trustee may sustain or incur
as a consequence of the occurrence of any Event of Default and/or
termination of the letting of the Aircraft pursuant to this Lease,
including but not limited to (i) any loss of profit suffered by
Lessor and/or Head Lessor because of Lessor's inability to place the
Aircraft on lease with another lessee on terms as favorable to
Lessor as the terms of this Lease or because whatever use, if any,
to which Lessor is able to put the Aircraft upon its return to
Lessor, or the funds arising upon a sale or other disposal thereof,
is not as profitable to Lessor as letting the Aircraft in accordance
with the terms of this Lease would have been to the extent the
foregoing loss of profit shall not be recovered under Article
15.3(b), (ii) any amount of interest, fees or other sums whatsoever
paid or payable on account of funds borrowed in order to carry any
unpaid amount, (iii) any loss, premium, penalty or expense which may
be incurred repaying funds raised to finance the Aircraft or in
unwinding any swap, forward interest rate agreement or other
financial instrument relating in whole to
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Lessor's financing of the Aircraft and/or the Aircraft under the
Other Aircraft Agreements, and (iv) any loss, cost, expense or
liability sustained or incurred by Lessor owing to Lessee's failure
to re-deliver the Aircraft in the condition required by this Lease.
15.4 No remedy referred to in this Article 15 is exclusive, but each
remedy shall be cumulative and in addition to any other remedy
referred to herein or otherwise available to Lessor. The exercise by
Lessor of any of its remedies hereunder shall not preclude or estop
the exercise or beginning of exercise by Lessor of any or more of
such other remedies.
No express or implied waiver by Lessor of any Event of Default, or
failure or delay of Lessor in exercising any right hereunder shall
operate as waiver thereof unless an express waiver is executed and
delivered to Lessee.
15.5 Prior to the Delivery Date Lessee shall deliver to Lessor a duly
authorized consent, undated and in form and substance acceptable to
Lessor, addressed to the Federal Aviation Administration consenting
to the release of this Lease in connection with the termination of
this Lease pursuant to the terms hereof and, if so requested by
Lessor, the deregistration of the Aircraft from the register of
civil aviation in the State of Registration.
16. RETURN OF AIRCRAFT
16.1 On the Expiry Date or upon earlier termination of the Term (unless a
Casualty Occurrence shall have occurred with respect to the
Aircraft), Lessee shall, at its own expense, redeliver the Aircraft
to Lessor at the Redelivery Location or such other airport as is
mutually acceptable to the parties, in a condition complying with
the provisions of Appendix E, free and clear of all liens and
encumbrances (including Permitted Liens other than Lessor Liens) and
upon request of Lessor cooperate in causing the Aircraft to be
removed from the register of civil aviation in the State of
Registration and Lessee shall return the Aircraft to Lessor together
with the Aircraft Documents supplied pursuant to this Lease when the
Aircraft was delivered to Lessee on the Original Delivery Date as
the same may be modified, supplemented or amended during the Term.
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16.2 Immediately prior to such redelivery of the Aircraft, Lessee, at its
own expense, shall make the Aircraft, Aircraft Documents and other
records available to Lessor for inspection ("Final Inspection") in
order to verify that the condition of the Aircraft complies with the
provisions of this Lease. Such inspection shall not unreasonably
interfere with the operation of the Aircraft. The period will be
long enough for the Final Inspection to permit the conduct by Lessor
of the following:
(a) Inspection of the Aircraft Documents;
(b) Inspection of the Aircraft structure and Parts;
(c) Inspection of the Engines and A.P.U., including without
limitation, a borescope inspection or any other equivalent
inspection method supported by Rolls Royce, inspection of the
compressor and turbine area, and, if reasonably requested
based on evidence that it is required, the Engine and A.P.U.
condition runs confirming release of each Engine and A.P.U for
its remaining operational life;
(d) A one-hour to two-hour test flight with Lessor's
representatives on board as observers and, if any non
compliance is found, a subsequent test flight to check
compliance after rectification.
16.3 To the extent that, upon such Final Inspection, the condition of the
Aircraft and Aircraft Documents does not comply with the provisions
of this Lease, Lessee, at its own expense, shall cause such
non-compliance to be promptly rectified and to the extent such
rectification extends beyond the Expiry Date, the Term shall, at
Lessor's sole option, be deemed to be automatically extended and the
provisions of this Lease shall remain in full force and effect until
such rectification has been accomplished. During such extension of
the Term Lessee shall be liable to pay Rent at a daily pro rata rate
equal to the Rent payable during the last Rental Period of the Term.
16.4 Upon redelivery Lessee shall provide to Lessor all necessary
assistance to enable Lessor to obtain any required documents in
relation to the export of the Aircraft from the State of
Registration, and if different, from the State of Incorporation
(including a valid and subsisting export license for the Aircraft),
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and shall reassign to Lessor, at the expense of Lessee, the benefit
of any indemnity or warranty which has been assigned to Lessee
pursuant to Article 13.3 above to the extent such indemnity or
warranty is assignable.
16.5 Prior to the Expiry Date or upon any earlier termination of the Term
and upon Lessor's request, Lessee will provide Lessor or its agent
reasonable access to and Lessor may make and retain copies of the
Approved Maintenance Program and the Aircraft Documents in order to
facilitate the Aircraft's integration into any subsequent operator's
fleet.
Lessor agrees that it will not disclose the contents of the Approved
Maintenance Program to any person or entity except to the extent
necessary to monitor Lessee's compliance with this Lease and/or to
bridge the maintenance program for the Aircraft from the Approved
Maintenance Program to another program.
16.6 Upon redelivery of the Aircraft to Lessor, an adjustment shall be
made in respect of fuel on board on the Original Delivery Date and
on redelivery at the price then prevailing at the Redelivery
Location.
16.7 If Lessor shall request that Lessee paint the Aircraft any other
basic color as contemplated by Section 1(h) of Appendix E, Lessor
agrees that it shall bear the cost and expense of the difference
between white paint and such other basic color.
16.8 Upon written request of Lessor given to Lessee not later than thirty
(30) days prior to the Expiry Date or termination of the Lease,
Lessee, at the Expiry Date or upon termination of the Lease, will
provide, or will cause to be provided, up to thirty (30) days'
storage of the Aircraft at Lessee's premises, at Lessor's cost and
expense. Lessee shall cause the Aircraft to be delivered to such
designated location at Lessor's cost and expense. During such period
of storage, Lessee will arrange for insurance and maintenance at
Lessor's cost and expense. Lessee shall allow Lessor or any person
designated by Lessor, including the authorized representatives of
any prospective purchaser or user of the Aircraft, to inspect the
same at all reasonable times.
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17. CASUALTY OCCURRENCES
17.1 In this Lease "Casualty Occurrence" shall mean any of the following
events with respect to the Aircraft, the Airframe or an Engine:
(a) the actual, agreed, constructive, arranged or compromised
total loss or destruction of the Aircraft, the Airframe or an
Engine, or damage to the Aircraft, Airframe or Engine
rendering repair impracticable or uneconomical, or the
Aircraft, Airframe or Engine being rendered permanently unfit
for normal use;
(b) requisition of title or other compulsory acquisition,
requisition, capture, seizure, deprivation, confiscation or
detention for any reason of the Aircraft, the Airframe or an
Engine by any Government Entity of the State of Registration
or by any other government or other competent authority,
whether de jure or de facto, but excluding requisition for use
or hire not involving requisition of title by any Governmental
Entity for a temporary period ending on the date ninety (90)
days (or the Expiry Date if the requisition for use or hire is
by the United States) after such requisition, or the Expiry
Date, whichever first occurs;
(c) the hijacking, theft, disappearance, condemnation,
confiscation or seizure of the Aircraft, the Airframe or an
Engine other than in the circumstances referred to in (b)
above which deprives Lessee of the use thereof for more than
ninety (90) consecutive days.
17.2 (a) In the event of a Casualty Occurrence with respect to the
Aircraft or Airframe prior to the Delivery Date, this Lease
shall immediately terminate with respect to such Aircraft and
neither party shall have any further obligation or liability
hereunder, save that Lessor shall return to Lessee the Deposit
or such part thereof as Lessor shall have received from Lessee
and Lessee shall remain liable to reimburse Lessor for any
amounts specified in Article 8.2(a).
(b) In the event of a Casualty Occurrence with respect to the
Aircraft or Airframe after delivery to Lessee hereunder,
Lessee shall pay the Agreed
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Value to Lessor on or prior to the earlier of (i) 45 days
after the Casualty Occurrence and (ii) the Business Day after
the date of receipt of the insurance proceeds in respect of
the Casualty Occurrence and, provided all other amounts which
are then due and payable by Lessee under this Lease have been
paid in full to Lessor, Lessee's obligation hereunder for
payment of Rent shall cease as from the date on which Lessor
receives payment in full of the Agreed Value. Rent paid in
advance for any days which occur after such Agreed Value is
paid shall be repaid to Lessee on a pro rata basis for each
day beyond such date of payment of Agreed Value. Any insurance
proceeds in excess of Agreed Value obtained by Lessee pursuant
to Article 11 for its own account, remaining after payment of
the foregoing amounts shall, unless an Event of Default under
Section 14(n) shall have occurred and be continuing, be paid
over to Lessee.
(c) Subject to the rights of any insurers and reinsurers or other
third party, upon irrevocable payment in full to Lessor of the
Agreed Value and all other amounts which may be or become
payable to Lessor under this Lease, Lessor will cause, title
to the Aircraft to be conveyed from Head Lessor to it, without
recourse or warranty (except as to title and Lessor's Liens)
and without further act, Lessor will convey title to Lessee.
Lessor will or will cause Head Lessor to transfer to Lessee
all of Head Lessor's rights to any Engines and Parts not
installed when the Casualty Occurrence occurred, all on an
as-is where-is basis, and will at Lessee's expense, execute
and deliver or cause to be executed and delivered such bills
of sale and other documents and instruments as Lessee may
reasonably request to evidence (on the public record or
otherwise) the transfer and the vesting of Lessor's rights in
such Engines and Parts in Lessee, free and clear of all rights
of Lessor and Lessor Liens.
17.3 Upon the Casualty Occurrence with respect to any Engine not
involving a Casualty Occurrence of the Aircraft, Lessee shall give
Lessor prompt written notice thereof and Lessee shall replace such
Engine as soon as reasonably possible, but in no event later than
ninety (90) days after such Casualty Occurrence, with a replacement
Engine in accordance with Article 5.1.2(a).
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Such replacement shall be deemed an "Engine" as defined herein.
Lessee agrees to take such action as Lessor may reasonably request
in order that any such replacement engine shall be duly and properly
titled in Head Lessor, leased hereunder and subject to the Security
Interest of the Indenture to the same extent as the Engine replaced
thereby. In such case or in the case of the installation of a
Replacement Engine in accordance with 5.1.2(a), the following
conditions shall be satisfied at no cost or expense to Lessor and
Lessor agrees to cooperate with Lessee to the extent necessary to
enable it to satisfy such conditions in a timely manner:
(i) the following documents shall be duly authorized,
executed and delivered by the respective party or parties
thereto and shall be in full force and effect, and an executed
counterpart of each shall be delivered to Lessor:
(A) a full warranty bill of sale in favor of Head
Lessor, in form and substance reasonably satisfactory to
Lessor, with respect to the Replacement Engine;
(B) a supplement to this Lease, in form and substance
reasonably satisfactory to Lessor, covering the
Replacement Engine (and releasing such replaced Engine
from this Lease) which shall have been duly filed (or a
short form thereof) for recordation with the Aviation
Authority;
(C) a certificate from a duly qualified independent
engineer, which engineer shall be reasonably
satisfactory to Lessor, confirming the operating
condition, value and utility of the Replacement Engine
satisfies the terms of Article 5.1.2(a)(i)
(D) evidence of compliance with the insurance provisions
of Article 11 with respect to such Replacement Engine as
Lessor may reasonably request; and
(E) an opinion of counsel (and such other evidence of
title as Lessor may reasonably request) to the effect
that, such conveyance, is effective to transfer to Head
Lessor title to such Replacement Engine and that it will
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be leased hereunder to the same extent as the Engine
replaced thereby.
Lessor will cause title to the Engine being replaced to be
transferred to Lessee or its designee without recourse or warranty
(except as to title and the absence of Lessor's Liens). Lessee's
obligation to pay the Rent hereunder shall continue in full force
and effect, but Lessee shall be entitled to be reimbursed by Lessor
the amount of insurance or condemnation proceeds, if any, received
by Lessor with respect to such replaced Engine.
17.4 In the event of requisition for hire of the Aircraft or any part
thereof not constituting a Casualty Occurrence, then, subject to the
proviso herein contained, the Rent and other charges payable under
this Lease shall not be suspended or abated either in whole or in
part, and Lessee shall not be released from any of its other
obligations (as to payment, indemnity or otherwise) hereunder (other
than operational obligations with which Lessee is unable to comply
solely by virtue of such confiscation or requisition). If Lessee
shall duly comply with all its obligations under this Lease, Lessee
shall during the Term be entitled to any hire paid by the
requisitioning or confiscating authority and Lessee shall, as soon
as practicable after the end of any requisition or confiscation,
cause the Aircraft to be put into the condition required by this
Lease. Lessor shall be entitled to all compensation payable by the
requisitioning or confiscating authority in respect of any change in
the structure, state or condition of the Aircraft arising during the
period of requisition or confiscation, and Lessor shall apply such
compensation in reimbursing Lessee for the cost of complying with
its obligations as aforesaid, but if any Default has occurred and is
continuing, Lessor shall be entitled to apply such compensation in
or towards settlement of any amounts owing by Lessee under this
Lease PROVIDED ALWAYS that if following such requisition or
confiscation the Aircraft is treated as an agreed, constructive,
arranged or compromised total loss by the insurers, then the
provisions of Article 17.1 shall apply with effect from the date on
which the insurer so determines.
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18. GOVERNING LAW AND JURISDICTION
18.1 This Lease and further agreements resulting herefrom shall be
governed by and construed in accordance with the internal Laws of
the State of New York and without regard to any conflict of law
rules. This Lease is being delivered in the State of New York.
18.2 Lessor and Lessee hereby irrevocably agree to submit to the
non-exclusive jurisdiction of, and to waive any objection to the
laying of venue in, the County of New York and that any suit, action
or proceedings (collectively, "Proceedings") may be brought by
Lessor in any court of the State of New York or any U.S. Federal
court located in New York County, New York.
18.3 Nothing contained in this Article 18 shall limit the right of either
party to this Lease to take Proceedings against the other in any
other court of competent jurisdiction, nor shall the taking of
Proceedings in one or more jurisdictions preclude the taking of
Proceedings in any other jurisdiction, whether concurrently or not.
18.4 Promptly after service of any process Lessor or Lessee shall
despatch a copy thereof to Lessee or Lessor, as the case may be, by
registered mail, postage prepaid but failure of Lessee or Lessor, as
the case may be, to receive such copy shall not invalidate the
service of such process.
18.5 To the extent that the parties may in any jurisdiction claim for
their or their assets immunity from suit, execution, attachment
(whether in aid of execution, before judgment or otherwise) or other
legal process and to the extent that in any such jurisdiction there
may be attributed to themselves or their assets such immunity
(whether or not claimed) the parties hereby irrevocably agree not to
claim and hereby irrevocably waive any immunity to the fullest
extent permitted by the laws of such jurisdiction with the intent,
inter alia, that the foregoing waiver shall have effect for the
purposes of the Foreign Sovereign Immunities Act of 1976 of the
United States of America.
18.6 Lessee and Lessor shall each at all times maintain an agent for
service of process in the New York, New York. For Lessee, such agent
shall be Paul, Hastings, Janofsky & Walker, Attn: John Howitt, 399
Park Avenue, New York, New York 10022-4697. For Lessor, such agent
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shall be Haight, Gardner, Poor & Havens, Attn: Bonny L.Y. Kwoh, 195
Broadway, New York, NY 10007. Any writ, judgment or other notice of
legal process shall be sufficiently served on Lessee or Lessor if
delivered to such agent at its address for the time being. Each of
Lessee and Lessor undertakes that if it shall revoke the authority
of its above agent or if for any reason any such agent no longer
serves as agent to receive service of process, Lessee or Lessor, as
the case may be, shall promptly appoint another such agent and
advise Lessor or Lessee, as the case may be, thereof.
19. MISCELLANEOUS
19.1 The rights of each of Lessor and Lessee under this Lease are
cumulative, may be exercised as often as it considers appropriate
and are in addition to its rights under general law. The rights of
Lessor against Lessee or in relation to the Aircraft (whether
arising under this Lease or the general law) shall not, as against
or in favor of Lessor, be capable of being waived or varied
otherwise than by an express waiver or variation in writing; and in
particular any failure to exercise or delay in exercising any of
such rights shall not operate as a waiver or variation of any other
such right; and defective or partial exercise of any such rights
shall not preclude any other or further exercise of that or any
other such right; and no act or course of conduct or negotiation on
Lessor's part or on Lessor's behalf shall in any way preclude Lessor
from exercising any such right or constitute a suspension or any
variation of any such right.
19.2 Save where expressly provided in this Lease, any certificate or
determination by Lessor as to any rate of interest or as to any
other amount payable under this Lease shall, in the absence of
manifest error, be conclusive and binding on Lessee.
19.3 If any sum paid or recovered in respect of the liabilities of Lessee
under this Lease is less than the amount then due, Lessor may apply
such sum to rental, interest, fees or any other amount due under
this Lease in such proportions and order and generally in such
manner as Lessor shall determine.
19.4 The terms and conditions of this Lease shall not be varied otherwise
than by an instrument in writing executed by or on behalf of Lessor
and Lessee.
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19.5 If any of the provisions of this Lease becomes invalid, illegal or
unenforceable in any respect under any law, the validity, legality
and enforceability of the remaining provisions shall not in any way
be affected or impaired.
19.6 Every notice, request, demand or other communication under this
Lease shall:
(a) be in English;
(b) be in writing and made by mail or by fax or telex transmission
or by reputable courier service;
(c) be deemed to have been received, subject as otherwise provided
in this Lease, in the case of a telex transmission, at the
time of dispatch with confirmed answerback of the addressee
appearing at the beginning and the end of the communication,
in the case of a fax transmission, at the time safe receipt is
confirmed by the addressee provided that if the date of
dispatch is not a business day in the country of the addressee
any telex or fax transmission shall be deemed to have been
received at the opening of business on the next such business
day, in the case of a letter five days after being deposited
in the mail first class postage prepaid and in the case of a
courier three days after being sent; and
(d) be sent:
(1) to Lessee at:
Prior to August 21, 1995:
Midway Airlines Corporation
5713 South Central Avenue
Chicago, Illinois 60638
Fax: (312) 838-2069
Attention: President
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Following August 21, 1995:
300 West Morgan St.
Durham, North Carolina 27702
Attention: President
Fax: (919) 956-7314
(2) to Lessor at:
Wings Aircraft Finance, Inc.
1199 N. Fairfax Street
Suite 500
Alexandria, VA 22314
Fax: (703) 683-2233
Attention: Secretary
or to such other address or telex or fax number as is notified by
either party to the other party to this Lease.
19.7 This Lease may be executed in any number of counterparts and all of
such counterparts taken together shall be deemed to constitute one
and the same instrument.
19.8 This Lease is the sole and entire agreement between Lessor and
Lessee in relation to the leasing of the Aircraft, and supersedes
all previous agreements in relation to such leasing. Each of Lessee
and Lessor represents for itself that no broker has been retained by
it in connection with this Lease.
19.9 This Lease is intended by the parties to be a lease between Lessor
and Lessee. Any waivers, consents, or deferrals of the payment of
Rent and Reserve Rate are not intended to be an agreement by Lessor
to make any capital contribution to the business of Lessee or to
share in or have liability for any of Lessee's losses, profits,
liabilities or obligations. Nothing contained in this Lease or
performed by Lessor in connection herewith and any other agreement
between Lessor and Lessee whether now existing or entered into in
the future shall make Lessor a partner or a joint venturer of Lessee
and shall not for any purpose be construed as a joint-venture
between the parties hereto.
19.10 [Intentionally omitted].
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19.11 Section 1110: Lessee acknowledges that Lessor would not have entered
into this Lease unless it had available to it the benefits of a
lessor under Section 1110 of Title 11 of the United States Code.
Lessee and Lessor hereby state that this Lease is intended to be a
true lease for U.S. Internal Revenue Code purposes. Lessee covenants
and agrees with Lessor that to better ensure the availability of
such benefits, Lessee shall support any motion, petition or
application filed by Lessor with any bankruptcy court having
jurisdiction over Lessee, whereby Lessor seeks recovery of
possession of the Aircraft under said Section 1110 and shall not in
any way oppose such action by Lessor unless Lessee shall have
complied with the requirements of said Section 1110 to be fulfilled
in order to entitle Lessee to continued use and possession of the
Aircraft hereunder. In the event said Section 1110 is amended, or if
it is repealed and another statute is enacted in lieu thereof,
Lessor and Lessee agree to amend this Lease and take such other
action not inconsistent with this Lease as Lessor reasonably deems
necessary so as to afford to Lessor the rights and benefits as such
amended or substituted statute confers upon owners and lessors of
aircraft similarly situated to Lessor.
19.12 [Intentionally omitted].
19.13 As between Lessor and Lessee, if Lessee fails to make any payment of
Rent or Reserve Rate required to be made by it hereunder or fails to
perform or comply with any of its agreements contained herein,
Lessor may itself make such payment or perform or comply with such
agreement, and the amount of such payment and the amount of the
reasonable and properly documented expenses of Lessor incurred in
connection with such payment or the performance of or compliance
with such agreement, as the case may be, together with interest
thereon at the interest rate defined in Appendix D, Paragraph 6,
shall be deemed Supplemental Rent, payable by Lessee upon demand.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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APPENDIX A
DESCRIPTION OF AIRCRAFT
Engine
Manufacturer Model Serial No. Engines Serial No.
- ------------ ----- ---------- ------- ----------
Fokker F28 11484 Two Rolls
MK0100 Royce Tay 17690
MK 650-15 17691
FAA Registration No.
N108ML
<PAGE>
IN WITNESS whereof the parties have executed this Lease the day and
year first herein written.
SIGNED on behalf of SIGNED on behalf of
WINGS AIRCRAFT FINANCE, INC. MIDWAY AIRLINES CORPORATION
By: /s/ Dennis de Jong By: /s/ Brian Olds
-------------------------------- --------------------------------
Name: Dennis de Jong Name: BRIAN OLDS
Title: Authorized Representative Title: Executive Vice President
<PAGE>
APPENDIX B
FURTHER DEFINITIONS AND VALUES
AGREED VALUE : Shall mean, during any year, the amount set
forth opposite such year in Annex 1 to this
Appendix B, which amounts may be adjusted
from time to time to reflect adjustments of
the Stipulated Loss Values (as defined in
the Head Lease) in accordance with the Head
Lease.
DEPOSIT : {***} and the Additional Deposit
described in Appendix D, if applicable.
RENT : {***} per month, as such amount may be
increased pursuant to Paragraphs 2.2 and
2.3 of Appendix D.
RESERVE RATE : (a) {***} for the months one up to and
including twelve of the Term;
(b) {***} for the months thirteen up to
and including the Expiry Date.
TRANSACTION
EXPENSES : {***} which, notwithstanding any other
provision in this Lease shall not be paid in
cash but shall be amortized pursuant to
Section 2.3 of Appendix D.
<PAGE>
Annex 1 to Appendix B
{***} (5 pages omitted)
<PAGE>
APPENDIX C
CERTIFICATE OF ACCEPTANCE
This Certificate of Acceptance is delivered, on and as of the date set forth
below, by Midway Airlines Corporation (herein referred to as "Lessee") to Wings
Aircraft Finance, Inc., (herein referred to as "Lessor") pursuant to that
Aircraft Operating Lease Agreement No. AOLAF-116-A dated as of July 10, 1995
between Lessor and Lessee (herein referred to as the "Lease"):
1. Details of Acceptance
Lessee hereby indicates and confirms to Lessor, its successors and
assigns, that Lessee has at ______ o'clock on this ______ day of ______
199_ at ________________________ accepted the following, in accordance
with the provisions of the Lease:
(a) Fokker 100 airframe, Manufacturer's serial Number 11484
(b) Rolls Royce Tay Mk 650-15 Engines (each of which engines has 750 or
more rated takeoff horsepower).
Engine Number Manufacturer's S/N
1. 17690
2. 17691
2. Confirmation of Undertakings
The terms used in this Certificate shall have the meanings given to such
terms in the Lease.
Lessee confirms that today being the Delivery Date as defined in the
Lease:
(i) the Aircraft is duly accepted by Lessee in accordance with and
subject to the provisions of the Lease and the execution and
delivery of this Certificate constitutes the acceptance of the
Aircraft by Lessee for all purposes of the Lease.
DELIVERY BY LESSEE TO LESSOR OF THIS CERTIFICATE OF ACCEPTANCE SHALL
CONSTITUTE CONCLUSIVE PROOF AS BETWEEN LESSOR AND LESSEE THAT ON THE
DELIVERY DATE LESSEE'S TECHNICAL EXPERTS EXAMINED AND INVESTIGATED
THE
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AIRCRAFT AND EVERY PART THEREOF AND THAT THE AIRCRAFT AND EVERY PART
THEREOF ARE AIRWORTHY AND IN GOOD WORKING ORDER AND REPAIR, WITHOUT
DEFECT WHETHER OR NOT DISCOVERABLE AS AT THE DELIVERY DATE AND IN
EVERY WAY SATISFACTORY TO LESSEE;
(ii) Lessee is obliged to pay to Lessor the amount provided for in the
Lease with respect to the Aircraft;
(iii) the Aircraft is insured in accordance with the Lease;
(iv) the representations and warranties contained in Article 13 of the
Lease remain, and if made at the date of this Certificate of
Acceptance, would be, true and correct in all respects;
(v) there have been affixed to the Aircraft and the Engines the fire
resistant notices required by Article 4.3 of the Lease;
(vi) Lessee has no right of set-off, deduction, withholding or
counterclaim against Lessor whatsoever; and
(vii) no Default is subsisting.
IN WITNESS WHEREOF, Lessee has caused this Certificate of Acceptance to be
executed in its name, by its duly authorized officer(s) or representative(s),
pursuant to due corporate authority, all as of the date written in Paragraph 1
above.
MIDWAY AIRLINES CORPORATION
By: _______________________
Title: _________________________
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APPENDIX D
CHARGES
1. Deposit
Lessee has paid to Lessor {***} as a Deposit for the Aircraft on or
prior to the date hereof.
Lessee shall pay the balance of the Deposit to Lessor in consecutive
monthly installments of {***} each, beginning on August 4, 1995,
and on each corresponding day of the month subsequent thereto until
the full Deposit amount as set forth in Appendix B has been paid.
Lessor acknowledges that Lessee has paid the Additional Deposit (as
defined in the Termination Agreement) to Fokker pursuant to the
Termination Agreement and that upon the terms set forth therein, such
Additional Deposit shall be transferred by Fokker to Lessor to be held as
a part of the Deposits under the Lease. Lessor agrees that upon such
transfer, such Additional Deposit shall constitute a part of the Deposits,
the disposition of which shall be subject to the terms and conditions of
the Lease in respect of the Deposits except as expressly set forth in this
Appendix D. The Deposit shall be held by Lessor during the Term as
security for the full and punctual performance of all of Lessee's
obligations to Lessor under this Lease. Lessor may, but shall not be
obliged to, apply the Deposit in whole or in part for the payment of any
Rent, Reserve Rate, indemnities, attorneys' fees and other expenses,
insurance and other casualty payments and any other amount owing from time
to time by Lessee hereunder or, to the extent provided in Article 15.1(n),
under any Other Aircraft Agreement, or for the payment of any loss or
damage suffered by Lessor as a result of any Event of Default or to
perform any of Lessee's obligations under this Lease or otherwise remedy
any other Event of Default, including, without limitation, in the
redelivery condition for the Aircraft without prejudice to any other
remedy of Lessor. In any such event Lessee shall on demand restore the
Deposit to the full amount provided for herein by payment to Lessor of an
amount in cash equal to the amount applied or utilized. Lessee shall not
attempt to subject the Deposit to any other lien, security interest,
charge or other encumbrance or assign any interest therein to any other
person and, to the extent of its interest therein, if any, Lessee hereby
grants to Lessor a security interest in the Deposit and assigns and
transfers
<PAGE>
to Lessor any and all of Lessee's right, title and interest therein, if
any, as security as provided above, and Lessor shall be entitled to the
remedy of offset against and application of the Deposit, without any
notice to or demand against Lessee, all of which are hereby waived. Should
any Event of Default hereunder occur, the Deposit shall automatically be
applied to any sum due to Lessor or as a prepayment of any sum to become
payable to Lessor, unless Lessor thereafter elects otherwise by notice to
Lessee.
Any remaining Deposit shall be repaid by Lessor to Lessee ten (10) days
following the Expiry Date or other date after redelivery of the Aircraft
in full compliance with all the requirements of Section 16 and otherwise
in accordance with this Lease or upon payment of the Agreed Value and all
other amounts owed under this Lease, so long as no Event of Default under
Section 15.1(n) shall have occurred and be continuing. In the event there
is a dispute as to whether Lessee is entitled to a return of any portion
of the Deposit, Lessor shall so return the undisputed amount of the
Deposit. Upon a repayment of such Deposit or portion thereof, Lessor's
security interest in such Deposit or portion thereof being repaid shall be
deemed released.
Lessor's obligations in respect of the return of the Deposit shall be
those of debtor of Lessee, not of a trustee or other fiduciary.
The Deposit (other than the Additional Deposit) shall bear interest on the
amounts then held at a rate of interest per annum yielding $10,500.00
(Dollars Ten Thousand Five Hundred) per year payable annually commencing
on the first anniversary of the Original Delivery Date, and on each
anniversary thereafter unless the Deposit and interest thereon shall have
been applied pursuant to this Lease. Any reference to the Deposit in this
Lease shall include the interest accumulated thereon and not paid to
Lessee.
The Additional Deposit shall include the interest to be accrued under the
Termination Agreement for the period prior to, and shall bear interest on
the amount thereof from, the date such Additional Deposit is transferred
to Lessor to such date as the Additional Deposit may be returned to Lessee
under the Lease at a rate of per annum equal to LIBOR for the applicable
six month period as determined from time to time. For purposes of this
Agreement, six month LIBOR shall have the definition given thereto in
Paragraph 6 of this Appendix D. Such interest shall accrue and subject to
the terms of this Paragraph 1, be paid to Lessee upon the repayment to
Lessee of the Additional Deposit pursuant to
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<PAGE>
the third clause of this Paragraph 1 or the next following clause. Any
reference to the Additional Deposit in this Agreement shall include the
interest accumulated thereon and not paid to Lessee.
Notwithstanding the terms of the third clause of this Paragraph 1,
provided that no Default as set forth in Article 15.1(a), (b), (f), (g),
(h) or (m) and is continuing, any remaining Additional Deposit shall be
repaid by Lessor to Lessee on the fourth anniversary of the Original
Delivery Date.
2. Rent
2.1 Rent shall be due and payable on each Rent Date. If such date
is not a Business Day then Rent shall be due and payable on
the last Business Day preceding such date.
2.2 The monthly Rent shall also be adjusted upward by an amount
equal to $875.00 (Dollars Eight Hundred Seventy Five) per
month which shall be payable to Lessor by check annually
commencing on the first anniversary of the Original Delivery
Date, and on each anniversary thereafter. Lessee may elect to
authorize Lessor in writing to set-off amounts payable
pursuant to this Article 2.2 against interest on the Deposit
which is payable by Lessor pursuant to Paragraph 1 of this
Appendix D whether or not an Event of Default shall have
occurred and be continuing, and whether or not Lessor
exercises its right to terminate this Lease after such Event
of Default.
2.3 The monthly Rent shall also be adjusted upward by an amount
(the "Transaction Expense Amount") of $907.00 (Dollars Nine
Hundred Seven) per month which shall be payable on each Rent
Date. If Lessee exercises the right to purchase the Aircraft
on the Option Exercise Date (as defined in Paragraph 9 of this
Appendix D), an amount (the "Additional Amount") in Dollars
shall be due and payable on the Option Exercise Date, such
Additional Amount to be equal to the present value as at the
Option Exercise Date (discounted at the interest rate of six
and a half percent (6.5%) per annum) of all unpaid Transaction
Expense Amounts that would have been payable during the period
from the Option Exercise Date to the Expiry Date
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<PAGE>
had Lessee not exercised the right to purchase the Aircraft.
3. Reserve Rate
3.1 Lessee shall be relieved of its obligation to pay the Reserve
Rate at any time that the Aircraft Maintenance Agreement is in
effect with respect to the Aircraft. At any time that the
Aircraft Maintenance Agreement is not in effect, then Lessee
shall, in addition to installments of Rent, pay to Lessor the
Reserve Rate as follows:
(a) by way of an Airframe maintenance accrual, the sum of
{***} for the months one up to and including twelve of
the Term and {***} for the months thirteen up to and
including the Expiry Date for each Flight Hour the
Aircraft is operated during the Term ("Airframe
Maintenance Accrual"), and
(b) by way of an Engine maintenance accrual, in respect of
each Engine the sum of {***} for the months one up to
and including twelve of the Term, and {***} for the
months thirteen up to and including the Expiry Date
for each Flight Hour operated by each Engine during
the Term ("Engine Maintenance Accrual"), and
(c) by way of a landing gear maintenance accrual, the sum of
{***} for the months one up to and including twelve of
the Term, and {***} for the months thirteen up to and
including the Expiry Date for each Cycle operated by
the landing gear during the Term ("Landing Gear
Maintenance Accrual"), and
(d) by way of an A.P.U. maintenance accrual, the sum of
{***} for the months one up to and including twelve
of the Term, and {***} for the months thirteen up to
and including the Expiry Date for each Flight Hour
operated by the A.P.U. during the Term ("A.P.U.
Maintenance Accrual").
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<PAGE>
The Airframe, Engine, Landing Gear and A.P.U. Maintenance
Accruals accruing in any Rental Period shall be paid by Lessee
to Lessor not later than ten (10) days after the end of the
calendar month in which such Rental Period shall end.
Concurrently with the payment thereof, Lessee shall report to
Lessor (in accordance with Article 7.1(e)) the number of
Flight Hours and Cycles accumulated in respect of the period
for which payment is being made.
The Reserve Rate will be subject to adjustment every twelve
(12) months during the Term by reference for 65% to the
Employment and Earnings Index for U.S.A. labor cost average
hourly earnings of production (Aircraft Equipment) SIC 3728,
table C-2 and for 35% to the Producer Price Index for U.S.A.
material cost commodity groupings (Machinery and Equipment)
Code 11/table 6. In addition the Engine Maintenance Accrual
will be subject to adjustment every twelve (12) months during
the Term having regard to the Engine Manufacturer
recommendations, industry experience and any change in the
operational environment of the Aircraft.
Any Reserve Rate shall, if requested by either Lessor or
(unless an Event of Default shall have occurred and be
continuing) Lessee, be adjusted to take into account any
changes in the maintenance intervals upon which Reserve Rates
are based.
3.2 Maintenance Accruals as defined in paragraph 3.1 above and
received by Lessor shall respectively be credited to funds
(collectively "Maintenance Funds") to be known as the
"Airframe Maintenance Fund", the "Engine Maintenance Fund",
the "Landing Gear Maintenance Fund" and the "A.P.U.
Maintenance Fund" which funds shall reduce as monies are
released to Lessee therefrom in accordance with Article 7.4.1.
3.3 [Intentionally deleted].
3.4 The Reserve Rates shall accrue interest at the applicable six
(6) months US Dollar LIBOR rate (as defined in Paragraph 6 of
this Appendix D) minus point twenty five percent (.25%) per
annum, which interest shall be added to the relevant
Maintenance Fund.
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<PAGE>
3.5 If Lessee would otherwise be required to pay the Reserve Rate
hereunder and if Lessee has improved its retained accumulated
net earnings (as determined in accordance with generally
accepted United States accounting principles consistently
applied) by an amount exceeding $9,000,000 (Dollars Nine
Million) from the level of such earnings as at February 28,
1995, then Lessee's obligation to continue to pay Reserve
Rates hereunder shall be stayed, provided, however, that in
connection with the release of monies to Lessee from the
Maintenance Fund pursuant to Article 7.4.1, prior to the
release of monies, if Lessee cannot provide Lessor with
evidence, reasonably satisfactory to Lessor, that Lessee
continues to have such level of retained earnings, Lessee's
obligation to pay Reserve Rates shall recommence pursuant to
the terms hereof and no monies shall be released from the
Maintenance Fund until such time as it shall have been
restored to the level at which it would have been had this
paragraph not been in effect.
Lessee hereby represents that its retained accumulated net
earnings (as determined in accordance with generally accepted
United States accounting principles consistently applied) as
at February 28, 1995 was negative (-) $15,270,000, subject to
final year-end audit adjustment.
If Lessee would otherwise be required to pay Reserve Rate
hereunder, Lessee may, at its election, pay to Lessor the
amount which is necessary to cause monies standing in the
Maintenance Fund to equal $1,500,000.00 (Dollars One Million
Five Hundred Thousand) and thereafter Lessee shall have no
further obligation to make Reserve Rate payments hereunder,
provided, however, that thereafter no funds shall be released
to Lessee from the Maintenance Fund pursuant to Article 7.4.1.
It is understood, for the avoidance of doubt, that the
foregoing terms of this Article 3.5 shall not affect Lessee's
or Lessor's obligations under Article 3.6 of this Appendix D.
3.6 On the Expiry Date, if there is any Excess (as defined below)
in any Maintenance Fund, such Excess shall, unless a Default
shall have occurred and be continuing (in which case only
after
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<PAGE>
termination, return of the Aircraft and payment of all amounts
due following exercise of remedies under Article 15), be paid
to Lessee, and on such date, if there is any Shortfall (as
defined below), Lessee shall pay such Shortfall to Lessor.
"Excess" in any Maintenance Fund on the Expiry Date shall mean
any positive difference obtained by subtracting (x) from (y)
for the Airframe, Engines, Landing Gears or A.P.U., as the
case may be; (x) shall mean the product of (I) the then market
cost from an independent Authorized Maintenance Performer in
the United States mutually agreed upon by Lessor and Lessee
and corrected for the experience of all United States based
operators of Fokker 100 aircraft for the relevant item:
with respect to the Aircraft, to perform a scheduled
airframe heavy maintenance as defined in the Maintenance
Program for 12,000 hours and 24,000 hours inspections or
any equivalent thereof with more or less hours
("Airframe Maintenance"), or
with respect to any Engine, to perform a scheduled shop
visit engine maintenance and repair, other than (i)
repairs arising as a result of foreign object damage or
operations mishandling and/or (ii) maintenance and
repair of QEC (Quick Engine Change) kits ("Engine
Maintenance"), or
with respect to any nose or main landing gear to perform
a schedule shop visit nose and main landing gear
maintenance and repair, other than repairs arising as a
result of foreign object damage or operational
mishandling ("Landing Gear Maintenance"), or
with respect to Auxiliary Power Unit ("A.P.U.") to
perform an off Aircraft shop A.P.U. maintenance and
repair, other than repairs arising as a result of
foreign object damage or operational mishandling
("A.P.U. Maintenance"), and
(II) a fraction of which (a) the numerator shall be the
difference between the actual number of hours or cycles (as to
landing gear), as the case
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may be, of operation remaining on the Airframe, Engine,
Landing Gear or A.P.U., as the case may be, to the next such
Airframe Maintenance, Engine Maintenance, Landing Gear
Maintenance or A.P.U. Maintenance, as the case may be, and the
total number of hours or cycles, as the case may be, of
operation allowable between such Maintenance and (b) the
denominator shall be the total number of hours or cycles, as
the case may be, of operation allowable between such
Maintenance.
(y) shall mean the actual dollar amount remaining in the
respective Maintenance Fund.
"Shortfall" in any Maintenance Fund on the Expiry Date shall
mean any negative difference obtained by subtracting (x) above
from (y) above, it being understood that Lessee shall not be
relieved from its obligation to pay the Shortfall
notwithstanding the waiver by Lessor at any time during the
Term of Lessee's obligation to pay the Reserve Rate.
4. Payments
All payments due hereunder shall be effected by Lessee to Lessor by
transfer to Lessor's account at Chemical Bank, New York, New York, Account
No. 400-056-011, Ref. Aircraft MSN 11450, AOLAF-116-A, in Dollars and in
immediately available funds, and all such payments shall be initiated
adequately in advance of the due dates to ensure that Lessor receives
credit for the full amount of such payment on the due dates. All such
payments shall be made in full without any deduction or withholding
(whether in respect of set-off, counterclaim, duties, taxes, charges or
otherwise howsoever) unless Lessee is prohibited by Law from doing so, in
which event Lessee shall (a) ensure that the deduction or withholding does
not exceed the minimum amount legally required; (b) and if the withholding
is a Tax for which Lessee is required to indemnify Lessor pursuant to
Article 8 of this Lease or is a wire transfer charge or other charge for
which Lessee is responsible under this Lease, forthwith pay to Lessor on
an After-Tax Basis such additional amount as shall result in the net
amount received by Lessor being equal to the amount which would have been
received by Lessor had such a deduction or withholding not been made; (c)
pay to the relevant taxation or other authorities within the period for
payment permitted by applicable Law the full amount of the deduction or
withholding with respect to any tax; and (d) upon request in writing from
Lessor to Lessee
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<PAGE>
furnish to Lessor, within the period for payment permitted by applicable
Law, an official receipt of the relevant taxation or other authorities
involved for all amounts deducted or withheld as aforesaid.
5. Currencies
If under any applicable Law, whether as a result of judgment against
Lessee or the liquidation of Lessee or for any other reason, any payment
under or in connection with this Lease is made or recovered in a currency
other than United States Dollars then, to the extent that the payment
(when converted to United States Dollars at the rate of exchange on the
date of payment or, in the case of the liquidation, the latest date for
the determination of liability permitted by the applicable Law) falls
short of the amount unpaid under this Lease, Lessee shall, as a separate
and independent obligation, fully indemnify Lessor against the amount of
the short fall; for the purposes of this paragraph, "rate of exchange"
means the rate at which Lessor is able on the relevant date to purchase
United States Dollars in London with that other currency.
6. Default Interest
If any amount payable pursuant to this Lease is not paid by Lessee on the
due date, Lessee shall pay to Lessor interest (after as well as before
judgment) on such amount, at the rate of LIBOR, which shall equal the
arithmetic mean expressed as a number (i.e., 40 per cent is 40 and not
0.4) of the rates of interest per cent per annum (rounded if not already
such a multiple, to the nearest whole multiple of 1/16th of one per cent)
at which, at or about 11.00 a.m. (London time) on the day two Business
Days before the Default, deposits in Dollars are offered for the duration
of six months on the REUTERS "LIBO" page (or such other page as may
replace it from time to time) ("LIBOR") plus four per cent (4%) per annum
from the due date to the date of payment in full by Lessee to Lessor, but
in the event such rate shall be in excess of the highest rate permitted by
applicable Law, then it shall mean the highest rate allowed by applicable
Law. All amounts of interest payable hereunder shall be calculated on the
basis of the actual number of days elapsed and a 360 day year.
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7. Set-off
At any time after a Default shall have occurred and be continuing, Lessor
shall be entitled to set-off or withhold from any amount due and payable
to Lessee under this Lease or, to the extent provided in Article 15.1(n),
any Other Aircraft Agreement, in or towards the satisfaction of any
amounts from time to time due and payable by Lessee under this Lease or,
to the extent provided in Article 15.1(n), any Other Aircraft Agreement or
any liability or obligation of Lessee under this Lease or, to the extent
provided in Article 15.1(n), any Other Aircraft Agreement, and shall be
entitled to do so notwithstanding that any such amount or amounts may not
be expressed in the same currency.
8. Time at which payments are due
Supplemental Rent shall be due and payable on demand unless otherwise
expressly stated herein.
9. Purchase Option
Lessor grants to Lessee the right to purchase and to take delivery of the
Aircraft (a) on January 2, 2010 (the "Option Exercise Date") for a price
equal to the greater of the FMV of the Aircraft on such date (as
determined by the Appraisal Procedure described in this Paragraph) and
{***}; or (b) on the Expiry Date for a price equal to the greater of the
FMV of the Aircraft on the Expiry Date (as determined by the appraisal
procedure described in this paragraph) and $13,500,000.00 (Dollars
Thirteen Million Five Hundred Thousand). If Lessee elects to exercise its
right to purchase the Aircraft, provided no Event of Default shall have
occurred and be continuing, Lessee shall do so by giving to Lessor
written notice of such election, which election shall be irrevocable, at
least two hundred seventy (270) days prior to the Option Exercise Date or
Expiry Date, as the case may be. On the Option Exercise Date or the
Expiry Date, as the case may be, if Lessee has given notice pursuant to
the preceding sentence, Lessee shall pay, in addition to the amount set
forth in clause (a) or (b) above as appropriate, all Rent (if any) due
and owing on such date and any other amounts due and owing by Lessee
under this Lease, including, but not limited to, any Additional Amount
pursuant to Paragraph 2.3 of this Appendix D and, upon receipt of all
of the foregoing amounts then due and owing, Lessor shall pay to
Lessee any Rent paid in advance for the period after such date, the
Deposits and any remaining Maintenance Funds and shall transfer, or cause
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<PAGE>
to be transferred, title without recourse or warranty (except as to the
absence of Lessor's Liens) to the Aircraft to Lessee or its designee.
Lessor and Lessee shall also share equally all costs associated with the
exercise of Lessee's right to purchase the Aircraft. The FMV of the
Aircraft on the Option Exercise Date and (so long as the Head Lease shall
not be in effect) on the Expiry Date shall be established by mutual
agreement between Lessor and Lessee and if no agreement can be reached as
to the FMV of the Aircraft, a determination of such value by a qualified
aircraft appraiser mutually satisfactory to Lessor and Lessee no later
than forty-five days prior to the date relevant to such determination. If
Lessor and Lessee are unable to select such an appraiser by the fifteenth
day prior to the date relevant to such determination, then such value of
the Aircraft shall be determined as follows: two qualified aircraft
appraisers, one chosen by Lessor and one by Lessee, shall mutually agree
thereupon, but if either party shall fail to choose an appraiser within
fifteen days after notice from the other party of the selection of its
appraiser, then the appraisal by such appointed appraiser shall be the
value applicable to the Aircraft. If the two appraisers cannot agree
within fifteen days after both shall have been appointed, then a third
appraiser shall be selected by the two appraisers or, failing agreement as
to such third appraiser within ten days after both shall have been
appointed, by the American Arbitration Association. The third appraiser
shall select the appraisal which such appraiser believes to be closest to
the FMV of the Aircraft and such amount shall be the FMV. The decision of
the third appraiser shall be given within ten days of its appointment. The
foregoing procedures in respect of obtaining the FMV of the Aircraft by
one or more appraisers shall be herein called the "Appraisal Procedure".
The FMV of the Aircraft (so long as the Head Lease shall be in effect) on
the Expiry Date shall be established by the appraisal procedure set forth
in the Head Lease, whereby if the FMV of the Aircraft is not established
by mutual agreement between the Head Lessor and Lessor, the FMV of the
Aircraft will be a determination obtained in accordance with the Appraisal
Procedure with Head Lessor and Lessor participating therein at the
direction of Lessee in lieu of Lessor. Lessor hereby agrees that in
connection with such Appraisal Procedure, Lessee may choose any qualified
aircraft appraisers to be appointed and may otherwise participate in the
Appraisal Procedure and the determination of the FMV of the Aircraft. The
FMV shall be equal in amount to the value that would be obtained in an
arm's-length transaction between an informed and willing buyer-user under
no compulsion to buy, and an informed and willing seller, under no
compulsion to sell,
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<PAGE>
evaluating the Aircraft based on the assumption that it is in the
condition required to be maintained for operating service by the terms of
the Lease. All costs and expenses of the Appraisal Procedure shall be
shared equally by Lessor and Lessee. Subject to Paragraph 7 of this
Appendix D, any amounts remaining in the Maintenance Funds shall be paid
to Lessee concurrently with its payment of the purchase price of the
Aircraft pursuant to this Paragraph 9. Lessor represents and warrants to
Lessee that Lessor has the right under the Head Lease to grant the
foregoing options to Lessee and to cause title to the Aircraft to be
transferred to Lessee upon exercise thereof as provided above and the
Appraisal Procedure is the same as the "Appraisal Procedure" in the Head
Lease and that Lessor will not amend such "Appraisal Procedure" in the
Head Lease without Lessee's prior written consent (such consent not to be
unreasonably withheld).
10. Wet Leasing and Subleasing
So long as no Event of Default shall have occurred and be continuing,
without the prior written consent of Lessor, Lessee may wet lease the
Aircraft including the Engines (the term "wet lease" meaning an agreement
whereby Lessee or Sublessee at all times retains operational control of
the cockpit and the Aircraft), provided, that Lessee's obligations under
this Lease shall continue in full force and effect during the period of
such wet lease and none of the Aircraft nor the Airframe nor any Engine
will be used "predominantly outside the United States" within the meaning
of Section 168(g) of the Code (as Code is defined in Article 8A) during
the period from the Delivery Date to the last day of the year in which the
seventh anniversary of the Delivery Date occurs.
So long as no Event of Default shall have occurred and be continuing, if
Wings Aircraft Finance, Inc. or any other affiliate or subsidiary of
Fokker is not either (x) the Lessor under the Lease or (y) holder of the
entire beneficial interest in the ownership of the Aircraft, Lessee may
sublease the Aircraft including the Engines, provided, that the following
conditions are met, in form and substance satisfactory to the then Lessor
under the Lease:
(a) Lessee (x) shall have a credit rating of "BB" as determined by
Standard & Poors Corporation or "Ba2" as determined by Moody's
Investors Service or an equivalent rating as determined by a
nationally recognized rating agency reasonably acceptable to Lessor
(or equivalent private rating), or if the
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<PAGE>
proposed sublessee meets such a credit rating standard and the
sublease is assigned to Lessor and (y) shall be a person that is a
citizen of the United States of America as defined in Section
40102(a)(15) of Title 49 of the United States Code (or any similar
legislation of the United States of America enacted in substitution
or replacement therefor) holding an air carrier operating
certificate issued by the Secretary of Transportation pursuant to
Chapter 447 of Title 49 of the United States Code (or any
predecessor or successor legislation therefor) for aircraft capable
of carrying ten or more individuals or 6,000 pounds or more cargo
which is also certificated so as to entitle Lessor to the benefits
of Section 1110 of Title 11 of the United States Code with respect
to the Aircraft;
(b) the proposed sublessee is not subject to a proceeding or final order
under applicable bankruptcy, insolvency or reorganization laws on
the date the proposed sublease is entered into;
(c) the proposed sublessee is a person (x) (except the United States
government) that is a citizen of the United States of America as
defined in Section 40102(a)(15) of Title 49 of the United States
Code (or any similar legislation of the United States of America
enacted in substitution or replacement therefor) holding an air
carrier operating certificate issued by the Secretary of
Transportation pursuant to Chapter 447 of Title 49 of the United
States Code (or any predecessor or successor legislation therefor)
for aircraft capable of carrying ten or more individuals or 6,000
pounds or more cargo which is also certificated so as to entitle
Lessor to the benefits of Section 1110 of Title 11 of the United
States Code with respect to the Aircraft; or (y) which holds a duly
issued air carrier operating certificate issued by the jurisdiction
of its domicile and principal place of business;
(d) the proposed sublessee is an air carrier domiciled and principally
located in any of the United States, Canada, a member state of the
European Union, Switzerland, Norway or Japan or other country
reasonably acceptable to Lessor, provided, that (x) the United
States and The Netherlands maintain diplomatic relations with such
country on the date of such determination and (y) there are no
economic sanctions imposed against such country by the government of
the United States or the United Nations or the European
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<PAGE>
Union such that persons in the United States or member states of
such organizations are prohibited or strongly discouraged from doing
business in or with such country and (x) such country is not engaged
in armed conflict with the armed forces of the United States or a
member of the European Union;
(e) such proposed sublease shall not (w) be for a term, including any
renewal options thereunder that extends beyond the Expiry Date, (x)
provide a sublessee with a purchase option for the Aircraft, (y)
permit any sub-subleasing of the Aircraft by the proposed sublessee,
and (z) permit a proposed sublessee the rights of quiet enjoyment in
the Aircraft; and
(f) such proposed sublease shall (x) contain a waiver of sovereign
immunity by the proposed sublessee, (y) be on terms and conditions
which are not inconsistent with the rights of Lessee under the Lease
and (z) be expressly subject and subordinate to all of the terms of
the Lease, the Head Lease and the Indenture.
For such sublease, Lessor, shall receive, in form and substance reasonably
satisfactory to Lessor,
(a) a certificate of insurance signed by an insurance broker to the
effect that the Aircraft shall be, upon such sublease, insured in
accordance with the requirements of the Lease;
(b) evidence that all filings, registrations and applications and the
receipt of all consents, necessary or advisable in connection with
the sublease of the Aircraft, the recognition of Lessor's rights in
the Aircraft, the recognition of Head Lessor's title in the
Aircraft, and the continued status of the Indenture as a first
priority Lien on the Aircraft have been made or given;
(c) assurances that such sublease will not result in the imposition of,
or increase in the amount of, any Taxes, expense, claim, loss or
damage for which Lessee is not required to indemnify Lessor pursuant
to the Lease; and
(d) assurances of the payment by Lessee or the sublessee of all related
costs and expenses (including, without limitation, the reasonable
costs and disbursements of counsel to Lessor relating to such
sublease.
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<PAGE>
Prior to the delivery of the Aircraft under the sublease, Lessor, shall
have received, in form and substance reasonably satisfactory to Lessor,
opinions of counsel to Lessee or the sublessee with respect to the
jurisdiction in which such sublessee is domiciled and principally located,
to the effect that
(a) the terms (including the governing law, service of process and
submission to jurisdiction provisions thereof) of the Lease, the
Head Lease and the Indenture are legal, valid, binding and
enforceable under the laws of such jurisdiction (subject to
customary, exceptions as to enforceability and the effectiveness of
certain remedial provisions which exceptions do not affect the
practical realization of benefits intended to be provided by such
documents);
(b) it is not necessary for Lessor, Indenture Trustee or any Participant
to qualify to do business in such jurisdiction solely as a result of
such sublease;
(c) the courts of such jurisdiction would give effect to Lessor's
leasehold interest in the Aircraft, Head Lessor's title to the
Aircraft and insofar as the laws of such jurisdiction are concerned
Head Lessor will continue to be recognized as the owner of the
Aircraft;
(d) the lien of the Indenture will continue to be a first priority, duly
perfected lien on the Aircraft after giving effect to such sublease;
(e) the courts of such jurisdiction would provide at least substantially
equivalent protection to Lessor, Head Lessor, the Owner Participant,
the Loan Participant and Indenture Trustee as provided under United
States and applicable state law in respect of the transactions
contemplated by such sublease, including, without limitation, the
remedies provided under the Indenture, the Head Lease, the Lease and
the sublease (subject to customary exceptions as to enforceability
and the effectiveness of certain remedial provisions which do not
affect the practical realization of benefits intended to be provided
by such documents);
(f) any import permit necessary to take the Aircraft into such country
has been obtained;
(g) there is no tort liability of the owner, lessor or mortgagee of an
aircraft not in possession thereof
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<PAGE>
under the laws of such jurisdiction more onerous than under the laws
of the United States;
(h) all filings, registrations and declarations that are necessary or
advisable in connection with such sublease have been duly made and
are effective;
(i) the courts of such jurisdiction would give effect to the waiver of
sovereign immunity given by the sublessee;
(j) the courts of such jurisdiction would give effect to the sublease
being subject and subordinate to the Lease, the Head Lease and the
Indenture; and
(k) that there exist no possessory rights in favor of the sublessee
which upon Lessee's bankruptcy or other default under the Lease
would prevent the return of the Aircraft in accordance with the
terms of the Lease or inhibit Lessor's rights therein.
If, in connection with a sublease, the proposed sublessee requests that
the registration of the Aircraft be changed from that of the State of
Registration, such change of registration shall be subject to the prior
written consent of Lessor.
11. Excess Insurance
For so long as the Agreed Value exceeds {***}, Lessor shall reimburse
Lessee for Lessee's incremental cost of the premium relating to All
Risks Aircraft Hull insurance, or, if applicable, Aircraft Hull War
and Allied Perils insurance with respect to the amount of such excess.
At any time that the Agreed Value is less than {***} and the Agreed Value
is or was changed to reflect adjustments in the Stipulated Loss Values
(as defined in the Head Lease) due to the issuance of loan certificates
pursuant to the Indenture, Lessor shall reimburse Lessee for Lessee's
incremental cost of the premium relating to All Risk Hull insurance or,
if applicable, Aircraft Hull War and Allied Perils insurance, attributable
to such change in the Agreed Value.
12. Maximum Takeoff Weight
Lessee agrees that, upon the written request of Lessor, Lessee will
undertake as soon as reasonably practicable and
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<PAGE>
within its normal maintenance schedule to perform or to supervise the
performance by outside contractors approved by Lessor of such alterations
to the Aircraft as are necessary to permit the Aircraft to be operated at
a maximum takeoff weight ("MTOW") of 101,000 pounds, with the Manufacturer
to be responsible for obtaining Air Authority certification of operation
as MTOW 101,000 pounds.
13. Supplement to Article 8A.5
If any Head Lease Tax Indemnitee shall pay any amount to Lessor pursuant
to Section 7A(n) of the Participation Agreement for which Lessee has
previously paid an indemnity to Lessor pursuant to Article 8A.1 hereof,
Lessor shall pay such amount to Lessee within 15 Business Days after
Lessor receives such amount.
14. Supplement to Article 8A.9(r)
Article 8A.9(r) (relating to the definition of "Specified Tax") shall be
modified by inserting at the end of clause (i) the phrase "under this
Lease or under applicable Law" and by changing the words "Closing Date" to
"Delivery Date" in clause (vii).
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<PAGE>
APPENDIX E
OPERATING CONDITION AT REDELIVERY
Upon redelivery of the Aircraft to Lessor, the Aircraft shall, subject to
ordinary wear and tear generally:
1. General Condition
(a) Be clean by airline standards;
(b) Have installed the Engines, and other equipment, Parts and
accessories and loose equipment as would remain installed in such
Aircraft, and shall be in a condition suitable for operation in
commercial service;
(c) Have in existence a valid Certificate of Airworthiness with respect
to the Aircraft issued by the Air Authority of the State of
Registration with a validity of at least nine (9) months after the
date of redelivery of the Aircraft to Lessor;
(d) Comply with the manufacturer's original specifications therefor, set
forth in Annex 1 to this Appendix E;
(e) Have undergone, immediately prior to redelivery, a 3000 check or any
subsequent higher inspection, if due within 3000 hrs, in accordance
with the Approved Maintenance Program, shall be free of any waivers,
and all deferred maintenance, if any, shall have been accomplished;
each engine and A.P.U. shall have had an inspection in accordance
with Article 16 confirming release for its remaining operational
life;
(f) All outstanding airworthiness directives and mandatory orders
affecting such model of Aircraft issued by the Air Authority which
require compliance during the Term shall have been accomplished;
(g) Have installed all applicable vendors' and manufacturers' service
bulletin kits theretofore received by Lessee free of charge that are
appropriate for the Aircraft and to the extent not installed, such
kits shall be furnished free of charge to Lessor;
(h) Stripped of all Lessee's paint scheme and repainted through an
Authorized Maintenance Performer with Manufacturer approved paints
in white or any other basic color requested by Lessor; and
<PAGE>
(i) Have been inspected and treated with respect to corrosion as defined
in the Approved Maintenance Program.
2. Airframe and major components
The Airframe and major components shall have not less than the following
hours/cycles/months expected life remaining to the next Major Check and/or
overhaul:
-Airframe : 3000 hours and 12 months to next Major
Check;
-Engine : half life on average to next Engine
shop visit but in no event less than
3000 hours;
-Main Landing Gear : 3000 cycles to next overhaul;
-Nose Landing Gear : 3000 cycles to next overhaul;
*The records as to remaining engine life shall be certified by Lessee in
writing to Lessor upon redelivery of the Aircraft to Lessor.
3. Components
(a) Each life-limited Part shall have not less than 3000 (Three
Thousand) flight hours or cycles of the total approved life
remaining to the scheduled replacement, in accordance with the
Approved Maintenance Program;
(b) Each hard-time controlled component shall have not less than 3000
(Three Thousand) Flight Hours or 3000 (Three Thousand) Cycles or 12
(twelve) months whatever is applicable, remaining to the next
scheduled overhaul/inspection, in accordance with the Approved
Maintenance Program;
(c) "On-condition" and "Condition Monitored" components shall be
serviceable;
(d) The A.P.U. shall be serviceable.
4. Fuselage, Windows and Doors
(a) Fuselage shall be free of major dents and abrasions, scab patches
and loose or pulled or missing rivets;
(b) Windows shall be free of delamination, blemishes, crazing and shall
be properly sealed;
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<PAGE>
(c) Doors shall be free moving, correctly rigged and be fitted with
serviceable seals.
5. Wings and Empennage
(a) All leading edges shall be free from damage;
(b) All unpainted cowlings, fairings and other surfaces shall be
polished;
(c) Wings shall be free of fuel leaks.
6. Interior
(a) Ceilings, sidewalls and bulkhead panels shall be clean and free of
cracks and stains;
(b) All carpets and seat covers shall be in good condition, clean and
stain free and meet Air Authority fire resistance regulations;
(c) All seats shall be serviceable, in good condition and repainted as
necessary;
(d) All signs and decals shall be clean and legible;
(e) All emergency equipment having a calendar life shall have a minimum
of one year or one hundred per cent of its total approved life,
whichever is less, remaining.
7. Cockpit
(a) All decals shall be clean, secure and legible;
(b) All fairing panels shall be free of stains and cracks, shall be
clean, secure and repainted as necessary;
(c) Floor coverings shall be clean and effectively sealed;
(d) Seat covers shall be in good condition, clean and shall conform to
Air Authority fire resistance regulations;
(e) Seats shall be fully serviceable and shall be repainted as
necessary.
8. Cargo Compartments
(a) All panels shall be in good condition;
(b) All nets shall be in good condition.
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<PAGE>
9. Landing Gear and Wheel Wells
(a) Shall be clean, free of leaks and repaired as necessary;
(b) All decals shall be clean, secure and legible.
10. Corrosion
(a) Entire fuselage shall be substantially free from corrosion and shall
be adequately treated and an approved corrosion prevention program
shall be in operation;
(b) Fuel tanks shall be free from contamination and corrosion and a tank
treatment program shall be in operation.
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<PAGE>
APPENDIX F
AIRCRAFT DOCUMENTS
FOKKER 100 AIRCRAFT
Aircraft Documents shall include the documents referred to in Table I ("Aircraft
Documentation"), Section (D), Exhibit (D) of the Support Services Agreement No.
ASSAF-110 between FAUSA and Lessee.
Aircraft Documents shall also include all logs, certificates and data, and
inspection, modification and overhaul records, relating to the Aircraft and
required to be maintained by the Air Authority and/or by the Approved
Maintenance Program.
Upon Expiry Date or upon earlier termination of the Lease all Aircraft Documents
shall be redelivered by Lessee to Lessor complete and fully updated
simultaneously with the redelivery of the Aircraft.
<PAGE>
APPENDIX G
FAA POWER OF ATTORNEY
This POWER OF ATTORNEY in favor of WINGS AIRCRAFT FINANCE, INC.
("Lessor") dated _____________, 199_ from MIDWAY AIRLINES CORPORATION
("Lessee").
RECITALS:
A. Lessor and Lessee have entered into an Aircraft Operating Lease
Agreement No. AOLAF-116-A dated as of ____________, 1995 (the "Lease
Agreement") with respect to the Fokker 100 aircraft, serial no.
11484, U.S. registration no. N108ML (the "Aircraft").
B. Capitalized terms used herein and not otherwise defined shall have
the respective meanings ascribed to such terms in the Lease
Agreement.
NOW, THEREFORE, for good and valuable consideration, the adequacy of
which is hereby acknowledged, it is hereby agreed as follows:
Lessee hereby irrevocably constitutes and appoints Lessor, with full
power of substitution, for and in the name and on behalf of Lessee, as the act
and deed or otherwise of Lessee:
to execute, sign, deliver, authorize and file such instruments
legally necessary for any and all actions necessary to take
possession and effect redelivery of the Aircraft, Engines or Parts
upon termination of the Lease Agreement due to an Event of Default;
to execute, sign, deliver and file all such instruments requested by
Lessor that may be required to deregister the Aircraft from the FAA,
or to terminate the Lease for the Aircraft that is recorded at the
FAA, or that may be deemed proper in or in connection with all or
any of the purposes aforesaid, and to appoint substitutes or agents
to take any such action on its behalf; provided, however, that such
power shall not be exercisable by or on behalf of Lessor until an
Event of Default shall have occurred and is continuing.
Lessee hereby ratifies and confirms and agrees to ratify and confirm
any direction, authorization and instruction of Lessor taken pursuant to this
Power of Attorney.
<PAGE>
This Power of Attorney shall expire on the date one year following
the Expiry Date, or earlier upon termination of the Lease.
IN WITNESS WHEREOF, Lessee has duly caused this Power of Attorney to
be executed on the date first set forth above.
MIDWAY AIRLINES CORPORATION
By: _________________________
Name:
Title:
[CERTIFIED RESOLUTIONS OF LESSEE AUTHORIZING THIS
POWER OF ATTORNEY TO BE ATTACHED]
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<PAGE>
THE SINGLE EXECUTED ORIGINAL OF THIS AMENDMENT MARKED "ORIGINAL" SHALL BE THE
"ORIGINAL" AND ALL OTHER COUNTERPARTS OF THIS AMENDMENT SHALL BE DUPLICATES AND
MARKED "DUPLICATE" OR "DUPLICATE ORIGINAL". TO THE EXTENT THAT THIS AMENDMENT
AND THE LEASE RELATED THERETO CONSTITUTE CHATTEL PAPER, AS SUCH TERM IS DEFINED
IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION, NO
SECURITY INTEREST MAY BE CREATED THROUGH TRANSFER OR POSSESSION OF ANY
COUNTERPART OTHER THAN THE "ORIGINAL".
AMENDMENT NO. 1
dated as of February , 1996
to
AIRCRAFT OPERATING LEASE AGREEMENT NO. AOLAF-116-A
dated as of July 10, 1995
between
WINGS AIRCRAFT FINANCE, INC.
as
Lessor
and
MIDWAY AIRLINES CORPORATION
as
Lessee
---------------------------------------
One Fokker 100 Aircraft
Manufacturer's Serial No. 11484
U.S. Registration Mark N108ML
<PAGE>
AMENDMENT NO. 1 dated as of February , 1996 to Aircraft Operating
Lease Agreement No. AOLAF-116-A between WINGS AIRCRAFT FINANCE, INC., a Delaware
corporation ("Lessor") and MIDWAY AIRLINES CORPORATION, a Delaware corporation
("Lessee").
WHEREAS
A. Lessee and Lessor are parties to that certain Aircraft Operating
Lease Agreement No. AOLAF-116-A dated as of July 10, 1995 relating to One Fokker
F28 MK 0100 Aircraft described therein which Lease was recorded with the Federal
Aviation Administration (the "Lease"). Capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to them in the Lease.
B. Lessee is in default under the Lease by reason of its failure to
make certain Deposit payments and Termination Payments (as defined in the
Termination Agreement) in December 1995 and January 1996.
C. Lessee and Lessor desire to amend the Lease as hereinafter set
forth and to agree to certain other terms as set forth herein.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Amendment.
1.1 Article 7 of the Lease is hereby amended by adding a new Article
7.6 thereto as follows:
"7.6 Without in any way limiting the rights contained elsewhere in
the Lease, Lessor shall have the right to have observers (who
may or may not be employees of Lessor) on site at Lessee's
premises (provided such observers do not unreasonably
interfere with Lessee's business or operations) and provided
the recipients of any financial and operational information of
Lessee (which recipients may include employees or other
representatives of Lessor or any of its affiliates, agents,
attorneys or accountants of Lessor or its affiliates) keep
strictly confidential any such information, Lessor shall have
the right to inspect and review any internal financial and
operational information of Lessee as Lessor may reasonably
request (provided such request is made to Lessee's controller,
or to a vice president, senior vice president or the president
of Lessee) including, without limitation, cash flow
statements, financial books and records, and any other records
relating to the
<PAGE>
operation of Lessee's fleet. Lessee covenants that it will
fully cooperate with Lessor regarding any inspection of
Lessee's fleet and records pursuant to this Lease."
1.2 Article 15.1(n) of the Lease is hereby amended by deleting it in
its entirety and replacing it with the following:
"(n) if an event of default (however defined) occurs under (i) any of the
Other Aircraft Agreements, (ii) any other lease agreements between
Lessee and a lessor for the benefit, directly or indirectly, of
debis AirFinance B.V. or Daimler-Benz Aerospace A.G. relating to
other aircraft ("DASA Aircraft Agreements"), or (iii) any Aircraft
Maintenance Agreement entered into by Lessee in lieu of Reserve Rate
payments, which event permits acceleration or termination;"
1.3 Article 15.1(o) of the Lease is hereby amended by deleting it in
its entirety and replacing it with the following:
"(o) if Lessee's financial performance deviates in any material adverse
way (as determined by Lessor in its sole but reasonable discretion)
from the projections set forth in Lessee's business plan for
calendar year 1996 (attached hereto as Exhibit A), taken as a whole,
and such deviation is not the result of a natural disaster which
effectively makes it impossible for Lessee to meet such
projections;"
1.4 Article 15.1(p) of the Lease is hereby amended by deleting it in
its entirety and replacing it with the following:
"(p) if, prior to the satisfaction of Lessee's obligations to pay
Deferred Deposit Payments or Deferred Rent (as defined in Section 2
of the Amendment No. 1 to this Lease) Lessee shall make (i) any
payment of principal or interest on any amounts owed by Lessee to
Zell/Chilmark Fund, L.P. ("Zell") or any affiliate of Zell, (ii) any
redemption of, or any dividend or distribution with respect to, any
shares of Lessee owned by Zell or any affiliate of Zell, (iii) any
prepayment of principal or interest with respect to any other
subordinated debt owed by Lessee or (iv) any redemption of, or any
dividend or other distribution with respect to, any other shares of
Lessee; or"
1.5 Article 15.1(q) of the Lease is hereby amended by deleting it in
its entirety and replacing it with the following:
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<PAGE>
"(q) if Lessee shall fail to make any of the payments which it is
required to make pursuant to Section 2 of Amendment No. 1 to this
Lease."
1.6 Article 15.2(b)(i) of the Lease is hereby amended by adding
"(a), (n), (q)" following the word "paragraph" and by adding to such Article the
following additional clause:
"provided, however, that such automatic termination shall not apply with
respect to defaults of the type referred to in Articles 15.1(a) or (n) of
the Lease prior to the date of Amendment No. 1 to this Lease or for
payment defaults for Rent Dates occurring in February or March 1996, for
so long as Lessee makes the payments specified in Section 2 of Amendment
No. 1 to this Lease;"
it being understood that the effect of this amendment is to include payment
defaults, cross-defaults with Other Aircraft Agreements and DASA Aircraft
Agreements, and failure to make any of the payments specified in Section 2 of
Amendment No. 1 to this Lease as events giving rise to automatic termination of
the Lease, as amended, without the necessity of any service of notice thereof
upon Lessee.
1.7 Article 16 of the Lease is hereby amended by adding a new
Article 16.9 as follows:
"16.9 Notwithstanding anything to the contrary contained in this
Lease, Lessee covenants that, upon earlier termination of the
Lease pursuant to Article 15, Lessee will not interpose any
defense to, or otherwise oppose, any action commenced by
Lessor to regain possession of the Aircraft and Lessee shall
join in any application by Lessor seeking to regain possession
of the Aircraft if so required by Lessor. This covenant shall
apply whether or not Lessee is or shall subsequently become a
debtor in a case under Title 11 of the United States Code and
in such event Lessee covenants that it will not oppose and
will join in any application by Lessor seeking to regain
possession of the Aircraft."
2. Forbearance.
Execution of this Amendment shall serve as Lessor's agreement to
forbear from exercising its remedies under Article 15 of the Lease with respect
to Lessee's failure to make (i) installment payments of the Deposit due under
Appendix D to the Lease and Termination Payments (as defined in the Termination
- 3 -
<PAGE>
Agreement) due in December 1995 and January 1996 and (ii) installment payments
of the Deposit and Termination Payments due on February 4 and March 4, 1996, for
so long, and only so long, as Lessee otherwise complies with all of the terms of
the Lease, as amended hereby, and the Termination Agreement, as amended, and
pays Lessor the following:
(a) all amounts payable as set forth in Amendment No. 1 to the
Termination Agreement dated as of the date of this Amendment;
(b) The amounts set forth in Exhibit A to this Amendment
("Deferred Deposit Payments") on April 4, 1996 and for the
next succeeding forty eight (48) Rent Dates on which Rent is
due; and
(c) The amounts set forth in Exhibit B to this Amendment
("Deferred Rent") on August 4, 1997 and for the next
succeeding Rent Dates on which Rent is due as set forth in
such Exhibit B.
Lessee may satisfy its obligations to pay the Deferred Deposit Payments and the
Deferred Rent at any time by paying the portion of all such amounts which
constitutes principal, together with the portion of such amounts which
constitutes interest accrued and unpaid as of the date of payment all as
reflected on Exhibits A or B to this Amendment. Each such Deferred Deposit
Payment and Deferred Rent payment on and after the dates set forth in clauses
(b) and (c) above, as the case may be, (i) shall constitute a portion of Deposit
and Rent, as the case may be, (ii) shall be made together with such installment
of Deposit and/or Rent as shall be otherwise due on each such Rent Date as
provided in Exhibit D of the Lease and (iii) shall be made in accordance with
the terms and conditions of the Lease.
Execution of this Amendment shall not constitute a waiver of the
Deposit payment defaults or of any other Events of Default which may have
occurred and be continuing or which may occur in the future. Lessor's agreement
to forbear shall terminate automatically if Lessee fails to make any payments
specified in this Section 2 or if any Event of Default occurs or has occurred
and is continuing (other than with respect to an Event of Default to which this
forbearance agreement set forth in this Section 2 applies). For so long, and
only so long as Lessor's agreement to forbear has not terminated (i) Lessee
shall be entitled to exercise its rights and privileges under Articles 5.1.2(b),
5.1.3, 7.4.1 and 13.3.1 of the Lease and (ii) Lessor shall be deemed to have
elected not to apply the Deposit to sums due or to be come due to Lessor
pursuant to Section 1 of Appendix D of the Lease, notwithstanding the occurrence
and continuation
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<PAGE>
of a Default or Event of Default under the Lease.
3. Governing Law.
This Amendment shall be governed by and construed in accordance with
the internal laws of the State of New York and without regard to any conflict of
law rules. This Amendment is being delivered in the State of New York. The terms
and conditions of Article 16 of the Lease are incorporated herein by reference
as applicable to this Amendment.
4. Miscellaneous.
Except as specifically amended or supplemented by this Amendment,
the Lease is hereby ratified, approved, confirmed and continued in all respects
and all provisions of the Lease shall remain in full force and effect. This
Amendment may be executed in any number of counterparts and all of such
counterparts taken together shall be deemed and constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
WINGS AIRCRAFT FINANCE, INC.
By:
-------------------------------
Title:
MIDWAY AIRLINES CORPORATION
By: /s/ Jonathan S. Waller
-------------------------------
Title: JONATHAN S. WALLER
SENIOR VICE PRESIDENT
GENERAL COUNSEL
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<PAGE>
of a Default or Event of Default under the Lease.
3. Governing Law.
This Amendment shall be governed by and construed in accordance with
the internal laws of the State of New York and without regard to any conflict of
law rules. This Amendment is being delivered in the State of New York. The terms
and conditions of Article 18 of the Lease are incorporated herein by reference
as applicable to this Amendment.
4. Miscellaneous.
Except as specifically amended or supplemented by this Amendment,
the Lease is hereby ratified, approved, confirmed and continued in all respects
and all provisions of the Lease shall remain in full force and effect. This
Amendment may be executed in any number of counterparts and all of such
counterparts taken together shall be deemed and constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
WINGS AIRCRAFT FINANCE, INC.
By: /s/ E.A. Wagner
-------------------------------
Title: E.A. WAGNER, PRESIDENT
MIDWAY AIRLINES CORPORATION
By:
-------------------------------
Title:
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<PAGE>
Summary of
Exhibits A B
{***} (5 pages omitted)
<PAGE>
116-A
AMENDMENT NO. 2
dated as of January 31, 1997
to
AIRCRAFT OPERATING LEASE AGREEMENT
NO. 116-A
dated as of July 10, 1995
between
WINGS AIRCRAFT FINANCE, INC., as
Lessor
and
MIDWAY AIRLINES CORPORATION, as
Lessee
Aircraft: Fokker 100
Serial No./RN: 11484/N108ML
<PAGE>
THIS AMENDMENT NO. 2 dated as of January 31, 1997 (this
"Amendment"), is between WINGS AIRCRAFT FINANCE, INC., a company incorporated
under the laws of the State of Delaware, having its principal place of business
at 119 N. Fairfax Street, Alexandria, Virginia 22314 ("Lessor") and MIDWAY
AIRLINES CORPORATION, a company incorporated under the laws of the State of
Delaware, having its principal place of business at 300 West Morgan Street,
Durham, North Carolina 27701 ("Lessee");
WHEREAS, Lessor and Lessee are parties to that certain Aircraft
Operating Lease Agreement No. AOLAF-116-A, dated as of July 10, 1995 (as amended
from time to time, the "Lease". Capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the Lease);
WHEREAS, Lessor and Lessee entered into Amendment No. 1 to the Lease
dated as of February, 1996 ("Amendment No. 1");
WHEREAS, Lessor and Lessee entered into a Deferral Agreement dated
as of October 25, 1996 ("Deferral Agreement"), which provided for the deferral
of certain payments due under the Lease, and amended the Lease in certain other
respects;
WHEREAS, Lessor and Lessee entered into an Amendment to Deferral
Agreements dated as of December 30, 1996, which modified the Deferral Agreement
in certain respects (the "Amendment to Deferral Agreements");
WHEREAS, Lessee has entered into an Agreement and Plan of Merger
dated as of January 17, 1997 (as amended, the "Merger Agreement") with GoodAero,
Inc., a Delaware corporation ("GoodAero") and Zell/Chilmark Fund, L.P., a
Delaware limited partnership, whereby it is proposed that GoodAero will be
merged into Lessee to effect a recapitalization of Lessee (the "Merger"),
subject to certain conditions precedent having been satisfied; and
WHEREAS, Lessor and Lessee desire to amend the Lease to become
effective upon the consummation of the Merger and to enter into further
agreements as hereinafter set forth.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Amendment of Lease. The Lease is hereby amended as follows:
(a) Section 1 of the Lease is amended by eliminating the
period at the end of the definition of "Expiry Date" and by inserting in lieu
thereof the following clause:
"or such earlier date as may be specified by Lessor pursuant
to notice given in accordance with, and subject to the terms
of Section 16.10 hereof."
<PAGE>
(b) Section 1 of the Lease is further amended by deleting the
period at the end of the definition of "Other Aircraft Agreements" and by
inserting the following in lieu thereof: "or any successor or assign thereof."
(c) Section 6.4 of the Lease is amended as follows: (a) by
deleting subsection (i) thereof in its entirety and by inserting in lieu thereof
the following: "(i) any financial reports or projections supplied to the
majority shareholder of Lessee"; and (b) by deleting the words "upon Lessor
requesting the same" from subsection (ii) thereof.
(d) Section 11.1(a) of the Lease is amended by deleting the
period at the end thereof and by inserting the following clause:
provided, however, that the deductible may be $500,000
(Dollars Five Hundred Thousand) for each accident, but only if
Lessee procures and maintains in favor of debis AirFinance
B.V. ("Beneficiary") for the benefit of the Beneficiary and/or
the Lessor under each of the Leases identified on Schedule
16.10 hereof (as those terms are defined therein) an
irrevocable letter of credit (the "Letter of Credit") in the
face amount of $800,000 (Dollars Eight Hundred Thousand)
issued by Wachovia Bank or another banking institution
reasonably acceptable to Beneficiary and in a form reasonably
acceptable to Beneficiary containing the terms set forth in
Schedule 11.1(a).1 of this Lease; provided, however, that
Lessee may reduce the amount of the Letter of Credit to
$400,000 in any year where Lessee's audited financial
statements for the prior year show that Lessee had net income
(as determined in accordance with generally accepted
accounting principles ("Net Income")) greater than the amount
for such prior year identified as "Net Income (1)" on Schedule
11.l(a).2, but less than the amount for such prior year
identified as "Net Income (2)" on Schedule 11.1(a).2; and
Lessee shall not be required to maintain the Letter of Credit
in any year where Lessee's audited financial statements for
the prior year show that Lessee had Net Income for such prior
year greater than the amount for such prior year identified as
"Net Income (2)" on Schedule 11.1(a).2; and provided, further,
that notwithstanding any reduction or cancellation of the
Letter of Credit in accordance with the terms hereof, Lessee
shall be required to restore the Letter of Credit in any year
where Lessee's audited financial statements for the
immediately preceding year show that Lessee's Net Income was
less than the threshold set by Schedule 11.1(a).2 for such
prior year for reduction of the Letter of Credit or in any
year in which audited financials for Lessee for the
immediately preceding year have not been certified on or
before April 15 of that year. For purposes of determining the
amount required for the Letter of Credit in any year,
reductions, if any, shall not be permitted until 30 days after
receipt by Beneficiary of the audited financial statements of
Lessee for the prior year and, in the event that the Letter of
Credit is to be reinstated or
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<PAGE>
increased in any year as aforedescribed, such Letter of Credit
shall be required on or before April 15 of such year. Any
failure by Lessee to comply with the provisions of this
Section 11.1(a) shall be an Event of Default under Section
15.1(b) of the Lease.
(e) Intentionally Omitted.
(f) Section 14.1(p) is amended by deleting the same in its
entirety and by inserting in lieu thereof the following:
"not become the surviving corporation of a merger with any
other entity, or itself consolidate with, or merge into, any
other corporation, or convey, transfer or lease substantially
all of its assets as entirety to any person, without the prior
written consent of Lessor (such consent not to be unreasonably
withheld) and the execution and delivery to Lessor of such
agreements, certificates and legal opinions as Lessor may
reasonably request with respect thereto;"
(g) Intentionally Omitted.
(h) Intentionally Omitted.
(i) Section 15.1(e) of the Lease is deleted in its entirety and the
following is inserted in lieu thereof:
"if (i) if Lessee or any of its subsidiaries is in default
under any lease, hire-purchase, conditional sale or credit
sale agreement for equipment having a casualty value in excess
of {***} and such default is not cured or waived within
the applicable grace period or five (5) Business Days
(whichever is greater); (ii) (regardless of the amount of
money involved), any event occurs which with or without notice
or lapse of time or both would constitute a default under any
agreement between Lessee and, or promissory note executed by
Lessee in favor of, (a) {***}; (b) Zell/Chilmark Fund, L.P.;
(c) {***}; (e) any affiliate of any of the foregoing; unless
such default or event of default is cured or waived within
the applicable grace period or five (5) Business Days
(whichever is greater); or (iii) any indebtedness owed by
Lessee or any of its subsidiaries in an amount in excess of
{***} is not paid when due or becomes due or capable of being
declared due prior to the date when it would otherwise become
due; provided, however, the failure of Lessee to pay amounts
approximating {***}
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<PAGE>
{***}, shall not be deemed a Default or an Event of Default
hereunder."
(j) Section 15.1(n) is modified by inserting the following after the
words "Daimler-Benz Aerospace A.G.": "or any affiliate, successor or assign of
either of them."
(k) Sections 15.1(o), (p) and (q) are deleted in their entirety and
the following new Sections 15.1(o) and (p) are inserted in lieu thereof:
"(o) if, an Event of Default shall occur under and as defined
in that certain Promissory Note dated as of January 31, 1997
from the Lessee to debis AirFinance B.V. or under, and as
defined in that certain Promissory Note dated as of January
31, 1997 from the Lessee to DASA Aircraft Finance XVI, B.V.
(each, a "Note" and collectively, the "Notes");
(p) if, prior to satisfaction of Lessee's obligations pursuant
to the Notes, Lessee shall make (i) any payment of principal
or interest on any debt owed by Lessee to Zell/Chilmark Fund,
L.P. or to any holder of equity in Lessee representing the
right to vote twenty percent (20%) or more of the stock in
Lessee on any matter presented for vote to the shareholders of
Lessee (an "Insider") or any affiliate of an Insider; or (ii)
any redemption of, or any dividend or distribution with
respect to, any shares of Lessee owned by an Insider or any
affiliate thereof."
(l) Section 15.2 is amended by deleting clause (i) of paragraph (b)
thereof in its entirety and inserting the following new clause (i) in lieu
thereof:
"(i) serving notice of such termination on Lessee specifying
the occurrence giving rise to such Event of Default or Events
of Default, provided that such notice shall be deemed to have
been served without the necessity of actual service and this
Lease shall terminate automatically without the necessity of
any service of notice thereof upon Lessee upon the occurrence
of any Event of Default described in paragraphs (a), (f), (g),
(h), (n) or (o) of Section 15.1 of this Lease; provided,
however, that actual service of notice of such termination on
Lessee shall be required where an Event of Default described
in paragraph (n) of Section 15.1 of the Lease has occurred
solely by reason of occurrence of an event of default under an
Other Aircraft Agreement or under a DASA Aircraft Agreement,
which event of default does not, under the terms of such Other
Aircraft Agreement or DASA Aircraft Agreement, result in
automatic termination of such Other Aircraft Agreement or such
DASA Aircraft Agreement."
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<PAGE>
(m) Article 16 of the Lease is amended by adding a new Section 16.10
as follows:
"(a) Notwithstanding anything to the contrary contained in
this Lease, Lessor may terminate this Lease by giving not less
than six (6) months' prior written notice of the termination
date to Lessee provided that in no event may Lessor choose a
termination date earlier than September 15, 1998 ("Lessor's
Termination Option") and the termination date specified in
such notice shall become the Expiry Date; provided, however,
that (subject to the following sentence) Lessor shall not be
entitled to exercise Lessor's Termination Option with respect
to this Lease where the same would result in the termination
of four (4) or more of the aircraft operating lease agreements
identified in Schedule 16.10 to the Lease in any twelve (12)
month period, taking into account the scheduled or actual
Expiry Date of each such aircraft operating lease agreement.
Nothing herein shall be construed to limit the Lessor's rights
upon the occurrence of any Default or Event of Default or upon
the termination of this Lease as a result thereof or upon the
expiration of any Lease in the absence of the exercise of
Lessor's Termination Option.
(b) Lessee shall in no event be liable for any costs,
expenses, liabilities, losses, damages or amounts incurred by
Lessor or Head Lessor which arise solely from the Lessor
exercising Lessor's Termination Option hereunder such as the
loss of any tax benefit, or fees or penalties arising from the
breakage of any contract or agreement. Except as expressly
provided in subsection (c) below, Lessor shall in no event be
liable for any costs, expenses, liabilities, losses, damages
or amounts incurred by Lessee as a result of Lessor exercising
Lessor's Termination Option in accordance with this Section
16.10.
(c) Notwithstanding the terms of clause (b) above, if Lessor
exercises Lessor's Termination Option hereunder in accordance
with this Section 16.10, then Lessee shall be responsible for
performing all of its obligations under and in accordance with
the terms of this Article 16, subject to the following:
(i) the Lessor shall pay or cause to be paid to Lessee
for Lessee's application against the "C Check" completed
pursuant to Appendix E, Item 1(e), an amount equal to the
lesser of (x) $100,000, or (y) an amount equal to the product
of the full cost of the "C Check" completed by Lessee pursuant
to Appendix E, Item 1(e) on the Aircraft multiplied by a
fraction, the numerator of which is the number of hours
(including fractions of an hour) remaining on the Aircraft
until Lessee's next scheduled "C Check" for the Aircraft
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<PAGE>
(assuming Lessor had not exercised Lessor's Termination Option
hereunder) and the denominator of which is 3000; and
(ii) for purposes of Section 7.4.1(b) and (c), any shop
visit required to meet the conditions of Appendix E shall be
deemed a "scheduled" shop visit."
(n) Section 18.6 of the Lease is amended by deleting the firm
of "Haight, Gardner, Poor & Havens, Attn: Bonny L.Y. Kwoh, 195
Broadway, New York, NY 10007" as agent for Lessor and by
inserting in lieu thereof the new agent for Lessor as follows:
"Hertzog, Calamari & Gleason, Attn: Carla Craig, 100 Park
Avenue, New York, New York 10017".
(o) Appendix B to the Lease is hereby amended as follows:
(i) The amount set forth as the "DEPOSIT" is deleted in
its entirety and the amount set forth on Schedule B.1 hereto
is substituted therefor.
(ii) The Amount set forth as "RENT" is deleted in its
entirety and the amount of {***} is substituted therefor.
(p) Appendix D to the Lease is hereby amended by deleting
Sections 2.2 and 2.3 in their entirety and by deleting the
first and second paragraphs of Section 1 in their entirety and
inserting the following in lieu thereof:
"1. Deposit. Lessee has paid to Lessor the amount set
forth on Schedule B.1 as a Deposit for the Aircraft on or
prior to January 31, 1997."
(q) Schedule 16.10 attached to this Amendment is hereby
attached to the Lease as Schedule 16.10 thereto and is
incorporated therein.
2. Waiver of Default. Lessor agrees that any Default or Event of
Default under Sections 15.1(a), 15.1(e), 15.1(g) or 15.1(o) of the Lease (prior
to the amendment of any such Sections hereunder) which occurred prior to the
date of this Amendment is hereby deemed to have been cured by Lessee and Lessor
waives any rights or remedies it may have had with respect to the occurrence of
any such Default or Event of Default.
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<PAGE>
3. Representations, Warranties and Covenants
The following shall be, as applicable, representations, warranties
or covenants of Lessee pursuant to Articles 13 and 14 of the Lease:
(a) Representations
(i) This Amendment and the Notes have been duly entered into
and delivered by Lessee, and each constitutes a valid, legal and binding
obligation of Lessee enforceable against Lessee in accordance with its terms.
(ii) As of the date of this Amendment, Lessee has entered,
or will contemporaneously herewith enter, into an agreement with {***} having
terms which are substantially in accordance with the terms set forth under
the heading {***} in Exhibit 6.02(k) to the Agreement and Plan of Merger
dated as of January 17, 1997 by and among GoodAero, Inc., James H. Goodnight,
John P. Sall, Midway Airlines Corporation and Zell/Chilmark Fund, L.P., as
amended, except to the extent otherwise specifically set forth in the letter
dated as of February 10, 1997, from Lessee to Lessor.
(b) Covenants
Lessee covenants that it will not make any prepayment in
respect of the Promissory Note dated February 7, 1997 in the amount of
{***} to provide for terms more favorable to the payee thereof (including,
without limitation, any increase in the interest rate or acceleration of
payment).
4. Reconciliation
Lessee acknowledges that the principal amount of the DASA Note
(which is the sum of all deferred payments as of February 10, 1997 under the
leases and lease termination agreements relating to the Fokker-100 aircraft
leased by Lessee having manufacturers' serial numbers 11450, 11484, 1185 and
11486), and the amount of the Deposit, have each been determined based solely
upon information supplied by Lessee. Lessee agrees that, in the event that
Lessor obtains access to information which in Lessor's opinion indicates that
the amount of the DASA Note or the amount of the Deposit is incorrect (the
"Information"), Lessee will, at Lessor's request, work in good faith with Lessor
to reconcile any discrepancy, provided that Lessor provides the Information to
Lessee. Upon the reconciliation of such discrepancy and the cancellation of the
existing DASA Note, Lessee will execute in favor of DASA, a new, replacement
DASA Note issued by Lessee in the reconciled amount and Lessor and Lessee will
execute an amendment to this Lease setting forth the reconciled amount of the
Deposit. The failure of Lessor and Lessee to reach final agreement upon a
reconciled amount of the DASA Note and/or the amount of the Deposit shall in no
event constitute a Default or an Event of Default by Lessee under the Lease and
Lessor's sole and exclusive remedy for Lessee's breach of its obligations
hereunder shall be the right to pursue money damages against Lessee, which right
to pursue such money damages is hereby acknowledged by Lessee.
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<PAGE>
5. Deferral Agreement. Lessor and Lessee agree that the Deferral
Agreement and the Amendment to Deferral Agreements are hereby declared null and
void and shall have no further force or effect with respect to the Lease.
6. Merger. Lessor hereby consents to the Merger.
7. Governing Law. This Amendment shall be governed by and construed
in accordance with the internal laws of the State of New York and without regard
to any conflict of law rules. This Amendment is being delivered in the State of
New York.
8. Miscellaneous. Except as specifically amended or supplemented by
this Amendment, the Lease is hereby ratified, approved, confirmed and continued
in all respects and all provisions of the Lease as heretofore amended shall
remain in full force and effect. The parties hereto acknowledge and confirm that
the Lease is intended to be a true lease and not a financing arrangement. This
Amendment may be executed in any number of counterparts, and all of such
counterparts taken together shall be deemed and constitute one and the same
instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
on the day and year first above-written.
WINGS AIRCRAFT FINANCE, INC.
By: /s/ [ILLEGIBLE]
-----------------------------
Name:
---------------------------
Title: PRESIDENT
--------------------------
MIDWAY AIRLINES CORPORATION
By: /s/ J.S. Waller
-----------------------------
Name:
---------------------------
Title:
--------------------------
<PAGE>
Schedule 11.1(a).1
The Letter of Credit shall contain the following terms:
The Beneficiary shall be entitled to draw amounts under the Letter of Credit
upon notice to the issuing bank signed by Beneficiary stating that amounts are
due under one or more of the following, and that such amounts remain unpaid:
Promissory Note dated as of January 31, 1997 executed by Midway
Airlines Corporation in favor of debis AirFinance B.V.
Promissory Note dated as of January 31, 1997 executed by Midway
Airlines Corporation in favor of Daimler-Benz Aerospace A.G.
Aircraft Operating Lease Agreement No. 111 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 112 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 113 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 114 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 135 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 136 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 524 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 525 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 115-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
<PAGE>
Aircraft Operating Lease Agreement No. 116-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
Aircraft Operating Lease Agreement No. 117-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
Aircraft Operating Lease Agreement No. 118-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
<PAGE>
Schedule 11.1(a).2
Midway Airlines
Net Income Thresholds for Reduction in Amount of Letter of Credit Pursuant to
Section 11.1(a)
US$ millions
Year 1997 1998 1999 2000 2001
Net Income(2) 12.0 18.0 25.2 32.8 41.0
Net Income(1) 8.0 12.0 16.8 21.8 27.3
Year 2002 2003 2004 2005 2006
Net Income(2) 49.1 57.7 67.8 67.8 67.8
Net Income(1) 32.8 38.5 45.2 45.2 45.2
Year 2007 2008 2009 2010 2011
Net Income(2) 67.8 67.8 67.8 67.8 67.8
Net Income(1) 45.2 45.2 45.2 45.2 45.2
Year 2012 2013 2014
Net Income(2) 67.8 67.8 67.8
Net Income(1) 45.2 45.2 45.2
Amount of
Letter of Credit
$800,000 If actual Net Income is less than or equal to Net Income(1)
$400,000 If actual Net Income is greater than Net Income(1) but less
than or equal to Net Income(2)
0 If actual Net Income is greater than Net Income(2)
<PAGE>
Schedule 16.10
1. Aircraft Operating Lease Agreement No. 111, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
2. Aircraft Operating Lease Agreement No. 112, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
3. Aircraft Operating Lease Agreement No. 113, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
4. Aircraft Operating Lease Agreement No. 114, dated as of November 11,
1993, between First Security Bank, N.A. and Midway Airlines Corporation.
5. Aircraft Operating Lease Agreement No. AOLAF-115-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
6. Aircraft Operating Lease Agreement No. AOLAF-116-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
7. Aircraft Operating Lease Agreement No. AOLAF-117-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
8. Aircraft Operating Lease Agreement No. AOLAF-118-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
9. Aircraft Operating Lease Agreement No. 135, dated as of July 20, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
10. Aircraft Operating Lease Agreement No. 136, dated as of December 15, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
11. Aircraft Operating Lease Agreement No. 524, dated as of August 1, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
12. Aircraft Operating Lease Agreement No. 525, dated as of October 15, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
<PAGE>
Schedule B.1
Security Deposits Paid by Midway
Aircraft AOLAF Deposit
MSN No. Paid
-------- ----- -------
11321 525 {***}
11323 524 {***}
11329 135 {***}
11330 136 {***}
11444 111 {***}
11445 112 {***}
11475 113 {***}
11477 114 {***}
11450 115 {***}
11484 116 {***}
11485 117 {***}
11486 118 {***}
<PAGE>
EXHIBIT 10.9
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY {***}. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
F-100 LEASE #117-A
(TAIL # N109ML)
<PAGE>
EXECUTION COPY
THE SINGLE EXECUTED ORIGINAL OF THIS LEASE MARKED "ORIGINAL" SHALL BE THE
"ORIGINAL" AND ALL OTHER COUNTERPARTS OF THIS LEASE SHALL BE DUPLICATES AND
MARKED "DUPLICATE" OR "DUPLICATE ORIGINAL". TO THE EXTENT THAT THIS LEASE AND
CERTIFICATE OF ACCEPTANCE RELATED THERETO CONSTITUTES CHATTEL PAPER, AS SUCH
TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE
JURISDICTION, NO SECURITY INTEREST MAY BE CREATED THROUGH TRANSFER OR POSSESSION
OF ANY COUNTERPART OTHER THAN THE "ORIGINAL".
AIRCRAFT OPERATING LEASE AGREEMENT NO. AOLAF-117-A
Dated as of
July 10, 1995
between
WINGS AIRCRAFT FINANCE, INC.
as
Lessor
and
MIDWAY AIRLINES CORPORATION
as
Lessee
-----------------------------------------------
Leveraged Lease Financing of
One Fokker 100 Aircraft
Manufacturer's Serial No. 11485
U.S. Registration Mark N109ML
================================================================================
<PAGE>
INDEX
ARTICLE PAGE
------- ----
1. Definitions ........................................... 2
2. Agreement to Lease .................................... 12
3. Term; Delivery; Acceptance ............................ 16
4. Registration and Title ................................ 17
5. Possession and Use .................................... 19
6. Charges, Method of Payment and Financial
Information ........................................... 25
7. Maintenance ........................................... 27
8. Taxes, Duties and Expenses ............................ 32
8A. Special Indemnity ..................................... 39
9. Liens ................................................. 57
10. Indemnification ....................................... 57
11. Insurance ............................................. 60
12. Assignment and Subletting ............................. 68
13. Disclaimer, Representations and Warranties ............ 71
14. Covenants of Lessee ................................... 77
15. Default by Lessee ..................................... 80
16. Return of Aircraft .................................... 86
17. Casualty Occurrences .................................. 89
18. Governing Law and Jurisdiction ........................ 92
19. Miscellaneous ......................................... 94
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<PAGE>
APPENDICES
A. Description of Aircraft
B. Further Definitions and Values
C. Certificate of Acceptance
D. Charges
E. Operating Condition at Re-Delivery
F. Aircraft Documents
G. FAA Power of Attorney
-ii-
<PAGE>
AIRCRAFT OPERATING LEASE AGREEMENT NO. AOLAF-117-A
THIS AIRCRAFT OPERATING LEASE AGREEMENT NO. AOLAF-117-A (this
"Lease") is made as of July 10, 1995 between WINGS AIRCRAFT FINANCE, INC., a
company incorporated under the laws of the State of Delaware, having its
principal place of business at 1199 N. Fairfax St., Alexandria, Virginia 22314
and its permitted successors and assigns (herein referred to as "Lessor") and
MIDWAY AIRLINES CORPORATION, a company incorporated under the laws of the State
of Delaware, having its principal place of business at 5713 South Central
Avenue, Chicago, Illinois 60638 and its permitted successors and assigns (herein
referred to as "Lessee").
W I T N E S S E T H:
WHEREAS, Lessee entered into an Aircraft Operating Lease Agreement
No. AOLAF-117 dated November 11, 1993 (the "Original Lease") between First
Security Bank of Utah, National Association, not in its individual capacity, but
solely as owner trustee and lessor ("Original Lessor") and Lessee as lessee with
respect to the Aircraft (as hereinafter defined);
WHEREAS, the Original Lease has been terminated pursuant to the
Termination Agreement dated as of the date hereof (the "Termination Agreement")
among Original Lessor, Lessee and Fokker (as hereinafter defined);
WHEREAS, Lessor has entered into a Lease Agreement (Trust No. 117-A)
dated as of the date hereof (the "Head Lease") with First Security Bank of Utah,
National Association, not in its individual capacity, but solely as owner
trustee pursuant to the Trust Agreement (Trust No. 117-A) dated as of the date
hereof between First Security Bank of Utah, National Association in its
individual capacity and CIBC Inc. as owner participant;
WHEREAS, Lessor has the right to possess, use and lease the
Aircraft;
WHEREAS, Lessee desires to lease the Aircraft from Lessor; and
WHEREAS, Lessor is willing to lease the Aircraft to Lessee upon the
terms and conditions set out herein.
NOW THEREFORE, in consideration of the mutual promises herein
contained, Lessor and Lessee agree as follows:
<PAGE>
1. DEFINITIONS
The following terms shall have the following respective meanings for all
purposes of this Lease:
"Air Authority" shall mean the Federal Aviation Administration of
the United States Department of Transportation and any successor.
"Aircraft" shall mean the aircraft identified and described in
Appendix A, including any Engine, Part, or component thereof, and/or
ancillary and loose equipment or devices installed in or on the Aircraft
at the Original Delivery Date (or which having been removed therefrom
remain the property of Lessor pursuant to this Lease) and Aircraft
Documents furnished therewith under this Lease, or any substitutions,
renewals and replacements from time to time made in or on the said
Aircraft in accordance with this Lease, whether or not for the time being
installed on or in the said Aircraft or any other aircraft.
"Aircraft Documents" shall mean the items identified in Appendix F.
"Aircraft Maintenance Agreement" shall mean the Aircraft Maintenance
Agreement between Lessee and American Airlines, Inc., dated as of November
1, 1993, or any subsequent aircraft maintenance agreement between Lessee
and any Authorized Maintenance Performer which, in the reasonable opinion
of Lessor, is in substance substantially similar thereto.
"Airframe" shall mean the Aircraft, excluding the Engines.
"Appraisal Procedure" shall mean the procedure for determining the
FMV of the Aircraft set forth in Paragraph 9 of Appendix D.
"Approved Maintenance Program" shall mean the Maintenance Program in
effect on the Delivery Date with respect to the Aircraft or such other
Maintenance Program as Lessor shall from time to time approve in writing,
such approval not to be unreasonably withheld.
"Authorized Maintenance Performer" shall mean Lessee, American
Airlines, Inc., U.S. Air, Aviall, Rolls Royce Canada or any Air Authority
approved provider.
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<PAGE>
"Business Day" shall mean a day (other than a Saturday or Sunday) on
which banks are open for business in New York.
"Casualty Occurrence" shall have the meaning set forth in Article
17.1.
"Certificate of Acceptance" shall mean the Certificate of Acceptance
given in the form of Appendix C.
"Certificated Air Carrier" shall mean any person (except the United
States Government) that is a citizen of the United States of America (as
defined in Section 40102 of Title 49 of the United States Code) holding an
air carrier operating certificate issued by the Secretary of
Transportation pursuant to Chapter 447 of Title 49 of the United States
Code (or any predecessor thereof) for aircraft capable of carrying ten or
more individuals or 6,000 pounds or more cargo, which is also certificated
so as to entitle Lessor, as lessor, to the benefits of Section 1110 of
Title 11 of the United States Code with respect to the Aircraft.
"Credit and Security Agreement" shall mean the Credit and Security
Agreement dated as of October 29, 1993 therein between FAUSA and Lessee.
"Cycle" shall mean one take-off and landing of the Aircraft.
"Default" shall mean an Event of Default or any event which, with
the giving of notice and/or lapse of time and/or the making of any
relevant determination, would constitute an Event of Default.
"Delivery Date" shall mean the date on which the Aircraft is
delivered to and accepted by Lessee for the purposes of this Lease.
"Delivery Location" shall mean the location of the Aircraft set
forth in the Certificate of Acceptance.
"Dollars and $" shall mean the lawful currency of the United States
of America and in respect of all payments to be made under this Lease in
Dollars shall mean funds which are for same day settlement in the New York
Clearing House Interbank Payments System (or such other US Dollar funds as
may at the relevant time be customary for the settlement of international
banking transactions denominated in United States Dollars).
-3-
<PAGE>
"Engine" shall mean (i) any engine installed on or furnished with
the Aircraft on the Original Delivery Date, such Engines being identified
as to manufacturer and type in Appendix A and as to serial numbers in the
Certificate of Acceptance executed by Lessee on the Delivery Date and (ii)
any substitute or replacement engine title to which has, or should have,
transferred to and vested in Lessor in accordance with this Lease, in each
case including all modules or Parts from time to time belonging to or
installed in that engine and irrespective of whether or not the same shall
for the time being be installed on the Aircraft or on any other aircraft.
The term "Engine" shall exclude any properly replaced engine title to
which has, or should have, passed to Lessee pursuant to this Lease.
"Equipment Change" shall have the meaning set forth in Article
7.3(a).
"Event of Default" shall mean any of the events specified in Article
15.1.
"Expiry Date" shall mean January 21, 2013.
"Fair Market Rental Value" shall be equal in amount to the value
that would be obtained in an arms'-length transaction between an informed
and willing lessee under no compulsion to lease and an informed and
willing lessor under no compulsion to lease, in accordance with a lease to
a lessee similarly situated with Lessee, for a term equal to the relevant
period and on conditions as herein provided, any such determination (made
for purposes of Article 15.3(b)) to be made on the basis of the then
actual condition of the Aircraft, to be determined pursuant to an
Independent Appraisal and to be the average of the two determinations
obtained thereunder.
"FAUSA" shall mean Fokker Aircraft U.S.A., Inc., a company
incorporated under the laws of the State of Delaware, with its principal
office at Alexandria, Virginia.
"Federal Aviation Act" shall mean Title 49 of the United States Code
as amended from time to time, or any similar legislation of the United
States of America enacted in substitution or replacement therefor.
"First Rent Date" shall mean January 10, 1997.
"Flight Hour" shall mean each hour or part thereof elapsing from the
moment at which the wheels of the Aircraft leave the ground on the take
off of the Aircraft until the
-4-
<PAGE>
wheels of the Aircraft touch the ground on the landing of the Aircraft
following such flight.
"FMV" shall have the meaning set forth in Appendix D.
"Fokker" shall mean Fokker Aircraft B.V., a Dutch corporation with
its principal office at Amsterdam-Zuidoost, The Netherlands, together with
its successors.
"Governing Law" shall mean the law of the state of New York.
"Government Entity" shall mean and include (i) any national or state
government, political subdivision thereof, or local jurisdiction therein;
(ii) any board, commission, department, division, organ, instrumentality,
court, or agency of any thereof, however constituted; and (iii) any
association, organization, or institution of which any thereof is a member
or to whose jurisdiction any thereof is subject or in whose activities any
thereof is a participant.
"Head Lease" shall have the meaning set forth in the third "Whereas"
clause of this Lease as the Head Lease may be amended, modified or
supplemented from time to time in accordance with the terms thereof or any
such other lease created over the Aircraft in accordance with the terms
thereof.
"Head Lessor" shall mean First Security Bank of Utah, National
Association, not in its individual capacity, but solely as owner trustee
pursuant to the Trust Agreement (Trust No. 117-A) dated as of the date
hereof between First Security Bank of Utah, National Association in its
individual capacity and CIBC Inc. as Owner Participant, and its successors
and permitted assigns.
"Indemnitees" shall mean Lessor and each of its permitted successors
and assigns and each of their respective shareholders, subsidiaries,
affiliates, directors, officers, agents and employees.
"Indenture" shall mean the Trust Indenture and Security Agreement
(Trust No. 117-A) dated as of July 10, 1995, between Indenture Trustee and
First Security Bank of Utah, National Association, as owner trustee, as it
may be amended, modified or supplemented from time to time, or any such
security agreement created over the Aircraft in accordance with the terms
thereof.
-5-
<PAGE>
"Indenture Trustee" shall mean Shawmut Bank Connecticut, National
Association, not in its individual capacity but solely as indenture
trustee pursuant to the Indenture, and its successors and permitted
assigns.
"Independent Appraisal" shall mean a determination of Fair Market
Rental Value of the Aircraft by two independent aircraft appraisers,
selected by Lessor, the costs and expenses of the appraisal to be paid by
Lessee.
"Law" shall mean and include (i) any law, statute, decree,
constitution, regulation, order or any directive of any Government Entity;
(ii) any treaty, pact, compact or other agreement to which any Government
Entity is a signatory or party; (iii) any judicial or administrative
interpretation or application of any thereof; and (iv) any amendment or
revision of any thereof.
"Lessor or Lessee" shall have the meanings respectively ascribed to
them in the first paragraph of this Lease and shall include their
respective assignees or successors.
"Lessor Liens" shall mean:
(a) the Indenture, the Security Assignment, the Head Lease and any
security or leasehold interest whatsoever from time to time
created by or through Lessor, Head Lessor, Owner Participant
or Loan Participant or any of their respective affiliates in
connection with the financing of the Aircraft;
(b) any other security interest or other lien in respect of the
Aircraft or this Lease which results from acts or omissions to
act of or claims against Lessor, Head Lessor, Owner
Participant or Loan Participant or any of their respective
affiliates not related to the transactions contemplated by or
permitted under this Lease;
(c) liens in respect of the Aircraft for Lessor Taxes; and
(d) Lessor's Liens (as such term is defined in the Head Lease).
-6-
<PAGE>
"Lessor Taxes" shall mean Taxes:
(a) imposed as a direct result of activities of a Tax Indemnitee
in any jurisdiction imposing a liability unrelated to that Tax
Indemnitee's dealings with Lessee, to the transactions
contemplated by this Lease or the operation of the Aircraft by
Lessee; or
(b) imposed on or measured by net income, profits or gains, or
capital or net worth (excluding, however, in each case; Taxes
that are, or are in the nature of, license, sales, use,
rental, value-added, or property taxes) of a Tax Indemnitee,
by (A) any Governmental Entity by or in which that Tax
Indemnitee would be subject to tax without regard to the
transactions contemplated by this Lease or (B) the Federal
Government of the United States of America (including, without
limitation, any withholding taxes imposed by such government);
or
(c) imposed with respect to any period or event occurring prior to
the date of this Lease or after the Expiry Date or earlier
termination of this Lease in accordance with the terms hereof,
provided that such Tax is unrelated to a Tax Indemnitee's
dealings with Lessee or to the transactions contemplated by
this Lease; or
(d) imposed as a result of any voluntary sale, assignment,
transfer or other disposition by Lessor (including to Head
Lessor) or any other Tax Indemnitee of any interest in the
Aircraft or any part thereof or this Lease unless such
transfer or disposition occurs (1) in connection with a Tax
Indemnitee's pursuing its remedies while an Event of Default
by Lessee is continuing or otherwise resulting from an Event
of Default, or (2) pursuant to Lessee's exercise of any of its
options to purchase the Aircraft (it being understood and
agreed that Lessor and Lessee will cooperate with each other
to minimize any Taxes resulting from any sale pursuant to this
clause (2)).
"Loan Participant" shall mean Kreditanstalt fur Wiederaufbau,
together with its successors and permitted assigns.
-7-
<PAGE>
"Maintenance Program" shall mean an Air Authority approved
maintenance program for the Aircraft encompassing scheduled maintenance
(including block maintenance), condition monitored maintenance, and
on-condition maintenance of Airframe, Engines and Parts, including but not
limited to, servicing, testing, preventive maintenance, repairs,
structural, inspections, system checks, overhauls, approved modifications,
service bulletins, engineering orders, airworthiness directives, corrosion
control, inspections and treatments.
"Major Checks" shall mean any 12,000 hours check, 24,000 hours check
or intersupplementary check or segment thereof or any equivalent thereof
with more or less hours, however denominated, to the extent set out in the
Approved Maintenance Program from time to time.
"Manufacturer" shall mean Fokker.
"Note" shall mean the Secured Promissory Note dated as of July 1,
1994, executed and delivered to FAUSA by Lessee and secured by the Credit
and Security Agreement.
"Original Delivery Date" shall mean July 22, 1994.
"Other Aircraft Agreements" shall mean Aircraft Operating Lease
Agreements relating to other Fokker-manufactured aircraft leased to Lessee
by Lessor or a lessor related to, or acting for the benefit of Wings
Aircraft Finance, Inc. or any affiliate thereof, the Credit and Security
Agreement, the Note, the Support Services Agreement, the Termination
Agreement or any other agreement between Lessee and Lessor or any
affiliate of Wings Aircraft Finance, Inc.; provided that, for the purpose
of this definition, the word "affiliate" shall mean any corporation or
other entity that, directly or indirectly, controls, is controlled by, or
is under common control with, Wings Aircraft Finance, Inc.
"Owner Participant" shall mean CIBC Inc., a corporation organized
and existing under the laws of the State of Delaware, together with its
permitted successors and assigns.
"Part " shall mean, whether or not installed on the Aircraft:
(a) any component, furnishing or equipment (other than a complete
Engine) furnished with the Aircraft on the Original Delivery
Date; and
-8-
<PAGE>
(b) any other component, furnishing or equipment (other than a
complete Engine) title to which has, or should have, passed to
Lessor pursuant to this Lease
but excludes any such items title to which has, or should have,
passed to (i) Lessee pursuant to this Lease or (ii) any person
pursuant to any agreement relating to the financing of spare parts
for the Aircraft, including, but not limited to, FAUSA pursuant to
the Credit and Security Agreement and the Note.
"Participation Agreement" shall mean that Participation Agreement
(Trust No. 117-A) dated as of July 10, 1995, among Lessor, Owner
Participant, Owner Trustee, Indenture Trustee and Loan Participant, as it
may be amended, modified or supplemented from time to time in accordance
with the terms thereof.
"Permitted Lien" shall mean:
(a) liens of repairers, mechanics, material men, carriers,
hangarkeepers, employees or other similar liens arising in the
ordinary course of business by statute or by operation of law
in respect of obligations which are either not overdue or are
being contested in good faith by appropriate proceedings;
(b) any lien for Taxes of any kind either not assessed or, if
assessed, not yet due and payable or being contested in good
faith by appropriate proceedings; and
(c) any lien arising out of a judgment against Lessee with respect
to which at the time an appeal is being prosecuted in good
faith and with respect to which there shall have been secured
a stay of execution pending such appeal,
provided that in the case of these subclauses (a), (b) and (c).
(i) adequate reserves for the payment of such obligations
have been provided by Lessee;
(ii) such proceedings, or the continued existence of such
lien, do not give rise to any likelihood of the sale,
forfeiture or other
-9-
<PAGE>
loss of the Aircraft or any Engine or any Part or any
interest therein; and
(iii) any such lien does not arise as a result of any default
on the part of Lessee in respect of its obligations
under this Lease;
(d) any Lessor Lien and the lien of this Lease; and
(e) any lien for Lessor Taxes.
"Redelivery Location" shall mean Schiphol Airport, The Netherlands.
"Rent Date" shall mean the First Rent Date and the numerically
corresponding date of each and every subsequent month during the Term, or
(if there is no corresponding date in any month), the last day of such
month.
"Rental Period" shall mean the period from and including any Rent
Date to and including the day preceding the next Rent Date.
"Replacement Engine" shall have the meaning set forth in Article
5.1.2(a) (i).
"Security Assignment" shall mean the Assignment of Sublease (Trust
No. 117-A) dated as of July 10, 1995 between Lessor, as assignor, and Head
Lessor, as assignee.
"Security Interest" shall mean any mortgage, charge, pledge, lien,
assignment, hypothecation, right of set-off or any agreement or
arrangement having the effect of creating a security interest.
"State of Incorporation" shall mean the State of Delaware.
"State of Registration" shall mean United States of America.
"Supplemental Rent" shall mean Agreed Value and any other amount
which by the terms of this Lease is payable by Lessee to Lessor other than
Rent and the Reserve Rate.
"Support Services Agreement" shall mean the Aircraft Support
Services and Product Assurances Agreement No. ASSAF-110 dated October 1,
1993 between FAUSA and Lessee.
-10-
<PAGE>
"Taxes" shall mean any and all present and future sales, use,
property, customs, value-added, turnover, stamp, interest equalization,
income, gross or net receipts, franchise, excise, net worth, capital or
other taxes, fees, withholdings, imposts, duties, levies, or other charges
of any nature, together with any penalties, fines, or interest thereon,
imposed, levied, or assessed by, or otherwise payable to, any Governmental
Entity and "Tax" shall be construed accordingly.
"Tax Indemnitee" shall mean each of Lessor and each of its permitted
successors and assigns and each shareholder, subsidiary and affiliate of
each of the foregoing.
"Term" shall bear the meaning ascribed to it in Article 3.4.
"Termination Agreement" shall mean the Lease Termination Agreement
(AOLAF- ) dated as of July 10, 1995 between Fokker, Lessee and the Owner
Trustee named therein, as it may be amended, modified or supplemented from
time to time, in accordance with its terms.
1.2 The terms:
Agreed Value,
Deposit,
Rent,
Reserve Rate, and
Transaction Expenses
shall have the meanings and values set forth in Appendix B.
1.3 References in this Lease to:
(a) Articles or Appendices are, unless otherwise specified,
references to Articles of, and Appendices to, this Lease and
references to this Lease include its Appendices;
(b) any statute or other legislative provision shall be read to
include any statutory or legislative modification or
re-enactment thereof, or any substitution therefor;
(c) the Aircraft include any Part of the Aircraft, and, where the
context so admits, any of the Aircraft Documents and
references to any part of the Aircraft include any part of any
Engine;
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<PAGE>
(d) the word "person" or "persons" or to words importing persons
include, without limitation, individuals, firms, partnerships,
joint ventures, trusts, Government Entities, organizations,
associations, corporations, government agencies, committees,
departments, authorities and other bodies, corporate or
incorporate, whether having distinct legal personality or not,
or any member of any of the same;
(e) words importing the plural include the singular and vice
versa;
(f) any agreement or instrument include such agreement or
instrument as it may from time to time be amended or
supplemented; and
(g) headings in this Lease are for ease of reference only.
2. AGREEMENT TO LEASE
2.1 Lessor will lease the Aircraft to Lessee and Lessee will take the
Aircraft on lease from Lessor in "As Is" condition in accordance
with the terms and conditions of this Lease.
2.2 Lessor's obligation to deliver the Aircraft on the Delivery Date
to Lessee shall be subject to:
(i) the receipt by Lessor from Lessee on or prior to the Delivery
Date of the following, all of which shall be in the English
language and be satisfactory in form and substance to Lessor:
(a) [intentionally omitted];
(b) copies of Lessee's certificate of incorporation and/or
memorandum and articles of association and/or by-laws
and/or other constitutional documents, certified to be
true and up to date copies by a duly authorized officer
of Lessee;
(c) copies of resolutions of Lessee's board of directors
authorizing Lessee to enter into and perform this Lease
and the transactions contemplated hereby, certified to
be true and
-12-
<PAGE>
in full force and effect by a duly authorized officer of
Lessee;
(d) evidence that each approval, license and consent which
may be required in relation to, or in connection with
the performance by Lessee of any of its obligations
hereunder has been granted by or obtained from the
applicable Government Entity in the State of
Registration;
(e) [intentionally omitted];
(f) evidence of appointment of Lessee's agent for service of
process in the State of New York;
(g) [intentionally omitted);
(h) [intentionally omitted];
(i) a power of attorney in the form of Appendix G
authorizing Lessor to take action at the Air Authority
and a certified resolution authorizing same;
(j) such other documents as Lessor may reasonably request;
(ii) the receipt by Lessor from Lessee on or before the Delivery
Date of:
(a) an opinion satisfactory in form and substance to Lessor
of counsel to Lessee, addressed to Lessor, Head Lessor,
Indenture Trustee, Owner Participant and Loan
Participant;
(b) [intentionally omitted];
(c) a certificate of insurance, a broker's letter of
undertaking and other evidence satisfactory to Lessor
that Lessee is taking the required steps to ensure due
compliance with the provisions of this Lease as to
Insurances with effect on and after the Delivery Date;
(d) evidence that the representations and warranties of
Lessee set forth in Article 13.4 are true and correct;
-13-
<PAGE>
(iii) receipt by Lessor of a certificate of an officer of Lessee
certifying that the Aircraft Maintenance Agreement is in full
force and effect with respect to the Aircraft;
(iv) receipt by Lessor of the executed Consent to the Security
Assignment (Trust No. 117-A) in the form attached to the
Security Assignment as Exhibit A thereto;
(v) evidence (including satisfactory opinions of Crowe & Dunlevy,
special Air Authority aviation counsel, as to Air Authority
registration and recordation matters) that on the Delivery
Date the Aircraft has been validly registered under the laws
of the State of Registration and that all filings,
registrations, recordings and other actions have been or will
be undertaken which are necessary or advisable to ensure the
validity, effectiveness and enforceability of this Lease and
the Head Lease and to protect the property rights of Lessor
and Head Lessor in the Aircraft or any Part and the Security
Interest of Indenture Trustee therein;
(vi) Lessor being satisfied that no default shall have occurred
under any Other Aircraft Agreement or any other agreement
between Fokker or FAUSA and Lessee;
(vii) this Lease and the Termination Agreement shall have been duly
executed and delivered by Lessee and shall be in full force
and effect, and an executed counterpart of each shall have
been delivered to Lessor; and
(viii) the Assignment of Support Services Agreement (Trust No.
117-A) dated as of July 10, 1995 between Lessee and Head
Lessor shall have been duly executed and delivered by Lessee
and shall be in full force and effect, and an executed
counterpart of each shall have been delivered to Lessor.
2.3 The conditions specified in Article 2.2 are inserted for the sole
benefit of Lessor and may be waived or deferred in whole or in part
and with or without conditions by Lessor. If any of the said
conditions are outstanding on the Delivery Date and Lessor (in its
absolute discretion) nonetheless agrees to deliver the
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<PAGE>
Aircraft to Lessee, Lessee shall ensure that such outstanding
conditions are fulfilled within fifteen (15) days after the Delivery
Date and Lessor shall be entitled to treat the failure of Lessee to
perform such outstanding conditions as an Event of Default.
2.4 The obligation of Lessee to accept delivery of the Aircraft from
Lessor is subject to the satisfaction of the following conditions
precedent on or before the Delivery Date:
(i) this Lease and the Termination Agreement shall have been
duly authorized, executed and delivered by Lessor and shall be in
full force and effect, and an executed counterpart shall have been
delivered to Lessee;
(ii) Lessee shall have received the following:
a. an incumbency certificate of Lessor as to the
persons authorized to execute and deliver this
Lease, including the signatures of such persons;
and
b. such other documents and evidence with respect to
Lessor as Lessee may reasonably request in order
to establish the taking of all corporate
proceedings in connection with such transactions
and compliance with the conditions set forth
herein;
(iii) on the Delivery Date, the representations and warranties
of Lessor contained in Article 13.6 shall be true and accurate as
though made on and as of such date;
(iv) Lessee shall have received the favorable opinion,
addressed to it and reasonably satisfactory in form and substance to
it, from Crowe & Dunlevy, special Air Authority aviation counsel;
(v) the Aircraft shall meet the delivery conditions specified
in Article 3.6;
(vi) Lessee shall have received the favorable opinion,
addressed to it and reasonably satisfactory in form and substance to
it, from Haight, Gardner, Poor & Havens, special counsel to Lessor
and Fokker;
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(vii) Lessee shall have received certified execution copies of
a. the Tax Indemnity Agreement (Trust No. 117-A)
dated as of July 10, 1995 between Lessor and Owner
Participant;
b. Sections 7(b) and 7A and the definition of
"Lessor's Lien" in the Participation Agreement
(Trust No. 117-A) among Lessor, Head Lessor, Owner
Participant and the other parties thereto; and
c. Section 7(c) (x) and the provisions relating
thereto in the Lease Agreement dated as of July
10, 1995 (Trust No. 117-A) between Lessor and Head
Lessor; and
d. Lessee shall have received letters of quiet
enjoyment from Head Lessor and Indenture Trustee
in form and substance satisfactory to it.
3. TERM; DELIVERY; ACCEPTANCE
3.1.1 Lessor shall deliver and Lessee shall accept the Aircraft and the
delivery thereof on the Delivery Date.
3.1.2 [Intentionally omitted].
3.2 [Intentionally omitted].
3.3.1 [Intentionally omitted].
3.3.2 [Intentionally omitted].
3.4 The term of the lease shall commence on the Delivery Date and shall
continue until the Expiry Date unless earlier terminated or extended
as herein provided (such period being herein referred to as the
"Term").
3.5 The Aircraft shall be delivered to and accepted by Lessee at the
Delivery Location or such other location as is mutually acceptable
to the parties.
Acceptance by Lessee of the Aircraft by execution and delivery of
the Certificate of Acceptance shall be
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deemed to be evidence that Lessor has performed all its obligations
under this Article 3.5.
3.6 [Intentionally omitted].
3.7 Lessee shall indemnify and hold harmless the Indemnitees from and
against any and all liabilities, damages, losses (including costs
and expenses incident thereto) arising by reason of death of or
injury to any such observer or any employee of Lessee, arising out
of, or in any way connected with the inspection of the Aircraft upon
redelivery of the Aircraft.
3.8 Lessee shall indicate and confirm its acceptance of the Aircraft by
the execution and delivery to Lessor of the Certificate of
Acceptance.
4. REGISTRATION AND TITLE
4.1 It shall be the responsibility of Lessee, at its expense, to
cooperate with Lessor and Head Lessor to effect and maintain
registration of the Aircraft in the name of Head Lessor under the
Laws of the State of Registration during the Term, such registration
to reflect the interests of Lessor, Head Lessor and Indenture
Trustee, and to obtain and maintain all licenses, permits and
approvals, including, without limitation, a certificate of
airworthiness from the Air Authority, as may be requisite in
connection with operation of the Aircraft under this Lease.
4.2 Lessee shall at its own expense and responsibility cause this Lease
to be kept, filed and recorded at all times during the Term, in such
office or offices for the registration of the Aircraft in the State
of Registration and in such other offices (in the United States but
not in any jurisdiction outside of the United States unless directly
required due to Lessee's operation) as may be necessary, to protect
Lessor's, Head Lessor's and Indenture Trustee's rights hereunder and
under the Head Lease and the Indenture in any state in which the
Aircraft may operate including the State of Registration of the
Aircraft and the State of Incorporation or as Lessor may reasonably
request to protect and preserve Lessor's, Head Lessor's and
Indenture Trustee's rights hereunder and under the Head Lease and
the Indenture and shall on request furnish to Lessor an opinion of
counsel or other evidence satisfactory to Lessor of such filing and
recording.
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4.3 Title to and ownership of the Aircraft shall at all times remain in
Head Lessor, and Lessee shall have no right, title or interest in or
to the Aircraft or any part thereof except as expressly provided by
this Lease. Lessee shall identify and specify the interest of Head
Lessor and Indenture Trustee and shall affix or keep affixed (i) in
a reasonably prominent position on the flight-deck of the Aircraft
and on each Engine a metal name plate (having dimensions of not less
than 10 cm x 7 cm) bearing the inscription (in fireproof and legible
characters) stating:
"NOTICE OF OWNERSHIP
THIS AIRCRAFT/ENGINE IS OWNED BY FIRST SECURITY BANK OF UTAH, NATIONAL
ASSOCIATION, NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS OWNER TRUSTEE
AND HEAD LESSOR AND IS SUBJECT TO A FIRST PRIORITY MORTGAGE IN FAVOR OF
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION"
The proper completion of the metal name plate shall be advised by
Lessor at its earliest convenience. Lessee shall not remove or
deface evidence of ownership of the Aircraft and shall not do or
permit to be done or omitted any act or thing which would jeopardize
the rights of Lessor, Head Lessor or Indenture Trustee in the
Aircraft. Lessee will on all occasions when the ownership of the
Aircraft or any Part is relevant make clear to third parties that
title to the same is held by Head Lessor.
4.4 Lessee acknowledges that the Aircraft is owned by Head Lessor and is
subject to the Indenture, which is a first priority Security
Interest, and that Lessor's interest in this Lease is subject to the
Security Assignment in favor of Head Lessor. Lessee undertakes to
Lessor (both for itself and as agent for each of Head Lessor and
Indenture Trustee) at Lessee's expense (except for the expense of
assignments pursuant to Article 12) to, from time to time, cooperate
with Lessor or Head Lessor to, cause this Lease, the Indenture, the
Security Assignment and such other documents as may be necessary or
advisable to give effect to the transactions contemplated hereby or
thereby, to be kept, recorded or filed in such office or offices in
the State of Incorporation and in the State of Registration as may
be necessary or advisable to protect and perfect the interests of
Lessor, Head Lessor and Indenture Trustee in the Aircraft, this
Lease, the Head Lease, the Indenture and the Security
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Assignment, and to do, from time to time, all other things which
Indenture Trustee, Head Lessor and/or Lessor may reasonably require
in order to protect and perfect their rights.
4.5 Lessor agrees that during the Term it shall not permit the
registration of the Aircraft to be changed to any registration other
than under the Laws of the State of Registration except as may be
required in connection with the sublease of the Aircraft by Lessee
pursuant to Article 12.1.
5. POSSESSION AND USE
5.1 Lessee shall not transfer possession of the Aircraft, the Engines or
any Part to any person or any legal entity or remove any Engine or
Part from the Airframe other than in accordance with the provisions
of this Article 5 or of Article 12.1; provided, however, that so
long as no Default shall have occurred and be continuing, Lessee
may, without the prior written consent of Lessor deliver possession
of the Aircraft, the Engines or Parts to the manufacturer thereof
for testing or other similar purposes, or to an Authorized
Maintenance Performer for service, repair, maintenance or overhaul
work on the Aircraft, the Engines or Parts, or for alterations,
modifications, or additions thereto, to the extent required or
permitted by the terms of Article 7.3.
5.1.1 Lessee will ensure that no Engine or Part installed on the Aircraft
is at any time removed from the Aircraft other than:
(a) if replaced as expressly permitted by this Lease; or
(b) if the removal is of an Obsolete Part (as defined in Article
7.3(b)) and is in accordance with the Approved Maintenance
Program; or
(c) (i) during the course of maintaining, servicing,
repairing, overhauling or testing that Engine or Part or
the Aircraft, as the case may be; or
(ii) as part of a normal engine or part rotation program; or
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(iii) for the purpose of making such modification to the
Engine or Part, or the Aircraft, as the case may be, as
are permitted under this Lease,
and then in each case only if it is reinstalled or replaced by an
engine or part complying with Article 5.1.2(a) as soon as
practicable (or in the case of Article 5.1.1(c) (ii) in the
ordinary course of such program) and in any event no later than the
Expiry Date except, in the case of Obsolete Parts, as provided in
Article 7.3(b).
5.1.2 (a) Lessee will ensure that, except as permitted by this
Lease, no engine or part is installed on the Aircraft unless:
(i) in the case of an engine, it is an engine of the same
make and model as, or an improved or advanced version of
the Engine it replaces, which is in similar or better
operating condition, and in the case only of a Casualty
Occurrence, has substantially similar hours available
until the next scheduled checks, inspections, overhauls
and shop visits and has the same or greater value and
utility as the replaced Engine (assuming the Engine
being replaced was of a value and utility and in at
least the condition and repair required by the terms of
this Lease) and shall be suitable for use on the
Airframe and compatible with each other Engine or engine
then on the Aircraft (a "Replacement Engine"). At
Lessee's election, Lessee may cause an Engine to be
replaced under this Lease with a Replacement Engine by
compliance with the provisions of Article 17.3 with
regard thereto;
(ii) in the case of a part, it is in as good operating
condition, is of similar or a more advanced make and
model and is of the same interchangeable modification
status as the replaced Part;
(iii) in the case of any part, it has become and remains the
property of Head Lessor free from Security Interests and
on installation on the Aircraft will, without further
act, be
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<PAGE>
subject to this Lease, the Head Lease and the Indenture;
and
(iv) in each case, Lessee has full details as to its source
and maintenance records.
(b) Provided no Default has occurred and is continuing, Lessee
shall be entitled to install any engine or part on the
Aircraft by way of replacement notwithstanding Article
5.1.2(a) if:
(i) there is not available to Lessee at the time and in the
place that 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 Article
5.1.2(a); and
(ii) it would result in an unreasonable disruption of the
operation of the Aircraft and/or the business of Lessee
to ground the Aircraft until an engine or part, as the
case may be, complying with Article 5.1.2(a) becomes
available for installation on the Aircraft; and
(iii) as soon as reasonably practicable after installation of
the same on the Aircraft, Lessee removes any such engine
or part and replaces it with the Engine or Part replaced
by it or by an engine or part, as the case may be,
complying with Article 5.1.2(a).
5.1.3 Lessee will:
(a) ensure that any Engine or Part which is not installed on the
Aircraft (or any other aircraft as permitted by this Lease)
is, except as expressly permitted by this Lease, properly and
safely stored, and kept free from Security Interests;
(b) from time to time on request, notify Lessor in writing as to
the location of any Engine and on request shall use its
reasonable efforts to procure that any person to whom
possession of an Engine is given acknowledges in writing to
Lessor, in terms satisfactory to Lessor, that it will respect
the interests of Head Lessor as owner, Indenture Trustee as
mortgagee and Lessor as
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lessor of the Engine and will not seek to exercise any rights
whatsoever in relation to it;
(c) (notwithstanding the foregoing provisions of this Article
5.1.3), be permitted, if no Default has occurred and is
continuing, to install any Engine or Part on an aircraft, or
in the case of a Part, on an engine:
(i) owned and operated by Lessee free from Security
Interests; or
(ii) leased or hired to Lessee pursuant to a lease or
conditional sale agreement on a long-term basis and on
terms whereby Lessee has full operational control of
that aircraft or engine; or
(iii) acquired by Lessee and/or financed or refinanced, and
operated by Lessee, on terms that ownership of that
aircraft or engine, as the case may be, pursuant to a
lease or conditional sale agreement, or a Security
Interest therein, is vested in or held by any other
person;
provided that in the case of (ii) and (iii):
(1) the terms of any such lease, conditional sale agreement or
Security Interest will not have the effect of prejudicing the
interests of Indenture Trustee as mortgagee or Head Lessor as
owner or Lessor as lessor of that Engine or Part; and
(2) the lessor under such lease, the seller under such conditional
sale agreement or the holder of such Security Interest, as the
case may be, has confirmed and acknowledged in writing to
Lessor, in form and substance satisfactory to Lessor, or has
otherwise agreed in writing, that it will respect the
interests of Head Lessor as owner, Indenture Trustee as
mortgagee and Lessor as lessor (without regard to whether such
writing identifies Head Lessor, Indenture Trustee and Lessor
by name) of that Engine or Part and that it will not seek to
exercise any rights whatsoever in relation thereto; and, to
the extent such an acknowledgment has been given, Lessor
hereby agrees, for the benefit of the lessor, the seller, or
secured party, as the case may be, of any engine or part
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(other than an Engine or a Part) leased to Lessee or owned by
Lessee subject to a conditional sale or other security
agreement, that Lessor will not acquire or claim, as against
such lessor, seller or secured party, any right, title or
interest in any engine or engines owned by the lessor under
such lease or subject to a security interest in favor of the
seller or secured party under such conditional sale or other
security agreement as the result of such engine or engines
being installed on the Airframe at any time while such engine
or engines are subject to such lease or conditional sale or
other security agreement.
5.1.4 Lessee will not enter into nor permit any pooling agreement or
arrangement in respect of an Engine or Part without the prior
written consent of Lessor, which shall not be unreasonably withheld.
5.2 Lessee shall use the Aircraft solely in commercial or other
operations for which Lessee is duly authorized by the Laws of the
State of Registration and/or any jurisdiction to whose Laws Lessee's
operation of the Aircraft is subject and shall not use or permit
the Aircraft to be used for any purpose for which the Aircraft is
not designed or reasonably suitable.
Lessee shall not use the Aircraft for the carriage of (i) whole
animals living or dead except in the cargo compartments according to
the United States Department of Transportation ("DOT") (or for
international flights, International Civil Aviation Organization
("ICAO")) regulations, and except domestic pet animals carried in a
suitable container to prevent the escape of any liquid and to ensure
the welfare of the animal; (ii) acids, toxic chemicals, other
corrosive materials, explosives, nuclear fuels, wastes, or any
nuclear assemblies or components, except as permitted for passenger
aircraft under the "Restriction of Goods" schedule issued by the DOT
(or for international flights, ICAO) from time to time and provided
that all the requirements for packaging or otherwise contained
therein are fulfilled; or (iii) any other goods, materials or items
of cargo which could reasonably be expected to cause damage to the
Aircraft and which would not be adequately covered by the insurance
required by or obtained pursuant to Article 11.
5.3 Lessee shall not permit the Aircraft to be maintained, used, or
operated in violation of any Law of any
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Government Entity having jurisdiction, or contrary to any
manufacturer's operating manuals and instructions, or in violation
of any airworthiness certificate, license or registration relating
to the Aircraft issued by any such Government Entity, unless the
validity thereof is being contested by Lessee in good faith and by
appropriate proceedings (but only so long as such proceedings do not
(i) involve any risk of the sale, forfeiture or loss of any interest
therein, (ii) otherwise adversely affect Lessor, Head Lessor,
Indenture Trustee, Owner Participant or Loan Participant or (iii)
involve any risk of criminal liability or any unindemnified material
risk of civil liability to Lessor, the Indenture Trustee, Owner
Participant or Loan Participant) provided, that Lessee shall give
prior written notice to Lessor of any such contest and provide
Lessor with any information Lessor may reasonably request with
respect to such contest. In the event that such Laws require
alteration of the Aircraft during the Term of this Lease, Lessee
shall conform therewith at its own expense and shall maintain the
same in proper condition for operation under such Laws. Lessee
agrees not to operate the Aircraft or to permit or suffer the
Aircraft to be operated (i) contrary to applicable Law, and/or (ii)
within or into any geographic area unless the Aircraft is covered by
insurance as required by the provisions of Article 11 or insurance
or an indemnity in lieu of such insurance from the United States
government against the risks and in the amounts required by Article
11 covering such area, and/or (iii) contrary to the terms of such
insurance as required by the provisions of Article 11.
5.4 Throughout the Term and until re-delivery of the Aircraft to Lessor
in accordance with the provisions of this Lease, the Aircraft and
every part thereof shall be in every respect at the sole risk of
Lessee, who shall bear all risks of loss, theft, damage or
destruction to the Aircraft from any cause whatsoever. Lessor shall
not be liable for any liability, claim, loss, damage or expense of
any kind or nature caused directly or indirectly by the Aircraft or
any part thereof by any inadequacy thereof for any purpose or any
deficiency or defect therein, by the use or performance thereof, by
any repairs or servicing thereto or any delay in providing or
failure to provide any thereof, by any interruption or loss of
service or use thereof, or by any loss of business or other
consequential damage or any damage whatsoever and
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howsoever caused prior to re-delivery of the Aircraft to Lessor.
5.5 Lessee shall ensure that such crew and engineers as are employed by
it in connection with the operation and maintenance of the Aircraft
shall have such qualifications and hold such licenses as are
required by the Air Authority and by all applicable Laws and
regulations.
5.6 Lessee shall use, operate and maintain the Aircraft in at least as
good a manner and with at least as much care as used by Lessee with
respect to aircraft of the same type owned, leased or operated by
Lessee, and Lessee shall not discriminate against the Aircraft (as
compared to other aircraft of the same type owned, leased or
operated by Lessee) in the use, operation or maintenance of the
Aircraft, other than withdrawal of the Aircraft from use and
operation for return in accordance with this Lease.
6. CHARGES, METHOD OF PAYMENT AND FINANCIAL INFORMATION
6.1 Lessee shall punctually pay to Lessor, when due, the Rent and
Supplemental Rent expressed to be payable by Lessee to Lessor
hereunder including the monies specified and calculated in
accordance with the provisions of Appendix D at the time and in the
manner therein specified, and shall punctually and duly observe and
perform Lessee's obligations under the said Appendix D which forms
an integral part of this Lease. The time stipulated in this Lease
for all payments payable by Lessee to Lessor and for the performance
of Lessee's other obligations under this Lease shall be of the
essence of this Lease.
6.2 Lessee shall not be entitled to any abatement, compensation,
reduction or set-off against any installment of Rent or
Supplemental Rent, including but not limited to, abatements,
compensations, reductions or set offs, by reason of any past,
present or future claims of Lessee against Lessor or any other
person under this Lease or otherwise.
6.3 Lessee's obligation to pay Rent and make other payments in
accordance with this Lease, until Lessee shall have redelivered the
Aircraft to Lessor in accordance with Article 16 and shall have
complied with its other obligations hereunder, shall be absolute and
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unconditional irrespective of any contingency whatsoever including
(but not limited to) (i) any right of set-off, counterclaim,
recoupment, defence or other right which either party may have
against the other, (ii) any unavailability of the Aircraft for any
reason, including, but not limited to, any defect in the
airworthiness, merchantability, fitness for any purpose, condition,
design, or operation of any kind or nature of the Aircraft, or the
ineligibility of the Aircraft for any particular use or trade, or
for registration or documentation under the laws of any relevant
jurisdiction, or (save as herein provided) any Casualty Occurrence
in respect of or any damage to the Aircraft, (iii) any insolvency,
bankruptcy, reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceedings by or against Lessor
or Lessee, (iv) any invalidity or unenforceability or lack of due
authorization of, or other defect in this Lease, (v) any failure of
Lessee to obtain any required license, certificate, authorization or
other approval of any Government Entity having jurisdiction over the
operation by Lessee of the Aircraft or the operation by Lessee in
any airport and (vi) any other cause which, but for this provision,
would or might have the effect of terminating, frustrating or in any
way affecting any obligation of Lessee hereunder, it being the
declared intention of the parties that the provisions of this
Article and the obligations of Lessee to pay the Rent and
Supplemental Rent provided for by this Lease shall survive any
frustration and that, save as expressly provided in this Lease, no
monies payable hereunder by Lessee to Lessor shall in any event or
circumstance be repayable to Lessee. Nothing in this Article 6.3
shall preclude Lessee from exercising its right to pursue a claim
for damages or specific performance or other judicial remedy against
Lessor and/or any Indemnitees.
6.4 Lessee agrees to furnish Lessor during the Term:
(i) [intentionally omitted];
(ii) upon Lessor requesting the same a quarterly unaudited balance
sheet of Lessee prepared by it as of the close of the most
recent previous financial quarter, together with the related
profit and loss statement for such period;
(iii) within ninety (90) days after the close of each financial year
of Lessee, an audited balance sheet
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and profit and loss statement as of the close of such
financial year;
(iv) from time to time such other non-confidential information as
Lessor may reasonably request; and
(v) copies of all notices sent by Lessee (A) to its shareholders
or creditors as a group in their respective capacities as such
relating to major business or financial developments of
Lessee, or (B) to the Securities Exchange Commission in
connection with or following a public offering of the equity
shares of Lessee.
7. MAINTENANCE
7.1 Lessee, during the Term, at its own cost and expense shall:
(a) service, repair, maintain, overhaul, test, or cause the same
to be done to the Aircraft in accordance with the Approved
Maintenance Program so as to keep the Aircraft in as good
operating condition as when delivered to Lessee on the
Original Delivery Date, ordinary wear and tear excepted, and
such operating condition as may be necessary to enable the
airworthiness certificate of the Aircraft to be maintained in
good standing at all times under applicable Law; and Lessee
shall at all times maintain current certificates of
airworthiness and Air Authority required records of
maintenance in respect of the Aircraft and produce copies
thereof to Lessor upon request, except in each case if Fokker
100 aircraft with similar engines are grounded by the Air
Authority;
(b) maintain in the English language all Aircraft Documents,
records, logs, and other materials required by applicable Laws
and best airline practice to be maintained in respect of the
Aircraft including engine trend monitoring data;
(c) perform, or cause to be performed, all airworthiness
directives and mandatory notes and mandatory bulletins
affecting the Aircraft having a compliance date during the
Term and issued by (a) the Air Authority and/or (b) Fokker or
any other manufacturer of any part of the Aircraft
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(except that, in the event of a conflict, those required by
the Air Authority shall prevail);
(d) maintain the Aircraft in conformity with Air Authority
Regulations and such other rules and regulations of the Air
Authority as may from time to time be applicable to passenger
category airline aircraft;
(e) provide Lessor by telex or fax message or by personal delivery
to a technical representative of Manufacturer, if any, with a
monthly summation (which may utilize Air Authority forms) of
Flight Hours and Cycles accumulated on the Airframe and
Engines, and, commencing upon the month following the date
(and so long as) Lessee is required to pay the Reserve Rate
hereunder, Auxiliary Power Unit ("A.P.U.") and Landing Gear
and details of all modifications and material component
changes within ten (10) days after the end of each month.
Such maintenance shall be performed by Lessee or by the Authorized
Maintenance Performer pursuant to the Aircraft Maintenance Agreement
or by any other Authorized Maintenance Performer, for the purposes
of this Lease.
7.2 Except as otherwise provided herein, Lessee, at its own cost and
expense, shall promptly replace all Engines or Parts which may from
time to time become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair, or unserviceable with an engine
or part meeting the requirements of Article 5.1.2(a).
7.3 (a) Save as expressly herein provided the Aircraft shall not
be modified, altered, converted or added to (each such action
in relation to the Aircraft being herein referred to as an
"Equipment Change"), provided that Lessee may, at its own
expense, make such Equipment Changes to the Aircraft as Lessee
may deem desirable in the proper conduct of its business,
provided that no such Equipment Change diminishes the value,
utility, condition or airworthiness of the Aircraft below the
value, utility, condition and airworthiness thereof
immediately prior to such Equipment Change, assuming the
Aircraft was then in the condition required to be maintained
by the provisions of this Lease.
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(b) Title to all Parts incorporated or installed in or attached or
added to the Aircraft as the result of such Equipment Change
shall, without further act, vest in Head Lessor free and clear
of all liens, charges and encumbrances. Lessee shall at its
own expense take all such steps and execute, and procure the
execution of, all such instruments as Lessor may require and
which are necessary to ensure that title to any such
replacement Part as aforesaid passes to Head Lessor according
to the Governing Law and the lex situs, provided, however,
that so long as a Default shall not have occurred and be
continuing, at any time during the Term, Lessee may remove any
such Part if (A) (i) such Part is in addition to, and not in
replacement of or in substitution for, any Part originally
incorporated or installed in or attached to the Aircraft at
the time of the Original Delivery Date, (ii) such Part is not
required to be incorporated or installed in or attached or
added to the Aircraft pursuant to the provisions of Article
7.1 and (iii) such Part can be removed from the Aircraft
without diminishing or impairing the value, utility,
airworthiness, condition or remaining useful life which the
Aircraft would have had at such time, had such Equipment
Change not occurred; or (B) such Part is deemed by Lessee to
be obsolete or no longer suitable or appropriate for use in
the Airframe or Engines (an "Obsolete Part") and its removal
shall not materially decrease the value or adversely affect
the utility or remaining useful life of the Airframe or
Engine, or impair the condition or airworthiness thereof below
the value, utility or remaining useful life, condition or
airworthiness thereof immediately prior to such removal
(assuming the Aircraft was then in the condition required to
be maintained by the terms of the Lease), except that the
value (but not the utility, remaining useful life, condition
or airworthiness) of the Airframe or the Engines may be
reduced, to the extent resulting from the removal of Obsolete
Parts, if the aggregate original cost of all Obsolete Parts
removed from such Aircraft and not replaced shall not exceed
$350,000.
(c) Upon the removal by Lessee of any such Part as above provided,
title thereto shall, without further act, vest in Lessee and
such Part shall no
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longer be deemed a part of the Aircraft. Any Part not removed
by Lessee as above provided prior to the return of the
Aircraft to Lessor hereunder shall remain the property of Head
Lessor (save as the parties may otherwise agree in writing)
provided that Lessor may require Lessee, prior to the end of
the Term, to remove any Parts incorporated or installed in the
Aircraft as a result of an Equipment Change and to restore the
Aircraft to its condition prior to an Equipment Change.
7.4.1 Upon submission by Lessee to Lessor of invoices or receipts
reasonably satisfactory to Lessor evidencing the performance in
accordance with the provisions of this Agreement by or at the
direction of Lessee of:
(a) with respect to the Airframe, the accomplishment of those
items of maintenance characterized as scheduled airframe heavy
maintenance as defined in the Approved Maintenance Program for
12,000 hours and 24,000 hours inspections or any equivalent
thereof with more or less hours ("Airframe Maintenance"), or
(b) with respect to any Engine or the replacement thereof, the
performance of all scheduled shop visit engine maintenance and
repair, other than (i) repairs arising as a result of foreign
object damage or operational mishandling and/or (ii)
maintenance and repair of QEC (Quick Engine Change) kits
("Engine Maintenance"), or
(c) with respect to any nose or main landing gear ("Landing
Gear"), the performance of all scheduled shop visit nose and
main landing gear maintenance and repair, other than repairs
arising as a result of foreign object damage or operational
mishandling ("Landing Gear Maintenance"), or
(d) with respect to the A.P.U., the performance of all off
Aircraft shop A.P.U. maintenance and repair, other than
repairs arising as a result of foreign object damage or
operational mishandling ("A.P.U. Maintenance"),
Lessor shall, subject to Article 3.5 of Appendix D and provided that
a Default shall not have occurred and be continuing, release to
Lessee, from the relevant Maintenance Fund as defined in paragraph
3.2 of
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Appendix D, a sum equal to the aggregate amount evidenced by such
invoices or receipts for such relevant maintenance, to the extent
there are sufficient sums in the relevant Maintenance Fund at the
date of the start of the relevant maintenance. Lessee agrees to use
its reasonable efforts to ensure that the relevant invoices or
receipts are received by Lessor as promptly as possible after
completion of the relevant maintenance. All sums remaining in any
Maintenance Fund at the expiration or other termination of this
Agreement shall be retained by Lessor, except (i) upon payment in
full of Agreed Value and any other amounts due to Lessor or
otherwise hereunder after a Casualty Occurrence pursuant to Article
17.2(b), in which case all sums remaining in any Maintenance Fund
shall be paid to Lessee and (ii) under the circumstances and to the
extent described in Paragraphs 3.6 and 9 of Appendix D. For the
avoidance of doubt, Lessor shall not refuse to release monies from
the Maintenance Fund on the ground that maintenance was required
due to operational mishandling, provided that Lessee can demonstrate
that Lessee complied with the original equipment manufacturer's
written instructions.
7.4.2 Lessor shall be entitled to delay the release or payment of funds
from any Maintenance Fund (to the extent related to any disputed
amounts) to Lessee provided for by this Article 7 until such time as
it shall in its opinion be in a position to determine (which Lessor
agrees to use reasonable efforts to do as promptly as possible) the
amount to be released or paid, but in any event release all
undisputed amounts from the relevant Maintenance Fund (but where
insufficient funds are in such maintenance Fund the lesser pro rata
portion of such funds which corresponds to the undisputed amount)
upon request unless a Default shall have occurred and be continuing.
7.5.1 During the Term, Lessee shall furnish to Lessor such information
concerning the location, condition, use and operation of the
Aircraft as Lessor may reasonably request. The right of Lessor, or
its designated representatives, to inspect the Aircraft during any
Major Checks performed by or on behalf of Lessee during the Term,
shall be absolute and Lessee shall inform Lessor by providing thirty
(30) days' written notice as to time and location of all Major
Checks. During such Major Checks, Lessee agrees to provide
sufficient manpower to allow Lessor, or its authorized
representatives (at Lessor's cost and expense), to
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inspect any area of the Aircraft which Lessor requests to inspect
and which would normally be required during such a Major Check,
provided that such inspection is to be made only at the time that
Lessee opens up such area in accordance with the Approved
Maintenance Program.
Lessee also shall permit any persons designated by Lessor to visit
and inspect the Aircraft, its condition, use and operation, and the
records maintained in connection therewith.
7.5.2 Lessor shall have the right at any time on reasonable notice to
inspect or survey the Aircraft or any part thereof, or instruct a
duly authorized surveyor to carry out a survey on its behalf, to
ascertain the condition of the Aircraft or any part thereof and
satisfy itself that the Aircraft is being properly repaired and
maintained in accordance with the terms of this Lease. The cost of
any such inspection or survey shall be borne by Lessor unless an
Event of Default has occurred and is continuing.
7.5.3 Lessor shall have no duty to make any such inspection as is referred
to in Article 7.5.1 and 7.5.2 and shall not incur any liability or
obligation by reason of not making any such inspection. Except in
connection with any Event of Default hereunder no exercise of any
inspection right under Articles 7.5.1, 7.5.2 or any other provision
of this Lease shall interfere with the normal operation or
maintenance of the Aircraft or the business of Lessee and shall be
conducted during normal maintenance business hours. In connection
with any such inspection, Lessee shall allow Lessor or any persons
designated by Lessor to copy, at Lessor's cost and expense, any
Aircraft Documents or other records relating to maintenance and
operation of the Aircraft. Lessee shall not be liable for the use of
any such Aircraft Documents or other records by Lessor or any other
person or entity which use is unrelated to Lessee's compliance with
the terms of this Lease.
8. TAXES, DUTIES AND EXPENSES
8.1 Lessee agrees promptly to pay and indemnify and hold Lessor harmless
against all Taxes (other than Lessor Taxes) levied or imposed
against or upon or otherwise payable by any Tax Indemnitee or Lessee
and relating to or attributable to Lessee, this Lease, the Aircraft
and/or the importation, exportation, registration,
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ownership, leasing, sub-leasing, delivery, possession, use,
operation, reregistration, repair, maintenance, overhaul,
replacement, improvement, modification, alteration, transportation,
landing, storage, presence or re-delivery of or addition to, the
Aircraft or any Engine or any Part thereof or any rent, receipts,
insurance proceeds or income arising therefrom, or any sum payable
by Lessee to a Tax Indemnitee under this Lease or any other
transactions or activities contemplated by this Lease, provided,
however, that Lessee shall have no indemnity liability under this
Article 8.1 or under Article 8A.1(c) to Lessor for any of the
following Taxes:
(a) any Tax imposed on or payable by Lessor with respect to any
sale, assignment, transfer or other disposition by Lessor of
any interest in the Aircraft or any part thereof or this
Lease, other than any such sale, assignment, transfer or other
disposition (i) that is pursuant to an exercise of remedies
after the occurrence and during the continuance of an Event of
Default or (ii) that is a result of a Casualty Occurrence or
(iii) that is a result of the exercise by Lessee of any of its
options to purchase the Aircraft or (iv) that occurs as a
result of any substitution, replacement or pooling of the
Aircraft, any Engine or any Part by a Lessee Related Person;
(b) any Tax to the extent imposed on Lessor as a result of a
failure of Lessor to comply with any certification,
information, documentation, reporting or other similar
procedure that is required by law (including any applicable
statute, income tax convention, regulation or ruling) as a
condition precedent to the allowance of any reduction in the
rate of such Tax or any exemption or other relief from such
Tax; provided that (i) Lessor is otherwise eligible for such
relief or exemption from such Tax, (ii) Lessor's compliance
with such requirement would not create a material risk of
adverse tax consequences to Lessor for which it is not
indemnified to its reasonable satisfaction and (iii) in the
case of a Tax other than United States Federal income tax or
income tax withholding Lessee shall have notified such Lessor
of such requirement by timely written notice;
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(c) any Tax to the extent resulting from one or more transactions
or activities of Lessor in the jurisdiction imposing the Tax
if those transactions or activities are unrelated to the
transactions described in this Lease or the Other Aircraft
Agreements;
(d) any Tax imposed on or payable by or required to be withheld
from any payment to any assignee or other transferee of any
interest of Lessor in the Aircraft or this Lease (or imposed
on or payable by or required to be withheld from any payment
to any subsequent assignee or other transferee) to the extent
that the amount of such Tax exceeds the amount of such Tax
that would have been imposed on or payable by or required to
be withheld from any payment to Lessor (determined at the time
of transfer) and would have been indemnified by Lessee
pursuant to this Article 8 or Article 8A.1(c) (determined at
the time of transfer); provided that the exclusion described
in this clause (d) shall not apply to any assignee or other
transferee that is a corporation incorporated under the law of
a state of the United States or a partnership each partner of
which is such a corporation, or (provided that Lessor gives
Lessee prior written notice of such transfer) to any assignee
or other transferee that acquires its interest as a result of
the exercise of remedies after the occurrence and during the
continuance of an Event of Default;
(e) any Tax to the extent arising out of or caused by, or to the
extent such Tax would not have been incurred but for, (i) any
act or omission of Lessor if such act or omission is not
permitted by this Lease or the Other Aircraft Agreements or
(ii) the willful misconduct or gross negligence of Lessor or
(iii) the inaccuracy or breach of any representation,
warranty, covenant or agreement by Lessor in this Lease except
to the extent that such act, omission, inaccurate
representation or breach is attributable to an act, omission,
inaccurate representation or breach by Lessee;
(f) any Tax to the extent resulting from any amendment to any Head
Lease Operative Document to which Lessee is not a party unless
(i) Lessee shall have given its prior written consent to such
amendment or (ii) such amendment consists of a change in the
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"Basic Rent" schedule of the Head Lease resulting from a
suspension or reduction of Lessee's payments of Rent under
this Lease that continues for a period of more than 60 days,
or (iii) such amendment is required by applicable Law relating
to the Aircraft or any part thereof or relating to Lessee;
(g) any Tax imposed on or payable by Lessor to the extent
indemnified pursuant to Article 8A hereof;
(h) any Tax imposed on or payable by Lessor to the extent arising
out of or caused by, or to the extent such Tax would not have
been incurred but for, the existence of any Lessor's Lien;
(i) half of any sales tax payable in connection with the purchase
of the Aircraft by Lessee pursuant to Lessee's exercise of a
purchase option described in Paragraph 9 of Appendix D of this
Lease (it being understood and agreed that each of Lessee and
Lessor shall pay half of any sales tax payable with respect to
Lessee's purchase of the Aircraft pursuant to Lessee's
exercise of such a purchase option); or
(j) half of any sales or use tax payable in connection with the
transfers of the Aircraft and the lease and sublease of the
Aircraft on the Delivery Date (it being understood and agreed
that each of Lessee and Lessor shall pay half of any sales or
use tax payable with respect to such sales, lease and sublease
of the Aircraft on the Delivery Date).
If Lessee is required by any applicable Law or regulation to deliver
or furnish any report or return in connection with any such Taxes
(other than Lessor Taxes), Lessee shall complete the same in a
manner reasonably satisfactory to the relevant Tax Indemnitee and in
particular no such report or return shall contain any statement that
is inconsistent with Head Lessor's being the owner of the Aircraft,
and Lessee shall supply a copy of such report or return to the
relevant Tax Indemnitee promptly upon receipt of a request therefor
from such Tax Indemnitee.
All payments by Lessee hereunder to Lessor shall be free of
withholdings of any nature whatsoever (and at the time Lessee is
required to make any payment upon
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which any withholding is required, Lessee shall pay an additional
amount such that the net amount actually received by Lessor will,
after such withholding, equal the full amount of the payment then
due) and shall be free of expense for collection or other charges.
If Lessee shall have paid any additional amount pursuant to the
first sentence of this paragraph with respect to Taxes not subject
to indemnification pursuant to the provisions of this Section 8.1,
Lessor shall reimburse Lessee within 10 Business Days of written
demand therefor for the amount of such Taxes so paid by Lessee. For
the purpose of this Article 8 and Article 8A, the term "Lessor"
shall include each group of corporations (and each member thereof
that is a corporation organized under the laws of the United States
or any state thereof) that includes Lessor and for which
consolidated, combined, unitary or other group tax returns are
filed.
8.2 Except as otherwise specifically provided herein, Lessee shall pay
to Lessor on or after Delivery Date (unless otherwise agreed to be
financed by Lessor) upon demand:
(a) all reasonable expenses paid to third parties (including
reasonable legal, printing and out-of-pocket expenses)
incurred or payable by Lessor, FAUSA and Fokker related to any
amendment to or extension of, or the granting of any waiver or
consent under, this Lease in each case requested or caused by
Lessee;
(b) the Transaction Expenses;
(c) all reasonable expenses paid to third parties (including
reasonable legal fees and disbursements but excluding surveyor
costs) payable or incurred by Lessor in connection with the
enforcement of or preservation of any rights of Lessor under
this Lease or otherwise in respect of moneys owing under this
Lease by Lessee or in respect of any breach by Lessee of any
representation, warranty, covenant or undertaking herein
contained; and
(d) the ongoing annual fees and reasonable out-of-pocket expenses
(other than those incurred in connection with any of the
events described in Articles 12.3(c) or 12.3(d) and those
incurred pursuant to a change in such trustees which was
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not requested by Lessee) related to the Head Lease of Owner
Trustee and Indenture Trustee.
8.3 Lessee shall pay all stamp, documentary, registration or other like
duties or taxes (including any such duties or taxes payable by a Tax
Indemnitee but excluding all Lessor Taxes) imposed on or in
connection with this Lease and shall indemnify each Tax Indemnitee
against any liability arising by reason of any delay or omission by
Lessee to pay such duties or taxes.
8.4 If and to the extent that any sum (the "indemnity sum") constituting
(directly or indirectly) an indemnity to one or more Tax Indemnitees
paid by Lessee to any person other than that Tax Indemnitee shall be
treated as taxable in the hands of the relevant Tax Indemnitee,
Lessee shall pay to the relevant Tax Indemnitee such sum as (after
taking into account any taxation suffered by the relevant Tax
Indemnitee on the indemnity sum) shall reimburse the relevant Tax
Indemnitee for the net amount of any Taxes suffered by them in
respect of the indemnity sum (after taking into account any current
tax savings or other benefits to the relevant Tax Indemnitee
resulting from the payment or accrual of the indemnified expense).
8.5 If and to the extent that any sums payable to a Tax Indemnitee by
Lessee under this Lease by way of indemnity are insufficient, by
reason of any Taxes payable in respect of those sums, for that Tax
Indemnitee to discharge the corresponding liability to the relevant
third party (including any taxation authority), or to reimburse that
Tax Indemnitee for the cost incurred by it to a third party
(including any taxation authority), Lessee will pay to that Tax
Indemnitee such sum as will after the tax liability has been fully
satisfied leave that Tax Indemnitee with the same net amount (after
taking into account any current tax savings or other benefits to the
that Tax Indemnitee resulting from the payment or accrual of the
indemnified expense) as it would have been entitled to receive in
the absence of that liability. For the purpose of computing the
amount of an indemnity payment pursuant to this Article 8.5 and the
amount of any payment to Lessee under Article 8, it shall be assumed
that the relevant Tax Indemnitee is subject to tax on the amount of
each indemnity it receives or accrues under this Lease and can use
any tax savings to offset Taxes at the highest marginal statutory
rates of tax applicable to that Tax Indemnitee (as certified to
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Lessee by an officer of that Tax Indemnitee) at the time such
indemnity or tax savings is received or accrued.
8.6 If, as a result of any indemnity paid by Lessee or any event giving
rise to an indemnity obligation of Lessee, a Tax Indemnitee at any
time realizes any tax savings, refunds or other reductions in taxes
not previously taken into account in computing the amount of an
indemnity, that Tax Indemnitee shall promptly pay to Lessee the
amount of such Tax savings, refunds or other reductions in Taxes;
provided, however, that no Tax Indemnitee will be required to make
any payment to Lessee pursuant to this Article 8.6 so long as a
Default shall be continuing or if Lessee shall not have theretofore
made all payments due to all Tax Indemnitees under this Lease, or to
the extent that the amount of such payment would exceed the amount
of all prior payments by Lessee to the relevant Tax Indemnitee
pursuant to this Article 8 less the amount of all prior payments by
the relevant Tax Indemnitee to Lessee pursuant to this Article 8.6.
The relevant Tax Indemnitee shall estimate the amount of such Tax
savings, refunds and other reductions in Taxes and shall use
reasonable efforts to take such actions in filing its tax returns
and in dealing with taxing authorities to seek and claim each such
Tax savings, refund and other reduction in Taxes, but shall not be
obligated to take any such action that it determines in its sole
discretion to involve the imposition or risk of any material
unindemnified cost or expense, and in no event will any person have
any right to inspect the books, records, tax returns or other
documents of any Tax Indemnitee, and the positions to be taken by
any Tax Indemnitee on or with respect to its tax returns and in any
tax proceedings shall be within its sole control.
8.7 Lessee's, and each Tax Indemnitee's obligations under this Article 8
shall continue in full force and effect, notwithstanding the
expiration or earlier termination of the Term hereunder.
8.8 If Lessee disputes the payment or imposition of any Taxes payable by
a Tax Indemnitee for which Lessee is responsible under this Lease,
that Tax Indemnitee will take such action as Lessee may reasonably
request at Lessee's expense to contest that payment or imposition
but that Tax Indemnitee will not be obliged to take any such action:
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(a) which that Tax Indemnitee considers in good faith may result
in the imposition of any material liability, cost, or expense
for which that Tax Indemnitee is not indemnified to its
reasonable satisfaction; or
(b) which that Tax Indemnitee considers not to have a reasonable
prospect of success, unless Lessee delivers to that Tax
Indemnitee a written opinion of independent tax counsel
selected by Lessee and reasonably acceptable to Lessor to the
effect that there is a Reasonable Basis for taking such
action; or
(c) for which Lessee has not made adequate provision to the
reasonable satisfaction of that Tax Indemnitee in respect of
the liability, cost or expense concerned.
8.9 If Lessor determines that any Indemnified Tax is required to be
withheld from any amount payable or creditable to or for the account
of any holder of a Loan Certificate, Lessor shall give prompt
written notice thereof to Lessee and if requested by Lessee by
written notice given within 10 Business Days after Lessee's receipt
of Lessor's written notice, Lessor shall exercise its rights under
Section 7A(b) (xi) of the Participation Agreement in the manner
requested by Lessee, provided that Lessor shall not be required to
take any action pursuant to this Article 8.9 that might reasonably
be expected to involve Lessor in any unlawful activity or might
reasonably be expected to subject Lessor or any Affiliate of Lessor
to any expense deemed material by Lessor unless Lessor is
indemnified therefor to its reasonable satisfaction.
8A. SPECIAL INDEMNITY
8A.l Indemnity.
(a) Inclusions. Except to the extent provided in Article 8A.2(a),
if Lessor is required by any tax authority to include in its
income for income tax purposes, or Lessor receives an opinion
of Lessor's tax counsel that Lessor does not have a Reasonable
Basis to exclude from its income for income tax purposes, any
amount relating to the Aircraft or any part thereof or the
Lease or any of the transactions, activities or payments
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described in or contemplated by the Lease, other than (i)
Rent, (ii) Reserve Rate, (iii) Supplemental Rent, (iv) any
proceeds derived from a sale of the Aircraft resulting from
the exercise by Lessee of a purchase option pursuant to
Paragraph 9 of Appendix D of this Lease, (v) any payment
calculated by reference to Agreed Value, (vi) any amount
specifically identified in the Lease as interest, (vii) any
payment calculated on an After-Tax Basis, (viii) any payment
pursuant to the terms of the Operating Lease Operative
Documents, (ix) any other amount to the extent offset by
deductions that would not have been currently available but
for the event which gave rise to the amount included in
Lessor's income and that are of the same character as such
income inclusion and are allowed in the same taxable year of
Lessor in which such amounts are included in Lessor's income,
or the Deposit described in Appendix D of this Lease or any
interest thereon (herein called an "Inclusion"), Lessee shall
pay to Lessor an amount which, on an After-Tax Basis, shall be
equal to the amount of additional taxes on or measured by
gross or net income (plus any and all fines, penalties,
additions to tax and interest calculated by reference thereto)
payable by Lessor as a result of such Inclusion.
(b) Pass-through of Tax Indemnity Agreement indemnities. Except to
the extent provided in Article 8A.2(b), if Lessor is required
to pay to Owner Participant any amount (herein called a "TIA
Liability") pursuant to the Tax Indemnity Agreement (Trust No.
117-A) dated as of July 10, 1995 between Lessor and Owner
Participant, Lessee shall pay to Lessor an amount which, on an
After-Tax Basis, shall be equal to that TIA Liability.
(c) Pass-through of Participation Agreement general tax indemnity
liability. Except to the extent provided in Article 8A.2(c),
if Lessor is required to pay any amount pursuant to Section 7A
of the Participation Agreement (herein called a "Head Lease
General Tax Indemnity Liability") and if the Tax that is the
subject of such Head Lease General Tax Indemnity Liability is
a Specified Tax, Lessee shall pay to Lessor an amount which,
on an AfterTax Basis, shall be equal to that Head Lease
General Tax Indemnity.
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(d) Minimum indemnity. The amount of any indemnity payable by
Lessee to Lessor pursuant to this Article 8A shall in all
events be an amount sufficient to restore Lessor to the
position Lessor would be in if the Inclusion or TIA Liability
or Head Lease General Tax Indemnity Liability that gave rise
to Lessee's liability under this Article 8A had not occurred.
8A.2 Exceptions.
(a) Exceptions to indemnity for Inclusions. Lessee shall not be
required to indemnify Lessor pursuant to Article 8A.1(a) for
Taxes to the extent arising from any of the following
Inclusions:
(i) any Inclusion caused by an event that occurs after the
expiration or earlier termination of this Lease, the
payment by Lessee of all Rent and other amounts due
pursuant to the Operating Lease Operative Documents, and
(if required by the terms of this Lease) the return of
the Aircraft to Lessor in accordance with the terms of
this Lease, provided that the exclusion set forth in
this Article 8A.2(a)(i) shall not apply to any Inclusion
to the extent such Inclusion is a result of one or more
events occurring or circumstances existing prior to or
concurrently with the expiration or earlier termination
of this Lease or to any payment or amount payable by
Lessee pursuant to this Lease or any other Operating
Lease Operative Document, or
(ii) any Inclusion that would not have occurred but for a
sale, assignment, transfer or other disposition by
Lessor of any interest in the Aircraft or this Lease,
either voluntarily or by reason of bankruptcy or similar
proceedings for the relief of debtors in which Lessor is
the debtor, unless in either case such disposition
occurs in connection with or as a result of (A) an Event
of Default, (B) a Casualty Occurrence, (C) any
substitution, replacement or pooling of the Aircraft or
any part thereof, (D) any maintenance, repair,
improvement, modification or alteration of, or
addition to, the Aircraft or any part thereof, or
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unless in either case such disposition is required by
applicable Law, or
(iii) any Inclusion that would not have occurred but for (A)
the refinancing of the Loan Certificates or (B) the
gross negligence or willful misconduct of Lessor, or
(iv) any Inclusion that would not have occurred but for the
timing of the recognition of income under Section 467 of
the Code unless such Inclusion would not have occurred
but for (A) any payment of Rent on a date prior to the
date on which such payment is scheduled to be due, (B)
any payment by Lessee of any expenses of any Tax
Indemnitee, or (C) the acquisition by Lessee or another
Lessee Related Person of any interest in the Loan
Certificates or any other evidence of indebtedness
issued by the Head Lessor to refund or refinance the
Loan Certificates in accordance with the Head Lease
Operative Documents, or
(v) any Inclusion that would not have occurred but for any
change in or addition to the Internal Revenue Code of
1986, any other statute relating to Federal income
taxes, any treaty, any regulation, revenue ruling,
revenue procedure or other administrative
interpretation, or any executive order that is enacted,
promulgated or issued after the Delivery Date, provided
that the exclusion in this clause (v) shall not apply to
any Inclusion resulting from (A) any alteration,
improvement, modification, pooling, repair, addition,
replacement or substitution of or to the Aircraft or any
part thereof, (B) any payment by Lessee of any expenses
of any Tax Indemnitee, or (C) the acquisition by Lessee
or another Lessee Related Person of any interest in the
Loan Certificates or any other evidence of indebtedness
issued by the Head Lessor to refund or refinance the
Loan Certificates in accordance with the Head Lease
Operative Documents, or
(vi) any Inclusion that would not have occurred but for an
event or occurrence as a result of which Lessee is
required to pay and shall
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have paid in full an amount calculated by reference to
Agreed Value.
(b) Exceptions to indemnity for TIA Liability. Lessee shall not be
required to indemnify Lessor pursuant to Article 8A.1(b) for
any TIA Liability that is not a result of an Operating Lease
Indemnification Event or that would not have been incurred but
for any of the following:
(i) the gross negligence or willful misconduct of Lessor, or
(ii) Lessor claiming deductions for depreciation of the
Aircraft for Federal, state or local income tax
purposes, or
(iii) Lessor (or any Affiliate of Lessor) claiming to be the
owner of the Aircraft for U.S. tax purposes, or
(iv) Lessor (or any Affiliate of Lessor) claiming deductions
for interest on the Loan Certificates for Federal, state
or local income tax purposes, or
(v) Lessor acquiring any interest in the Loan Certificates,
or
(vi) Lessor supplying to the Appraiser inaccurate information
unless such information was obtained from Lessee, or
(vii) the timing of the recognition of income under Section
467 of the Code unless such Inclusion would not have
occurred but for (A) any payment of Rent on a date prior
to the date on which such payment is scheduled to be
due, (B) any payment by Lessee of any expenses of any
Tax Indemnitee, or (C) the acquisition by Lessee or
another Lessee Related Person of any interest in the
Loan Certificates or any other evidence of indebtedness
issued by the Head Lessor to refund or refinance the
Loan Certificates in accordance with the Head Lease
Operative Documents, or
(viii) the failure of the Head Lease to be a "true lease" for
Federal income tax purposes or the failure of Owner
Participant to be the owner
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of the Aircraft (including any such failure resulting
from the existence of any of Lessee's rights under the
Operating Lease Operative Documents), unless such
failure is caused by an Operating Lease Indemnification
Event, or
(ix) any change in or addition to the Code, any other statute
relating to Federal income taxes, any treaty, any
regulation, revenue ruling, revenue procedure or other
administrative interpretation, or any executive order
that is enacted, promulgated or issued after the
Delivery Date, provided, however, that the exclusion in
this clause (ix) shall not apply to any Inclusion
resulting from (A) any alteration, modification,
pooling, repair, addition, replacement or substitution
of or to the Aircraft or any Engine, (B) any payment by
Lessee of any expenses of any Tax Indemnitee, or (C) the
acquisition by Lessee or another Lessee Related Person
of any interest in the Loan Certificates or any other
evidence of indebtedness issued by the Head Lessor to
refund or refinance the Loan Certificates in accordance
with the Head Lease Operative Documents, or
(x) Owner Participant's having an adjusted basis with
respect to the Aircraft that is less than Lessor's Cost
except to the extent resulting from an Operating Lease
Indemnification Event, or
(xi) any event or occurrence as a result of which Lessee is
required to pay and shall have paid in full an amount
calculated by reference to Agreed Value;
(xii) any inaccuracy in the Appraisal unless caused by the
inaccuracy of Lessee's representation in Article 8A.10,
or
(xiii) any disposition of Lessor's interest in the Aircraft or
the Operating Lease Operative Documents either
voluntarily or by reason of Lessor's bankruptcy or
similar proceedings for the protection of debtors in
which Lessor is a debtor, provided that the exclusion in
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this clause (xiii) shall not apply to (A) a disposition
pursuant to the exercise of remedies after the
occurrence and during the continuance of an Event of
Default, (B) a disposition resulting from a Casualty
Occurrence or (C) a disposition resulting from a
substitution, replacement or pooling of the Aircraft,
any Engine or any part of either thereof by Lessee or
any other Lessee Related Person.
(xiv) any amendment or modification of any of the Head Lease
Operative Documents approved by Lessor and to which
Lessee has not consented in writing unless unless (A)
Lessee shall have given its prior written consent to
such amendment or (B) such amendment consists of a
change in the "Basic Rent" schedule of the Head Lease
resulting from a suspension or reduction of Lessee's
payments of Rent under this Lease that continues for a
period of more than 60 days, or (C) such amendment is
required by applicable Law relating to the Aircraft or
any part thereof or relating to Lessee;
(xv) the treatment of the Aircraft as "tax-exempt use
property" by reason of Lessor's status as a "tax-exempt
entity" within the meaning of Section 168(h) of the
Code;
(xvi) any failure of the Aircraft to be registered with the
United States Federal Aviation Administration or any
successor thereto by reason of the status or citizenship
of Lessor;
(xvii) any breach of Lessor's obligations relating to the
Lessee's contest rights pursuant to Article 8A.6 hereof
to the extent such failure legally precludes Lessee from
contesting, or causing a contest of, an indemnified
claim;
(xviii) the reporting by the Owner Participant of an Inclusion
on any of its Federal income tax returns, unless Lessee
has received a copy of the opinion of independent tax
counsel described in Section 3.1 of the Tax Indemnity
Agreement with respect to such Inclusion;
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(xix) the inaccuracy of the representation in Section 2(f) of
the Tax Indemnity Agreement;
(xx) the refinancing of the Loan Certificates other than a
refinancing requested by Lessee; or
(xxi) the existence of the Assignment of Termination Agreement
dated as of July 10, 1995 from Fokker Aircraft B.V. to
Kreditanstalt fur Wiederaufbau.
(c) Exceptions to indemnity for Head Lease general tax indemnity
liability. Lessee shall not be required to indemnify Lessor
pursuant to Article 8A.1(c) for any Head Lease General Tax
Indemnity Liability that would not have been incurred but for
any of the following:
(i) an event that occurs after the expiration or earlier
termination of this Lease, the payment by Lessee of all
Rent and other amounts due pursuant to this Lease and
the other Operating Lease Operative Documents and (if
required by the terms of this Lease) the return of the
Aircraft to Lessor in accordance with the terms of this
Lease, provided that the exclusion set forth in this
Article 8A.2(c) (i) shall not apply to any Head Lease
General Tax Indemnity Liability to the extent such Head
Lease General Tax Indemnity Liability is a result of one
or more events occurring or circumstances existing prior
to or concurrently with the expiration or earlier
termination of this Lease or to any payment or amount
payable by Lessee pursuant to this Lease or any other
Operating Lease Operative Document, or
(ii) a sale, assignment, transfer or other disposition by
Lessor of any interest in this Lease either voluntarily
or by reason of bankruptcy or similar proceedings for
the relief of debtors in which Lessor is the debtor,
unless in either case such disposition occurs in
connection with or as a result of an Event of Default, a
Casualty Occurrence, a substitution, replacement or
pooling of the Aircraft or any part thereof, the
exercise by Lessee of any option to
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terminate the Lease or to purchase the Aircraft or any
act or omission of Lessee, or unless in either case such
disposition is required by Applicable Law, or
(iii) the gross negligence or willful misconduct of Lessor, or
8A.3 Time of Payment by Lessee.
Any payment due under this Article 8A to Lessor shall be paid by
Lessee within 15 Business Days after receipt of a written demand
therefor from Lessor, provided that Lessee shall not be required to
make any such payment before the date that is two Business Days
prior to the date on which Lessor's related income tax payment, TIA
Liability or Head Lease General Tax Indemnity payment is due. If
Lessor is required to pay an indemnity pursuant to the Tax Indemnity
Agreement, Lessor agrees to elect, pursuant to Section 3.3 of the
Tax Indemnity Agreement, the form of indemnity payment requested by
Lessee in writing provided that Lessor receives Lessee's written
request at least two Business Days before the last day for making
such election.
8A.4 Tax Savings; Contest.
The provisions of Articles 8.6 (relating to tax savings) and 8.8
(relating to contesting Taxes) of this Lease shall apply, mutatis
mutandis, to the indemnity for Inclusions described in Article
8A.l(a) hereof.
8A.5 Payments From Head Lease Tax Indemnitees.
If any Head Lease Tax Indemnitee shall pay any amount to Lessor
pursuant to Section 7A(b), 7A(e), 7A(g) or 7A(h) of the
Participation Agreement or pursuant to Section 3.2 or 4 of the Tax
Indemnity Agreement, for which Lessee has previously paid an
indemnity to Lessor pursuant to Article 8A.l hereof, Lessor shall
pay such amount to Lessee within 15 Business Days after Lessor
receives such amount.
8A.6 Contest.
If Lessor receives a written claim for an indemnity pursuant to
Section 7A of the Participation Agreement or pursuant to the Tax
Indemnity Agreement for which Lessee would be required to pay Lessor
an indemnity
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pursuant to this Article 8A, Lessor shall promptly notify Lessee
thereof in writing. If requested by Lessee by written notice
received by Lessor at least four Business Days before the latest
date on which Lessor may request or initiate a contest pursuant to
Section 7A(g) of the Participation Agreement or Section 4 of the Tax
Indemnity Agreement, Lessor shall exercise its rights under Section
7A(g) of the Participation Agreement or under Section 4 of the Tax
Indemnity Agreement, as the case may be, in the manner requested by
Lessee, provided that in no event shall Lessor be required to
initiate or continue (or required to request any other Person to
initiate or continue) a contest of any such claim unless:
(a) no Major Default or Event of Default shall have occurred and
be continuing unless Lessee shall have provided security
reasonably satisfactory to Lessor securing Lessee's
performance of its obligations under this Article 8A;
(b) Lessee shall have agreed to pay on an After-Tax Basis all
reasonable costs and expenses that Lessor incurs in connection
with contesting such claim and all amounts that Lessor is
required to pay from time to time pursuant to Section 7A(g)
(iv) (B) of the Participation Agreement or Section 4(d) of the
Tax Indemnity Agreement, as the case may be;
(c) the action to be taken will not result in a material danger of
sale, forfeiture or loss of the Aircraft or any part thereof
or any interest therein or the creation of a Lien (other than
a Permitted Lien) on the Aircraft, the Trust Estate or the
Trust Indenture Estate unless Lessee shall have adequately
bonded or otherwise made provision to protect the interests of
Lessor and the Owner Participant in a manner reasonably
satisfactory to Lessor and the Owner Participant;
(d) if such contest shall require payment of the Tax claimed,
Lessee shall have advanced on an interest-free basis the
amount thereof (including any interest, penalties and
additions to tax with respect thereto) for the period during
which such contest is continuing and shall have agreed to
indemnify such Lessor and (in the case of a contest pursuant
to Section 4 of the Tax Indemnity Agreement) the Owner
Participant or (in the case
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of a contest pursuant to Section 7A of the Participation
Agreement) each Head Lease Tax Indemnitee for any adverse tax
consequences of such interest-free loan;
(e) Lessee shall have acknowledged its obligation to indemnify
Lessor should the contested claim prove to be correct except
to the extent that the Final Determination demonstrates that
Lessee would not be so obligated absent such acknowledgment;
(f) in the case of a Tax Indemnitee Controlled Contest pursuant to
Section 7A(g) of the Participation Agreement or any contest
pursuant to Section 4 of the Tax Indemnity Agreement, Lessor
and the relevant Head Lease Tax Indemnitee shall have
received, at Lessee's expense, a written opinion of
independent tax counsel selected by Lessee and reasonably
acceptable to Lessor and such Head Lease Tax Indemnitee to the
effect that there is a Reasonable Basis for such contest;
(g) in the case of a Tax Indemnitee Controlled Contest pursuant to
Section 7A of the Participation Agreement, the amount of the
indemnity that would be payable by Lessor pursuant to Section
7A if such claim is not contested or if a contest of such
claim is unsuccessful (plus the aggregate amount of the
indemnities that would be payable by Lessor pursuant to
Section 7A if all related claims that have been or could be
raised with respect to any other period are not contested)
would exceed $ 10,000; and
(h) in the case of a contest pursuant to Section 4 of the Tax
Indemnity Agreement, the amount of the indemnity that would be
payable by Lessor pursuant to the Tax Indemnity Agreement if
such claim is not contested or if a contest of such claim is
unsuccessful (plus the aggregate amount of the indemnities
that would be payable by Lessor pursuant to the Tax Indemnity
Agreement if all related claims that have been or could be
raised with respect to any other period are not contested)
would exceed $ 50,000.
8A.7 Verification
If requested by Lessee in writing within ten Business Days after
receipt of a Lessor demand for an indemnity,
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Lessor shall exercise its rights under Section 7A(j) of the
Participation Agreement or under Section 3.8 of the Tax Indemnity
Agreement, as the case may be, provided that Lessee shall have
agreed to pay, and shall be paying currently, on an After-Tax Basis
any and all amounts payable by Lessor under Section 7A(j) of the
Participation Agreement or under Section 3.8 of the Tax Indemnity
Agreement, as the case may be.
8A.8 Documents and Other Information
(a) Lessee shall provide or cause to be provided to Lessor, upon
request, all documents and other information that Lessor is
required to provide to any Head Lease Tax Indemnitee pursuant
to the Head Lease Operative Documents and that is within the
control of any Lessee Related Person.
(b) Lessee shall prepare or cause to be prepared, and shall timely
file or cause to be timely filed, all returns, reports,
statements and other documents that Lessor is required to
prepare and/or file pursuant to Section 7A(i) of the
Participation Agreement; provided that Lessor shall have
furnished or caused to be furnished to Lessee any information
that is reasonably requested by Lessee, that is not within the
control of a Lessee Related Person, that is within the control
of Lessor or of a Head Lease Tax Indemnitee and that is
reasonably necessary to enable Lessee to prepare and file such
report, return or statement.
(c) Lessee shall timely pay or cause to be timely paid directly to
the appropriate taxing authority all amounts that Lessor is
required to pay directly to such taxing authority pursuant to
Section 7A(f) of the Participation Agreement to the extent
that Lessee is liable for such amount pursuant to this Article
8.
8A.9 Certain Definitions
As used in this Lease:
(a) "Affiliate" means, with respect to any Person, any other
Person (other than an individual) directly or indirectly
controlling, controlled by, or under direct or indirect common
control with such Person; or if such Person is a partnership,
any general partner of such Person or Person
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controlling such general partner. A Person shall be deemed to
control another Person if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the
management and policies of such other Person, whether through
the ownership of voting securities, by contract or otherwise.
(b) "After-Tax Basis" has the meaning explained as follows: If
Lessee is required to pay a specified amount on an After-Tax
Basis to or for the benefit of any Person, the Lessee must pay
the sum of (i) the specified amount plus (ii) the net amount
of all Taxes (taking into account any current deduction or
other income tax benefit actually realized by such Person
resulting from the payment or accrual of the cost, expense or
tax for which the specified amount is payable) required to be
paid by such Person with respect to the receipt or accrual of
the specified amount and the additional amounts described in
this clause (ii) (calculated by assuming, in the case of any
payment to or for the benefit of the Owner Participant or any
related tax indemnitee, that such Person is subject to United
States Federal income tax at the highest marginal statutory
rate imposed on corporations for the relevant period, and is
subject to United States state and local income taxes and
foreign income taxes at the actual rates applicable to such
Person for the relevant period, with respect to the receipt or
accrual of such amount by such Person. If Lessee shall have
paid or reimbursed any Person pursuant to the Operating Lease
Operative Documents for any expense on an After-Tax Basis (an
"After-Tax Basis Payment") and such Person (or a member of a
group of corporations that includes such Person and for which
consolidated, combined or unitary tax returns are filed) shall
actually realize any tax savings attributable to such expense,
such Person shall pay to Lessee an amount equal to the sum of
(x) the amount of such tax savings plus (y) the amount of any
further tax savings realized by such Person (or by a member of
such group of corporations) as a result of such payment,
provided that the amount paid to Lessee pursuant to this
sentence shall not exceed the amount of Lessee's underlying
After-Tax Basis Payment, and provided further that if any such
tax savings are subsequently disallowed or reduced, such lost
tax
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savings shall be deemed to be a Tax for which Lessee is
required to indemnify Lessor pursuant to Article 8, without
regard to any exclusion of Lessor Taxes.
(c) "Appraisal" means the opinion provided by BK Associates
concerning the Aircraft pursuant to the Participation
Agreement.
(d) "Code" means the Internal Revenue Code of 1986, as amended
(e) "Final Determination" means (A) a decision, judgment, decree
or other order by any court of competent jurisdiction, which
decision, judgment, decree or other order has become final and
unappealable (or, if appealable to the U.S. Supreme Court, the
relevant Tax Indemnitee has not consented to such appeal), (B)
a closing agreement or any other binding settlement agreement
entered into with the consent of Lessee in connection with an
administrative or judicial proceeding which is not subject to
further appeal, or (C) the expiration of the time for
instituting a claim for refund, or if such claim for refund is
filed, the expiration of the time for instituting suit with
respect thereto.
(f) "Head Lease Operative Documents" means each of the
Participation Agreement, the Lease, each Lease Supplement, the
Tax Indemnity Agreement, the Support Services Agreement, the
Support Services Agreement Assignment, the Indenture, each
Indenture Supplement, the Trust Agreement, the Initial
Sublease, each other Qualified Sublease, the Sublease
Certificate of Acceptance, the Sublease Assignment, the
Consent to Assignment, the Consent and Agreement, the Loan
Certificates outstanding at the time of reference, the
Guaranties, the FAA Bill of Sale, the Warranty Bill of Sale,
the DASA Confirmation, the Fokker Confirmation and the
Assumption Agreement (as each of the foregoing is defined in
Schedule Z to the Participation Agreement), each as amended,
modified or supplemented from time to time in accordance with
its terms.
(g) "Head Lease Tax Indemnitee" means any of the following: (i)
the Owner Participant, the Head Lessor (in its individual
capacity and as Owner
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Trustee), the Trust Estate, the Indenture Trustee (in its
individual capacity and as the Indenture Trustee), the Loan
Participant, the Trust Indenture Estate (as each of the
foregoing is defined in Schedule Z to the Participation
Agreement), (ii) each successor or permitted assignee of each
entity described in subdivision (i) above, (iii) each
Affiliate of each entity described in subdivisions (i) and
(ii) above, and (iv) each director, officer, employee and
agent (in their respective representative capacities) of each
entity described in subdivisions (i), (ii) and (iii) above;
(h) "Lessee Related Person" means any of the following: Lessee,
any sublessee or sub-sublessee of Lessee, any other Person
(other than a Lessor Related Person) in possession or use of
the Aircraft or any part thereof through Lessee, and any
Affiliate, successor or assign of any of the foregoing.
(i) "Lessor Related Person" means any of the following: Lessor,
each successor or permitted assignee of Lessor and each
Affiliate of each of the foregoing.
(j) "Loan Certificates" means the loan certificates issued
pursuant to the Indenture.
(k) "Major Default" means a Default described in Article 15.1(a),
15.1(f) or 15.1(h) of this Lease.
(l) "Operating Lease Indemnification Event" means any of the
following:
(i) any act or omission of Lessee or any other Lessee
Related Person other than a Required Act or Omission or
a Permitted Act,
(ii) any breach or inaccuracy of any representation, warranty
or covenant of Lessee in this Lease or in the Lease
Termination Agreement dated as of July~10, 1995 among
Fokker Aircraft B.V., Lessee and First Security Bank of
Utah, National Association, as owner trustee,
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(iii) any destruction, theft, confiscation or requisition of
title to the Aircraft or any part thereof,
(iv) any warranty or similar payment received or receivable
by Lessee or another Lessee Related Person with respect
to the Aircraft, any Engine or any part thereof and not
paid or payable to, and retained by Owner Participant,
Owner Trustee or Lessor,
(v) any alteration, modification, improvement, addition,
repair, maintenance, replacement, substitution or
pooling of or to the Aircraft, any Engine or any part of
any thereof by Lessee or any other Lessee Related
Person.
(m) "Operating Lease Operative Documents" means this Lease and (to
the extent relating to the Aircraft) the Credit and Security
Agreement, the Note, the Support Services Agreement, the
Termination Agreement and each other agreement between Lessee
and Lessor (or any affiliate ~f Lessor) relating to the lease
of the Aircraft by Lessor (or any affiliate of Lessor) to
Lessee, each as amended, modified or supplemented from time to
time in accordance with its terms.
(n) "Permitted Act" means the execution and delivery of the
Operating Lease Operative Documents and any act that is
expressly permitted by Paragraph 9 of Appendix D of this
Lease.
(o) "Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust,
unincorporated organization or Government Entity.
(p) "Reasonable Basis" for a position exists if tax counsel may
properly advise reporting such a position on a tax return in
accordance with Formal Opinion 85-352 issued by the Standing
Committee on Ethics and Professional Responsibility of the
American Bar Association.
(q) "Required Act or Omission" means any act or omission that is
expressly required by any of the Operating Lease Operative
Documents.
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(r) "Specified Tax" means any Tax imposed on, payable by or
asserted against any Head Lease Tax Indemnitee arising from,
as a result of, with respect to or in connection with any of
the following or any combination of the following:
(i) any act or omission of Lessee or any other Lessee
Related Person or any failure of Lessee or any other
Lessee Person to act when required to act,
(ii) any breach or inaccuracy of any representation, warranty
or covenant of Lessee in the Lease or the Lease
Termination Agreement,
(iii) any loss, damage, destruction, casualty, forfeiture,
theft, governmental taking, confiscation, requisition,
seizure or condemnation of the Aircraft or any part
thereof,
(iv) any alteration, modification, improvement, addition,
repair, maintenance, testing, servicing, replacement,
substitution or pooling of or to the Aircraft, any
Engine or any part of any thereof by Lessee or any other
Lessee Related Person,
(v) the location, use, insuring, possession, leasing,
subleasing, sub-subleasing, storage, operation, basing
or presence of the Aircraft or any part thereof by
Lessor under this Lease or by Lessee or any other Lessee
Related Person,
(vi) the situs of organization, any place of business or any
activity or transaction of Lessee or any other Lessee
Related Person in the jurisdiction imposing the tax,
(vii) any amount paid or payable pursuant to the Loan
Certificates or the Indenture to the extent such Tax
would not have been imposed but for a change after the
Delivery Date in the income tax convention between the
United States and Germany as in effect on the Delivery
Date,
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(viii) any amount paid or payable pursuant to the Head Lease
(to the extent resulting from the location or use of the
Aircraft or any part thereof) or this Lease,
(ix) the return, redelivery, importation or exportation
resulting from the use of the Aircraft by Lessee or any
other Lessee Related Person, abandonment or other
disposition of the Aircraft or any part thereof by
Lessee or any other Lessee Related Person,
(x) the enforcement of rights under the Head Lease Operative
Documents or the Operating Lease Operative Documents, in
each case after the occurrence and during the
continuance of an Event of Default under this Lease,
(xi) the occurrence of an Event of Default or a Casualty
Occurrence,
(xii) the imposition of any Lien (other than a Lessor Lien) on
the Aircraft or any part thereof,
(xiii) the existence, presence, execution, delivery, filing,
recording, amendment or enforcement of the Operating
Lease Operative Documents,
(xiv) any other transaction by, activity of, or event or
occurrence with respect to Lessee or any other Lessee
Related Person pursuant to this Lease.
8A.10. Representation and Warranty of Lessee
Lessee hereby represents and warrants that (a) all airworthiness
directives affecting the Aircraft have been complied with; (b) no
accident involving the Aircraft, or other damage to the Aircraft,
has occurred that would affect the market value of the Aircraft; and
(c) the Aircraft has been maintained in accordance with a
maintenance program approved by the U.S. Federal Aviation
Administration and in accordance with accepted industry standards.
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9. LIENS
9.1 Lessee, during the Term, shall not create or suffer to exist any
lien, attachment, mortgage or other encumbrance upon or against the
Aircraft, or any of its rights under this Lease, other than
Permitted Liens. If at any time a lien, attachment, mortgage, or
other encumbrance except as permitted above shall be created or
suffered to exist by Lessee, or be levied upon the Aircraft or any
of its rights under this Lease, Lessee shall forthwith notify Lessor
and cause the same forthwith to be discharged by bond or otherwise.
In the event Lessee shall fail to discharge any such lien,
attachment, mortgage or other encumbrance, Lessor, Head Lessor or
Indenture Trustee shall be entitled (but not bound) to discharge the
same, in which event Lessee shall pay to Lessor, on demand, the
amount paid by Lessor and/or Head Lessor and/or Indenture Trustee,
together with Lessor's and/or Head Lessor's and/or Indenture
Trustee's losses, costs and expenses, including reasonable legal
fees and expenses.
10. INDEMNIFICATION
10.1 LESSEE SHALL RELEASE AND DEFEND, HOLD HARMLESS AND INDEMNIFY ANY
AND/OR ALL OF THE INDEMNITEES, FROM AND AGAINST ANY AND ALL CLAIMS,
PROCEEDINGS, SUITS, JUDGEMENTS, COSTS, EXPENSES, PENALTIES, FINES
AND LIABILITIES, DIRECT AND CONSEQUENTIAL DAMAGES AND LOSSES,
INCLUDING WITHOUT LIMITATION COSTS AND EXPENSES INCIDENTAL THERETO,
OF WHATSOEVER KIND AND NATURE, AND INCLUDING REASONABLE LEGAL FEES
AND EXPENSES BUT EXCLUDING ANY TAXES, INDEMNITY FOR WHICH IS
ENCOMPASSED SOLELY IN ARTICLE 4.1 AND ARTICLE 8 AND ARTICLE 8A (EACH
A "CLAIM") ATTRIBUTABLE TO LESSEE'S ACTS OR OMISSIONS TO ACT (WHERE
LESSEE IS SO OBLIGATED) OCCURRING DURING THE TERM, WHICH MAY BE
SUFFERED BY, ASSERTED AGAINST, CHARGED TO OR RECOVERABLE FROM,
DIRECTLY OR INDIRECTLY, ANY AND/OR ALL OF THE INDEMNITEES:
(A) RELATING TO, ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE
POSSESSION, DELIVERY, PERFORMANCE, MANAGEMENT, CONTROL,
MAINTENANCE, CONDITION, SERVICE, REPAIR, OVERHAUL, LEASING,
USE, OPERATION OR RETURN OF THE AIRCRAFT, ANY ENGINE OR ANY
PART, OR THE PERFORMANCE OR NON-PERFORMANCE OF ANY AND/OR ALL
OF THE INDEMNITEES OF SERVICES OR DELIVERY OF ANY THINGS IN
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CONNECTION WITH THE AIRCRAFT DURING THE TERM, OR OTHERWISE IN
CONNECTION WITH THIS LEASE, WHETHER OR NOT ARISING IN TORT OR
OCCASIONED IN WHOLE OR IN PART BY THE FAULT OR NEGLIGENCE OF
ANY AND/OR ALL OF THE INDEMNITEES; OR
(B) AS A CONSEQUENCE OF ANY DESIGN, ARTICLE OR MATERIAL IN THE
AIRCRAFT, ANY ENGINE OR ANY PART OR ITS OPERATION OR USE
CONSTITUTING AN INFRINGEMENT OF PATENT (TO THE EXTENT AND
SCOPE AND SUBJECT TO THE LIMITATIONS SET FORTH IN PART C OF
EXHIBIT G OF THE SUPPORT SERVICES AGREEMENT), COPYRIGHT,
TRADEMARK, DESIGN OR OTHER PROPRIETARY RIGHT OR A BREACH BY
LESSEE OF ANY OBLIGATION OF CONFIDENTIALITY OWED TO ANY
PERSON; OR
(C) PURSUANT TO SECTION 7(b) (EXCLUDING SUBCLAUSE (iv) THEREOF) OF
THE PARTICIPATION AGREEMENT;
EXCLUDING, HOWEVER, FROM THE FOREGOING ANY SUCH CLAIM TO THE
EXTENT THAT SUCH CLAIM RESULTS FROM A LESSOR LIEN OR THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE OR FROM
ANY MISREPRESENTATION BY SUCH INDEMNITEE CONTAINED IN THIS
LEASE OR ANY BREACH BY SUCH INDEMNITEE OF ANY COVENANT SET
FORTH IN THIS LEASE.
10.2 The indemnities contained in this Article 10 shall continue in full
force and effect notwithstanding the expiration or other termination
of this Lease or of the letting of the Aircraft hereunder.
10.3 The indemnities contained in this Article 10 are given to Lessor for
itself and as agent and trustee on behalf of the other Indemnitees.
10.4 Notwithstanding anything to the contrary contained herein, Lessee
does not release and does not agree to defend, hold harmless or
indemnify under this Lease (and without limiting any obligations or
indemnities contained in any other agreement with Lessee) Fokker or
any other Indemnitee in its capacity as manufacturer or seller of
the Aircraft from or against (i) claims of third parties made
directly against Fokker or such Indemnitee, based on its product
liability or its status as manufacturer or Seller, or (ii) claims
made against Fokker or such Indemnitee based on the warranties or
indemnities contained in the Product Assurance Document which is
Exhibit G of the Support
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Services Agreement, or (iii) the matters described in Article
10.1(B).
10.5 If any Indemnitee has knowledge of the occurrence of any Claim,
liability or other matter for which it is or may be entitled to be
indemnified hereunder, it shall give prompt written notice thereof
to Lessee. Each Indemnitee shall cooperate in good faith with Lessee
and supply such information as may reasonably be requested by Lessee
to enable Lessee to investigate, defend or contest any Claim,
liability or other matter for which Lessee may be required to
indemnify an Indemnitee hereunder. In the event that Lessee pays any
amount to an Indemnitee pursuant to this Article 10, Lessee shall be
subrogated to all rights of the Indemnitee in respect of the Claim,
liability or other matter indemnified against giving rise to such
payment. Lessee or its insurers shall have the right, unless an
Event of Default shall have occurred and be continuing and such
matter is not covered by insurance, to investigate or (provided that
Lessee or its insurers shall agree not to dispute liability
hereunder or under any insurance policies pursuant to which coverage
is sought and provided that Lessee shall have consulted with Lessor
prior thereto), defend or compromise any Claim, and Lessor shall
cooperate with Lessee with respect thereto.
10.6 With respect to any Claims that Lessee is required to indemnify an
Indemnitee against pursuant to Article 10.1(c), the Indemnitee
agrees to give such further assurance or agreements and to cooperate
with Lessee to permit Lessee to pursue any and all contest rights
that such Indemnitee may have under the Participation Agreement and
agrees that if the assignment to Lessee of the Indemnitee's contest
rights under the Participation Agreement is not permitted under the
Participation Agreement, the Indemnitee will exercise its contest
rights with respect to such Claim pursuant to instructions from
Lessee, at Lessee's cost and expense, provided, however, that Lessee
shall have indemnified Lessor, to Lessor's satisfaction, against all
material liabilities of Lessor in connection with such contest not
otherwise indemnified in Article 10.1 and such contest could not in
the good faith opinion of the Indemnitee entail any material risk of
criminal liability; provided, however that Lessor shall not be
required to permit Lessee to exercise such contest rights so long as
there is continuing an Event of Default hereunder.
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In the event that Lessee shall have paid an indemnity to or on
behalf of an Indemnitee pursuant to this Article 10.6, then within
ten days of the receipt by an Indemnitee from any person with
respect to which such Indemnitee has an indemnification obligation
under the Participation Agreement of any payment constituting a
refund with respect to the indemnity, such Indemnitee shall pay to
Lessee an amount that, on a net after tax basis, shall be equal to
such payment (but in no event more than such payment together with
interest received by such Indemnitee thereon).
11. INSURANCE
11.1 On or before the Delivery Date of the Aircraft and throughout the
Term, Lessee shall carry and maintain in full force and effect, at
its own cost and expense, in such forms, on such conditions and with
such insurers and, if requested, reinsurers and through such
insurance and, if requested, reinsurance brokers as are satisfactory
to Lessor, the following insurances with respect to the Aircraft,
Engines and Parts (herein referred to as "the Insurances"):
(a) All Risks Aircraft Hull insurance of the type usually insured
against by commercial airlines engaged in the same or similar
business and owning or operating similar aircraft (including
Engines and Parts while not installed on the Aircraft and
including Extended Coverage Endorsement (Aircraft Hull) AVNS1
or equivalent on the Agreed Value. The insurance may be
subject to a deductible in respect of losses other than total
loss, arranged total loss or constructive total loss of not
more than $100,000.00 (Dollars One Hundred Thousand) for each
accident subject, however, that (i) such deductible may be
adjusted during the ten (10) year period from the Original
Delivery Date only with the consent of Lessor (such consent
not to be unreasonably withheld) and (ii) thereafter may be
adjusted to such deductible amount as is customary for
commercial airlines engaged in the same or similar business in
the United States and operating similar aircraft (but not
necessarily Fokker-manufactured) and having a similar claims
history and credit standing.
(b) If operated outside the United States and Canada, Aircraft
Hull War and Allied Perils insurance
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covering the risks excluded from the All Risks Aircraft Hull
insurance specified in paragraph (a) above by the terms of the
War, Hi-Jacking and Other Perils Exclusion Clause AVN.48B
except paragraph (b) thereof and shall include cover in
respect of confiscation, nationalization, seizure, restraint,
detention, appropriation for title or use by or under the
order of any Government Entity of the State of Registration.
(c) Comprehensive Airline Liability insurance (including without
limitation aircraft Third Party Liability, Passenger and Crew
Liability (including Baggage and Personal Effects)), Cargo
Liability, Mail Liability, Personal Injury Liability,
Contractual Liability, Hangar Keeper's Liability, Aircraft
Products Liability and General Third Party Liability of the
types usually insured against by commercial airlines engaged
in the same or similar business and owning or operating
similar aircraft (but not necessarily Fokker-manufactured) in
an amount of not less than $500,000,000.00 (Dollars Five
Hundred Million) Combined Single Limit any one occurrence each
Aircraft but limited in respect of Personal Injury to the
equivalent of $25,000,000.00 (Dollars Twenty Five Million) any
one offence and in the aggregate.
Such insurance shall include cover in respect of the risks
excluded by War, Hi-Jacking and Other Perils Exclusion Clause
AVN.48B except paragraph (b) thereof.
This insurance may be subject to deductibles in respect of
passengers baggage and personal effects of not more than
$1,250.00 (Dollars One Thousand Two Hundred Fifty) any one
claim and in respect of cargo and mail of not more than
$5,000.00 (Dollars Five Thousand) any one claim subject,
however to adjustment of such deductible amount as is
customary in the aviation insurance market for commercial
airlines engaged in the same or similar business in the United
States and operating similar aircraft and having a similar
claims history and credit standing. Such deductibles shall not
apply to claims arising from accidents to the carrying
aircraft.
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(d) All Risks insurance on Engines and Parts while any such items
are not installed on the Aircraft and in respect of which
cover is not provided under the All Risks Aircraft Hull
insurance and/or Aircraft Hull War and Allied Perils insurance
(respectively specified in paragraphs (a) and (b) above) of
the type usually insured against by commercial airlines
engaged in the same or similar business and owning or
operating similar aircraft for not less than full replacement
value. If Engines and Parts are located outside the United
States and Canada, such insurance shall include War and Allied
Perils to the extent that such insurance is customarily
available in the international insurance market for this type
of insurance.
This insurance may be subject to a deductible of not more than
$10,000.00 (Dollars Ten Thousand), subject, however, to
adjustment of such deductible amount as is customary in the
aviation insurance market for commercial airlines engaged in
the same or similar business in the United States and
operating similar (but not necessarily Fokker-manufactured)
aircraft and having a similar claims history and credit
standing.
The Lessor will accept a United States government indemnity in lieu
of the foregoing or otherwise required under this Article 11.
Lessor's current requirements as at the date of this Lease as to the
Insurances are as specified in this Article. Lessor reserves the
right to amend, and will cooperate with Lessee reasonably to amend,
the insurance requirements of this Article 11 to reflect changes in
insurance practice subject, however to such amendments being
customary for and applicable to airlines engaged in the same or
similar business in the United States and similar aircraft and
having a similar claims history and credit standing.
If required by the first paragraph of Article 11.1, Lessee shall
procure that the insurers effect reinsurances in the same form and
conditions through such reinsurance brokers and with such reinsurers
and for such proportions as are satisfactory to Lessor.
11.2 All Insurances to be carried in accordance with Article 11.1 above
shall:
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(a) in respect of All Risks Aircraft Hull insurance, Aircraft Hull
War and Allied Perils insurance and All Risks insurance on
Engines and Parts:
(i) name Lessor, Head Lessor in its individual capacity and
as owner of the Aircraft, the Indenture Trustee in its
individual and its trust capacity, Owner Participant and
Loan Participant, and each of their respective
affiliates, successors and assigns, along with the
respective directors, officers and employees of each of
the foregoing (collectively, the "Additional Assureds");
(ii) provide that all claims in respect of the Aircraft,
Engines and Parts shall be payable to Indenture Trustee
for so long as the lien of the Indenture is in effect,
and thereafter to Head Lessor for so long as the Head
Lease is in effect, and thereafter to Lessor or as it
may direct, such payee to be named Loss Payee; provided,
that partial loss amounts shall be paid by the insurers
directly to repairers of the Aircraft, Engines or Parts
or to Lessee solely as reimbursement for repairs for
which Lessee has paid unless the insurers have been
given notice that a Default has occurred; and
(iii) if applicable, provide in respect of Hull All Risks and
Hull War and Allied Perils for a 50/50 Claims Settlement
Clause in the form of AVS.l03;
(b) in respect of Comprehensive Airline Liability insurance:
(i) name the Additional Assureds as additional assureds; and
(ii) provide that the insurance shall operate in all respects
as if a separate policy had been issued covering each
party insured thereunder, but this provision shall not
operate to include any claim howsoever arising in
respect of loss or damage to the Aircraft, Engines and
Parts insured under the All Risks Hull, Hull War and
Allied Perils or All Risks insurance of the assured.
Notwithstanding the foregoing the total
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liability of insurers in respect of any and all assureds
shall not exceed the limits of liability stated in the
policy;
(c) in respect of all Insurances:
(i) be effective worldwide except for territories approved
in writing by Lessor;
(ii) provide that insurers waive all rights of subrogation
against the Additional Assureds;
(iii) provide that in the event that the Insurances are
cancelled (including cancellation for non-payment of
premium) or are materially changed such cancellation or
change shall not be effective as to the interests of the
Additional Assureds until thirty (30) days (but seven
(7) days or such lesser period as is customarily
available in accordance with policy conditions in
respect of war and allied perils) after confirmed
receipt by the Additional Assureds of written notice by
insurers of such cancellation or change;
(iv) provide that in respect of the interests of the
Additional Assureds, the Insurances shall not be
invalidated by any act, neglect, omission,
misrepresentation or non-disclosure on the part of
Lessee or any other party other than the Additional
Assured seeking to make a claim thereunder, and shall
insure each Additional Assured regardless of any breach
or violation of any warranties, declarations or
conditions contained in such policies by Lessee or any
other party other than the Additional Assured seeking to
make a claim thereunder;
(v) provide that the Additional Assureds shall have no
responsibility for premium and insurers shall waive any
right of set-off or counterclaim against the Additional
Assureds except in respect of outstanding premium in
respect of the Aircraft, Engines and Parts subject of a
claim;
(vi) not provide for any deductible or self insurance other
than the deductibles allowed under the terms of Article
11.1 above;
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(vii) be primary without right of contribution from any other
insurance carried by Lessor, Lessee or any other person;
and
(viii) be denominated in Dollars.
11.3 If required by the first paragraph of Article 11.1, the re-insurance
policies shall:
(a) provide that cover shall b& identical to the cover provided by
the original insurances and be subject to the same terms and
conditions as the original insurances;
(b) provide that so far as the respective interests of the
Additional Assureds are concerned the reinsurance shall not be
invalidated by any act, neglect, omission, misrepresentation
or nondisclosure on the part of the reinsured party;
(c) confirm the insurers' agreement to the provision of paragraph
(d) below;
(d) include a "cut-through" clause in the following terms or in
such other terms as may be satisfactory to Lessor:
"In respect of All Risks Aircraft Hull insurance, Aircraft
Hull War Risk and Allied Perils insurance as described in
Article 11.1(a) and (b) above and All Risks insurance on any
Engine and Parts as described in Article 11.1(d) above, the
reinsurers and the reassured hereby agree that in the event of
any claim arising under the relevant reinsurances the
reinsurers shall in lieu of payment to the reassured, its
successors in interest and assigns pay to the Loss Payee
specified in the primary insurances all sums payable under or
in connection with such reinsurances by virtue of any
reinsured loss of, or damage to, the Aircraft, Engines and
Parts, without any deduction or deductions whatsoever, other
than any outstanding premium in respect of the Aircraft,
Engines or Parts the subject of the claim, it being understood
and agreed that any such payment by the reinsurers shall fully
discharge and release the reinsurers from any and all further
liability in connection therewith.
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In respect of Comprehensive Airline Liability insurance as
described in Article 11.1(c) above, the reinsurers and
reassured hereby agree that in the event of any claim arising
under the relevant reinsurances, the reinsurers shall in lieu
of payment to the reassured, its successors in interest and
assigns pay to the person or party who has sustained the
relevant loss (or as reimbursement of any payment made by any
Additional Assureds) all sums payable under such reinsurances
by virtue of such reinsured loss, without any deduction or
deductions whatsoever, it being understood and agreed that any
such payment by the reinsurers shall fully discharge and
release the reinsurers from any and all further liability in
connection therewith"; and
(e) provide that the reinsurers and reassured agree that in the
event that the reassured, its successors in interest and
assigns shall at any time be or become insolvent or suspend
business or file a petition in bankruptcy or be adjudicated
insolvent or bankrupt or admit in writing its inability to pay
its debts as they become due, or make a general assignment for
the benefit of creditors or that a receiver or liquidator or
assignee or trustee or state commissioner of insurance be
appointed in respect of the reassured its successors in
interest or assigns or any substantial part of its property
for the purpose of liquidation on account of insolvency, then
the reinsurers, in lieu of payment to the reassured, its
successors in interest or assigns, shall pay upon demand that
portion of any loss due to the party entitled thereto under
the terms of the original insurance for which such reinsurers
would under the terms of the reinsurance be liable to pay the
reassured, its successors in interest or assigns, less any
amounts already paid, it being understood and agreed that any
such direct payment by reinsurers shall fully discharge and
release the reinsurers from any and all further liability for
such payment made.
11.4 Prior to the Delivery Date and thereafter during the Term, at least
five (5) Business Days prior to the renewal date of any Insurance
required or maintained by Lessee under Article 11.1 but in no event
less than once in each 12 month period, Lessee shall furnish or
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cause to be furnished to Lessor by the insurer or insurance broker
and the reinsurance broker
1) a certificate of insurance describing in detail the insurance
then carried and maintained, and certifying that such
insurance complies with the terms of this Lease, including:
(i) confirmation that the insurance/reinsurance has been
placed with the insurers/reinsurers required (giving the
name of such insurers/reinsurers), the insured/reinsured
amount and the period of the policy and
(ii) confirmation that all premiums due to
insurers/reinsurers have been paid,
and
2) a letter of undertaking from Lessee's brokers and, if
required, from the reinsurance brokers.
Such certificate(s) of insurance and letter(s) of undertaking
shall be substantially in the form as delivered on the
Delivery Date.
In the event that Lessee shall fail to effect, maintain or cause to
be effected or maintained, insurance as required by this Article 11,
Lessor, Head Lessor or Indenture Trustee may at its option, but
without any obligation to do so, and without prejudice to Lessor's,
Head Lessor's and Indenture Trustee's other rights or remedies
hereunder, maintain such insurance or provide such or a similar
insurance, and, in such event, Lessee shall, upon demand, promptly
reimburse to Lessor, Head Lessor or Indenture Trustee the cost
thereof, including interest thereon at the rate referred to in
Paragraph 6 of Appendix D.
11.5 In the event of any damage to the Aircraft, Engines or Parts during
the Term not constituting a Casualty Occurrence, Lessee shall
repair, or cause the same to be repaired by an Authorized
Maintenance Performer at its sole cost and expense. Lessor and
Lessee agree that all insurance proceeds payable in connection with
any such damage shall be payable as provided in Section 11.2(a)
(ii). Any excess remaining shall, unless a Default shall have
occurred and be continuing, be paid over to Lessee.
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11.6 Lessee may carry insurance with respect to its interest in the
Aircraft in excess of the Agreed Value, provided that such insurance
coverage shall not prejudice the ability of Head Lessor or Lessor to
obtain insurance of their respective interests in the Aircraft.
11.7 [Intentionally omitted].
12. ASSIGNMENT AND SUBLETTING
12.1 Lessee shall not assign any of its rights or obligations or delegate
any of its duties under this Lease and, except as permitted by
Article 5.1 above or Paragraph 10 of Appendix D, Lessee shall not
sublet or otherwise part with possession of the Aircraft or any Part
thereof unless previously approved by Lessor in writing (such
consent not to be unreasonably withheld).
12.2 This Lease, the Aircraft and Lessor's interest in each thereof is
freely assignable and alienable by Lessor upon written notice to
Lessee in accordance with Article 12.3, provided, however, that so
long as the Aircraft shall be leased to Lessee under this Lease,
Lessor will not sell, assign, convey or otherwise transfer
absolutely (and not for security) any of its right, title, or
interest in and to this Lease or the Aircraft to any person unless
Lessor and the proposed transferee (the "Transferee") have complied
with the following conditions:
(i) Lessor shall give Lessee written notice of such
transfer at least 10 Business Days before the date of such
transfer, specifying the name and address of the proposed
Transferee;
(ii) the Transferee shall not be an airline or a
commercial air carrier or person controlling, controlled by or
under common control with an airline or a commercial air
carrier which is in direct competition with Lessee in the
United States;
(iii) the Transferee shall qualify as a "citizen of the
United States" within the meaning of Section 40102 (a) (15) of
the Federal Aviation Act by a Voting Trust Agreement or
otherwise; and
(iv) on the transfer date Lessor and the Transferee
shall enter into an agreement or
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agreements in which the Transferee confirms that it shall be
deemed a party to this Lease and agrees to be bound by all the
terms of, and to undertake all of the obligations of, Lessor
contained in this Lease, and shall deliver a certificate of
quiet enjoyment to Lessee in form and substance reasonably
acceptable to it and Lessee shall receive an opinion of
counsel to the Transferee stating, with the customary
assumptions and exceptions, that such agreement or agreements
has been duly authorized, executed and delivered and
constitute the legal, valid and binding obligations of the
Transferee enforceable in accordance with their terms and that
the entry into such agreement(s) does not violate any laws or
agreements applicable to such Transferee.
The agreements, covenants, obligations and liabilities contained
herein, including but not limited to all obligations to pay Rent and
indemnify Lessor, are made for the benefit of Lessor and its
respective successors and assigns, notwithstanding the possibility
that any such person was not originally a party to this Lease or
may, at the time any enforcement is sought, no longer be a party to
this Lease. Lessee shall comply, at Lessor's cost and expenses, with
all reasonable requests of Lessor, its successors and assigns
respecting the assignment and Lessee's acknowledgement of the
assignee as Lessor. Notwithstanding anything contained in this
paragraph to the contrary, no assignment of Lessor's interest in
this Lease or the Aircraft shall alter the terms of this Lease in so
far as the costs to Lessee of the performance of its obligations to
pay Rent, Reserve Rate and Deposits hereunder and, except as
otherwise expressly provided in this Lease, the rights and
liabilities of Lessee under this Lease are concerned. Lessee's
rights under this Lease shall not be subject or subordinate to the
Head Lease, the Security Assignment or the Indenture. The rights of
Head Lessor and Indenture Trustee under the Head Lease, the Security
Assignment and the Indenture, as the case may be, shall be subject
to Lessee's rights under Section 13.7 of this Lease.
12.3 It is acknowledged and agreed that:
(a) As at the date of the Certificate of Acceptance, ownership of
the Aircraft has been transferred to Head Lessor, Head Lessor
has leased the Aircraft to Lessor under the Head Lease and,
subject to the
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terms of the Head Lease, Lessor has subleased the Aircraft to
Lessee under this Lease.
(b) Lessor has assigned all of its right, title and interest in
and to this Lease to Head Lessor and Head Lessor has assigned
all its right, title and interest in and to this Lease and
granted a Security Interest in the Aircraft to Indenture
Trustee.
(c) Lessor may from time to time require to amend, modify or
replace the security arrangements in respect of the financing
or refinancing of the Aircraft and Lessee agrees to cooperate
with Lessor in connection therewith at the cost and expense of
Lessor and, in particular (but without limiting the generality
of the foregoing), to change the plates provided for in
Article 4.3 and to execute and deliver such other or further
acknowledgments of assignment or other documents and to do
such other things as Lessor may reasonably require to be
executed and delivered;
(d) Upon any financing or refinancing of the Aircraft as
contemplated by this Article 12.3 or otherwise at the cost and
expense of Lessor, Lessee will promptly and duly execute and
deliver to Lessor and such persons as Lessor shall designate,
such other documents and assurances and take such further
action as may from time to time be reasonably requested in
order more effectively to carry out the intent and purpose of
this Lease, the Head Lease, the Indenture, the Security
Assignment and any other documents relating to such financing
or refinancing;
(e) [Intentionally omitted]; and
(f) Lessee shall not be liable to any Transferee for any payment
of Taxes or other amounts pursuant to this Lease or otherwise
be subject to any liabilities in excess of the amount that
would have been payable to, or beyond the scope of the
liabilities to, as the case may be, Lessor originally party
hereto, if that party had remained as Lessor.
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13. DISCLAIMER. REPRESENTATIONS AND WARRANTIES
13.1 NEITHER LESSOR, NOR HEAD LESSOR, NOR OWNER PARTICIPANT NOR INDENTURE
TRUSTEE NOR LOAN PARTICIPANT IS A MANUFACTURER OF THE AIRCRAFT OR
OTHER AIRCRAFT OR A DEALER IN SIMILAR AIRCRAFT AND HAS NOT INSPECTED
THE AIRCRAFT PRIOR TO DELIVERY TO AND ACCEPTANCE BY LESSEE. LESSEE
(I) ACKNOWLEDGES AND AGREES THAT THE AIRCRAFT IS BEING DELIVERED BY
LESSOR TO LESSEE "AS IS" AND "WHERE IS" AND THAT NO CONDITION,
WARRANTY OR REPRESENTATION OF ANY KIND WHATSOEVER HAS BEEN OR IS
GIVEN BY OR IS TO BE IMPLIED ON THE PART OF LESSOR OR ON THE PART OF
HEAD LESSOR OR OWNER PARTICIPANT OR INDENTURE TRUSTEE OR LOAN
PARTICIPANT IN RELATION TO THE AIRCRAFT, AND (II) HEREBY WAIVES AS
BETWEEN ITSELF AND LESSOR OR ON THE PART OF HEAD LESSOR OR OWNER
PARTICIPANT OR INDENTURE TRUSTEE OR LOAN PARTICIPANT ALL ITS RIGHTS,
EXPRESS OR IMPLIED (WHETHER STATUTORY OR OTHERWISE), TO MAKE CLAIMS
IN RESPECT OF THE AIRCRAFT RELATING TO THE TITLE, AIRWORTHINESS,
VALUE, CONDITION, DESIGN, OPERATION, CONFORMITY TO SAMPLES OR
MODELS, COMPLIANCE WITH SPECIFICATIONS, MERCHANTABILITY OR FITNESS
OR SUITABILITY FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT OR
ANY PART THEREOF, QUALITY OF THE MATERIAL OR WORKMANSHIP, ABSENCE OF
LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, ABSENCE OF ANY
INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, ABSENCE OF ANY
OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN TORT, BASED ON
STRICT LIABILITY OR NEGLIGENCE, ACTUAL OR IMPUTED, AND LESSEE HEREBY
WAIVES ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR
IMPLIED, WITH RESPECT TO THE AIRCRAFT, IT BEING UNDERSTOOD THAT ALL
SUCH RISKS, AS BETWEEN LESSEE AND LESSOR OR ON THE PART OF HEAD
LESSOR OR OWNER PARTICIPANT OR INDENTURE TRUSTEE OR LOAN
PARTICIPANT, ARE TO BE BORNE BY LESSEE.
Nothing in this Lease shall afford Lessor or any Indemnitee any
wider or greater exclusion of liability for death or bodily injury
than would be permitted by the Governing Law.
This paragraph shall not be modified except by a written agreement
signed on behalf of Lessor and Lessee by their respective duly
authorized representatives.
13.2 Lessor and Lessee agree that this Article 13 has been the subject of
discussion and negotiation and is fully understood by the parties,
and that the amount of the Rent and other mutual agreements of the
parties set
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forth in this Lease were arrived at in consideration of the
provisions of this Article 13 specifically including the waiver by
Lessee set forth in Article 13.1.
13.3.1 So long as no Event of Default has occurred and is continuing Lessor
agrees to assign or otherwise make available to Lessee for the
duration of the Term such rights as Lessor may have under any
warranty, express or implied, with respect to the Aircraft made by
the Manufacturer of the Aircraft, any subcontractor or supplier
thereof, or any other seller thereof, to the extent that the same
may be assigned or otherwise made available to Lessee and without
warranty by Lessor as to enforceability of any of the rights so
assigned.
To the extent that the same may not be assigned or otherwise made
available to Lessee, Lessor agrees to exert its reasonable efforts,
at Lessee's expense, to enforce such rights as Lessor may have with
respect thereto for the benefit of Lessee; provided however, that
upon an Event of Default all such rights shall immediately revert to
Lessor including all claims thereunder, whether or not perfected,
unless such Event of Default has forthwith been remedied by Lessee.
13.3.2 [Intentionally omitted].
13.4 Lessee represents and warrants that:
(a) Lessee is a corporation organized and existing in good
standing, in accordance with the Laws of the State of
Incorporation, and has the corporate power and authority to
carry on its business as presently conducted and to perform
its obligations under this Lease, is a Certificated Air
Carrier and is the holder of all necessary licenses issued by
all Government Entities having jurisdiction to authorize or
permit Lessee to engage in air transportation and to perform
and comply with its obligations hereunder;
(b) This Lease has been duly authorized by all necessary corporate
action on the part of Lessee, and neither the execution and
delivery nor the consummation of the transactions contemplated
hereby nor compliance by Lessee with the provisions of this
Lease will contravene any Law applicable to Lessee or result
in any breach of, or constitute any default under, or result
in the
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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;
(c) The execution and delivery by Lessee of this Lease, and all of
the transactions by Lessee contemplated hereby, have received,
and Lessee has complied with, every necessary consent,
approval, order, or authorization of, or registration with, or
the giving of prior notice to, any Government Entity having
jurisdiction with respect to the execution and delivery of
this Lease or the validity and enforceability of this Lease or
the satisfaction of all monetary and other obligations
hereunder;
(d) This Lease has been duly entered into and delivered by Lessee
and constitutes the valid, legal and binding obligations of
Lessee, enforceable in accordance with their terms subject to
principles of equity, laws relating to bankruptcy, insolvency
or liquidation or any other laws or legal procedures generally
affecting the enforcement of creditor's rights or the rights
of contracting parties;
(e) It is not necessary or advisable under the Laws of the State
of Registration in order to ensure the validity, effectiveness
and enforceability of this Lease, the Head Lease, the
Indenture or the Security Assignment or to protect the
property rights of Lessor, Head Lessor, or Indenture Trustee
in the Aircraft and under the Head Lease, the Indenture and
the Security Assignment that this Lease, the Head Lease, the
Indenture, the Security Assignment or any other instrument
relating thereto be filed, registered or recorded or that any
other action be taken under the Laws of the States of Illinois
or North Carolina and the State of Registration to perfect the
property rights of Lessor, Head Lessor and Indenture Trustee
in the Aircraft other than the filing of all such instruments
with the Air Authority, the filing of UCC-1 financing
statements in relevant jurisdictions and possession of an
original
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version of this Lease, if deemed to be chattel paper, and the
Indenture and Security Assignment will have priority in all
respects over the claims of all creditors of Lessee in or
against the Aircraft;
(f) Under the Laws of the State of Incorporation and the State of
Registration Lessee will not be required to make any deduction
or withholding from any payment it may make under this Lease.
There is no withholding or other tax to be deducted from any
payment to be made by Lessee under this Lease;
(g) There are no suits or legal proceedings (including any
administrative proceeding) pending or threatened before any
court or administrative agency against Lessee which, if
adversely determined, would have a material adverse effect
upon its financial condition or business or its ability to
perform its obligations hereunder;
(h) [Intentionally omitted];
(i) There has been no material adverse change in the financial
position of Lessee or the consolidated financial position of
Lessee and its subsidiaries from that set forth in the
financial statements last furnished pursuant to Article 6.4
and neither Lessee nor any of its subsidiaries have any
significant liabilities (contingent or otherwise) which are
not disclosed by, or reserved against in such financial
statements;
(j) The chief executive office (as such term is used in Sections
9-103 and 9-401 of the Uniform Commercial Code) of Lessee is
located at Chicago, Illinois, and, commencing August 21, 1995,
shall be located in Durham, North Carolina and Lessee agrees
to give at least 30 days' prior notice to Lessor of any
relocation of said chief executive office or place where such
records are kept and of any change in its name.
13.5 The representations and warranties in Article 13.4 (other than in
clauses (f), (g) and (i)) shall be deemed to be repeated by Lessee
on and as of each Rent Date as if made with reference to the facts
and circumstances existing on each such date.
13.6 Lessor represents, warrants and covenants that:
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(a) Lessor is a corporation organized and existing in good
standing, in accordance with the Laws of the State of Delaware
and has the corporate power and authority to carry on its
business as presently conducted and to perform its obligations
under this Lease;
(b) This Lease has been duly authorized by all necessary corporate
action on the part of Lessor, has been duly entered into and
delivered by Lessor and constitutes the valid, legal and
binding obligations of Lessor, enforceable in accordance with
their respective terms subject to principles of equity, laws
relating to bankruptcy, insolvency or liquidation or any other
laws or legal procedures generally affecting the enforcement
of creditor's rights or the rights of contracting parties;
(c) Neither the execution and delivery nor the consummation of the
transactions contemplated hereby nor compliance by Lessor with
the provisions of this Lease will result in any breach of, or
constitute any default under, any indenture or any 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; and
(d) Except for the registration of the Aircraft, neither the
execution and delivery nor the consummation of the
transactions contemplated hereby nor compliance by Lessor with
the provisions of this Lease requires the consent or approval
of, the giving of notice to, or the registration with, or the
taking of any other action in respect of any Government
Entity.
13.7 Lessor undertakes that, so long as no Event of Default shall have
occurred and be continuing, Lessor will not interfere with the
peaceful and quiet use and enjoyment of the Aircraft by Lessee in
accordance with the terms of this Lease. Lessor shall procure from
Head Lessor and Indenture Trustee a letter confirming that neither
Head Lessor nor Indenture Trustee shall take or cause to be taken
any action interfering with Lessee's quiet enjoyment and use and
possession of the Aircraft, provided, that no Event of Default shall
have occurred and be continuing. Lessee hereby agrees that if an
event of default under the Head Lease shall have
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occurred and be continuing, Lessee shall, at the reasonable cost and
expense of Lessee, enter into a lease with Head Lessor, such lease
to be upon terms and conditions substantially similar to those of
this Lease, and such lease shall be assigned to Indenture Trustee
under the Indenture with such changes as appropriate to reflect the
change in relationship between Lessee and the parties to the
Participation Agreement (other than the Lessor) resulting from the
Lessor no longer being interposed between the Lessee and such
parties.
13.8 On the Delivery Date, Head Lessor shall have received full legal and
beneficial title to the Aircraft from Lessor, Lessor shall have the
right to sublease the Aircraft hereunder and the Aircraft shall be
free of Lessor's Lien except for the lien of the Indenture, the
Security Assignment and the Head Lease, and Lessor covenants that
Lessor shall not create, incur, assume or suffer to exist any
Lessor's Lien (except the Indenture, the Security Assignment and the
Head Lease) on the Aircraft or any part thereof and agrees at its
own cost and expense, promptly to take such action as may be
necessary duly to discharge any such Lessor's Lien provided,
however, without limiting Lessor's liability under Article 13.7,
that Lessor may in good faith by appropriate proceedings contest
claims or charges resulting in any such Lessor's Lien as long as
such contest does not involve any material danger of the sale,
forfeiture or loss (or loss of use) of the Aircraft or any interest
therein and will indemnify and hold harmless Lessee against any and
all Claims, of whatever kind and nature, incurred by or asserted
against Lessee as a consequence of any such Lessor's Lien.
13.9 Lessor will not enter into any waiver, amendment or other
modification of the Tax Indemnity Agreement, Sections 7A or 7(b)(i),
(ii) or (iii) of the Participation Agreement or the Head Lease
definitions used therein that would increase Lessee's liabilities or
decrease its rights hereunder without Lessee's consent. Promptly
upon the execution and delivery of any amendment, modification,
supplement or waiver to the Tax Indemnity Agreement or Sections 7(b)
or 7A of the Head Lease, Lessor shall deliver true and accurate
copies thereof to Lessee. Lessor shall immediately notify Lessee of
the existence of any "Event of Default" or "Default" under the Head
Lease (that does not result from an Event of Default or Default
under
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this Lease) and shall promptly notify Lessee when the Head Lease is
no longer in effect.
14. COVENANTS OF LESSEE
14.1 Lessee hereby covenants with Lessor that from the Delivery Date and
during the Term and until redelivery of the Aircraft to Lessor in
accordance with Article 16 it will:
(a) remain in and continue to operate as a Certificated Air
Carrier holding a valid certificate of convenience and
necessity issued pursuant to the Federal Aviation Act and,
except as permitted in Section 14.1(p) hereof, preserve its
corporate existence;
(b) comply with all Laws and regulations for the time being in
force in the State of Incorporation, the State of Registration
and in any country to, from, in or over which the Aircraft is
flown, the failure with which to comply is likely to have a
material adverse effect on Lessee, provided, however, that
such failure shall have no adverse effect on the Aircraft or
the interests of Lessor, Head Lessor or Indenture Trustee
therein or the Insurance required to be maintained pursuant to
Article 11;
(c) (i) at its own expense from time to time do and perform such
other and further acts and execute and deliver any and all
further instruments as may be required by Law (in the United
States but not in any jurisdiction outside the United States
unless directly required due to Lessee's operation), and (ii)
at Lessor's expense (insofar as not covered in Article 8.2(a))
from time to time do and perform such other and further acts
and execute and deliver any and all further instruments as may
be reasonably requested by Lessor to establish, maintain and
protect the respective rights and remedies of Lessor, Head
Lessor and Indenture Trustee and to carry out and give effect
to the intents and purposes of this Lease and the Head Lease;
(d) notify Lessor immediately of any Default;
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(e) obtain and maintain all necessary government and other
certificates, consents, licenses, permits and authorizations
and take all action which may be necessary for the continued
due performance of Lessee's obligations under this Lease and
for the use and operation of the Aircraft;
(f) not do or permit to be done any act or thing which might
impair the respective interests of Lessor, Head Lessor and
Indenture Trustee in the Aircraft, or the registration of the
Aircraft;
(g) notify Lessor as soon as practicable after becoming aware of
any loss, theft, damage or destruction of or to the Aircraft
or any part thereof if the potential cost of repair or
replacement is likely to exceed $250,000.00 (Dollars Two
Hundred Fifty Thousand);
(h) not do anything which is likely to subject the Aircraft or any
part thereof to penalty, forfeiture, seizure, arrest,
impounding, detention, confiscation, taking in execution or
appropriation or destruction, nor abandon the Aircraft or any
part thereof;
(i) not represent or hold out Lessor, Head Lessor or Indenture
Trustee as carrying goods or passengers on the Aircraft or as
being in any way connected or associated with any operation or
carriage (whether for hire or reward or gratuitously) which
Lessee may undertake;
(j) not pledge the credit of Lessor, Head Lessor or Indenture
Trustee for any maintenance, overhauls, replacements, repairs
or modifications to the Aircraft;
(k) keep Lessor and the insurers, as referred to in Article 11,
informed as to current serial numbers of the Engines and any
engine installed on the Aircraft in accordance with the
provisions of this Lease, and the location of any Engine for
the time being not installed on the Aircraft; and shall notify
such insurers of any renewal, replacement or substitution, or
the location of any Engine not installed on the Aircraft;
(l) discharge all fees, charges and expenses payable to any third
party in relation to the use or
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operation of the Aircraft or any premises where the Aircraft
is situated;
(m) in the event of any forfeiture, impounding or detention of the
Aircraft or any part thereof not constituting a Casualty
Occurrence, use all reasonable endeavors to procure the
immediate release therefrom of the same;
(n) keep accurate, complete and current records of all flights
made by the Aircraft. Such records shall be kept in such
manner as the Air Authority may from time to time require and
in accordance with the Approved Maintenance Program. Lessee
shall permit Lessor or any person designated by Lessor to
examine such records upon giving reasonable notice not
involving delay to the Aircraft and subject to the terms of
Article 7.5.3, at the expense of Lessor or such person, to
copy such records;
(o) on request, provide Lessor with evidence satisfactory to
Lessor that all Taxes and charges incurred by Lessee with
respect to the Aircraft, including without limitation any
payments due to any relevant air traffic control authorities
and airport authorities, have been paid and discharged in full
or duly provided for;
(p) not consolidate with, or merge into, any other corporation,
convey, transfer or lease substantially all of its assets as
an entirety to any person without the prior written consent of
Lessor (such consent not to be unreasonably withheld) and the
execution and delivery to Lessor of such agreements,
certificates and legal opinions as Lessor may request with
respect thereto; and
(q) provide to Lessor immediate written notice of any termination
or expiration of the Aircraft Maintenance Agreement, and a
copy of any subsequent Aircraft Maintenance Agreement entered
into by Lessee.
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15. DEFAULT BY LESSEE
15.1 Each of the following events shall constitute an "Event of Default":
(a) if default shall be made by Lessee in the making of payment of
any Rent, Reserve Rate, Agreed Value, and/or of any other
Supplemental Rent, within S Business Days after the date when
due and payable under this Lease; or
(b) (i) if default shall be made by Lessee at any time in the
procurement or maintenance of any insurance coverage
prescribed herein or (ii) any insurance which may be
maintained by Lessor, Head Lessor or Indenture Trustee under
Article 11.4 is cancelled or terminated or notice of
cancellation is given; or
(c) if default shall be made by Lessee in the observance or
performance of any of the other obligations of Lessee
contained in this Lease and, if such default is in the opinion
of Lessor capable of remedy, such default shall continue for a
period of fifteen (15) Business Days after notice from Lessor
to Lessee specifying the default and requiring that the same
be remedied; or
(d) if any representation or warranty made (or deemed to be
repeated) by Lessee in or pursuant to this Lease or in any
document or certificate or statement referred to in or
delivered under this Lease is or proves to have been incorrect
in any material respect when made or deemed to be repeated and
such incorrectness, if capable of being cured, shall continue
for fifteen (15) Business Days after written notice from
Lessor specifying such incorrectness; or
(e) if any borrowed money having an outstanding principal amount
in excess of $4,000,000.00 (Dollars Four Million) of Lessee or
any of its subsidiaries is not paid when due, or by reason of
breach or default under the terms of any instrument evidencing
or guaranteeing the same on the part of Lessee or any of its
subsidiaries any borrowed money having an outstanding
principal amount in excess of $4,000,000.00 (Dollars Four
Million) of Lessee or any of its subsidiaries
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becomes due or capable of being declared due prior to the date
when it would otherwise have become due, or the security for
any such borrowed money or any guarantee in respect thereof
becomes enforceable; or
(f) if an encumbrancer takes possession or a receiver,
administrator, administrative receiver, trustee, liquidator or
similar officer is appointed of the whole or any substantial
part of the assets, rights or revenues of Lessee or any of its
subsidiaries or a distress, execution, sequestration or other
process is levied or enforced upon or sued out against all or
a substantial part of the assets, rights or revenues of Lessee
or any of its subsidiaries and is not discharged within
fourteen days, or Lessee applies for or consents to the
appointment of a receiver, administrator, administrative
receiver, trustee, liquidator or similar officer for it or for
all or any part of its assets, rights or revenues; or
(g) if Lessee or any of its subsidiaries suspends payment of its
debts, or is unable or admits its inability to pay its debts
as they fall due, or shall be adjudicated or found, or
becomes, bankrupt or insolvent, or proposes or enters into any
composition or other arrangement for the benefit of its
creditors generally, or Lessee or any of its subsidiaries
shall, by voluntary petition, answer or consent, seek relief
under the provisions of any bankruptcy, insolvency or other
similar law providing for the reorganization, liquidation,
administration, dissolution or winding-up of corporations, or
providing for an agreement, composition, extension or
adjustment with its creditors; or
(h) if a petition against Lessee in a proceeding under applicable
bankruptcy or other insolvency laws shall be filed and shall
not be withdrawn or dismissed within 30 days thereafter, or if
any order shall be made by any competent court or resolution
passed by Lessee or any of its subsidiaries or their
respective board of management or supervisory board, whichever
is competent to pass such resolution for the winding-up or
dissolution of Lessee or any of its subsidiaries or for the
appointment of a liquidator, trustee or conservator, save for
winding-up or
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dissolution for the purposes of amalgamation or
reorganization (not involving or arising out of insolvency)
the terms of which shall have received the prior written
approval of Lessor; or
(i) if Lessee or any of its subsidiaries disposes of all or a
material part of its assets, whether by one or a series of
transactions, related or not, other than for the purpose of a
reconstruction or amalgamation the terms of which have
received the previous consent in writing of Lessor; or
(j) if any action shall be taken by Lessee which shall impair the
rights, title or ownership of Lessor or Head Lessor or the
Security Interest of Indenture Trustee, in the Aircraft or
this Lease, or this Lease is or becomes wholly or partly
invalid, ineffective or unenforceable by reason of any act or
omission of Lessee; or
(k) if any consent, authorization, license, certificate or
approval of or registration with or declaration to any
Government Entity in connection with this Lease including,
without limitation:
(i) Lessee's air carrier operating certificate issued
pursuant to Chapter 447 of the Federal Aviation Act; or
(ii) required by Lessee or as a condition precedent required
by Lessor pursuant to Article 2.3 to authorize, or in
connection with, the execution, delivery, validity,
enforceability or admissibility in evidence of this
Lease or the performance by Lessee of its obligations
under this Lease; or
(iii) the registration of the Aircraft; or
(iv) any airline license or air transport license; is changed
such that it materially impairs the ability of Lessee to
perform its obligations hereunder, or is withheld, or is
revoked, suspended, cancelled, withdrawn, terminated or
not renewed, or otherwise ceases to be in full force; or
(m) if any circumstances analogous to any of the circumstances
described in paragraphs (f), (g) or
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(h) above arise under the Law of any applicable jurisdiction;
(n) for so long as Wings Aircraft Finance, Inc. or any other
affiliate or subsidiary of Fokker is the Lessor hereunder or
retains the entire beneficial interest in the ownership of the
Aircraft, if an event of default (however defined) occurs
under any Other Aircraft Agreement which event permits
acceleration or termination;
(o) [intentionally omitted],
(p) [intentionally omitted]; or
(q) [intentionally omitted].
15.2 If one or more Events of Default shall have occurred and be
continuing, at Lessor's option and subject to any mandatory
requirement of Law:
(a) For Lessee's account Lessor may do anything that may
reasonably be required to cure any Event of Default and
recover from Lessee all costs including legal expenses
incurred in so doing, and/or
(b) Lessor may accept such Event of Default as a repudiation of
this Lease and terminate the lease of the Aircraft to Lessee
hereunder by:
(i) serving notice of such termination on Lessee specifying
the occurrence giving rise to such Event of Default or
Events of Default, provided that such notice shall be
deemed to have been served without the necessity of
actual service upon the occurrence of any Event of
Default described in paragraph (f), (g), (h) or (m) of
Article 15.1.
Thereafter (if the Term shall have commenced) Lessee
shall redeliver possession of the Aircraft to Lessor at
the Redelivery Location (or such other location as
Lessor may require); or
(ii) at Lessor's election, taking possession of the Aircraft
for which purpose Lessor by its servants or agents may
enter upon Lessee's premises where the Aircraft may be
located,
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or cause the same to be redelivered to Lessor at the
Redelivery Location (or such other location as Lessor
may require Lessee to assemble and deliver the Aircraft
to Lessor, and Lessor shall be entitled to act as
attorney for Lessee in causing such redelivery and shall
have all the powers and authorizations legally necessary
for taking such action. In the event of exercise by
Lessor of its powers under this sub-paragraph (ii) such
termination shall be deemed to take effect on such
taking of possession by Lessor or such redelivery of the
Aircraft to Lessor at the said airport; and/or
(c) Lessor may proceed by appropriate court action or actions to
enforce performance of Article 15.2(b) or to recover damages
for the breach thereof; and/or
(d) all rights of Lessee hereunder shall, in the event the Term
shall be terminated pursuant to Article 15.2(b) henceforth
absolutely cease and terminate but without prejudice to
Lessee's obligations under this Lease all of which shall
continue in full force and effect except for obligations to
pay Rent and Reserve Rate after the Aircraft is returned to
Lessor, and is in the condition required by Article 16; and
Lessee shall cooperate in taking all steps necessary to effect
deregistration of the Aircraft in the State of Registration
and Lessor shall be entitled to sell or otherwise deal with
the Aircraft as if this Lease had never been made. Without
prejudice to the foregoing, Lessee hereby appoints Lessor as
its attorney to do any act or thing required in connection
with such deregistration of the Aircraft.
15.3 If an Event of Default occurs, Lessor shall have the right to demand
that:
(a) Lessee pay all amounts which may be then due and unpaid
hereunder, and
(b) at Lessor's option whether or not Lessor shall have exercised,
or shall thereafter at any time exercise, any of its rights
under Article 15.2, by thirty (30) days written notice to
Lessee from Lessor specifying a payment date, Lessee pay
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Lessor, and Lessee shall pay Lessor, on the payment date
specified in such notice, as liquidated damages for loss of
bargain and not as a penalty (in lieu of the Rent due for the
Aircraft covered by such notice for the period commencing
after the date specified for payment in such notice), any
unpaid Rent for the Aircraft (prorated in the case of Rent on
a daily basis) to and including the payment date specified in
such notice, plus the amount, if any, by which the aggregate
Rent for the Aircraft for the remainder of the Term for the
Aircraft, discounted periodically (equal to installment
frequency) to present worth at the interest rate of six and a
half percent (6.5%) per annum, exceeds the Fair Market Rental
Value of the Aircraft for the remainder of the Term, after
discounting such Fair Market Rental Value periodically (equal
to installment frequency) to present worth as of the payment
date specified in such notice at the interest rate of six and
a half percent (6.5%) per annum.
Lessee shall fully indemnify Lessor on its own behalf and on behalf
of Head Lessor and Indenture Trustee on demand and on an After-Tax
Basis against any loss (including loss of profit), damage, expense
(including without limitation attorneys' fees), cost or liability
which Lessor, Head Lessor or Indenture Trustee may sustain or incur
as a consequence of the occurrence of any Event of Default and/or
termination of the letting of the Aircraft pursuant to this Lease,
including but not limited to (i) any loss of profit suffered by
Lessor and/or Head Lessor because of Lessor's inability to place the
Aircraft on lease with another lessee on terms as favorable to
Lessor as the terms of this Lease or because whatever use, if any,
to which Lessor is able to put the Aircraft upon its return to
Lessor, or the funds arising upon a sale or other disposal thereof,
is not as profitable to Lessor as letting the Aircraft in accordance
with the terms of this Lease would have been to the extent the
foregoing loss of profit shall not be recovered under Article
15.3(b), (ii) any amount of interest, fees or other sums whatsoever
paid or payable on account of funds borrowed in order to carry any
unpaid amount, (iii) any loss, premium, penalty or expense which may
be incurred repaying funds raised to finance the Aircraft or in
unwinding any swap, forward interest rate agreement or other
financial instrument relating in whole to
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Lessor's financing of the Aircraft and/or the Aircraft under the
Other Aircraft Agreements, and (iv) any loss, cost, expense or
liability sustained or incurred by Lessor owing to Lessee's failure
to re-deliver the Aircraft in the condition required by this Lease.
15.4 No remedy referred to in this Article 15 is exclusive, but each
remedy shall be cumulative and in addition to any other remedy
referred to herein or otherwise available to Lessor. The exercise by
Lessor of any of its remedies hereunder shall not preclude or estop
the exercise or beginning of exercise by Lessor of any or more of
such other remedies.
No express or implied waiver by Lessor of any Event of Default, or
failure or delay of Lessor in exercising any right hereunder shall
operate as waiver thereof unless an express waiver is executed and
delivered to Lessee.
15.5 Prior to the Delivery Date Lessee shall deliver to Lessor a duly
authorized consent, undated and in form and substance acceptable to
Lessor, addressed to the Federal Aviation Administration consenting
to the release of this Lease in connection with the termination of
this Lease pursuant to the terms hereof and, if so requested by
Lessor, the deregistration of the Aircraft from the register of
civil aviation in the State of Registration.
16. RETURN OF AIRCRAFT
16.1 On the Expiry Date or upon earlier termination of the Term (unless a
Casualty Occurrence shall have occurred with respect to the
Aircraft), Lessee shall, at its own expense, redeliver the Aircraft
to Lessor at the Redelivery Location or such other airport as is
mutually acceptable to the parties, in a condition complying with
the provisions of Appendix E, free and clear of all liens and
encumbrances (including Permitted Liens other than Lessor Liens) and
upon request of Lessor cooperate in causing the Aircraft to be
removed from the register of civil aviation in the State of
Registration and Lessee shall return the Aircraft to Lessor together
with the Aircraft Documents supplied pursuant to this Lease when the
Aircraft was delivered to Lessee on the Original Delivery Date as
the same may be modified, supplemented or amended during the Term.
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16.2 Immediately prior to such redelivery of the Aircraft, Lessee, at its
own expense, shall make the Aircraft, Aircraft Documents and other
records available to Lessor for inspection ("Final Inspection") in
order to verify that the condition of the Aircraft complies with the
provisions of this Lease. Such inspection shall not unreasonably
interfere with the operation of the Aircraft. The period will be
long enough for the Final Inspection to permit the conduct by Lessor
of the following:
(a) Inspection of the Aircraft Documents;
(b) Inspection of the Aircraft structure and Parts;
(c) Inspection of the Engines and A.P.U., including without
limitation, a borescope inspection or any other equivalent
inspection method supported by Rolls Royce, inspection of the
compressor and turbine area, and, if reasonably requested
based on evidence that it is required, the Engine and A.P.U.
condition runs confirming release of each Engine and A.P.U for
its remaining operational life;
(d) A one-hour to two-hour test flight with Lessor's
representatives on board as observers and, if any non
compliance is found, a subsequent test flight to check
compliance after rectification.
16.3 To the extent that, upon such Final Inspection, the condition of the
Aircraft and Aircraft Documents does not comply with the provisions
of this Lease, Lessee, at its own expense, shall cause such
non-compliance to be promptly rectified and to the extent such
rectification extends beyond the Expiry Date, the Term shall, at
Lessor's sole option, be deemed to be automatically extended and the
provisions of this Lease shall remain in full force and effect until
such rectification has been accomplished. During such extension of
the Term Lessee shall be liable to pay Rent at a daily pro rata rate
equal to the Rent payable during the last Rental Period of the Term.
16.4 Upon redelivery Lessee shall provide to Lessor all necessary
assistance to enable Lessor to obtain any required documents in
relation to the export of the Aircraft from the State of
Registration, and if different, from the State of Incorporation
(including a valid and subsisting export license for the Aircraft),
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and shall reassign to Lessor, at the expense of Lessee, the benefit
of any indemnity or warranty which has been assigned to Lessee
pursuant to Article 13.3 above to the extent such indemnity or
warranty is assignable.
16.5 Prior to the Expiry Date or upon any earlier termination of the Term
and upon Lessor's request, Lessee will provide Lessor or its agent
reasonable access to and Lessor may make and retain copies of the
Approved Maintenance Program and the Aircraft Documents in order to
facilitate the Aircraft's integration into any subsequent operator's
fleet.
Lessor agrees that it will not disclose the contents of the Approved
Maintenance Program to any person or entity except to the extent
necessary to monitor Lessee's compliance with this Lease and/or to
bridge the maintenance program for the Aircraft from the Approved
Maintenance Program to another program.
16.6 Upon redelivery of the Aircraft to Lessor, an adjustment shall be
made in respect of fuel on board on the Original Delivery Date and
on redelivery at the price then prevailing at the Redelivery
Location.
16.7 If Lessor shall request that Lessee paint the Aircraft any other
basic color as contemplated by Section 1(h) of Appendix E, Lessor
agrees that it shall bear the cost and expense of the difference
between white paint and such other basic color.
16.8 Upon written request of Lessor given to Lessee not later than thirty
(30) days prior to the Expiry Date or termination of the Lease,
Lessee, at the Expiry Date or upon termination of the Lease, will
provide, or will cause to be provided, up to thirty (30) days'
storage of the Aircraft at Lessee's premises, at Lessor's cost and
expense. Lessee shall cause the Aircraft to be delivered to such
designated location at Lessor's cost and expense. During such period
of storage, Lessee will arrange for insurance and maintenance at
Lessor's cost and expense. Lessee shall allow Lessor or any person
designated by Lessor, including the authorized representatives of
any prospective purchaser or user of the Aircraft, to inspect the
same at all reasonable times.
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17. CASUALTY OCCURRENCES
17.1 In this Lease "Casualty Occurrence" shall mean any of the following
events with respect to the Aircraft, the Airframe or an Engine:
(a) the actual, agreed, constructive, arranged or compromised
total loss or destruction of the Aircraft, the Airframe or an
Engine, or damage to the Aircraft, Airframe or Engine
rendering repair impracticable or uneconomical, or the
Aircraft, Airframe or Engine being rendered permanently unfit
for normal use;
(b) requisition of title or other compulsory acquisition,
requisition, capture, seizure, deprivation, confiscation or
detention for any reason of the Aircraft, the Airframe or an
Engine by any Government Entity of the State of Registration
or by any other government or other competent authority,
whether de jure or de facto, but excluding requisition for use
or hire not involving requisition of title by any Governmental
Entity for a temporary period ending on the date ninety (90)
days (or the Expiry Date if the requisition for use or hire is
by the United States) after such requisition, or the Expiry
Date, whichever first occurs;
(c) the hijacking, theft, disappearance, condemnation,
confiscation or seizure of the Aircraft, the Airframe or an
Engine other than in the circumstances referred to in (b)
above which deprives Lessee of the use thereof for more than
ninety (90) consecutive days.
17.2 (a) In the event of a Casualty Occurrence with respect to the
Aircraft or Airframe prior to the Delivery Date, this Lease
shall immediately terminate with respect to such Aircraft and
neither party shall have any further obligation or liability
hereunder, save that Lessor shall return to Lessee the Deposit
or such part thereof as Lessor shall have received from Lessee
and Lessee shall remain liable to reimburse Lessor for any
amounts specified in Article 8.2(a).
(b) In the event of a Casualty Occurrence with respect to the
Aircraft or Airframe after delivery to Lessee hereunder,
Lessee shall pay the Agreed
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Value to Lessor on or prior to the earlier of (i) 45 days
after the Casualty Occurrence and (ii) the Business Day after
the date of receipt of the insurance proceeds in respect of
the Casualty Occurrence and, provided all other amounts which
are then due and payable by Lessee under this Lease have been
paid in full to Lessor, Lessee's obligation hereunder for
payment of Rent shall cease as from the date on which Lessor
receives payment in full of the Agreed Value. Rent paid in
advance for any days which occur after such Agreed Value is
paid shall be repaid to Lessee on a pro rata basis for each
day beyond such date of payment in full of the Agreed Value.
Any insurance proceeds in excess of Agreed Value obtained by
Lessee pursuant to Article 11 for its own account, remaining
after payment of the foregoing amounts shall, unless an Event
of Default under Section 14(n) shall have occurred and be
continuing, be paid over to Lessee.
(c) Subject to the rights of any insurers and reinsurers or other
third party, upon irrevocable payment in full to Lessor of the
Agreed Value and all other amounts which may be or become
payable to Lessor under this Lease, Lessor will cause, title
to the Aircraft to be conveyed from Head Lessor to it, without
recourse or warranty (except as to title and Lessor's Liens)
and without further act, Lessor will convey title to Lessee.
Lessor will or will cause Head Lessor to transfer to Lessee
all of Head Lessor's rights to any Engines and Parts not
installed when the Casualty Occurrence occurred, all on an
as-is where-is basis, and will at Lessee's expense, execute
and deliver or cause to be executed and delivered such bills
of sale and other documents and instruments as Lessee may
reasonably request to evidence (on the public record or
otherwise) the transfer and the vesting of Lessor's rights in
such Engines and Parts in Lessee, free and clear of all rights
of Lessor and Lessor Liens.
17.3 Upon the Casualty Occurrence with respect to any Engine not
involving a Casualty Occurrence of the Aircraft, Lessee shall give
Lessor prompt written notice thereof and Lessee shall replace such
Engine as soon as reasonably possible, but in no event later than
ninety (90) days after such Casualty Occurrence, with a replacement
Engine in accordance with Article 5.1.2(a).
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Such replacement shall be deemed an "Engine" as defined herein.
Lessee agrees to take such action as Lessor may reasonably request
in order that any such replacement engine shall be duly and properly
titled in Head Lessor, leased hereunder and subject to the Security
Interest of the Indenture to the same extent as the Engine replaced
thereby. In such case or in the case of the installation of a
Replacement Engine in accordance with 5.1.2(a), the following
conditions shall be satisfied at no cost or expense to Lessor and
Lessor agrees to cooperate with Lessee to the extent necessary to
enable it to satisfy such conditions in a timely manner:
(i) the following documents shall be duly authorized,
executed and delivered by the respective party or parties
thereto and shall be in full force and effect, and an executed
counterpart of each shall be delivered to Lessor:
(A) a full warranty bill of sale in favor of Head
Lessor, in form and substance reasonably satisfactory to
Lessor, with respect to the Replacement Engine;
(B) a supplement to this Lease, in form and substance
reasonably satisfactory to Lessor, covering the
Replacement Engine (and releasing such replaced Engine
from this Lease) which shall have been duly filed (or a
short form thereof) for recordation with the Aviation
Authority;
(C) a certificate from a duly qualified independent
engineer, which engineer shall be reasonably
satisfactory to Lessor, confirming the operating
condition, value and utility of the Replacement Engine
satisfies the terms of Article 5.1.2(a) (i);
(D) evidence of compliance with the insurance provisions
of Article 11 with respect to such Replacement Engine as
Lessor may reasonably request; and
(E) an opinion of counsel (and such other evidence of
title as Lessor may reasonably request) to the effect
that, such conveyance, is effective to transfer to Head
Lessor title to such Replacement Engine and that it will
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be leased hereunder to the same extent as the Engine
replaced thereby.
Lessor will cause title to the Engine being replaced to be
transferred to Lessee or its designee without recourse or warranty
(except as to title and the absence of Lessor's Liens). Lessee's
obligation to pay the Rent hereunder shall continue in full force
and effect, but Lessee shall be entitled to be reimbursed by Lessor
the amount of insurance or condemnation proceeds, if any, received
by Lessor with respect to such replaced Engine.
17.4 In the event of requisition for hire of the Aircraft or any part
thereof not constituting a Casualty Occurrence, then, subject to the
proviso herein contained, the Rent and other charges payable under
this Lease shall not be suspended or abated either in whole or in
part, and Lessee shall not be released from any of its other
obligations (as to payment, indemnity or otherwise) hereunder (other
than operational obligations with which Lessee is unable to comply
solely by virtue of such confiscation or requisition). If Lessee
shall duly comply with all its obligations under this Lease, Lessee
shall during the Term be entitled to any hire paid by the
requisitioning or confiscating authority and Lessee shall, as soon
as practicable after the end of any requisition or confiscation,
cause the Aircraft to be put into the condition required by this
Lease. Lessor shall be entitled to all compensation payable by the
requisitioning or confiscating authority in respect of any change in
the structure, state or condition of the Aircraft arising during the
period of requisition or confiscation, and Lessor shall apply such
compensation in reimbursing Lessee for the cost of complying with
its obligations as aforesaid, but if any Default has occurred and is
continuing, Lessor shall be entitled to apply such compensation in
or towards settlement of any amounts owing by Lessee under this
Lease PROVIDED ALWAYS that if following such requisition or
confiscation the Aircraft is treated as an agreed, constructive,
arranged or compromised total loss by the insurers, then the
provisions of Article 17.1 shall apply with effect from the date on
which the insurer so determines.
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18. GOVERNING LAW AND JURISDICTION
18.1 This Lease and further agreements resulting herefrom shall be
governed by and construed in accordance with the internal Laws of
the State of New York and without regard to any conflict of law
rules. This Lease is being delivered in the State of New York.
18.2 Lessor and Lessee hereby irrevocably agree to submit to the
non-exclusive jurisdiction of, and to waive any objection to the
laying of venue in, the County of New York and that any suit, action
or proceedings (collectively, "Proceedings") may be brought by
Lessor in any court of the State of New York or any U.S. Federal
court located in New York County, New York.
18.3 Nothing contained in this Article 18 shall limit the right of either
party to this Lease to take Proceedings against the other in any
other court of competent jurisdiction, nor shall the taking of
Proceedings in one or more jurisdictions preclude the taking of
Proceedings in any other jurisdiction, whether concurrently or not.
18.4 Promptly after service of any process Lessor or Lessee shall
despatch a copy thereof to Lessee or Lessor, as the case may be, by
registered mail, postage prepaid but failure of Lessee or Lessor, as
the case may be, to receive such copy shall not invalidate the
service of such process.
18.5 To the extent that the parties may in any jurisdiction claim for
their or their assets immunity from suit, execution, attachment
(whether in aid of execution, before judgment or otherwise) or other
legal process and to the extent that in any such jurisdiction there
may be attributed to themselves or their assets such immunity
(whether or not claimed) the parties hereby irrevocably agree not to
claim and hereby irrevocably waive any immunity to the fullest
extent permitted by the laws of such jurisdiction with the intent,
inter alia, that the foregoing waiver shall have effect for the
purposes of the Foreign Sovereign Immunities Act of 1976 of the
United States of America.
18.6 Lessee and Lessor shall each at all times maintain an agent for
service of process in the New York, New York. For Lessee, such agent
shall be Paul, Hastings, Janofsky & Walker, Attn: John Howitt, 399
Park Avenue, New York, New York 10022-4697. For Lessor, such agent
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shall be Haight, Gardner, Poor & Havens, Attn: Bonny L.Y. Kwoh, 195
Broadway, New York, NY 10007. Any writ, judgment or other notice of
legal process shall be sufficiently served on Lessee or Lessor if
delivered to such agent at its address for the time being. Each of
Lessee and Lessor undertakes that if it shall revoke the authority
of its above agent or if for any reason any such agent no longer
serves as agent to receive service of process, Lessee or Lessor, as
the case may be, shall promptly appoint another such agent and
advise Lessor or Lessee, as the case may be, thereof.
19. MISCELLANEOUS
19.1 The rights of each of Lessor and Lessee under this Lease are
cumulative, may be exercised as often as it considers appropriate
and are in addition to its rights under general law. The rights of
Lessor against Lessee or in relation to the Aircraft (whether
arising under this Lease or the general law) shall not, as against
or in favor of Lessor, be capable of being waived or varied
otherwise than by an express waiver or variation in writing; and in
particular any failure to exercise or delay in exercising any of
such rights shall not operate as a waiver or variation of any other
such right; and defective or partial exercise of any such rights
shall not preclude any other or further exercise of that or any
other such right; and no act or course of conduct or negotiation on
Lessor's part or on Lessor's behalf shall in any way preclude Lessor
from exercising any such right or constitute a suspension or any
variation of any such right.
19.2 Save where expressly provided in this Lease, any certificate or
determination by Lessor as to any rate of interest or as to any
other amount payable under this Lease shall, in the absence of
manifest error, be conclusive and binding on Lessee.
19.3 If any sum paid or recovered in respect of the liabilities of Lessee
under this Lease is less than the amount then due, Lessor may apply
such sum to rental, interest, fees or any other amount due under
this Lease in such proportions and order and generally in such
manner as Lessor shall determine.
19.4 The terms and conditions of this Lease shall not be varied otherwise
than by an instrument in writing executed by or on behalf of Lessor
and Lessee.
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19.5 If any of the provisions of this Lease becomes invalid, illegal or
unenforceable in any respect under any law, the validity, legality
and enforceability of the remaining provisions shall not in any way
be affected or impaired.
19.6 Every notice, request, demand or other communication under this
Lease shall:
(a) be in English;
(b) be in writing and made by mail or by fax or telex transmission
or by reputable courier service;
(c) be deemed to have been received, subject as otherwise provided
in this Lease, in the case of a telex transmission, at the
time of dispatch with confirmed answerback of the addressee
appearing at the beginning and the end of the communication,
in the case of a fax transmission, at the time safe receipt is
confirmed by the addressee provided that if the date of
dispatch is not a business day in the country of the addressee
any telex or fax transmission shall be deemed to have been
received at the opening of business on the next such business
day, in the case of a letter five days after being deposited
in the mail first class postage prepaid and in the case of a
courier three days after being sent; and
(d) be sent:
(1) to Lessee at:
Prior to August 21, 1995:
Midway Airlines Corporation
5713 South Central Avenue
Chicago, Illinois 60638
Fax: (312) 838-2069
Attention: President
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Following August 21, 1995:
300 West Morgan St.
Durham, North Carolina 27702
Attention: President
Fax: (919) 956-7314
(2) to Lessor at:
Wings Aircraft Finance, Inc.
1199 N. Fairfax Street
Suite 500
Alexandria, VA 22314
Fax: (703) 683-2233
Attention: Secretary
or to such other address or telex or fax number as is notified by
either party to the other party to this Lease.
19.7 This Lease may be executed in any number of counterparts and all of
such counterparts taken together shall be deemed to constitute one
and the same instrument.
19.8 This Lease is the sole and entire agreement between Lessor and
Lessee in relation to the leasing of the Aircraft, and supersedes
all previous agreements in relation to such leasing. Each of Lessee
and Lessor represents for itself that no broker has been retained by
it in connection with this Lease.
19.9 This Lease is intended by the parties to be a lease between Lessor
and Lessee. Any waivers, consents, or deferrals of the payment of
Rent and Reserve Rate are not intended to be an agreement by Lessor
to make any capital contribution to the business of Lessee or to
share in or have liability for any of Lessee's losses, profits,
liabilities or obligations. Nothing contained in this Lease or
performed by Lessor in connection herewith and any other agreement
between Lessor and Lessee whether now existing or entered into in
the future shall make Lessor a partner or a joint venturer of Lessee
and shall not for any purpose be construed as a joint-venture
between the parties hereto.
19.10 [Intentionally omitted].
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19.11 Section 1110: Lessee acknowledges that Lessor would not have entered
into this Lease unless it had available to it the benefits of a
lessor under Section 1110 of Title 11 of the United States Code.
Lessee and Lessor hereby state that this Lease is intended to be a
true lease for U.S. Internal Revenue Code purposes. Lessee covenants
and agrees with Lessor that to better ensure the availability of
such benefits, Lessee shall support any motion, petition or
application filed by Lessor with any bankruptcy court having
jurisdiction over Lessee, whereby Lessor seeks recovery of
possession of the Aircraft under said Section 1110 and shall not in
any way oppose such action by Lessor unless Lessee shall have
complied with the requirements of said Section 1110 to be fulfilled
in order to entitle Lessee to continued use and possession of the
Aircraft hereunder. In the event said Section 1110 is amended, or if
it is repealed and another statute is enacted in lieu thereof,
Lessor and Lessee agree to amend this Lease and take such other
action not inconsistent with this Lease as Lessor reasonably deems
necessary so as to afford to Lessor the rights and benefits as such
amended or substituted statute confers upon owners and lessors of
aircraft similarly situated to Lessor.
19.12 [Intentionally omitted].
19.13 As between Lessor and Lessee, if Lessee fails to make any payment of
Rent or Reserve Rate required to be made by it hereunder or fails to
perform or comply with any of its agreements contained herein,
Lessor may itself make such payment or perform or comply with such
agreement, and the amount of such payment and the amount of the
reasonable and properly documented expenses of Lessor incurred in
connection with such payment or the performance of or compliance
with such agreement, as the case may be, together with interest
thereon at the interest rate defined in Appendix D, Paragraph 6,
shall be deemed Supplemental Rent, payable by Lessee upon demand.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS whereof the parties have executed this Lease the day
and year first herein written.
SIGNED on behalf of SIGNED on behalf of
WINGS AIRCRAFT FINANCE, INC. MIDWAY AIRLINES CORPORATION
By: /s/ Dennis de Jong By: /s/ Brian Olds
------------------------------ ------------------------------
Name: Dennis de Jong Name: BRIAN OLDS
Title: Authorized Representative Title: EXECUTIVE VICE PRESIDENT
<PAGE>
APPENDIX A
DESCRIPTION OF AIRCRAFT
Engine
Manufacturer Model Serial No. Engines Serial No.
- ------------ ----- ---------- ------- ----------
Fokker F28 11485 Two Rolls
MKO1OO Royce Tay 17704
MK 650-15 17706
FAA Registration No.
N109ML
<PAGE>
APPENDIX B
FURTHER DEFINITIONS AND VALUES
AGREED VALUE : Shall mean, during any year, the
amount set forth opposite such year
in Annex 1 to this Appendix B,
which amounts may be adjusted from
time to time to reflect adjustments
of the Stipulated Loss Values (as
defined in the Head Lease) in
accordance with the Head Lease.
DEPOSIT : {***} and the Additional Deposit
described in Appendix D, if applicable.
RENT {***} per month, as such amount may be
increased pursuant to Paragraphs 2.2 and
2.3 of Appendix D.
RESERVE RATE : (a) {***} for the months one up to and
including twelve of the Term;
(b) {***} for the months thirteen up to
and including the Expiry Date.
TRANSACTION
EXPENSES : {***}, which, notwithstanding any
other provision in this Lease shall not be
paid in cash but shall be amortized
pursuant to Section 2.3 of Appendix D.
<PAGE>
Annex 1 to Appendix B
{***} (5 pages omitted)
<PAGE>
APPENDIX C
CERTIFICATE OF ACCEPTANCE
This Certificate of Acceptance is delivered, on and as of the date set forth
below, by Midway Airlines Corporation (herein referred to as "Lessee") to Wings
Aircraft Finance, Inc., (herein referred to as "Lessor") pursuant to that
Aircraft Operating Lease Agreement No. AOLAF-117-A dated as of July 10, 1995
between Lessor and Lessee (herein referred to as the "Lease"):
1. Details of Acceptance.
Lessee hereby indicates and confirms to Lessor, its successors and
assigns, that Lessee has at ______ o'clock on this ______ day of ______
199__ at ________________________ accepted the following, in accordance
with the provisions of the Lease:
(a) Fokker 100 airframe, Manufacturer's serial Number 11485
(b) Rolls Royce Tay Mk 650-15 Engines (each of which engines has 750 or
more rated takeoff horsepower).
Engine Number Manufacturer's S/N
1. 17704
2. 17706
2. Confirmation of Undertakings
The terms used in this Certificate shall have the meanings given to such
terms in the Lease.
Lessee confirms that today being the Delivery Date as defined in the
Lease:
(i) the Aircraft is duly accepted by Lessee in accordance with and
subject to the provisions of the Lease and the execution and
delivery of this Certificate constitutes the acceptance of the
Aircraft by Lessee for all purposes of the Lease.
DELIVERY BY LESSEE TO LESSOR OF THIS CERTIFICATE OF ACCEPTANCE SHALL
CONSTITUTE CONCLUSIVE PROOF AS BETWEEN LESSOR AND LESSEE THAT ON THE
DELIVERY DATE LESSEE'S TECHNICAL EXPERTS EXAMINED AND INVESTIGATED
THE
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AIRCRAFT AND EVERY PART THEREOF AND THAT THE AIRCRAFT AND EVERY PART
THEREOF ARE AIRWORTHY AND IN GOOD WORKING ORDER AND REPAIR, WITHOUT
DEFECT WHETHER OR NOT DISCOVERABLE AS AT THE DELIVERY DATE AND IN
EVERY WAY SATISFACTORY TO LESSEE;
(ii) Lessee is obliged to pay to Lessor the amount provided for in the
Lease with respect to the Aircraft;
(iii) the Aircraft is insured in accordance with the Lease;
(iv) the representations and warranties contained in Article 13 of the
Lease remain, and if made at the date of this Certificate of
Acceptance, would be, true and correct in all respects;
(v) there have been affixed to the Aircraft and the Engines the fire
resistant notices required by Article 4.3 of the Lease;
(vi) Lessee has no right of set-off, deduction, withholding or
counterclaim against Lessor whatsoever; and
(vii) no Default is subsisting.
IN WITNESS WHEREOF, Lessee has caused this Certificate of Acceptance to be
executed in its name, by its duly authorized officer(s) or representative(s),
pursuant to due corporate authority, all as of the date written in Paragraph 1
above.
MIDWAY AIRLINES CORPORATION
By: ____________________________
Title: _________________________
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APPENDIX D
CHARGES
1. Deposit
Lessee has paid to Lessor {***} as a Deposit for the Aircraft on or
prior to the date hereof.
Lessee shall pay the balance of the Deposit to Leasor in consecutive
monthly installments of {***} each, beginning on August 9, 1995, and on
each corresponding day of the month subsequent thereto until the full
Deposit amount as set forth in Appendix B has been paid.
Lessor acknowledges that Lessee has paid the Additional Deposit (as
defined in the Termination Agreement) to Fokker pursuant to the
Termination Agreement and that upon the terms set forth therein, such
Additional Deposit shall be transferred by Fokker to Lessor to be held as
a part of the Deposits under the Lease. Lessor agrees that upon such
transfer, such Additional Deposit shall constitute a part of the Deposits,
the disposition of which shall be subject to the terms and conditions of
the Lease in respect of the Deposits except as expressly set forth in this
Appendix D. The Deposit shall be held by Lessor during the Term as
security for the full and punctual performance of all of Lessee's
obligations to Lessor under this Lease. Lessor may, but shall not be
obliged to, apply the Deposit in whole or in part for the payment of any
Rent, Reserve Rate, indemnities, attorneys' fees and other expenses,
insurance and other casualty payments and any other amount owing from time
to time by Lessee hereunder or, to the extent provided in Article 15.1(n),
under any Other Aircraft Agreement, or for the payment of any loss or
damage suffered by Lessor as a result of any Event of Default or to
perform any of Lessee's obligations under this Lease or otherwise remedy
any other Event of Default, including, without limitation, in the
redelivery condition for the Aircraft without prejudice to any other
remedy of Lessor. In any such event Lessee shall on demand restore the
Deposit to the full amount provided for herein by payment to Lessor of an
amount in cash equal to the amount applied or utilized. Lessee shall not
attempt to subject the Deposit to any other lien, security interest,
charge or other encumbrance or assign any interest therein to any other
person and, to the extent of its interest therein, if any, Lessee hereby
grants to Lessor a security interest in the Deposit and assigns and
transfers
<PAGE>
to Lessor any and all of Lessee's right, title and interest therein, if
any, as security as provided above, and Lessor shall be entitled to the
remedy of offset against and application of the Deposit, without any
notice to or demand against Lessee, all of which are hereby waived. Should
any Event of Default hereunder occur, the Deposit shall automatically be
applied to any sum due to Lessor or as a prepayment of any sum to become
payable to Lessor, unless Lessor thereafter elects otherwise by notice to
Lessee.
Any remaining Deposit shall be repaid by Lessor to Lessee ten (10) days
following the Expiry Date or other date after redelivery of the Aircraft
in full compliance with all the requirements of Section 16 and otherwise
in accordance with this Lease or upon payment of the Agreed Value and all
other amounts owed under this Lease, so long as no Event of Default under
Section 15.1(n) shall have occurred and be continuing. In the event there
is a dispute as to whether Lessee is entitled to a return of any portion
of the Deposit, Lessor shall so return the undisputed amount of the
Deposit. Upon a repayment of such Deposit or portion thereof, Lessor's
security interest in such Deposit or portion thereof being repaid shall be
deemed released.
Lessor's obligations in respect of the return of the Deposit shall be
those of debtor of Lessee, not of a trustee or other fiduciary.
The Deposit (other than the Additional Deposit) shall bear interest on the
amounts then held at a rate of interest per annum yielding $10,500.00
(Dollars Ten Thousand Five Hundred) per year payable annually commencing
on the first anniversary of the Original Delivery Date, and on each
anniversary thereafter unless the Deposit and interest thereon shall have
been applied pursuant to this Lease. Any reference to the Deposit in this
Lease shall include the interest accumulated thereon and not paid to
Lessee.
The Additional Deposit shall include the interest to be accrued under the
Termination Agreement for the period prior to, and shall bear interest on
the amount thereof from, the date such Additional Deposit is transferred
to Lessor to such date as the Additional Deposit may be returned to Lessee
under the Lease at a rate of per annum equal to LIBOR for the applicable
six month period as determined from time to time. For purposes of this
Agreement, six month LIBOR shall have the definition given thereto in
Paragraph 6 of this Appendix D. Such interest shall accrue and subject to
the terms of this Paragraph 1, be paid to Lessee upon the repayment to
Lessee of the Additional Deposit pursuant to
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the third clause of this Paragraph 1 or the next following clause. Any
reference to the Additional Deposit in this Agreement shall include the
interest accumulated thereon and not paid to Lessee.
Notwithstanding the terms of the third clause of this Paragraph 1,
provided that no Default as set forth in Article 15.1(a), (b), (f), (g),
(h) or (m) and is continuing, any remaining Additional Deposit shall be
repaid by Lessor to Lessee on the fourth anniversary of the Original
Delivery Date.
2. Rent
2.1 Rent shall be due and payable on each Rent Date. If such date is not
a Business Day then Rent shall be due and payable on the last
Business Day preceding such date.
2.2 The monthly Rent shall also be adjusted upward by an amount equal to
$875.00 (Dollars Eight Hundred Seventy Five) per month which shall
be payable to Lessor by check annually commencing on the first
anniversary of the Original Delivery Date, and on each anniversary
thereafter. Lessee may elect to authorize Lessor in writing to
set-off amounts payable pursuant to this Article 2.2 against
interest on the Deposit which is payable by Lessor pursuant to
Paragraph 1 of this Appendix D whether or not an Event of Default
shall have occurred and be continuing, and whether or not Lessor
exercises its right to terminate this Lease after such Event of
Default.
2.3 The monthly Rent shall also be adjusted upward by an amount (the
"Transaction Expense Amount") of $907.00 (Dollars Nine Hundred
Seven) per month which shall be payable on each Rent Date. If Lessee
exercises the right to purchase the Aircraft on the Option Exercise
Date (as defined in Paragraph 9 of this Appendix D), an amount (the
"Additional Amount") in Dollars shall be due and payable on the
Option Exercise Date, such Additional Amount to be equal to the
present value as at the Option Exercise Date (discounted at the
interest rate of six and a half percent (6.5%) per annum) of all
unpaid Transaction Expense Amounts that would have been payable
during the period from the Option Exercise Date to the Expiry Date
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<PAGE>
had Lessee not exercised the right to purchase the Aircraft.
3. Reserve Rate
3.1 Lessee shall be relieved of its obligation to pay the Reserve Rate
at any time that the Aircraft Maintenance Agreement is in effect
with respect to the Aircraft. At any time that the Aircraft
Maintenance Agreement is not in effect, then Lessee shall, in
addition to installments of Rent, pay to Lessor the Reserve Rate as
follows:
(a) by way of an Airframe maintenance accrual, the sum of {***}
for the months one up to and including twelve of the Term and
{***} for the months thirteen up to and including the Expiry
Date for each Flight Hour the Aircraft is operated during the
Term ("Airframe Maintenance Accrual"), and
(b) by way of an Engine maintenance accrual, in respect of each
Engine the sum of {***} for the months one up to and
including twelve of the Term, and {***} for the months
thirteen up to and including the Expiry Date for each
Flight Hour operated by each Engine during the Term
("Engine Maintenance Accrual"), and
(c) by way of a landing gear maintenance accrual, the sum of
{***} for the months one up to and including twelve of the
Term, and {***} for the months thirteen up to and including
the Expiry Date for each Cycle operated by the landing gear
during the Term ("Landing Gear Maintenance Accrual"), and
(d) by way of an A.P.U. maintenance accrual, the sum of {***} for
the months one up to and including twelve of the Term, and
{***} for the months thirteen up to and including the Expiry
Date for each Flight Hour operated by the A.P.U. during the
Term ("A.P.U. Maintenance Accrual").
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The Airframe, Engine, Landing Gear and A.P.U. Maintenance Accruals
accruing in any Rental Period shall be paid by Lessee to Lessor not
later than ten (10) days after the end of the calendar month in
which such Rental Period shall end. Concurrently with the payment
thereof, Lessee shall report to Lessor (in accordance with Article
7.1 (e)) the number of Flight Hours and Cycles accumulated in
respect of the period for which payment is being made.
The Reserve Rate will be subject to adjustment every twelve (12)
months during the Term by reference for 65% to the Employment and
Earnings Index for U.S.A. labor cost average hourly earnings of
production (Aircraft Equipment) SIC 3728, table C-2 and for 35% to
the Producer Price Index for U.S.A. material cost commodity
groupings (Machinery and Equipment) Code 11/table 6. In addition the
Engine Maintenance Accrual will be subject to adjustment every
twelve (12) months during the Term having regard to the Engine
Manufacturer recommendations, industry experience and any change in
the operational environment of the Aircraft.
Any Reserve Rate shall, if requested by either Lessor or (unless an
Event of Default shall have occurred and be continuing) Lessee, be
adjusted to take into account any changes in the maintenance
intervals upon which Reserve Rates are based.
3.2 Maintenance Accruals as defined in paragraph 3.1 above and received
by Lessor shall respectively be credited to funds (collectively
"Maintenance Funds") to be known as the "Airframe Maintenance Fund",
the "Engine Maintenance Fund", the "Landing Gear Maintenance Fund"
and the "A.P.U. Maintenance Fund" which funds shall reduce as monies
are released to Lessee therefrom in accordance with Article 7.4.1.
3.3 [Intentionally deleted].
3.4 The Reserve Rates shall accrue interest at the applicable six (6)
months US Dollar LIBOR rate (as defined in Paragraph 6 of this
Appendix D) minus point twenty five percent (.25%) per annum, which
interest shall be added to the relevant Maintenance Fund.
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<PAGE>
3.5 If Lessee would otherwise be required to pay the Reserve Rate
hereunder and if Lessee has improved its retained accumulated net
earnings (as determined in accordance with generally accepted United
States accounting principles consistently applied) by an amount
exceeding $9,000,000 (Dollars Nine Million) from the level of such
earnings as at February 28, 1995, then Lessee's obligation to
continue to pay Reserve Rates hereunder shall be stayed, provided,
however, that in connection with the release of monies to Lessee
from the Maintenance Fund pursuant to Article 7.4.1, prior to the
release of monies, if Lessee cannot provide Lessor with evidence,
reasonably satisfactory to Lessor, that Lessee continues to have
such level of retained earnings, Lessee's obligation to pay Reserve
Rates shall recommence pursuant to the terms hereof and no monies
shall be released from the Maintenance Fund until such time as it
shall have been restored to the level at which it would have been
had this paragraph not been in effect.
Lessee hereby represents that its retained accumulated net earnings
(as determined in accordance with generally accepted United States
accounting principles consistently applied) as at February 28, 1995
was negative (-) $15,270,000, subject to final year-end audit
adjustment.
If Lessee would otherwise be required to pay Reserve Rate hereunder,
Lessee may, at its election, pay to Lessor the amount which is
necessary to cause monies standing in the Maintenance Fund to equal
$1,500,000.00 (Dollars One Million Five Hundred Thousand) and
thereafter Lessee shall have no further obligation to make Reserve
Rate payments hereunder, provided, however, that thereafter no funds
shall be released to Lessee from the Maintenance Fund pursuant to
Article 7.4.1. It is understood, for the avoidance of doubt, that
the foregoing terms of this Article 3.5 shall not affect Lessee's or
Lessor's obligations under Article 3.6 of this Appendix D.
3.6 On the Expiry Date, if there is any Excess (as defined below) in any
Maintenance Fund, such Excess shall, unless a Default shall have
occurred and be continuing (in which case only after
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termination, return of the Aircraft and payment of all amounts due
following exercise of remedies under Article 15), be paid to Lessee,
and on such date, if there is any Shortfall (as defined below),
Lessee shall pay such Shortfall to Lessor.
"Excess" in any Maintenance Fund on the Expiry Date shall mean any
positive difference obtained by subtracting (x) from (y) for the
Airframe, Engines, Landing Gears or A.P.U., as the case may be; (x)
shall mean the product of (I) the then market cost from an
independent Authorized Maintenance Performer in the United States
mutually agreed upon by Lessor and Lessee and corrected for the
experience of all United States based operators of Fokker 100
aircraft for the relevant item:
with respect to the Aircraft, to perform a scheduled airframe
heavy maintenance as defined in the Maintenance Program for
12,000 hours and 24,000 hours inspections or any equivalent
thereof with more or less hours ("Airframe Maintenance"), or
with respect to any Engine, to perform a scheduled shop visit
engine maintenance and repair, other than (i) repairs arising
as a result of foreign object damage or operations mishandling
and/or (ii) maintenance and repair of QEC (Quick Engine
Change) kits ("Engine Maintenance"), or
with respect to any nose or main landing gear to perform a
schedule shop visit nose and main landing gear maintenance and
repair, other than repairs arising as a result of foreign
object damage or operational mishandling ("Landing Gear
Maintenance"), or
with respect to Auxiliary Power Unit ("A.P.U.") to perform an
off Aircraft shop A.P.U. maintenance and repair, other than
repairs arising as a result of foreign object damage or
operational mishandling ("A.P.U. Maintenance"), and
(II) a fraction of which (a) the numerator shall be the difference
between the actual number of hours or cycles (as to landing gear),
as the case
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may be, of operation remaining on the Airframe, Engine, Landing Gear
or A.P.U., as the case may be, to the next such Airframe
Maintenance, Engine Maintenance, Landing Gear Maintenance or A.P.U.
Maintenance, as the case may be, and the total number of hours or
cycles, as the case may be, of operation allowable between such
Maintenance and (b) the denominator shall be the total number of
hours or cycles, as the case may be, of operation allowable between
such Maintenance.
(y) shall mean the actual dollar amount remaining in the respective
Maintenance Fund.
"Shortfall" in any Maintenance Fund on the Expiry Date shall mean
any negative difference obtained by subtracting (x) above from (y)
above, it being understood that Lessee shall not be relieved from
its obligation to pay the Shortfall notwithstanding the waiver by
Lessor at any time during the Term of Lessee's obligation to pay the
Reserve Rate.
4. Payments
All payments due hereunder shall be effected by Lessee to Lessor by
transfer to Lessor's account at Chemical Bank, New York, New York, Account
No. 400-056-011, Ref. Aircraft MSN 11450, AOLAF-117-A, in Dollars and in
immediately available funds, and all such payments shall be initiated
adequately in advance of the due dates to ensure that Lessor receives
credit for the full amount of such payment on the due dates. All such
payments shall be made in full without any deduction or withholding
(whether in respect of set-off, counterclaim, duties, taxes, charges or
otherwise howsoever) unless Lessee is prohibited by Law from doing so, in
which event Lessee shall (a) ensure that the deduction or withholding does
not exceed the minimum amount legally required; (b) and if the withholding
is a Tax for which Lessee is required to indemnify Lessor pursuant to
Article 8 of this Lease or is a wire transfer charge or other charge for
which Lessee is responsible under this Lease, forthwith pay to Lessor on
an After-Tax Basis such additional amount as shall result in the net
amount received by Lessor being equal to the amount which would have been
received by Lessor had such a deduction or withholding not been made; (c)
pay to the relevant taxation or other authorities within the period for
payment permitted by applicable Law the full amount of the deduction or
withholding with respect to any tax; and (d) upon request in writing from
Lessor to Lessee
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<PAGE>
furnish to Lessor, within the period for payment permitted by applicable
Law, an official receipt of the relevant taxation or other authorities
involved for all amounts deducted or withheld as aforesaid.
5. Currencies
If under any applicable Law, whether as a result of judgment against
Lessee or the liquidation of Lessee or for any other reason, any payment
under or in connection with this Lease is made or recovered in a currency
other than United States Dollars then, to the extent that the payment
(when converted to United States Dollars at the rate of exchange on the
date of payment or, in the case of the liquidation, the latest date for
the determination of liability permitted by the applicable Law) falls
short of the amount unpaid under this Lease, Lessee shall, as a separate
and independent obligation, fully indemnify Lessor against the amount of
the short fall; for the purposes of this paragraph, "rate of exchange"
means the rate at which Lessor is able on the relevant date to purchase
United States Dollars in London with that other currency.
6. Default Interest
If any amount payable pursuant to this Lease is not paid by Lessee on the
due date, Lessee shall pay to Lessor interest (after as well as before
judgment) on such amount, at the rate of LIBOR, which shall equal the
arithmetic mean expressed as a number (i.e., 40 per cent is 40 and not
0.4) of the rates of interest per cent per annum (rounded if not already
such a multiple, to the nearest whole multiple of 1/16th of one per cent)
at which, at or about 11.00 a.m. (London time) on the day two Business
Days before the Default, deposits in Dollars are offered for the duration
of six months on the REUTERS "LIBO" page (or such other page as may
replace it from time to time) ("LIBOR") plus four per cent (4%) per annum
from the due date to the date of payment in full by Lessee to Lessor, but
in the event such rate shall be in excess of the highest rate permitted by
applicable Law, then it shall mean the highest rate allowed by applicable
Law. All amounts of interest payable hereunder shall be calculated on the
basis of the actual number of days elapsed and a 360 day year.
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7. Set-off
At any time after a Default shall have occurred and be continuing, Lessor
shall be entitled to set-off or withhold from any amount due and payable
to Lessee under this Lease or, to the extent provided in Article 15.1(n),
any Other Aircraft Agreement, in or towards the satisfaction of any
amounts from time to time due and payable by Lessee under this Lease or,
to the extent provided in Article 15.1(n), any Other Aircraft Agreement or
any liability or obligation of Lessee under this Lease or, to the extent
provided in Article 15.1(n), any Other Aircraft Agreement, and shall be
entitled to do so notwithstanding that any such amount or amounts may not
be expressed in the same currency.
8. Time at which payments are due
Supplemental Rent shall be due and payable on demand unless otherwise
expressly stated herein.
9. Purchase Option
Lessor grants to Lessee the right to purchase and to take delivery of the
Aircraft (a) on January 2, 2010 (the "Option Exercise Date") for a price
equal to the greater of the FMV of the Aircraft on such date (as
determined by the Appraisal Procedure described in this Paragraph) and
$18,047,216.91 (Dollars Eighteen Million Forty Seven Thousand Two Hundred
Sixteen and Ninety One Cents); or (b) on the Expiry Date for a price equal
to the greater of the FMV of the Aircraft on the Expiry Date (as
determined by the appraisal procedure described in this paragraph) and
{***}. If Lessee elects to exercise its right to purchase the Aircraft,
provided no Event of Default shall have occurred and be continuing,
Lessee shall do so by giving to Lessor written notice of such election,
which election shall be irrevocable, at least two hundred seventy
(270) days prior to the Option Exercise Date or Expiry Date, as the case
may be. On the Option Exercise Date or the Expiry Date, as the case may
be, if Lessee has given notice pursuant to the preceding sentence, Lessee
shall pay, in addition to the amount set forth in clause (a) or (b) above
as appropriate, all Rent (if any) due and owing on such date and any
other amounts due and owing by Lessee under this Lease, including, but
not limited to, any Additional Amount pursuant to Paragraph 2.3 of this
Appendix D and, upon receipt of all of the foregoing amounts then due and
owing, Lessor shall pay to Lessee any Rent paid in advance for the period
after such date, the Deposits and any remaining Maintenance Funds and
shall transfer, or cause
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to be transferred, title without recourse or warranty (except as to the
absence of Lessor's Liens) to the Aircraft to Lessee or its designee.
Lessor and Lessee shall also share equally all costs associated with the
exercise of Lessee's right to purchase the Aircraft. The FMV of the
Aircraft on the Option Exercise Date and (so long as the Head Lease shall
not be in effect) on the Expiry Date shall be established by mutual
agreement between Lessor and Lessee and if no agreement can be reached as
to the FMV of the Aircraft, a determination of such value by a qualified
aircraft appraiser mutually satisfactory to Lessor and Lessee no later
than forty-five days prior to the date relevant to such determination. If
Lessor and Lessee are unable to select such an appraiser by the fifteenth
day prior to the date relevant to such determination, then such value of
the Aircraft shall be determined as follows: two qualified aircraft
appraisers, one chosen by Lessor and one by Lessee, shall mutually agree
thereupon, but if either party shall fail to choose an appraiser within
fifteen days after notice from the other party of the selection of its
appraiser, then the appraisal by such appointed appraiser shall be the
value applicable to the Aircraft. If the two appraisers cannot agree
within fifteen days after both shall have been appointed, then a third
appraiser shall be selected by the two appraisers or, failing agreement as
to such third appraiser within ten days after both shall have been
appointed, by the American Arbitration Association. The third appraiser
shall select the appraisal which such appraiser believes to be closest to
the FMV of the Aircraft and such amount shall be the FMV. The decision of
the third appraiser shall be given within ten days of its appointment. The
foregoing procedures in respect of obtaining the FMV of the Aircraft by
one or more appraisers shall be herein called the "Appraisal Procedure".
The FMV of the Aircraft (so long as the Head Lease shall be in effect) on
the Expiry Date shall be established by the appraisal procedure set forth
in the Head Lease, whereby if the FMV of the Aircraft is not established
by mutual agreement between the Head Lessor and Lessor, the FMV of the
Aircraft will be a determination obtained in accordance with the Appraisal
Procedure with Head Lessor and Lessor participating therein at the
direction of Lessee in lieu of Lessor. Lessor hereby agrees that in
connection with such Appraisal Procedure, Lessee may choose any qualified
aircraft appraisers to be appointed and may otherwise participate in the
Appraisal Procedure and the determination of the FMV of the Aircraft. The
FMV shall be equal in amount to the value that would be obtained in an
arm's-length transaction between an informed and willing buyer-user under
no compulsion to buy, and an informed and willing seller, under no
compulsion to sell,
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<PAGE>
evaluating the Aircraft based on the assumption that it is in the
condition required to be maintained for operating service by the terms of
the Lease. All costs and expenses of the Appraisal Procedure shall be
shared equally by Lessor and Lessee. Subject to Paragraph 7 of this
Appendix D, any amounts remaining in the Maintenance Funds shall be paid
to Lessee concurrently with its payment of the purchase price of the
Aircraft pursuant to this Paragraph 9. Lessor represents and warrants to
Lessee that Lessor has the right under the Head Lease to grant the
foregoing options to Lessee and to cause title to the Aircraft to be
transferred to Lessee upon exercise thereof as provided above and the
Appraisal Procedure is the same as the "Appraisal Procedure" in the Head
Lease and that Lessor will not amend such "Appraisal Procedure" in the
Head Lease without Lessee's prior written consent (such consent not to be
unreasonably withheld).
10. Wet Leasing and Subleasing
So long as no Event of Default shall have occurred and be continuing,
without the prior written consent of Lessor, Lessee may wet lease the
Aircraft including the Engines (the term "wet lease" meaning an agreement
whereby Lessee or Sublessee at all times retains operational control of
the cockpit and the Aircraft), provided, that Lessee's obligations under
this Lease shall continue in full force and effect during the period of
such wet lease and none of the Aircraft nor the Airframe nor any Engine
will be used "predominantly outside the United States" within the meaning
of Section 168(g) of the Code (as Code is defined in Article 8A) during
the period from the Delivery Date to the last day of the year in which the
seventh anniversary of the Delivery Date occurs.
So long as no Event of Default shall have occurred and be continuing, if
Wings Aircraft Finance, Inc. or any other affiliate or subsidiary of
Fokker is not either (x) the Lessor under the Lease or (y) holder of the
entire beneficial interest in the ownership of the Aircraft, Lessee may
sublease the Aircraft including the Engines, provided, that the following
conditions are met, in form and substance satisfactory to the then Lessor
under the Lease:
(a) Lessee (x) shall have a credit rating of "BB" as determined by
Standard & Poor's Corporation or "Ba2" as determined by Moody's
Investors Service or an equivalent rating as determined by a
nationally recognized rating agency reasonably acceptable to Lessor
(or equivalent private rating), or if the
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<PAGE>
proposed sublessee meets such a credit rating standard and the
sublease is assigned to Lessor and (y) shall be a person that is a
citizen of the United States of America as defined in Section 40102
(a) (15) of Title 49 of the United States Code (or any similar
legislation of the United States of America enacted in substitution
or replacement therefor) holding an air carrier operating
certificate issued by the Secretary of Transportation pursuant to
Chapter 447 of Title 49 of the United States Code (or any
predecessor or successor legislation therefor) for aircraft capable
of carrying ten or more individuals or 6,000 pounds or more cargo
which is also certificated so as to entitle Lessor to the benefits
of Section 1110 of Title 11 of the United States Code with respect
to the Aircraft;
(b) the proposed sublessee is not subject to a proceeding or final order
under applicable bankruptcy, insolvency or reorganization laws on
the date the proposed sublease is entered into;
(c) the proposed sublessee is a person (x) (except the United States
government) that is a citizen of the United States of America as
defined in Section 40102 (a) (15) of Title 49 of the United States
Code (or any similar legislation of the United States of America
enacted in substitution or replacement therefor) holding an air
carrier operating certificate issued by the Secretary of
Transportation pursuant to Chapter 447 of Title 49 of the United
States Code (or any predecessor or successor legislation therefor)
for aircraft capable of carrying ten or more individuals or 6,000
pounds or more cargo which is also certificated so as to entitle
Lessor to the benefits of Section 1110 of Title 11 of the United
States Code with respect to the Aircraft; or (y) which holds a duly
issued air carrier operating certificate issued by the jurisdiction
of its domicile and principal place of business;
(d) the proposed sublessee is an air carrier domiciled and principally
located in any of the United States, Canada, a member state of the
European Union, Switzerland, Norway or Japan or other country
reasonably acceptable to Lessor, provided, that (x) the United
States and The Netherlands maintain diplomatic relations with such
country on the date of such determination and (y) there are no
economic sanctions imposed against such country by the government of
the United States or the United Nations or the European
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<PAGE>
Union such that persons in the United States or member states of
such organizations are prohibited or strongly discouraged from doing
business in or with such country and (x) such country is not engaged
in armed conflict with the armed forces of the United States or a
member of the European Union;
(e) such proposed sublease shall not (w) be for a term, including any
renewal options thereunder that extends beyond the Expiry Date, (x)
provide a sublessee with a purchase option for the Aircraft, (y)
permit any sub-subleasing of the Aircraft by the proposed sublessee,
and (z) permit a proposed sublessee the rights of quiet enjoyment in
the Aircraft; and
(f) such proposed sublease shall (x) contain a waiver of sovereign
immunity by the proposed sublessee, (y) be on terms and conditions
which are not inconsistent with the rights of Lessee under the Lease
and (z) be expressly subject and subordinate to all of the terms of
the Lease, the Head Lease and the Indenture.
For such sublease, Lessor, shall receive, in form and substance reasonably
satisfactory to Lessor,
(a) a certificate of insurance signed by an insurance broker to the
effect that the Aircraft shall be, upon such sublease, insured in
accordance with the requirements of the Lease;
(b) evidence that all filings, registrations and applications and the
receipt of all consents, necessary or advisable in connection with
the sublease of the Aircraft, the recognition of Lessor's rights in
the Aircraft, the recognition of Head Lessor's title in the
Aircraft, and the continued status of the Indenture as a first
priority Lien on the Aircraft have been made or given;
(c) assurances that such sublease will not result in the imposition of,
or increase in the amount of, any Taxes, expense, claim, loss or
damage for which Lessee is not required to indemnify Lessor pursuant
to the Lease; and
(d) assurances of the payment by Lessee or the sublessee of all related
costs and expenses (including, without limitation, the reasonable
costs and disbursements of counsel to Lessor relating to such
sublease.
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<PAGE>
Prior to the delivery of the Aircraft under the sublease, Lessor, shall
have received, in form and substance reasonably satisfactory to Lessor,
opinions of counsel to Lessee or the sublessee with respect to the
jurisdiction in which such sublessee is domiciled and principally located,
to the effect that
(a) the terms (including the governing law, service of process and
submission to jurisdiction provisions thereof) of the Lease, the
Head Lease and the Indenture are legal, valid, binding and
enforceable under the laws of such jurisdiction (subject to
customary, exceptions as to enforceability and the effectiveness of
certain remedial provisions which exceptions do not affect the
practical realization of benefits intended to be provided by such
documents);
(b) it is not necessary for Lessor, Indenture Trustee or any Participant
to qualify to do business in such jurisdiction solely as a result of
such sublease;
(c) the courts of such jurisdiction would give effect to Lessor's
leasehold interest in the Aircraft, Head Lessor's title to the
Aircraft and insofar as the laws of such jurisdiction are concerned
Head Lessor will continue to be recognized as the owner of the
Aircraft;
(d) the lien of the Indenture will continue to be a first priority, duly
perfected lien on the Aircraft after giving effect to such sublease;
(e) the courts of such jurisdiction would provide at least substantially
equivalent protection to Lessor, Head Lessor, the Owner Participant,
the Loan Participant and Indenture Trustee as provided under United
States and applicable state law in respect of the transactions
contemplated by such sublease, including, without limitation, the
remedies provided under the Indenture, the Head Lease, the Lease and
the sublease (subject to customary exceptions as to enforceability
and the effectiveness of certain remedial provisions which do not
affect the practical realization of benefits intended to be provided
by such documents);
(f) any import permit necessary to take the Aircraft into such country
has been obtained;
(g) there is no tort liability of the owner, lessor or mortgagee of an
aircraft not in possession thereof
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<PAGE>
under the laws of such jurisdiction more onerous than under the laws
of the United States;
(h) all filings, registrations and declarations that are necessary or
advisable in connection with such sublease have been duly made and
are effective;
(i) the courts of such jurisdiction would give effect to the waiver of
sovereign immunity given by the sublessee;
(j) the courts of such jurisdiction would give effect to the sublease
being subject and subordinate to the Lease, the Head Lease and the
Indenture; and
(k) that there exist no possessory rights in favor of the sublessee
which upon Lessee's bankruptcy or other default under the Lease
would prevent the return of the Aircraft in accordance with the
terms of the Lease or inhibit Lessor's rights therein.
If, in connection with a sublease, the proposed sublessee requests that
the registration of the Aircraft be changed from that of the State of
Registration, such change of registration shall be subject to the prior
written consent of Lessor.
11. Excess Insurance
For so long as the Agreed Value exceeds {***}, Lessor shall reimburse
Lessee for Lessee's incremental cost of the premium relating to All Risks
Aircraft Hull insurance, or, if applicable, Aircraft Hull War and Allied
Perils insurance with respect to the amount of such excess.
At any time that the Agreed Value is less than {***} and the Agreed Value
is orwas changed to reflect adjustments in the Stipulated Loss Values (as
defined in the Head Lease) due to the issuance of loan certificates
pursuant to the Indenture, Lessor shall reimburse Lessee for Lessee's
incremental cost of the premium relating to All Risk Hull insurance or,
if applicable, Aircraft Hull War and Allied Perils insurance, attributable
to such change in the Agreed Value.
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12. Maximum Takeoff Weight
Lessee agrees that, upon the written request of Lessor, Lessee will
undertake as soon as reasonably practicable and within its normal
maintenance schedule to perform or to supervise the performance by outside
contractors approved by Lessor of such alterations to the Aircraft as are
necessary to permit the Aircraft to be operated at a maximum takeoff
weight ("MTOW") of 101,000 pounds, with the Manufacturer to be responsible
for obtaining Air Authority certification of operation as MTOW 101,000
pounds.
13. Supplement to Article 8A.5
If any Head Lease Tax Indemnitee shall pay any amount to Lessor pursuant
to Section 7A(n) of the Participation Agreement for which Lessee has
previously paid an indemnity to Lessor pursuant to Article 8A.1 hereof,
Lessor shall pay such amount to Lessee within 15 Business Days after
Lessor receives such amount.
14. Supplement to Article 8A.9(r)
Article 8A.9(r) (relating to the definition of "Specified Tax") shall be
modified by inserting at the end of clause (i) the phrase "under this
Lease or under applicable Law" and by changing the words "Closing Date" to
"Delivery Date" in clause (vii).
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APPENDIX E
OPERATING CONDITION AT REDELIVERY
Upon redelivery of the Aircraft to Lessor, the Aircraft shall, subject to
ordinary wear and tear generally:
1. General Condition
(a) Be clean by airline standards;
(b) Have installed the Engines, and other equipment, Parts and
accessories and loose equipment as would remain installed in such
Aircraft, and shall be in a condition suitable for operation in
commercial service;
(c) Have in existence a valid Certificate of Airworthiness with respect
to the Aircraft issued by the Air Authority of the State of
Registration with a validity of at least nine (9) months after the
date of redelivery of the Aircraft to Lessor;
(d) Comply with the manufacturer's original specifications therefor, set
forth in Annex 1 to this Appendix E;
(e) Have undergone, immediately prior to redelivery, a 3000 check or any
subsequent higher inspection, if due within 3000 hrs, in accordance
with the Approved Maintenance Program, shall be free of any waivers,
and all deferred maintenance, if any, shall have been accomplished;
each engine and A.P.U. shall have had an inspection in accordance
with Article 16 confirming release for its remaining operational
life;
(f) All outstanding airworthiness directives and mandatory orders
affecting such model of Aircraft issued by the Air Authority which
require compliance during the Term shall have been accomplished;
(g) Have installed all applicable vendors' and manufacturers' service
bulletin kits theretofore received by Lessee free of charge that are
appropriate for the Aircraft and to the extent not installed, such
kits shall be furnished free of charge to Lessor;
(h) Stripped of all Lessee's paint scheme and repainted through an
Authorized Maintenance Performer with Manufacturer approved paints
in white or any other basic color requested by Lessor; and
<PAGE>
(i) Have been inspected and treated with respect to corrosion as defined
in the Approved Maintenance Program.
2. Airframe and major components
The Airframe and major components shall have not less than the following
hours/cycles/months expected life remaining to the next Major Check and/or
overhaul:
-Airframe : 3000 hours and 12 months to
next Major Check;
-Engine : half life on average to next
Engine shop visit but in no
event less than 3000 hours;
-Main Landing Gear : 3000 cycles to next overhaul;
-Nose Landing Gear : 3000 cycles to next overhaul;
*The records as to remaining engine life shall be certified by Lessee in
writing to Lessor upon redelivery of the Aircraft to Lessor.
3. Components
(a) Each life-limited Part shall have not less than 3000 (Three
Thousand) flight hours or cycles of the total approved life
remaining to the scheduled replacement, in accordance with the
Approved Maintenance Program;
(b) Each hard-time controlled component shall have not less than 3000
(Three Thousand) Flight Hours or 3000 (Three Thousand) Cycles or 12
(twelve) months whatever is applicable, remaining to the next
scheduled overhaul/inspection, in accordance with the Approved
Maintenance Program;
(c) "On-condition" and "Condition Monitored" components shall be
serviceable;
(d) The A.P.U. shall be serviceable.
4. Fuselage, Windows and Doors
(a) Fuselage shall be free of major dents and abrasions, scab patches
and loose or pulled or missing rivets;
(b) Windows shall be free of delamination, blemishes, crazing and shall
be properly sealed;
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(c) Doors shall be free moving, correctly rigged and be fitted with
serviceable seals.
5. Wings and Empennage
(a) All leading edges shall be free from damage;
(b) All unpainted cowlings, fairings and other surfaces shall be
polished;
(c) Wings shall be free of fuel leaks.
6. Interior
(a) Ceilings, sidewalls and bulkhead panels shall be clean and free of
cracks and stains;
(b) All carpets and seat covers shall be in good condition, clean and
stain free and meet Air Authority fire resistance regulations;
(c) All seats shall be serviceable, in good condition and repainted as
necessary;
(d) All signs and decals shall be clean and legible;
(e) All emergency equipment having a calendar life shall have a minimum
of one year or one hundred per cent of its total approved life,
whichever is less, remaining.
7. Cockpit
(a) All decals shall be clean, secure and legible;
(b) All fairing panels shall be free of stains and cracks, shall be
clean, secure and repainted as necessary;
(c) Floor coverings shall be clean and effectively sealed;
(d) Seat covers shall be in good condition, clean and shall conform to
Air Authority fire resistance regulations;
(e) Seats shall be fully serviceable and shall be repainted as
necessary.
8. Cargo Compartments
(a) All panels shall be in good condition;
(b) All nets shall be in good condition.
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9. Landing Gear and Wheel Wells
(a) Shall be clean, free of leaks and repaired as necessary;
(b) All decals shall be clean, secure and legible.
10. Corrosion
(a) Entire fuselage shall be substantially free from corrosion and shall
be adequately treated and an approved corrosion prevention program
shall be in operation;
(b) Fuel tanks shall be free from contamination and corrosion and a tank
treatment program shall be in operation.
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APPENDIX F
AIRCRAFT DOCUMENTS
FOKKER 100 AIRCRAFT
Aircraft Documents shall include the documents referred to in Table I ("Aircraft
Documentation"), Section (D), Exhibit (D) of the Support Services Agreement No.
ASSAF-110 between FAUSA and Lessee.
Aircraft Documents shall also include all logs, certificates and data, and
inspection, modification and overhaul records, relating to the Aircraft and
required to be maintained by the Air Authority and/or by the Approved
Maintenance Program.
Upon Expiry Date or upon earlier termination of the Lease all Aircraft Documents
shall be redelivered by Lessee to Lessor complete and fully updated
simultaneously with the redelivery of the Aircraft.
<PAGE>
APPENDIX G
FAA POWER OF ATTORNEY
This POWER OF ATTORNEY in favor of WINGS AIRCRAFT
FINANCE, INC. ("Lessor") dated ______________________ , 199__ from MIDWAY
AIRLINES CORPORATION ("Lessee").
RECITALS:
A. Lessor and Lessee have entered into an Aircraft Operating Lease
Agreement No. AOLAF-117-A dated as of ________________, 1995 (the
"Lease Agreement") with respect to the Fokker 100 aircraft,
serial no. 11485, U.S. registration no. N109ML (the "Aircraft").
B. Capitalized terms used herein and not otherwise defined shall
have the respective meanings ascribed to such terms in the Lease
Agreement.
NOW, THEREFORE, for good and valuable consideration, the adequacy of
which is hereby acknowledged, it is hereby agreed as follows:
Lessee hereby irrevocably constitutes and appoints Lessor, with full
power of substitution, for and in the name and on behalf of Lessee, as the act
and deed or otherwise of Lessee:
to execute, sign, deliver, authorize and file such instruments
legally necessary for any and all actions necessary to take
possession and effect redelivery of the Aircraft, Engines or Parts
upon termination of the Lease Agreement due to an Event of Default;
to execute, sign, deliver and file all such instruments requested by
Lessor that may be required to deregister the Aircraft from the FAA,
or to terminate the Lease for the Aircraft that is recorded at the
FAA, or that may be deemed proper in or in connection with all or
any of the purposes aforesaid, and to appoint substitutes or agents
to take any such action on its behalf; provided, however, that such
power shall not be exercisable by or on behalf of Lessor until an
Event of Default shall have occurred and is continuing.
Lessee hereby ratifies and confirms and agrees to ratify and confirm
any direction, authorization and instruction of Lessor taken pursuant to this
Power of Attorney.
<PAGE>
This Power of Attorney shall expire on the date one year following
the Expiry Date, or earlier upon termination of the Lease.
IN WITNESS WHEREOF, Lessee has duly caused this Power of Attorney to
be executed on the date first set forth above.
MIDWAY AIRLINES CORPORATION
By: ________________________________
Name:
Title:
[CERTIFIED RESOLUTIONS OF LESSEE AUTHORIZING THIS
POWER OF ATTORNEY TO BE ATTACHED]
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THE SINGLE EXECUTED ORIGINAL OF THIS AMENDMENT MARKED "ORIGINAL" SHALL BE THE
"ORIGINAL" AND ALL OTHER COUNTERPARTS OF THIS AMENDMENT SHALL BE DUPLICATES AND
MARKED "DUPLICATE " OR "DUPLICATE ORIGINAL". TO THE EXTENT THAT THIS AMENDMENT
AND THE LEASE RELATED THERETO CONSTITUTE CHATTEL PAPER, AS SUCH TERM IS DEFINED
IN THE UNIFORM COMMERCIAL CODE AS IN ANY APPLICABLE JURISDICTION, NO SECURITY
INTEREST MAY BE CREATED THROUGH TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER
THAN THE "ORIGINAL".
AMENDMENT NO. 1
dated as of February , 1996
to
AIRCRAFT OPERATING LEASE AGREEMENT NO. AOLAF-117-A
dated as of July 10, 1995
between
WINGS AIRCRAFT FINANCE, INC.
as
Lessor
and
MIDWAY AIRLINES CORPORATION
as
Lessee
--------------------------------
One Fokker 100 Aircraft
Manufacturer's Serial No. 11485
U.S. Registration Mark Nl09ML
<PAGE>
AMENDMENT NO. 1 dated as of February ___, 1996 to Aircraft Operating
Lease Agreement No. AOLAF-117-A between WINGS AIRCRAFT FINANCE, INC., a Delaware
corporation ("Lessor") and MIDWAY AIRLINES CORPORATION, a Delaware corporation
("Lessee").
WHEREAS
A. Lessee and Lessor are parties to that certain Aircraft Operating
Lease Agreement No. AOLAF-ll7-A dated as of July 10, 1995 relating to One Fokker
F28 MK 0100 Aircraft described therein which Lease was recorded with the Federal
Aviation Administration (the "Lease"). Capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to them in the Lease.
B. Lessee is in default under the Lease by reason of its failure to
make certain Deposit payments and Termination Payments (as defined in the
Termination Agreement) in December 1995 and January 1996.
C. Lessee and Lessor desire to amend the Lease as hereinafter set
forth and to agree to certain other terms as set forth herein.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Amendment.
1.1 Article 7 of the Lease is hereby amended by adding a new Article
7.6 thereto as follows:
"7.6 Without in any way limiting the rights contained elsewhere
in the Lease, Lessor shall have the right to have observers
(who may Or may not be employees of Lessor) on site at
Lessee's premises (provided such observers do not
unreasonably interfere with Lessee's business or operations)
and provided the recipients of any financial and operational
information of Lessee (which recipients may include
employees or other representatives of Lessor or any of its
affiliates, agents, attorneys or accountants of Lessor or
its affiliates) keep strictly confidential any such
information, Lessor shall have the right to inspect and
review any internal financial and operational information of
Lessee as Lessor may reasonably request (provided such
request is made to Lessee's controller, or to a vice
president, senior vice president or the president of Lessee)
including, without limitation, cash flow statements,
financial books and records, and any other records relating
to the
<PAGE>
operation of Lessee's fleet. Lessee covenants that it
will fully cooperate with Lessor regarding any inspection
of Lessee's fleet and records pursuant to this Lease."
1.2 Article 15.1(o) of the Lease is hereby amended by deleting it in
its entirety and replacing it with the following:
"(n) if an event of default (however defined) occurs under (i) any of the
Other Aircraft Agreements, (ii) any other lease agreements between
Lessee and a lessor for the benefit, directly or indirectly, of
debis AirFinance B.V. or Daimler-Benz Aerospace A.G. relating to
other aircraft ("DASA Aircraft Agreements"), or (iii) any Aircraft
Maintenance Agreement entered into by Lessee in lieu of Reserve Rate
payments, which event permits acceleration or termination;"
1.3 Article 15.1(o) of the Lease is hereby amended by deleting it in
its entirety and replacing it with the following:
"(o) if Lessee's financial performance deviates in any material adverse
way (as determined by Lessor in its sole but reasonable discretion)
from the projections set forth in Lessee's business plan for
calendar year 1996 (attached hereto as Exhibit A), taken as a whole,
and such deviation is not the result of a natural disaster which
effectively makes it impossible for Lessee to meet such
projections;"
1.4 Article 15.1(p) of the Lease is hereby amended by deleting it in
its entirety and replacing it with the following:
"(p) if, prior to the satisfaction of Lessee's obligations to pay
Deferred Deposit Payments or Deferred Rent (as defined in Section 2
of the Amendment No. 1 to this Lease) Lessee shall make (i) any
payment of principal or interest on any amounts owed by Lessee to
Zell/Chilmark Fund, L.P. ("Zell") or any affiliate of Zell, (ii) any
redemption of, or any dividend or distribution with respect to, any
shares of Lessee owned by Sell or any affiliate of Sell, (iii) any
prepayment of principal or interest with respect to any other
subordinated debt owed by Lessee or (iv) any redemption of, or any
dividend or other distribution with respect to, any other shares of
Lessee; or"
1.5 Article 15.1(q) of the Lease is hereby amended by deleting it in
its entirety and replacing it with the following:
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<PAGE>
"(q) if Lessee shall fail to make any of the payments which it is
required to make pursuant to Section 2 of Amendment No. 1 to this
Lease."
1.6 Article 15.2(b)(i) of the Lease is hereby amended by adding
"(a), (n), (q)" following the word "paragraph" and by adding to such Article
the following additional clause:
"provided, however, that such automatic termination shall not apply with
respect to defaults of the type referred to in Articles 15.1(a) or (n) of
the Lease prior to the date of Amendment No. 1 to this Lease or for
payment defaults for Rent Dates occurring in February or March 1996, for
so long as Lessee makes the payments specified in Section 2 of Amendment
No. 1 to this Lease;"
it being understood that the effect of this amendment is to include payment
defaults, cross-defaults with Other Aircraft Agreements and DASA Aircraft
Agreements, and failure to make any of the payments specified in Section 2 of
Amendment No. 1 to this Lease as events giving rise to automatic termination of
the Lease, as amended, without the necessity of any service of notice thereof
upon Lessee.
1.7 Article 16 of the Lease is hereby amended by adding a new
Article 16.9 as follows:
"16.9 Notwithstanding anything to the contrary contained in this
Lease, Lessee covenants that, upon earlier termination of the
Lease pursuant to Article 15, Lessee will not interpose any
defense to, or otherwise oppose, any action commenced by
Lessor to regain possession of the Aircraft and Lessee shall
join in any application by Lessor seeking to regain possession
of the Aircraft if so required by Lessor. This covenant shall
apply whether or not Lessee is or shall subsequently become a
debtor in a case under Title 11 of the United States Code and
in such event Lessee covenants that it will not oppose and
will join in any application by Lessor seeking to regain
possession of the Aircraft."
2. Forbearance.
Execution of this Amendment shall serve as Lessor's agreement to
forbear from exercising its remedies under Article 15 of the Lease with respect
to Lessee's failure to make (i) installment payments of the Deposit due under
Appendix D to the Lease and Termination Payments (as defined in the Termination
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<PAGE>
Agreement) due in December 1995 and January 1996 and (ii) installment payments
of the Deposit and Termination Payments due on February 10 and March 10, 1996,
for so long, and only so long, as Lessee otherwise complies with all of the
terms of the Lease, as amended hereby, and the Termination Agreement, as
amended, and pays Lessor the following:
(a) all amounts payable as set forth in Amendment No. 1 to the
Termination Agreement dated as of the date of this Amendment;
(b) The amounts set forth in Exhibit A to this Amendment
("Deferred Deposit Payments") on April 10, 1996 and for the
next succeeding forty eight (48) Rent Dates on which Rent is
due; and
(c) The amounts set forth in Exhibit B to this Amendment
("Deferred Rent") on August 10, 1997 and for the next
succeeding Rent Dates on which Rent is due as set forth in
such Exhibit B.
Lessee may satisfy its obligations to pay the Deferred Deposit Payments and the
Deferred Rent at any time by paying the portion of all such amounts which
constitutes principal, together with the portion of such amounts which
constitutes interest accrued and unpaid as of the date of payment all as
reflected on Exhibits A or B to this Amendment. Each such Deferred Deposit
Payment and Deferred Rent payment on and after the dates set forth in clauses
(b) and (c) above, as the case may be, (i) shall constitute a portion of Deposit
and Rent, as the case may be, (ii) shall be made together with such installment
of Deposit and/or Rent as shall be otherwise due on each such Rent Date as
provided in Exhibit D of the Lease and (iii) shall be made in accordance with
the terms and conditions of the Lease.
Execution of this Amendment shall not constitute a waiver of the
Deposit payment defaults or of any other Events of Default which may have
occurred and be continuing or which may occur in the future. Lessor's agreement
to forbear shall terminate automatically if Lessee fails to make any payments
specified in this Section 2 or if any Event of Default occurs or has occurred
and is continuing (other than with respect to an Event of Default to which this
forbearance agreement set forth in this section 2 applies). For so long, and
only so long as Lessor's agreement to forbear has not terminated (i) Lessee
shall be entitled to exercise its rights and privileges under Articles 5.1.2(b),
5.1.3, 7.4.1 and 13.3.1 of the Lease and (ii) Lessor shall be deemed to have
elected not to apply the Deposit to sums due or to be come due to Lessor
pursuant to Section 1 of Appendix D of the Lease, notwithstanding the occurrence
and continuation
-4-
<PAGE>
of a Default or Event of Default under the Lease.
3. Governing Law.
This Amendment shall be governed by and construed in accordance with
the internal laws of the State of New York and without regard to any conflict of
law rules. This Amendment is being delivered in the State of New York. The terms
and conditions of Article 18 of the Lease are incorporated herein by reference
as applicable to this Amendment.
4. Miscellaneous.
Except as specifically amended or supplemented by this Amendment,
the Lease is hereby ratified, approved, confirmed and continued in all respects
and all provisions of the Lease shall remain in full force and effect. This
Amendment may be executed in any number of counterparts and all of such
counterparts taken together shall be deemed and constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
WINGS AIRCRAFT FINANCE, INC.
By: ____________________________________
Title:
MIDWAY AIRLINES CORPORATION
By: /s/ J S Waller
------------------------------------
Title: JONATHAN S. WALLER
SENIOR VICE PRESIDENT
GENERAL COUNSEL
-5-
<PAGE>
of a Default or Event of Default under the Lease.
3. Governing Law.
This Amendment shall be governed by and construed in accordance with
the internal laws of the State of New York and without regard to any conflict of
law rules. This Amendment is being delivered in the State of New York. The terms
and conditions of Article 18 of the Lease are incorporated herein by reference
as applicable to this Amendment.
4. Miscellaneous.
Except as specifically amended or supplemented by this Amendment,
the Lease is hereby ratified, approved, confirmed and continued in all respects
and all provisions of the Lease shall remain in full force and effect. This
Amendment may be executed in any number of counterparts and all of such
counterparts taken together shall be deemed and constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
WINGS AIRCRAFT FINANCE, INC.
By /s/ E. A. Wagner
------------------------------------
Title: E. A. WAGNER, PRESIDENT
MIDWAY AIRLINES CORPORATION
By: ___________________________________
Title:
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<PAGE>
Summary of
Exhibits A B
{***} (5 pages omitted)
<PAGE>
117-A
AMENDMENT NO. 2
dated as of January 31, 1997
to
AIRCRAFT OPERATING LEASE AGREEMENT
NO. 117-A
dated as of July 10, 1995
between
WINGS AIRCRAFT FINANCE, INC., as
Lessor
and
MIDWAY AIRLINES CORPORATION, as
Lessee
Aircraft: Fokker 100
Serial No./IRN: 11485/N109ML
<PAGE>
117-A
THIS AMENDMENT NO. 2 dated as of January 31, 1997 (this
"Amendment"), is between WINGS AIRCRAFT FINANCE, INC., a company incorporated
under the laws of the State of Delaware, having its principal place of business
at 119 N. Fairfax Street, Alexandria, Virginia 22314 ("Lessor") and MIDWAY
AIRLINES CORPORATION, a company incorporated under the laws of the State of
Delaware, having its principal place of business at 300 West Morgan Street,
Durham, North Carolina 27701 ("Lessee");
WHEREAS, Lessor and Lessee are parties to that certain Aircraft
Operating Lease Agreement No. AOLAF-117-A, dated as of July 10, 1995 (as amended
from time to time, the "Lease". Capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the Lease);
WHEREAS, Lessor and Lessee entered into Amendment No. 1 to the Lease
dated as of February, 1996 ("Amendment No. 1");
WHEREAS, Lessor and Lessee entered into a Deferral Agreement dated
as of October 25, 1996 ("Deferral Agreement"), which provided for the deferral
of certain payments due under the Lease, and amended the Lease in certain other
respects;
WHEREAS, Lessor and Lessee entered into an Amendment to Deferral
Agreements dated as of December 30, 1996, which modified the Deferral Agreement
in certain respects (the "Amendment to Deferral Agreements");
WHEREAS, Lessee has entered into an Agreement and Plan of Merger
dated as of January 17, 1997 (as amended, the "Merger Agreement") with GoodAero,
Inc., a Delaware corporation ("GoodAero") and Zell/Chilmark Fund, L.P., a
Delaware limited partnership, whereby it is proposed that GoodAero will be
merged into Lessee to effect a recapitalization of Lessee (the "Merger"),
subject to certain conditions precedent having been satisfied; and
WHEREAS, Lessor and Lessee desire to amend the Lease to become
effective upon the consummation of the Merger and to enter into further
agreements as hereinafter set forth.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Amendment of Lease. The Lease is hereby amended as follows:
(a) Section 1 of the Lease is amended by eliminating the
period at the end of the definition of "Expiry Date" and by inserting in lieu
thereof the following clause:
"or such earlier date as may be specified by Lessor pursuant
to notice given in accordance with, and subject to the terms
of Section 16.10 hereof."
<PAGE>
117-A
(b) Section 1 of the Lease is further amended by deleting the
period at the end of the definition of "Other Aircraft Agreements" and by
inserting the following in lieu thereof: "or any successor or assign thereof"
(c) Section 6.4 of the Lease is amended as follows: (a) by
deleting subsection (i) thereof in its entirety and by inserting in lieu thereof
the following: "(i) any financial reports or projections supplied to the
majority shareholder of Lessee"; and (b) by deleting the words "upon Lessor
requesting the same" from subsection (ii) thereof.
(d) Section 11.1(a) of the Lease is amended by deleting the
period at the end thereof and by inserting the following clause:
provided, however, that the deductible may be $500,000
(Dollars Five Hundred Thousand) for each accident, but only
if Lessee procures and maintains in favor of debis AirFinance
B.V. ("Beneficiary") for the benefit of the Beneficiary
and/or the Lessor under each of the Leases identified on
Schedule 16.10 hereof (as those terms are defined therein) an
irrevocable letter of credit (the "Letter of Credit") in the
face amount of $800,000 (Dollars Eight Hundred Thousand)
issued by Wachovia Bank or another banking institution
reasonably acceptable to Beneficiary and in a form reasonably
acceptable to Beneficiary containing the terms set forth in
Schedule 11.1(a).1 of this Lease; provided, however, that
Lessee may reduce the amount of the Letter of Credit to
$400,000 in any year where Lessee's audited financial
statements for the prior year show that Lessee had net income
(as determined in accordance with generally accepted
accounting principles ("Net Income")) greater than the amount
for such prior year identified as "Net Income (1)" on
Schedule 11.1(a).2, but less than the amount for such prior
year identified as "Net Income (2)" on Schedule 11.1(a).2;
and Lessee shall not be required to maintain the Letter of
Credit in any year where Lessee's audited financial
statements for the prior year show that Lessee had Net Income
for such prior year greater than the amount for such prior
year identified as "Net Income (2)" on Schedule 11.1(a).2;
and provided, further, that notwithstanding any reduction or
cancellation of the Letter of Credit in accordance with the
terms hereof, Lessee shall be required to restore the Letter
of Credit in any year where Lessee's audited financial
statements for the immediately preceding year show that
Lessee's Net Income was less than the threshold set by
Schedule 11.1(a).2 for such prior year for reduction of the
Letter of Credit or in any year in which audited financials
for Lessee for the immediately preceding year have not been
certified on or before April 15 of that year. For purposes of
determining the amount required for the Letter of Credit in
any year, reductions, if any, shall not be permitted until 30
days after receipt by Beneficiary of the audited financial
statements of Lessee for the prior year and, in the event
that the Letter of Credit is to be reinstated or
-2-
<PAGE>
117-A
increased in any year as aforedescribed, such Letter of
Credit shall be required on or before April 15 of such year.
Any failure by Lessee to comply with the provisions of this
Section 11.1(a) shall be an Event of Default under Section
15.1(b) of the Lease.
(e) Intentionally Omitted.
(f) Section 14.1(p) is amended by deleting the same in its
entirety and by inserting in lieu thereof the following:
"not become the surviving corporation of a merger with any
other entity, or itself consolidate with, or merge into, any
other corporation, or convey, transfer or lease substantially
all of its assets as entirety to any person, without the
prior written consent of Lessor (such consent not to be
unreasonably withheld) and the execution and delivery to
Lessor of such agreements, certificates and legal opinions as
Lessor may reasonably request with respect thereto;"
(g) Intentionally Omitted.
(h) Intentionally Omitted.
(i) Section 15.1(e) of the Lease is deleted in its entirety and the
following is inserted in lieu thereof:
"if (i) if Lessee or any of its subsidiaries is in default
under any lease, hire-purchase, conditional sale or credit
sale agreement for equipment having a casualty value in excess
of $ {***} and such default is not cured or waived within
the applicable grace period or five (5) Business Days
(whichever is greater); (ii) (regardless of the amount of
money involved), any event occurs which with or without notice
or lapse of time or both would constitute a default under any
agreement between Lessee and, or promissory note executed by
Lessee in favor of, (a) {***}; (b) Zell/Chilmark Fund, L.P.;
(c) {***}; (e) any affiliate of any of the foregoing; unless
such default or event of default is cured or waived within
the applicable grace period or five (5) Business Days
(whichever is greater); or (iii) any indebtedness owed by
Lessee or any of its subsidiaries in an amount in excess of
{***} is not paid when due or becomes
due or capable of being declared due prior to the date when it
would otherwise become due; provided, however, the failure of
Lessee to pay amounts approximating {***},
-3-
<PAGE>
117-A
{***}, shall not be deemed a Default or an Event of Default
hereunder.
(j) Section 15.1(n) is modified by inserting the following after the
words "Daimler-Benz Aerospace A.G. ": "or any affiliate, successor or assign of
either of them."
(k) Sections 15.1(o), (p) and (q) are deleted in their entirety and
the following new Sections 15.1(o) and (p) are inserted in lieu thereof:
"(o) if, an Event of Default shall occur under and as defined
in that certain Promissory Note dated as of January 31, 1997
from the Lessee to debis AirFinance B.V. or under, and as
defined in that certain Promissory Note dated as of January
31, 1997 from the Lessee to DASA Aircraft Finance XVI, B.V.
(each, a "Note" and collectively, the "Notes");
(p) if, prior to satisfaction of Lessee's obligations pursuant
to the Notes, Lessee shall make (i) any payment of principal
or interest on any debt owed by Lessee to Zell/Chilmark Fund,
L.P. or to any holder of equity in Lessee representing the
right to vote twenty percent (20%) or more of the stock in
Lessee on any matter presented for vote to the shareholders of
Lessee (an "Insider") or any affiliate of an Insider; or (ii)
any redemption of, or any dividend or distribution with
respect to, any shares of Lessee owned by an Insider or any
affiliate thereof."
(l) Section 15.2 is amended by deleting clause (i) of
paragraph (b) thereof in its entirety and inserting the following new clause
(i) in lieu thereof:
"(i) serving notice of such termination on Lessee specifying
the occurrence giving rise to such Event of Default or Events
of Default, provided that such notice shall be deemed to have
been served without the necessity of actual service and this
Lease shall terminate automatically without the necessity of
any service of notice thereof upon Lessee upon the occurrence
of any Event of Default described in paragraphs (a), (f), (g)
(h), (n) or (o) of Section 15.1 of this Lease; provided,
however, that actual service of notice of such termination on
Lessee shall be required where an Event of Default described
in paragraph (n) of Section 15.1 of the Lease has occurred
solely by reason of occurrence of an event of default under an
Other Aircraft Agreement or under a DASA Aircraft Agreement,
which event of default does not, under the terms of such Other
Aircraft Agreement or DASA Aircraft Agreement, result in
automatic termination of such Other Aircraft Agreement or such
DASA Aircraft Agreement."
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<PAGE>
117-A
(m) Article 16 of the Lease is amended by adding a new Section 16.10
as follows:
"(a) Notwithstanding anything to the contrary contained in
this Lease, Lessor may terminate this Lease by giving not less
than six (6) months' prior written notice of the termination
date to Lessee provided that in no event may Lessor choose a
termination date earlier than September 15, 1998 ("Lessor's
Termination Option") and the termination date specified in
such notice shall become the Expiry Date; provided, however,
that (subject to the following sentence) Lessor shall not be
entitled to exercise Lessor's Termination Option with respect
to this Lease where the same would result in the termination
of four (4) or more of the aircraft operating lease agreements
identified in Schedule 16.10 to the Lease in any twelve (12)
month period, taking into account the scheduled or actual
Expiry Date of each such aircraft operating lease agreement.
Nothing herein shall be construed to limit the Lessor's rights
upon the occurrence of any Default or Event of Default or upon
the termination of this Lease as a result thereof or upon the
expiration of any Lease in the absence of the exercise of
Lessor's Termination Option.
(b) Lessee shall in no event be liable for any costs,
expenses, liabilities, losses, damages or amounts incurred by
Lessor or Head Lessor which arise solely from the Lessor
exercising Lessor's Termination Option hereunder such as the
loss of any tax benefit, or fees or penalties arising from the
breakage of any contract or agreement. Except as expressly
provided in subsection (c) below, Lessor shall in no event be
liable for any costs, expenses, liabilities, losses, damages
or amounts incurred by Lessee as a result of Lessor exercising
Lessor's Termination Option in accordance with this Section
16.10.
(c) Notwithstanding the terms of clause (b) above, if Lessor
exercises Lessor's Termination Option hereunder in accordance
with this Section 16.10, then Lessee shall be responsible for
performing all of its obligations under and in accordance with
the terms of this Article 16, subject to the following:
(i) the Lessor shall pay or cause to be paid to Lessee
for Lessee's application against the "C Check" completed
pursuant to Appendix E, Item 1(e), an amount equal to the
lesser of (x) $100,000, or (y) an amount equal to the product
of the full cost of the "C Check" completed by Lessee pursuant
to Appendix E, Item 1(e) on the Aircraft multiplied by a
fraction, the numerator of which is the number of hours
(including fractions of an hour) remaining on the Aircraft
until Lessee's next scheduled "C Check" for the Aircraft
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<PAGE>
117-A
(assuming Lessor had not exercised Lessor's Termination Option
hereunder) and the denominator of which is 3000; and
(ii) for purposes of Section 7.4.1(b) and (c), any shop
visit required to meet the conditions of Appendix E shall be
deemed a "scheduled" shop visit."
(n) Section 18.6 of the Lease is amended by deleting the firm
of "Haight, Gardner, Poor & Havens, Attn: Bonny L.Y. Kwoh, 195
Broadway, New York, NY 10007" as agent for Lessor and by
inserting in lieu thereof the new agent for Lessor as follows:
"Hertzog, Calamari & Gleason, Attn: Carla Craig, 100 Park
Avenue, New York, New York 10017".
(o) Appendix B to the Lease is hereby amended as follows:
(i) The amount set forth as the "DEPOSIT" is deleted in
its entirety and the amount set forth on Schedule B.1 hereto
is substituted therefor.
(ii) The Amount set forth as "RENT" is deleted in its
entirety and the amount of {***} is substituted therefor.
(p) Appendix D to the Lease is hereby amended by deleting
Sections 2.2 and 2.3 in their entirety and by deleting the
first and second paragraphs of Section 1 in their entirety and
inserting the following in lieu thereof:
"1. Deposit. Lessee has paid to Lessor the amount set
forth on Schedule B.1 as a Deposit for the Aircraft on or
prior to January 31, 1997."
(q) Schedule 16.10 attached to this Amendment is hereby
attached to the Lease as Schedule 16.10 thereto and is
incorporated therein.
2. Waiver of Default. Lessor agrees that any Default or Event of
Default under Sections 15.1(a), 15.1(e), 15.1(g) or 15.1(o) of the Lease (prior
to the amendment of any such Sections hereunder) which occurred prior to the
date of this Amendment is hereby deemed to have been cured by Lessee and Lessor
waives any rights or remedies it may have had with respect to the occurrence of
any such Default or Event of Default.
<PAGE>
117-A
3. Representations, Warranties and Covenants
The following shall be, as applicable, representations, warranties
or covenants of Lessee pursuant to Articles 13 and 14 of the Lease:
(a) Representations
(i) This Amendment and the Notes have been duly entered into
and delivered by Lessee, and each constitutes a valid, legal and binding
obligation of Lessee enforceable against Lessee in accordance with its terms.
(ii) As of the date of this Amendment, Lessee has entered,
or will contemporaneously herewith enter, into an agreement with {***} having
terms which are substantially in accordance with the terms set forth under
the heading {***} in Exhibit 6.02(k) to the Agreement and Plan of
Merger dated as of January 17, 1997 by and among GoodAero, Inc., James H.
Goodnight, John P. Sall, Midway Airlines Corporation and Zell/Chilmark Fund,
L.P., as amended, except to the extent otherwise specifically set forth in
the letter dated as of February 10, 1997, from Lessee to Lessor.
(b) Covenants
Lessee covenants that it will not make any prepayment in
respect of the Promissory Note dated February 7, 1997 in the amount of
{***} to provide for terms more favorable to the payee thereof (including,
without limitation, any increase in the interest rate or acceleration of
payment).
4. Reconciliation
Lessee acknowledges that the principal amount of the DASA Note
(which is the sum of all deferred payments as of February 10, 1997 under the
leases and lease termination agreements relating to the Fokker-100 aircraft
leased by Lessee having manufacturers' serial numbers 11450, 11484, 1185 and
11486), and the amount of the Deposit, have each been determined based solely
upon information supplied by Lessee. Lessee agrees that, in the event that
Lessor obtains access to information which in Lessor's opinion indicates that
the amount of the DASA Note or the amount of the Deposit is incorrect (the
"Information"), Lessee will, at Lessor's request, work in good faith with Lessor
to reconcile any discrepancy, provided that Lessor provides the Information to
Lessee. Upon the reconciliation of such discrepancy and the cancellation of the
existing DASA Note, Lessee will execute in favor of DASA, a new, replacement
DASA Note issued by Lessee in the reconciled amount and Lessor and Lessee will
execute an amendment to this Lease selling forth the reconciled amount of the
Deposit. The failure of Lessor and Lessee to reach final agreement upon a
reconciled amount of the DASA Note and/or the amount of the Deposit shall in no
event constitute a Default or an Event of Default by Lessee under the Lease and
Lessor's sole and exclusive remedy for Lessee's breach of its obligations
hereunder shall be the right to pursue money damages against Lessee, which right
to pursue such money damages is hereby acknowledged by Lessee.
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<PAGE>
117-A
5. Deferral Agreement. Lessor and Lessee agree that the Deferral
Agreement and the Amendment to Deferral Agreements are hereby declared null and
void and shall have no further force or effect with respect to the Lease.
6. Merger. Lessor hereby consents to the Merger.
7. Governing Law. This Amendment shall be governed by and construed
in accordance with the internal laws of the State of New York and without regard
to any conflict of law rules. This Amendment is being delivered in the State of
New York.
8. Miscellaneous. Except as specifically amended or supplemented by
this Amendment, the Lease is hereby ratified, approved, confirmed and continued
in all respects and all provisions of the Lease as heretofore amended shall
remain in full force and effect. The parties hereto acknowledge and confirm that
the Lease is intended to be a true lease and not a financing arrangement. This
Amendment may be executed in any number of counterparts, and all of such
counterparts taken together shall be deemed and constitute one and the same
instrument.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
on the day and year first above written.
WINGS AIRCRAFT FINANCE, INC.
By: /s/ [Illegible]
---------------------------------
Name:
Title: President
MIDWAY AIRLINES CORPORATION
By: /s/ J S Waller
Name: __________________________________
Title:__________________________________
<PAGE>
117-A
Schedule 11.1(a).1
The Letter of Credit shall contain the following terms:
The Beneficiary shall be entitled to draw amounts under the Letter of Credit
upon notice to the issuing bank signed by Beneficiary stating that amounts are
due under one or more of the following, and that such amounts remain unpaid:
Promissory Note dated as of January 31, 1997 executed by Midway
Airlines Corporation in favor of debis AirFinance B.V.
Promissory Note dated as of January 31, 1997 executed by Midway
Airlines Corporation in favor of Daimler-Benz Aerospace A.G.
Aircraft Operating Lease Agreement No. 111 between Midway
Airlines Corporation, as Lessee, and First Security Bank, N.A.
(formerly known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 112 between Midway
Airlines Corporation, as Lessee, and First Security Bank, N.A.
(formerly known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 113 between Midway
Airlines Corporation, as Lessee, and First Security Bank, N.A.
(formerly known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 114 between Midway
Airlines Corporation, as Lessee, and First Security Bank, N.A.
(formerly known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 135 between Midway
Airlines Corporation, as Lessee, and First Security Bank, N.A.
(formerly known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 136 between Midway
Airlines Corporation, as Lessee, and First Security Bank, N.A.
(formerly known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 524 between Midway
Airlines Corporation, as Lessee, and First Security Bank, N.A.
(formerly known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 525 between Midway
Airlines Corporation, as Lessee, and First Security Bank, N.A.
(formerly known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 115-A between Midway
Airlines Corporation, as Lessee, and Wings Aircraft Finance, Inc.,
as Lessor
<PAGE>
117-A
Aircraft Operating Lease Agreement No. 116-A between Midway
Airlines Corporation, as Lessee, and Wings Aircraft Finance, Inc.,
as Lessor
Aircraft Operating Lease Agreement No. 117-A between Midway
Airlines Corporation, as Lessee, and Wings Aircraft Finance, Inc.,
as Lessor
Aircraft Operating Lease Agreement No. 118-A between Midway
Airlines Corporation, as Lessee, and Wings Aircraft Finance, Inc.,
as Lessor
<PAGE>
117-A
Schedule 11.1(a).2
Midway Airlines
Net Income Thresholds for Reduction in Amount of Letter of Credit Pursuant to
Section 11.1(a)
US$ millions
Year 1997 1998 1999 2000 2001
Net Income(2) 12.0 18.0 25.2 32.8 41.0
Net Income(1) 8.0 12.0 16.8 21.8 27.3
Year 2002 2003 2004 2005 2006
Net Income(2) 49.1 57.7 67.8 67.8 67.8
Net Income(1) 32.8 38.5 45.2 45.2 45.2
Year 2007 2008 2009 2010 2011
Net Income(2) 67.8 67.8 67.8 67.8 67.8
Net Income(1) 45.2 45.2 45.2 45.2 45.2
Year 2012 2013 2014
Net Income(2) 67.8 67.8 67.8
Net Income(l) 45.2 45.2 45.2
Amount of
Letter of Credit
- ----------------
$800,000 If actual Net Income is less than or equal to Net Income(1)
$400,000 If actual Net Income is greater than Net Income(1) but less
than or equal to Net Income(2)
0 If actual Net Income is greater than Net Income(2)
<PAGE>
117-A
Schedule 16.10
1. Aircraft Operating Lease Agreement No. 111, dated as of November 11,
1993, between First Security Bank, N.A. and Midway Airlines Corporation.
2. Aircraft Operating Lease Agreement No. 112, dated as of November 11,
1993, between First Security Bank, N.A. and Midway Airlines Corporation.
3. Aircraft Operating Lease Agreement No. 113, dated as of November 11,
1993, between First Security Bank, N.A. and Midway Airlines Corporation.
4. Aircraft Operating Lease Agreement No. 114, dated as of November 11,
1993, between First Security Bank, N.A. and Midway Airlines Corporation.
5. Aircraft Operating Lease Agreement No. AOLAF-115-A, dated as of July
10,1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
6. Aircraft Operating Lease Agreement No. AOLAF-116-A, dated as of July
10, 1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
7. Aircraft Operating Lease Agreement No. AOLAF-117-A, dated as of July
10, 1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
8. Aircraft Operating Lease Agreement No. AOLAF-118-A, dated as of July
10, 1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
9. Aircraft Operating Lease Agreement No. 135, dated as of July 20, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
10. Aircraft Operating Lease Agreement No. 136, dated as of December 15,
1995, between First Security Bank, N.A. and Midway Airlines Corporation.
11. Aircraft Operating Lease Agreement No. 524, dated as of August 1, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
12. Aircraft Operating Lease Agreement No. 525, dated as of October 15,
1995, between First Security Bank, N.A. and Midway Airlines Corporation.
<PAGE>
117-A
Schedule B.1
Security Deposits Paid by Midway
{***}
<PAGE>
EXHIBIT 10.10
**CONFIDENTIAL TREATMENT REQUESTED**
F-100 LEASE #118-A
(TAIL # N11OML)
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY {***}. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
<PAGE>
EXECUTION COPY
THE SINGLE EXECUTED ORIGINAL OF THIS LEASE MARKED "ORIGINAL" SHALL BE THE
"ORIGINAL" AND ALL OTHER COUNTERPARTS OF THIS LEASE SHALL BE DUPLICATES AND
MARKED "DUPLICATE" OR "DUPLICATE ORIGINAL". TO THE EXTENT THAT THIS LEASE AND
CERTIFICATE OF ACCEPTANCE RELATED THERETO CONSTITUTES CHATTEL PAPER, AS SUCH
TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE
JURISDICTION, NO SECURITY INTEREST MAY BE CREATED THROUGH TRANSFER OR POSSESSION
OF ANY COUNTERPART OTHER THAN THE "ORIGINAL".
AIRCRAFT OPERATING LEASE AGREEMENT NO. AOLAF-118-A
Dated as of
July 10, 1995
between
WINGS AIRCRAFT FINANCE, INC.
as
Lessor
and
MIDWAY AIRLINES CORPORATION
as
Lessee
----------------------------------
Leveraged Lease Financing of
One Fokker 100 Aircraft
Manufacturer's Serial No. 11486
U.S. Registration Mark N110ML
================================================================================
<PAGE>
INDEX
ARTICLE PAGE
------- ----
1. Definitions .................................................... 2
2. Agreement to Lease ............................................. 12
3. Term; Delivery; Acceptance ..................................... 16
4. Registration and Title ......................................... 17
5. Possession and Use ............................................. 19
6. Charges, Method of Payment and Financial
Information .................................................... 25
7. Maintenance .................................................... 27
8. Taxes, Duties and Expenses ..................................... 32
8A. Special Indemnity .............................................. 39
9. Liens .......................................................... 57
10. Indemnification ................................................ 57
11. Insurance ...................................................... 60
12. Assignment and Subletting ...................................... 68
13. Disclaimer, Representations and Warranties ..................... 71
14. Covenants of Lessee ............................................ 77
15. Default by Lessee .............................................. 80
16. Return of Aircraft ............................................. 86
17. Casualty Occurrences ........................................... 89
18. Governing Law and Jurisdiction ................................. 92
19. Miscellaneous .................................................. 94
-i-
<PAGE>
APPENDICES
A. Description of Aircraft
B. Further Definitions and Values
C. Certificate of Acceptance
D. Charges
E. Operating Condition at Re-Delivery
F. Aircraft Documents
G. FAA Power of Attorney
-ii-
<PAGE>
AIRCRAFT OPERATING LEASE AGREEMENT NO. AOLAF-118-A
THIS AIRCRAFT OPERATING LEASE AGREEMENT NO. AOLAF-118-A (this
"Lease") is made as of July 10, 1995 between WINGS AIRCRAFT FINANCE, INC., a
company incorporated under the laws of the State of Delaware, having its
principal place of business at 1199 N. Fairfax St., Alexandria, Virginia 22314
and its permitted successors and assigns (herein referred to as "Lessor") and
MIDWAY AIRLINES CORPORATION, a company incorporated under the laws of the State
of Delaware, having its principal place of business at 5713 South Central
Avenue, Chicago, Illinois 60638 and its permitted successors and assigns (herein
referred to as "Lessee").
W I T N E S S E T H:
WHEREAS, Lessee entered into an Aircraft Operating Lease Agreement
No. AOLAF-118 dated November 11, 1993 (the "Original Lease") between First
Security Bank of Utah, National Association, not in its individual capacity, but
solely as owner trustee and lessor ("Original Lessor") and Lessee as lessee with
respect to the Aircraft (as hereinafter defined);
WHEREAS, the Original Lease has been terminated pursuant to the
Termination Agreement dated as of the date hereof (the "Termination Agreement")
among Original Lessor, Lessee and Fokker (as hereinafter defined);
WHEREAS, Lessor has entered into a Lease Agreement (Trust No. 118-A)
dated as of the date hereof (the "Head Lease") with First Security Bank of Utah,
National Association, not in its individual capacity, but solely as owner
trustee pursuant to the Trust Agreement (Trust No. 118-A) dated as of the date
hereof between First Security Bank of Utah, National Association in its
individual capacity and CIBC Inc. as owner participant;
WHEREAS, Lessor has the right to possess, use and lease the
Aircraft;
WHEREAS, Lessee desires to lease the Aircraft from Lessor; and
WHEREAS, Lessor is willing to lease the Aircraft to Lessee upon the
terms and conditions set out herein.
NOW THEREFORE, in consideration of the mutual promises herein
contained, Lessor and Lessee agree as follows:
<PAGE>
1. DEFINITIONS
The following terms shall have the following respective meanings for all
purposes of this Lease:
"Air Authority" shall mean the Federal Aviation Administration of
the United States Department of Transportation and any successor.
"Aircraft" shall mean the aircraft. identified and described in
Appendix A, including any Engine, Part, or component thereof, and/or
ancillary and loose equipment or devices installed in or on the Aircraft
at the Original Delivery Date (or which having been removed therefrom
remain the property of Lessor pursuant to this Lease) and Aircraft
Documents furnished therewith under this Lease, or any substitutions,
renewals and replacements from time to time made in or on the said
Aircraft in accordance with this Lease, whether or not for the time being
installed on or in the said Aircraft or any other aircraft.
"Aircraft Documents" shall mean the items identified in Appendix
F.
"Aircraft Maintenance Agreement" shall mean the Aircraft Maintenance
Agreement between Lessee and American Airlines, Inc., dated as of November
1, 1993, or any subsequent aircraft maintenance agreement between Lessee
and any Authorized Maintenance Performer which, in the reasonable opinion
of Lessor, is in substance substantially similar thereto.
"Airframe" shall mean the Aircraft, excluding the Engines.
"Appraisal Procedure" shall mean the procedure for determining the
FMV of the Aircraft set forth in Paragraph 9 of Appendix D.
"Approved Maintenance Program" shall mean the Maintenance Program in
effect on the Delivery Date with respect to the Aircraft or such other
Maintenance Program as Lessor shall from time to time approve in writing,
such approval not to be unreasonably withheld.
"Authorized Maintenance Performer" shall mean Lessee, American
Airlines, Inc., U.S. Air, Aviall, Rolls Royce Canada or any Air
Authority approved provider.
-2-
<PAGE>
"Business Day" shall mean a day (other than a Saturday or Sunday) on which
banks are open for business in New York.
"Casualty Occurrence" shall have the meaning set forth in Article 17.1.
"Certificate of Acceptance" shall mean the Certificate of Acceptance given
in the form of Appendix C.
"Certificated Air Carrier" shall mean any person (except the United States
Government) that is a citizen of the United States of America (as defined in
Section 40102 of Title 49 of the United States Code) holding an air carrier
operating certificate issued by the Secretary of Transportation pursuant to
Chapter 447 of Title 49 of the United States Code (or any predecessor thereof)
for aircraft capable of carrying ten or more individuals or 6,000 pounds or more
cargo, which is also certificated so as to entitle Lessor, as lessor, to the
benefits of Section 1110 of Title 11 of the United States Code with respect to
the Aircraft.
"Credit and Security Agreement" shall mean the Credit and Security
Agreement dated as of October 29, 1993 therein between FAUSA and Lessee.
"Cycle" shall mean one take-off and landing of the Aircraft.
"Default" shall mean an Event of Default or any event which, with the
giving of notice and/or lapse of time and/or the making of any relevant
determination, would constitute an Event of Default.
"Delivery Date" shall mean the date on which the Aircraft is delivered to
and accepted by Lessee for the purposes of this Lease.
"Delivery Location" shall mean the location of the Aircraft set forth
in the Certificate of Acceptance.
"Dollars and $" shall mean the lawful currency of the United States of
America and in respect of all payments to be made under this Lease in Dollars
shall mean funds which are for same day settlement in the New York Clearing
House Interbank Payments System (or such other US Dollar funds as may at the
relevant time be customary for the settlement of international banking
transactions denominated in United States Dollars).
-3-
<PAGE>
"Engine" shall mean (i) any engine installed on or furnished with the
Aircraft on the Original Delivery Date, such Engines being identified as to
manufacturer and type in Appendix A and as to serial numbers in the Certificate
of Acceptance executed by Lessee on the Delivery Date and (ii) any substitute or
replacement engine title to which has, or should have, transferred to and vested
in Lessor in accordance with this Lease, in each case including all modules or
Parts from time to time belonging to or installed in that engine and
irrespective of whether or not the same shall for the time being be installed on
the Aircraft or on any other aircraft. The term "Engine" shall exclude any
properly replaced engine title to which has, or should have, passed to Lessee
pursuant to this Lease.
"Equipment Change" shall have the meaning set forth in Article 7.3(a).
"Event of Default" shall mean any of the events specified in Article
15.1.
"Expiry Date" shall mean January 21, 2013.
"Fair Market Rental Value" shall be equal in amount to the value that
would be obtained in an arms'-length transaction between an informed and willing
lessee under no compulsion to lease and an informed and willing lessor under no
compulsion to lease, in accordance with a lease to a lessee similarly situated
with Lessee, for a term equal to the relevant period and on conditions as herein
provided, any such determination (made for purposes of Article 15.3(b)) to be
made on the basis of the then actual condition of the Aircraft, to be determined
pursuant to an Independent Appraisal and to be the average of the two
determinations obtained thereunder.
"FAUSA" shall mean Fokker Aircraft U.S.A., Inc., a company incorporated
under the laws of the State of Delaware, with its principal office at
Alexandria, Virginia.
"Federal Aviation Act" shall mean Title 49 of the United States Code as
amended from time to time, or any similar legislation of the United States of
America enacted in substitution or replacement therefor.
"First Rent Date" shall mean August 8, 1996.
"Flight Hour" shall mean each hour or part thereof elapsing from the
moment at which the wheels of the Aircraft leave the ground on the take off of
the Aircraft until the
-4-
<PAGE>
wheels of the Aircraft touch the ground on the landing of the Aircraft
following such flight.
"FMV" shall have the meaning set forth in Appendix D.
"Fokker" shall mean Fokker Aircraft B.V., a Dutch corporation with its
principal office at Amsterdam-Zuidoost, The Netherlands, together with its
successors.
"Governing Law" shall mean the law of the state of New York.
"Government Entity" shall mean and include (i) any national or state
government, political subdivision thereof, or local jurisdiction therein; (ii)
any board, commission, department, division, organ, instrumentality, court, or
agency of any thereof, however constituted; and (iii) any association,
organization, or institution of which any thereof is a member or to whose
jurisdiction any thereof is subject or in whose activities any thereof is a
participant.
"Head Lease" shall have the meaning set forth in the third "Whereas"
clause of this Lease as the Head Lease may be amended, modified or supplemented
from time to time in accordance with the terms thereof or any such other lease
created over the Aircraft in accordance with the terms thereof.
"Head Lessor" shall mean First Security Bank of Utah, National
Association, not in its individual capacity, but solely as owner trustee
pursuant to the Trust Agreement (Trust No. 118-A) dated as of the date hereof
between First Security Bank of Utah, National Association in its individual
capacity and CIBC Inc. as Owner Participant, and its successors and permitted
assigns.
"Indemnitees" shall mean Lessor and each of its permitted successors and
assigns and each of their respective shareholders, subsidiaries, affiliates,
directors, officers, agents and employees.
"Indenture" shall mean the Trust Indenture and Security Agreement (Trust
No. 118-A) dated as of July 10, 1995, between Indenture Trustee and First
Security Bank of Utah, National Association, as owner trustee, as it may be
amended, modified or supplemented from time to time, or any such security
agreement created over the Aircraft in accordance with the terms thereof.
-5-
<PAGE>
"Indenture Trustee" shall mean Shawmut Bank Connecticut, National
Association, not in its individual capacity but solely as indenture trustee
pursuant to the Indenture, and its successors and permitted assigns.
"Independent Appraisal" shall mean a determination of Fair Market Rental
Value of the Aircraft by two independent aircraft appraisers, selected by
Lessor, the costs and expenses of the appraisal to be paid by Lessee.
"Law" shall mean and include (i) any law, statute, decree, constitution,
regulation, order or any directive of any Government Entity; (ii) any treaty,
pact, compact or other agreement to which any Government Entity is a signatory
or party; (iii) any judicial or administrative interpretation or application of
any thereof; and (iv) any amendment or revision of any thereof.
"Lessor or Lessee" shall have the meanings respectively ascribed to them
in the first paragraph of this Lease and shall include their respective
assignees or successors.
"Lessor Liens" shall mean:
(a) the Indenture, the Security Assignment, the Head Lease and any
security or leasehold interest whatsoever from time to time created
by or through Lessor, Head Lessor, Owner Participant or Loan
Participant or any of their respective affiliates in connection with
the financing of the Aircraft;
(b) any other security interest or other lien in respect of the Aircraft
or this Lease which results from acts or omissions to act of or
claims against Lessor, Head Lessor, Owner Participant or Loan
Participant or any of their respective affiliates not related to the
transactions contemplated by or permitted under this Lease;
(c) liens in respect of the Aircraft for Lessor Taxes; and
(d) Lessor's Liens (as such term is defined in the Head Lease).
-6-
<PAGE>
"Lessor Taxes" shall mean Taxes:
(a) imposed as a direct result of activities of a Tax Indemnitee in any
jurisdiction imposing a liability unrelated to that Tax Indemnitee's
dealings with Lessee, to the transactions contemplated by this Lease
or the operation of the Aircraft by Lessee; or
(b) imposed on or measured by net income, profits or gains, or
capital or net worth (excluding, however, in each case, Taxes
that are, or are in the nature of, license, sales, use, rental,
value-added, or property taxes) of a Tax Indemnitee, by (A) any
Governmental Entity by or in which that Tax Indemnitee would be
subject to tax without regard to the transactions contemplated by
this Lease or (B) the Federal Government of the United States of
America (including, without limitation, any withholding taxes
imposed by such government); or
(c) imposed with respect to any period or event occurring prior to the
date of this Lease or after the Expiry Date or earlier termination
of this Lease in accordance with the terms hereof, provided that
such Tax is unrelated to a Tax Indemnitee's dealings with Lessee or
to the transactions contemplated by this Lease; or
(d) imposed as a result of any voluntary sale, assignment, transfer
or other disposition by Lessor (including to Head Lessor) or any
other Tax Indemnitee of any interest in the Aircraft or any part
thereof or this Lease unless such transfer or disposition occurs
(1) in connection with a Tax Indemnitee's pursuing its remedies
while an Event of Default by Lessee is continuing or otherwise
resulting from an Event of Default, or (2) pursuant to Lessee's
exercise of any of its options to purchase the Aircraft (it being
understood and agreed that Lessor and Lessee will cooperate with
each other to minimize any Taxes resulting from any sale pursuant
to this clause (2)).
"Loan Participant" shall mean Kreditanstalt fur Wiederaufbau, together
with its successors and permitted assigns.
-7-
<PAGE>
"Maintenance Program" shall mean an Air Authority approved maintenance
program for the Aircraft encompassing scheduled maintenance (including block
maintenance), condition monitored maintenance, and on-condition maintenance of
Airframe, Engines and Parts, including but not limited to, servicing, testing,
preventive maintenance, repairs, structural, inspections, system checks,
overhauls, approved modifications, service bulletins, engineering orders,
airworthiness directives, corrosion control, inspections and treatments.
"Major Checks" shall mean any 12,000 hours check, 24,000 hours check or
intersupplementary check or segment thereof or any equivalent thereof with more
or less hours, however denominated, to the extent set out in the Approved
Maintenance Program from time to time.
"Manufacturer" shall mean Fokker.
"Note" shall mean the Secured Promissory Note dated as of July 1, 1994,
executed and delivered to FAUSA by Lessee and secured by the Credit and Security
Agreement.
"Original Delivery Date" shall mean July 22, 1994.
"Other Aircraft Agreements" shall mean Aircraft Operating Lease Agreements
relating to other Fokker-manufactured aircraft leased to Lessee by Lessor or a
lessor related to, or acting for the benefit of Wings Aircraft Finance, Inc. or
any affiliate thereof, the Credit and Security Agreement, the Note, the Support
Services Agreement, the Termination Agreement or any other agreement between
Lessee and Lessor or any affiliate of Wings Aircraft Finance, Inc.; provided
that, for the purpose of this definition, the word "affiliate" shall mean any
corporation or other entity that, directly or indirectly, controls, is
controlled by, or is under common control with, Wings Aircraft Finance, Inc.
"Owner Participant" shall mean CIBC Inc., a corporation organized and
existing under the laws of the State of Delaware, together with its permitted
successors and assigns.
"Part" shall mean, whether or not installed on the
Aircraft:
(a) any component, furnishing or equipment (other than a complete
Engine) furnished with the Aircraft on the Original Delivery
Date; and
-8-
<PAGE>
(b) any other component, furnishing or equipment (other than a complete
Engine) title to which has, or should have, passed to Lessor
pursuant to this Lease
but excludes any such items title to which has, or should have, passed to
(i) Lessee pursuant to this Lease or (ii) any person pursuant to any
agreement relating to the financing of spare parts for the Aircraft,
including, but not limited to, FAUSA pursuant to the Credit and Security
Agreement and the Note.
"Participation Agreement" shall mean that Participation Agreement (Trust
No. 118-A) dated as of July 10, 1995, among Lessor, Owner Participant, Owner
Trustee, Indenture Trustee and Loan Participant, as it may be amended, modified
or supplemented from time to time in accordance with the terms thereof.
"Permitted Lien" shall mean:
(a) liens of repairers, mechanics, material men, carriers,
hangarkeepers, employees or other similar liens arising in the
ordinary course of business by statute or by operation of law in
respect of obligations which are either not overdue or are being
contested in good faith by appropriate proceedings;
(b) any lien for Taxes of any kind either not assessed or, if
assessed, not yet due and payable or being contested in good
faith by appropriate proceedings; and
(c) any lien arising out of a judgment against Lessee with respect to
which at the time an appeal is being prosecuted in good faith and
with respect to which there shall have been secured a stay of
execution pending such appeal,
provided that in the case of these subclauses (a), (b) and (c):
(i) adequate reserves for the payment of such obligations have
been provided by Lessee;
(ii) such proceedings, or the continued existence of such lien,
do not give rise to any likelihood of the sale, forfeiture
or other
-9-
<PAGE>
loss of the Aircraft or any Engine or any Part or any interest
therein; and
(iii) any such lien does not arise as a result of any default on the
part of Lessee in respect of its obligations under this Lease;
(d) any Lessor Lien and the lien of this Lease; and
(e) any lien for Lessor Taxes.
"Redelivery Location" shall mean Schiphol Airport, The Netherlands.
"Rent Date" shall mean the First Rent Date and the numerically
corresponding date of each and every subsequent month during the Term, or (if
there is no corresponding date in any month), the last day of such month.
"Rental Period" shall mean the period from and including any Rent Date to
and including the day preceding the next Rent Date.
"Replacement Engine" shall have the meaning set forth in Article
5.1.2(a)(i).
"Security Assignment" shall mean the Assignment of Sublease (Trust No.
118-A) dated as of July 10, 1995 between Lessor, as assignor, and Head
Lessor, as assignee.
"Security Interest" shall mean any mortgage, charge, pledge, lien,
assignment, hypothecation, right of set-off or any agreement or arrangement
having the effect of creating a security interest.
"State of Incorporation" shall mean the State of Delaware.
"State of Registration" shall mean United States of America.
"Supplemental Rent" shall mean Agreed Value and any other amount which by
the terms of this Lease is payable by Lessee to Lessor other than Rent and the
Reserve Rate.
"Support Services Agreement" shall mean the Aircraft Support Services
and Product Assurances Agreement No. ASSAF-110 dated October 1, 1993 between
FAUSA and Lessee.
-10-
<PAGE>
"Taxes" shall mean any and all present and future sales, use,
property, customs, value-added, turnover, stamp, interest equalization,
income, gross or net receipts, franchise, excise, net worth, capital or
other taxes, fees, withholdings, imposts, duties, levies, or other charges
of any nature, together with any penalties, fines, or interest thereon,
imposed, levied, or assessed by, or otherwise payable to, any Governmental
Entity and "Tax" shall be construed accordingly.
"Tax Indemnitee" shall mean each of Lessor and each of its permitted
successors and assigns and each shareholder, subsidiary and affiliate of
each of the foregoing.
"Term" shall bear the meaning ascribed to it in Article 3.4.
"Termination Agreement" shall mean the Lease Termination Agreement
(AOLAF- ) dated as of July 10, 1995 between Fokker, Lessee and the Owner
Trustee named therein, as it may be amended, modified or supplemented from
time to time, in accordance with its terms.
1.2 The terms:
Agreed Value,
Deposit,
Rent,
Reserve Rate, and
Transaction Expenses
shall have the meanings and values set forth in Appendix B.
1.3 References in this Lease to:
(a) Articles or Appendices are, unless otherwise specified,
references to Articles of, and Appendices to, this Lease and
references to this Lease include its Appendices;
(b) any statute or other legislative provision shall be read to
include any statutory or legislative modification or
re-enactment thereof, or any substitution therefor;
(c) the Aircraft include any Part of the Aircraft, and, where the
context so admits, any of the Aircraft Documents and
references to any part of the Aircraft include any part of any
Engine;
-11-
<PAGE>
(d) the word "person" or "persons" or to words importing persons
include, without limitation, individuals, firms, partnerships,
joint ventures, trusts, Government Entities, organizations,
associations, corporations, government agencies, committees,
departments, authorities and other bodies, corporate or
incorporate, whether having distinct legal personality or not,
or any member of any of the same;
(e) words importing the plural include the singular and vice
versa;
(f) any agreement or instrument include such agreement or
instrument as it may from time to time be amended or
supplemented; and
(g) headings in this Lease are for ease of reference only.
2. AGREEMENT TO LEASE
2.1 Lessor will lease the Aircraft to Lessee and Lessee will take the
Aircraft on lease from Lessor in "As Is" condition in accordance
with the terms and conditions of this Lease.
2.2 Lessor's obligation to deliver the Aircraft on the Delivery Date
to Lessee shall be subject to:
(i) the receipt by Lessor from Lessee on or prior to the Delivery
Date of the following, all of which shall be in the English
language and be satisfactory in form and substance to Lessor:
(a) (intentionally omitted];
(b) copies of Lessee's certificate of incorporation and/or
memorandum and articles of association and/or by-laws
and/or other constitutional documents, certified to be
true and up to date copies by a duly authorized officer
of Lessee;
(c) copies of resolutions of Lessee's board of directors
authorizing Lessee to enter into and perform this Lease
and the transactions contemplated hereby, certified to
be true and
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in full force and effect by a duly authorized officer of
Lessee;
(d) evidence that each approval, license and consent which
may be required in relation to, or in connection with
the performance by Lessee of any of its obligations
hereunder has been granted by or obtained from the
applicable Government Entity in the State of
Registration;
(e) [intentionally omitted];
(f) evidence of appointment of Lessee's agent for service of
process in the State of New York;
(g) [intentionally omitted];
(h) [intentionally omitted];
(i) a power of attorney in the form of Appendix G
authorizing Lessor to take action at the Air Authority
and a certified resolution authorizing same;
(j) such other documents as Lessor may reasonably request;
(ii) the receipt by Lessor from Lessee on or before the Delivery
Date of:
(a) an opinion satisfactory in form and substance to Lessor
of counsel to Lessee, addressed to Lessor, Head Lessor,
Indenture Trustee, Owner Participant and Loan
Participant;
(b) [intentionally omitted];
(c) a certificate of insurance, a broker's letter of
undertaking and other evidence satisfactory to Lessor
that Lessee is taking the required steps to ensure due
compliance with the provisions of this Lease as to
Insurances with effect on and after the Delivery Date;
(d) evidence that the representations and warranties of
Lessee set forth in Article 13.4 are true and correct;
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(iii) receipt by Lessor of a certificate of an officer of Lessee
certifying that the Aircraft Maintenance Agreement is in full
force and effect with respect to the Aircraft;
(iv) receipt by Lessor of the executed Consent to the Security
Assignment (Trust No. 118-A) in the form attached to the
Security Assignment as Exhibit A thereto;
(v) evidence (including satisfactory opinions of Crowe & Dunlevy,
special Air Authority aviation counsel, as to Air Authority
registration and recordation matters) that on the Delivery
Date the Aircraft has been validly registered under the laws
of the State of Registration and that all filings,
registrations, recordings and other actions have been or will
be undertaken which are necessary or advisable to ensure the
validity, effectiveness and enforceability of this Lease and
the Head Lease and to protect the property rights of Lessor
and Head Lessor in the Aircraft or any Part and the Security
Interest of Indenture Trustee therein;
(vi) Lessor being satisfied that no default shall have occurred
under any Other Aircraft Agreement or any other agreement
between Fokker or FAUSA and Lessee;
(vii) this Lease and the Termination Agreement shall have been duly
executed and delivered by Lessee and shall be in full force
and effect, and an executed counterpart of each shall have
been delivered to Lessor; and
(viii) the Assignment of Support Services Agreement (Trust No.
118-A) dated as of July 10, 1995 between Lessee and Head
Lessor shall have been duly executed and delivered by Lessee
and shall be in full force and effect, and an executed
counterpart of each shall have been delivered to Lessor.
2.3 The conditions specified in Article 2.2 are inserted for the sole
benefit of Lessor and may be waived or deferred in whole or in part
and with or without conditions by Lessor. If any of the said
conditions are outstanding on the Delivery Date and Lessor (in its
absolute discretion) nonetheless agrees to deliver the
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Aircraft to Lessee, Lessee shall ensure that such outstanding
conditions are fulfilled within fifteen (15) days after the Delivery
Date and Lessor shall be entitled to treat the failure of Lessee to
perform such outstanding conditions as an Event of Default.
2.4 The obligation of Lessee to accept delivery of the Aircraft from
Lessor is subject to the satisfaction of the following conditions
precedent on or before the Delivery Date:
(i) this Lease and the Termination Agreement shall have been
duly authorized, executed and delivered by Lessor and shall be in
full force and effect, and an executed counterpart shall have been
delivered to Lessee;
(ii) Lessee shall have received the following:
a. an incumbency certificate of Lessor as to the
persons authorized to execute and deliver this
Lease, including the signatures of such
persons; and
b. such other documents and evidence with respect to
Lessor as Lessee may reasonably request in order
to establish the taking of all corporate
proceedings in connection with such transactions
and compliance with the conditions set forth
herein;
(iii) on the Delivery Date, the representations and warranties
of Lessor contained in Article 13.6 shall be true and accurate as
though made on and as of such date;
(iv) Lessee shall have received the favorable opinion,
addressed to it and reasonably satisfactory in form and substance to
it, from Crowe & Dunlevy, special Air Authority aviation counsel;
(v) the Aircraft shall meet the delivery conditions specified
in Article 3.6;
(vi) Lessee shall have received the favorable opinion,
addressed to it and reasonably satisfactory in form and substance to
it, from Haight, Gardner, Poor & Havens, special counsel to Lessor
and Fokker;
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<PAGE>
(vii) Lessee shall have received certified execution copies of
a. the Tax Indemnity Agreement (Trust No. 118-A)
dated as of July 10, 1995 between Lessor and Owner
Participant;
b. Sections 7(b) and 7A and the definition of
"Lessor's Lien" in the Participation Agreement
(Trust No. 118-A) among Lessor, Head Lessor, Owner
Participant and the other parties thereto; and
c. Section 7(c) (x) and the provisions relating
thereto in the Lease Agreement dated as of July
10, 1995 (Trust No. 118-A) between Lessor and Head
Lessor; and
d. Lessee shall have received letters of quiet
enjoyment from Head Lessor and Indenture Trustee
in form and substance satisfactory to it.
3. TERM; DELIVERY; ACCEPTANCE
3.1.1 Lessor shall deliver and Lessee shall accept the Aircraft and the
delivery thereof on the Delivery Date.
3.1.2 [Intentionally omitted].
3.2 [Intentionally omitted].
3.3.1 [Intentionally omitted].
3.3.2 [Intentionally omitted].
3.4 The term of the lease shall commence on the Delivery Date and shall
continue until the Expiry Date unless earlier terminated or extended
as herein provided (such period being herein referred to as the
"Term").
3.5 The Aircraft shall be delivered to and accepted by Lessee at the
Delivery Location or such other location as is mutually acceptable
to the parties.
Acceptance by Lessee of the Aircraft by execution and delivery
of the Certificate of Acceptance shall be
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deemed to be evidence that Lessor has performed all its obligations
under this Article 3.5.
3.6 [Intentionally omitted].
3.7 Lessee shall indemnify and hold harmless the Indemnitees from and
against any and all liabilities, damages, losses (including costs
and expenses incident thereto) arising by reason of death of or
injury to any such observer or any employee of Lessee, arising out
of, or in any way connected with the inspection of the Aircraft upon
redelivery of the Aircraft.
3.8 Lessee shall indicate and confirm its acceptance of the Aircraft
by the execution and delivery to Lessor of the Certificate of
Acceptance.
4. REGISTRATION AND TITLE
4.1 It shall be the responsibility of Lessee, at its expense, to
cooperate with Lessor and Head Lessor to effect and maintain
registration of the Aircraft in the name of Head Lessor under the
Laws of the State of Registration during the Term, such registration
to reflect the interests of Lessor, Head Lessor and Indenture
Trustee, and to obtain and maintain all licenses, permits and
approvals, including, without limitation, a certificate of
airworthiness from the Air Authority, as may be requisite in
connection with operation of the Aircraft under this Lease.
4.2 Lessee shall at its own expense and responsibility cause this Lease
to be kept, filed and recorded at all times during the Term, in such
office or offices for the registration of the Aircraft in the State
of Registration and in such other offices (in the United States but
not in any jurisdiction outside of the United States unless directly
required due to Lessee's operation) as may be necessary, to protect
Lessor's, Head Lessor's and Indenture Trustee's rights hereunder and
under the Head Lease and the Indenture in any state in which the
Aircraft may operate including the State of Registration of the
Aircraft and the State of Incorporation or as Lessor may reasonably
request to protect and preserve Lessor's, Head Lessor's and
Indenture Trustee's rights hereunder and under the Head Lease and
the Indenture and shall on request furnish to Lessor an opinion of
counsel or other evidence satisfactory to Lessor of such filing and
recording.
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4.3 Title to and ownership of the Aircraft shall at all times remain in
Head Lessor, and Lessee shall have no right, title or interest in or
to the Aircraft or any part thereof except as expressly provided by
this Lease. Lessee shall identify and specify the interest of Head
Lessor and Indenture Trustee and shall affix or keep affixed (i) in
a reasonably prominent position on the flight-deck of the Aircraft
and on each Engine a metal name plate (having dimensions of not less
than 10 cm x 7 cm) bearing the inscription (in fireproof and legible
characters) stating:
"NOTICE OF OWNERSHIP
THIS AIRCRAFT/ENGINE IS OWNED BY FIRST SECURITY BANK OF UTAH, NATIONAL
ASSOCIATION, NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS OWNER TRUSTEE
AND HEAD LESSOR AND IS SUBJECT TO A FIRST PRIORITY MORTGAGE IN FAVOR OF
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION"
The proper completion of the metal name plate shall be advised by
Lessor at its earliest convenience. Lessee shall not remove or
deface evidence of ownership of the Aircraft and shall not do or
permit to be done or omitted any act or thing which would jeopardize
the rights of Lessor, Head Lessor or Indenture Trustee in the
Aircraft. Lessee will on all occasions when the ownership of the
Aircraft or any Part is relevant make clear to third parties that
title to the same is held by Head Lessor.
4.4 Lessee acknowledges that the Aircraft is owned by Head Lessor and is
subject to the Indenture, which is a first priority Security
Interest, and that Lessor's interest in this Lease is subject to the
Security Assignment in favor of Head Lessor. Lessee undertakes to
Lessor (both for itself and as agent for each of Head Lessor and
Indenture Trustee) at Lessee's expense (except for the expense of
assignments pursuant to Article 12) to, from time to time, cooperate
with Lessor or Head Lessor to, cause this Lease, the Indenture, the
Security Assignment and such other documents as may be necessary or
advisable to give effect to the transactions contemplated hereby or
thereby, to be kept, recorded or filed in such office or offices in
the State of Incorporation and in the State of Registration as may
be necessary or advisable to protect and perfect the interests of
Lessor, Head Lessor and Indenture Trustee in the Aircraft, this
Lease, the Head Lease, the Indenture and the Security
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Assignment, and to do, from time to time, all other things which
Indenture Trustee, Head Lessor and/or Lessor may reasonably require
in order to protect and perfect their rights.
4.5 Lessor agrees that during the Term it shall not permit the
registration of the Aircraft to be changed to any registration other
than under the Laws of the State of Registration except as may be
required in connection with the sublease of the Aircraft by Lessee
pursuant to Article 12.1.
5. POSSESSION AND USE
5.1 Lessee shall not transfer possession of the Aircraft, the Engines or
any Part to any person or any legal entity or remove any Engine or
Part from the Airframe other than in accordance with the provisions
of this Article 5 or of Article 12.1; provided, however, that so
long as no Default shall have occurred and be continuing, Lessee
may, without the prior written consent of Lessor deliver possession
of the Aircraft, the Engines or Parts to the manufacturer thereof
for testing or other similar purposes, or to an Authorized
Maintenance Performer for service, repair, maintenance or overhaul
work on the Aircraft, the Engines or Parts, or for alterations,
modifications, or additions thereto, to the extent required or
permitted by the terms of Article 7.3.
5.1.1 Lessee will ensure that no Engine or Part installed on the Aircraft
is at any time removed from the Aircraft other than:
(a) if replaced as expressly permitted by this Lease; or
(b) if the removal is of an Obsolete Part (as defined in
Article 7.3(b)) and is in accordance with the Approved
Maintenance Program; or
(c) (i) during the course of maintaining, servicing,
repairing, overhauling or testing that Engine or Part
or the Aircraft, as the case may be; or
(ii) as part of a normal engine or part rotation program;
or
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<PAGE>
(iii) for the purpose of making such modification to the
Engine or Part, or the Aircraft, as the case may be,
as are permitted under this Lease,
and then in each case only if it is reinstalled or replaced by an
engine or part complying with Article 5.1.2(a) as soon as
practicable (or in the case of Article 5.1.1(c) (ii) in the ordinary
course of such program) and in any event no later than the Expiry
Date except, in the case of Obsolete Parts, as provided in Article
7.3(b).
5.1.2 (a) Lessee will ensure that, except as permitted by this Lease, no
engine or part is installed on the Aircraft unless:
(i) in the case of an engine, it is an engine of the same
make and model as, or an improved or advanced version of
the Engine it replaces, which is in similar or better
operating condition, and in the case only of a Casualty
Occurrence, has substantially similar hours available
until the next scheduled checks, inspections, overhauls
and shop visits and has the same or greater value and
utility as the replaced Engine (assuming the Engine
being replaced was of a value and utility and in at
least the condition and repair required by the terms of
this Lease) and shall be suitable for use on the
Airframe and compatible with each other Engine or engine
then on the Aircraft (a "Replacement Engine"). At
Lessee's election, Lessee may cause an Engine to be
replaced under this Lease with a Replacement Engine by
compliance with the provisions of Article 17.3 with
regard thereto;
(ii) in the case of a part, it is in as good operating
condition, is of similar or a more advanced make and
model and is of the same interchangeable modification
status as the replaced Part;
(iii) in the case of any part, it has become and remains the
property of Head Lessor free from Security Interests and
on installation on the Aircraft will, without further
act, be
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<PAGE>
subject to this Lease, the Head Lease and the Indenture;
and
(iv) in each case, Lessee has full details as to its source
and maintenance records.
(b) Provided no Default has occurred and is continuing, Lessee
shall be entitled to install any engine or part on the
Aircraft by way of replacement notwithstanding Article
5.1.2(a) if:
(i) there is not available to Lessee at the time and in the
place that 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 Article
5.1.2(a); and
(ii) it would result in an unreasonable disruption of the
operation of the Aircraft and/or the business of Lessee
to ground the Aircraft until an engine or part, as the
case may be, complying with Article 5.1.2(a) becomes
available for installation on the Aircraft; and
(iii) as soon as reasonably practicable after installation of
the same on the Aircraft, Lessee removes any such engine
or part and replaces it with the Engine or Part replaced
by it or by an engine or part, as the case may be,
complying with Article 5.1.2(a).
5.1.3 Lessee will:
(a) ensure that any Engine or Part which is not installed on the
Aircraft (or any other aircraft as permitted by this Lease)
is, except as expressly permitted by this Lease, properly and
safely stored, and kept free from Security Interests;
(b) from time to time on request, notify Lessor in writing as to
the location of any Engine and on request shall use its
reasonable efforts to procure that any person to whom
possession of an Engine is given acknowledges in writing to
Lessor, in terms satisfactory to Lessor, that it will respect
the interests of Head Lessor as owner, Indenture Trustee as
mortgagee and Lessor as
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lessor of the Engine and will not seek to exercise any rights
whatsoever in relation to it;
(c) (notwithstanding the foregoing provisions of this Article
5.1.3), be permitted, if no Default has occurred and is
continuing, to install any Engine or Part on an aircraft, or
in the case of a Part, on an engine:
(i) owned and operated by Lessee free from Security
Interests; or
(ii) leased or hired to Lessee pursuant to a lease or
conditional sale agreement on a long-term basis and on
terms whereby Lessee has full operational control of
that aircraft or engine; or
(iii) acquired by Lessee and/or financed or refinanced, and
operated by Lessee, on terms that ownership of that
aircraft or engine, as the case may be, pursuant to a
lease or conditional sale agreement, or a Security
Interest therein, is vested in or held by any other
person;
provided that in the case of (ii) and (iii):
(1) the terms of any such lease, conditional sale agreement or
Security Interest will not have the effect of prejudicing the
interests of Indenture Trustee as mortgagee or Head Lessor as
owner or Lessor as lessor of that Engine or Part; and
(2) the lessor under such lease, the seller under such conditional
sale agreement or the holder of such Security Interest, as the
case may be, has confirmed and acknowledged in writing to
Lessor, in form and substance satisfactory to Lessor, or has
otherwise agreed in writing, that it will respect the
interests of Head Lessor as owner, Indenture Trustee as
mortgagee and Lessor as lessor (without regard to whether such
writing identifies Head Lessor, Indenture Trustee and Lessor
by name) of that Engine or Part and that it will not seek to
exercise any rights whatsoever in relation thereto; and, to
the extent such an acknowledgment has been given, Lessor
hereby agrees, for the benefit of the lessor, the seller, or
secured party, as the case may be, of any engine or part
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(other than an Engine or a Part) leased to Lessee or owned by
Lessee subject to a conditional sale or other security
agreement, that Lessor will not acquire or claim, as against
such lessor, seller or secured party, any right, title or
interest in any engine or engines owned by the lessor under
such lease or subject to a security interest in favor of the
seller or secured party under such conditional sale or other
security agreement as the result of such engine or engines
being installed on the Airframe at any time while such engine
or engines are subject to such lease or conditional sale or
other security agreement.
5.1.4 Lessee will not enter into nor permit any pooling agreement or
arrangement in respect of an Engine or Part without the prior
written consent of Lessor, which shall not be unreasonably withheld.
5.2 Lessee shall use the Aircraft solely in commercial or other
operations for which Lessee is duly authorized by the Laws of the
State of Registration and/or any jurisdiction to whose Laws Lessee's
operation of the Aircraft is subject and shall not use or permit the
Aircraft to be used for any purpose for which the Aircraft is not
designed or reasonably suitable.
Lessee shall not use the Aircraft for the carriage of (i) whole
animals living or dead except in the cargo compartments according to
the United States Department of Transportation ("DOT") (or for
international flights, International Civil Aviation Organization
("ICAO")) regulations, and except domestic pet animals carried in a
suitable container to prevent the escape of any liquid and to ensure
the welfare of the animal; (ii) acids, toxic chemicals, other
corrosive materials, explosives, nuclear fuels, wastes, or any
nuclear assemblies or components, except as permitted for passenger
aircraft under the "Restriction of Goods" schedule issued by the DOT
(or for international flights, ICAO) from time to time and provided
that all the requirements for packaging or otherwise contained
therein are fulfilled; or (iii) any other goods, materials or items
of cargo which could reasonably be expected to cause damage to the
Aircraft and which would not be adequately covered by the insurance
required by or obtained pursuant to Article 11.
5.3 Lessee shall not permit the Aircraft to be maintained, used, or
operated in violation of any Law of any
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Government Entity having jurisdiction, or contrary to any
manufacturer's operating manuals and instructions, or in violation
of any airworthiness certificate, license or registration relating
to the Aircraft issued by any such Government Entity, unless the
validity thereof is being contested by Lessee in good faith and by
appropriate proceedings (but only so long as such proceedings do not
(i) involve any risk of the sale, forfeiture or loss of any interest
therein, (ii) otherwise adversely affect Lessor, Head Lessor,
Indenture Trustee, Owner Participant or Loan Participant or (iii)
involve any risk of criminal liability or any unindemnified material
risk of civil liability to Lessor, the Indenture Trustee, Owner
Participant or Loan Participant) provided, that Lessee shall give
prior written notice to Lessor of any such contest and provide
Lessor with any information Lessor may reasonably request with
respect to such contest. In the event that such Laws require
alteration of the Aircraft during the Term of this Lease, Lessee
shall conform therewith at its own expense and shall maintain the
same in proper condition for operation under such Laws. Lessee
agrees not to operate the Aircraft or to permit or suffer the
Aircraft to be operated (i) contrary to applicable Law, and/or (ii)
within or into any geographic area unless the Aircraft is covered by
insurance as required by the provisions of Article 11 or insurance
or an indemnity in lieu of such insurance from the United States
government against the risks and in the amounts required by Article
11 covering such area, and/or (iii) contrary to the terms of such
insurance as required by the provisions of Article 11.
5.4 Throughout the Term and until re-delivery of the Aircraft to Lessor
in accordance with the provisions of this Lease, the Aircraft and
every part thereof shall be in every respect at the sole risk of
Lessee, who shall bear all risks of loss, theft, damage or
destruction to the Aircraft from any cause whatsoever. Lessor shall
not be liable for any liability, claim, loss, damage or expense of
any kind or nature caused directly or indirectly by the Aircraft or
any part thereof by any inadequacy thereof for any purpose or any
deficiency or defect therein, by the use or performance thereof, by
any repairs or servicing thereto or any delay in providing or
failure to provide any thereof, by any interruption or loss of
service or use thereof, or by any loss of business or other
consequential damage or any damage whatsoever and
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howsoever caused prior to re-delivery of the Aircraft to Lessor.
5.5 Lessee shall ensure that such crew and engineers as are employed by
it in connection with the operation and maintenance of the Aircraft
shall have such qualifications and hold such licenses as are
required by the Air Authority and by all applicable Laws and
regulations.
5.6 Lessee shall use, operate and maintain the Aircraft in at least as
good a manner and with at least as much care as used by Lessee with
respect to aircraft of the same type owned, leased or operated by
Lessee, and Lessee shall not discriminate against the Aircraft (as
compared to other aircraft of the same type owned, leased or
operated by Lessee) in the use, operation or maintenance of the
Aircraft, other than withdrawal of the Aircraft from use and
operation for return in accordance with this Lease.
6. CHARGES, METHOD OF PAYMENT AND FINANCIAL INFORMATION
6.1 Lessee shall punctually pay to Lessor, when due, the Rent and
Supplemental Rent expressed to be payable by Lessee to Lessor
hereunder including the monies specified and calculated in
accordance with the provisions of Appendix D at the time and in the
manner therein specified, and shall punctually and duly observe and
perform Lessee's obligations under the said Appendix D which forms
an integral part of this Lease. The time stipulated in this Lease
for all payments payable by Lessee to Lessor and for the performance
of Lessee's other obligations under this Lease shall be of the
essence of this Lease.
6.2 Lessee shall not be entitled to any abatement, compensation,
reduction or set-off against any installment of Rent or Supplemental
Rent, including but not limited to, abatements, compensations,
reductions or set offs, by reason of any past, present or future
claims of Lessee against Lessor or any other person under this Lease
or otherwise.
6.3 Lessee's obligation to pay Rent and make other payments in
accordance with this Lease, until Lessee shall have redelivered the
Aircraft to Lessor in accordance with Article 16 and shall have
complied with its other obligations hereunder, shall be absolute and
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unconditional irrespective of any contingency whatsoever including
(but not limited to) (i) any right of set-off, counterclaim,
recoupment, defence or other right which either party may have
against the other, (ii) any unavailability of the Aircraft for any
reason, including, but not limited to, any defect in the
airworthiness, merchantability, fitness for any purpose, condition,
design, or operation of any kind or nature of the Aircraft, or the
ineligibility of the Aircraft for any particular use or trade, or
for registration or documentation under the laws of any relevant
jurisdiction, or (save as herein provided) any Casualty Occurrence
in respect of or any damage to the Aircraft, (iii) any insolvency,
bankruptcy, reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceedings by or against Lessor
or Lessee, (iv) any invalidity or unenforceability or lack of due
authorization of, or other defect in this Lease, (v) any failure of
Lessee to obtain any required license, certificate, authorization or
other approval of any Government Entity having jurisdiction over the
operation by Lessee of the Aircraft or the operation by Lessee in
any airport and (vi) any other cause which, but for this provision,
would or might have the effect of terminating, frustrating or in any
way affecting any obligation of Lessee hereunder, it being the
declared intention of the parties that the provisions of this
Article and the obligations of Lessee to pay the Rent and
Supplemental Rent provided for by this Lease shall survive any
frustration and that, save as expressly provided in this Lease, no
monies payable hereunder by Lessee to Lessor shall in any event or
circumstance be repayable to Lessee. Nothing in this Article 6.3
shall preclude Lessee from exercising its right to pursue a claim
for damages or specific performance or other judicial remedy against
Lessor and/or any Indemnitees.
6.4 Lessee agrees to furnish Lessor during the Term:
(i) [intentionally omitted];
(ii) upon Lessor requesting the same a quarterly unaudited balance
sheet of Lessee prepared by it as of the close of the most
recent previous financial quarter, together with the related
profit and loss statement for such period;
(iii) within ninety (90) days after the close of each financial year
of Lessee, an audited balance sheet
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and profit and loss statement as of the close of such
financial year;
(iv) from time to time such other non-confidential information
as Lessor may reasonably request; and
(v) copies of all notices sent by Lessee (A) to its shareholders
or creditors as a group in their respective capacities as such
relating to major business or financial developments of
Lessee, or (B) to the Securities Exchange Commission in
connection with or following a public offering of the equity
shares of Lessee.
7. MAINTENANCE
7.1 Lessee, during the Term, at its own cost and expense shall:
(a) service, repair, maintain, overhaul, test, or cause the
same to be done to the Aircraft in accordance with the
Approved Maintenance Program so as to keep the Aircraft in
as good operating condition as when delivered to Lessee on
the Original Delivery Date, ordinary wear and tear
excepted, and such operating condition as may be necessary
to enable the airworthiness certificate of the Aircraft to
be maintained in good standing at all times under
applicable Law; and Lessee shall at all times maintain
current certificates of airworthiness and Air Authority
required records of maintenance in respect of the Aircraft
and produce copies thereof to Lessor upon request, except
in each case if Fokker 100 aircraft with similar engines
are grounded by the Air Authority;
(b) maintain in the English language all Aircraft Documents,
records, logs, and other materials required by applicable Laws
and best airline practice to be maintained in respect of the
Aircraft including engine trend monitoring data;
(c) perform, or cause to be performed, all airworthiness
directives and mandatory notes and mandatory bulletins
affecting the Aircraft having a compliance date during the
Term and issued by (a) the Air Authority and/or (b) Fokker or
any other manufacturer of any part of the Aircraft
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(except that, in the event of a conflict, those required by
the Air Authority shall prevail);
(d) maintain the Aircraft in conformity with Air Authority
Regulations and such other rules and regulations of the Air
Authority as may from time to time be applicable to passenger
category airline aircraft;
(e) provide Lessor by telex or fax message or by personal
delivery to a technical representative of Manufacturer, if
any, with a monthly summation (which may utilize Air
Authority forms) of Flight Hours and Cycles accumulated on
the Airframe and Engines, and, commencing upon the month
following the date (and so long as) Lessee is required to
pay the Reserve Rate hereunder, Auxiliary Power Unit
("A.P.U.") and Landing Gear and details of all
modifications and material component changes within ten
(10) days after the end of each month.
Such maintenance shall be performed by Lessee or by the Authorized
Maintenance Performer pursuant to the Aircraft Maintenance Agreement
or by any other Authorized Maintenance Performer, for the purposes
of this Lease.
7.2 Except as otherwise provided herein, Lessee, at its own cost and
expense, shall promptly replace all Engines or Parts which may from
time to time become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair, or unserviceable with an engine
or part meeting the requirements of Article 5.1.2(a).
7.3 (a) Save as expressly herein provided the Aircraft shall not be
modified, altered, converted or added to (each such action
in relation to the Aircraft being herein referred to as an
"Equipment Change"), provided that Lessee may, at its own
expense, make such Equipment Changes to the Aircraft as
Lessee may deem desirable in the proper conduct of its
business, provided that no such Equipment Change diminishes
the value, utility, condition or airworthiness of the
Aircraft below the value, utility, condition and
airworthiness thereof immediately prior to such Equipment
Change, assuming the Aircraft was then in the condition
required to be maintained by the provisions of this Lease.
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(b) Title to all Parts incorporated or installed in or attached or
added to the Aircraft as the result of such Equipment Change
shall, without further act, vest in Head Lessor free and clear
of all liens, charges and encumbrances. Lessee shall at its
own expense take all such steps and execute, and procure the
execution of, all such instruments as Lessor may require and
which are necessary to ensure that title to any such
replacement Part as aforesaid passes to Head Lessor according
to the Governing Law and the lex situs, provided, however,
that so long as a Default shall not have occurred and be
continuing, at any time during the Term, Lessee may remove any
such Part if (A) (i) such Part is in addition to, and not in
replacement of or in substitution for, any Part originally
incorporated or installed in or attached to the Aircraft at
the time of the Original Delivery Date, (ii) such Part is not
required to be incorporated or installed in or attached or
added to the Aircraft pursuant to the provisions of Article
7.1 and (iii) such Part can be removed from the Aircraft
without diminishing or impairing the value, utility,
airworthiness, condition or remaining useful life which the
Aircraft would have had at such time, had such Equipment
Change not occurred; or (B) such Part is deemed by Lessee to
be obsolete or no longer suitable or appropriate for use in
the Airframe or Engines (an "Obsolete Part") and its removal
shall not materially decrease the value or adversely affect
the utility or remaining useful life of the Airframe or
Engine, or impair the condition or airworthiness thereof below
the value, utility or remaining useful life, condition or
airworthiness thereof immediately prior to such removal
(assuming the Aircraft was then in the condition required to
be maintained by the terms of the Lease), except that the
value (but not the utility, remaining useful life, condition
or airworthiness) of the Airframe or the Engines may be
reduced, to the extent resulting from the removal of Obsolete
Parts, if the aggregate original cost of all Obsolete Parts
removed from such Aircraft and not replaced shall not exceed
$350,000.
(c) Upon the removal by Lessee of any such Part as above provided,
title thereto shall, without further act, vest in Lessee and
such Part shall no
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longer be deemed a part of the Aircraft. Any Part not removed
by Lessee as above provided prior to the return of the
Aircraft to Lessor hereunder shall remain the property of Head
Lessor (save as the parties may otherwise agree in writing)
provided that Lessor may require Lessee, prior to the end of
the Term, to remove any Parts incorporated or installed in the
Aircraft as a result of an Equipment Change and to restore the
Aircraft to its condition prior to an Equipment Change.
7.4.1 Upon submission by Lessee to Lessor of invoices or receipts
reasonably satisfactory to Lessor evidencing the performance in
accordance with the provisions of this Agreement by or at the
direction of Lessee of:
(a) with respect to the Airframe, the accomplishment of those
items of maintenance characterized as scheduled airframe heavy
maintenance as defined in the Approved Maintenance Program for
12,000 hours and 24,000 hours inspections or any equivalent
thereof with more or less hours ("Airframe Maintenance"), or
(b) with respect to any Engine or the replacement thereof, the
performance of all scheduled shop visit engine maintenance and
repair, other than (i) repairs arising as a result of foreign
object damage or operational mishandling and/or (ii)
maintenance and repair of QEC (Quick Engine Change) kits
("Engine Maintenance"), or
(c) with respect to any nose or main landing gear ("Landing
Gear"), the performance of all scheduled shop visit nose and
main landing gear maintenance and repair, other than repairs
arising as a result of foreign object damage or operational
mishandling ("Landing Gear Maintenance"), or
(d) with respect to the A.P.U., the performance of all off
Aircraft shop A.P.U. maintenance and repair, other than
repairs arising as a result of foreign object damage or
operational mishandling ("A.P.U. Maintenance"),
Lessor shall, subject to Article 3.5 of Appendix D and provided that
a Default shall not have occurred and be continuing, release to
Lessee, from the relevant Maintenance Fund as defined in paragraph
3.2 of
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Appendix D, a sum equal to the aggregate amount evidenced by such
invoices or receipts for such relevant maintenance, to the extent
there are sufficient sums in the relevant Maintenance Fund at the
date of the start of the relevant maintenance. Lessee agrees to use
its reasonable efforts to ensure that the relevant invoices or
receipts are received by Lessor as promptly as possible after
completion of the relevant maintenance. All sums remaining in any
Maintenance Fund at the expiration or other termination of this
Agreement shall be retained by Lessor, except (i) upon payment in
full of Agreed Value and any other amounts due to Lessor or
otherwise hereunder after a Casualty Occurrence pursuant to Article
17.2(b), in which case all sums remaining in any Maintenance Fund
shall be paid to Lessee and (ii) under the circumstances and to the
extent described in Paragraphs 3.6 and 9 of Appendix D. For the
avoidance of doubt, Lessor shall not refuse to release monies from
the Maintenance Fund on the ground that maintenance was required due
to operational mishandling, provided that Lessee can demonstrate
that Lessee complied with the original equipment manufacturer's
written instructions.
7.4.2 Lessor shall be entitled to delay the release or payment of funds
from any Maintenance Fund (to the extent related to any disputed
amounts) to Lessee provided for by this Article 7 until such time
as it shall in its opinion be in a position to determine (which
Lessor agrees to use reasonable efforts to do as promptly as
possible) the amount to be released or paid, but in any event
release all undisputed amounts from the relevant Maintenance Fund
(but where insufficient funds are in such maintenance Fund the
lesser pro rata portion of such funds which corresponds to the
undisputed amount) upon request unless a Default shall have
occurred and be continuing.
7.5.1 During the Term, Lessee shall furnish to Lessor such information
concerning the location, condition, use and operation of the
Aircraft as Lessor may reasonably request. The right of Lessor,
or its designated representatives, to inspect the Aircraft during
any Major Checks performed by or on behalf of Lessee during the
Term, shall be absolute and Lessee shall inform Lessor by
providing thirty (30) days' written notice as to time and
location of all Major Checks. During such Major Checks, Lessee
agrees to provide sufficient manpower to allow Lessor, or its
authorized representatives (at Lessor's cost and expense), to
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inspect any area of the Aircraft which Lessor requests to inspect
and which would normally be required during such a Major Check,
provided that such inspection is to be made only at the time that
Lessee opens up such area in accordance with the Approved
Maintenance Program.
Lessee also shall permit any persons designated by Lessor to visit
and inspect the Aircraft, its condition, use and operation, and the
records maintained in connection therewith.
7.5.2 Lessor shall have the right at any time on reasonable notice to
inspect or survey the Aircraft or any part thereof, or instruct a
duly authorized surveyor to carry out a survey on its behalf, to
ascertain the condition of the Aircraft or any part thereof and
satisfy itself that the Aircraft is being properly repaired and
maintained in accordance with the terms of this Lease. The cost
of any such inspection or survey shall be borne by Lessor unless
an Event of Default has occurred and is continuing.
7.5.3 Lessor shall have no duty to make any such inspection as is
referred to in Article 7.5.1 and 7.5.2 and shall not incur any
liability or obligation by reason of not making any such
inspection. Except in connection with any Event of Default
hereunder no exercise of any inspection right under Articles
7.5.1, 7.5.2 or any other provision of this Lease shall interfere
with the normal operation or maintenance of the Aircraft or the
business of Lessee and shall be conducted during normal
maintenance business hours. In connection with any such
inspection, Lessee shall allow Lessor or any persons designated
by Lessor to copy, at Lessor's cost and expense, any Aircraft
Documents or other records relating to maintenance and operation
of the Aircraft. Lessee shall not be liable for the use of any
such Aircraft Documents or other records by Lessor or any other
person or entity which use is unrelated to Lessee's compliance
with the terms of this Lease.
8. TAXES, DUTIES AND EXPENSES
8.1 Lessee agrees promptly to pay and indemnify and hold Lessor harmless
against all Taxes (other than Lessor Taxes) levied or imposed
against or upon or otherwise payable by any Tax Indemnitee or Lessee
and relating to or attributable to Lessee, this Lease, the Aircraft
and/or the importation, exportation, registration,
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ownership, leasing, sub-leasing, delivery, possession, use,
operation, reregistration, repair, maintenance, overhaul,
replacement, improvement, modification, alteration, transportation,
landing, storage, presence or re-delivery of or addition to, the
Aircraft or any Engine or any Part thereof or any rent, receipts,
insurance proceeds or income arising therefrom, or any sum payable
by Lessee to a Tax Indemnitee under this Lease or any other
transactions or activities contemplated by this Lease, provided,
however, that Lessee shall have no indemnity liability under this
Article 8.1 or under Article 8A.1(c) to Lessor for any of the
following Taxes:
(a) any Tax imposed on or payable by Lessor with respect to any
sale, assignment, transfer or other disposition by Lessor of
any interest in the Aircraft or any part thereof or this
Lease, other than any such sale, assignment, transfer or
other disposition (i) that is pursuant to an exercise of
remedies after the occurrence and during the continuance of an
Event of Default or (ii) that is a result of a Casualty
Occurrence or (iii) that is a result of the exercise by Lessee
of any of its options to purchase the Aircraft or (iv) that
occurs as a result of any substitution, replacement or pooling
of the Aircraft, any Engine or any Part by a Lessee Related
Person;
(b) any Tax to the extent imposed on Lessor as a result of a
failure of Lessor to comply with any certification,
information, documentation, reporting or other similar
procedure that is required by law (including any applicable
statute, income tax convention, regulation or ruling) as a
condition precedent to the allowance of any reduction in the
rate of such Tax or any exemption or other relief from such
Tax; provided that (i) Lessor is otherwise eligible for such
relief or exemption from such Tax, (ii) Lessor's compliance
with such requirement would not create a material risk of
adverse tax consequences to Lessor for which it is not
indemnified to its reasonable satisfaction and (iii) in the
case of a Tax other than United States Federal income tax or
income tax withholding Lessee shall have notified such Lessor
of such requirement by timely written notice;
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(c) any Tax to the extent resulting from one or more transactions
or activities of Lessor in the jurisdiction imposing the Tax
if those transactions or activities are unrelated to the
transactions described in this Lease or the Other Aircraft
Agreements;
(d) any Tax imposed on or payable by or required to be withheld
from any payment to any assignee or other transferee of any
interest of Lessor in the Aircraft or this Lease (or imposed
on or payable by or required to be withheld from any payment
to any subsequent assignee or other transferee) to the extent
that the amount of such Tax exceeds the amount of such Tax
that would have been imposed on or payable by or required to
be withheld from any payment to Lessor (determined at the time
of transfer) and would have been indemnified by Lessee
pursuant to this Article 8 or Article 8A.l(c) (determined at
the time of transfer); provided that the exclusion described
in this clause (d) shall not apply to any assignee or other
transferee that is a corporation incorporated under the law of
a state of the United States or a partnership each partner of
which is such a corporation, or (provided that Lessor gives
Lessee prior written notice of such transfer) to any assignee
or other transferee that acquires its interest as a result of
the exercise of remedies after the occurrence and during the
continuance of an Event of Default;
(e) any Tax to the extent arising out of or caused by, or to the
extent such Tax would not have been incurred but for, (i) any
act or omission of Lessor if such act or omission is not
permitted by this Lease or the Other Aircraft Agreements or
(ii) the willful misconduct or gross negligence of Lessor or
(iii) the inaccuracy or breach of any representation,
warranty, covenant or agreement by Lessor in this Lease except
to the extent that such act, omission, inaccurate
representation or breach is attributable to an act, omission,
inaccurate representation or breach by Lessee;
(f) any Tax to the extent resulting from any amendment to any Head
Lease Operative Document to which Lessee is not a party unless
(i) Lessee shall have given its prior written consent to such
amendment or (ii) such amendment consists of a change in the
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"Basic Rent" schedule of the Head Lease resulting from a
suspension or reduction of Lessee's payments of Rent under
this Lease that continues for a period of more than 60 days,
or (iii) such amendment is required by applicable Law relating
to the Aircraft or any part thereof or relating to Lessee;
(g) any Tax imposed on or payable by Lessor to the extent
indemnified pursuant to Article 8A hereof;
(h) any Tax imposed on or payable by Lessor to the extent arising
out of or caused by, or to the extent such Tax would not have
been incurred but for, the existence of any Lessor's Lien;
(i) half of any sales tax payable in connection with the purchase
of the Aircraft by Lessee pursuant to Lessee's exercise of a
purchase option described in Paragraph 9 of Appendix D of this
Lease (it being understood and agreed that each of Lessee and
Lessor shall pay half of any sales tax payable with respect to
Lessee's purchase of the Aircraft pursuant to Lessee's
exercise of such a purchase option); or
(j) half of any sales or use tax payable in connection with the
transfers of the Aircraft and the lease and sublease of the
Aircraft on the Delivery Date (it being understood and agreed
that each of Lessee and Lessor shall pay half of any sales or
use tax payable with respect to such sales, lease and sublease
of the Aircraft on the Delivery Date).
If Lessee is required by any applicable Law or regulation to deliver
or furnish any report or return in connection with any such Taxes
(other than Lessor Taxes), Lessee shall complete the same in a
manner reasonably satisfactory to the relevant Tax Indemnitee and in
particular no such report or return shall contain any statement
that is inconsistent with Head Lessor's being the owner of the
Aircraft, and Lessee shall supply a copy of such report or return to
the relevant Tax Indemnitee promptly upon receipt of a request
therefor from such Tax Indemnitee.
All payments by Lessee hereunder to Lessor shall be free of
withholdings of any nature whatsoever (and at the time Lessee is
required to make any payment upon
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which any withholding is required, Lessee shall pay an additional
amount such that the net amount actually received by Lessor will,
after such withholding, equal the full amount of the payment then
due) and shall be free of expense for collection or other charges.
If Lessee shall have paid any additional amount pursuant to the
first sentence of this paragraph with respect to Taxes not subject
to indemnification pursuant to the provisions of this Section 8.1,
Lessor shall reimburse Lessee within 10 Business Days of written
demand therefor for the amount of such Taxes so paid by Lessee. For
the purpose of this Article 8 and Article 8A, the term "Lessor"
shall include each group of corporations (and each member thereof
that is a corporation organized under the laws of the United States
or any state thereof) that includes Lessor and for which
consolidated, combined, unitary or other group tax returns are
filed.
8.2 Except as otherwise specifically provided herein, Lessee shall pay
to Lessor on or after Delivery Date (unless otherwise agreed to be
financed by Lessor) upon demand:
(a) all reasonable expenses paid to third parties (including
reasonable legal, printing and out-of-pocket expenses)
incurred or payable by Lessor, FAUSA and Fokker related to any
amendment to or extension of, or the granting of any waiver or
consent under, this Lease in each case requested or caused by
Lessee;
(b) the Transaction Expenses;
(c) all reasonable expenses paid to third parties (including
reasonable legal fees and disbursements but excluding
surveyor costs) payable or incurred by Lessor in connection
with the enforcement of or preservation of any rights of
Lessor under this Lease or otherwise in respect of moneys
owing under this Lease by Lessee or in respect of any
breach by Lessee of any representation, warranty, covenant
or undertaking herein contained; and
(d) the ongoing annual fees and reasonable out-of-pocket expenses
(other than those incurred in connection with any of the
events described in Articles 12.3(c) or 12.3(d) and those
incurred pursuant to a change in such trustees which was
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not requested by Lessee) related to the Head Lease of
Owner Trustee and Indenture Trustee.
8.3 Lessee shall pay all stamp, documentary, registration or other like
duties or taxes (including any such duties or taxes payable by a Tax
Indemnitee but excluding all Lessor Taxes) imposed on or in
connection with this Lease and shall indemnify each Tax Indemnitee
against any liability arising by reason of any delay or omission by
Lessee to pay such duties or taxes.
8.4 If and to the extent that any sum (the "indemnity sum") constituting
(directly or indirectly) an indemnity to one or more Tax Indemnitees
paid by Lessee to any person other than that Tax Indemnitee shall be
treated as taxable in the hands of the relevant Tax Indemnitee,
Lessee shall pay to the relevant Tax Indemnitee such sum as (after
taking into account any taxation suffered by the relevant Tax
Indemnitee on the indemnity sum) shall reimburse the relevant Tax
Indemnitee for the net amount of any Taxes suffered by them in
respect of the indemnity sum (after taking into account any current
tax savings or other benefits to the relevant Tax Indemnitee
resulting from the payment or accrual of the indemnified expense).
8.5 If and to the extent that any sums payable to a Tax Indemnitee by
Lessee under this Lease by way of indemnity are insufficient, by
reason of any Taxes payable in respect of those sums, for that Tax
Indemnitee to discharge the corresponding liability to the relevant
third party (including any taxation authority), or to reimburse that
Tax Indemnitee for the cost incurred by it to a third party
(including any taxation authority), Lessee will pay to that Tax
Indemnitee such sum as will after the tax liability has been fully
satisfied leave that Tax Indemnitee with the same net amount (after
taking into account any current tax savings or other benefits to the
that Tax Indemnitee resulting from the payment or accrual of the
indemnified expense) as it would have been entitled to receive in
the absence of that liability. For the purpose of computing the
amount of an indemnity payment pursuant to this Article 8.5 and the
amount of any payment to Lessee under Article 8, it shall be assumed
that the relevant Tax Indemnitee is subject to tax on the amount of
each indemnity it receives or accrues under this Lease and can use
any tax savings to offset Taxes at the highest marginal statutory
rates of tax applicable to that Tax Indemnitee (as certified to
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Lessee by an officer of that Tax Indemnitee) at the time such
indemnity or tax savings is received or accrued.
8.6 If, as a result of any indemnity paid by Lessee or any event giving
rise to an indemnity obligation of Lessee, a Tax Indemnitee at any
time realizes any tax savings, refunds or other reductions in taxes
not previously taken into account in computing the amount of an
indemnity, that Tax Indemnitee shall promptly pay to Lessee the
amount of such Tax savings, refunds or other reductions in Taxes;
provided, however, that no Tax Indemnitee will be required to make
any payment to Lessee pursuant to this Article 8.6 so long as a
Default shall be continuing or if Lessee shall not have theretofore
made all payments due to all Tax Indemnitees under this Lease, or to
the extent that the amount of such payment would exceed the amount
of all prior payments by Lessee to the relevant Tax Indemnitee
pursuant to this Article 8 less the amount of all prior payments by
the relevant Tax Indemnitee to Lessee pursuant to this Article 8.6.
The relevant Tax Indemnitee shall estimate the amount of such Tax
savings, refunds and other reductions in Taxes and shall use
reasonable efforts to take such actions in filing its tax returns
and in dealing with taxing authorities to seek and claim each such
Tax savings, refund and other reduction in Taxes, but shall not be
obligated to take any such action that it determines in its sole
discretion to involve the imposition or risk of any material
unindemnified cost or expense, and in no event will any person have
any right to inspect the books, records, tax returns or other
documents of any Tax Indemnitee, and the positions to be taken by
any Tax Indemnitee on or with respect to its tax returns and in any
tax proceedings shall be within its sole control.
8.7 Lessee's, and each Tax Indemnitee's obligations under this Article 8
shall continue in full force and effect, notwithstanding the
expiration or earlier termination of the Term hereunder.
8.8 If Lessee disputes the payment or imposition of any Taxes payable by
a Tax Indemnitee for which Lessee is responsible under this Lease,
that Tax Indemnitee will take such action as Lessee may reasonably
request at Lessee's expense to contest that payment or imposition
but that Tax Indemnitee will not be obliged to take any such action:
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(a) which that Tax Indemnitee considers in good faith may result
in the imposition of any material liability, cost, or expense
for which that Tax Indemnitee is not indemnified to its
reasonable satisfaction; or
(b) which that Tax Indemnitee considers not to have a reasonable
prospect of success, unless Lessee delivers to that Tax
Indemnitee a written opinion of independent tax counsel
selected by Lessee and reasonably acceptable to Lessor to the
effect that there is a Reasonable Basis for taking such
action; or
(c) for which Lessee has not made adequate provision to the
reasonable satisfaction of that Tax Indemnitee in respect of
the liability, cost or expense concerned.
8.9 If Lessor determines that any Indemnified Tax is required to be
withheld from any amount payable or creditable to or for the account
of any holder of a Loan Certificate, Lessor shall give prompt
written notice thereof to Lessee and if requested by Lessee by
written notice given within 10 Business Days after Lessee's receipt
of Lessor's written notice, Lessor shall exercise its rights under
Section 7A(b)(xi) of the Participation Agreement in the manner
requested by Lessee, provided that Lessor shall not be required to
take any action pursuant to this Article 8.9 that might reasonably
be expected to involve Lessor in any unlawful activity or might
reasonably be expected to subject Lessor or any Affiliate of Lessor
to any expense deemed material by Lessor unless Lessor is
indemnified therefor to its reasonable satisfaction.
8A. SPECIAL INDEMNITY
8A.1 Indemnity.
(a) Inclusions. Except to the extent provided in Article
8A.2(a), if Lessor is required by any tax authority to
include in its income for income tax purposes, or Lessor
receives an opinion of Lessor's tax counsel that Lessor
does not have a Reasonable Basis to exclude from its income
for income tax purposes, any amount relating to the
Aircraft or any part thereof or the Lease or any of the
transactions, activities or payments
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described in or contemplated by the Lease, other than (i)
Rent, (ii) Reserve Rate, (iii) Supplemental Rent, (iv) any
proceeds derived from a sale of the Aircraft resulting from
the exercise by Lessee of a purchase option pursuant to
Paragraph 9 of Appendix D of this Lease, (v) any payment
calculated by reference to Agreed Value, (vi) any amount
specifically identified in the Lease as interest, (vii) any
payment calculated on an After-Tax Basis, (viii) any payment
pursuant to the terms of the Operating Lease Operative
Documents, (ix) any other amount to the extent offset by
deductions that would not have been currently available but
for the event which gave rise to the amount included in
Lessor's income and that are of the same character as such
income inclusion and are allowed in the same taxable year of
Lessor in which such amounts are included in Lessor's income,
or the Deposit described in Appendix D of this Lease or any
interest thereon (herein called an "Inclusion"), Lessee shall
pay to Lessor an amount which, on an After-Tax Basis, shall be
equal to the amount of additional taxes on or measured by
gross or net income (plus any and all fines, penalties,
additions to tax and interest calculated by reference thereto)
payable by Lessor as a result of such Inclusion.
(b) Pass-through of Tax Indemnity Agreement indemnities. Except to
the extent provided in Article 8A.2(b), if Lessor is required
to pay to Owner Participant any amount (herein called a "TIA
Liability") pursuant to the Tax Indemnity Agreement (Trust No.
118-A) dated as of July 10, 1995 between Lessor and Owner
Participant, Lessee shall pay to Lessor an amount which, on an
After-Tax Basis, shall be equal to that TIA Liability.
(c) Pass-through of Participation Agreement general tax indemnity
liability. Except to the extent provided in Article 8A.2(c),
if Lessor is required to pay any amount pursuant to Section 7A
of the Participation Agreement (herein called a "Head Lease
General Tax Indemnity Liability") and if the Tax that is the
subject of such Head Lease General Tax Indemnity Liability is
a Specified Tax, Lessee shall pay to Lessor an amount which,
on an After-Tax Basis, shall be equal to that Head Lease
General Tax Indemnity.
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(d) Minimum indemnity. The amount of any indemnity payable by
Lessee to Lessor pursuant to this Article 8A shall in all
events be an amount sufficient to restore Lessor to the
position Lessor would be in if the Inclusion or TIA Liability
or Head Lease General Tax Indemnity Liability that gave rise
to Lessee's liability under this Article 8A had not occurred.
8A.2 Exceptions.
(a) Exceptions to indemnity for Inclusions. Lessee shall not be
required to indemnify Lessor pursuant to Article 8A.1(a) for
Taxes to the extent arising from any of the following
Inclusions:
(i) any Inclusion caused by an event that occurs after
the expiration or earlier termination of this Lease,
the payment by Lessee of all Rent and other amounts
due pursuant to the Operating Lease Operative
Documents, and (if required by the terms of this
Lease) the return of the Aircraft to Lessor in
accordance with the terms of this Lease, provided
that the exclusion set forth in this Article
8A.2(a)(i) shall not apply to any Inclusion to the
extent such Inclusion is a result of one or more
events occurring or circumstances existing prior to
or concurrently with the expiration or earlier
termination of this Lease or to any payment or amount
payable by Lessee pursuant to this Lease or any other
Operating Lease Operative Document, or
(ii) any Inclusion that would not have occurred but for a
sale, assignment, transfer or other disposition by
Lessor of any interest in the Aircraft or this Lease,
either voluntarily or by reason of bankruptcy or
similar proceedings for the relief of debtors in
which Lessor is the debtor, unless in either case
such disposition occurs in connection with or as a
result of (A) an Event of Default, (B) a Casualty
Occurrence, (C) any substitution, replacement or
pooling of the Aircraft or any part thereof, (D) any
maintenance, repair, improvement, modification or
alteration of, or addition to, the Aircraft or any
part thereof, or
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unless in either case such disposition is required by
applicable Law, or
(iii) any Inclusion that would not have occurred but for (A)
the refinancing of the Loan Certificates or (B) the
gross negligence or willful misconduct of Lessor, or
(iv) any Inclusion that would not have occurred but for the
timing of the recognition of income under Section 467 of
the Code unless such Inclusion would not have occurred
but for (A) any payment of Rent on a date prior to the
date on which such payment is scheduled to be due, (B)
any payment by Lessee of any expenses of any Tax
Indemnitee, or (C) the acquisition by Lessee or another
Lessee Related Person of any interest in the Loan
Certificates or any other evidence of indebtedness
issued by the Head Lessor to refund or refinance the
Loan Certificates in accordance with the Head Lease
Operative Documents, or
(v) any Inclusion that would not have occurred but for any
change in or addition to the Internal Revenue Code of
1986, any other statute relating to Federal income
taxes, any treaty, any regulation, revenue ruling,
revenue procedure or other administrative
interpretation, or any executive order that is enacted,
promulgated or issued after the Delivery Date, provided
that the exclusion in this clause (v) shall not apply to
any Inclusion resulting from (A) any alteration,
improvement, modification, pooling, repair, addition,
replacement or substitution of or to the Aircraft or any
part thereof, (B) any payment by Lessee of any expenses
of any Tax Indemnitee, or (C) the acquisition by Lessee
or another Lessee Related Person of any interest in the
Loan Certificates or any other evidence of indebtedness
issued by the Head Lessor to refund or refinance the
Loan Certificates in accordance with the Head Lease
Operative Documents, or
(vi) any Inclusion that would not have occurred but for an
event or occurrence as a result of which Lessee is
required to pay and shall
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have paid in full an amount calculated by reference to
Agreed Value.
(b) Exceptions to indemnity for TIA Liability. Lessee shall not be
required to indemnify Lessor pursuant to Article 8A.l(b) for
any TIA Liability that is not a result of an Operating Lease
Indemnification Event or that would not have been incurred but
for any of the following:
(i) the gross negligence or willful misconduct of Lessor, or
(ii) Lessor claiming deductions for depreciation of the
Aircraft for Federal, state or local income tax
purposes, or
(iii) Lessor (or any Affiliate of Lessor) claiming to be the
owner of the Aircraft for U.S. tax purposes, or
(iv) Lessor (or any Affiliate of Lessor) claiming deductions
for interest on the Loan Certificates for Federal, state
or local income tax purposes, or
(v) Lessor acquiring any interest in the Loan Certificates,
or
(vi) Lessor supplying to the Appraiser inaccurate information
unless such information was obtained from Lessee, or
(vii) the timing of the recognition of income under Section
467 of the Code unless such Inclusion would not have
occurred but for (A) any payment of Rent on a date prior
to the date on which such payment is scheduled to be
due, (B) any payment by Lessee of any expenses of any
Tax Indemnitee, or (C) the acquisition by Lessee or
another Lessee Related Person of any interest in the
Loan Certificates or any other evidence of indebtedness
issued by the Head Lessor to refund or refinance the
Loan Certificates in accordance with the Head Lease
Operative Documents, or
(viii) the failure of the Head Lease to be a "true lease" for
Federal income tax purposes or the failure of Owner
Participant to be the owner
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of the Aircraft (including any such failure resulting
from the existence of any of Lessee's rights under the
Operating Lease Operative Documents), unless such
failure is caused by an Operating Lease Indemnification
Event, or
(ix) any change in or addition to the Code, any other statute
relating to Federal income taxes, any treaty, any
regulation, revenue ruling, revenue procedure or other
administrative interpretation, or any executive order
that is enacted, promulgated or issued after the
Delivery Date, provided, however, that the exclusion in
this clause (ix) shall not apply to any Inclusion
resulting from (A) any alteration, modification,
pooling, repair, addition, replacement or substitution
of or to the Aircraft or any Engine, (B) any payment by
Lessee of any expenses of any Tax Indemnitee, or (C) the
acquisition by Lessee or another Lessee Related Person
of any interest in the Loan Certificates or any other
evidence of indebtedness issued by the Head Lessor to
refund or refinance the Loan Certificates in accordance
with the Head Lease Operative Documents, or
(x) Owner Participant's having an adjusted basis with
respect to the Aircraft that is less than Lessor's Cost
except to the extent resulting from an Operating Lease
Indemnification Event, or
(xi) any event or occurrence as a result of which Lessee is
required to pay and shall have paid in full an amount
calculated by reference to Agreed Value;
(xii) any inaccuracy in the Appraisal unless caused by the
inaccuracy of Lessee's representation in Article 8A.10,
or
(xiii) any disposition of Lessor's interest in the Aircraft or
the Operating Lease Operative Documents either
voluntarily or by reason of Lessor's bankruptcy or
similar proceedings for the protection of debtors in
which Lessor is a debtor, provided that the exclusion in
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this clause (xiii) shall not apply to (A) a disposition
pursuant to the exercise of remedies after the
occurrence and during the continuance of an Event of
Default, (B) a disposition resulting from a Casualty
Occurrence or (C) a disposition resulting from a
substitution, replacement or pooling of the Aircraft,
any Engine or any part of either thereof by Lessee or
any other Lessee Related Person.
(xiv) any amendment or modification of any of the Head Lease
Operative Documents approved by Lessor and to which
Lessee has not consented in writing unless unless (A)
Lessee shall have given its prior written consent to
such amendment or (B) such amendment consists of a
change in the "Basic Rent" schedule of the Head Lease
resulting from a suspension or reduction of Lessee's
payments of Rent under this Lease that continues for a
period of more than 60 days, or (C) such amendment is
required by applicable Law relating to the Aircraft or
any part thereof or relating to Lessee;
(xv) the treatment of the Aircraft as "tax-exempt use
property" by reason of Lessor's status as a "tax-exempt
entity" within the meaning of Section 168(h) of the
Code;
(xvi) any failure of the Aircraft to be registered with the
United States Federal Aviation Administration or any
successor thereto by reason of the status or citizenship
of Lessor;
(xvii) any breach of Lessor's obligations relating to the
Lessee's contest rights pursuant to Article 8A.6 hereof
to the extent such failure legally precludes Lessee from
contesting, or causing a contest of, an indemnified
claim;
(xviii) the reporting by the Owner Participant of an Inclusion
on any of its Federal income tax returns, unless Lessee
has received a copy of the opinion of independent tax
counsel described in Section 3.1 of the Tax Indemnity
Agreement with respect to such Inclusion;
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(xix) the inaccuracy of the representation in Section 2(f) of
the Tax Indemnity Agreement;
(xx) the refinancing of the Loan Certificates other than a
refinancing requested by Lessee; or
(xxi) the existence of the Assignment of Termination Agreement
dated as of July 10, 1995 from Fokker Aircraft B.V. to
Kreditanstalt fur Wiederaufbau.
(c) Exceptions to indemnity for Head Lease general tax indemnity
liability. Lessee shall not be required to indemnify Lessor
pursuant to Article 8A.1(c) for any Head Lease General Tax
Indemnity Liability that would not have been incurred but for
any of the following:
(i) an event that occurs after the expiration or earlier
termination of this Lease, the payment by Lessee of all
Rent and other amounts due pursuant to this Lease and
the other Operating Lease Operative Documents and (if
required by the terms of this Lease) the return of the
Aircraft to Lessor in accordance with the terms of this
Lease, provided that the exclusion set forth in this
Article 8A.2(c)(i) shall not apply to any Head Lease
General Tax Indemnity Liability to the extent such Head
Lease General Tax Indemnity Liability is a result of one
or more events occurring or circumstances existing prior
to or concurrently with the expiration or earlier
termination of this Lease or to any payment or amount
payable by Lessee pursuant to this Lease or any other
Operating Lease Operative Document, or
(ii) a sale, assignment, transfer or other disposition by
Lessor of any interest in this Lease either voluntarily
or by reason of bankruptcy or similar proceedings for
the relief of debtors in which Lessor is the debtor,
unless in either case such disposition occurs in
connection with or as a result of an Event of Default, a
Casualty Occurrence, a substitution, replacement or
pooling of the Aircraft or any part thereof, the
exercise by Lessee of any option to
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terminate the Lease or to purchase the Aircraft or any
act or omission of Lessee, or unless in either case such
disposition is required by Applicable Law, or
(iii) the gross negligence or willful misconduct of Lessor, or
8A.3 Time of Payment by Lessee.
Any payment due under this Article 8A to Lessor shall be paid by
Lessee within 15 Business Days after receipt of a written demand
therefor from Lessor, provided that Lessee shall not be required to
make any such payment before the date that is two Business Days
prior to the date on which Lessor's related income tax payment, TIA
Liability or Head Lease General Tax Indemnity payment is due. If
Lessor is required to pay an indemnity pursuant to the Tax Indemnity
Agreement, Lessor agrees to elect, pursuant to Section 3.3 of the
Tax Indemnity Agreement, the form of indemnity payment requested by
Lessee in writing provided that Lessor receives Lessee's written
request at least two Business Days before the last day for making
such election.
8A.4 Tax Savings; Contest.
The provisions of Articles 8.6 (relating to tax savings) and 8.8
(relating to contesting Taxes) of this Lease shall apply, mutatis
mutandis, to the indemnity for Inclusions described in Article
8A.1(a) hereof.
8A.5 Payments From Head Lease Tax Indemnitees.
If any Head Lease Tax Indemnitee shall pay any amount to Lessor
pursuant to Section 7A(b), 7A(e), 7A(g) or 7A(h) of the
Participation Agreement or pursuant to Section 3.2 or 4 of the Tax
Indemnity Agreement, for which Lessee has previously paid an
indemnity to Lessor pursuant to Article 8A.1 hereof, Lessor shall
pay such amount to Lessee within 15 Business Days after Lessor
receives such amount.
8A.6 Contest.
If Lessor receives a written claim for an indemnity pursuant to
Section 7A of the Participation Agreement or pursuant to the Tax
Indemnity Agreement for which Lessee would be required to pay Lessor
an indemnity
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pursuant to this Article 8A, Lessor shall promptly notify Lessee
thereof in writing. If requested by Lessee by written notice
received by Lessor at least four Business Days before the latest
date on which Lessor may request or initiate a contest pursuant to
Section 7A(g) of the Participation Agreement or Section 4 of the Tax
Indemnity Agreement, Lessor shall exercise its rights under Section
7A(g) of the Participation Agreement or under Section 4 of the Tax
Indemnity Agreement, as the case may be, in the manner requested by
Lessee, provided that in no event shall Lessor be required to
initiate or continue (or required to request any other Person to
initiate or continue) a contest of any such claim unless:
(a) no Major Default or Event of Default shall have occurred and
be continuing unless Lessee shall have provided security
reasonably satisfactory to Lessor securing Lessee's
performance of its obligations under this Article 8A;
(b) Lessee shall have agreed to pay on an After-Tax Basis all
reasonable costs and expenses that Lessor incurs in connection
with contesting such claim and all amounts that Lessor is
required to pay from time to time pursuant to Section 7A(g)
(iv) (B) of the Participation Agreement or Section 4(d) of the
Tax Indemnity Agreement, as the case may be;
(c) the action to be taken will not result in a material danger of
sale, forfeiture or loss of the Aircraft or any part thereof
or any interest therein or the creation of a Lien (other than
a Permitted Lien) on the Aircraft, the Trust Estate or the
Trust Indenture Estate unless Lessee shall have adequately
bonded or otherwise made provision to protect the interests of
Lessor and the Owner Participant in a manner reasonably
satisfactory to Lessor and the Owner Participant;
(d) if such contest shall require payment of the Tax claimed,
Lessee shall have advanced on an interest-free basis the
amount thereof (including any interest, penalties and
additions to tax with respect thereto) for the period during
which such contest is continuing and shall have agreed to
indemnify such Lessor and (in the case of a contest pursuant
to Section 4 of the Tax Indemnity Agreement) the Owner
Participant or (in the case
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of a contest pursuant to Section 7A of the Participation
Agreement) each Head Lease Tax Indemnitee for any adverse tax
consequences of such interest-free loan;
(e) Lessee shall have acknowledged its obligation to indemnify
Lessor should the contested claim prove to be correct except
to the extent that the Final Determination demonstrates that
Lessee would not be so obligated absent such acknowledgment;
(f) in the case of a Tax Indemnitee Controlled Contest pursuant to
Section 7A(g) of the Participation Agreement or any contest
pursuant to Section 4 of the Tax Indemnity Agreement, Lessor
and the relevant Head Lease Tax Indemnitee shall have
received, at Lessee's expense, a written opinion of
independent tax counsel selected by Lessee and reasonably
acceptable to Lessor and such Head Lease Tax Indemnitee to the
effect that there is a Reasonable Basis for such contest;
(g) in the case of a Tax Indemnitee Controlled Contest pursuant to
Section 7A of the Participation Agreement, the amount of the
indemnity that would be payable by Lessor pursuant to Section
7A if such claim is not contested or if a contest of such
claim is unsuccessful (plus the aggregate amount of the
indemnities that would be payable by Lessor pursuant to
Section 7A if all related claims that have been or could be
raised with respect to any other period are not contested)
would exceed $ 10,000; and
(h) in the case of a contest pursuant to Section 4 of the Tax
Indemnity Agreement, the amount of the indemnity that would be
payable by Lessor pursuant to the Tax Indemnity Agreement if
such claim is not contested or if a contest of such claim is
unsuccessful (plus the aggregate amount of the indemnities
that would be payable by Lessor pursuant to the Tax Indemnity
Agreement if all related claims that have been or could be
raised with respect to any other period are not contested)
would exceed $ 50,000.
8A.7 Verification
If requested by Lessee in writing within ten Business Days after
receipt of a Lessor demand for an indemnity,
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Lessor shall exercise its rights under Section 7A(j) of the
Participation Agreement or under Section 3.8 of the Tax Indemnity
Agreement, as the case may be, provided that Lessee shall have
agreed to pay, and shall be paying currently, on an After-Tax Basis
any and all amounts payable by Lessor under Section 7A(j) of the
Participation Agreement or under Section 3.8 of the Tax Indemnity
Agreement, as the case may be.
8A.8 Documents and Other Information
(a) Lessee shall provide or cause to be provided to Lessor, upon
request, all documents and other information that Lessor is
required to provide to any Head Lease Tax Indemnitee pursuant
to the Head Lease Operative Documents and that is within the
control of any Lessee Related Person.
(b) Lessee shall prepare or cause to be prepared, and shall timely
file or cause to be timely filed, all returns, reports,
statements and other documents that Lessor is required to
prepare and/or file pursuant to Section 7A(i) of the
Participation Agreement; provided that Lessor shall have
furnished or caused to be furnished to Lessee any information
that is reasonably requested by Lessee, that is not within the
control of a Lessee Related Person, that is within the control
of Lessor or of a Head Lease Tax Indemnitee and that is
reasonably necessary to enable Lessee to prepare and file such
report, return or statement.
(c) Lessee shall timely pay or cause to be timely paid directly to
the appropriate taxing authority all amounts that Lessor is
required to pay directly to such taxing authority pursuant to
Section 7A(f) of the Participation Agreement to the extent
that Lessee is liable for such amount pursuant to this Article
8.
8A.9 Certain Definitions
As used in this Lease:
(a) "Affiliate" means, with respect to any Person, any other
Person (other than an individual) directly or indirectly
controlling, controlled by, or under direct or indirect common
control with such Person; or if such Person is a partnership,
any general partner of such Person or Person
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controlling such general partner. A Person shall be deemed to
control another Person if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the
management and policies of such other Person, whether through
the ownership of voting securities, by contract or otherwise.
(b) "After-Tax Basis" has the meaning explained as follows: If
Lessee is required to pay a specified amount on an After-Tax
Basis to or for the benefit of any Person, the Lessee must pay
the sum of (i) the specified amount plus (ii) the net amount
of all Taxes (taking into account any current deduction or
other income tax benefit actually realized by such Person
resulting from the payment or accrual of the cost, expense or
tax for which the specified amount is payable) required to be
paid by such Person with respect to the receipt or accrual of
the specified amount and the additional amounts described in
this clause (ii) (calculated by assuming, in the case of any
payment to or for the benefit of the Owner Participant or any
related tax indemnitee, that such Person is subject to United
States Federal income tax at the highest marginal statutory
rate imposed on corporations for the relevant period, and is
subject to United States state and local income taxes and
foreign income taxes at the actual rates applicable to such
Person for the relevant period, with respect to the receipt or
accrual of such amount by such Person. If Lessee shall have
paid or reimbursed any Person pursuant to the Operating Lease
Operative Documents for any expense on an After-Tax Basis (an
"After-Tax Basis Payment") and such Person (or a member of a
group of corporations that includes such Person and for which
consolidated, combined or unitary tax returns are filed) shall
actually realize any tax savings attributable to such expense,
such Person shall pay to Lessee an amount equal to the sum of
(x) the amount of such tax savings plus (y) the amount of any
further tax savings realized by such Person (or by a member of
such group of corporations) as a result of such payment,
provided that the amount paid to Lessee pursuant to this
sentence shall not exceed the amount of Lessee's underlying
After-Tax Basis Payment, and provided further that if any such
tax savings are subsequently disallowed or reduced, such lost
tax
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savings shall be deemed to be a Tax for which Lessee is
required to indemnify Lessor pursuant to Article 8, without
regard to any exclusion of Lessor Taxes.
(c) "Appraisal" means the opinion provided by BK Associates
concerning the Aircraft pursuant to the Participation
Agreement.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Final Determination" means (A) a decision, judgment, decree
or other order by any court of competent jurisdiction, which
decision, judgment, decree or other order has become final and
unappealable (or, if appealable to the U.S. Supreme Court, the
relevant Tax Indemnitee has not consented to such appeal), (B)
a closing agreement or any other binding settlement agreement
entered into with the consent of Lessee in connection with an
administrative or judicial proceeding which is not subject to
further appeal, or (C) the expiration of the time for
instituting a claim for refund, or if such claim for refund is
filed, the expiration of the time for instituting suit with
respect thereto.
(f) "Head Lease Operative Documents" means each of the
Participation Agreement, the Lease, each Lease Supplement, the
Tax Indemnity Agreement, the Support Services Agreement, the
Support Services Agreement Assignment, the Indenture, each
Indenture Supplement, the Trust Agreement, the Initial
Sublease, each other Qualified Sublease, the Sublease
Certificate of Acceptance, the Sublease Assignment, the
Consent to Assignment, the Consent and Agreement, the Loan
Certificates outstanding at the time of reference, the
Guaranties, the FAA Bill of Sale, the Warranty Bill of Sale,
the DASA Confirmation, the Fokker Confirmation and the
Assumption Agreement (as each of the foregoing is defined in
Schedule Z to the Participation Agreement), each as amended,
modified or supplemented from time to time in accordance with
its terms.
(g) "Head Lease Tax Indemnitee" means any of the following: (i)
the Owner Participant, the Head Lessor (in its individual
capacity and as Owner
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Trustee), the Trust Estate, the Indenture Trustee (in its
individual capacity and as the Indenture Trustee), the Loan
Participant, the Trust Indenture Estate (as each of the
foregoing is defined in Schedule Z to the Participation
Agreement), (ii) each successor or permitted assignee of each
entity described in subdivision (i) above, (iii) each
Affiliate of each entity described in subdivisions (i) and
(ii) above, and (iv) each director, officer, employee and
agent (in their respective representative capacities) of each
entity described in subdivisions (i), (ii) and (iii) above;
(h) "Lessee Related Person" means any of the following: Lessee,
any sublessee or sub-sublessee of Lessee, any other Person
(other than a Lessor Related Person) in possession or use of
the Aircraft or any part thereof through Lessee, and any
Affiliate, successor or assign of any of the foregoing.
(i) "Lessor Related Person" means any of the following: Lessor,
each successor or permitted assignee of Lessor and each
Affiliate of each of the foregoing.
(j) "Loan Certificates" means the loan certificates issued
pursuant to the Indenture.
(k) "Major Default" means a Default described in Article 15.1(a),
15.1(f) or 15.1(h) of this Lease.
(l) "Operating Lease Indemnification Event" means any of the
following:
(i) any act or omission of Lessee or any other Lessee
Related Person other than a Required Act or Omission or
a Permitted Act,
(ii) any breach or inaccuracy of any representation, warranty
or covenant of Lessee in this Lease or in the Lease
Termination Agreement dated as of July 10, 1995 among
Fokker Aircraft B.V., Lessee and First Security Bank of
Utah, National Association, as owner trustee,
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(iii) any destruction, theft, confiscation or requisition of
title to the Aircraft or any part thereof,
(iv) any warranty or similar payment received or receivable
by Lessee or another Lessee Related Person with respect
to the Aircraft, any Engine or any part thereof and not
paid or payable to, and retained by Owner Participant,
Owner Trustee or Lessor,
(v) any alteration, modification, improvement, addition,
repair, maintenance, replacement, substitution or
pooling of or to the Aircraft, any Engine or any part of
any thereof by Lessee or any other Lessee Related
Person.
(m) "Operating Lease Operative Documents" means this Lease and (to
the extent relating to the Aircraft) the Credit and Security
Agreement, the Note, the Support Services Agreement, the
Termination Agreement and each other agreement between Lessee
and Lessor (or any affiliate of Lessor) relating to the lease
of the Aircraft by Lessor (or any affiliate of Lessor) to
Lessee, each as amended, modified or supplemented from time to
time in accordance with its terms.
(n) "Permitted Act" means the execution and delivery of the
Operating Lease Operative Documents and any act that is
expressly permitted by Paragraph 9 of Appendix D of this
Lease.
(o) "Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust,
unincorporated organization or Government Entity.
(p) "Reasonable Basis" for a position exists if tax counsel may
properly advise reporting such a position on a tax return in
accordance with Formal Opinion 85-352 issued by the Standing
Committee on Ethics and Professional Responsibility of the
American Bar Association.
(q) "Required Act or Omission" means any act or omission that is
expressly required by any of the Operating Lease Operative
Documents.
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(r) "Specified Tax" means any Tax imposed on, payable by or
asserted against any Head Lease Tax Indemnitee arising from,
as a result of, with respect to or in connection with any of
the following or any combination of the following:
(i) any act or omission of Lessee or any other Lessee
Related Person or any failure of Lessee or any other
Lessee Person to act when required to act,
(ii) any breach or inaccuracy of any representation, warranty
or covenant of Lessee in the Lease or the Lease
Termination Agreement,
(iii) any loss, damage, destruction, casualty, forfeiture,
theft, governmental taking, confiscation, requisition,
seizure or condemnation of the Aircraft or any part
thereof,
(iv) any alteration, modification, improvement, addition,
repair, maintenance, testing, servicing, replacement,
substitution or pooling of or to the Aircraft, any
Engine or any part of any thereof by Lessee or any other
Lessee Related Person,
(v) the location, use, insuring, possession, leasing,
subleasing, sub-subleasing, storage, operation, basing
or presence of the Aircraft or any part thereof by
Lessor under this Lease or by Lessee or any other Lessee
Related Person,
(vi) the situs of organization, any place of business or any
activity or transaction of Lessee or any other Lessee
Related Person in the jurisdiction imposing the tax,
(vii) any amount paid or payable pursuant to the Loan
Certificates or the Indenture to the extent such Tax
would not have been imposed but for a change after the
Delivery Date in the income tax convention between the
United States and Germany as in effect on the Delivery
Date,
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(viii) any amount paid or payable pursuant to the Head Lease
(to the extent resulting from the location or use of the
Aircraft or any part thereof) or this Lease,
(ix) the return, redelivery, importation or exportation
resulting from the use of the Aircraft by Lessee or any
other Lessee Related Person, abandonment or other
disposition of the Aircraft or any part thereof by
Lessee or any other Lessee Related Person,
(x) the enforcement of rights under the Head Lease Operative
Documents or the Operating Lease Operative Documents, in
each case after the occurrence and during the
continuance of an Event of Default under this Lease,
(xi) the occurrence of an Event of Default or a Casualty
Occurrence,
(xii) the imposition of any Lien (other than a Lessor Lien) on
the Aircraft or any part thereof,
(xiii) the existence, presence, execution, delivery, filing,
recording, amendment or enforcement of the Operating
Lease Operative Documents,
(xiv) any other transaction by, activity of, or event or
occurrence with respect to Lessee or any other Lessee
Related Person pursuant to this Lease.
8A.10. Representation and Warranty of Lessee
Lessee hereby represents and warrants that (a) all airworthiness
directives affecting the Aircraft have been complied with; (b) no
accident involving the Aircraft, or other damage to the Aircraft,
has occurred that would affect the market value of the Aircraft; and
(c) the Aircraft' has been maintained in accordance with a
maintenance program approved by the U.S. Federal Aviation
Administration and in accordance with accepted industry standards.
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9. LIENS
9.1 Lessee, during the Term, shall not create or suffer to exist any
lien, attachment, mortgage or other encumbrance upon or against the
Aircraft, or any of its rights under this Lease, other than
Permitted Liens. If at any time a lien, attachment, mortgage, or
other encumbrance except as permitted above shall be created or
suffered to exist by Lessee, or be levied upon the Aircraft or any
of its rights under this Lease, Lessee shall forthwith notify Lessor
and cause the same forthwith to be discharged by bond or otherwise.
In the event Lessee shall fail to discharge any such lien,
attachment, mortgage or other encumbrance, Lessor, Head Lessor or
Indenture Trustee shall be entitled (but not bound) to discharge the
same, in which event Lessee shall pay to Lessor, on demand, the
amount paid by Lessor and/or Head Lessor and/or Indenture Trustee,
together with Lessor's and/or Head Lessor's and/or Indenture
Trustee's losses, costs and expenses, including reasonable legal
fees and expenses.
10. INDEMNIFICATION
10.1 LESSEE SHALL RELEASE AND DEFEND, HOLD HARMLESS AND INDEMNIFY ANY
AND/OR ALL OF THE INDEMNITEES, FROM AND AGAINST ANY AND ALL CLAIMS,
PROCEEDINGS, SUITS, JUDGEMENTS, COSTS, EXPENSES, PENALTIES, FINES
AND LIABILITIES, DIRECT AND CONSEQUENTIAL DAMAGES AND LOSSES,
INCLUDING WITHOUT LIMITATION COSTS AND EXPENSES INCIDENTAL THERETO,
OF WHATSOEVER KIND AND NATURE, AND INCLUDING REASONABLE LEGAL FEES
AND EXPENSES BUT EXCLUDING ANY TAXES, INDEMNITY FOR WHICH IS
ENCOMPASSED SOLELY IN ARTICLE 4.1 AND ARTICLE 8 AND ARTICLE 8A (EACH
A "CLAIM") ATTRIBUTABLE TO LESSEE'S ACTS OR OMISSIONS TO ACT (WHERE
LESSEE IS SO OBLIGATED) OCCURRING DURING THE TERM, WHICH MAY BE
SUFFERED BY, ASSERTED AGAINST, CHARGED TO OR RECOVERABLE FROM,
DIRECTLY OR INDIRECTLY, ANY AND/OR ALL OF THE INDEMNITEES:
(A) RELATING TO, ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE
POSSESSION, DELIVERY, PERFORMANCE, MANAGEMENT, CONTROL,
MAINTENANCE, CONDITION, SERVICE, REPAIR, OVERHAUL, LEASING,
USE, OPERATION OR RETURN OF THE AIRCRAFT, ANY ENGINE OR ANY
PART, OR THE PERFORMANCE OR NON-PERFORMANCE OF ANY AND/OR ALL
OF THE INDEMNITEES OF SERVICES OR DELIVERY OF ANY THINGS IN
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CONNECTION WITH THE AIRCRAFT DURING THE TERM, OR OTHERWISE IN
CONNECTION WITH THIS LEASE, WHETHER OR NOT ARISING IN TORT OR
OCCASIONED IN WHOLE OR IN PART BY THE FAULT OR NEGLIGENCE OF
ANY AND/OR ALL OF THE INDEMNITEES; OR
(B) AS A CONSEQUENCE OF ANY DESIGN, ARTICLE OR MATERIAL IN THE
AIRCRAFT, ANY ENGINE OR ANY PART OR ITS OPERATION OR USE
CONSTITUTING AN INFRINGEMENT OF PATENT (TO THE EXTENT AND
SCOPE AND SUBJECT TO THE LIMITATIONS SET FORTH IN PART C OF
EXHIBIT G OF THE SUPPORT SERVICES AGREEMENT), COPYRIGHT,
TRADEMARK, DESIGN OR OTHER PROPRIETARY RIGHT OR A BREACH BY
LESSEE OF ANY OBLIGATION OF CONFIDENTIALITY OWED TO ANY
PERSON; OR
(C) PURSUANT TO SECTION 7(b) (EXCLUDING SUBCLAUSE (iv) THEREOF) OF
THE PARTICIPATION AGREEMENT;
EXCLUDING, HOWEVER, FROM THE FOREGOING ANY SUCH CLAIM TO THE
EXTENT THAT SUCH CLAIM RESULTS FROM A LESSOR LIEN OR THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE OR FROM
ANY MISREPRESENTATION BY SUCH INDEMNITEE CONTAINED IN THIS
LEASE OR ANY BREACH BY SUCH INDEMNITEE OF ANY COVENANT SET
FORTH IN THIS LEASE.
10.2 The indemnities contained in this Article 10 shall continue in full
force and effect notwithstanding the expiration or other termination
of this Lease or of the letting of the Aircraft hereunder.
10.3 The indemnities contained in this Article 10 are given to Lessor for
itself and as agent and trustee on behalf of the other Indemnitees.
10.4 Notwithstanding anything to the contrary contained herein, Lessee
does not release and does not agree to defend, hold harmless or
indemnify under this Lease (and without limiting any obligations or
indemnities contained in any other agreement with Lessee) Fokker or
any other Indemnitee in its capacity as manufacturer or seller of
the Aircraft from or against (i) claims of third parties made
directly against Fokker or such Indemnitee, based on its product
liability or its status as manufacturer or Seller, or (ii) claims
made against Fokker or such Indemnitee based on the warranties or
indemnities contained in the Product Assurance Document which is
Exhibit G of the Support
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Services Agreement, or (iii) the matters described in Article
10.1(B).
10.5 If any Indemnitee has knowledge of the occurrence of any Claim,
liability or other matter for which it is or may be entitled to be
indemnified hereunder, it shall give prompt written notice thereof
to Lessee. Each Indemnitee shall cooperate in good faith with Lessee
and supply such information as may reasonably be requested by Lessee
to enable Lessee to investigate, defend or contest any Claim,
liability or other matter for which Lessee may be required to
indemnify an Indemnitee hereunder. In the event that Lessee pays any
amount to an Indemnitee pursuant to this Article 10, Lessee shall be
subrogated to all rights of the Indemnitee in respect of the Claim,
liability or other matter indemnified against giving rise to such
payment. Lessee or its insurers shall have the right, unless an
Event of Default shall have occurred and be continuing and such
matter is not covered by insurance, to investigate or (provided that
Lessee or its insurers shall agree not to dispute liability
hereunder or under any insurance policies pursuant to which coverage
is sought and provided that Lessee shall have consulted with Lessor
prior thereto), defend or compromise any Claim, and Lessor shall
cooperate with Lessee with respect thereto.
10.6 With respect to any Claims that Lessee is required to indemnify an
Indemnitee against pursuant to Article 10.1(c), the Indemnitee
agrees to give such further assurance or agreements and to cooperate
with Lessee to permit Lessee to pursue any and all contest rights
that such Indemnitee may have under the Participation Agreement and
agrees that if the assignment to Lessee of the Indemnitee's contest
rights under the Participation Agreement is not permitted under the
Participation Agreement, the Indemnitee will exercise its contest
rights with respect to such Claim pursuant to instructions from
Lessee, at Lessee's cost and expense, provided, however, that Lessee
shall have indemnified Lessor, to Lessor's satisfaction, against all
material liabilities of Lessor in connection with such contest not
otherwise indemnified in Article 10.1 and such contest could not in
the good faith opinion of the Indemnitee entail any material risk of
criminal liability; provided, however that Lessor shall not be
required to permit Lessee to exercise such contest rights so long as
there is continuing an Event of Default hereunder.
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In the event that Lessee shall have paid an indemnity to or on
behalf of an Indemnitee pursuant to this Article 10.6, then within
ten days of the receipt by an Indemnitee from any person with
respect to which such Indemnitee has an indemnification obligation
under the Participation Agreement of any payment constituting a
refund with respect to the indemnity, such Indemnitee shall pay to
Lessee an amount that, on a net after tax basis, shall be equal to
such payment (but in no event more than such payment together with
interest received by such Indemnitee thereon)
11. INSURANCE
11.1 On or before the Delivery Date of the Aircraft and throughout the
Term, Lessee shall carry and maintain in full force and effect, at
its own cost and expense, in such forms, on such conditions and with
such insurers and, if requested, reinsurers and through such
insurance and, if requested, reinsurance brokers as are satisfactory
to Lessor, the following insurances with respect to the Aircraft,
Engines and Parts (herein referred to as "the Insurances"):
(a) All Risks Aircraft Hull insurance of the type usually
insured against by commercial airlines engaged in the same
or similar business and owning or operating similar
aircraft (including Engines and Parts while not installed
on the Aircraft and including Extended Coverage Endorsement
(Aircraft Hull) AVN51 or equivalent on the Agreed Value.
The insurance may be subject to a deductible in respect of
losses other than total loss, arranged total loss or
constructive total loss of not more than $100,000.00
(Dollars One Hundred Thousand) for each accident subject,
however, that (i) such deductible may be adjusted during
the ten (10) year period from the Original Delivery Date
only with the consent of Lessor (such consent not to be
unreasonably withheld) and (ii) thereafter may be adjusted
to such deductible amount as is customary for commercial
airlines engaged in the same or similar business in the
United States and operating similar aircraft (but not
necessarily Fokker-manufactured) and having a similar
claims history and credit standing.
(b) If operated outside the United States and Canada, Aircraft
Hull War and Allied Perils insurance
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covering the risks excluded from the All Risks Aircraft Hull
insurance specified in paragraph (a) above by the terms of the
War, Hi-Jacking and Other Perils Exclusion Clause AVN.48B
except paragraph (b) thereof and shall include cover in
respect of confiscation, nationalization, seizure, restraint,
detention, appropriation for title or use by or under the
order of any Government Entity of the State of Registration.
(c) Comprehensive Airline Liability insurance (including without
limitation aircraft Third Party Liability, Passenger and Crew
Liability (including Baggage and Personal Effects)), Cargo
Liability, Mail Liability, Personal Injury Liability,
Contractual Liability, Hangar Keeper's Liability, Aircraft
Products Liability and General Third Party Liability of the
types usually insured against by commercial airlines engaged
in the same or similar business and owning or operating
similar aircraft (but not necessarily Fokker-manufactured) in
an amount of not less than $500,000,000.00 (Dollars Five
Hundred Million) Combined Single Limit any one occurrence each
Aircraft but limited in respect of Personal Injury to the
equivalent of $25,000,000.00 (Dollars Twenty Five Million) any
one offence and in the aggregate.
Such insurance shall include cover in respect of the risks
excluded by War, Hi-Jacking and Other Perils Exclusion Clause
AVN.48B except paragraph (b) thereof.
This insurance may be subject to deductibles in respect of
passengers baggage and personal effects of not more than
$1,250.00 (Dollars One Thousand Two Hundred Fifty) any one
claim and in respect of cargo and mail of not more than
$5,000.00 (Dollars Five Thousand) any one claim subject,
however to adjustment of such deductible amount as is
customary in the aviation insurance market for commercial
airlines engaged in the same or similar business in the United
States and operating similar aircraft and having a similar
claims history and credit standing. Such deductibles shall not
apply to claims arising from accidents to the carrying
aircraft.
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(d) All Risks insurance on Engines and Parts while any such
items are not installed on the Aircraft and in respect of
which cover is not provided under the All Risks Aircraft
Hull insurance and/or Aircraft Hull War and Allied Perils
insurance (respectively specified in paragraphs (a) and (b)
above) of the type usually insured against by commercial
airlines engaged in the same or similar business and owning
or operating similar aircraft for not less than full
replacement value. If Engines and Parts are located
outside the United States and Canada, such insurance shall
include War and Allied Perils to the extent that such
insurance is customarily available in the international
insurance market for this type of insurance.
This insurance may be subject to a deductible of not more than
$10,000.00 (Dollars Ten Thousand), subject, however, to
adjustment of such deductible amount as is customary in the
aviation insurance market for commercial airlines engaged in
the same or similar business in the United States and
operating similar (but not necessarily Fokker-manufactured)
aircraft and having a similar claims history and credit
standing.
The Lessor will accept a United States government indemnity in lieu
of the foregoing or otherwise required under this Article 11.
Lessor's current requirements as at the date of this Lease as to the
Insurances are as specified in this Article. Lessor reserves the
right to amend, and will cooperate with Lessee reasonably to amend,
the insurance requirements of this Article 11 to reflect changes in
insurance practice subject, however to such amendments being
customary for and applicable to airlines engaged in the same or
similar business in the United States and similar aircraft and
having a similar claims history and credit standing.
If required by the first paragraph of Article 11.1; Lessee shall
procure that the insurers effect reinsurances in the same form and
conditions through such reinsurance brokers and with such reinsurers
and for such proportions as are satisfactory to Lessor.
11.2 All Insurances to be carried in accordance with Article 11.1 above
shall:
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(a) in respect of All Risks Aircraft Hull insurance, Aircraft Hull
War and Allied Perils insurance and All Risks insurance on
Engines and Parts:
(i) name Lessor, Head Lessor in its individual capacity and
as owner of the Aircraft, the Indenture Trustee in its
individual and its trust capacity, Owner Participant and
Loan Participant, and each of their respective
affiliates, successors and assigns, along with the
respective directors, officers and employees of each of
the foregoing (collectively, the "Additional Assureds");
(ii) provide that all claims in respect of the Aircraft,
Engines and Parts shall be payable to Indenture Trustee
for so long as the lien of the Indenture is in effect,
and thereafter to Head Lessor for so long as the Head
Lease is in effect, and thereafter to Lessor or as it
may direct, such payee to be named Loss Payee; provided,
that partial loss amounts shall be paid by the insurers
directly to repairers of the Aircraft, Engines or Parts
or to Lessee solely as reimbursement for repairs for
which Lessee has paid unless the insurers have been
given notice that a Default has occurred; and
(iii) if applicable, provide in respect of Hull All Risks and
Hull War and Allied Perils for a 50/50 Claims Settlement
Clause in the form of AVS.103;
(b) in respect of Comprehensive Airline Liability insurance:
(i) name the Additional Assureds as additional assureds; and
(ii) provide that the insurance shall operate in all respects
as if a separate policy had been issued covering each
party insured thereunder, but this provision shall not
operate to include any claim howsoever arising in
respect of loss or damage to the Aircraft, Engines and
Parts insured under the All Risks Hull, Hull War and
Allied Perils or All Risks insurance of the assured.
Notwithstanding the foregoing the total
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liability of insurers in respect of any and all assureds
shall not exceed the limits of liability stated in the
policy;
(c) in respect of all Insurances:
(i) be effective worldwide except for territories approved
in writing by Lessor;
(ii) provide that insurers waive all rights of subrogation
against the Additional Assureds;
(iii) provide that in the event that the Insurances are
cancelled (including cancellation for non-payment of
premium) or are materially changed such cancellation or
change shall not be effective as to the interests of the
Additional Assureds until thirty (30) days (but seven
(7) days or such lesser period as is customarily
available in accordance with policy conditions in
respect of war and allied perils) after confirmed
receipt by the Additional Assureds of written notice by
insurers of such cancellation or change;
(iv) provide that in respect of the interests of the
Additional Assureds, the Insurances shall not be
invalidated by any act, neglect, omission,
misrepresentation or non-disclosure on the part of
Lessee or any other party other than the Additional
Assured seeking to make a claim thereunder, and shall
insure each Additional Assured regardless of any breach
or violation of any warranties, declarations or
conditions contained in such policies by Lessee or any
other party other than the Additional Assured seeking to
make a claim thereunder;
(v) provide that the Additional Assureds shall have no
responsibility for premium and insurers shall waive any
right of set-off or counterclaim against the Additional
Assureds except in respect of outstanding premium in
respect of the Aircraft, Engines and Parts subject of a
claim;
(vi) not provide for any deductible or self insurance other
than the deductibles allowed under the terms of Article
11.1 above;
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(vii) be primary without right of contribution from any other
insurance carried by Lessor, Lessee or any other person;
and
(viii) be denominated in Dollars.
11.3 If required by the first paragraph of Article 11.1, the
re-insurance policies shall:
(a) provide that cover shall be identical to the cover provided by
the original insurances and be subject to the same terms and
conditions as the original insurances;
(b) provide that so far as the respective interests of the
Additional Assureds are concerned the reinsurance shall not be
invalidated by any act, neglect, omission, misrepresentation
or non-disclosure on the part of the reinsured party;
(c) confirm the insurers' agreement to the provision of paragraph
(d) below;
(d) include a "cut-through" clause in the following terms or in
such other terms as may be satisfactory to Lessor:
"In respect of All Risks Aircraft Hull insurance, Aircraft
Hull War Risk and Allied Perils insurance as described in
Article 11.1(a) and (b) above and All Risks insurance on any
Engine and Parts as described in Article 11.1(d) above, the
reinsurers and the reassured hereby agree that in the event of
any claim arising under the relevant reinsurances the
reinsurers shall in lieu of payment to the reassured, its
successors in interest and assigns pay to the Loss Payee
specified in the primary insurances all sums payable under or
in connection with such reinsurances by virtue of any
reinsured loss of, or damage to, the Aircraft, Engines and
Parts, without any deduction or deductions whatsoever, other
than any outstanding premium in respect of the Aircraft,
Engines or Parts the subject of the claim, it being understood
and agreed that any such payment by the reinsurers shall fully
discharge and release the reinsurers from any and all further
liability in connection therewith.
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In respect of Comprehensive Airline Liability insurance as
described in Article 11.1(c) above, the reinsurers and
reassured hereby agree that in the event of any claim arising
under the relevant reinsurances, the reinsurers shall in lieu
of payment to the reassured, its successors in interest and
assigns pay to the person or party who has sustained the
relevant loss (or as reimbursement of any payment made by any
Additional Assureds) all sums payable under such reinsurances
by virtue of such reinsured loss, without any deduction or
deductions whatsoever, it being understood and agreed that any
such payment by the reinsurers shall fully discharge and
release the reinsurers from any and all further liability in
connection therewith"; and
(e) provide that the reinsurers and reassured agree that in the
event that the reassured, its successors in interest and
assigns shall at any time be or become insolvent or suspend
business or file a petition in bankruptcy or be adjudicated
insolvent or bankrupt or admit in writing its inability to
pay its debts as they become due, or make a general
assignment for the benefit of creditors or that a receiver
or liquidator or assignee or trustee or state commissioner
of insurance be appointed in respect of the reassured its
successors in interest or assigns or any substantial part
of its property for the purpose of liquidation on account
of insolvency, then the reinsurers, in lieu of payment to
the reassured, its successors in interest or assigns, shall
pay upon demand that portion of any loss due to the party
entitled thereto under the terms of the original insurance
for which such reinsurers would under the terms of the
reinsurance be liable to pay the reassured, its successors
in interest or assigns, less any amounts already paid, it
being understood and agreed that any such direct payment by
reinsurers shall fully discharge and release the reinsurers
from any and all further liability for such payment made.
11.4 Prior to the Delivery Date and thereafter during the Term, at least
five (5) Business Days prior to the renewal date of any Insurance
required or maintained by Lessee under Article 11.1 but in no event
less than once in each 12 month period, Lessee shall furnish or
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cause to be furnished to Lessor by the insurer or insurance broker
and the reinsurance broker
1) a certificate of insurance describing in detail the
insurance then carried and maintained, and certifying that
such insurance complies with the terms of this Lease,
including:
(i) confirmation that the insurance/reinsurance has been
placed with the insurers/reinsurers required (giving the
name of such insurers/reinsurers), the insured/reinsured
amount and the period of the policy and
(ii) confirmation that all premiums due to
insurers/reinsurers have been paid,
and
2) a letter of undertaking from Lessee's brokers and, if
required, from the reinsurance brokers.
Such certificate(s) of insurance and letter(s) of undertaking
shall be substantially in the form as delivered on the
Delivery Date.
In the event that Lessee shall fail to effect, maintain or cause to
be effected or maintained, insurance as required by this Article 11,
Lessor, Head Lessor or Indenture Trustee may at its option, but
without any obligation to do so, and without prejudice to Lessor's,
Head Lessor's and Indenture Trustee's other rights or remedies
hereunder, maintain such insurance or provide such or a similar
insurance, and, in such event, Lessee shall, upon demand, promptly
reimburse to Lessor, Head Lessor or Indenture Trustee the cost
thereof, including interest thereon at the rate referred to in
Paragraph 6 of Appendix D.
11.5 In the event of any damage to the Aircraft, Engines or Parts during
the Term not constituting a Casualty Occurrence, Lessee shall
repair, or cause the same to be repaired by an Authorized
Maintenance Performer at its sole cost and expense. Lessor and
Lessee agree that all insurance proceeds payable in connection with
any such damage shall be payable as provided in Section 11.2(a)
(ii). Any excess remaining shall, unless a Default shall have
occurred and be continuing, be paid over to Lessee.
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11.6 Lessee may carry insurance with respect to its interest in the
Aircraft in excess of the Agreed Value, provided that such insurance
coverage shall not prejudice the ability of Head Lessor or Lessor to
obtain insurance of their respective interests in the Aircraft.
11.7 [Intentionally omitted].
12. ASSIGNMENT AND SUBLETTING
12.1 Lessee shall not assign any of its rights or obligations or delegate
any of its duties under this Lease and, except as permitted by
Article 5.1 above or Paragraph 10 of Appendix D, Lessee shall not
sublet or otherwise part with possession of the Aircraft or any Part
thereof unless previously approved by Lessor in writing (such
consent not to be unreasonably withheld).
12.2 This Lease, the Aircraft and Lessor's interest in each thereof is
freely assignable and alienable by Lessor upon written notice to
Lessee in accordance with Article 12.3, provided, however, that so
long as the Aircraft shall be leased to Lessee under this Lease,
Lessor will not sell, assign, convey or otherwise transfer
absolutely (and not for security) any of its right, title, or
interest in and to this Lease or the Aircraft to any person unless
Lessor and the proposed transferee (the "Transferee") have complied
with the following conditions:
(i) Lessor shall give Lessee written notice of such
transfer at least 10 Business Days before the date of such
transfer, specifying the name and address of the proposed
Transferee;
(ii) the Transferee shall not be an airline or a
commercial air carrier or person controlling, controlled by or
under common control with an airline or a commercial air
carrier which is in direct competition with Lessee in the
United States;
(iii) the Transferee shall qualify as a "citizen of the
United States" within the meaning of Section 40102 (a) (15) of
the Federal Aviation Act by a Voting Trust Agreement or
otherwise; and
(iv) on the transfer date Lessor and the Transferee
shall enter into an agreement or
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agreements in which the Transferee confirms that it shall be
deemed a party to this Lease and agrees to be bound by all the
terms of, and to undertake all of the obligations of, Lessor
contained in this Lease, and shall deliver a certificate of
quiet enjoyment to Lessee in form and substance reasonably
acceptable to it and Lessee shall receive an opinion of
counsel to the Transferee stating, with the customary
assumptions and exceptions, that such agreement or agreements
has been duly authorized, executed and delivered and
constitute the legal, valid and binding obligations of the
Transferee enforceable in accordance with their terms and that
the entry into such agreement(s) does not violate any laws or
agreements applicable to such Transferee.
The agreements, covenants, obligations and liabilities contained
herein, including but not limited to all obligations to pay Rent and
indemnify Lessor, are made for the benefit of Lessor and its
respective successors and assigns, notwithstanding the possibility
that any such person was not originally a party to this Lease or
may, at the time any enforcement is sought, no longer be a party to
this Lease. Lessee shall comply, at Lessor's cost and expenses, with
all reasonable requests of Lessor, its successors and assigns
respecting the assignment and Lessee's acknowledgement of the
assignee as Lessor. Notwithstanding anything contained in this
paragraph to the contrary, no assignment of Lessor's interest in
this Lease or the Aircraft shall alter the terms of this Lease in so
far as the costs to Lessee of the performance of its obligations to
pay Rent, Reserve Rate and Deposits hereunder and, except as
otherwise expressly provided in this Lease, the rights and
liabilities of Lessee under this Lease are concerned. Lessee's
rights under this Lease shall not be subject or subordinate to the
Head Lease, the Security Assignment or the Indenture. The rights of
Head Lessor and Indenture Trustee under the Head Lease, the Security
Assignment and the Indenture, as the case may be, shall be subject
to Lessee's rights under Section 13.7 of this Lease.
12.3 It is acknowledged and agreed that:
(a) As at the date of the Certificate of Acceptance, ownership of
the Aircraft has been transferred to Head Lessor, Head Lessor
has leased the Aircraft to Lessor under the Head Lease and,
subject to the
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terms of the Head Lease, Lessor has subleased the Aircraft to
Lessee under this Lease.
(b) Lessor has assigned all of its right, title and interest in
and to this Lease to Head Lessor and Head Lessor has assigned
all its right, title and interest in and to this Lease and
granted a Security Interest in the Aircraft to Indenture
Trustee.
(c) Lessor may from time to time require to amend, modify or
replace the security arrangements in respect of the financing
or refinancing of the Aircraft and Lessee agrees to cooperate
with Lessor in connection therewith at the cost and expense of
Lessor and, in particular (but without limiting the generality
of the foregoing), to change the plates provided for in
Article 4.3 and to execute and deliver such other or further
acknowledgments of assignment or other documents and to do
such other things as Lessor may reasonably require to be
executed and delivered;
(d) Upon any financing or refinancing of the Aircraft as
contemplated by this Article 12.3 or otherwise at the cost and
expense of Lessor, Lessee will promptly and duly execute and
deliver to Lessor and such persons as Lessor shall designate,
such other documents and assurances and take such further
action as may from time to time be reasonably requested in
order more effectively to carry out the intent and purpose of
this Lease, the Head Lease, the Indenture, the Security
Assignment and any other documents relating to such financing
or refinancing;
(e) [Intentionally omitted]; and
(f) Lessee shall not be liable to any Transferee for any payment
of Taxes or other amounts pursuant to this Lease or otherwise
be subject to any liabilities in excess of the amount that
would have been payable to, or beyond the scope of the
liabilities to, as the case may be, Lessor originally party
hereto, if that party had remained as Lessor.
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13. DISCLAIMER, REPRESENTATIONS AND WARRANTIES
13.1 NEITHER LESSOR, NOR HEAD LESSOR, NOR OWNER PARTICIPANT NOR INDENTURE
TRUSTEE NOR LOAN PARTICIPANT IS A MANUFACTURER OF THE AIRCRAFT OR
OTHER AIRCRAFT OR A DEALER IN SIMILAR AIRCRAFT AND HAS NOT INSPECTED
THE AIRCRAFT PRIOR TO DELIVERY TO AND ACCEPTANCE BY LESSEE. LESSEE
(I) ACKNOWLEDGES AND AGREES THAT THE AIRCRAFT IS BEING DELIVERED BY
LESSOR TO LESSEE "AS IS" AND "WHERE IS" AND THAT NO CONDITION,
WARRANTY OR REPRESENTATION OF ANY KIND WHATSOEVER HAS BEEN OR IS
GIVEN BY OR IS TO BE IMPLIED ON THE PART OF LESSOR OR ON THE PART OF
HEAD LESSOR OR OWNER PARTICIPANT OR INDENTURE TRUSTEE OR LOAN
PARTICIPANT IN RELATION TO THE AIRCRAFT, AND (II) HEREBY WAIVES AS
BETWEEN ITSELF AND LESSOR OR ON THE PART OF HEAD LESSOR OR OWNER
PARTICIPANT OR INDENTURE TRUSTEE OR LOAN PARTICIPANT ALL ITS RIGHTS,
EXPRESS OR IMPLIED (WHETHER STATUTORY OR OTHERWISE), TO MAKE CLAIMS
IN RESPECT OF THE AIRCRAFT RELATING TO THE TITLE, AIRWORTHINESS,
VALUE, CONDITION, DESIGN, OPERATION, CONFORMITY TO SAMPLES OR
MODELS, COMPLIANCE WITH SPECIFICATIONS, MERCHANTABILITY OR FITNESS
OR SUITABILITY FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT OR
ANY PART THEREOF, QUALITY OF THE MATERIAL OR WORKMANSHIP, ABSENCE OF
LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, ABSENCE OF ANY
INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, ABSENCE OF ANY
OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN TORT, BASED ON
STRICT LIABILITY OR NEGLIGENCE, ACTUAL OR IMPUTED, AND LESSEE HEREBY
WAIVES ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR
IMPLIED, WITH RESPECT TO THE AIRCRAFT, IT BEING UNDERSTOOD THAT ALL
SUCH RISKS, AS BETWEEN LESSEE AND LESSOR OR ON THE PART OF HEAD
LESSOR OR OWNER PARTICIPANT OR INDENTURE TRUSTEE OR LOAN
PARTICIPANT, ARE TO BE BORNE BY LESSEE.
Nothing in this Lease shall afford Lessor or any Indemnitee any
wider or greater exclusion of liability for death or bodily injury
than would be permitted by the Governing Law.
This paragraph shall not be modified except by a written agreement
signed on behalf of Lessor and Lessee by their respective duly
authorized representatives.
13.2 Lessor and Lessee agree that this Article 13 has been the subject of
discussion and negotiation and is fully understood by the parties,
and that the amount of the Rent and other mutual agreements of the
parties set
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forth in this Lease were arrived at in consideration of the
provisions of this Article 13 specifically including the waiver by
Lessee set forth in Article 13.1.
13.3.1 So long as no Event of Default has occurred and is continuing
Lessor agrees to assign or otherwise make available to Lessee for
the duration of the Term such rights as Lessor may have under any
warranty, express or implied, with respect to the Aircraft made
by the Manufacturer of the Aircraft, any subcontractor or
supplier thereof, or any other seller thereof, to the extent that
the same may be assigned or otherwise made available to Lessee
and without warranty by Lessor as to enforceability of any of the
rights so assigned.
To the extent that the same may not be assigned or otherwise made
available to Lessee, Lessor agrees to exert its reasonable efforts,
at Lessee's expense, to enforce such rights as Lessor may have with
respect thereto for the benefit of Lessee; provided however, that
upon an Event of Default all such rights shall immediately revert to
Lessor including all claims thereunder, whether or not perfected,
unless such Event of Default has forthwith been remedied by Lessee.
13.3.2 [Intentionally omitted].
13.4 Lessee represents and warrants that:
(a) Lessee is a corporation organized and existing in good
standing, in accordance with the Laws of the State of
Incorporation, and has the corporate power and authority to
carry on its business as presently conducted and to perform
its obligations under this Lease, is a Certificated Air
Carrier and is the holder of all necessary licenses issued
by all Government Entities having jurisdiction to authorize
or permit Lessee to engage in air transportation and to
perform and comply with its obligations hereunder;
(b) This Lease has been duly authorized by all necessary corporate
action on the part of Lessee, and neither the execution and
delivery nor the consummation of the transactions contemplated
hereby nor compliance by Lessee with the provisions of this
Lease will contravene any Law applicable to Lessee or result
in any breach of, or constitute any default under, or result
in the
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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;
(c) The execution and delivery by Lessee of this Lease, and all of
the transactions by Lessee contemplated hereby, have received,
and Lessee has complied with, every necessary consent,
approval, order, or authorization of, or registration with, or
the giving of prior notice to, any Government Entity having
jurisdiction with respect to the execution and delivery of
this Lease or the validity and enforceability of this Lease or
the satisfaction of all monetary and other obligations
hereunder;
(d) This Lease has been duly entered into and delivered by Lessee
and constitutes the valid, legal and binding obligations of
Lessee, enforceable in accordance with their terms subject. to
principles of equity, laws relating to bankruptcy, insolvency
or liquidation or any other laws or legal procedures generally
affecting the enforcement of creditor's rights or the rights
of contracting parties;
(e) It is not necessary or advisable under the Laws of the State
of Registration in order to ensure the validity, effectiveness
and enforceability of this Lease, the Head Lease, the
Indenture or the Security Assignment or to protect the
property rights of Lessor, Head Lessor, or Indenture Trustee
in the Aircraft and under the Head Lease, the Indenture and
the Security Assignment that this Lease, the Head Lease, the
Indenture, the Security Assignment or any other instrument
relating thereto be filed, registered or recorded or that any
other action be taken under the Laws of the States of Illinois
or North Carolina and the State of Registration to perfect the
property rights of Lessor, Head Lessor and Indenture Trustee
in the Aircraft other than the filing of all such instruments
with the Air Authority, the filing of UCC-1 financing
statements in relevant jurisdictions and possession of an
original
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version of this Lease, if deemed to be chattel paper, and the
Indenture and Security Assignment will have priority in all
respects over the claims of all creditors of Lessee in or
against the Aircraft;
(f) Under the Laws of the State of Incorporation and the State of
Registration Lessee will not be required to make any deduction
or withholding from any payment it may make under this Lease.
There is no withholding or other tax to be deducted from any
payment to be made by Lessee under this Lease;
(g) There are no suits or legal proceedings (including any
administrative proceeding) pending or threatened before any
court or administrative agency against Lessee which, if
adversely determined, would have a material adverse effect
upon its financial condition or business or its ability to
perform its obligations hereunder;
(h) [Intentionally omitted];
(i) There has been no material adverse change in the financial
position of Lessee or the consolidated financial position of
Lessee and its subsidiaries from that set forth in the
financial statements last furnished pursuant to Article 6.4
and neither Lessee nor any of its subsidiaries have any
significant liabilities (contingent or otherwise) which are
not disclosed by, or reserved against in such financial
statements;
(j) The chief executive office (as such term is used in Sections
9-103 and 9-401 of the Uniform Commercial Code) of Lessee is
located at Chicago, Illinois, and, commencing August 21, 1995,
shall be located in Durham, North Carolina and Lessee agrees
to give at least 30 days' prior notice to Lessor of any
relocation of said chief executive office or place where such
records are kept and of any change in its name.
13.5 The representations and warranties in Article 13.4 (other than in
clauses (f), (g) and (i)) shall be deemed to be repeated by Lessee
on and as of each Rent Date as if made with reference to the facts
and circumstances existing on each such date.
13.6 Lessor represents, warrants and covenants that:
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(a) Lessor is a corporation organized and existing in good
standing, in accordance with the Laws of the State of Delaware
and has the corporate power and authority to carry on its
business as presently conducted and to perform its obligations
under this Lease;
(b) This Lease has been duly authorized by all necessary
corporate action on the part of Lessor, has been duly
entered into and delivered by Lessor and constitutes the
valid, legal and binding obligations of Lessor, enforceable
in accordance with their respective terms subject to
principles of equity, laws relating to bankruptcy,
insolvency or liquidation or any other laws or legal
procedures generally affecting the enforcement of
creditor's rights or the rights of contracting parties;
(c) Neither the execution and delivery nor the consummation of the
transactions contemplated hereby nor compliance by Lessor with
the provisions of this Lease will result in any breach of, or
constitute any default under, any indenture or any 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; and
(d) Except for the registration of the Aircraft, neither the
execution and delivery nor the consummation of the
transactions contemplated hereby nor compliance by Lessor with
the provisions of this Lease requires the consent or approval
of, the giving of notice to, or the registration with, or the
taking of any other action in respect of any Government
Entity.
13.7 Lessor undertakes that, so long as no Event of Default shall have
occurred and be continuing, Lessor will not interfere with the
peaceful and quiet use and enjoyment of the Aircraft by Lessee in
accordance with the terms of this Lease. Lessor shall procure from
Head Lessor and Indenture Trustee a letter confirming that neither
Head Lessor nor Indenture Trustee shall take or cause to be taken
any action interfering with Lessee's quiet enjoyment and use and
possession of the Aircraft, provided, that no Event of Default shall
have occurred and be continuing. Lessee hereby agrees that if an
event of default under the Head Lease shall have
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occurred and be continuing, Lessee shall, at the reasonable cost and
expense of Lessee, enter into a lease with Head Lessor, such lease
to be upon terms and conditions substantially similar to those of
this Lease, and such lease shall be assigned to Indenture Trustee
under the Indenture with such changes as appropriate to reflect the
change in relationship between Lessee and the parties to the
Participation Agreement (other than the Lessor) resulting from the
Lessor no longer being interposed between the Lessee and such
parties.
13.8 On the Delivery Date, Head Lessor shall have received full legal and
beneficial title to the Aircraft from Lessor, Lessor shall have the
right to sublease the Aircraft hereunder and the Aircraft shall be
free of Lessor's Lien except for the lien of the Indenture, the
Security Assignment and the Head Lease, and Lessor covenants that
Lessor shall not create, incur, assume or suffer to exist any
Lessor's Lien (except the Indenture, the Security Assignment and the
Head Lease) on the Aircraft or any part thereof and agrees at its
own cost and expense, promptly to take such action as may be
necessary duly to discharge any such Lessor's Lien provided,
however, without limiting Lessor's liability under Article 13.7,
that Lessor may in good faith by appropriate proceedings contest
claims or charges resulting in any such Lessor's Lien as long as
such contest does not involve any material danger of the sale,
forfeiture or loss (or loss of use) of the Aircraft or any interest
therein and will indemnify and hold harmless Lessee against any and
all Claims, of whatever kind and nature, incurred by or asserted
against Lessee as a consequence of any such Lessor's Lien.
13.9 Lessor will not enter into any waiver, amendment or other
modification of the Tax Indemnity Agreement, Sections 7A or 7(b)(i),
(ii) or (iii) of the Participation Agreement or the Head Lease
definitions used therein that would increase Lessee's liabilities or
decrease its rights hereunder without Lessee's consent. Promptly
upon the execution and delivery of any amendment, modification,
supplement or waiver to the Tax Indemnity Agreement or Sections 7(b)
or 7A of the Head Lease, Lessor shall deliver true and accurate
copies thereof to Lessee. Lessor shall immediately notify Lessee of
the existence of any "Event of Default" or "Default" under the Head
Lease (that does not result from an Event of Default or Default
under
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this Lease) and shall promptly notify Lessee when the Head Lease is
no longer in effect.
14. COVENANTS OF LESSEE
14.1 Lessee hereby covenants with Lessor that from the Delivery Date and
during the Term and until redelivery of the Aircraft to Lessor in
accordance with Article 16 it will:
(a) remain in and continue to operate as a Certificated Air
Carrier holding a valid certificate of convenience and
necessity issued pursuant to the Federal Aviation Act and,
except as permitted in Section 14.1(p) hereof, preserve its
corporate existence;
(b) comply with all Laws and regulations for the time being in
force in the State of Incorporation, the State of
Registration and in any country to, from, in or over which
the Aircraft is flown, the failure with which to comply is
likely to have a material adverse effect on Lessee,
provided, however, that such failure shall have no adverse
effect on the Aircraft or the interests of Lessor, Head
Lessor or Indenture Trustee therein or the Insurance
required to be maintained pursuant to Article 11;
(c) (i) at its own expense from time to time do and perform
such other and further acts and execute and deliver any and
all further instruments as may be required by Law (in the
United States but not in any jurisdiction outside the
United States unless directly required due to Lessee's
operation), and (ii) at Lessor's expense (insofar as not
covered in Article 8.2(a)) from time to time do and perform
such other and further acts and execute and deliver any and
all further instruments as may be reasonably requested by
Lessor to establish, maintain and protect the respective
rights and remedies of Lessor, Head Lessor and Indenture
Trustee and to carry out and give effect to the intents and
purposes of this Lease and the Head Lease;
(d) notify Lessor immediately of any Default;
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(e) obtain and maintain all necessary government and other
certificates, consents, licenses, permits and authorizations
and take all action which may be necessary for the continued
due performance of Lessee's obligations under this Lease and
for the use and operation of the Aircraft;
(f) not do or permit to be done any act or thing which might
impair the respective interests of Lessor, Head Lessor and
Indenture Trustee in the Aircraft, or the registration of the
Aircraft;
(g) notify Lessor as soon as practicable after becoming aware of
any loss, theft, damage or destruction of or to the Aircraft
or any part thereof if the potential cost of repair or
replacement is likely to exceed $250,000.00 (Dollars Two
Hundred Fifty Thousand);
(h) not do anything which is likely to subject the Aircraft or any
part thereof to penalty, forfeiture, seizure, arrest,
impounding, detention, confiscation, taking in execution or
appropriation or destruction, nor abandon the Aircraft or any
part thereof;
(i) not represent or hold out Lessor, Head Lessor or Indenture
Trustee as carrying goods or passengers on the Aircraft or as
being in any way connected or associated with any operation or
carriage (whether for hire or reward or gratuitously) which
Lessee may undertake;
(j) not pledge the credit of Lessor, Head Lessor or Indenture
Trustee for any maintenance, overhauls, replacements, repairs
or modifications to the Aircraft;
(k) keep Lessor and the insurers, as referred to in Article 11,
informed as to current serial numbers of the Engines and any
engine installed on the Aircraft in accordance with the
provisions of this Lease, and the location of any Engine for
the time being not installed on the Aircraft; and shall notify
such insurers of any renewal, replacement or substitution, or
the location of any Engine not installed on the Aircraft;
(l) discharge all fees, charges and expenses payable to any third
party in relation to the use or
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operation of the Aircraft or any premises where the Aircraft
is situated;
(m) in the event of any forfeiture, impounding or detention of the
Aircraft or any part thereof not constituting a Casualty
Occurrence, use all reasonable endeavors to procure the
immediate release therefrom of the same;
(n) keep accurate, complete and current records of all flights
made by the Aircraft. Such records shall be kept in such
manner as the Air Authority may from time to time require and
in accordance with the Approved Maintenance Program. Lessee
shall permit Lessor or any person designated by Lessor to
examine such records upon giving reasonable notice not
involving delay to the Aircraft and subject to the terms of
Article 7.5.3, at the expense of Lessor or such person, to
copy such records;
(o) on request, provide Lessor with evidence satisfactory to
Lessor that all Taxes and charges incurred by Lessee with
respect to the Aircraft, including without limitation any
payments due to any relevant air traffic control authorities
and airport authorities, have been paid and discharged in full
or duly provided for;
(p) not consolidate with, or merge into, any other corporation,
convey, transfer or lease substantially all of its assets as
an entirety to any person without the prior written consent of
Lessor (such consent not to be unreasonably withheld) and the
execution and delivery to Lessor of such agreements,
certificates and legal opinions as Lessor may request with
respect thereto; and
(q) provide to Lessor immediate written notice of any termination
or expiration of the Aircraft Maintenance Agreement, and a
copy of any subsequent Aircraft Maintenance Agreement entered
into by Lessee.
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15. DEFAULT BY LESSEE
15.1 Each of the following events shall constitute an "Event of
Default":
(a) if default shall be made by Lessee in the making of payment of
any Rent, Reserve Rate, Agreed Value, and/or of any other
Supplemental Rent, within 5 Business Days after the date when
due and payable under this Lease; or
(b) (i) if default shall be made by Lessee at any time in the
procurement or maintenance of any insurance coverage
prescribed herein or (ii) any insurance which may be
maintained by Lessor, Head Lessor or Indenture Trustee under
Article 11.4 is cancelled or terminated or notice of
cancellation is given; or
(c) if default shall be made by Lessee in the observance or
performance of any of the other obligations of Lessee
contained in this Lease and, if such default is in the opinion
of Lessor capable of remedy, such default shall continue for a
period of fifteen (15) Business Days after notice from Lessor
to Lessee specifying the default and requiring that the same
be remedied; or
(d) if any representation or warranty made (or deemed to be
repeated) by Lessee in or pursuant to this Lease or in any
document or certificate or statement referred to in or
delivered under this Lease is or proves to have been
incorrect in any material respect when made or deemed to be
repeated and such incorrectness, if capable of being cured,
shall continue for fifteen (15) Business Days after written
notice from Lessor specifying such incorrectness; or
(e) if any borrowed money having an outstanding principal
amount in excess of $4,000,000.00 (Dollars Four Million) of
Lessee or any of its subsidiaries is not paid when due, or
by reason of breach or default under the terms of any
instrument evidencing or guaranteeing the same on the part
of Lessee or any of its subsidiaries any borrowed money
having an outstanding principal amount in excess of
$4,000,000.00 (Dollars Four Million) of Lessee or any of
its subsidiaries
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becomes due or capable of being declared due prior to the date
when it would otherwise have become due, or the security for
any such borrowed money or any guarantee in respect thereof
becomes enforceable; or
(f) if an encumbrancer takes possession or a receiver,
administrator, administrative receiver, trustee, liquidator or
similar officer is appointed of the whole or any substantial
part of the assets, rights or revenues of Lessee or any of its
subsidiaries or a distress, execution, sequestration or other
process is levied or enforced upon or sued out against all or
a substantial part of the assets, rights or revenues of Lessee
or any of its subsidiaries and is not discharged within
fourteen days, or Lessee applies for or consents to the
appointment of a receiver, administrator, administrative
receiver, trustee, liquidator or similar officer for it or for
all or any part of its assets, rights or revenues; or
(g) if Lessee or any of its subsidiaries suspends payment of its
debts, or is unable or admits its inability to pay its debts
as they fall due, or shall be adjudicated or found, or
becomes, bankrupt or insolvent, or proposes or enters into any
composition or other arrangement for the benefit of its
creditors generally, or Lessee or any of its subsidiaries
shall, by voluntary petition, answer or consent, seek relief
under the provisions of any bankruptcy, insolvency or other
similar law providing for the reorganization, liquidation,
administration, dissolution or winding-up of corporations, or
providing for an agreement, composition, extension or
adjustment with its creditors; or
(h) if a petition against Lessee in a proceeding under applicable
bankruptcy or other insolvency laws shall be filed and shall
not be withdrawn or dismissed within 30 days thereafter, or if
any order shall be made by any competent court or resolution
passed by Lessee or any of its subsidiaries or their
respective board of management or supervisory board, whichever
is competent to pass such resolution for the winding-up or
dissolution of Lessee or any of its subsidiaries or for the
appointment of a liquidator, trustee or conservator, save for
winding-up or
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dissolution for the purposes of amalgamation or reorganization
(not involving or arising out of insolvency) the terms of
which shall have received the prior written approval of
Lessor; or
(i) if Lessee or any of its subsidiaries disposes of all or a
material part of its assets, whether by one or a series of
transactions, related or not, other than for the purpose of a
reconstruction or amalgamation the terms of which have
received the previous consent in writing of Lessor; or
(j) if any action shall be taken by Lessee which shall impair the
rights, title or ownership of Lessor or Head Lessor or the
Security Interest of Indenture Trustee, in the Aircraft or
this Lease, or this Lease is or becomes wholly or partly
invalid, ineffective or unenforceable by reason of any act or
omission of Lessee; or
(k) if any consent, authorization, license, certificate or
approval of or registration with or declaration to any
Government Entity in connection with this Lease including,
without limitation:
(i) Lessee's air carrier operating certificate issued
pursuant to Chapter 447 of the Federal Aviation Act; or
(ii) required by Lessee or as a condition precedent required
by Lessor pursuant to Article 2.3 to authorize, or in
connection with, the execution, delivery, validity,
enforceability or admissibility in evidence of this
Lease or the performance by Lessee of its obligations
under this Lease; or
(iii) the registration of the Aircraft; or
(iv) any airline license or air transport license;
is changed such that it materially impairs the ability of
Lessee to perform its obligations hereunder, or is withheld,
or is revoked, suspended, cancelled, withdrawn, terminated or
not renewed, or otherwise ceases to be in full force; or
(m) if any circumstances analogous to any of the circumstances
described in paragraphs (f), (g) or
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(h) above arise under the Law of any applicable jurisdiction;
(n) for so long as Wings Aircraft Finance, Inc. or any other
affiliate or subsidiary of Fokker is the Lessor hereunder or
retains the entire beneficial interest in the ownership of the
Aircraft, if an event of default (however defined) occurs
under any Other Aircraft Agreement which event permits
acceleration or termination;
(o) [intentionally omitted],
(p) [intentionally omitted]; or
(q) [intentionally omitted].
15.2 If one or more Events of Default shall have occurred and be
continuing, at Lessor's option and subject to any mandatory
requirement of Law:
(a) For Lessee's account Lessor may do anything that may
reasonably be required to cure any Event of Default and
recover from Lessee all costs including legal expenses
incurred in so doing, and/or
(b) Lessor may accept such Event of Default as a repudiation of
this Lease and terminate the lease of the Aircraft to Lessee
hereunder by:
(i) serving notice of such termination on Lessee specifying
the occurrence giving rise to such Event of Default or
Events of Default, provided that such notice shall be
deemed to have been served without the necessity of
actual service upon the occurrence of any Event of
Default described in paragraph (f), (g), (h) or (m) of
Article 15.1.
Thereafter (if the Term shall have commenced) Lessee
shall redeliver possession of the Aircraft to Lessor at
the Redelivery Location (or such other location as
Lessor may require); or
(ii) at Lessor's election, taking possession of the Aircraft
for which purpose Lessor by its servants or agents may
enter upon Lessee's premises where the Aircraft may be
located,
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or cause the same to be redelivered to Lessor at the
Redelivery Location (or such other location as Lessor
may require Lessee to assemble and deliver the Aircraft
to Lessor, and Lessor shall be entitled to act as
attorney for Lessee in causing such redelivery and shall
have all the powers and authorizations legally necessary
for taking such action. In the event of exercise by
Lessor of its powers under this sub-paragraph (ii) such
termination shall be deemed to take effect on such
taking of possession by Lessor or such redelivery of the
Aircraft to Lessor at the said airport; and/or
(c) Lessor may proceed by appropriate court action or actions to
enforce performance of Article 15.2(b) or to recover damages
for the breach thereof; and/or
(d) all rights of Lessee hereunder shall, in the event the Term
shall be terminated pursuant to Article 15.2(b) henceforth
absolutely cease and terminate but without prejudice to
Lessee's obligations under this Lease all of which shall
continue in full force and effect except for obligations to
pay Rent and Reserve Rate after the Aircraft is returned to
Lessor, and is in the condition required by Article 16; and
Lessee shall cooperate in taking all steps necessary to
effect deregistration of the Aircraft in the State of
Registration and Lessor shall be entitled to sell or
otherwise deal with the Aircraft as if this Lease had never
been made. Without prejudice to the foregoing, Lessee
hereby appoints Lessor as its attorney to do any act or
thing required in connection with such deregistration of
the Aircraft.
15.3 If an Event of Default occurs, Lessor shall have the right to
demand that:
(a) Lessee pay all amounts which may be then due and unpaid
hereunder, and
(b) at Lessor's option whether or not Lessor shall have exercised,
or shall thereafter at any time exercise, any of its rights
under Article 15.2, by thirty (30) days written notice to
Lessee from Lessor specifying a payment date, Lessee pay
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Lessor, and Lessee shall pay Lessor, on the payment date
specified in such notice, as liquidated damages for loss of
bargain and not as a penalty (in lieu of the Rent due for the
Aircraft covered by such notice for the period commencing
after the date specified for payment in such notice), any
unpaid Rent for the Aircraft (prorated in the case of Rent on
a daily basis) to and including the payment date specified in
such notice, plus the amount, if any, by which the aggregate
Rent for the Aircraft for the remainder of the Term for the
Aircraft, discounted periodically (equal to installment
frequency) to present worth at the interest rate of six and a
half percent (6.5%) per annum, exceeds the Fair Market Rental
Value of the Aircraft for the remainder of the Term, after
discounting such Fair Market Rental Value periodically (equal
to installment frequency) to present worth as of the payment
date specified in such notice at the interest rate of six and
a half percent (6.5%) per annum.
Lessee shall fully indemnify Lessor on its own behalf and on behalf
of Head Lessor and Indenture Trustee on demand and on an After-Tax
Basis against any loss (including loss of profit), damage, expense
(including without limitation attorneys' fees), cost or liability
which Lessor, Head Lessor or Indenture Trustee may sustain or incur
as a consequence of the occurrence of any Event of Default and/or
termination of the letting of the Aircraft pursuant to this Lease,
including but not limited to (i) any loss of profit suffered by
Lessor and/or Head Lessor because of Lessor's inability to place the
Aircraft on lease with another lessee on terms as favorable to
Lessor as the terms of this Lease or because whatever use, if any,
to which Lessor is able to put the Aircraft upon its return to
Lessor, or the funds arising upon a sale or other disposal thereof,
is not as profitable to Lessor as letting the Aircraft in accordance
with the terms of this Lease would have been to the extent the
foregoing loss of profit shall not be recovered under Article
15.3(b), (ii) any amount of interest, fees or other sums whatsoever
paid or payable on account of funds borrowed in order to carry any
unpaid amount, (iii) any loss, premium, penalty or expense which may
be incurred repaying funds raised to finance the Aircraft or in
unwinding any swap, forward interest rate agreement or other
financial instrument relating in whole to
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Lessor's financing of the Aircraft and/or the Aircraft under the
Other Aircraft Agreements, and (iv) any loss, cost, expense or
liability sustained or incurred by Lessor owing to Lessee's failure
to re-deliver the Aircraft in the condition required by this Lease.
15.4 No remedy referred to in this Article 15 is exclusive, but each
remedy shall be cumulative and in addition to any other remedy
referred to herein or otherwise available to Lessor. The exercise by
Lessor of any of its remedies hereunder shall not preclude or estop
the exercise or beginning of exercise by Lessor of any or more of
such other remedies.
No express or implied waiver by Lessor of any Event of Default, or
failure or delay of Lessor in exercising any right hereunder shall
operate as waiver thereof unless an express waiver is executed and
delivered to Lessee.
15.5 Prior to the Delivery Date Lessee shall deliver to Lessor a duly
authorized consent, undated and in form and substance acceptable to
Lessor, addressed to the Federal Aviation Administration consenting
to the release of this Lease in connection with the termination of
this Lease pursuant to the terms hereof and, if so requested by
Lessor, the deregistration of the Aircraft from the register of
civil aviation in the State of Registration.
16. RETURN OF AIRCRAFT
16.1 On the Expiry Date or upon earlier termination of the Term (unless a
Casualty Occurrence shall have occurred with respect to the
Aircraft), Lessee shall, at its own expense, redeliver the Aircraft
to Lessor at the Redelivery Location or such other airport as is
mutually acceptable to the parties, in a condition complying with
the provisions of Appendix E, free and clear of all liens and
encumbrances (including Permitted Liens other than Lessor Liens) and
upon request of Lessor cooperate in causing the Aircraft to be
removed from the register of civil aviation in the State of
Registration and Lessee shall return the Aircraft to Lessor together
with the Aircraft Documents supplied pursuant to this Lease when the
Aircraft was delivered to Lessee on the Original Delivery Date as
the same may be modified, supplemented or amended during the Term.
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16.2 Immediately prior to such redelivery of the Aircraft, Lessee, at its
own expense, shall make the Aircraft, Aircraft Documents and other
records available to Lessor for inspection ("Final Inspection") in
order to verify that the condition of the Aircraft complies with the
provisions of this Lease. Such inspection shall not unreasonably
interfere with the operation of the Aircraft. The period will be
long enough for the Final Inspection to permit the conduct by Lessor
of the following:
(a) Inspection of the Aircraft Documents;
(b) Inspection of the Aircraft structure and Parts;
(c) Inspection of the Engines and A.P.U., including without
limitation, a borescope inspection or any other equivalent
inspection method supported by Rolls Royce, inspection of the
compressor and turbine area, and, if reasonably requested
based on evidence that it is required, the Engine and A.P.U.
condition runs confirming release of each Engine and A.P.U for
its remaining operational life;
(d) A one-hour to two-hour test flight with Lessor's
representatives on board as observers and, if any non
compliance is found, a subsequent test flight to check
compliance after rectification.
16.3 To the extent that, upon such Final Inspection, the condition of the
Aircraft and Aircraft Documents does not comply with the provisions
of this Lease, Lessee, at its own expense, shall cause such
non-compliance to be promptly rectified and to the extent such
rectification extends beyond the Expiry Date, the Term shall, at
Lessor's sole option, be deemed to be automatically extended and the
provisions of this Lease shall remain in full force and effect until
such rectification has been accomplished. During such extension of
the Term Lessee shall be liable to pay Rent at a daily pro rata rate
equal to the Rent payable during the last Rental Period of the Term.
16.4 Upon redelivery Lessee shall provide to Lessor all necessary
assistance to enable Lessor to obtain any required documents in
relation to the export of the Aircraft from the State of
Registration, and if different, from the State of Incorporation
(including a valid and subsisting export license for the Aircraft),
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17. CASUALTY OCCURRENCES
17.1 In this Lease "Casualty Occurrence" shall mean any of the following
events with respect to the Aircraft, the Airframe or an Engine:
(a) the actual, agreed, constructive, arranged or compromised
total loss or destruction of the Aircraft, the Airframe or an
Engine, or damage to the Aircraft, Airframe or Engine
rendering repair impracticable or uneconomical, or the
Aircraft, Airframe or Engine being rendered permanently unfit
for normal use;
(b) requisition of title or other compulsory acquisition,
requisition, capture, seizure, deprivation, confiscation or
detention for any reason of the Aircraft, the Airframe or
an Engine by any Government Entity of the State of
Registration or by any other government or other competent
authority, whether de jure or de facto, but excluding
requisition for use or hire not involving requisition of
title by any Governmental Entity for a temporary period
ending on the date ninety (90) days (or the Expiry Date if
the requisition for use or hire is by the United States)
after such requisition, or the Expiry Date, whichever first
occurs;
(c) the hijacking, theft, disappearance, condemnation,
confiscation or seizure of the Aircraft, the Airframe or an
Engine other than in the circumstances referred to in (b)
above which deprives Lessee of the use thereof for more than
ninety (90) consecutive days.
17.2 (a) In the event of a Casualty Occurrence with respect to the
Aircraft or Airframe prior to the Delivery Date, this Lease
shall immediately terminate with respect to such Aircraft and
neither party shall have any further obligation or liability
hereunder, save that Lessor shall return to Lessee the Deposit
or such part thereof as Lessor shall have received from Lessee
and Lessee shall remain liable to reimburse Lessor for any
amounts specified in Article 8.2(a).
(b) In the event of a Casualty Occurrence with respect to the
Aircraft or Airframe after delivery to Lessee hereunder,
Lessee shall pay the Agreed
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Value to Lessor on or prior to the earlier of (i) 45 days
after the Casualty Occurrence and (ii) the Business Day after
the date of receipt of the insurance proceeds in respect of
the Casualty Occurrence and, provided all other amounts which
are then due and payable by Lessee under this Lease have been
paid in full to Lessor, Lessee's obligation hereunder for
payment of Rent shall cease as from the date on which Lessor
receives payment in full of the Agreed Value. Rent paid in
advance for any days which occur after such Agreed Value is
paid shall be repaid to Lessee on a pro rata basis for each
day beyond such date of payment of Agreed Value. Any insurance
proceeds in excess of Agreed Value obtained by Lessee pursuant
to Article 11 for its own account, remaining after payment of
the foregoing amounts shall, unless an Event of Default under
Section 14(n) shall have occurred and be continuing, be paid
over to Lessee.
(c) Subject to the rights of any insurers and reinsurers or
other third party, upon irrevocable payment in full to
Lessor of the Agreed Value and all other amounts which may
be or become payable to Lessor under this Lease, Lessor
will cause, title to the Aircraft to be conveyed from Head
Lessor to it, without recourse or warranty (except as to
title. and Lessor's Liens) and without further act, Lessor
will convey title to Lessee. Lessor will or will cause Head
Lessor to transfer to Lessee all of Head Lessor's rights to
any Engines and Parts not installed when the Casualty
Occurrence occurred, all on an as-is where-is basis, and
will at Lessee's expense, execute and deliver or cause to
be executed and delivered such bills of sale and other
documents and instruments as Lessee may reasonably request
to evidence (on the public record or otherwise) the
transfer and the vesting of Lessor's rights in such Engines
and Parts in Lessee, free and clear of all rights of Lessor
and Lessor Liens.
17.3 Upon the Casualty Occurrence with respect to any Engine not
involving a Casualty Occurrence of the Aircraft, Lessee shall give
Lessor prompt written notice thereof and Lessee shall replace such
Engine as soon as reasonably possible, but in no event later than
ninety (90) days after such Casualty Occurrence, with a replacement
Engine in accordance with Article 5.1.2(a).
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<PAGE>
Such replacement shall be deemed an "Engine" as defined herein.
Lessee agrees to take such action as Lessor may reasonably request
in order that any such replacement engine shall be duly and properly
titled in Head Lessor, leased hereunder and subject to the Security
Interest of the Indenture to the same extent as the Engine replaced
thereby. In such case or in the case of the installation of a
Replacement Engine in accordance with 5.1.2(a), the following
conditions shall be satisfied at no cost or expense to Lessor and
Lessor agrees to cooperate with Lessee to the extent necessary to
enable it to satisfy such conditions in a timely manner:
(i) the following documents shall be duly authorized,
executed and delivered by the respective party or parties
thereto and shall be in full force and effect, and an executed
counterpart of each shall be delivered to Lessor:
(A) a full warranty bill of sale in favor of Head
Lessor, in form and substance reasonably satisfactory to
Lessor, with respect to the Replacement Engine;
(B) a supplement to this Lease, in form and substance
reasonably satisfactory to Lessor, covering the
Replacement Engine (and releasing such replaced Engine
from this Lease) which shall have been duly filed (or a
short form thereof) for recordation with the Aviation
Authority;
(C) a certificate from a duly qualified independent
engineer, which engineer shall be reasonably
satisfactory to Lessor, confirming the operating
condition, value and utility of the Replacement Engine
satisfies the terms of Article 5.1.2(a) (i);
(D) evidence of compliance with the insurance provisions
of Article 11 with respect to such Replacement Engine as
Lessor may reasonably request; and
(E) an opinion of counsel (and such other evidence of
title as Lessor may reasonably request) to the effect
that, such conveyance, is effective to transfer to Head
Lessor title to such Replacement Engine and that it will
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be leased hereunder to the same extent as the Engine
replaced thereby.
Lessor will cause title to the Engine being replaced to be
transferred to Lessee or its designee without recourse or warranty
(except as to title and the absence of Lessor's Liens). Lessee's
obligation to pay the Rent hereunder shall continue in full force
and effect, but Lessee shall be entitled to be reimbursed by Lessor
the amount of insurance or condemnation proceeds, if any, received
by Lessor with respect to such replaced Engine.
17.4 In the event of requisition for hire of the Aircraft or any part
thereof not constituting a Casualty Occurrence, then, subject to the
proviso herein contained, the Rent and other charges payable under
this Lease shall not be suspended or abated either in whole or in
part, and Lessee shall not be released from any of its other
obligations (as to payment, indemnity or otherwise) hereunder (other
than operational obligations with which Lessee is unable to comply
solely by virtue of such confiscation or requisition). If Lessee
shall duly comply with all its obligations under this Lease, Lessee
shall during the Term be entitled to any hire paid by the
requisitioning or confiscating authority and Lessee shall, as soon
as practicable after the end of any requisition or confiscation,
cause the Aircraft to be put into the condition required by this
Lease. Lessor shall be entitled to all compensation payable by the
requisitioning or confiscating authority in respect of any change in
the structure, state or condition of the Aircraft arising during the
period of requisition or confiscation, and Lessor shall apply such
compensation in reimbursing Lessee for the cost of complying with
its obligations as aforesaid, but if any Default has occurred and is
continuing, Lessor shall be entitled to apply such compensation in
or towards settlement of any amounts owing by Lessee under this
Lease PROVIDED ALWAYS that if following such requisition or
confiscation the Aircraft is treated as an agreed, constructive,
arranged or compromised total loss by the insurers, then the
provisions of Article 17.1 shall apply with effect from the date on
which the insurer so determines.
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18. GOVERNING LAW AND JURISDICTION
18.1 This Lease and further agreements resulting herefrom shall be
governed by and construed in accordance with the internal Laws of
the State of New York and without regard to any conflict of law
rules. This Lease is being delivered in the State of New York.
18.2 Lessor and Lessee hereby irrevocably agree to submit to the
non-exclusive jurisdiction of, and to waive any objection to the
laying of venue in, the County of New York and that any suit, action
or proceedings (collectively, "Proceedings") may be brought by
Lessor in any court of the State of New York or any U.S. Federal
court located in New York County, New York.
18.3 Nothing contained in this Article 18 shall limit the right of either
party to this Lease to take Proceedings against the other in any
other court of competent jurisdiction, nor shall the taking of
Proceedings in one or more jurisdictions preclude the taking of
Proceedings in any other jurisdiction, whether concurrently or not.
18.4 Promptly after service of any process Lessor or Lessee shall
despatch a copy thereof to Lessee or Lessor, as the case may be, by
registered mail, postage prepaid but failure of Lessee or Lessor, as
the case may be, to receive such copy shall not invalidate the
service of such process.
18.5 To the extent that the parties may in any jurisdiction claim for
their or their assets immunity from suit, execution, attachment
(whether in aid of execution, before judgment or otherwise) or other
legal process and to the extent that in any such jurisdiction there
may be attributed to themselves or their assets such immunity
(whether or not claimed) the parties hereby irrevocably agree not to
claim and hereby irrevocably waive any immunity to the fullest
extent permitted by the laws of such jurisdiction with the intent,
inter alia, that the foregoing waiver shall have effect for the
purposes of the Foreign Sovereign Immunities Act of 1976 of the
United States of America.
18.6 Lessee and Lessor shall each at all times maintain an agent for
service of process in the New York, New York. For Lessee, such
agent shall be Paul, Hastings, Janofsky & Walker, Attn: John
Howitt, 399 Park Avenue, New York, New York 10022-4697. For
Lessor, such agent
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shall be Haight, Gardner, Poor & Havens, Attn: Bonny L.Y. Kwoh, 195
Broadway, New York, NY 10007. Any writ, judgment or other notice of
legal process shall be sufficiently served on Lessee or Lessor if
delivered to such agent at its address for the time being. Each of
Lessee and Lessor undertakes that if it shall revoke the authority
of its above agent or if for any reason any such agent no longer
serves as agent to receive service of process, Lessee or Lessor, as
the case may be, shall promptly appoint another such agent and
advise Lessor or Lessee, as the case may be, thereof.
19. MISCELLANEOUS
19.1 The rights of each of Lessor and Lessee under this Lease are
cumulative, may be exercised as often as it considers appropriate
and are in addition to its rights under general law. The rights of
Lessor against Lessee or in relation to the Aircraft (whether
arising under this Lease or the general law) shall not, as against
or in favor of Lessor, be capable of being waived or varied
otherwise than by an express waiver or variation in writing; and in
particular any failure to exercise or delay in exercising any of
such rights shall not operate as a waiver or variation of any other
such right; and defective or partial exercise of any such rights
shall not preclude any other or further exercise of that or any
other such right; and no act or course of conduct or negotiation on
Lessor's part or on Lessor's behalf shall in any way preclude Lessor
from exercising any such right or constitute a suspension or any
variation of any such right.
19.2 Save where expressly provided in this Lease, any certificate or
determination by Lessor as to any rate of interest or as to any
other amount payable under this Lease shall, in the absence of
manifest error, be conclusive and binding on Lessee.
19.3 If any sum paid or recovered in respect of the liabilities of Lessee
under this Lease is less than the amount then due, Lessor may apply
such sum to rental, interest, fees or any other amount due under
this Lease in such proportions and order and generally in such
manner as Lessor shall determine.
19.4 The terms and conditions of this Lease shall not be varied otherwise
than by an instrument in writing executed by or on behalf of Lessor
and Lessee.
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19.5 If any of the provisions of this Lease becomes invalid, illegal or
unenforceable in any respect under any law, the validity, legality
and enforceability of the remaining provisions shall not in any way
be affected or impaired.
19.6 Every notice, request, demand or other communication under this
Lease shall:
(a) be in English;
(b) be in writing and made by mail or by fax or telex
transmission or by reputable courier service;
(c) be deemed to have been received, subject as otherwise
provided in this Lease, in the case of a telex
transmission, at the time of dispatch with confirmed
answerback of the addressee appearing at the beginning and
the end of the communication, in the case of a fax
transmission, at the time safe receipt is confirmed by the
addressee provided that if the date of dispatch is not a
business day in the country of the addressee any telex or
fax transmission shall be deemed to have been received at
the opening of business on the next such business day, in
the case of a letter five days after being deposited in the
mail first class postage prepaid and in the case of a
courier three days after being sent; and
(d) be sent:
(1) to Lessee at:
Prior to August 21, 1995:
Midway Airlines Corporation
5713 South Central Avenue
Chicago, Illinois 60638
Fax: (312) 838-2069
Attention: President
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Following August 21, 1995:
300 West Morgan St.
Durham, North Carolina 27702
Attention: President
Fax: (919) 956-7314
(2) to Lessor at:
Wings Aircraft Finance, Inc.
1199 N. Fairfax Street
Suite 500
Alexandria, VA 22314
Fax: (703) 683-2233
Attention: Secretary
or to such other address or telex or fax number as is notified by
either party to the other party to this Lease.
19.7 This Lease may be executed in any number of counterparts and all of
such counterparts taken together shall be deemed to constitute one
and the same instrument.
19.8 This Lease is the sole and entire agreement between Lessor and
Lessee in relation to the leasing of the Aircraft, and supersedes
all previous agreements in relation to such leasing. Each of Lessee
and Lessor represents for itself that no broker has been retained by
it in connection with this Lease.
19.9 This Lease is intended by the parties to be a lease between Lessor
and Lessee. Any waivers, consents, or deferrals of the payment of
Rent and Reserve Rate are not intended to be an agreement by Lessor
to make any capital contribution to the business of Lessee or to
share in or have liability for any of Lessee's losses, profits,
liabilities or obligations. Nothing contained in this Lease or
performed by Lessor in connection herewith and any other agreement
between Lessor and Lessee whether now existing or entered into in
the future shall make Lessor a partner or a joint venturer of Lessee
and shall not for any purpose be construed as a joint-venture
between the parties hereto.
19.10 [Intentionally omitted].
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19.11 Section 1110: Lessee acknowledges that Lessor would not have entered
into this Lease unless it had available to it the benefits of a
lessor under Section 1110 of Title 11 of the United States Code.
Lessee and Lessor hereby state that this Lease is intended to be a
true lease for U.S. Internal Revenue Code purposes. Lessee covenants
and agrees with Lessor that to better ensure the availability of
such benefits, Lessee shall support any motion, petition or
application filed by Lessor with any bankruptcy court having
jurisdiction over Lessee, whereby Lessor seeks recovery of
possession of the Aircraft under said Section 1110 and shall not in
any way oppose such action by Lessor unless Lessee shall have
complied with the requirements of said Section 1110 to be fulfilled
in order to entitle Lessee to continued use and possession of the
Aircraft hereunder. In the event said Section 1110 is amended, or if
it is repealed and another statute is enacted in lieu thereof,
Lessor and Lessee agree to amend this Lease and take such other
action not inconsistent with this Lease as Lessor reasonably deems
necessary so as to afford to Lessor the rights and benefits as such
amended or substituted statute confers upon owners and lessors of
aircraft similarly situated to Lessor.
19.12 [Intentionally omitted].
19.13 As between Lessor and Lessee, if Lessee fails to make any payment of
Rent or Reserve Rate required to be made by it hereunder or fails to
perform or comply with any of its agreements contained herein,
Lessor may itself make such payment or perform or comply with such
agreement, and the amount of such payment and the amount of the
reasonable and properly documented expenses of Lessor incurred in
connection with such payment or the performance of or compliance
with such agreement, as the case may be, together with interest
thereon at the interest rate defined in Appendix D1 Paragraph 6,
shall be deemed Supplemental Rent, payable by Lessee upon demand.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS whereof the parties have executed this Lease the day and
year first herein written.
SIGNED on behalf of SIGNED on behalf of
WINGS AIRCRAFT FINANCE, INC. MIDWAY AIRLINES CORPORATION
By: /s/ Dennis de Jong By: /s/ Brian Olds
------------------------- -------------------------
Name: Dennis de Jong Name: Brian Olds
Title: Authorized Representative Title: Executive Vice President
<PAGE>
APPENDIX A
DESCRIPTION OF AIRCRAFT
Engine
Manufacturer Model Serial No. Engines Serial No.
- ------------ ----- ---------- ------- ----------
Fokker F28 11486 Two Rolls
MK0100 Royce Tay 17721
MK 650-15 17717
FAA Registration No.
- --------------------
N110ML
<PAGE>
APPENDIX B
FURTHER DEFINITIONS AND VALUES
AGREED VALUE : Shall mean, during any year, the amount set forth
opposite such year in Annex 1 to this Appendix B, which
amounts may be adjusted from time to time to reflect
adjustments of the Stipulated Loss Values (as defined in
the Head Lease) in accordance with the Head Lease.
DEPOSIT : {***} and the Additional Deposit described in
Appendix D, if applicable.
RENT : {***} per month, as such amount may be increased
pursuant to Paragraphs 2.2 and 2.3 of Appendix D.
RESERVE RATE : (a) {***} for the months one up to and including
twelve of the Term;
(b) {***} for the months thirteen up to and including
the Expiry Date.
TRANSACTION
EXPENSES : {***} which, notwithstanding any other provision in this
Lease shall not be paid in cash but shall be amortized
pursuant to Section 2.3 of Appendix D.
<PAGE>
Annex 1 to Appendix B
Agreed Values
{***} (5 pages omitted)
<PAGE>
APPENDIX C
CERTIFICATE OF ACCEPTANCE
This Certificate of Acceptance is delivered, on and as of the date set forth
below, by Midway Airlines Corporation (herein referred to as "Lessee") to Wings
Aircraft Finance, Inc., (herein referred to as "Lessor") pursuant to that
Aircraft Operating Lease Agreement No. AOLAF-118-A dated as of July 10, 1995
between Lessor and Lessee (herein referred to as the "Lease"):
1. Details of Acceptance
Lessee hereby indicates and confirms to Lessor, its successors and
assigns, that Lessee has at ______ o'clock on this ______ day of ______
199_ at ________________________ accepted the following, in accordance
with the provisions of the Lease:
(a) Fokker 100 airframe, Manufacturer's serial Number 11486
(b) Rolls Royce Tay Mk 650-15 Engines (each of which engines has 750 or
more rated takeoff horsepower)
Engine Number Manufacturer's S/N
1. 17721
2. 17717
2. Confirmation of Undertakings
The terms used in this Certificate shall have the meanings given to such
terms in the Lease.
Lessee confirms that today being the Delivery Date as defined in the
Lease:
(i) the Aircraft is duly accepted by Lessee in accordance with and
subject to the provisions of the Lease and the execution and
delivery of this Certificate constitutes the acceptance of the
Aircraft by Lessee for all purposes of the Lease.
DELIVERY BY LESSEE TO LESSOR OF THIS CERTIFICATE OF ACCEPTANCE SHALL
CONSTITUTE CONCLUSIVE PROOF AS BETWEEN LESSOR AND LESSEE THAT ON THE
DELIVERY DATE LESSEE'S TECHNICAL EXPERTS EXAMINED AND INVESTIGATED
THE
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AIRCRAFT AND EVERY PART THEREOF AND THAT THE AIRCRAFT AND EVERY PART
THEREOF ARE AIRWORTHY AND IN GOOD WORKING ORDER AND REPAIR, WITHOUT
DEFECT WHETHER OR NOT DISCOVERABLE AS AT THE DELIVERY DATE AND IN
EVERY WAY SATISFACTORY TO LESSEE;
(ii) Lessee is obliged to pay to Lessor the amount provided for in the
Lease with respect to the Aircraft;
(iii) the Aircraft is insured in accordance with the Lease;
(iv) the representations and warranties contained in Article 13 of the
Lease remain, and if made at the date of this Certificate of
Acceptance, would be, true and correct in all respects;
(v) there have been affixed to the Aircraft and the Engines the fire
resistant notices required by Article 4.3 of the Lease;
(vi) Lessee has no right of set-off, deduction, withholding or
counterclaim against Lessor whatsoever; and
(vii) no Default is subsisting.
IN WITNESS WHEREOF, Lessee has caused this Certificate of Acceptance to be
executed in its name, by its duly authorized officer(s) or representative(s),
pursuant to due corporate authority, all as of the date written in Paragraph 1
above.
MIDWAY AIRLINES CORPORATION
By:
------------------------
Title:
---------------------
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APPENDIX D
CHARGES
1. Deposit
Lessee has paid to Lessor {***} as a Deposit for the Aircraft on or prior
to the date hereof.
Lessee shall pay the balance of the Deposit to Lessor in consecutive
monthly installments of {***} each, beginning on August 8, 1995, and on
each corresponding day of the month subsequent thereto until the full
Deposit amount as set forth in Appendix B has been paid.
Lessor acknowledges that Lessee has paid the Additional Deposit (as
defined in the Termination Agreement) to Fokker pursuant to the
Termination Agreement and that upon the terms set forth therein, such
Additional Deposit shall be transferred by Fokker to Lessor to be held as
a part of the Deposits under the Lease. Lessor agrees that upon such
transfer, such Additional Deposit shall constitute a part of the Deposits,
the disposition of which shall be subject to the terms and conditions of
the Lease in respect of the Deposits except as expressly set forth in this
Appendix D. The Deposit shall be held by Lessor during the Term as
security for the full and punctual performance of all of Lessee's
obligations to Lessor under this Lease. Lessor may, but shall not be
obliged to, apply the Deposit in whole or in part for the payment of any
Rent, Reserve Rate, indemnities, attorneys' fees and other expenses,
insurance and other casualty payments and any other amount owing from time
to time by Lessee hereunder or, to the extent provided in Article 15.1(n),
under any Other Aircraft Agreement, or for the payment of any loss or
damage suffered by Lessor as a result of any Event of Default or to
perform any of Lessee's obligations under this Lease or otherwise remedy
any other Event of Default, including, without limitation, in the
redelivery condition for the Aircraft without prejudice to any other
remedy of Lessor. In any such event Lessee shall on demand restore the
Deposit to the full amount provided for herein by payment to Lessor of an
amount in cash equal to the amount applied or utilized. Lessee shall not
attempt to subject the Deposit to any other lien, security interest,
charge or other encumbrance or assign any interest therein to any other
person and, to the extent of its interest therein, if any, Lessee hereby
grants to Lessor a security interest in the Deposit and assigns and
transfers
<PAGE>
to Lessor any and all of Lessee's right, title and interest therein, if
any, as security as provided above, and Lessor shall be entitled to the
remedy of offset against and application of the Deposit, without any
notice to or demand against Lessee, all of which are hereby waived. Should
any Event of Default hereunder occur, the Deposit shall automatically be
applied to any sum due to Lessor or as a prepayment of any sum to become
payable to Lessor, unless Lessor thereafter elects otherwise by notice to
Lessee.
Any remaining Deposit shall be repaid by Lessor to Lessee ten (10) days
following the Expiry Date or other date after redelivery of the Aircraft
in full compliance with all the requirements of Section 16 and otherwise
in accordance with this Lease or upon payment of the Agreed Value and all
other amounts owed under this Lease, so long as no Event of Default under
Section 15.1(n) shall have occurred and be continuing. In the event there
is a dispute as to whether Lessee is entitled to a return of any portion
of the Deposit, Lessor shall so return the undisputed amount of the
Deposit. Upon a repayment of such Deposit or portion thereof, Lessor's
security interest in such Deposit or portion thereof being repaid shall be
deemed released.
Lessor's obligations in respect of the return of the Deposit shall be
those of debtor of Lessee, not of a trustee or other fiduciary.
The Deposit (other than the Additional Deposit) shall bear interest on the
amounts then held at a rate of interest per annum yielding $10,500.00
(Dollars Ten Thousand Five Hundred) per year payable annually commencing
on the first anniversary of the Original Delivery Date, and on each
anniversary thereafter unless the deposit and interest thereon shall have
been applied pursuant to this Lease. Any reference to the Deposit in this
Lease shall include the interest accumulated thereon and not paid to
Lessee.
The Additional Deposit shall include the interest to be accrued under the
Termination Agreement for the period prior to, and shall bear interest on
the amount thereof from, the date such Additional Deposit is transferred
to Lessor to such date as the Additional Deposit may be returned to Lessee
under the Lease at a rate of per annum equal to LIBOR for the applicable
six month period as determined from time to time. For purposes of this
Agreement, six month LIBOR shall have the definition given thereto in
Paragraph 6 of this Appendix D. Such interest shall accrue and subject to
the terms of this Paragraph 1, be paid to Lessee upon the repayment to
Lessee of the Additional Deposit pursuant to
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<PAGE>
the third clause of this Paragraph 1 or the next following clause. Any
reference to the Additional Deposit in this Agreement shall include the
interest accumulated thereon and not paid to Lessee.
Notwithstanding the terms of the third clause of this Paragraph 1,
provided that no Default as set forth in Article 15.1 (a), (b), (f), (g),
(h) or (m) and is continuing, any remaining Additional Deposit shall be
repaid by Lessor to Lessee on the fourth anniversary of the Original
Delivery Date.
2. Rent
2.1 Rent shall be due and payable on each Rent Date. If such date
is not a Business Day then Rent shall be due and payable on
the last Business Day preceding such date.
2.2 The monthly Rent shall also be adjusted upward by an amount
equal to $875.00 (Dollars Eight Hundred Seventy Five) per
month which shall be payable to Lessor by check annually
commencing on the first anniversary of the Original Delivery
Date, and on each anniversary thereafter. Lessee may elect to
authorize Lessor in writing to set-off amounts payable
pursuant to this Article 2.2 against interest on the Deposit
which is payable by Lessor pursuant to Paragraph 1 of this
Appendix D whether or not an Event of Default shall have
occurred and be continuing, and whether or not Lessor
exercises its right to terminate this Lease after such Event
of Default.
2.3 The monthly Rent shall also be adjusted upward by an amount
(the "Transaction Expense Amount") of $907.00 (Dollars Nine
Hundred Seven) per month which shall be payable on each Rent
Date. If Lessee exercises the right to purchase the Aircraft
on the Option Exercise Date (as defined in Paragraph 9 of this
Appendix D), an amount (the "Additional Amount") in Dollars
shall be due and payable on the Option Exercise Date, such
Additional Amount to be equal to the present value as at the
Option Exercise Date (discounted at the interest rate of six
and a half percent (6.5%) per annum) of all unpaid Transaction
Expense Amounts that would have been payable during the period
from the Option Exercise Date to the Expiry Date
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<PAGE>
had Lessee not exercised the right to purchase the Aircraft.
3. Reserve Rate
3.1 Lessee shall be relieved of its obligation to pay the Reserve
Rate at any time that the Aircraft Maintenance Agreement is in
effect with respect to the Aircraft. At any time that the
Aircraft Maintenance Agreement is not in effect, then Lessee
shall, in addition to installments of Rent, pay to Lessor the
Reserve Rate as follows:
(a) by way of an Airframe maintenance accrual, the sum of
{***} for the months one up to and including twelve of
the Term and {***} for the months thirteen up to and
including the Expiry Date for each Flight Hour the
Aircraft is operated during the Term ("Airframe
Maintenance Accrual"), and
(b) by way of an Engine maintenance accrual, in respect of
each Engine the sum of {***} for the months one up to
and including twelve of the Term, and {***} for the
months thirteen up to and including the Expiry Date for
each Flight Hour operated by each Engine during the
Term ("Engine Maintenance Accrual"), and
(c) by way of a landing gear maintenance accrual, the sum of
{***} for the months one up to and including twelve of
the Term, and {***} for the months thirteen up to and
including the Expiry Date for each Cycle operated by the
landing gear during the Term ("Landing Gear Maintenance
Accrual"), and
(d) by way of an A.P.U. maintenance accrual, the sum of
{***} for the months one up to and including twelve of
the Term, and {***} for the months thirteen up to and
including the Expiry Date for each Flight Hour operated
by the A.P.U. during the Term ("A.P.U. Maintenance
Accrual").
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<PAGE>
The Airframe, Engine, Landing Gear and A.P.U.
Maintenance Accruals accruing in any Rental Period shall
be paid by Lessee to Lessor not later than ten (10) days
after the end of the calendar month in which such Rental
Period shall end. Concurrently with the payment thereof,
Lessee shall report to Lessor (in accordance with
Article 7.1 (e)) the number of Flight Hours and Cycles
accumulated in respect of the period for which payment
is being made.
The Reserve Rate will be subject to adjustment every
twelve (12) months during the Term by reference for 65%
to the Employment and Earnings Index for U.S.A. labor
cost average hourly earnings of production (Aircraft
Equipment) SIC 3728, table C-2 and for 35% to the
Producer Price Index for U.S.A. material cost commodity
groupings (Machinery and Equipment) Code 11/table 6. In
addition the Engine Maintenance Accrual will be subject
to adjustment every twelve (12) months during the Term
having regard to the Engine Manufacturer
recommendations, industry experience and any change in
the operational environment of the Aircraft.
Any Reserve Rate shall, if requested by either Lessor or
(unless an Event of Default shall have occurred and be
continuing) Lessee, be adjusted to take into account any
changes in the maintenance intervals upon which Reserve
Rates are based.
3.2 Maintenance Accruals as defined in paragraph 3.1 above
and received by Lessor shall respectively be credited to
funds (collectively "Maintenance Funds") to be known as
the "Airframe Maintenance Fund", the "Engine Maintenance
Fund", the "Landing Gear Maintenance Fund" and the
"A.P.U. Maintenance Fund" which funds shall reduce as
monies are released to Lessee therefrom in accordance
with Article 7.4.1.
3.3 [Intentionally deleted].
3.4 The Reserve Rates shall accrue interest at the
applicable six (6) months US Dollar LIBOR rate (as
defined in Paragraph 6 of this Appendix D) minus point
twenty five percent (.25%) per annum, which interest
shall be added to the relevant Maintenance Fund.
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3.5 If Lessee would otherwise be required to pay the Reserve
Rate hereunder and if Lessee has improved its retained
accumulated net earnings (as determined in accordance
with generally accepted United States accounting
principles consistently applied) by an amount exceeding
$9,000,000 (Dollars Nine Million) from the level of such
earnings as at February 28, 1995, then Lessee's
obligation to continue to pay Reserve Rates hereunder
shall be stayed, provided, however, that in connection
with the release of monies to Lessee from the
Maintenance Fund pursuant to Article 7.4.1, prior to the
release of monies, if Lessee cannot provide Lessor with
evidence, reasonably satisfactory to Lessor, that Lessee
continues to have such level of retained earnings,
Lessee's obligation to pay Reserve Rates shall
recommence pursuant to the terms hereof and no monies
shall be released from the Maintenance Fund until such
time as it shall have been restored to the level at
which it would have been had this paragraph not been in
effect.
Lessee hereby represents that its retained accumulated
net earnings (as determined in accordance with generally
accepted United States accounting principles
consistently applied) as at February 28, 1995 was
negative (-) $15,270,000, subject to final year-end
audit adjustment.
If Lessee would otherwise be required to pay Reserve
Rate hereunder, Lessee may, at its election, pay to
Lessor the amount which is necessary to cause monies
standing in the Maintenance Fund to equal $1,500,000.00
(Dollars One Million Five Hundred Thousand) and
thereafter Lessee shall have no further obligation to
make Reserve Rate payments hereunder, provided, however,
that thereafter no funds shall be released to Lessee
from the Maintenance Fund pursuant to Article 7.4.1. It
is understood, for the avoidance of doubt, that the
foregoing terms of this Article 3.5 shall not affect
Lessee's or Lessor's obligations under Article 3.6 of
this Appendix D.
3.6 On the Expiry Date, if there is any Excess (as defined
below) in any Maintenance Fund, such Excess shall,
unless a Default shall have occurred and be continuing
(in which case only after
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termination, return of the Aircraft and payment of all
amounts due following exercise of remedies under Article
15), be paid to Lessee, and on such date, if there is
any Shortfall (as defined below), Lessee shall pay such
Shortfall to Lessor.
"Excess" in any Maintenance Fund on the Expiry Date
shall mean any positive difference obtained by
subtracting (x) from (y) for the Airframe, Engines,
Landing Gears or A.P.U., as the case may be; (x) shall
mean the product of (I) the then market cost from an
independent Authorized Maintenance Performer in the
United States mutually agreed upon by Lessor and Lessee
and corrected for the experience of all United States
based operators of Fokker 100 aircraft for the relevant
item:
with respect to the Aircraft, to perform a
scheduled airframe heavy maintenance as defined in
the Maintenance Program for 12,000 hours and
24,000 hours inspections or any equivalent thereof
with more or less hours ("Airframe Maintenance"),
or
with respect to any Engine, to perform a scheduled
shop visit engine maintenance and repair, other
than (i) repairs arising as a result of foreign
object damage or operations mishandling and/or
(ii) maintenance and repair of QEC (Quick Engine
Change) kits ("Engine Maintenance"), or
with respect to any nose or main landing gear to
perform a schedule shop visit nose and main
landing gear maintenance and repair, other than
repairs arising as a result of foreign object
damage or operational mishandling ("Landing Gear
Maintenance"), or
with respect to Auxiliary Power Unit ("A.P.U.") to
perform an off Aircraft shop A.P.U. maintenance
and repair, other than repairs arising as a result
of foreign object damage or operational
mishandling ("A.P.U. Maintenance"), and
(II) a fraction of which (a) the numerator shall be the
difference between the actual number of hours or cycles
(as to landing gear), as the case
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may be, of operation remaining on the Airframe, Engine,
Landing Gear or A.P.U., as the case may be, to the next
such Airframe Maintenance, Engine Maintenance, Landing
Gear Maintenance or A.P.U. Maintenance, as the case may
be, and the total number of hours or cycles, as the case
may be, of operation allowable between such Maintenance
and (b) the denominator shall be the total number of
hours or cycles, as the case may be, of operation
allowable between such Maintenance.
(y) shall mean the actual dollar amount remaining in the
respective Maintenance Fund.
"Shortfall" in any Maintenance Fund on the Expiry Date
shall mean any negative difference obtained by
subtracting (x) above from (y) above, it being
understood that Lessee shall not be relieved from its
obligation to pay the Shortfall notwithstanding the
waiver by Lessor at any time during the Term of Lessee's
obligation to pay the Reserve Rate.
4. Payments
All payments due hereunder shall be effected by Lessee to Lessor by
transfer to Lessor's account at Chemical Bank, New York, New York, Account
No. 400-056-011, Ref. Aircraft MSN 11450, AOLAF-118-A, in Dollars and in
immediately available funds, and all such payments shall be initiated
adequately in advance of the due dates to ensure that Lessor receives
credit for the full amount of such payment on the due dates. All such
payments shall be made in full without any deduction or withholding
(whether in respect of set-off, counterclaim, duties, taxes, charges or
otherwise howsoever) unless Lessee is prohibited by Law from doing so, in
which event Lessee shall (a) ensure that the deduction or withholding does
not exceed the minimum amount legally required; (b) and if the withholding
is a Tax for which Lessee is required to indemnify Lessor pursuant to
Article 8 of this Lease or is a wire transfer charge or other charge for
which Lessee is responsible under this Lease, forthwith pay to Lessor on
an After-Tax Basis such additional amount as shall result in the net
amount received by Lessor being equal to the amount which would have been
received by Lessor had such a deduction or withholding not been made; (c)
pay to the relevant taxation or other authorities within the period for
payment permitted by applicable Law the full amount of the deduction or
withholding with respect to any tax; and (d) upon request in writing from
Lessor to Lessee
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furnish to Lessor, within the period for payment permitted by applicable
Law, an official receipt of the relevant taxation or other authorities
involved for all amounts deducted or withheld as aforesaid.
5. Currencies
If under any applicable Law, whether as a result of judgment against
Lessee or the liquidation of Lessee or for any other reason, any payment
under or in connection with this Lease is made or recovered in a currency
other than United States Dollars then, to the extent that the payment
(when converted to United States Dollars at the rate of exchange on the
date of payment or, in the case of the liquidation, the latest date for
the determination of liability permitted by the applicable Law) falls
short of the amount unpaid under this Lease, Lessee shall, as a separate
and independent obligation, fully indemnify Lessor against the amount of
the short fall; for the purposes of this paragraph, "rate of exchange"
means the rate at which Lessor is able on the relevant date to purchase
United States Dollars in London with that other currency.
6. Default Interest
If any amount payable pursuant to this Lease is not paid by Lessee on the
due date, Lessee shall pay to Lessor interest (after as well as before
judgment) on such amount, at the rate of LIBOR, which shall equal the
arithmetic mean expressed as a number (i.e., 40 per cent is 40 and not
0.4) of the rates of interest per cent per annum (rounded if not already
such a multiple, to the nearest whole multiple of 1/16th of one per cent)
at which, at or about 11.00 a.m. (London time) on the day two Business
Days before the Default, deposits in Dollars are offered for the duration
of six months on the REUTERS "LIBO" page (or such other page as may
replace it from time to time) ("LIBOR") plus four per cent (4%) per annum
from the due date to the date of payment in full by Lessee to Lessor, but
in the event such rate shall be in excess of the highest rate permitted by
applicable Law, then it shall mean the highest rate allowed by applicable
Law. All amounts of interest payable hereunder shall be calculated on the
basis of the actual number of days elapsed and a 360 day year.
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7. Set-off
At any time after a Default shall have occurred and be continuing, Lessor
shall be entitled to set-off or withhold from any amount due and payable
to Lessee under this Lease or, to the extent provided in Article 15.1(n),
any Other Aircraft Agreement, in or towards the satisfaction of any
amounts from time to time due and payable by Lessee under this Lease or,
to the extent provided in Article 15.1(n), any Other Aircraft Agreement or
any liability or obligation of Lessee under this Lease or, to the extent
provided in Article 15.1(n), any Other Aircraft Agreement, and shall be
entitled to do so notwithstanding that any such amount or amounts may not
be expressed in the same currency.
8. Time at which payments are due
Supplemental Rent shall be due and payable on demand unless otherwise
expressly stated herein.
9. Purchase Option
Lessor grants to Lessee the right to purchase and to take delivery of the
Aircraft (a) on November 1, 2009 (the "Option Exercise Date") for a price
equal to the greater of the FMV of the Aircraft on such date (as
determined by the Appraisal Procedure described in this Paragraph) and
$18,781,800.31 (Dollars Eighteen Million Seven Hundred Eighty One Thousand
and Thirty One Cents); or (b) on the Expiry Date for a price equal to the
greater of the FMV of the Aircraft on the Expiry Date (as determined by
the appraisal procedure described in this paragraph) and [***]. If Lessee
elects to exercise its right to purchase the Aircraft, provided no Event
of Default shall have occurred and be continuing, Lessee shall do so by
giving to Lessor written notice of such election, which election shall be
irrevocable, at least two hundred seventy (270) days prior to the Option
Exercise Date or Expiry Date, as the case may be. On the Option Exercise
Date or the Expiry Date, as the case may be, if Lessee has given notice
pursuant to the preceding sentence, Lessee shall pay, in addition to the
amount set forth in clause (a) or (b) above as appropriate, all Rent (if
any) due and owing on such date and any other amounts due and owing by
Lessee under this Lease, including, but not limited to, any Additional
Amount pursuant to Paragraph 2.3 of this Appendix D and, upon receipt of
all of the foregoing amounts then due and owing, Lessor shall pay to
Lessee any Rent paid in advance for the period after such date, the
Deposits and any remaining
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Maintenance Funds and shall transfer, or cause to be transferred, title
without recourse or warranty (except as to the absence of Lessor's Liens)
to the Aircraft to Lessee or its designee. Lessor and Lessee shall also
share equally all costs associated with the exercise of Lessee's right to
purchase the Aircraft. The FMV of the Aircraft on the Option Exercise Date
and (so long as the Head Lease shall not be in effect) on the Expiry Date
shall be established by mutual agreement between Lessor and Lessee and if
no agreement can be reached as to the FMV of the Aircraft, a determination
of such value by a qualified aircraft appraiser mutually satisfactory to
Lessor and Lessee no later than forty-five days prior to the date relevant
to such determination. If Lessor and Lessee are unable to select such an
appraiser by the fifteenth day prior to the date relevant to such
determination, then such value of the Aircraft shall be determined as
follows: two qualified aircraft appraisers, one chosen by Lessor and one
by Lessee, shall mutually agree thereupon, but if either party shall fail
to choose an appraiser within fifteen days after notice from the other
party of the selection of its appraiser, then the appraisal by such
appointed appraiser shall be the value applicable to the Aircraft. If the
two appraisers cannot agree within fifteen days after both shall have been
appointed, then a third appraiser shall be selected by the two appraisers
or, failing agreement as to such third appraiser within ten days after
both shall have been appointed, by the American Arbitration Association.
The third appraiser shall select the appraisal which such appraiser
believes to be closest to the FMV of the Aircraft and such amount shall be
the FMV. The decision of the third appraiser shall be given within ten
days of its appointment. The foregoing procedures in respect of obtaining
the FMV of the Aircraft by one or more appraisers shall be herein called
the "Appraisal Procedure". The FMV of the Aircraft (so long as the Head
Lease shall be in effect) on the Expiry Date shall be established by the
appraisal procedure set forth in the Head Lease, whereby if the FMV of the
Aircraft is not established by mutual agreement between the Head Lessor
and Lessor, the FMV of the Aircraft will be a determination obtained in
accordance with the Appraisal Procedure with Head Lessor and Lessor
participating therein at the direction of Lessee in lieu of Lessor. Lessor
hereby agrees that in connection with such Appraisal Procedure, Lessee may
choose any qualified aircraft appraisers to be appointed and may otherwise
participate in the Appraisal Procedure and the determination of the FMV of
the Aircraft. The FMV shall be equal in amount to the value that would be
obtained in an arm's-length transaction between an informed and willing
buyer-user under no compulsion to buy, and an
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<PAGE>
informed and willing seller, under no compulsion to sell, evaluating the
Aircraft based on the assumption that it is in the condition required to
be maintained for operating service by the terms of the Lease. All costs
and expenses of the Appraisal Procedure shall be shared equally by Lessor
and Lessee. Subject to Paragraph 7 of this Appendix D, any amounts
remaining in the Maintenance Funds shall be paid to Lessee concurrently
with its payment of the purchase price of the Aircraft pursuant to this
Paragraph 9. Lessor represents and warrants to Lessee that Lessor has the
right under the Head Lease to grant the foregoing options to Lessee and to
cause title to the Aircraft to be transferred to Lessee upon exercise
thereof as provided above and the Appraisal Procedure is the same as the
"Appraisal Procedure" in the Head Lease and that Lessor will not amend
such "Appraisal Procedure" in the Head Lease without Lessee's prior
written consent (such consent not to be unreasonably withheld).
10. Wet Leasing and Subleasing
So long as no Event of Default shall have occurred and be continuing,
without the prior written consent of Lessor, Lessee may wet lease the
Aircraft including the Engines (the term "wet lease" meaning an agreement
whereby Lessee or Sublessee at all times retains operational control of
the cockpit and the Aircraft), provided, that Lessee's obligations under
this Lease shall continue in full force and effect during the period of
such wet lease and none of the Aircraft nor the Airframe nor any Engine
will be used "predominantly outside the United States" within the meaning
of Section 168(g) of the Code (as Code is defined in Article 8A) during
the period from the Delivery Date to the last day of the year in which the
seventh anniversary of the Delivery Date occurs.
So long as no Event of Default shall have occurred and be continuing, if
Wings Aircraft Finance, Inc. or any other affiliate or subsidiary of
Fokker is not either (x) the Lessor under the Lease or (y) holder of the
entire beneficial interest in the ownership of the Aircraft, Lessee may
sublease the Aircraft including the Engines, provided, that the following
conditions are met, in form and substance satisfactory to the then Lessor
under the Lease:
(a) Lessee (x) shall have a credit rating of "BB" as determined by
Standard & Poor's Corporation or "Ba2" as determined by Moody's
Investors Service or an equivalent rating as determined by a
nationally recognized rating agency reasonably acceptable to
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Lessor (or equivalent private rating), or if the proposed sublessee
meets such a credit rating standard and the sublease is assigned to
Lessor and (y) shall be a person that is a citizen of the United
States of America as defined in Section 40102(a)(15) of Title 49 of
the United States Code (or any similar legislation of the United
States of America enacted in substitution or replacement therefor)
holding an air carrier operating certificate issued by the Secretary
of Transportation pursuant to Chapter 447 of Title 49 of the United
States Code (or any predecessor or successor legislation therefor)
for aircraft capable of carrying ten or more individuals or 6,000
pounds or more cargo which is also certificated so as to entitle
Lessor to the benefits of Section 1110 of Title 11 of the United
States Code with respect to the Aircraft;
(b) the proposed sublessee is not subject to a proceeding or final order
under applicable bankruptcy, insolvency or reorganization laws on
the date the proposed sublease is entered into;
(c) the proposed sublessee is a person (x) (except the United States
government) that is a citizen of the United States of America as
defined in Section 40102(a)(15) of Title 49 of the United States
Code (or any similar legislation of the United States of America
enacted in substitution or replacement therefor) holding an air
carrier operating certificate issued by the Secretary of
Transportation pursuant to Chapter 447 of Title 49 of the United
States Code (or any predecessor or successor legislation therefor)
for aircraft capable of carrying ten or more individuals or 6,000
pounds or more cargo which is also certificated so as to entitle
Lessor to the benefits of Section 1110 of Title 11 of the United
States Code with respect to the Aircraft; or (y) which holds a duly
issued air carrier operating certificate issued by the jurisdiction
of its domicile and principal place of business;
(d) the proposed sublessee is an air carrier domiciled and principally
located in any of the United States, Canada, a member state of the
European Union, Switzerland, Norway or Japan or other country
reasonably acceptable to Lessor, provided, that (x) the United
States and The Netherlands maintain diplomatic relations with such
country on the date of such determination and (y) there are no
economic sanctions imposed against such country by the government of
the
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United States or the United Nations or the European Union such that
persons in the United States or member states of such organizations
are prohibited or strongly discouraged from doing business in or
with such country and (x) such country is not engaged in armed
conflict with the armed forces of the United States or a member of
the European Union;
(e) such proposed sublease shall not (w) be for a term, including any
renewal options thereunder that extends beyond the Expiry Date, (x)
provide a sublessee with a purchase option for the Aircraft, (y)
permit any sub-subleasing of the Aircraft by the proposed sublessee,
and (z) permit a proposed sublessee the rights of quiet enjoyment in
the Aircraft; and
(f) such proposed sublease shall (x) contain a waiver of sovereign
immunity by the proposed sublessee, (y) be on terms and conditions
which are not inconsistent with the rights of Lessee under the Lease
and (z) be expressly subject and subordinate to all of the terms of
the Lease, the Head Lease and the Indenture.
For such sublease, Lessor, shall receive, in form and substance reasonably
satisfactory to Lessor,
(a) a certificate of insurance signed by an insurance broker to the
effect that the Aircraft shall be, upon such sublease, insured in
accordance with the requirements of the Lease;
(b) evidence that all filings, registrations and applications and the
receipt of all consents, necessary or advisable in connection with
the sublease of the Aircraft, the recognition of Lessor's rights in
the Aircraft, the recognition of Head Lessor's title in the
Aircraft, and the continued status of the Indenture as a first
priority Lien on the Aircraft have been made or given;
(c) assurances that such sublease will not result in the imposition of,
or increase in the amount of, any Taxes, expense, claim, loss or
damage for which Lessee is not required to indemnify Lessor pursuant
to the Lease; and
(d) assurances of the payment by Lessee or the sublessee of all related
costs and expenses (including, without limitation, the reasonable
costs and disbursements of counsel to Lessor relating to such
sublease.
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Prior to the delivery of the Aircraft under the sublease, Lessor, shall
have received, in form and substance reasonably satisfactory to Lessor,
opinions of counsel to Lessee or the sublessee with respect to the
jurisdiction in which such sublessee is domiciled and principally located,
to the effect that
(a) the terms (including the governing law, service of process and
submission to jurisdiction provisions thereof) of the Lease, the
Head Lease and the Indenture are legal, valid, binding and
enforceable under the laws of such jurisdiction (subject to
customary, exceptions as to enforceability and the effectiveness of
certain remedial provisions which exceptions do not affect the
practical realization of benefits intended to be provided by such
documents);
(b) it is not necessary for Lessor, Indenture Trustee or any Participant
to qualify to do business in such jurisdiction solely as a result of
such sublease;
(c) the courts of such jurisdiction would give effect to Lessor's
leasehold interest in the Aircraft, Head Lessor's title to the
Aircraft and insofar as the laws of such jurisdiction are concerned
Head Lessor Will continue to be recognized as the owner of the
Aircraft;
(d) the lien of the Indenture will continue to be a first priority, duly
perfected lien on the Aircraft after giving effect to such sublease;
(e) the courts of such jurisdiction would provide at least substantially
equivalent protection to Lessor, Head Lessor, the Owner Participant,
the Loan Participant and Indenture Trustee as provided under United
States and applicable state law in respect of the transactions
contemplated by such sublease, including, without limitation, the
remedies provided under the Indenture, the Head Lease, the Lease and
the sublease (subject to customary exceptions as to enforceability
and the effectiveness of certain remedial provisions which do not
affect the practical realization of benefits intended to be provided
by such documents);
(f) any import permit necessary to take the Aircraft into such country
has been obtained;
(g) there is no tort liability of the owner, lessor or mortgagee of an
aircraft not in possession thereof
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<PAGE>
under the laws of such jurisdiction more onerous than under the laws
of the United States;
(h) all filings, registrations and declarations that are necessary or
advisable in connection with such sublease have been duly made and
are effective;
(i) the courts of such jurisdiction would give effect to the waiver of
sovereign immunity given by the sublessee;
(j) the courts of such jurisdiction would give effect to the sublease
being subject and subordinate to the Lease, the Head Lease and the
Indenture; and
(k) that there exist no possessory rights in favor of the sublessee
which upon Lessee's bankruptcy or other default under the Lease
would prevent the return of the Aircraft in accordance with the
terms of the Lease or inhibit Lessor's rights therein.
If, in connection with a sublease, the proposed sublessee requests that
the registration of the Aircraft be changed from that of the State of
Registration, such change of registration shall be subject to the prior
written consent of Lessor.
11. Excess Insurance
For so long as the Agreed Value exceeds {***}, Lessor shall reimburse
Lessee for Lessee's incremental cost of the premium relating to All Risks
Aircraft Hull insurance, or, if applicable, Aircraft Hull War and Allied
Perils insurance with respect to the amount of such excess.
At any time that the Agreed Value is less than {***} and the Agreed Value
is or was changed to reflect adjustments in the Stipulated Loss Values (as
defined in the Head Lease) due to the issuance of loan certificates
pursuant to the Indenture, Lessor shall reimburse Lessee for Lessee's
incremental cost of the premium relating to All Risk Hull insurance or,
if applicable, Aircraft Hull War and Allied Perils insurance, attributable
to such change in the Agreed Value.
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12. Maximum Takeoff Weight
Lessee agrees that, upon the written request of Lessor, Lessee will
undertake as soon as reasonably practicable and within its normal
maintenance schedule to perform or to supervise the performance by outside
contractors approved by Lessor of such alterations to the Aircraft as are
necessary to permit the Aircraft to be operated at a maximum takeoff
weight ("MTOW") of 101,000 pounds, with the Manufacturer to be responsible
for obtaining Air Authority certification of operation as MTOW 101,000
pounds.
13. Supplement to Article 8A.5
If any Head Lease Tax Indemnitee shall pay any amount to Lessor pursuant
to Section 7A(n) of the Participation Agreement for which Lessee has
previously paid an indemnity to Lessor pursuant to Article 8A.1 hereof,
Lessor shall pay such amount to Lessee within 15 Business Days after
Lessor receives such amount.
14. Supplement to Article 8A.9(r)
Article 8A.9(r) (relating to the definition of "Specified Tax") shall be
modified by inserting at the end of clause (i) the phrase "under this
Lease or under applicable Law" and by changing the words "Closing Date" to
"Delivery Date" in clause (vii).
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APPENDIX E
OPERATING CONDITION AT REDELIVERY
Upon redelivery of the Aircraft to Lessor, the Aircraft shall, subject to
ordinary wear and tear generally:
1. General Condition
(a) Be clean by airline standards;
(b) Have installed the Engines, and other equipment, Parts and
accessories and loose equipment as would remain installed in such
Aircraft, and shall be in a condition suitable for operation in
commercial service;
(c) Have in existence a valid Certificate of Airworthiness with respect
to the Aircraft issued by the Air Authority of the State of
Registration with a validity of at least nine (9) months after the
date of redelivery of the Aircraft to Lessor;
(d) Comply with the manufacturer's original specifications therefor, set
forth in Annex 1 to this Appendix E;
(e) Have undergone, immediately prior to redelivery, a 3000 check or any
subsequent higher inspection, if due within 3000 hrs, in accordance
with the Approved Maintenance Program, shall be free of any waivers,
and all deferred maintenance, if any, shall have been accomplished;
each engine and A.P.U. shall have had an inspection in accordance
with Article 16 confirming release for its remaining operational
life;
(f) All outstanding airworthiness directives and mandatory orders
affecting such model of Aircraft issued by the Air Authority which
require compliance during the Term shall have been accomplished;
(g) Have installed all applicable vendors' and manufacturers' service
bulletin kits theretofore received by Lessee free of charge that are
appropriate for the Aircraft and to the extent not installed, such
kits shall be furnished free of charge to Lessor;
(h) Stripped of all Lessee's paint scheme and repainted through an
Authorized Maintenance Performer with Manufacturer approved paints
in white or any other basic color requested by Lessor; and
<PAGE>
(i) Have been inspected and treated with respect to corrosion as defined
in the Approved Maintenance Program.
2. Airframe and major components
The Airframe and major components shall have not less than the following
hours/cycles/months expected life remaining to the next Major Check and/or
overhaul:
-Airframe : 3000 hours and 12 months to next Major Check;
-Engine : half life on average to next Engine shop visit but
in no event less than 3000 hours;
-Main Landing Gear : 3000 cycles to next overhaul;
-Nose Landing Gear : 3000 cycles to next overhaul;
*The records as to remaining engine life shall be certified by Lessee in
writing to Lessor upon redelivery of the Aircraft to Lessor.
3. Components
(a) Each life-limited Part shall have not less than 3000 (Three
Thousand) flight hours or cycles of the total approved life
remaining to the scheduled replacement, in accordance with the
Approved Maintenance Program;
(b) Each hard-time controlled component shall have not less than 3000
(Three Thousand) Flight Hours or 3000 (Three Thousand) Cycles or 12
(twelve) months whatever is applicable, remaining to the next
scheduled overhaul/inspection, in accordance with the Approved
Maintenance Program;
(c) "On-condition" and "Condition Monitored" components shall be
serviceable;
(d) The A.P.U. shall be serviceable.
4. Fuselage Windows and Doors
(a) Fuselage shall be free of major dents and abrasions, scab patches
and loose or pulled or missing rivets;
(b) Windows shall be free of delamination, blemishes, crazing and shall
be properly sealed;
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(c) Doors shall be free moving, correctly rigged and be fitted with
serviceable seals.
5. Wings and Empennage
(a) All leading edges shall be free from damage;
(b) All unpainted cowlings, fairings and other surfaces shall be
polished;
(c) Wings shall be free of fuel leaks.
6. Interior
(a) Ceilings, sidewalls and bulkhead panels shall be clean and free of
cracks and stains;
(b) All carpets and seat covers shall be in good condition, clean and
stain free and meet Air Authority fire resistance regulations;
(c) All seats shall be serviceable, in good condition and repainted as
necessary;
(d) All signs and decals shall be clean and legible;
(e) All emergency equipment having a calendar life shall have a minimum
of one year or one hundred per cent of its total approved life,
whichever is less, remaining.
7. Cockpit
(a) All decals shall be clean, secure and legible;
(b) All fairing panels shall be free of stains and cracks, shall be
clean, secure and repainted as necessary;
(c) Floor coverings shall be clean and effectively sealed;
(d) Seat covers shall be in good condition, clean and shall conform to
Air Authority fire resistance regulations;
(e) Seats shall be fully serviceable and shall be repainted as
necessary.
8. Cargo Compartments
(a) All panels shall be in good condition;
(b) All nets shall be in good condition.
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9. Landing Gear and Wheel Wells
(a) Shall be clean, free of leaks and repaired as necessary;
(b) All decals shall be clean, secure and legible.
10. Corrosion
(a) Entire fuselage shall be substantially free from corrosion and shall
be adequately treated and an approved corrosion prevention program
shall be in operation;
(b) Fuel tanks shall be free from contamination and corrosion and a tank
treatment program shall be in operation.
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APPENDIX F
AIRCRAFT DOCUMENTS
FOKKER 100 AIRCRAFT
Aircraft Documents shall include the documents referred to in Table I ("Aircraft
Documentation"), Section (D), Exhibit (D) of the Support Services Agreement No.
ASSAF-110 between FAUSA and Lessee.
Aircraft Documents shall also include all logs, certificates and data, and
inspection, modification and overhaul records, relating to the Aircraft and
required to be maintained by the Air Authority and/or by the Approved
Maintenance Program.
Upon Expiry Date or upon earlier termination of the Lease all Aircraft Documents
shall be redelivered by Lessee to Lessor complete and fully updated
simultaneously with the redelivery of the Aircraft.
<PAGE>
APPENDIX G
FAA POWER OF ATTORNEY
This POWER OF ATTORNEY in favor of WINGS AIRCRAFT FINANCE, INC.
("Lessor") dated _____________, 199_ from MIDWAY AIRLINES CORPORATION
("Lessee").
RECITALS:
A. Lessor and Lessee have entered into an Aircraft Operating Lease
Agreement No. AOLAF-118-A dated as of ____________, 1995 (the
"Lease Agreement") with respect to the Fokker 100 aircraft,
serial no. 11486, U.S. registration no. N110ML (the "Aircraft").
B. Capitalized terms used herein and not otherwise defined shall
have the respective meanings ascribed to such terms in the Lease
Agreement.
NOW, THEREFORE, for good and valuable consideration, the adequacy of
which is hereby acknowledged, it is hereby agreed as follows:
Lessee hereby irrevocably constitutes and appoints Lessor, with full
power of substitution, for and in the name and on behalf of Lessee, as the act
and deed or otherwise of Lessee:
to execute, sign, deliver, authorize and file such instruments
legally necessary for any and all actions necessary to take
possession and effect redelivery of the Aircraft, Engines or Parts
upon termination of the Lease Agreement due to an Event of Default;
to execute, sign, deliver and file all such instruments requested by
Lessor that may be required to deregister the Aircraft from the FAA,
or to terminate the Lease for the Aircraft that is recorded at the
FAA, or that may be deemed proper in or in connection with all or
any of the purposes aforesaid, and to appoint substitutes or agents
to take any such action on its behalf; provided, however, that such
power shall not be exercisable by or on behalf of Lessor until an
Event of Default shall have occurred and is continuing.
Lessee hereby ratifies and confirms and agrees to ratify and confirm
any direction, authorization and instruction of Lessor taken pursuant to this
Power of Attorney.
<PAGE>
This Power of Attorney shall expire on the date one year following
the Expiry Date, or earlier upon termination of the Lease.
IN WITNESS WHEREOF, Lessee has duly caused this Power of Attorney to
be executed on the date first set forth above.
MIDWAY AIRLINES CORPORATION
By:
------------------------
Name:
Title:
[CERTIFIED RESOLUTIONS OF LESSEE AUTHORIZING THIS
POWER OF ATTORNEY TO BE ATTACHED]
-2-
<PAGE>
THE SINGLE EXECUTED ORIGINAL OF THIS AMENDMENT MARKED "ORIGINAL" SHALL BE THE
"ORIGINAL" AND ALL OTHER COUNTERPARTS OF THIS AMENDMENT SHALL BE DUPLICATES AND
MARKED "DUPLICATE" OR "DUPLICATE ORIGINAL". TO THE EXTENT THAT THIS AMENDMENT
AND THE LEASE RELATED THERETO CONSTITUTE CHATTEL PAPER, AS SUCH TERM IS DEFINED
IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN AN APPLICABLE JURISDICTION, NO
SECURITY INTEREST MAY BE CREATED THROUGH TRANSFER OR POSSESSION OF ANY
COUNTERPART OTHER THAN THE "ORIGINAL".
AMENDMENT NO. 1
dated as of February , 1996
to
AIRCRAFT OPERATING LEASE AGREEMENT NO. AOLAF-118-A
dated as of July 10, 1995
between
WINGS AIRCRAFT FINANCE, INC.
as
Lessor
and
MIDWAY AIRLINES CORPORATION
as
Lessee
--------------------------------------------------
One Fokker 100 Aircraft
Manufacturer's Serial No. 11486
U.S. Registration Mark N110ML
<PAGE>
AMENDMENT NO. 1 dated as of February , 1996 to Aircraft Operating
Lease Agreement No. AOLAF-118-A between WINGS AIRCRAFT FINANCE, INC., a Delaware
corporation ("Lessor") and MIDWAY AIRLINES CORPORATION, a Delaware corporation
("Lessee").
WHEREAS
A. Lessee and Lessor are parties to that certain Aircraft Operating
Lease Agreement No. AOLAF-118-A dated as of July 10, 1995 relating to One Fokker
F28 MK 0100 Aircraft described therein which Lease was recorded with the Federal
Aviation Administration (the "Lease"). Capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to them in the Lease.
B. Lessee is in default under the Lease by reason of its failure to
make certain Deposit payments and Termination Payments (as defined in the
Termination Agreement) in December 1995 and January 1996.
C. Lessee and Lessor desire to amend the Lease as hereinafter set
forth and to agree to certain other terms as set forth herein.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Amendment
1.1 Article 7 of the Lease is hereby amended by adding a new Article
7.6 thereto as follows:
"7.6 Without in any way limiting the rights contained elsewhere in
the Lease, Lessor shall have the right to have observers (who
may or may not be employees of Lessor) on site at Lessee's
premises (provided such observers do not unreasonably
interfere with Lessee's business or operations) and provided
the recipients of any financial and operational information of
Lessee (which recipients may include employees or other
representatives of Lessor or any of its affiliates, agents,
attorneys or accountants of Lessor or its affiliates) keep
strictly confidential any such information, Lessor shall have
the right to inspect and review any internal financial and
operational information of Lessee as Lessor may reasonably
request (provided such request is made to Lessee's controller,
or to a vice president, senior vice president or the president
of Lessee) including, without limitation, cash flow
statements, financial books and records, and any other records
relating to the
<PAGE>
operation of Lessee's fleet. Lessee covenants that it will
fully cooperate with Lessor regarding any inspection of
Lessee's fleet and records pursuant to this Lease."
1.2 Article 15.1(n) of the Lease is hereby amended by deleting it in
its entirety and replacing it with the following:
"(n) if an event of default (however defined) occurs under (i) any of the
Other Aircraft Agreements, (ii) any other lease agreements between
Lessee and a lessor for the benefit, directly or indirectly, of
debis AirFinance B.V. or Daimler-Benz Aerospace A.G. relating to
other aircraft ("DASA Aircraft Agreements"), or (iii) any Aircraft
Maintenance Agreement entered into by Lessee in lieu of Reserve Rate
payments, which event permits acceleration or termination;"
1.3 Article 15.1(o) of the Lease is hereby amended by deleting it in
its entirety and replacing it with the following:
"(o) if Lessee's financial performance deviates in any material adverse
way (as determined by Lessor in its sole but reasonable discretion)
from the projections set forth in Lessee's business plan for
calendar year 1996 (attached hereto as Exhibit A), taken as a whole,
and such deviation is not the result of a natural disaster which
effectively makes it impossible for Lessee to meet such
projections;"
1.4 Article 15.1(p) of the Lease is hereby amended by deleting it in
its entirety and replacing it with the following:
"(p) if, prior to the satisfaction of Lessee's obligations to pay
Deferred Deposit Payments or Deferred Rent (as defined in Section 2
of the Amendment No. 1 to this Lease) Lessee shall make (i) any
payment of principal or interest on any amounts owed by Lessee to
Zell/Chilmark Fund, L.P. ("Zell") or any affiliate of Zell, (ii) any
redemption of, or any dividend or distribution with respect to, any
shares of Lessee owned by Zell or any affiliate of Zell, (iii) any
prepayment of principal or interest with respect to any other
subordinated debt owed by Lessee or (iv) any redemption of, or any
dividend or other distribution with respect to, any other shares of
Lessee; or"
1.5 Article 15.1(q) of the Lease is hereby amended by deleting it in
its entirety and replacing it with the following:
-2-
<PAGE>
"(q) if Lessee shall fail to make any of the payments which it is
required to make pursuant to Section 2 of Amendment No. 1 to this
Lease."
1.6 Article 15.2(b) (i) of the Lease is hereby amended by adding
"(a), (n), (q)" following the word "paragraph" and by adding to such Article the
following additional clause:
"provided, however, that such automatic termination shall not apply with
respect to defaults of the type referred to in Articles 15.1(a) or (n) of
the Lease prior to the date of Amendment No. 1 to this Lease or for
payment defaults for Rent Dates occurring in February or March 1996, for
so long as Lessee makes the payments specified in Section 2 of Amendment
No. 1 to this Lease;"
it being understood that the effect of this amendment is to include payment
defaults, cross-defaults with Other Aircraft Agreements and DASA Aircraft
Agreements, and failure to make any of the payments specified in Section 2 of
Amendment No. 1 to this Lease as events giving rise to automatic termination of
the Lease, as amended, without the necessity of any service of notice thereof
upon Lessee.
1.7 Article 16 of the Lease is hereby amended by adding a new
Article 16.9 as follows:
"16.9 Notwithstanding anything to the contrary contained in this Lease,
Lessee covenants that, upon earlier termination of the Lease
pursuant to Article 15, Lessee will not interpose any defense to, or
otherwise oppose, any action commenced by Lessor to regain
possession of the Aircraft and Lessee shall join in any application
by Lessor seeking to regain possession of the Aircraft if so
required by Lessor. This covenant shall apply whether or not Lessee
is or shall subsequently become a debtor in a case under Title 11 of
the United States Code and in such event Lessee covenants that it
will not oppose and will join in any application by Lessor seeking
to regain possession of the Aircraft."
2. Forbearance.
Execution of this Amendment shall serve as Lessor's agreement to
forbear from exercising its remedies under Article 15 of the Lease with respect
to Lessee's failure to make (i) installment payments of the Deposit due under
Appendix D to the Lease and Termination Payments (as defined in the Termination
-3-
<PAGE>
Agreement) due in December 1995 and January 1996 and (ii) installment payments
of the Deposit and Termination Payments due on February 10 and March 10, 1996,
for so long, and only so long, as Lessee otherwise complies with all of the
terms of the Lease, as amended hereby, and the Termination Agreement, as
amended, and pays Lessor the following:
(a) all amounts payable as set forth in Amendment No. 1 to the
Termination Agreement dated as of the date of this Amendment;
(b) The amounts set forth in Exhibit A to this Amendment
("Deferred Deposit Payments") on April 8, 1996 and for the
next succeeding forty eight (48) Rent Dates on which Rent is
due; and
(c) The amounts set forth in Exhibit B to this Amendment
("Deferred Rent") on October 8, 1996.
Lessee may satisfy its obligations to pay the Deferred Deposit Payments and the
Deferred Rent at any time by paying the portion of all such amounts which
constitutes principal, together with the portion of such amounts which
constitutes interest accrued and unpaid as of the date of payment all as
reflected on Exhibits A or B to this Amendment. Each such Deferred Deposit
Payment and Deferred Rent payment on and after the dates set forth in clauses
(b} and (c) above, as the case may be, (i) shall constitute a portion of Deposit
and Rent, as the case may be, (ii) shall be made together with such installment
of Deposit and/or Rent as shall be otherwise due on each such Rent Date as
provided in Exhibit D of the Lease and (iii) shall be made in accordance with
the terms and conditions of the Lease.
Execution of this Amendment shall not constitute a waiver of the
Deposit payment defaults or of any other Events of Default which may have
occurred and be continuing or which may occur in the future. Lessor's agreement
to forbear shall terminate automatically if Lessee fails to make any payments
specified in this Section 2 or if any Event of Default occurs or has occurred
and is continuing (other than with respect to an Event of Default to which this
forbearance, agreement set forth in this Section 2 applies). For so long, and
only so long as Lessor's agreement to forbear has not terminated (i) Lessee
shall be entitled to exercise its rights and privileges under Articles 5.1.2(b),
5.1.3, 7.4.1 and 13.3.1 of the Lease and (ii) Lessor shall be deemed to have
elected not to apply the Deposit to sums due or to be come due to Lessor
pursuant to Section 1 of Appendix D of the Lease, notwithstanding the occurrence
and continuation of a Default or Event of Default under the Lease.
-4-
<PAGE>
3. Governing Law.
This Amendment shall be governed by and construed in accordance with
the internal laws of the State of New York and without regard to any conflict of
law rules. This Amendment is being delivered in the State of New York. The terms
and conditions of Article 18 of the Lease are incorporated herein by reference
as applicable to this Amendment.
4. Miscellaneous.
Except as specifically amended or supplemented by this Amendment,
the Lease is hereby ratified, approved, confirmed and continued in all respects
and all provisions of the Lease shall remain in full force and effect. This
Amendment may be executed in any number of counterparts and all of such
counterparts taken together shall be deemed and constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
WINGS AIRCRAFT FINANCE, INC.
By:
--------------------------
Title:
MIDWAY AIRLINES CORPORATION
By: /s/ J. S. Waller
-------------------------
Title: JONATHAN S. WALLER
SENIOR VICE PRESIDENT
GENERAL COUNSEL
-5-
<PAGE>
3. Governing Law.
This Amendment shall be governed by and construed in accordance with
the internal laws of the State of New York and without regard to any conflict of
law rules. This Amendment is being delivered in the State of New York. The terms
and conditions of Article 18 of the Lease are incorporated herein by reference
as applicable to this Amendment.
4. Miscellaneous.
Except as specifically amended or supplemented by this Amendment,
the Lease is hereby ratified, approved, confirmed and continued in all respects
and all provisions of the Lease shall remain in full force and effect. This
Amendment may be executed in any number of counterparts and all of such
counterparts taken together shall be deemed and constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
WINGS AIRCRAFT FINANCE, INC.
By: /s/ E.A. WAGNER
------------------------------
Title: E.A. WAGNER, PRESIDENT
MIDWAY AIRLINES CORPORATION
By:
------------------------------
Title:
-5-
<PAGE>
Summary of
Exhibits A B
{***} (3 pages omitted)
<PAGE>
Exhibit B
{***} (2 pages omitted)
<PAGE>
118-A
AMENDMENT NO. 2
dated as of January 31, 1997
to
AIRCRAFT OPERATING LEASE AGREEMENT
NO. 118-A
dated as of July 10, 1995
between
WINGS AIRCRAFT FINANCE, INC., as
Lessor
and
MIDWAY AIRLINES CORPORATION, as
Lessee
Aircraft: Fokker 100
Serial No./RN: 11486/N110ML
<PAGE>
THIS AMENDMENT NO. 2 dated as of January 31, 1997 (this
"Amendment"), is between WINGS AIRCRAFT FINANCE, INC., a company incorporated
under the laws of the State of Delaware, having its principal place of business
at 119 N. Fairfax Street, Alexandria, Virginia 22314 ("Lessor") and MIDWAY
AIRLINES CORPORATION, a company incorporated under the laws of the State of
Delaware, having its principal place of business at 300 West Morgan Street,
Durham, North Carolina 27701 ("Lessee");
WHEREAS, Lessor and Lessee are parties to that certain Aircraft
Operating Lease Agreement No. AOLAF-118-A, dated as of July 10, 1995 (as
amended from time to time, the "Lease". Capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to them in the Lease);
WHEREAS, Lessor and Lessee entered into Amendment No. 1 to the
Lease dated as of February, 1996 ("Amendment No. 1");
WHEREAS, Lessor and Lessee entered into a Deferral Agreement dated
as of October 25, 1996 ("Deferral Agreement"), which provided for the deferral
of certain payments due under the Lease, and amended the Lease in certain other
respects;
WHEREAS, Lessor and Lessee entered into an Amendment to Deferral
Agreements dated as of December 30, 1996, which modified the Deferral Agreement
in certain respects (the "Amendment to Deferral Agreements");
WHEREAS, Lessee has entered into an Agreement and Plan of Merger
dated as of January 17, 1997 (as amended, the "Merger Agreement") with GoodAero,
Inc., a Delaware corporation ("GoodAero") and Zell/Chilmark Fund, L.P., a
Delaware limited partnership, whereby it is proposed that GoodAero will be
merged into Lessee to effect a recapitalization of Lessee (the "Merger"),
subject to certain conditions precedent having been satisfied; and
WHEREAS, Lessor and Lessee desire to amend the Lease to become
effective upon the consummation of the Merger and to enter into further
agreements as hereinafter set forth.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Amendment of Lease. The Lease is hereby amended as follows:
(a) Section 1 of the Lease is amended by eliminating the
period at the end of the definition of "Expiry Date" and by inserting in lieu
thereof the following clause:
"or such earlier date as may be specified by Lessor pursuant
to notice given in accordance with, and subject to the terms
of Section 16.10 hereof."
<PAGE>
(b) Section 1 of the Lease is further amended by deleting the
period at the end of the definition of "Other Aircraft Agreements" and by
inserting the following in lieu thereof: "or any successor or assign thereof."
(c) Section 6.4 of the Lease is amended as follows: (a) by
deleting subsection (i) thereof in its entirety and by inserting in lieu thereof
the following: "(i) any financial reports or projections supplied to the
majority shareholder of Lessee"; and (b) by deleting the words "upon Lessor
requesting the same" from subsection (ii) thereof.
(d) Section 11.1(a) of the Lease is amended by deleting the
period at the end thereof and by inserting the following clause:
provided, however, that the deductible may be $500,000
(Dollars Five Hundred Thousand) for each accident, but only if
Lessee procures and maintains in favor of debis AirFinance
B.V. ("Beneficiary") for the benefit of the Beneficiary and/or
the Lessor under each of the Leases identified on Schedule
16.10 hereof (as those terms are defined therein) an
irrevocable letter of credit (the "Letter of Credit") in the
face amount of $800,000 (Dollars Eight Hundred Thousand)
issued by Wachovia Bank or another banking institution
reasonably acceptable to Beneficiary and in a form reasonably
acceptable to Beneficiary containing the terms set forth in
Schedule 11.1(a).1 of this Lease; provided, however, that
Lessee may reduce the amount of the Letter of Credit to
$400,000 in any year where Lessee's audited financial
statements for the prior year show that Lessee had net income
(as determined in accordance with generally accepted
accounting principles ("Net Income")) greater than the amount
for such prior year identified as "Net Income (1)" on Schedule
11.1(a).2, but less than the amount for such prior year
identified as "Net Income (2)" on Schedule 11. 1(a).2; and
Lessee shall not be required to maintain the Letter of Credit
in any year where Lessee's audited financial statements for
the prior year show that Lessee had Net Income for such prior
year greater than the amount for such prior year identified as
"Net Income (2)" on Schedule 11.1(a).2; and provided, further,
that notwithstanding any reduction or cancellation of the
Letter of Credit in accordance with the terms hereof, Lessee
shall be required to restore the Letter of Credit in any year
where Lessee's audited financial statements for the
immediately preceding year show that Lessee's Net Income was
less than the threshold set by Schedule 11. 1(a).2 for such
prior year for reduction of the Letter of Credit or in any
year in which audited financials for Lessee for the
immediately preceding year have not been certified on or
before April 15 of that year. For purposes of determining the
amount required for the Letter of Credit in any year,
reductions, if any, shall not be permitted until 30 days after
receipt by Beneficiary of the audited financial statements of
Lessee for the prior year and, in the event that the Letter of
Credit is to be reinstated or
-2-
<PAGE>
increased in any year as aforedescribed, such Letter of Credit
shall be required on or before April 15 of such year. Any
failure by Lessee to comply with the provisions of this
Section 11.1(a) shall be an Event of Default under Section
15.1(b) of the Lease.
(e) Intentionally Omitted.
(f) Section 14.1(p)) is amended by deleting the same in its
entirety and by inserting in lieu thereof the following:
"not become the surviving corporation of a merger with any
other entity, or itself consolidate with, or merge into, any
other corporation, or convey, transfer or lease substantially
all of its assets as entirety to any person, without the prior
written consent of Lessor (such consent not to be unreasonably
withheld) and the execution and delivery to Lessor of such
agreements, certificates and legal opinions as Lessor may
reasonably request with respect thereto;
(g) Intentionally Omitted.
(h) Intentionally Omitted.
(i) Section 15.1(e) of the Lease is deleted in its entirety
and the following is inserted in lieu thereof:
"if (i) if Lessee or any of its subsidiaries is in default
under any lease, hire-purchase, conditional sale or credit
sale agreement for equipment having a casualty value in excess
of {***} and such default is not cured or waived within the
applicable grace period or five (5) Business Days (whichever
is greater); (ii) (regardless of the amount of money
involved), any event occurs which with or without notice or
lapse of time or both would constitute a default under any
agreement between Lessee and, or promissory note executed by
Lessee in favor of, {***}; (b) Zell/Chilmark Fund, L.P.
{***}; (e) any affiliate of any of the foregoing; unless such
default or event of default is cured or waived within the
applicable grace period or five (5) Business Days (whichever
is greater); or (iii) any indebtedness owed by Lessee or any
of its subsidiaries in an amount in excess of {***} is not
paid when due or becomes due or capable of being declared due
prior to the date when it would otherwise become due;
provided, however, the failure of Lessee to pay amounts
approximating {***}
-3-
<PAGE>
{***}, shall not be deemed a Default or an Event of Default
hereunder."
(j) Section 15.1(n) is modified by inserting the following after the
words "Daimler-Benz Aerospace A.G.": "or any affiliate, successor or assign of
either of them."
(k) Sections 15.1(o), (p) and (q) are deleted in their entirety and
the following new Sections 15.1(o) and (p) are inserted in lieu thereof:
"(o) if, an Event of Default shall occur under and as defined
in that certain Promissory Note dated as of January 31, 1997
from the Lessee to debis AirFinance B.V. or under, and as
defined in that certain Promissory Note dated as of January
31, 1997 from the Lessee to DASA Aircraft Finance XVI, B.V.
(each, a "Note" and collectively, the "Notes");
(p) if, prior to satisfaction of Lessee's obligations pursuant
to the Notes, Lessee shall make (i) any payment of principal
or interest on any debt owed by Lessee to Zell/Chilmark Fund,
L.P. or to any holder of equity in Lessee representing the
right to vote twenty percent (20%) or more of the stock in
Lessee on any matter presented for vote to the shareholders of
Lessee (an "Insider") or any affiliate of an Insider; or (ii)
any redemption of, or any dividend or distribution with
respect to, any shares of Lessee owned by an Insider or any
affiliate thereof."
(l) Section 15.2 is amended by deleting clause (i) of paragraph (b)
thereof in its entirety and inserting the following new clause (i) in lieu
thereof:
"(i) serving notice of such termination on Lessee specifying
the occurrence giving rise to such Event of Default or Events
of Default, provided that such notice shall be deemed to have
been served without the necessity of actual service and this
Lease shall terminate automatically without the necessity of
any service of notice thereof upon Lessee upon the occurrence
of any Event of Default described in paragraphs (a), (f), (g),
(h), (n) or (o) of Section 15.1 of this Lease; provided,
however, that actual service of notice of such termination on
Lessee shall be required where an Event of Default described
in paragraph (n) of Section 15.1 of the Lease has occurred
solely by reason of occurrence of an event of default under an
Other Aircraft Agreement or under a DASA Aircraft Agreement,
which event of default does not, under the terms of such Other
Aircraft Agreement or DASA Aircraft Agreement, result in
automatic termination of such Other Aircraft Agreement or such
DASA Aircraft Agreement."
-4-
<PAGE>
(m) Article 16 of the Lease is amended by adding a new Section 16.10
as follows:
"(a) Notwithstanding anything to the contrary contained in
this Lease, Lessor may terminate this Lease by giving not less
than six (6) months' prior written notice of the termination
date to Lessee provided that in no event may Lessor choose a
termination date earlier than September 15, 1998 ("Lessor's
Termination Option") and the termination date specified in
such notice shall become the Expiry Date; provided, however,
that (subject to the following sentence) Lessor shall not be
entitled to exercise Lessor's Termination Option with respect
to this Lease where the same would result in the termination
of four (4) or more of the aircraft operating lease agreements
identified in Schedule 16.10 to the Lease in any twelve (12)
month period, taking into account the scheduled or actual
Expiry Date of each such aircraft operating lease agreement.
Nothing herein shall be construed to limit the Lessor's rights
upon the occurrence of any Default or Event of Default or upon
the termination of this Lease as a result thereof or upon the
expiration of any Lease in the absence of the exercise of
Lessor's Termination Option.
(b) Lessee shall in no event be liable for any costs,
expenses, liabilities, losses, damages or amounts incurred by
Lessor or Head Lessor which arise solely from the Lessor
exercising Lessor's Termination Option hereunder such as the
loss of any tax benefit, or fees or penalties arising from the
breakage of any contract or agreement. Except as expressly
provided in subsection (c) below, Lessor shall in no event be
liable for any costs, expenses, liabilities, losses, damages
or amounts incurred by Lessee as a result of Lessor exercising
Lessor's Termination Option in accordance with this Section
16.10.
(c) Notwithstanding the terms of clause (b) above, if Lessor
exercises Lessor's Termination Option hereunder in accordance
with this Section 16.10, then Lessee shall be responsible for
performing all of its obligations under and in accordance with
the terms of this Article 16, subject to the following:
(i) the Lessor shall pay or cause to be paid to Lessee
for Lessee's application against the "C Check" completed
pursuant to Appendix E, Item 1(e), an amount equal to the
lesser of (x) $100,000, or (y) an amount equal to the product
of the full cost of the "C check" completed by Lessee pursuant
to Appendix E, Item 1(e) on the Aircraft multiplied by a
fraction, the numerator of which is the number of hours
(including fractions of an hour) remaining on the Aircraft
until Lessee's next scheduled "C Check" for the Aircraft
-5-
<PAGE>
(assuming Lessor had not exercised Lessor's Termination Option
hereunder) and the denominator of which is 3000; and
(ii) for purposes of Section 7.4.1(b)) and (c), any shop
visit required to meet the conditions of Appendix E shall be
deemed a "scheduled" shop visit."
(n) Section 18.6 of the Lease is amended by deleting the firm
of "Haight, Gardner, Poor & Havens, Attn: Bonny L.Y. Kwoh, 195
Broadway, New York, NY 10007" as agent for Lessor and by
inserting in lieu thereof the new agent for Lessor as follows:
"Hertzog, Calamari & Gleason, Attn: Carla Craig, 100 Park
Avenue, New York, New York 10017".
(o) Appendix B to the Lease is hereby amended as follows:
(i) The amount set forth as the "DEPOSIT" is deleted in
its entirety and the amount set forth on Schedule B.1 hereto
is substituted therefor.
(ii) The Amount set forth as "RENT" is deleted in its
entirety and the amount of {***} is substituted therefor.
(p) Appendix D to the Lease is hereby amended by deleting
Sections 2.2 and 2.3 in their entirety and by deleting the
first and second paragraphs of Section 1 in their entirety and
inserting the following in lieu thereof:
"1. Deposit. Lessee has paid to Lessor the amount set
forth on Schedule B.1 as a Deposit for the Aircraft on or
prior to January 31, 1997."
(q) Schedule 16.10 attached to this Amendment is hereby
attached to the Lease as Schedule 16.10 thereto and is
incorporated therein.
2. Waiver of Default. Lessor agrees that any Default or Event of
Default under Sections 15.1(a), 15.1(e), 15.1(g) or 15.1(o) of the Lease (prior
to the amendment of any such Sections hereunder) which occurred prior to the
date of this Amendment is hereby deemed to have been cured by Lessee and Lessor
waives any rights or remedies it may have had with respect to the occurrence of
any such Default or Event of Default.
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<PAGE>
3. Representations Warranties and Covenants
The following shall be, as applicable, representations, warranties
or covenants of Lessee pursuant to Articles 13 and 14 of the Lease:
(a) Representations
(i) This Amendment and the Notes have been duly entered into
and delivered by Lessee, and each constitutes a valid, legal and binding
obligation of Lessee enforceable against Lessee in accordance with its terms.
(ii) As of the date of this Amendment, Lessee has entered, or
will contemporaneously herewith enter, into an agreement with {***} having terms
which are substantially in accordance with the terms set forth under the heading
{***} Exhibit 6.02(k) to the Agreement and Plan of Merger dated as of
January 17, 1997 by and among GoodAero, Inc., James H. Goodnight, John P. Sall,
Midway Airlines Corporation and Zell/Chilmark Fund, L.P., as amended, except to
the extent otherwise specifically set forth in the letter dated as of
February 10, 1997, from Lessee to Lessor.
(b) Covenants
Lessee covenants that it will not make any prepayment in
respect of the Promissory Note dated February 7, 1997 in the amount of {***} or
amend the {***} to provide for terms more favorable to the payee
thereof (including, without limitation, any increase in the interest rate or
acceleration of payment).
4. Reconciliation
Lessee acknowledges that the principal amount of the DASA Note
(which is the sum of all deferred payments as of February 10, 1997 under the
leases and lease termination agreements relating to the Fokker-100 aircraft
leased by Lessee having manufacturers' serial numbers 11450, 11484, 1185 and
11486), and the amount of the Deposit, have each been determined based solely
upon information supplied by Lessee. Lessee agrees that, in the event that
Lessor obtains access to information which in Lessor's opinion indicates that
the amount of the DASA Note or the amount of the Deposit is incorrect (the
"Information"), Lessee will, at Lessor's request, work in good faith with Lessor
to reconcile any discrepancy, provided that Lessor provides the Information to
Lessee. Upon the reconciliation of such discrepancy and the cancellation of the
existing DASA Note, Lessee will execute in favor of DASA, a new, replacement
DASA Note issued by Lessee in the reconciled amount and Lessor and Lessee will
execute an amendment to this Lease setting forth the reconciled amount of the
Deposit. The failure of Lessor and Lessee to reach final agreement upon a
reconciled amount of the DASA Note and/or the amount of the Deposit shall in no
event constitute a Default or an Event of Default by Lessee under the Lease and
Lessor's sole and exclusive remedy for Lessee's breach of its obligations
hereunder shall be the right to pursue money damages against Lessee, which right
to pursue such money damages is hereby acknowledged by Lessee.
-7-
<PAGE>
5. Deferral Agreement. Lessor and Lessee agree that the Deferral
Agreement and the Amendment to Deferral Agreements are hereby declared null and
void and shall have no further force or effect with respect to the Lease.
6. Merger. Lessor hereby consents to the Merger.
7. Governing Law. This Amendment shall be governed by and construed
in accordance with the internal laws of the State of New York and without regard
to any conflict of law rules. This Amendment is being delivered in the State of
New York.
8. Miscellaneous. Except as specifically amended or supplemented by
this Amendment, the Lease is hereby ratified, approved, confirmed and continued
in all respects and all provisions of the Lease as heretofore amended shall
remain in full force and effect. The parties hereto acknowledge and confirm that
the Lease is intended to be a true lease and not a financing arrangement. This
Amendment may be executed in any number of counterparts, and all of such
counterparts taken together shall be deemed and constitute one and the same
instrument.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
on the day and year first above written.
WINGS AIRCRAFT FINANCE, INC.
By: /s/ [ILLEGIBLE]
------------------------------
Name:
----------------------------
Title: President
MIDWAY-AIRLINES CORPORATION
By: /s/ J.S. Waller
------------------------------
Name:
----------------------------
Title:
----------------------------
<PAGE>
Schedule 11.1(a).1
The Letter of Credit shall contain the following terms:
The Beneficiary shall be entitled to draw amounts under the Letter of Credit
upon notice to the issuing bank signed by Beneficiary stating that amounts are
due under one or more of the following, and that such amounts remain unpaid:
Promissory Note dated as of January 31, 1997 executed by Midway
Airlines Corporation in favor of debis AirFinance B.V.
Promissory Note dated as of January 31, 1997 executed by Midway
Airlines Corporation in favor of Dairnler-Benz Aerospace A.G.
Aircraft Operating Lease Agreement No. 111 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 112 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 113 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 114 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 135 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 136 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 524 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 525 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 115-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
<PAGE>
Aircraft Operating Lease Agreement No. 116-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
Aircraft Operating Lease Agreement No. 117-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
Aircraft Operating Lease Agreement No. 118-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
<PAGE>
Schedule 11.1(a).2
Midway Airlines
Net Income Thresholds for Reduction in Amount of Letter of Credit Pursuant to
Section 11.1(a)
US$ millions
Year 1997 1998 1999 2000 2001
Net Income(2) 12.0 18.0 25.2 32.8 41.0
Net Income(1) 8.0 12.0 16.8 21.8 27.3
Year 2002 2003 2004 2005 2006
Net Income(2) 49.1 57.7 67.8 67.8 67.8
Net Income(1) 32.8 38.5 45.2 45.2 45.2
Year 2007 2008 2009 2010 2011
Net Income(2) 67.8 67.8 67.8 67.8 67.8
Net Income(1) 45.2 45.2 45.2 45.2 45.2
Year 2012 2013 2014
Net Income(2) 67.8 67.8 67.8
Net Income(1) 45.2 45.2 45.2
Amount of
Letter of Credit
- ----------------
$800,000 If actual Net Income is less than or equal to Net Income(1)
$400,000 If actual Net Income is greater than Net Income(1) but less than
or equal to Net Income(2)
0 If actual Net Income is greater than Net Income(2)
<PAGE>
Schedule 16.10
1. Aircraft Operating Lease Agreement No. 111, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
2. Aircraft Operating lease Agreement No. 112, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
3. Aircraft Operating Lease Agreement No. 113, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
4. Aircraft Operating Lease Agreement No. 114, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
5. Aircraft Operating Lease Agreement No. AOLAF-115-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
6. Aircraft Operating Lease Agreement No. AOLAF-116-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
7. Aircraft Operating Lease Agreement No. AOLAF-117-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
8. Aircraft Operating Lease Agreement No. AOLAF-118-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
9. Aircraft Operating Lease Agreement No. 135, dated as of July 20, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
10. Aircraft Operating Lease Agreement No. 136, dated as of December 15, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
11. Aircraft Operating Lease Agreement No. 524, dated as of August 1, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
12. Aircraft Operating Lease Agreement No. 525, dated as of October 15, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
<PAGE>
Schedule B.1
Security Deposits Paid by Midway
Aircraft AOLAF Deposit
MSN No. Paid
- -------- ----- -------
11321 525 {***}
-----------
11323 524 {***}
-----------
11329 135 {***}
-----------
11330 136 {***}
-----------
11444 111 {***}
-----------
11445 112 {***}
-----------
11475 113 {***}
-----------
11477 114 {***}
-----------
11450 115 {***}
-----------
11484 116 {***}
-----------
11485 117 {***}
-----------
11486 118 {***}
-----------
<PAGE>
EXHIBIT 10.11
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY {***}. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
F-100 LEASE #135
(TAIL # N130ML)
<PAGE>
DUPLICATE
THE SINGLE EXECUTED ORIGINAL OF THIS AGREEMENT MARKED "ORIGINAL" SHALL BE THE
"ORIGINAL" AND ALL OTHER COUNTERPARTS OF THIS AGREEMENT SHALL BE DUPLICATES AND
MARKED "DUPLICATE" OR "DUPLICATE ORIGINAL". TO THE EXTENT THAT THIS AGREEMENT
AND CERTIFICATE OF ACCEPTANCE RELATED THERETO CONSTITUTES CHATTEL PAPER, AS SUCH
TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE
JURISDICTION, NO SECURITY INTEREST MAY BE CREATED THROUGH TRANSFER OR POSSESSION
OF ANY COUNTERPART OTHER THAN THE "ORIGINAL".
AIRCRAFT OPERATING LEASE AGREEMENT
No. 135
Dated as of
July 20, 1995
between
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual
capacity but solely as trustee,
as
Lessor
and
MIDWAY AIRLINES CORPORATION
as
Lessee
Aircraft : Fokker 100
Serial No : 11329/N130ML
<PAGE>
INDEX
ARTICLE PAGE
- ------- ----
1. Definitions ................................................. 1
2. Agreement to Lease .......................................... 12
3. Term; Delivery; Acceptance; Delay ........................... 16
4. Registration and Title ...................................... 17
5. Possession and Use .......................................... 20
6. Charges, Method of Payment and Financial
Information ................................................. 25
7. Maintenance ................................................. 27
8. Taxes, Duties and Expenses .................................. 33
9. Liens ....................................................... 38
10. Indemnification ............................................. 38
11. Insurance ................................................... 41
12. Assignment and Subletting ................................... 49
13. Disclaimer, Representations and Warranties .................. 53
14. Covenants of Lessee ......................................... 58
15. Default by Lessee ........................................... 61
16. Return of Aircraft .......................................... 68
17. Casualty Occurrences ........................................ 70
18. Governing Law and Jurisdiction .............................. 73
19. Miscellaneous ............................................... 75
i
<PAGE>
APPENDICES PAGE
- ---------- ----
A. Description of Aircraft 80
B. Further Definitions and Values 81
C. Certificate of Acceptance 83
D. Charges 85
E. Operating Condition at Re-Delivery 94
F. Aircraft Documents 99
G. FAA Power of Attorney 101
ii
<PAGE>
AIRCRAFT OPERATING LEASE AGREEMENT
No. 135
THIS AIRCRAFT OPERATING LEASE AGREEMENT No. 135 is made as of the
20th day of July, 1995 between FIRST SECURITY BANK OF UTAH, N.A., a national
banking association existing pursuant to the laws of the United States, having
its principal place of business at 79 South Main Street, Salt Lake City, Utah
84130-0007, not in its individual capacity (except as expressly herein set
forth) but solely as Owner Trustee under the Trust Agreement (as defined in
Article 1 hereof) and its permitted successors and assigns (herein referred to
as "Lessor") and MIDWAY AIRLINES CORPORATION a company incorporated under the
laws of the State of Delaware, having its principal place of business at 5713
South Central Avenue, Chicago, Illinois 60638 and its permitted successors and
assigns (herein referred to as "Lessee").
WHEREAS, subject to fulfillment of the conditions precedent stated
in Article 2.2 (viii), (ix) and (x), Lessor has the right to possess, use and
lease the Aircraft; and
WHEREAS Lessee desires to lease the Aircraft from Lessor; and
WHEREAS Lessor is willing to lease the Aircraft to Lessee upon the
terms and conditions set out herein.
NOW THEREFORE, in consideration of the mutual promises herein
contained, Lessor and Lessee agree as follows:
1. DEFINITIONS
The following terms shall have the following respective meanings for
all purposes of this Agreement:
1.1 Air Authority shall mean the Federal Aviation Administration of the
United States Department of Transportation and any successor.
1.2 Aircraft shall mean the aircraft identified and described in
Appendix A, including any Engine, Part, or component thereof, and/or
ancillary and loose equipment or devices installed in or on the
Aircraft at the Delivery Date (or which having been removed
therefrom remain the property of the Lessor pursuant to this
<PAGE>
Agreement) and Aircraft Documents furnished therewith under this
Agreement, or any substitutions, renewals and replacements from time
to time made in or on the said Aircraft in accordance with this
Agreement, whether or not for the time being installed on or in the
said Aircraft or any other aircraft.
1.3 Aircraft Documents shall mean the items identified in Appendix F.
1.4 Aircraft Maintenance Agreement shall mean a Flight Hour Agreement
entered into between Lessee and an overhaul /repair agency relating
to the Engines and the landing gear and any modification, amendment
or substitution therefor consented to by Beneficiary.
The terms and conditions of such Aircraft Maintenance Agreement and
the overhaul/repair agency shall be subject to the prior written
consent of Beneficiary.
1.5 Airframe shall mean the Aircraft, excluding the Engines.
1.6 Appraisal Procedure shall mean the procedure for determining the FMV
of the Aircraft set forth Article 9 of Appendix D.
1.7 Approved Maintenance Program shall mean the Maintenance Program in
effect on the Delivery Date with respect to the aircraft which are
the subject of the Other Aircraft Agreements or such other
Maintenance Program as Lessor shall from time to time approve in
writing, such approval not to be unreasonably withheld.
1.8 Authorized Maintenance Performer shall mean Lessee, American
Airlines, Inc., U.S. Air, Aviall, Rolls Royce Canada or any Air
Authority approved provider.
1.9 Bank shall mean the financial institution(s) and/or other
provider(s) of finance from whom finance respecting the acquisition
or continued ownership of the Aircraft by Lessor is to be, or is for
the time being, obtained and/or in whose favor or for whose benefit
security over, or rights with respect to, the Aircraft is to be, or
is for the time being, granted by Lessor or at its request and shall
include any financial institution providing finance to the Head
Lessor in respect of Head Lessor's acquisition of the Aircraft by
whatever means, including without
2
<PAGE>
limitation by way of loan or by way of non-recourse sale of lease
receivables.
1.10 Beneficiary shall mean, Stockholm Aircraft Finance IV, B.V., which
is (i) a company incorporated under the laws of the Netherlands,
(ii) wholly-owned by Fokker and (iii) the beneficiary under the
Trust Agreement, together with its successors and permitted assigns.
1.11 Business Day shall mean a day (other than a Saturday or Sunday) on
which banks are open for business in New York.
1.12 Casualty Occurrence shall have the meaning set forth in Article
17.1.
1.13 Certificate of Acceptance shall mean the Certificate of Acceptance
given in the form of Exhibit C.
1.14 Certificated Air Carrier means any person (except the United States
Government) that is a citizen of the United States of America (as
defined in Section 40102 of Title 49 of the United States Code)
holding an air carrier operating certificate issued by the Secretary
of Transportation pursuant to Chapter 447 of Title 49 of the United
States Code (or any predecessor thereof) for aircraft capable of
carrying ten or more individuals or 6,000 pounds or more cargo,
which is also certificated so as to entitle Lessor, as lessor, to
the benefits of Section 1110 of Title 11 of the United States Code
with respect to the Aircraft.
1.15 Credit and Security Agreement shall mean the Credit and Security
Agreement dated as of October 29, 1993 therein between FAUSA and
Lessee.
1.16 Cycle shall mean one take-off and landing of the Aircraft.
1.17 Default shall mean an Event of Default or any event which, with the
giving of notice and/or lapse of time and/or the making of any
relevant determination, would constitute an Event of Default.
1.18 Delivery Date shall mean the Midway Technical Acceptance Date as
such term is defined in the Tripartite Agreement which will be the
date on which the Aircraft is delivered to and accepted by the
Lessee for the purposes of this Agreement.
3
<PAGE>
1.19 Delivery Location shall mean the location at which Transwede
delivers the Aircraft to Lessor and identified in the Certificate of
Acceptance.
1.20 Dollars and $ shall mean the lawful currency of the United States of
America and in respect of all payments to be made under this
Agreement in Dollars shall mean funds which are for same day
settlement in the New York Clearing House Interbank Payments System
(or such other US Dollar funds as may at the relevant time be
customary for the settlement of international banking transactions
denominated in United States Dollars).
1.21 Engine shall mean (i) any engine installed on or furnished with the
Aircraft on the Delivery Date, such Engines being identified as to
manufacturer and type in Appendix A and as to serial numbers in the
Certificate of Acceptance executed by Lessee on the Delivery Date
and (ii) any substitute or replacement engine title to which has, or
should have, transferred to and vested in Lessor in accordance with
this Agreement, in each case including all modules or Parts from
time to time belonging to or installed in that engine and
irrespective of whether or not the same shall for the time being be
installed on the Aircraft or on any other aircraft. The term
"Engine" shall exclude any properly replaced engine title to which
has, or should have, passed to Lessee pursuant to this Agreement.
1.22 Equipment Change shall have the meaning set forth in Article
17.3(a).
1.23 Event of Default shall mean any of the events specified in Article
15.1.
1.24 Intentionally omitted.
1.25 Expiry Date shall mean March 22, 1999.
1.26 Fair Market Rental Value shall be equal in amount to the value that
would be obtained in an arms'-length transaction between an informed
and willing lessee under no compulsion to lease and an informed and
willing lessor under no compulsion to lease, in accordance with a
lease to a lessee similarly situated with Lessee, for a term equal
to the relevant period and on conditions as herein provided, any
such determination (made for purposes of Article 15.3(b)) to
4
<PAGE>
be made on the basis of the then actual condition of the Aircraft,
to be determined pursuant to an Independent Appraisal and to be the
average of the two determinations obtained thereunder.
1.27 FAUSA shall mean Fokker Aircraft U.S.A., Inc., a company
incorporated under the laws of the State of Delaware, with its
principal office at Alexandria, Virginia.
1.28 First Rent Date shall mean the Delivery Date.
1.29 Flight Hour shall mean each hour or part thereof elapsing from the
moment at which the wheels of the Aircraft leave the ground on the
take off of the Aircraft until the wheels of the Aircraft touch the
ground on the landing of the Aircraft following such flight.
1.30 FMV shall have the meaning set forth in Appendix D.
1.31 Fokker shall mean Fokker Aircraft B.V., a Netherlands corporation
with its principal office at Amsterdam Zuid-Oost, The Netherlands,
together with its successors.
1.32 Intentionally omitted.
1.33 Governing Law shall mean the law of the state of New York.
1.34 Government Entity shall mean and include (i) any national or state
government, political subdivision thereof, or local jurisdiction
therein; (ii) any board, commission, department, division, organ,
instrumentality, court, or agency of any thereof, however
constituted; and (iii) any association, organization, or institution
of which any thereof is a member or to whose jurisdiction any
thereof is subject or in whose activities any thereof is a
participant.
1.35 Head Lessor shall mean any person or persons to whom title to the
Aircraft is vested or transferred in accordance with Article
12.3(e).
1.36 Indemnitees shall mean Lessor (in its trust and individual
capacities), the Voting Trustee (in its trust and individual
capacities), the Beneficiary, the Head Lessor, the Bank, Fokker,
FAUSA, including any of
5
<PAGE>
their respective successors and assigns and their respective
shareholders, subsidiaries, affiliates, directors, officers, agents
and employees.
1.37 Independent Appraisal shall mean a determination of Fair Market
Rental Value of the Aircraft by two independent aircraft appraisers,
selected by Lessor, the costs and expenses of the appraisal to be
paid by Lessee
1.38 Law shall mean and include (i) any law, statute, decree,
constitution, regulation, order or any directive of any Government
Entity; (ii) any treaty, pact, compact or other agreement to which
any Government Entity is a signatory or party; (iii) any judicial or
administrative interpretation or application of any thereof; and
(iv) any amendment or revision of any thereof.
1.39 Lessor or Lessee shall have the meanings respectively ascribed to
them in the first paragraph of this Agreement and shall include
their respective assignees or successors.
1.40 Lessor Liens shall mean:
(a) the Mortgage, the Security Assignment and any security
interest whatsoever from time to time created by or through
Lessor and/or Head Lessor in connection with the financing of
the Aircraft;
(b) any other security interest or other lien in respect of the
Aircraft or this Agreement, which results from acts of or
omissions to act or claims against Lessor and/or Head Lessor
or any of their respective affiliates not related to the
transactions contemplated by or permitted under this
Agreement; and
(c) liens in respect of the Aircraft for Lessor Taxes.
1.41 Lessor Taxes shall mean Taxes:
(a) imposed as a direct result of activities of a Tax Indemnitee
in any jurisdiction imposing a liability unrelated to that Tax
Indemnitee's dealings with Lessee, to the transactions
contemplated by this Agreement or the operation of the
Aircraft by Lessee; or
6
<PAGE>
(b) imposed on or measured by net income, profits or gains, or
capital or net worth (excluding, however, in each case, Taxes
that are, or are in the nature of, license, sales, use,
rental, value-added, or property taxes) of a Tax Indemnitee,
by (A) any Governmental Entity by or in which that Tax
Indemnitee would be subject to tax without regard to the
transactions contemplated by this Lease, or (B) the Federal
Government of the United States of America (including, without
limitation, any withholding taxes imposed by such government);
or
(c) imposed with respect to any period or event occurring prior to
the date of this Agreement or after the Expiry Date or earlier
termination of this Agreement in accordance with the terms
hereof, provided that such Tax is unrelated to a Tax
Indemnitee's dealings with Lessee or to the transactions
contemplated by this Agreement; or
(d) for which Transwede is liable under the Tripartite Agreement.
(e) imposed as a result of any voluntary sale, assignment,
transfer or other disposition by the Lessor (including to the
Head Lessor) or any other Tax Indemnitee of any interest in
the Aircraft or any part thereof or this Agreement unless such
transfer or disposition occurs (1) in connection with a Tax
Indemnitee's pursuing its remedies while an Event of Default
by Lessee is continuing or otherwise resulting from an Event
of Default, or (2) pursuant to Lessee's exercise of its option
to purchase the Aircraft under Article 9 of Appendix D (it
being understood and agreed that Lessor and Lessee will
cooperate with each other to minimize any Taxes resulting from
any sale pursuant to this clause (2)).
1.42 LIBOR shall mean the rate of interest per cent per annum (rounded
upward, if not already such a multiple, to the nearest whole
multiple of 1/16th. of one per cent) at which, at or about 11.00
a.m. (London time) on the day two Business Days before the beginning
of the relevant period deposits in Dollars are offered for the
duration of such relevant period on the REUTERS "LIBO" page (or such
other page as may replace it from time to time).
7
<PAGE>
1.43 Maintenance Program shall mean an Air Authority approved maintenance
program for the Aircraft encompassing scheduled maintenance
(including block maintenance), condition monitored maintenance, and
on-condition maintenance of Airframe, Engines and Parts, including
but not limited to, servicing, testing, preventive maintenance,
repairs, structural, inspections, system checks, overhauls, approved
modifications, service bulletins, engineering orders, airworthiness
directives, corrosion control, inspections and treatments.
1.44 Major Checks shall mean any 12,000 hours Check, 24,000 hours Check
or Intersupplementary Check or segment thereof or any equivalent
thereof with more or less hours, however denominated, to the extent
set out in the Approved Maintenance Program from time to time.
1.45 Manufacturer shall mean Fokker.
1.46 Mortgage shall mean such mortgage or other security as from time to
time may be created over the Aircraft in favor of the Bank or over
the Beneficiary's interest in the Trust Agreement, in favor of the
Bank.
1.47 Note shall mean the Secured Promissory Note executed and delivered
to FAUSA by the Lessee and secured by the Credit and Security
Agreement.
1.48 Other Aircraft Agreements shall mean Aircraft Operating Lease
Agreements relating to other Fokker 100 aircraft so long as leased
to Lessee by a lessor for the benefit of Fokker, FAUSA or any
affiliate thereof (including Wings Aircraft Finance, Inc.), as
Beneficiary and the Support Services Agreement, the Credit and
Security Agreement and the Note or any other agreement between
Lessee and Lessor for the benefit of Fokker, FAUSA or any affiliate
thereof, including Wings Aircraft Finance, Inc., provided that, for
the purpose of this definition, the word "affiliate" shall mean any
corporation or other entity that, directly or indirectly, controls,
is controlled by or is under common control with, Fokker.
1.49 Part shall mean, whether or not installed on the Aircraft:
8
<PAGE>
(a) any component, furnishing or equipment (other than a complete
Engine) furnished with the Aircraft on the Delivery Date; and
(b) any other component, furnishing or equipment (other than a
complete Engine) title to which has, or should have, passed to
Lessor pursuant to this Agreement
but excludes any such items title to which has, or should have,
passed to (i) Lessee pursuant to this Agreement or (ii) any person
pursuant to any agreement relating to the financing of spare parts
for the Aircraft, including, but not limited to, FAUSA pursuant to
the Credit and Security Agreement and the Note.
1.50 Permitted Lien shall mean:
(a) liens of repairers, mechanics, material men, carriers,
hangarkeepers, employees or other similar liens arising in the
ordinary course of business by statute or by operation of law
in respect of obligations which are either not overdue or are
being contested in good faith by appropriate proceedings;
(b) any lien for Taxes of any kind either not assessed or, if
assessed, not yet due and payable or being contested in good
faith by appropriate proceedings, and
(c) any lien arising out of a judgment against Lessee with respect
to which at the time an appeal is being prosecuted in good
faith and with respect to which there shall have been secured
a stay of execution pending such appeal,
provided that in the case of these subclauses (a), (b) and (c):
(i) adequate reserves for the payment of such obligations
have been provided by Lessee;
(ii) such proceedings, or the continued existence of such
lien, do not give rise to any likelihood of the sale,
forfeiture or other loss of the Aircraft or any Engine
or any Part or any interest therein; and
9
<PAGE>
(iii) any such lien does not arise as a result of any default
on the part of Lessee in respect of its obligations
under this Agreement;
(d) any Lessor Lien and the lien of this Agreement; and
(e) any lien for Lessor Taxes.
1.51 Redelivery Location shall mean Schiphol Airport, The Netherlands.
1.52 Rent Date shall mean the First Rent Date and the numerically
corresponding date of each and every subsequent month during the
Term, or (if there is no corresponding date in any month), the last
day of such month.
1.53 Rental Period shall mean the period from and including any Rent Date
to and including the day preceding the next Rent Date.
1.54 Security Assignment shall mean an assignment or pledge in favor of
the Head Lessor or the Bank of the benefit of all or any part of
Lessor's rights hereunder.
1.55 Security Interest shall mean any mortgage, charge, pledge, lien,
assignment, hypothecation, right of set-off or any agreement or
arrangement having the effect of creating a security interest.
1.56 State of Incorporation shall mean the State of Delaware.
1.57 State of Registration shall mean United States of America.
1.58 Supplemental Rent shall mean Agreed Value and any other amount which
by the terms of this Agreement is payable by Lessee to Lessor other
than Rent and the Reserve Rate.
1.59 Support Services Agreement shall mean the Aircraft Support Services
Agreement No. ASSAF-110 between FAUSA and Lessee.
1.60 Taxes shall mean any and all present and future sales, use,
property, customs, value-added, turnover, stamp, interest
equalization, income, gross or net receipts,
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franchise, excise, net worth, capital or other taxes, fees,
withholdings, imposts, duties, levies, or other charges of any
nature, together with any penalties, fines, or interest thereon,
imposed, levied, or assessed by, or otherwise payable to, any
Governmental Entity and "Tax" shall be construed accordingly.
1.61 Tax Indemnitee shall mean each of the Lessor, Voting Trustee,
Beneficiary and the Head Lessor, including any of their respective
successors and assigns.
1.62 Term shall bear the meaning ascribed to it in Article 3.4.
1.63 Transwede shall mean Transwede Airways A.B., a corporation organized
under the laws of Sweden.
1.64 Transwede Lease shall mean Aircraft Operating Lease Agreement No.
AOLA 648.060 between Beneficiary, as lessor, and Transwede.
1.65 Tripartite Agreement means Tripartite Agreement No. TA-517, dated as
of July 7, 1995 among Transwede, Fokker, Beneficiary and Lessee.
1.66 Trust Agreement shall mean the Trust Agreement dated as of July 20,
1995 between the Beneficiary and the Lessor in its individual
capacity, as the same may be amended from time to time.
1.67 Trust Estate shall mean the "Trust Estate" as defined in the Trust
Agreement.
1.68 Voting Trust Agreement shall mean the Voting Trust Agreement dated
as of July 20, 1995 between the Beneficiary and the Voting Trustee,
as the same may be amended from time to time,.
1.69 Voting Trustee shall mean First Security Bank of Idaho, N.A., a
national banking association, and its permitted successors and
assigns.
1.70 The terms:
Agreed Value,
Deposit,
Partial Loss Amount,
Rent,
Reserve Rate,
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shall have the meanings and values set forth in Appendix B.
1.71 References in this Agreement to:
(a) Articles or Appendices are, unless otherwise specified,
references to Articles of, and Appendices to, this Agreement
and references to this Agreement include its Appendices;
(b) any statute or other legislative provision shall be read to
include any statutory or legislative modification or
re-enactment thereof, or any substitution therefor;
(c) the Aircraft include any Part of the Aircraft, and, where the
context so admits, any of the Aircraft Documents and
references to any part of the Aircraft include any part of any
Engine;
(d) the word "person" or "persons" or to words importing persons
include, without limitation, individuals, firms, partnerships,
joint ventures, trusts, Government Entities, organizations,
associations, corporations, government agencies, committees,
departments, authorities and other bodies, corporate or
incorporate, whether having distinct legal personality or not,
or any member of any of the same;
(e) words importing the plural include the singular and vice
versa;
(f) any agreement or instrument include such agreement or
instrument as it may from time to time be amended or
supplemented; and
(g) headings in this Agreement are for ease of reference only.
2. AGREEMENT T0 LEASE
2.1 Lessor will lease the Aircraft to Lessee and Lessee will take the
Aircraft on lease from Lessor in "AS-IS--WHERE-IS" condition, in
accordance with the terms and conditions of this Agreement.
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2.2 Lessor's obligation to deliver the Aircraft on the Delivery Date to
Lessee shall be subject to:
(i) the receipt by Lessor from Lessee on or prior to the Delivery
Date of the following, all of which shall be in the English
language and be satisfactory in form and substance to Lessor:
(a) copies of Lessee's certificate of incorporation and/or
memorandum and articles of association and/or by-laws
and/or other constitutional documents, certified to be
true and up to date copies by a duly authorized officer
of Lessee;
(b) copies of resolutions of Lessee's board of directors
authorizing Lessee to enter into and perform this
Agreement and the transactions contemplated hereby,
certified to be true and in full force and effect by a
duly authorized officer of Lessee;
(c) evidence that each approval, license and consent which
may be required in relation to, or in connection with
the performance by Lessee of any of its obligations
hereunder has been granted by or obtained from the
applicable Government Entity in the State of
Registration;
(d) copies of Lessee's air transport license, certificate of
public convenience and necessity, and any other air
operator certificates and other licenses, certificates
and permits required by a Governmental Authority
enabling Lessee to operate as an air carrier, certified
to be true copies and to be in full force and effect by
a duly authorized officer of Lessee;
(e) evidence of appointment of Lessee's agent for service of
process in the State of New York;
(f) a power of attorney in the form of Appendix G
authorizing Lessor and/or the Head Lessor/and/or the
Bank to take action at the Air Authority and a certified
resolution authorizing same;
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(g) such other documents as Lessor may reasonably request;
(ii) the receipt by Lessor from Lessee on or before the Delivery
Date of:
(a) opinions satisfactory in form and substance to Lessor of
counsel to Lessee, addressed to Lessor and Beneficiary;
(b) all sums due to Lessor pursuant to this Agreement;
(c) a certificate of insurance, a broker's letter of
undertaking and other evidence, all in form and
substance satisfactory to Lessor, that Lessee is taking
the required steps to ensure due compliance with the
provisions of this Agreement as to Insurances with
effect on and after the Delivery Date;
(d) evidence that the representations and warranties of
Lessee set forth in Article 13.4 are true and correct;
(iii) Intentionally omitted;
(iv) Intentionally omitted;
(v) evidence (including satisfactory opinions of Crowe & Dunlevy,
special Air Authority aviation counsel, as to Air Authority
registration and recordation matters) that on the Delivery
Date the Aircraft has been validly registered under the laws
of the State of Registration and that all filings,
registrations, recordings and other actions have been or will
be undertaken which are necessary or advisable to ensure the
validity, effectiveness and enforceability of this Agreement
and to protect the property rights of Lessor and Head Lessor
in the Aircraft or any Part and any Security Interest of the
Bank therein;
(vi) Lessor being satisfied that no default shall have occurred
under any Other Aircraft Agreement;
(vii) the Certificate of Acceptance shall have been duly authorized,
executed and delivered by Lessee,
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shall be satisfactory in form and substance to Lessor, and
shall be in full force and effect;
(viii) all of Transwede's rights and interest in the Aircraft shall
have been terminated to the satisfaction of Beneficiary,
including the termination of the Transwede Lease and the
fulfillment of all conditions precedent and obligations of
Lessee and Transwede with respect to the Aircraft under the
Tripartite Agreement;
(ix) the Beneficiary shall have consented to the termination of the
Transwede Lease and its mortgage on the Aircraft under Swedish
law; and
(x) Lessee shall have accepted the Aircraft from Transwede in
accordance with the terms and conditions of the Tripartite
Agreement and simultaneously therewith Transwede has
redelivered the Aircraft to Lessor.
2.3 The conditions specified in Article 2.2 are inserted for the sole
benefit of Lessor and may be waived or deferred in whole or in part
and with or without conditions by Lessor. If any of the said
conditions are outstanding on the Delivery Date and Lessor (in its
absolute discretion) nonetheless agrees to deliver the Aircraft to
Lessee, Lessee shall ensure that such outstanding conditions are
fulfilled within fifteen (15) days after the Delivery Date and
Lessor shall be entitled to treat the failure of Lessee to perform
such outstanding conditions as an Event of Default.
2.4 The obligation of Lessee to accept delivery of the Aircraft from
Lessor is subject to the satisfaction of the following conditions
precedent on or before the Delivery Date:
(i) each of the Operative Documents to which Lessor is a party
shall have been duly authorized, executed and delivered by
Lessor and shall be in full force and effect, and executed
counterparts shall have been delivered to Lessee;
ii) Lessee shall have received the following:
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(a) an incumbency certificate of each of Lessor as to the
persons authorized to execute and deliver the Operative
Documents to which Lessor is a party and each other
document to be executed on behalf of Lessor in
connection with the transactions contemplated by the
Operative Documents, including the signatures of such
persons; and
(b) such other documents and evidence with respect to Lessor
and the transactions contemplated by the Operative
Documents as Lessee may reasonably request in order to
establish the consummation of the transactions
contemplated by the Operative Documents to be performed
by Lessor, the taking of all corporate proceedings in
connection with such transactions and compliance with
the conditions set forth herein;
(iii) on the Delivery Date, the representations and warranties of
Lessor contained in Article 13.6 shall be true and accurate as
though made on and as of such date;
(iv) Lessee shall have received the favorable opinion, addressed to
it and reasonably satisfactory in form and substance to it,
from Crowe & Dunlevy, special Air Authority aviation counsel;
and
(v) the Aircraft shall meet the delivery conditions specified in
Article 3.6.
3. TERM; DELIVERY; ACCEPTANCE; DELAY
3.1. Subject to Articles 2.1, 2.2 and 3.3, Lessor shall deliver the
Aircraft on the Delivery Date. Subject to Article 2.4 only, Lessee
shall accept the Aircraft and the delivery thereof on the Delivery
Date. Lessee acknowledges that Lessor's sole obligation with respect
to delivery of the Aircraft is (i) to deliver it to Lessee upon
acceptance of the Aircraft by Lessee from Transwede on the Midway
Technical Acceptance Date as such term is defined in the Tripartite
Agreement pursuant to the terms and conditions of the Tripartite
Agreement, and (ii) that Lessor is delivering the Aircraft to Lessee
"AS IS--WHERE IS."
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3.2 If for any reason (including any failure of the conditions specified
in Article 2.2, Clauses (viii), (ix) and (x)), the Aircraft has not
been delivered by Lessor by August 7, 1995, (as such date may be
amended, pursuant to the provisions of the Tripartite Agreement),
either party may terminate this Agreement by written notice to the
other party. Upon any such termination by Lessee, if the Aircraft
has not been delivered by Lessor due to Lessee's breach of its
obligations hereunder or under the Tripartite Agreement, Lessor may
retain the Deposit. Otherwise, Lessor shall return the Deposit to
Lessee.
3.4 The term of the lease shall commence on the Delivery Date and shall
continue until the Expiry Date unless earlier terminated or extended
as herein provided (such period being herein referred to as the
"Term").
3.5 The Aircraft shall be delivered to and accepted by Lessee at the
Delivery Location or such other location as is mutually acceptable
to the parties.
3.6 Simultaneously with Lessee's technical acceptance of the Aircraft
from Transwede under the Tripartite Agreement, Lessee shall indicate
and confirm its acceptance of the Aircraft by the execution and
delivery to Lessor of the Certificate of Acceptance.
4. REGISTRATION AND TITLE
4.1 As from the Delivery Date Lessee shall cooperate with Lessor or Head
Lessor, to effect and maintain registration of the Aircraft in the
name of Lessor or Head Lessor, as the case may be, under the Laws of
the State of Registration during the Term, such registration to
reflect the interests of Lessor or Head Lessor as the case may be,
and to obtain and maintain all licenses, permits and approvals,
including, without limitation, a certificate of airworthiness from
the Air Authority, as may be requisite in connection with operation
of the Aircraft under this Agreement.
4.2 Lessee shall at its own expense and responsibility cause this
Agreement to be kept, filed and recorded at all times during the
Term, in such office or offices for the registration of the Aircraft
in the State of Registration and in such other offices (in the
United States but not in any jurisdiction outside of the
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United States unless directly required due to Lessee's operation) as
may be necessary, to protect Lessor's, Head Lessor's and the Bank's
rights in any state in which the Aircraft may operate including the
State of Registration of the Aircraft and the State of Incorporation
or as Lessor may reasonably request to protect and preserve
Lessor's, Head Lessor's and the Bank's rights hereunder, and shall
on request furnish to Lessor an opinion of counsel or other evidence
satisfactory to Lessor of such filing and recording.
4.3 Title to and ownership of the Aircraft as between Lessor, Head
Lessor and Lessee shall at all times remain in Lessor or Head
Lessor, as the case may be, and Lessee shall have no right, title or
interest in or to the Aircraft or any part thereof except as
expressly provided by this Agreement. Lessee shall identify and
specify the interest of Lessor, Head Lessor and the Bank and shall
affix or keep affixed (i) in a reasonably prominent position on the
flight-deck of the Aircraft and on each Engine a metal name plate
(having dimensions of not less than 10 cm x 7 cm) bearing the
inscription (in fireproof and legible characters) stating:
"NOTICE OF OWNERSHIP
THIS AIRCRAFT/ENGINE IS OWNED BY
FIRST SECURITY BANK OF UTAH, N.A."
The proper completion of the metal name plate shall be advised by
Lessor at its earliest convenience. Lessee shall not remove or
deface evidence of ownership of the Aircraft and shall not do or
permit to be done or omitted any act or thing which would jeopardize
the rights of Lessor, Head Lessor or the Bank in the Aircraft.
Lessee will on all occasions when the ownership of the Aircraft or
any Part is relevant make clear to third parties that title to the
same is held by Lessor, Head Lessor or the Bank as the case may be.
4.4 Lessee acknowledges that the Aircraft may from time to time be owned
by Head Lessor or the Bank and/or be subject to the Mortgage, which
shall be a first priority mortgage, and to the Security Assignment,
in favor of Head Lessor or the Bank. Lessee undertakes to Lessor
(both for itself and as agent for each of Head Lessor and the Bank)
at Lessee's expense (except for the expense of assignments pursuant
to Article 12 after
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the first refinancing and first assignment described therein) to,
from time to time, cooperate with Lessor or Head Lessor to cause
this Agreement, the Mortgage, the Security Assignment and such other
documents as may be necessary or advisable to give effect to the
transactions contemplated hereby or thereby, to be kept, recorded or
filed in such office or offices in the State of Incorporation and in
the State of Registration as may be necessary or advisable to
protect and perfect the interests of Lessor, Head Lessor and the
Bank in the Aircraft, this Agreement, the Mortgage and the Security
Assignment, and to do, from time to time, all other things which the
Bank, Head Lessor and/or Lessor may reasonably require in order to
protect and perfect their rights.
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5. POSSESSION AND USE
5.1 Lessee shall not transfer possession of the Aircraft, the Engines or
any Part to any person or any legal entity or remove any Engine or
Part from the Airframe other than in accordance with the provisions
of this Article 5 or of Article 12.1; provided, however, that so
long as no Default shall have occurred and be continuing, Lessee
may, without the prior written consent of Lessor deliver possession
of the Aircraft, the Engines or Parts to the manufacturer thereof
for testing or other similar purposes, or to an Authorized
Maintenance Performer for service, repair, maintenance or overhaul
work on the Aircraft, the Engines or Parts, or for alterations,
modifications, or additions thereto, to the extent required or
permitted by the terms of Article 7.3.
5.1.1 Lessee will ensure that no Engine or Part installed on the Aircraft
is at any time removed from the Aircraft other than:
(a) if replaced as expressly permitted by this Agreement; or
(b) if the removal is of an obsolete item and is in accordance
with the Approved Maintenance Program; or
(c) (i) during the course of maintaining, servicing, repairing,
overhauling or testing that Engine or Part or the
Aircraft, as the case may be; or
(ii) as part of a normal engine or part rotation program; or
(iii) for the purpose of making such modification to the
Engine or Part, or the Aircraft, as the case may be, as
are permitted under this Agreement,
and then in each case only if it is reinstalled or replaced by an
engine or part complying with Article 5.1.2(a) as soon as
practicable (or in the case of Article 5.1.1(c) (ii) in the ordinary
course of such program) and in any event no later than the Expiry
Date.
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5.1.2 (a) Lessee will ensure that, except as permitted by this
Agreement, no engine or part is installed on the Aircraft
unless:
(i) in the case of an engine, it is an engine of the same
model as, or an improved or advanced version of the
Engine it replaces, which is in similar or better
operating condition, and in the case only of a Casualty
Occurrence, has substantially similar hours available
until the next scheduled checks, inspections, overhauls
and shop visits and has the same or greater value and
utility as the replaced Engine;
(ii) in the case of a part, it is in as good operating
condition, is of similar or a more advanced make and
model and is of the same interchangeable modification
status as the replaced Part;
(iii) in the case of any part, it has become and remains the
property of Lessor free from Security Interests and on
installation on the Aircraft will without further act be
subject to this Agreement and the Mortgage; and
(iv) in each case, Lessee has full details as to its source
and maintenance records.
(b) Provided no Default has occurred and is continuing, Lessee
shall be entitled to install any engine or part on the
Aircraft by way of replacement notwithstanding Article
5.1.2(a) if:
(i) there is not available to Lessee at the time and in the
place that 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 Article
5.1.2(a); and
(ii) it would result in an unreasonable disruption of the
operation of the Aircraft and/or the business of Lessee
to ground the Aircraft until an engine or part, as the
case may be, complying with Article 5.1.2(a) becomes
available for installation on the Aircraft; and
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<PAGE>
(iii) as soon as reasonably practicable after installation of
the same on the Aircraft, Lessee removes any such engine
or part and replaces it with the Engine or Part replaced
by it or by an engine or part, as the case may be,
complying with Article 5.1.2(a).
5.1.3 Lessee will:
(a) ensure that any Engine or Part which is not installed on the
Aircraft (or any other aircraft as permitted by this
Agreement) is, except as expressly permitted by this
Agreement, properly and safely stored, and kept free from
Security Interests;
(b) from time to time on request, notify Lessor in writing as to
the location of any Engine and on request shall use its
reasonable efforts to procure that any person to whom
possession of an Engine is given acknowledges in writing to
Lessor, in terms satisfactory to Lessor, that it will respect
the interest of the Bank as mortgagee and Lessor (or, as the
case may be, Head Lessor) as owner and lessor of the Engine
and will not seek to exercise any rights whatsoever in
relation to it;
(c) (notwithstanding the foregoing provisions of this Article
5.1.3), be permitted, if no Default has occurred and is
continuing, to install any Engine or Part on an aircraft, or
in the case of a Part, on an engine:
(i) owned and operated by Lessee free from Security
Interests; or
(ii) leased or hired to Lessee pursuant to a lease or
conditional sale agreement on a long-term basis and on
terms whereby Lessee has full operational control of
that aircraft or engine; or
(iii) acquired by Lessee and/or financed or refinanced, and
operated by Lessee, on terms that ownership of that
aircraft or engine, as the case may be, pursuant to a
lease or conditional sale agreement, or a Security
Interest therein, is vested in or held by any
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other person; provided that in the case of (ii) and
(iii):
(1) the terms of any such lease, conditional sale agreement or
Security Interest will not have the effect of prejudicing the
interests of the Bank as mortgagee or Lessor (or, as the case
may be, Head Lessor) as owner and lessor of that Engine or
Part; and
(2) the lessor under such lease, the seller under such conditional
sale agreement or the holder of such Security Interest, as the
case may be, has confirmed and acknowledged in writing to
Lessor, in form and substance satisfactory to Lessor, or has
otherwise agreed in writing that it will respect the interest
of Lessor (or, as the case may be, Head Lessor) or, generally
(without naming such parties) the owner and/or lessor as owner
and lessor and the Bank, or generally (without naming the
Bank) any mortgagee as mortgagee of that Engine or Part and
that it will not seek to exercise any rights whatsoever in
relation thereto; and, to the extent such an acknowledgment
has been given, Lessor hereby agrees, for the benefit of the
lessor, the seller, or secured party, as the case may be, of
any engine or part (other than an Engine or a Part) leased to
Lessee or owned by Lessee subject to a conditional sale or
other security agreement, that Lessor will not acquire or
claim, as against such lessor, seller or secured party, any
right, title or interest in any engine or engines owned by the
lessor under such lease or subject to a security interest in
favor of the seller or secured party under such conditional
sale or other security agreement as the result of such engine
or engines being installed on the Airframe at any time while
such engine or engines are subject to such lease or
conditional sale or other security agreement.
5.1.4 Lessee will not enter into nor permit any pooling agreement or
arrangement in respect of an Engine or Part without the prior
written consent of Lessor, which shall not be unreasonably withheld.
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<PAGE>
5.2 Lessee shall use the Aircraft solely in commercial or other
operations for which Lessee is duly authorized by the Laws of the
State of Registration and/or any jurisdiction to whose Laws Lessee's
operation of the Aircraft is subject and shall not use or permit the
Aircraft to be used for any purpose for which the Aircraft is not
designed or reasonably suitable.
Lessee shall not use the Aircraft for the carriage of (i) whole
animals living or dead except in the cargo compartments according to
the United States Department of Transportation ("DOT") (or for
international flights, International Civil Aviation Organization
("ICAO")) regulations, and except domestic pet animals carried in a
suitable container to prevent the escape of any liquid and to ensure
the welfare of the animal; (ii) acids, toxic chemicals, other
corrosive materials, explosives, nuclear fuels, wastes, or any
nuclear assemblies or components, except as permitted for passenger
aircraft under the "Restriction of Goods" schedule issued by the DOT
(or for international flights, ICAO) from time to time and provided
that all the requirements for packaging or otherwise contained
therein are fulfilled; or (iii) any other goods, materials or items
of cargo which could reasonably be expected to cause damage to the
Aircraft and which would not be adequately covered by the insurance
required by or obtained pursuant to Article 11.
5.3 Lessee shall not permit the Aircraft to be maintained, used, or
operated in violation of any Law of any Government Entity having
jurisdiction, or contrary to any manufacturer's operating manuals
and instructions, or in violation of any airworthiness certificate,
license or registration relating to the Aircraft issued by any such
Government Entity. In the event that such Laws require alteration of
the Aircraft during the Term, Lessee shall conform therewith at its
own expense and shall maintain the same in proper condition for
operation under such Laws. Lessee agrees not to operate the Aircraft
or to permit or suffer the Aircraft to be operated (i) contrary to
applicable Law, and/or (ii) within or into any geographic area
unless the Aircraft is covered by insurance as required by the
provisions of Article 11 or insurance or an indemnity in lieu of
such insurance from the United States government against the risks
and in the amounts required by Article 11 covering such area, and/or
(iii)
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contrary to the terms of such insurance as required by the
provisions of Article 11.
5.4 Throughout the Term and until re-delivery of the Aircraft to Lessor
in accordance with the provisions of this Agreement, the Aircraft
and every part thereof shall be in every respect at the sole risk of
Lessee, who shall bear all risks of loss, theft, damage or
destruction to the Aircraft from any cause whatsoever. Lessor shall
not be liable for any liability, claim, loss, damage or expense of
any kind or nature caused directly or indirectly by the Aircraft or
any part thereof by any inadequacy thereof for any purpose or any
deficiency or defect therein, by the use or performance thereof, by
any repairs or servicing thereto or any delay in providing or
failure to provide any thereof, by any interruption or loss of
service or use thereof, or by any loss of business or other
consequential damage or any damage whatsoever and howsoever caused
prior to re-delivery of the Aircraft to Lessor.
5.5 Lessee shall ensure that such crew and engineers as are employed by
it in connection with the operation and maintenance of the Aircraft
shall have such qualifications and hold such licenses as are
required by the Air Authority and by all applicable Laws and
regulations.
6. CHARGES, METHOD OF PAYMENT AND FINANCIAL INFORMATION
6.1 Lessee shall punctually pay to Lessor, when due, the Rent, Reserve
Rate and Supplemental Rent expressed to be payable by the Lessee to
the Lessor hereunder including the monies specified and calculated
in accordance with the provisions of Appendix D at the time and in
the manner therein specified, and shall punctually and duly observe
and perform Lessee's obligations under the said Appendix D which
forms an integral part of this Agreement. The time stipulated in
this Agreement for all payments payable by Lessee to Lessor and for
the performance of Lessee's other obligations under this Agreement
shall be of the essence of this Agreement.
6.2 Lessee shall not be entitled to any abatement, compensation,
reduction or set-off against any installment of Rent, the Reserve
Rate or Supplemental
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Rent, including but not limited to, abatements, compensations,
reductions or set offs, by reason of any past, present or future
claims of Lessee against Lessor or any other person under this
Agreement or otherwise.
6.3 Lessee's obligation to pay Rent and make other payments in
accordance with this Agreement, until Lessee shall have redelivered
the Aircraft to Lessor in accordance with Article 16 and shall have
complied with its other obligations hereunder, shall be absolute and
unconditional irrespective of any contingency whatsoever including
(but not limited to) (i) any right of set-off, counterclaim,
recoupment, defense or other right which either party may have
against the other, (ii) any unavailability of the Aircraft for any
reason, including, but not limited to, any defect in the
airworthiness, merchantability, fitness for any purpose, condition,
design, or operation of any kind or nature of the Aircraft, or the
ineligibility of the Aircraft for any particular use or trade, or
for registration or documentation under the laws of any relevant
jurisdiction, or (save as herein provided) any Casualty Occurrence
in respect of or any damage to the Aircraft, (iii) any insolvency,
bankruptcy, reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceedings by or against Lessor
or Lessee, (iv) any invalidity or unenforceability or lack of due
authorization of, or other defect in this Agreement, (v) any failure
of Lessee to obtain any required license, certificate, authorization
or other approval of any Governmental Entity having jurisdiction
over the operation by Lessee of the Aircraft or the operation by
Lessee in any airport and (vi) any other cause which, but for this
provision, would or might have the effect of terminating,
frustrating or in any way affecting any obligation of Lessee
hereunder, it being the declared intention of the parties that the
provisions of this Article and the obligations of Lessee to pay the
Rent, the Reserve Rate and Supplemental Rent provided for by this
Agreement shall survive any frustration and that, save as expressly
provided in this Agreement, no monies payable hereunder by Lessee to
Lessor shall in any event or circumstance be repayable to Lessee.
6.4 Lessee agrees to furnish Lessor during the Term:
(i) Intentionally omitted;
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(ii) upon Lessor requesting the same a quarterly unaudited balance
sheet of Lessee prepared by it as of the close of the most
recent previous financial quarter, together with the related
profit and loss statement for such period;
(iii) within ninety (90) days after the close of each financial year
of Lessee, an audited balance sheet and profit and loss
statement as of the close of such financial year;
(iv) from time to time such other non-confidential information as
Lessor may reasonably request; and
(v) copies of all notices sent by Lessee (A) to its shareholders
or creditors as a group in their respective capacities as such
relating to major business or financial developments of Lessee
or (B) to the Securities and Exchange Commission in connection
with or following a public offering of the equity shares of
Lessee.
7. MAINTENANCE
7.1 Lessee, during the Term, at its own cost and expense shall:
(a) service, repair, maintain, overhaul, test, or cause the same
to be done to the Aircraft in accordance with the Approved
Maintenance Program so as to keep the Aircraft in as good
operating condition as when delivered to Lessee on the
Delivery Date, ordinary wear and tear excepted, and such
operating condition as may be necessary to enable the
airworthiness certificate of the Aircraft to be maintained in
good standing at all times under applicable Law, and Lessee
shall at all times maintain current certificates of
airworthiness (except in each case if Fokker 100 aircraft with
similar engines are grounded by the Air authority other than
as a result of the acts and omissions of Lessee) and Air
Authority required records of maintenance in respect of the
Aircraft and produce copies thereof to Lessor upon request;
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(b) maintain in the English language all Aircraft Documents,
records, logs, and other materials required by applicable Laws
and best airline practice to be maintained in respect of the
Aircraft including engine trend monitoring data;
(c) perform, or cause to be performed, all airworthiness
directives and mandatory notes and mandatory bulletins
affecting the Aircraft having a compliance date during the
Term and issued by (a) the Air Authority and/or (b) Fokker or
any other manufacturer of any part of the Aircraft (except
that, in the event of a conflict, those required by the Air
Authority shall prevail);
(d) maintain the Aircraft in conformity with Air Authority
Regulations and such other rules and regulations of the Air
Authority as may from time to time be applicable to passenger
category airline aircraft;
(e) provide Lessor by telex or fax message with a monthly
summation (which may utilize Air Authority forms) of Flight
Hours and Cycles accumulated on the Airframe, Engines, A.P.U.
and Landing Gear and details of all modifications and material
component changes within five (5) days after the end of each
month.
Such maintenance shall be performed by Lessee or by an Authorized
Maintenance Performer.
7.2 Except as otherwise provided herein, Lessee, at its own cost and
expense, shall promptly replace all Engines or Parts which may from
time to time become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair, or unserviceable with an engine
or part meeting the requirements of Article 5.1.2(a).
7.3 (a) Save as expressly herein provided the Aircraft shall not be
modified, altered, converted or added to (each such action in
relation to the Aircraft being herein referred to as an
"Equipment Change"), provided that Lessee may, at its own
expense and subject to the prior written approval of Lessor
(such approval not to be unreasonably withheld), make such
Equipment Changes to the Aircraft as Lessee may deem desirable
in the proper conduct of its business, provided that no
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such Equipment Change diminishes the value, utility, condition
or airworthiness of the Aircraft below the value, utility,
condition and airworthiness thereof immediately prior to such
Equipment Change, assuming the Aircraft was then in the
condition required to be maintained by the provisions of this
Agreement.
(b) Title to all Parts incorporated or installed in or attached or
added to the Aircraft as the result of such Equipment Change
shall, without further act, vest in Lessor free and clear of
all liens, charges and encumbrances. Lessee shall at its own
expense take all such steps and execute, and procure the
execution of, all such instruments as Lessor may require and
which are necessary to ensure that title to any such
replacement Part as aforesaid passes to Lessor according to
the Governing Law and the lex situs, provided, however, that
so long as a Default shall not have occurred and be
continuing, at any time during the Term, Lessee may remove any
such Part if (A) (i) such Part is in addition to, and not in
replacement of or in substitution for, any Part originally
incorporated or installed in or attached to the Aircraft at
the time of the delivery thereof hereunder, (ii) such Part is
not required to be incorporated or installed in or attached or
added to the Aircraft pursuant to the provisions of Article
7.1 and (iii) such Part can be removed from the Aircraft
without diminishing or impairing the value, utility or
airworthiness which the Aircraft would have had at such time,
had such Equipment Change not occurred. Or (B) such Part is
deemed by Lessee to be obsolete or no longer suitable or
appropriate for use in the Airframe or Engines (an "Obsolete
Part") and its removal shall not materially decrease the value
or adversely affect the utility or remaining useful life of
the Airframe or Engines, or impair the condition or
airworthiness thereof below the value, utility or remaining
useful life, condition or airworthiness thereof immediately
prior to such removal (assuming the Aircraft was then in the
condition required to be maintained by the terms of the
Lease), except that the value (but not the utility, remaining
useful life, condition or airworthiness) of the Airframe or
the Engines may be reduced, to the extent resulting from the
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removal of Obsolete Parts, if the aggregate original cost of
all Obsolete Parts removed from such Aircraft and not replaced
shall not exceed $70,000.
(c) Upon the removal by Lessee of any such Part as above provided,
title thereto shall, without further act, vest in Lessee and
such Part shall no longer be deemed a part of the Aircraft.
Any Part not removed by Lessee as above provided prior to the
return of the Aircraft to Lessor hereunder shall remain the
property of Lessor (save as the parties may otherwise agree in
writing) provided that Lessor may require Lessee, prior to the
end of the Term, to remove any Parts incorporated or installed
in the Aircraft as a result of an Equipment Change and to
restore the Aircraft to its condition prior to an Equipment
Change.
7.4.1 Upon submission by Lessee to Lessor of invoices or receipts
reasonably satisfactory to Lessor evidencing the performance in
accordance with the provisions of this Agreement by or at the
direction of Lessee of:
(a) with respect to the Airframe, the accomplishment of those
items of maintenance characterized as scheduled airframe heavy
maintenance as defined in the Approved Maintenance Program for
12,000 hours and 24,000 hours inspections or any equivalent
thereof with more or less hours ("Airframe Maintenance"), or
(b) with respect to any Engine, the performance of all scheduled
shop visit engine maintenance and repair, other than (i)
repairs arising as a result of foreign object damage or
operational mishandling and/or (ii) maintenance and repair of
QEC (Quick Engine Change) kits ("Engine Maintenance"), or
(c) with respect to any nose or main landing gear ("Landing
Gear"), the performance of all scheduled shop visit nose and
main landing gear maintenance and repair, other than repairs
arising as a result of foreign object damage or operational
mishandling ("Landing Gear Maintenance"),
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Lessor shall, subject to Article 3.6 of Appendix D and
provided that a Default shall not have occurred and be
continuing, release to Lessee, from the relevant Maintenance
Fund as defined in paragraph 3.2 of Appendix D, a sum equal to
the aggregate amount evidenced by such invoices or receipts
for such relevant maintenance, to the extent there are
sufficient sums in the relevant Maintenance Fund at the date
of the start of the relevant maintenance. Lessee agrees to use
its reasonable efforts to ensure that the relevant invoices or
receipts are received by Lessor as promptly as possible after
completion of the relevant maintenance. All sums remaining in
any Maintenance Fund at the expiration or other termination of
this Agreement shall be retained by Lessor, except (i) upon
payment in full of Agreed Value and any other amounts due to
Lessor or otherwise hereunder after a Casualty Occurrence
pursuant to Article 17.2(b), in which case all sums remaining
in any Maintenance Fund shall be paid to Lessee and (ii) under
the circumstances and to the extent described in Article 3.6
or 9 of Appendix D.
For the avoidance of doubt, Lessor shall not refuse to release
monies from the Maintenance Fund on the ground that
maintenance was required due to operational mishandling,
provided that Lessee can demonstrate that Lessee complied with
the original equipment manufacturer's written instructions.
7.4.2 Lessor shall be entitled to delay the release or payment of funds
from any Maintenance Fund (to the extent related to any disputed
amounts) to Lessee provided for by this Article 7 until such time as
it shall in its opinion be in a position to determine (which Lessor
agrees to use reasonable efforts to do as promptly as possible) the
amount to be released or paid, but in any event release all
undisputed amounts from the relevant Maintenance Fund (but where
insufficient funds are in such maintenance Fund the lesser pro rata
portion of such funds which corresponds to the undisputed amount)
upon request unless a Default shall have occurred and be continuing.
7.5.1 During the Term, Lessee shall furnish to Lessor such information
concerning the location, condition, use and operation of the
Aircraft as Lessor may reasonably request. The right of Lessor, or
its designated representatives, to inspect the Aircraft during any
Major Checks performed by or on behalf of Lessee during
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the Term, shall be absolute and Lessee shall inform Lessor by
providing sixty (60) days' written notice as to time and location of
all Major Checks. During such Major Checks, Lessee agrees to provide
sufficient manpower to allow Lessor, or its authorized
representatives, to inspect any area of the Aircraft which Lessor
requests to inspect and which would normally be required during such
a Major Check, provided that such inspection is to be made only at
the time that Lessee opens up such area in accordance with the
Approved Maintenance Program.
Lessee also shall permit any persons designated by Lessor to visit
and inspect the Aircraft, its condition, use and operation, and the
records maintained in connection therewith.
7.5.2 Lessor shall have the right at any time on reasonable notice to
inspect or survey the Aircraft or any part thereof , or instruct a
duly authorized surveyor to carry out a survey on its behalf, to
ascertain the condition of the Aircraft or any part thereof and
satisfy itself that the Aircraft is being properly repaired and
maintained in accordance with the terms of this Agreement. The cost
of any such inspection or survey shall be borne by Lessor unless an
Event of Default has occurred and is continuing.
7.5.3 Lessor shall have no duty to make any such inspection as is referred
to in Article 7.5.1 and 7.5.2 and shall not incur any liability or
obligation by reason of not making any such inspection. Except in
connection with any Event of Default, no exercise of any inspection
right under Articles 7.5.1, 7.5.2 or any other provision of this
Agreement shall interfere with the normal operation or maintenance
of the Aircraft or the business of Lessee and shall be conducted
during normal maintenance or business hours. In connection with any
such inspection, Lessee shall allow Lessor or any persons designated
by Lessor to copy, at Lessor's cost and expense, any Aircraft
Documents or other records relating to maintenance and operation of
the Aircraft. Lessee shall not be liable for the use of any such
Aircraft Documents or other records by Lessor or any other person or
entity which use is unrelated to Lessee's compliance with the terms
of this Agreement.
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8. TAXES, DUTIES AND EXPENSES
8.1 Lessee agrees promptly to pay and indemnify and hold Lessor and Head
Lessor harmless against all Taxes (other than Lessor Taxes) levied
or imposed against or upon or otherwise payable by any Tax
Indemnitee or Lessee and relating to or attributable to Lessee, this
Agreement, the Aircraft and/or the importation, exportation,
registration, ownership, leasing, subleasing, delivery, possession,
use, operation, reregistration, repair, maintenance, overhaul,
replacement, improvement, modification, alteration, transportation,
landing, storage, presence or redelivery of or addition to, the
Aircraft or any Engine or any Part thereof or any rent, receipts,
insurance proceeds or income arising therefrom, or any sum payable
by Lessee to a Tax Indemnitee under this Agreement or any other
transactions or activities contemplated by this Agreement. If Lessee
is required by any applicable Law or regulation to deliver or
furnish any report or return in connection with any such Taxes,
Lessee shall complete the same in a manner satisfactory to the
relevant Tax Indemnitee and in particular shall state therein that
Lessor or Head Lessor, as the case may be, is the owner of the
Aircraft and that the Lessee is exclusively responsible for the use
and operation of the Aircraft and for any such Taxes and Lessee
shall supply a copy of such report or return to the relevant Tax
Indemnitee.
All payments by Lessee hereunder to Lessor shall be free of
withholdings of any nature whatsoever (and at the time Lessee is
required to make any payment upon which any withholding is required,
Lessee shall pay an additional amount such that the net amount
actually received by the Lessor will, after such withholding, equal
the full amount of the payment then due) and shall be free of
expense for collection or other charges.
If Lessee shall have paid any additional amount pursuant to the
first sentence of this paragraph with respect to Taxes not subject
to indemnification pursuant to the provisions of this Section 8.1,
the Lessor for whose benefit such Taxes were paid shall reimburse
Lessee within 10 Business Days of written demand therefor for the
amount of such Taxes so paid by Lessee. For the purpose of Article
1.10 and Article 8, the terms, "Lessor" and "Head Lessor" shall
include
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each group of corporations (and each member thereof) that includes
Lessor or Head Lessor and for which consolidated, combined, unitary
or other group tax returns are filed.
8.2 Except as otherwise specifically provided herein, Lessee shall pay
to Lessor on or after Delivery Date (unless otherwise agreed to be
financed by Lessor or to be paid by Transwede pursuant to the
Tripartite Agreement) upon demand:
(a) all reasonable expenses paid to third parties (including
legal, printing and out-of-pocket expenses) incurred or
payable by Lessor (i) in connection with the negotiation,
preparation and execution of this Agreement and all related
documents, including reasonable out-of-pocket expenses in
connection with this Agreement and (ii) related to any
amendment to or extension of, or the granting of any waiver or
consent under, this Agreement, resulting either from the first
refinancing of the Aircraft by the Bank or from a request of
Lessee;
(b) all reasonable expenses paid to third parties (including legal
fees and disbursements but excluding surveyor costs) payable
or incurred by Lessor in connection with, the enforcement of
or preservation of any rights of Lessor under this Agreement
or otherwise in respect of moneys owing under this Agreement
by Lessee or in respect of any breach of Lessee of any
representation, warranty, covenant or undertaking herein
contained; and
(c) the ongoing annual fees and reasonable out-of-pocket expenses
related to this Agreement of the Owner Trustee, the Voting
Trustee and any trustee on behalf of the Bank (other than
those incurred pursuant to a change in any of such trustees
which was not requested by Lessee);
8.3 Lessee shall pay all stamp, documentary, registration or other like
duties or taxes (including any such duties or taxes payable by a Tax
Indemnitee but excluding all Lessor Taxes) imposed on or in
connection with this Agreement and shall indemnify that Tax
Indemnitee against any liability arising by reason of
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any delay or omission by Lessee to pay such duties or taxes.
8.4 If and to the extent that any sum (the "indemnity sum") constituting
(directly or indirectly) an indemnity to one or more Tax Indemnitees
paid by Lessee to any person other than that Tax Indemnitee shall be
treated as taxable in the hands of the relevant Tax Indemnitee,
Lessee shall pay to the relevant Tax Indemnitee a sum as (after
taking into account any taxation suffered by the relevant Tax
Indemnitee on the indemnity sum) shall reimburse the relevant Tax
Indemnitee for the net amount of any Taxes suffered by them in
respect of the indemnity sum (after taking into account any current
tax savings or other benefits to the relevant Tax Indemnitee
resulting from the payment or accrual of the indemnified expense).
8.5 If and to the extent that any sums payable to a Tax Indemnitee by
Lessee under this Agreement by way of indemnity are insufficient, by
reason of any Taxes payable in respect of those sums, for that Tax
Indemnitee to discharge the corresponding liability to the relevant
third party (including any taxation authority), or to reimburse that
Tax Indemnitee for the cost incurred by it to a third party
(including any taxation authority), Lessee will pay to that Tax
Indemnitee such sum as will after the tax liability has been fully
satisfied leave that Tax Indemnitee with the same net amount (after
taking into account any current tax savings or other benefits to
that Tax Indemnitee resulting from the payment or accrual of the
indemnified expense) as it would have been entitled to receive in
the absence of that liability. For the purpose of computing the
amount of an indemnity payment pursuant to this Article 8.5 and the
amount of any payment to Lessee under Article 8, it shall be assumed
that the relevant Tax Indemnitee is subject to tax on the amount of
each indemnity it receives or accrues under this Agreement and can
use any tax savings to offset Taxes at the highest marginal
statutory rates of tax applicable to that Tax Indemnitee (as
certified to Lessee by an officer of that Tax Indemnitee) at the
time such indemnity or tax savings is received or accrued.
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8.6 If, as a result of any indemnity paid by Lessee or any event giving
rise to an indemnity obligation of Lessee, a Tax Indemnitee at any
time realizes any tax savings, refunds or other reductions in taxes
not previously taken into account in computing the amount of the
indemnity, that Tax Indemnitee shall promptly pay to the Lessee the
amount of such tax savings, refunds or other reductions in taxes;
provided, however, that no Tax Indemnitee will be required to make
any payment to Lessee pursuant to this Article 8.6 so long as a
Default shall be continuing or if Lessee shall not have theretofore
made all payments due to all Tax Indemnitees under this Agreement,
or to the extent that the amount of such payment would exceed the
amount of all prior payments by Lessee to the relevant Tax
Indemnitee pursuant to this Article 8 less the amount of all prior
payments by the relevant Tax Indemnitee to Lessee pursuant to this
Article 8.6. The relevant Tax Indemnitee shall estimate the amount
of such tax savings, refunds and other reductions in Taxes and shall
use reasonable efforts to take such actions in filing its tax
returns and in dealing with taxing authorities to seek and claim
each such tax savings, refund and other reduction in Taxes, but
shall not be obligated to take any such action that it determines in
its sole discretion to involve the imposition or risk of any
material unindemnified cost or expense, and in no event will any
person have any right to inspect the books, records, tax returns or
other documents of any Tax Indemnitee, and the positions to be taken
by any Tax Indemnitee on or with respect to its tax returns and in
any tax proceedings shall be within their sole control.
8.7 Lessee's, and each Tax Indemnitee's obligations under this Article 8
shall continue in full force and effect, notwithstanding the
expiration or earlier termination of the Term hereunder.
8.8 If Lessee disputes the payment of any Taxes payable by a Tax
Indemnitee for which Lessee is responsible under this Agreement,
that Tax Indemnitee will take such action as Lessee may reasonably
request at Lessee's expense to contest that payment but that Tax
Indemnitee will not be obliged to take any such action:
(a) which that Tax Indemnitee considers in good faith may result
in the imposition or risks of any material liability cost, or
expense for which that
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Tax Indemnitee is not indemnified to its satisfaction; or
(b) which that Tax Indemnitee considers not to have a reasonable
prospect of success; or
(c) for which Lessee has not made adequate provision to the
satisfaction of that Tax Indemnitee in respect of the expense
concerned.
8.9 Lessor covenants and agrees to deliver to Lessee, (a) within 30 days
prior to January 1, 1996 and each January 1 falling every three
years thereafter (or at such other date as prescribed by United
States Treasury Regulations) as long as this Agreement has not been
terminated, two accurate and complete original copies of Internal
Revenue Service Form 1001 (or any successor form), dated the date
hereof or January 1, 1996 (or such subsequent January 1 or other
date) signed by Beneficiary, as appropriate, and such other related
forms (including any certificate with respect thereto) as Lessee may
reasonably request, or (b) within 30 days of the signing of this
Agreement (but in all events prior to the date of the first payment
of Rent to Lessor under this Agreement) and within 30 days prior to
the beginning of each taxable year of Lessor beginning subsequent to
the date of this Agreement (or at such other date as prescribed by
United States Treasury Regulations), two accurate and complete
original copies of Internal Revenue Service Form 4224 (or any
successor form), signed by Beneficiary, dated as appropriate, and
such other related forms (including any certificate with respect
thereto) as Lessee may reasonably request. In addition, Lessor shall
deliver to Lessee two accurate and complete original copies of Form
1001 or Form 4224 signed by Beneficiary, at any time that a change
in circumstances renders the previous form inaccurate in any
material respect. Nothing in this Article 8.9 shall be construed as
imposing on the Lessee any obligation whatsoever, including, without
limitation, to indemnify Lessor or any other party for U.S.
withholding taxes.
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9. LIENS
9.1 Lessee, during the Term, shall not create or suffer to exist any
lien, attachment, mortgage or other encumbrance upon or against the
Aircraft, or any of its rights under this Agreement, other than the
Mortgage, the Security Assignment and Permitted Liens. If at any
time a lien, attachment, mortgage, or other encumbrance except as
permitted above shall be created or suffered to exist by Lessee, or
be levied upon the Aircraft or any of its rights under this
Agreement, Lessee shall forthwith notify Lessor and cause the same
forthwith to be discharged by bond or otherwise. In the event Lessee
shall fail to discharge any such lien, attachment, mortgage or other
encumbrance, Lessor, Head Lessor or the Bank shall be entitled (but
not bound) to discharge the same, in which event Lessee shall pay to
Lessor, on demand, the amount paid by Lessor and/or Head Lessor
and/or the Bank, together with Lessor's and/or Head Lessor's and/or
the Bank's losses, costs and expenses, including reasonable legal
fees and expenses.
10. INDEMNIFICATION
10.1 LESSEE SHALL RELEASE AND DEFEND, HOLD HARMLESS AND INDEMNIFY ANY
AND/OR ALL OF THE INDEMNITEES, FROM AND AGAINST ANY AND ALL CLAIMS,
PROCEEDINGS, SUITS, JUDGMENTS, COSTS, EXPENSES, PENALTIES, FINES AND
LIABILITIES, DIRECT AND CONSEQUENTIAL DAMAGES AND LOSSES, INCLUDING
WITHOUT LIMITATION COSTS AND EXPENSES INCIDENTAL THERETO, OF
WHATSOEVER KIND AND NATURE, AND INCLUDING REASONABLE LEGAL FEES AND
EXPENSES BUT EXCLUDING ANY TAXES, INDEMNITY FOR WHICH IS ENCOMPASSED
SOLELY IN ARTICLE 4.1 AND ARTICLE 8 (EACH A "CLAIM"), ATTRIBUTABLE
TO ACTS OR OMISSIONS OCCURRING DURING THE TERM OF THIS AGREEMENT,
WHICH MAY BE SUFFERED BY, ASSERTED AGAINST, CHARGED TO OR
RECOVERABLE FROM, DIRECTLY OR INDIRECTLY, ANY AND/OR ALL OF THE
INDEMNITEES:
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(A) RELATING TO, ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE
POSSESSION, DELIVERY, PERFORMANCE, MANAGEMENT, OWNERSHIP,
REGISTRATION, CONTROL, MAINTENANCE, CONDITION, SERVICE,
REPAIR, OVERHAUL, LEASING, USE, OPERATION OR RETURN OF THE
AIRCRAFT, ANY ENGINE OR ANY PART, OR THE PERFORMANCE OR
NON-PERFORMANCE OF ANY AND/OR ALL OF THE INDEMNITEES OF
SERVICES OR DELIVERY OF ANY THINGS IN CONNECTION WITH THE
AIRCRAFT DURING THE TERM, OR OTHERWISE IN CONNECTION WITH THIS
AGREEMENT, WHETHER OR NOT ARISING IN TORT OR OCCASIONED IN
WHOLE OR IN PART BY THE FAULT OR NEGLIGENCE OF ANY AND/OR ALL
OF THE INDEMNITEES; OR
(B) AS A CONSEQUENCE OF ANY DESIGN, ARTICLE OR MATERIAL IN THE
AIRCRAFT, ANY ENGINE OR ANY PART OR ITS OPERATION OR USE
CONSTITUTING AN INFRINGEMENT OF PATENT (TO THE EXTENT AND
SCOPE AND SUBJECT TO THE LIMITATIONS SET FORTH IN PART C OF
EXHIBIT G OF THE SUPPORT SERVICES AGREEMENT), COPYRIGHT,
TRADEMARK, DESIGN OR OTHER PROPRIETARY RIGHT OR A BREACH BY
LESSEE OF ANY OBLIGATION OF CONFIDENTIALITY OWED TO ANY
PERSON;
EXCLUDING, HOWEVER, FROM THE FOREGOING ANY SUCH CLAIM TO THE
EXTENT THAT SUCH CLAIM RESULTS FROM (I) THE FAILURE OF
TRANSWEDE TO SATISFY ANY OF ITS OBLIGATIONS TOWARDS
BENEFICIARY AND/OR FOKKER UNDER THE TRIPARTITE AGREEMENT, OR
(II) THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH
INDEMNITEE, OR (III) FROM ANY MISREPRESENTATION BY SUCH
INDEMNITEE CONTAINED IN THIS AGREEMENT OR ANY BREACH BY SUCH
INDEMNITEE OF ANY COVENANT SET FORTH IN THIS AGREEMENT.
10.2 The indemnities contained in this Article 10 shall continue in full
force and effect notwithstanding the expiration or other termination
of this Agreement or of the letting of the Aircraft hereunder.
10.3 The indemnities contained in this Article 10 are given to the Lessor
for itself and as agent and trustee on behalf of the other
Indemnitees
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10.4 Notwithstanding anything to the contrary contained herein, Lessee
does not release and does not agree to defend, hold harmless or
indemnify under this Agreement (and without limiting any obligations
or indemnities contained in any other agreement with Lessee) Fokker
or any other Indemnitee in its capacity as manufacturer or seller of
the Aircraft from or against (i) claims of third parties made
directly against Fokker or such Indemnitee, based on its product
liability or its status as manufacturer or Seller, or (ii) claims
made against Fokker or such Indemnitee based on the warranties or
indemnities contained in the Product Assurance Document which is
Exhibit G of the Support Services Agreement, or (iii) the matters
described in Article 10.1(B).
10.5 If any Indemnitee has knowledge of the occurrence of any Claim,
liability or other matter for which it is or may be entitled to be
indemnified hereunder, it shall give prompt written notice thereof
to the Lessee. Each Indemnitee shall cooperate in good faith with
Lessee and supply such information as may reasonably be requested by
Lessee to enable Lessee to investigate, defend or contest any Claim,
liability or other matter for which Lessee may be required to
indemnify an Indemnitee hereunder. In the event that Lessee pays any
amount to an Indemnitee pursuant to this Article 10, Lessee shall be
subrogated to all rights of the Indemnitee in respect of the Claim,
liability or other matter indemnified against giving rise to such
payment. Lessee or its insurers shall have the right, unless an
Event of Default shall have occurred and be continuing and such
matter is not covered by insurance, to investigate or (provided that
Lessee or its insurers shall agree not to dispute liability
hereunder or under any insurance policies pursuant to which coverage
is sought and provided that Lessee shall have consulted with Lessor
prior thereto), defend or compromise any Claim, and Lessor shall
cooperate with Lessee with respect thereto.
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11. INSURANCE
11.1 On or before the Expected Delivery Date of the Aircraft and
throughout the Term, Lessee shall carry and maintain in full force
and effect, at its own cost and expense, in such forms, on such
conditions and with such insurers and, if requested, reinsurers and
through such insurance and, if requested, reinsurance brokers as are
satisfactory to Lessor, the following insurances with respect to the
Aircraft, Engines and Parts (herein referred to as "the
Insurances"):
(a) All Risks Aircraft Hull insurance of the type usually insured
against by commercial airlines engaged in the same or similar
business and owning or operating similar aircraft (including
Engines and Parts while not installed on the Aircraft and
including Extended Coverage Endorsement (Aircraft Hull) AVN51
or equivalent on the Agreed Value. The insurance may be
subject to a deductible in respect of losses other than total
loss, arranged total loss or constructive total loss of not
more than $100,000.00 (Dollars One Hundred Thousand) for each
accident.
(b) If operated outside the United States and Canada, Aircraft
Hull War and Allied Perils insurance covering the risks
excluded from the All Risks Aircraft Hull insurance specified
in paragraph (a) above by the terms of the War, Hi-Jacking and
Other Perils Exclusion Clause AVN.48B except paragraph (b)
thereof and shall include cover in respect of confiscation,
nationalization, seizure, restraint, detention, appropriation
for title or use by or under the order of any Government
Entity of the State of Registration.
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(c) Comprehensive Airline Liability insurance (including without
limitation aircraft Third Party Liability, Passenger and Crew
Liability (including Baggage and Personal Effects)), Cargo
Liability, Mail Liability, Personal Injury Liability,
Contractual Liability, Hangar Keeper's Liability, Aircraft
Products Liability and General Third Party Liability of the
types usually insured against by commercial airlines engaged
in the same or similar business and owning or operating
similar (but not necessarily Fokker-manufactured) aircraft in
an amount of not less than $500,000,000.00 (Dollars Five
Hundred Million) Combined Single Limit any one occurrence each
Aircraft but limited in respect of Personal Injury to the
equivalent of $25,000,000.00 (Dollars Twenty Five Million) any
one offense and in the aggregate.
Such insurance shall include cover in respect of the risks
excluded by War, Hi-Jacking and Other Perils Exclusion Clause
AVN.48B except paragraph (b) thereof.
This insurance may be subject to deductibles in respect of
passengers baggage and personal effects of not more than
$1,250.00 (Dollars One Thousand Two Hundred Fifty) any one
claim and in respect of cargo and mail of not more than
$5,000.00 (Dollars Five Thousand) any one claim. Such
deductibles shall not apply to claims arising from accidents
to the carrying aircraft.
(d) All Risks insurance on Engines and Parts while any such items
are not installed on the Aircraft and in respect of which
cover is not provided under the All Risks Aircraft Hull
insurance and/or Aircraft Hull War and Allied Perils insurance
(respectively specified in paragraphs (a) and (b) above) of
the type usually insured against by commercial airlines
engaged in the same or similar business and owning or
operating similar aircraft for not less than full replacement
value. If Engines and Parts are located outside the United
States and Canada, such insurance shall include War and Allied
Perils to the extent that such insurance is customarily
available in the international insurance market for this type
of insurance.
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This insurance may be subject to a deductible of not more than
$10,000.00 (Dollars Ten Thousand).
The Lessor will accept a United States government indemnity (as
referred to in Article 5.3) in lieu of the foregoing or as otherwise
required under this Article 11. Lessor's current requirements as at
the date of this Agreement as to the Insurances are as specified in
this Article and in Appendices H and I. Lessor reserves the right to
amend, and will cooperate with Lessee reasonably to amend, the
insurance requirements of this Article 11 to reflect changes in
insurance practice.
If required by the first paragraph of Article 11.1, the Lessee shall
procure that the insurers effect reinsurances in the same form and
conditions through such reinsurance brokers and with such reinsurers
and for such proportions as are satisfactory to Lessor.
11.2 All Insurances to be carried in accordance with Article 11.1 above
shall:
(a) in respect of All Risks Aircraft Hull insurance, Aircraft Hull
War and Allied Perils insurance and All Risks insurance on
Engines and Parts:
(i) name the Lessor, Head Lessor and the Bank and their
respective successors and assigns as additional
assureds;
(ii) provide that all claims in respect of the Aircraft,
Engines and Parts shall be payable to Lessor or as it
may direct, such payee to be named Loss Payee; provided,
that partial loss amounts up to the Partial Loss Amount
set forth in Appendix B shall be payable to Lessee
unless the insurers have been given notice that a
Default has occurred; and
(iii) if applicable, provide in respect of Hull All Risks and
Hull War and Allied Perils for a 50/50 Claims Settlement
Clause in the form of AVS.103;
(b) in respect of Comprehensive Airline Liability insurance:
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(i) name the Lessor, its successors and assigns and its
shareholders, subsidiaries, directors, officers, agents,
employees and the Indemnitees as additional assureds;
and
(ii) provide that the insurance shall operate in all respects
as if a separate policy had been issued covering each
party insured thereunder, but this provision shall not
operate to include any claim howsoever arising in
respect of loss or damage to the Aircraft, Engines and
Parts insured under the All Risks Hull, Hull War and
Allied Perils or All Risks insurance of the assured.
Notwithstanding the foregoing the total liability of
insurers in respect of any and all assureds shall not
exceed the limits of liability stated in the policy;
(c) in respect of all Insurances:
(i) be effective worldwide except for territories approved
in writing by the Lessor;
(ii) provide that insurers waive all rights of subrogation
against the Lessor, its subcontractors, FAUSA, Fokker,
the Head Lessor, the Bank, and their respective
officers, directors, employees, servants, agents,
successors and assigns;
(iii) provide that in the event that the Insurances are
canceled (including cancellation for nonpayment of
premium) or are materially changed such cancellation or
change shall not be effective as to the interest of the
Lessor until thirty (30) days (but seven (7) days or
such lesser period as is customarily available in
accordance with policy conditions in respect of war and
allied perils) after confirmed receipt by Lessor of
written notice by insurers of such cancellation or
change;
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(iv) provide that in respect of the interests of the
Additional Assureds, the Insurances shall not be
invalidated by any act, neglect, omission,
misrepresentation or non-disclosure on the part of the
Lessee or any other party other than the Additional
Assured seeking to make a claim thereunder, and shall
insure each Additional Assured regardless of any breach
or violation of any warranties, declarations or
conditions contained in such policies by the Lessee or
any other party other than the Additional Assured
seeking to make a claim thereunder;
(v) provide that the Additional Assureds shall have no
responsibility for premium and insurers shall waive any
right of set-off or counterclaim against the Additional
Assureds except in respect of outstanding premium in
respect of the Aircraft, Engines and Parts subject of a
claim;
(vi) not provide for any deductible or self insurance other
than the deductibles allowed under the terms of Article
11.1 above;
(vii) be primary without right of contribution from any other
insurance carried by Lessor, Lessee or any other person;
and
(viii) be denominated in Dollars.
11.3 If required by the first paragraph of Article 11.1, the re-insurance
policies shall:
(a) provide that cover shall be identical to the cover provided by
the original insurances and be subject to the same terms and
conditions as the original insurances;
(b) provide that so far as the respective interests of the
Additional Assureds are concerned the reinsurance shall not be
invalidated by any act, neglect, omission, misrepresentation
or nondisclosure on the part of the reinsured party;
(c) confirm the insurers' agreement to the provision of paragraph
(d) below,
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(d) include a "cut-through" clause in the following terms or in
such other terms as may be satisfactory to Lessor:
"In respect of All Risks Aircraft Hull insurance, Aircraft
Hull War Risk and Allied Perils insurance as described in
Article 11.1(a) and (b) above and All Risks insurance on any
Engine and Parts as described in Article 11.1(d) above, the
reinsurers and the reassured hereby agree that in the event of
any claim arising under the relevant reinsurances the
reinsurers shall in lieu of payment to the reassured, its
successors in interest and assigns pay to the Loss Payee
specified in the primary insurances all sums payable under or
in connection with such reinsurances by virtue of any
reinsured loss of, or damage to, the Aircraft, Engines and
Parts, without any deduction or deductions whatsoever, other
than any outstanding premium in respect of the Aircraft,
Engines or Parts the subject of the claim, it being understood
and agreed that any such payment by the reinsurers shall fully
discharge and release the reinsurers from any and all further
liability in connection therewith.
In respect of Comprehensive Airline Liability insurance as
described in Article 11.1(c) above, the reinsurers and
reassured hereby agree that in the event of any claim arising
under the relevant reinsurances, the reinsurers shall in lieu
of payment to the reassured, its successors in interest and
assigns pay to the person or party who has sustained the
relevant loss (or as reimbursement of any payment made by any
Additional Assureds) all sums payable under such reinsurances
by virtue of such reinsured loss, without any deduction or
deductions whatsoever, it being understood and agreed that any
such payment by the reinsurers shall fully discharge and
release the reinsurers from any and all further liability in
connection therewith"; and
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(e) provide that the reinsurers and reassured agree that in the
event that the reassured, its successors in interest and
assigns shall at any time be or become insolvent or suspend
business or file a petition in bankruptcy or be adjudicated
insolvent or bankrupt or admit in writing its inability to pay
its debts as they become due, or make a general assignment for
the benefit of creditors or that a receiver or liquidator or
assignee or trustee or state commissioner of insurance be
appointed in respect of the reassured its successors in
interest or assigns or any substantial part of its property
for the purpose of liquidation on account of insolvency, then
the reinsurers, in lieu of payment to the reassured, its
successors in interest or assigns, shall pay upon demand that
portion of any loss due to the party entitled thereto under
the terms of the original insurance for which such reinsurers
would under the terms of the reinsurance be liable to pay the
reassured, its successors in interest or assigns, less any
amounts already paid, it being understood and agreed that any
such direct payment by reinsurers shall fully discharge and
release the reinsurers from any and all further liability for
such payment made.
11.4 Prior to the Expected Delivery Date and thereafter during the Term,
at least five (5) Business Days prior to the renewal date of any
Insurance required or maintained by Lessee under Article 11.1 but in
no event less than once in each 12 month period, Lessee shall
furnish or cause to be furnished to Lessor by the insurer or
insurance broker and the reinsurance broker
1) a certificate of insurance describing in detail the insurance
then carried and maintained, and certifying that such
insurance complies with the terms of this Agreement,
including:
(i) confirmation that the insurance/ reinsurance has been
placed with the insurers/reinsurers required (giving the
name of such insurers reinsurers), the insured/reinsured
amount and the period of the policy and
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(ii) confirmation that all premiums due to
insurers/reinsurers have been paid,
and
2) a letter of undertaking from Lessee's brokers and, if
required, from the reinsurance brokers.
Such certificate(s) of insurance and letter(s) of undertaking
shall be in form and substance satisfactory to Lessor.
In the event that Lessee shall fail to effect, maintain or cause to
be effected or maintained, insurance as required by this Article 11,
Lessor, Head Lessor or the Bank may at its option, but without any
obligation to do so, and without prejudice to Lessor's, Head
Lessor's and the Bank's other rights or remedies hereunder, maintain
such insurance or provide such or a similar insurance, and, in such
event, Lessee shall, upon demand, promptly reimburse to Lessor, Head
Lessor or the Bank the cost thereof, including interest thereon at
the rate referred to in paragraph 6 of Appendix D.
11.5 In the event of any damage to the Aircraft, Engines or Parts during
the Term not constituting a Casualty Occurrence, Lessee shall, if so
consented to by Lessor (such consent not to be unreasonably
withheld), repair, or cause the same to be repaired by an Authorized
Maintenance Performer at its sole cost and expense. Except as
otherwise provided in Section 11.2(a) (ii), Lessor and Lessee agree
that all insurance proceeds payable in connection with any such
damage shall be payable directly to Lessor. In such event any
insurance proceeds received by Lessor shall be applied to reimburse
Lessee for such cost and expense. Any excess remaining shall, unless
a Default shall have occurred and be continuing, be paid over to
Lessee.
11.6 Intentionally Omitted.
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11.7 When used in this Article 11, the expression Additional Assured(s)
denotes:
(a) in relation to those insurances referred to in Article
11.2(a), those persons referred to in subparagraph (i) of
Article 11.2(a); and
(b) in relation to those insurances referred to in Article
11.2(b), those persons referred to in sub-paragraph (i) of
Article 11.2(b).
12. ASSIGNMENT AND SUBLETTING
12.1 Lessee shall not assign any of its rights or obligations or delegate
any of its duties under this Agreement and, except as permitted by
Article 5.1 above, Lessee shall not sublet or otherwise part with
possession of the Aircraft or any Part thereof unless previously
approved by Lessor in writing (such consent not to be unreasonably
withheld).
Lessee may wet lease the Aircraft whereby the term "wet lease" shall
mean an agreement whereby Lessee at all times retains operational
control of the cockpit and the Aircraft including all of its
maintenance.
12.2 This Agreement, the Aircraft and Lessor's interest in each thereof
is freely assignable and alienable by Lessor upon written notice to
Lessee in accordance with Article 12.3, provided, however, that so
long as the Aircraft shall be leased to Lessee under this Lease,
Lessor will not sell, assign, convey or otherwise transfer
absolutely (and not for security) any of its right, title, or
interest in and to this Agreement or the Aircraft to any person
unless Lessor and the proposed transferee (the "Transferee") have
complied with the following conditions:
(i) Lessor shall give Lessee written notice of such transfer
at least 3 Business Days before the date of such
transfer, specifying the name and address of the
proposed Transferee;
(ii) the Transferee shall not be an airline or a commercial
air carrier or person controlling, controlled by or
under common control with an airline or a commercial air
carrier which is in direct competition with Lessee in
the United States;
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(iii) the Transferee shall qualify as a "citizen of the United
States" within the meaning of Section 40102(a) (15) of
Title 49 of the United States Code by a Voting Trust
Agreement or otherwise; and
(iv) on the transfer date the Lessor and the Transferee shall
enter into an agreement or agreements in which the
Transferee confirms that it shall be deemed a party to
this Lease and agrees to be bound by all the terms of,
and to undertake all of the obligations of, the Lessor
contained in this Agreement and shall deliver a
certificate of quiet enjoyment to Lessee in a form and
substance reasonably acceptable to it and Lessee shall
receive an opinion of counsel to the Transferee stating,
with the customary assumptions and exceptions, that such
agreement or agreements has been duly authorized,
executed and delivered and constitute the legal, valid
and binding obligations of the Transferee enforceable in
accordance with their terms and that the entry into such
agreement(s) does not violate any laws or agreements
applicable to such Transferee.
The agreements, covenants, obligations and liabilities contained
herein, including but not limited to all obligations to pay Rent and
indemnify Lessor, are made for the benefit of Lessor, Beneficiary,
any assignee including the Head Lessor and/or the Bank as security
assignee, and their respective successors and assigns,
notwithstanding the possibility that any such person was not
originally a party to this Agreement or may, at the time any
enforcement is sought, no longer be a party to this Agreement.
Lessee shall comply, at Lessor's cost and expense, with all
reasonable requests of Lessor, its successors and assigns respecting
the assignment and Lessee's acknowledgment of the assignee as
Lessor. Notwithstanding anything contained in this paragraph to the
contrary, no assignment of Lessor's interest in this Agreement or
the Aircraft or Beneficiary's interest in the Trust Estate shall
alter the terms of this Agreement in so far as the costs to Lessee
of the performance of its obligations to pay
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Rent, Reserve Rate, and Deposits hereunder and, except as otherwise
expressly provided in this Agreement, the rights and liabilities of
Lessee under this Agreement are concerned. Lessee's rights under
this Agreement shall not be subject or subordinate to any Security
Assignment or Mortgage executed by Lessor or Beneficiary (which
Security Assignment or Mortgage shall be subject to this Agreement).
12.3 It is acknowledged and agreed that:
(a) Lessor has the right to assign all of its right, title and
interest in and to this Agreement and the Aircraft to the Head
Lessor and/or the Bank. In order to comply with its
obligations in relation thereto, Lessor will, upon such
assignment, give Lessee a notice of assignment and it is
agreed that Lessee shall forthwith acknowledge the same by
executing and delivering to Lessor on behalf of Head Lessor
and/or the Bank a consent to assignment in form and substance
reasonably acceptable to Head Lessor and/or the Bank;
(b) Lessor may be required by Head Lessor and/or the Bank to
assign to Head Lessor and/or the Bank all of its rights, title
and interest in and to the Insurances (other than liability
insurances). In order to comply with its obligations in
relation thereto, Lessor, upon assignment of this Agreement
pursuant to Article 12.3 (a), shall give the insurers a notice
of assignment of Insurances and the Lessee shall procure that
such insurers forthwith acknowledge the same by executing and
delivering to Lessor an acknowledgment in form and substance
acceptable to Head Lessor and/or the Bank;
(c) Lessor may from time to time require to amend, modify or
replace the security arrangements in respect of the financing
or refinancing of the Aircraft and Lessee agrees to cooperate
with Lessor in connection therewith and, in particular (but
without limiting the generality of the foregoing), to change
the plates provided for in Article 4.3 and to execute and
deliver such other or further acknowledgments of assignment or
other documents and to do such other things as Lessor
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may reasonably require to be executed and delivered;
(d) Upon any financing or refinancing of the Aircraft as
contemplated by this Article 12.3, Lessee will promptly and
duly execute and deliver to Lessor, Head Lessor or the Bank
such other documents and assurances and take such further
action as may from time to time be reasonably requested in
order more effectively to carry out the intent and purpose of
this Agreement, the Mortgage and the Security Assignment.
Lessee will procure on request of Lessor that the independent
counsel will confirm to the Head Lessor and the Bank that the
Head Lessor and the Bank may rely on the terms of the opinion
provided pursuant to Article 2.2 as if the Head Lessor and the
Bank were each addressees of such opinion;
(e) Title to the Aircraft may be transferred by Lessor to the Head
Lessor to be indicated by Lessor or Beneficiary's interest in
the Trust Estate may be transferred by Beneficiary, in either
case for the purpose of enabling Lessor to raise finance in
relation to the Aircraft. In such event either a lease
agreement shall be executed in respect of the Aircraft between
the Head Lessor and Lessor ("Head Lease") in order to enable
Lessor to continue to lease the Aircraft to Lessee in
accordance with this Agreement or Lessor may assign all or
part of its rights, title and interest in and to this
Agreement and the Aircraft to Head Lessor pursuant to Article
12.2 or Beneficiary may assign all of its right, title and
interest in and to the Trust Estate and Lessee agrees to
cooperate with Lessor in connection therewith and, in
particular (but without limiting the generality of the
foregoing), to cooperate in the execution of any documents,
agreements and amendments to this Agreement that are necessary
in connection with such Head Lease or such assignment and to
do such other things as Lessor may require to be executed and
delivered so long as any such amendments to this Agreement do
not adversely affect Lessee; and
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(f) Lessee shall not be liable to (1) any Transferee or (2) any
assignee, purchaser, or transferee of the beneficial interest
of the Trust Estate (a "Beneficiary Transferee") for any
payment of Taxes pursuant to this Agreement in excess of the
amount that would have been payable to the Lessor or the
Beneficiary originally party hereto, as the case may be, if
that party had remained as the Lessor or the Beneficiary,
respectively.
13. DISCLAIMER, REPRESENTATIONS AND WARRANTIES
13.1 NEITHER LESSOR NOR BENEFICIARY IS A MANUFACTURER OF THE AIRCRAFT OR
OTHER AIRCRAFT OR A DEALER IN SIMILAR AIRCRAFT AND HAS NOT INSPECTED
THE AIRCRAFT PRIOR TO DELIVERY TO AND ACCEPTANCE BY LESSEE. LESSEE
(I) ACKNOWLEDGES AND AGREES THAT THE AIRCRAFT IS BEING DELIVERED BY
LESSOR TO LESSEE "AS IS" AND "WHERE IS" AND THAT NO CONDITION,
WARRANTY OR REPRESENTATION OF ANY KIND WHATSOEVER HAS BEEN OR IS
GIVEN BY OR IS TO BE IMPLIED ON THE PART OF LESSOR OR BENEFICIARY IN
RELATION TO THE AIRCRAFT, AND (II) HEREBY WAIVES AS BETWEEN ITSELF
AND LESSOR OR BENEFICIARY ALL ITS RIGHTS, EXPRESS OR IMPLIED
(WHETHER STATUTORY OR OTHERWISE), TO MAKE CLAIMS IN RESPECT OF THE
AIRCRAFT RELATING TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION,
DESIGN, OPERATION, CONFORMITY TO SAMPLES OR MODELS, COMPLIANCE WITH
SPECIFICATIONS, MERCHANTABILITY OR FITNESS OR SUITABILITY FOR USE
FOR A PARTICULAR PURPOSE OF THE AIRCRAFT OR ANY PART THEREOF,
QUALITY OF THE MATERIAL OR WORKMANSHIP, ABSENCE OF LATENT OR OTHER
DEFECTS, WHETHER OR NOT DISCOVERABLE, ABSENCE OR ANY INFRINGEMENT OF
ANY PATENT, TRADEMARK OR COPYRIGHT, REMEDY IN TORT, BASED ON STRICT
LIABILITY OR NEGLIGENCE, ACTUAL OR IMPUTED, AND LESSEE HEREBY WAIVES
ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED,
WITH RESPECT TO THE AIRCRAFT, IT BEING UNDERSTOOD THAT ALL SUCH
RISKS, AS BETWEEN LESSEE AND LESSOR OR BENEFICIARY ARE TO BE BORNE
BY LESSEE.
Nothing in this Agreement shall afford Lessor or any Indemnitee any
wider or greater exclusion of liability for death or bodily injury
than would be permitted by the Governing Law.
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This paragraph shall not be modified except by a written agreement
signed on behalf of Lessor and Lessee by their respective duly
authorized representatives.
13.2 Lessor and Lessee agree that this Article 13 has been the subject of
discussion and negotiation and is fully understood by the parties,
and that the amount of the Rent and other mutual agreements of the
parties set forth in this Agreement were arrived at in consideration
of the provisions of this Article 13 specifically including the
waiver by Lessee set forth in Article 13.1.
13.3 So long as no Event of Default has occurred and is continuing Lessor
agrees to assign or otherwise make available to Lessee for the
duration of the Term such rights as Lessor may have under any
warranty, express or implied, with respect to the Aircraft made by
the Manufacturer of the Aircraft, any subcontractor or supplier
thereof, or any other seller thereof, to the extent that the same
may be assigned or otherwise made available to Lessee and without
warranty by Lessor as to enforceability of any of the rights so
assigned.
To the extent that the same may not be assigned or otherwise made
available to Lessee, Lessor agrees to exert its reasonable efforts,
at Lessee's expense, to enforce such rights as Lessor may have with
respect thereto for the benefit of Lessee; provided however, that
upon an Event of Default all such rights shall immediately revert to
Lessor including all claims thereunder, whether or not perfected,
unless such Event of Default has forthwith been remedied by Lessee.
13.4 Lessee represents and warrants that:
(a) Lessee is a corporation organized and existing in good
standing, in accordance with the Laws of the State of
Incorporation, and has the corporate power and authority to
carry on its business as presently conducted and to perform
its obligations under this Agreement, is a Certificated Air
Carrier operating under a certificate of public convenience
and necessity issued by the Secretary of Transportation and is
the holder of all necessary licenses issued by all Government
Entities having jurisdiction to authorize or permit Lessee to
engage in air transportation and
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to perform and comply with its obligations hereunder;
(b) This Agreement has been duly authorized by all necessary
corporate action on the part of Lessee, and neither the
execution and delivery nor the consummation of the
transactions contemplated hereby nor compliance by Lessee with
the provisions of this Agreement will 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;
(c) The execution and delivery by Lessee of this Agreement, and
all of the transactions by Lessee contemplated hereby, have
received, and Lessee has complied with, every necessary
consent, approval, order, or authorization of, or registration
with, or the giving of prior notice to, any Government Entity
having jurisdiction with respect to the execution and delivery
of this Agreement or the validity and enforceability of this
Agreement or the satisfaction of all monetary and other
obligations hereunder;
(d) This Agreement has been duly entered into and delivered by
Lessee and constitutes the valid, legal and binding
obligations of Lessee, enforceable in accordance with their
terms subject to principles of equity, laws relating to
bankruptcy, insolvency or liquidation or any other laws or
legal procedures generally affecting the enforcement of
creditor's rights or the rights of contracting parties;
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(e) Assuming the proper deregistration of the Aircraft and any
mortgage(s) placed thereon from the Swedish aircraft registry
it is not necessary or advisable under the Laws of the State
of Registration in order to ensure the validity, effectiveness
and enforceability of this Agreement, the Mortgage or the
Security Assignment or to protect the property rights of
Lessor, Beneficiary, Head Lessor or the Bank in the Aircraft
and under the Mortgage and Security Assignment that this
Agreement, the Mortgage, the Security Assignment or any other
instrument relating thereto be filed, registered or recorded
or that any other action be taken under the Laws of the State
of Incorporation and the State of Registration to perfect the
property rights of Lessor, Head Lessor and the Bank in the
Aircraft other than the filing of all such instruments with
the Air Authority, the filing of UCC-l financing statements in
relevant jurisdictions, and the Mortgage and Security
Assignment will have priority in all respects over the claims
of all creditors of Lessee in or against the Aircraft, except
for Permitted Liens;
(f) Under the Laws of the State of Incorporation and the State of
Registration Lessee will not be required to make any deduction
or withholding from any payment it may make under this
Agreement. There is no withholding or other tax to be deducted
from any payment to be made by Lessee under this Agreement;
(g) There are no suits or legal proceedings (including any
administrative proceeding) pending or threatened before any
court or administrative agency against Lessee which, if
adversely determined, would have a material adverse effect
upon its financial condition or business or its ability to
perform its obligations hereunder;
(h) There has been no material adverse change in the financial
position of Lessee or in the consolidated financial position
of Lessee and its subsidiaries from that set forth in the
financial statements last furnished pursuant to Article 6.4
and neither Lessee nor any of its subsidiaries have any
significant liabilities (contingent or
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otherwise) which are not disclosed by, or reserved against in
such financial statements; and
(i) The chief executive office (as such term is used in Sections
9-103 and 9-401 of the Uniform Commercial Code) of Lessee is
at the date hereof located at Chicago, Illinois, and
commencing August 7, 1995 shall be located in Durham, North
Carolina and Lessee agrees to give at least 30 days' prior
notice to Lessor of any relocation of said chief executive
office or place where such records are kept and of any change
in its name.
13.5 The representations and warranties in Article 13.4 (other than in
clauses (f), (g) and (h)) shall be deemed to be repeated by Lessee
on and as of each Rent Date as if made with reference to the facts
and circumstances existing on each such date.
13.6 Lessor represents, warrants and covenants that:
(a) Lessor is a national banking association duly organized and
validly existing in good standing under the laws of the United
States of America, qualifies as a "citizen of the United
States" within the meaning of Section 40102(a) (15) of Title
49 of the United States Code and has the corporate power and
authority to carry on its business as presently conducted and
to perform its obligations under this Agreement; if at any
time Lessor shall have actual knowledge that it has ceased to
qualify as such a citizen, it will, if such citizenship is
then necessary to maintain the eligibility of the Aircraft for
United States registration, take such action as may be
necessary to maintain such United States registration;
(b) This Agreement has been duly authorized by all necessary
corporate action on the part of Lessor, has been duly entered
into and delivered by Lessor in accordance with the Trust
Agreement and constitutes the valid, legal and binding
obligations of Lessor, enforceable in accordance with their
respective terms subject to principles of equity, laws
relating to bankruptcy, insolvency or liquidation or any other
laws or legal procedures generally affecting the enforcement
of creditor's rights or the rights of contracting parties;
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(c) Neither the execution and delivery nor the consummation of the
transactions contemplated hereby nor compliance by Lessor with
the provisions of this Agreement will result in any breach of,
or constitute any default under, any indenture or any
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; and
(d) Except for the registration of the Aircraft and the issuance
of the licenses described in Article 4.1, neither the
execution and delivery nor the consummation of the
transactions contemplated hereby nor compliance by Lessor with
the provisions of this Agreement requires the consent or
approval of, the giving of notice to, or the registration
with, or the taking of any other action in respect of any
Government Entity.
The representations and warranties contained in clauses (a), (b) and
(c) of this Article 13.6 are made by Lessor in its individual
capacity.
13.7 Lessor undertakes that, so long as no Event of Default shall have
occurred and be continuing, Lessor will not interfere with the
peaceful and quiet use and enjoyment of the Aircraft by Lessee in
accordance with the terms of this Agreement.
14. COVENANTS OF LESSEE
14.1 Lessee hereby covenants with Lessor that from the Delivery Date and
during the Term and until redelivery of the Aircraft to Lessor in
accordance with Article 16 it will:
(a) remain in and continue to operate as a Certificated Air
Carrier holding a valid certificate of public convenience and
necessity issued by the Secretary of Transportation, to
preserve its corporate existence and to satisfy its debts and
obligations as they fall due;
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(b) comply with all Laws and regulations for the time being in
force in the State of Incorporation, the State of Registration
and in any country to, from, in or over which the Aircraft is
flown, the failure with which to comply is likely to have a
material adverse effect on Lessee; provided, however, that
such failure shall have no adverse effect on the Aircraft or
on the interests of Lessor, Head Lessor or the Bank therein or
in this Agreement or on the Insurances required to be
maintained pursuant to Article 11;
(c) (i) at its own expense from time to time do and perform such
other and further acts and execute and deliver any and all
further instruments as may be required by Law (in the United
States but not in any jurisdiction outside the United States
unless directly required due to Lessee's operation), and (ii)
at Lessor's expense (insofar as not covered in Article 8.2(a))
from time to time do and perform such other and further acts
and execute and deliver any and all further instruments as may
be reasonably requested by Lessor to establish, maintain and
protect the respective rights and remedies of Lessor, Head
Lessor and the Bank and to carry out and give effect to the
intents and purposes of this Agreement and the parties;
(d) notify Lessor immediately of the occurrence of any Default;
(e) obtain and maintain all necessary government and other
certificates, consents, licenses, permits and authorizations
and take all action which may be necessary for the continued
due performance of Lessee's obligations under this Agreement
and for the use and operation of the Aircraft;
(f) not do or permit to be done any act or thing which might
impair the respective interests of Lessor, Head Lessor and the
Bank in the Aircraft, or the registration of the Aircraft;
(g) notify Lessor as soon as practicable after becoming aware of
any loss, theft, damage or destruction of or to the Aircraft
or any part thereof if the potential cost of repair or
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replacement is likely to exceed $100,000.00 (Dollars One
Hundred Thousand);
(h) not do anything which is likely to subject the Aircraft or any
part thereof to penalty, forfeiture, seizure, arrest,
impounding, detention, confiscation, taking in execution,
appropriation or destruction nor abandon the Aircraft or any
part thereof;
(i) not represent or hold out Lessor, Head Lessor or the Bank as
carrying goods or passengers on the Aircraft or as being in
any way connected or associated with any operation or carriage
(whether for hire or reward or gratuitously) which Lessee may
undertake;
(j) not pledge the credit of Lessor, Head Lessor or the Bank for
any maintenance, overhauls, replacements, repairs or
modifications to the Aircraft;
(k) keep Lessor and the insurers, as referred to in Article 11,
informed as to current serial numbers of the Engines and any
engine installed on the Aircraft in accordance with the
provisions of this Agreement, and the location of any Engine
for the time being not installed on the Aircraft; and shall
notify such insurers of any renewal, replacement or
substitution, or the location of any Engine not installed on
the Aircraft;
(l) discharge all fees, charges and expenses payable to any third
party in relation to the use or operation of the Aircraft or
any premises where the Aircraft is situated;
(m) in the event of any forfeiture, impounding or detention of the
Aircraft or any part thereof not constituting a Casualty
Occurrence, use all reasonable endeavors to procure the
immediate release therefrom of the Same;
(n) keep accurate, complete and current records of all flights
made by the Aircraft. Such records shall be kept in such
manner as the Air Authority may from time to time require and
in accordance with the Approved Maintenance Program. Lessee
shall permit Lessor or its authorized representatives to
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examine such records upon giving reasonable notice not
involving delay to the Aircraft and, subject to the terms of
Article 7.5.3, at the expense of Lessor or such person, to
copy such records;
(o) on request, provide Lessor with evidence satisfactory to
Lessor that all Taxes and charges incurred by Lessee with
respect to the Aircraft, including without limitation any
payments due to any relevant air traffic control authorities
and airport authorities, have been paid and discharged in full
or duly provided; and
(p) not consolidate with, or merge into, any other corporation,
convey, transfer or lease substantially all of its assets as
an entirety to any person without the prior written consent of
Lessor (such consent not to be unreasonably withheld) and the
execution and delivery to Lessor of such agreements,
certificates and legal opinions as Lessor may request with
respect thereto.
15. DEFAULT BY LESSEE
15.1 Each of the following events shall constitute an "Event of Default":
(a) if default shall be made by Lessee in the making of any Rent,
Reserve Rate, or Supplemental Rent payment within five (5)
Business Days after the date when such payment is due and
payable under this Agreement; or
(b) (i) if default shall be made by Lessee at any time in the
procurement or maintenance of any insurance coverage
prescribed herein or (ii) any insurance which may be
maintained by Lessor, Head Lessor or the Bank under Article
11.4 is canceled or terminated or notice of cancellation is
given; or
(c) if default shall be made by Lessee in the observance or
performance of any of the other obligations of Lessee
contained in this Agreement and, if such default is in the
opinion of Lessor capable of remedy, such default shall
continue for a period of fifteen (15) Business Days after
notice from Lessor to Lessee specifying the
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default and requiring that the same be remedied; or
(d) if any representation or warranty made (or deemed to be
repeated) by Lessee in or pursuant to this Agreement or in any
document or certificate or statement referred to in or
delivered under this Agreement is or proves to have been
incorrect in any material respect when made or deemed to be
repeated and such incorrectness, if capable of being cured,
shall continue for fifteen (15) Business Days after notice
from Lessor specifying such incorrectness; or
(e) if any borrowed money of Lessee or any of its subsidiaries
having an outstanding principal amount in excess of $4,000,000
(Dollars Four Million) is not paid when due, or by reason of
breach or default under the terms of any instrument evidencing
or guaranteeing the same on the part of Lessee or any of its
subsidiaries any such borrowed money having an outstanding
principal amount in excess of $4,000,000 of Lessee or any of
its subsidiaries becomes due or capable of being declared due
prior to the date when it would otherwise have become due, or
the security for any such borrowed money or any guarantee in
respect thereof becomes enforceable; or
(f) if an encumbrancer takes possession or a receiver,
administrator, administrative receiver, trustee, liquidator or
similar officer is appointed of the whole or any substantial
part of the assets, rights or revenues of Lessee or any of its
subsidiaries or a distress, execution, sequestration or other
process is levied or enforced upon or sued out against all or
a substantial part of the assets, rights or revenues of Lessee
or any of its subsidiaries and is not discharged within
fourteen days, or Lessee applies for or consents to the
appointment of a receiver, administrator, administrative
receiver, trustee, liquidator or similar officer for it or for
all or any part of its assets, rights or revenues; or
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(g) if Lessee or any of its subsidiaries suspends payment of its
debts, or is unable or admits its inability to pay its debts
as they fall due, or shall be adjudicated or found, or
becomes, bankrupt or insolvent, or proposes or enters into any
composition or other arrangement for the benefit of its
creditors generally, or Lessee or any of its subsidiaries
shall, by voluntary petition, answer or consent, seek relief
under the provisions of any bankruptcy, insolvency or other
similar law providing for the reorganization, liquidation,
administration, dissolution or winding-up of corporations, or
providing for an agreement, composition, extension or
adjustment with its creditors; or
(h) if a petition against Lessee in a proceeding under applicable
bankruptcy or other insolvency laws shall be filed and shall
not be withdrawn or dismissed within 30 days thereafter, or if
any order shall be made by any competent court or resolution
passed by Lessee or any of its subsidiaries or their
respective board of management or supervisory board, whichever
is competent to pass such resolution for the winding-up or
dissolution of Lessee or any of its subsidiaries or for the
appointment of a liquidator, trustee or conservator, save for
winding-up or dissolution for the purposes of amalgamation or
reorganization (not involving or arising out of insolvency)
the terms of which shall have received the prior written
approval of Lessor; or
(i) if Lessee or any of its subsidiaries disposes of all or a
material part of its assets, whether by one or a series of
transactions, related or not, other than for the purpose of a
reconstruction or amalgamation the terms of which have
received the previous consent in writing of Lessor; or
(j) if any action shall be taken by Lessee which shall impair the
title or ownership of Lessor (or Head Lessor), or the Security
Interest of the Bank, in the Aircraft or this Agreement is or
becomes wholly or partly invalid, ineffective or unenforceable
by reason of any act or omission of Lessee; or
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(k) if any consent, authorization, license, certificate or
approval of or registration with or declaration to any
Government Entity in connection with this Agreement including,
without limitation.
(i) any Certificate of Public Convenience and Necessity; or
(ii) required by Lessee or as a condition precedent required
by Lessor pursuant to Article 2.3 to authorize, or in
connection with, the execution, delivery, validity,
enforceability or admissibility in evidence of this
Agreement or the performance by Lessee of its
obligations under this Agreement; or
(iii) the registration of the Aircraft; or
(iv) any airline license or air transport license;
is changed such that it materially impairs the ability of
Lessee to perform its obligations hereunder, or is withheld,
or is revoked, suspended, canceled, withdrawn, terminated or
not renewed, or otherwise ceases to be in full force; or
(m) if any circumstances analogous to any of the circumstances
described in paragraphs (f), (g) or (h) above arise under the
Law of any applicable jurisdiction; or
(n) if an event of default (however defined) occurs under any of
the Other Aircraft Agreements which event permits acceleration
or termination.
15.2 If one or more Events of Default shall have occurred and be
continuing, at Lessor's option and subject to any mandatory
requirement of Law:
(a) For Lessee's account Lessor may do anything that may
reasonably be required to cure any Event of Default and
recover from Lessee all costs including legal expenses
incurred in so doing, and/or
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(b) Lessor may accept such Event of Default as a repudiation of
this Agreement and terminate the lease of the Aircraft to
Lessee hereunder by:
(i) serving notice of such termination on Lessee specifying
the occurrence giving rise to such Event of Default or
Events of Default, provided that such notice shall be
deemed to have been served without the necessity of
actual service upon the occurrence of any Event of
Default described in paragraphs (f), (g) and (h) of
Article 15.1.
Thereafter (if the Term shall have commenced) Lessee
shall redeliver possession of the Aircraft to Lessor at
Schiphol Airport, The Netherlands (or such other
location as Lessor may require); or (at Lessor's
election)
(ii) taking possession of the Aircraft for which purpose
Lessor by its servants or agents may enter upon Lessee's
premises where the Aircraft may be located, or cause the
same to be redelivered to Lessor at Schiphol Airport,
The Netherlands, (or such other location as Lessor may
require Lessee to assemble and deliver the Aircraft to
Lessor, and Lessor shall be entitled to act as attorney
for Lessee in causing such redelivery and shall have all
the powers and authorizations legally necessary for
taking such action. In the event of exercise by Lessor
of its powers under this sub-paragraph (ii) such
termination shall be deemed to take effect on such
taking of possession by Lessor or such redelivery of the
Aircraft to Lessor at the said airport; and/or
(c) Lessor may proceed by appropriate court action or actions to
enforce performance of Article 15.2(b) or to recover damages
for the breach thereof; and/or
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(d) all rights of Lessee hereunder shall, in the event the Term
shall be terminated pursuant to Article 15.2(b) henceforth
absolutely cease and terminate but without prejudice to
Lessee's obligations under this Agreement all of which shall
continue in full force and effect except for obligations to
pay Rent and Reserve Rate after the Aircraft is returned to
Lessor, and is in the condition required by Article 16; and
Lessee shall take all steps necessary to effect deregistration
of the Aircraft in the State of Registration and Lessor shall
be entitled to sell or otherwise deal with the Aircraft as if
this Agreement had never been made. Without prejudice to the
foregoing, Lessee hereby appoints Lessor as its attorney to do
any act or thing required in connection with such
deregistration of the Aircraft.
15.3 If an Event of Default occurs, Lessor shall have the right to demand
that:
(a) Lessee pay all amounts which may be then due and unpaid
hereunder, and
(b) at Lessor's option whether or not Lessor shall have exercised,
or shall thereafter at any time exercise, any of its rights
under Article 15.2, by thirty (30) days written notice to
Lessee from Lessor specifying a payment date, Lessee pay
Lessor, and Lessee shall pay Lessor, on the payment date
specified in such notice, as liquidated damages for loss of
bargain and not as a penalty (in lieu of the Rent due for the
Aircraft covered by such notice for the period commencing
after the date specified for payment in such notice), any
unpaid Rent for the Aircraft (prorated in the case of Rent on
a daily basis) to and including the payment date specified in
such notice, plus the amount, if any, by which the aggregate
Rent for the Aircraft for the remainder of the Term for the
Aircraft, discounted periodically (equal to installment
frequency) to present worth at the interest rate of six
percent (6%) per annum, exceeds the Fair Market Rental Value
of the Aircraft for the remainder of the Term, after
discounting such Fair Market Rental
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Value periodically (equal to installment frequency) to present
worth as of the payment date specified in such notice at the
interest rate of six percent (6%) per annum.
Lessee shall fully indemnify Lessor on its own behalf and on
behalf of the Head Lessor and the Bank on demand against any
loss (including loss of profit), damage, expense (including
without limitation attorneys' fees), cost or liability which
Lessor, Head Lessor or the Bank may sustain or incur as a
consequence of the occurrence of any Event of Default and/or
termination of the letting of the Aircraft pursuant to this
Agreement, including but not limited to (i) any loss of profit
suffered by Lessor and/or the Head Lessor because of Lessor's
inability to place the Aircraft on lease with another lessee
on terms as favorable to Lessor as the terms of this Agreement
or because whatever use, if any, to which Lessor is able to
put the Aircraft upon its return to Lessor, or the funds
arising upon a sale or other disposal thereof, is not as
profitable to Lessor as letting the Aircraft in accordance
with the terms of this Agreement would have been to the extent
the foregoing loss of profit shall not be recovered under
Article 15.3(b), (ii) any amount of interest, fees or other
sums whatsoever paid or payable on account of funds borrowed
in order to carry any unpaid amount, (iii) any loss, premium,
penalty or expense which may be incurred repaying funds raised
to finance the Aircraft or in unwinding any swap, forward
interest rate agreement or other financial instrument relating
in whole to Lessor's financing of the Aircraft and/or the
Aircraft under the Other Aircraft Agreement, and (iv) any
loss, cost, expense or liability sustained or incurred by
Lessor owing to Lessee's failure to re-deliver the Aircraft in
the condition required by this Agreement.
15.4 No remedy referred to in this Article 15 is exclusive, but each
remedy shall be cumulative and in addition to any other remedy
referred to herein or otherwise available to Lessor. The exercise by
Lessor of any of its remedies hereunder shall not preclude or estop
the exercise or beginning of exercise by Lessor of any or more of
such other remedies.
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No express or implied waiver by Lessor of any Event of Default, or
failure or delay of Lessor in exercising any right hereunder shall
operate as waiver thereof unless an express waiver is executed and
delivered to Lessee.
15.5 Prior to the Expected Delivery Date Lessee shall deliver to Lessor a
duly authorized consent, undated and in form and substance
acceptable to Lessor, addressed to the Federal Aviation
Administration consenting to the release of this Agreement in
Connection with the termination of this Agreement pursuant to the
terms hereof and, if so requested by Lessor, the deregistration of
the Aircraft from the register of civil aviation in the State of
Registration.
16. RETURN OF AIRCRAFT
16.1 On the Expiry Date or upon earlier termination of the Term (unless a
Casualty Occurrence shall have occurred with respect to the
Aircraft), Lessee shall, at its own expense, redeliver the Aircraft
to Lessor at the Re-Delivery Location or such other airport as is
mutually acceptable to the parties, in a condition complying with
the provisions of Appendix E, free and clear of all liens and
encumbrances (including Permitted Liens other than Lessor Liens) and
thereupon cause the Aircraft to be removed from the Register of
Civil Aircraft in the State of Registration and Lessee shall return
the Aircraft to Lessor together with the Aircraft Documents and all
equipment and records supplied pursuant to this Agreement when the
Aircraft was delivered to Lessee hereunder.
16.2 Immediately prior to such redelivery of the Aircraft, Lessee, at its
own expense, shall make the Aircraft, Aircraft Documents and other
records available to Lessor for inspection ("Final Inspection") in
order to verify that the condition of the Aircraft complies with the
provisions of this Agreement. Such inspection shall not unreasonably
interfere with the operation of the Aircraft. The period will be
long enough for the Final Inspection to permit the conduct by Lessor
of the following:
(a) Inspection of the Aircraft Documents;
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(b) Inspection of the Aircraft structure and Parts;
(c) Inspection of the Engines and Auxiliary Power Unit ("A.P.U."),
including without limitation, a boroscope inspection or any
other equivalent inspection method supported by Rolls Royce,
inspection of the compressor and turbine area, and, if
reasonably requested based on evidence that it is required,
the Engine and A.P.U. condition runs confirming release of
each Engine and A.P.U for its remaining operational life;
(d) A one-hour to two-hour test flight with Lessor's
representatives on board as observers and, if any non
compliance is found, a subsequent test flight to check
compliance after rectification.
16.3 To the extent that, upon such Final Inspection, the condition of the
Aircraft and Aircraft Documents does not comply with the provisions
of this Agreement, Lessee, at its own expense, shall cause such
noncompliance to be promptly rectified and to the extent such
rectification extends beyond the Expiry Date, the Term shall, at
Lessor's sole option, be deemed to be automatically extended and the
provisions of this Agreement shall remain in full force and effect
until such rectification has been accomplished. During such
extension of the Term the Lessee shall be liable to pay Rent at a
daily pro rata rate equal to the Rent payable during the last Rental
Period of the Term.
16.4 Upon redelivery Lessee shall provide to Lessor all necessary
assistance to enable Lessor to obtain any required documents in
relation to the export of the Aircraft from the State of
Registration, and if different, from the State of Incorporation
(including a valid and subsisting export license for the Aircraft),
and shall reassign to Lessor, at the expense of Lessee, the benefit
of any indemnity or warranty which has been assigned to Lessee
pursuant to Article 13.3 above to the extent such indemnity or
warranty is assignable.
16.5 Prior to the Expiry Date or upon any earlier termination of the Term
and upon Lessor's request, Lessee will provide Lessor or its agent
reasonable access to the Approved Maintenance Program and the
Aircraft Documents in order to facilitate the Aircraft's integration
into any subsequent operator's fleet.
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Lessee will, if requested by Lessor to do so, upon return of the
Aircraft deliver to Lessor a certified true current and complete
copy of the Approved Maintenance Program. Lessor agrees that it will
not disclose the contents of the Approved Maintenance Program to any
person or entity except to the extent necessary to monitor Lessee's
compliance with this Agreement and/or to bridge the maintenance
program for the Aircraft from the Approved Maintenance Program to
another program.
16.6 Upon redelivery of the Aircraft to Lessor, an adjustment shall be
made in respect of fuel on board on the Delivery Date and on
redelivery at the price then prevailing at the Redelivery Location.
16.7 If Lessor shall request that Lessee paint the Aircraft any other
basic color as contemplated by Section 1(h) of Appendix E, Lessor
agrees that it shall bear the cost and expense of the difference
between white paint and such other basic color.
16.8 Upon written request of Lessor given to Lessee not later than thirty
(30) days prior to the Expiry Date of termination of the Lease,
Lessee, at the Expiry Date or upon termination of the Lease, will
provide, or will cause to be provided, up to thirty (30) days'
storage of the Aircraft at Lessee's premises, at Lessor's cost and
expense. During such period of storage, Lessee will arrange for
insurance and maintenance at Lessor's cost and expense. Lessee shall
allow Lessor or any representatives of any prospective purchaser or
user of the Aircraft to inspect the same at all reasonable times.
17. CASUALTY OCCURRENCES
17.1 In this Agreement "Casualty Occurrence" shall mean any of the
following events with respect to the Aircraft, the Airframe or an
Engine:
(a) the actual, agreed, constructive, arranged or compromised
total loss or destruction of the Aircraft, the Airframe or an
Engine, or damage to the Aircraft, Airframe or Engine
rendering repair impracticable or uneconomical, or the
Aircraft, Airframe or Engine being rendered permanently unfit
for normal use;
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(b) requisition of title or other compulsory acquisition,
requisition, capture, seizure, deprivation, confiscation or
detention for any reason of the Aircraft, the Airframe or an
Engine by any Government Entity of the State of Registration
or by any other government or other competent authority,
whether de jure or de facto, but excluding requisition for use
or hire not involving requisition of title by any Governmental
Entity for a temporary period ending on the date fifteen (15)
days (or the Expiry Date) if the requisition for use or hire
is by the United States) after such requisition, or the Expiry
Date, whichever first occurs; and
(c) the hijacking, theft, disappearance, condemnation,
confiscation or seizure of the Aircraft, the Airframe or an
Engine other than in the circumstances referred to in (b)
above which deprives Lessee of the use thereof for more than
fifteen (15) consecutive days.
17.2 (a) In the event of a Casualty Occurrence with respect to the
Aircraft or Airframe prior to the Delivery Date, this
Agreement shall immediately terminate with respect to such
Aircraft and neither party shall have any further obligation
or liability hereunder, save that Lessor shall return to
Lessee the Deposit or such part thereof as Lessor shall have
received from Lessee and Lessee shall remain liable to
reimburse Lessor for any amounts specified in Article 8.2(a).
(b) In the event of a Casualty Occurrence with respect to the
Aircraft or Airframe after delivery to Lessee hereunder,
Lessee shall pay the Agreed Value to Lessor on or prior to the
earlier of (i) 45 days after the Casualty Occurrence and (ii)
the Business Day after the date of receipt of the Insurance
proceeds in respect of the Casualty Occurrence and, provided
all other amounts which are then due and payable by Lessee
under this Agreement have been paid in full to Lessor,
Lessee's obligation hereunder for payment of Rent shall cease
as from the date on which Lessor receives payment in full of
the Agreed Value. Rent paid in advance for any days which
occur after such Agreed Value is paid shall be repaid to
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Lessee, so long as no Default has occurred and is continuing,
on a pro rata basis for each day beyond such date of payment
of Agreed Value. Any excess insurance proceeds from the
insurance obtained by Lessee pursuant to Article 11 remaining
after payment of the foregoing amounts shall, unless a Default
shall have occurred and be continuing, be paid over to Lessee.
(c) Subject to the rights of any insurers and reinsurers or other
third party, upon irrevocable payment in full to Lessor of the
Agreed Value and all other amounts which may be or become
payable to Lessor under this Agreement, Lessor will without
recourse or warranty (except as to title and Lessor's Liens)
and without further act, be deemed to have transferred to
Lessee all of Lessor's rights to any Engines and Parts not
installed when the Casualty Occurrence occurred, all on an
as-is where-is basis, and will at Lessee's expense, execute
and deliver such bills of sale and other documents and
instruments as Lessee may reasonably request to evidence (on
the public record or otherwise) the transfer and the vesting
of Lessor's rights in such Engines and Parts in Lessee, free
and clear of all rights of Lessor and Lessor Liens.
17.3 Upon the Casualty Occurrence with respect to any Engine not
involving a Casualty Occurrence of the Aircraft, Lessee shall give
Lessor prompt written notice thereof and Lessee shall replace such
Engine as soon as reasonably possible with a replacement Engine in
accordance with Article 5.1.2(a). Such replacement shall be deemed
an "Engine" as defined herein. Lessee agrees to take such action as
Lessor may reasonably request in order that any such replacement
Engine shall be duly and properly titled in Lessor or the Bank and
leased hereunder and subject to the Mortgage to the same extent as
the Engine replaced thereby. Lessee's obligation to pay the Rent
hereunder shall continue in full force and effect, but Lessee shall
be entitled to be reimbursed by Lessor the amount of insurance or
condemnation proceeds, if any, received by Lessor with respect to
such replaced Engine.
17.4 In the event of requisition for hire of the Aircraft or any part
thereof not constituting a Casualty Occurrence, then, subject to the
proviso herein
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contained, the Rent and other charges payable under this Agreement
shall not be suspended or abated either in whole or in part, and
Lessee shall not be released from any of its other obligations (as
to payment, indemnity or otherwise) hereunder (other than
operational obligations with which Lessee is unable to comply solely
by virtue of such confiscation or requisition).
If Lessee shall duly comply with all its obligations under this
Agreement, Lessee shall during the Term be entitled to any hire paid
by the requisitioning or confiscating authority and Lessee shall, as
soon as practicable after the end of any requisition or
confiscation, cause the Aircraft to be put into the condition
required by this Agreement. Lessor shall be entitled to all
compensation payable by the requisitioning or confiscating authority
in respect of any change in the structure, state or condition of the
Aircraft arising during the period of requisition or confiscation,
and Lessor shall apply such compensation in reimbursing Lessee for
the cost of complying with its obligations as aforesaid, but so
that, if any Default has occurred and is continuing, Lessor shall be
entitled to apply such compensation in or towards settlement of any
amounts owing by Lessee under this Agreement PROVIDED ALWAYS that if
following such requisition or confiscation the Aircraft is treated
as an agreed, constructive, arranged or compromised total loss by
the insurers, then the provisions of Article 17.1 shall apply with
effect from the date on which the insurer so determines.
18. GOVERNING LAW AND JURISDICTION
18.1 This Agreement and further agreements resulting herefrom shall be
governed by and construed in accordance with the internal Laws of
the State of New York and without regard to any conflict of law
rules. This Agreement is being delivered in the State of New York.
18.2 Lessor and Lessee hereby irrevocably agree to submit to the
non-exclusive jurisdiction of, and to waive any objection to the
laying of venue in, the County of New York and that any suit, action
or proceedings (collectively, "Proceedings") may be brought by
Lessor
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in any court of the State of New York or any U.S. Federal court
located in New York County, New York.
18.3 Nothing contained in this Article 18 shall limit the right of either
party to this Agreement to take Proceedings against the other in any
other court of competent jurisdiction, nor shall the taking of
Proceedings in one or more jurisdictions preclude the taking of
Proceedings in any other jurisdiction, whether concurrently or not.
18.4 Promptly after service of any process the Lessor or Lessee shall
dispatch a copy thereof to Lessee or Lessor, as the case may be, by
registered mail, postage prepaid but failure of Lessee or Lessor, as
the case may be, to receive such copy shall not invalidate the
service of such process.
18.5 To the extent that the parties may in any jurisdiction claim for
their or their assets immunity from suit, execution, attachment
(whether in aid of execution, before judgment or otherwise) or other
legal process and to the extent that in any such jurisdiction there
may be attributed to themselves or their assets such immunity
(whether or not claimed) the parties hereby irrevocably agree not to
claim and hereby irrevocably waive any immunity to the fullest
extent permitted by the laws of such jurisdiction with the intent,
inter alia, that the foregoing waiver shall have effect for the
purposes of the Foreign Sovereign Immunities Act of 1976 of the
United States of America.
18.6 Lessee and Lessor shall each at all times maintain an agent for
service of process in the New York, New York. For Lessee, such agent
shall be Paul, Hastings, Janofsky & Walker, Attn: John Howitt, Esq.,
399 Park Avenue, New York, NY 10022-4697. For Lessor, such agent
shall be Haight, Gardner, Poor & Havens, Attn: Bonny L. Y. Kwoh, 195
Broadway, New York, NY 10007. Any writ, judgment or other notice of
legal process shall be sufficiently served on Lessee or Lessor if
delivered to such agent at its address for the time being. Each of
Lessee and Lessor undertakes that if it shall revoke the authority
of its above agent or if for any reason any such agent no longer
serves as agent to receive service of process, Lessee or Lessor, as
the case may be, shall promptly appoint another such agent and
advise Lessor or Lessee, as the case may be, thereof.
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19. MISCELLANEOUS
19.1 The rights of each of Lessor and Lessee under this Agreement are
cumulative, may be exercised as often as it considers appropriate
and are in addition to its rights under general law. The rights of
Lessor against the Lessee or in relation to the Aircraft (whether
arising under this Agreement or the general law) shall not, as
against or in favor of Lessor, be capable of being waived or varied
otherwise than by an express waiver or variation in writing; and in
particular any failure to exercise or delay in exercising any of
such rights shall not operate as a waiver or variation of any other
such right; and defective or partial exercise of any such rights
shall not preclude any other or further exercise of that or any
other such right; and no act or course of conduct or negotiation on
Lessor's part or on Lessor's behalf shall in any way preclude Lessor
from exercising any such right or constitute a suspension or any
variation of any such right.
19.2 Save where expressly provided in this Agreement, any certificate or
determination by Lessor as to any rate of interest or as to any
other amount payable under this Agreement shall, in the absence of
manifest error, be conclusive and binding on Lessee.
19.3 If any sum paid or recovered in respect of the liabilities of Lessee
under this Agreement is less than the amount then due, Lessor may
apply such sum to rental, interest, fees or any other amount due
under this Agreement in such proportions and order and generally in
such manner as Lessor shall determine.
19.4 The terms and conditions of this Agreement shall not be varied
otherwise than by an instrument in writing executed by or on behalf
of Lessor and Lessee.
19.5 If any of the provisions of this Agreement becomes invalid, illegal
or unenforceable in any respect under any law, the validity,
legality and enforceability of the remaining provisions shall not in
any way be affected or impaired.
19.6 Every notice, request, demand or other communication under this
Agreement shall:
(a) be in English;
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(b) be in writing and made by mail or by fax or telex transmission
or by reputable courier service;
(c) be deemed to have been received, subject as otherwise provided
in this Agreement, in the case of a telex transmission, at the
time of dispatch with confirmed answerback of the addressee
appearing at the beginning and the end of the communication,
in the case of a fax transmission, at the time safe receipt is
confirmed by the addressee provided that if the date of
dispatch is not a business day in the country of the addressee
any telex or fax transmission shall be deemed to have been
received at the opening of business on the next such business
day, in the case of a letter five days after being deposited
in the mail first class postage prepaid and in the case of a
courier three days after being sent; and
(d) be sent:
(1) to Lessee at:
until August 14, 1995:
Midway Airlines Corporation
5713 South Central Avenue
Chicago, Illinois 60638
Tel: (312) 838-2060
Fax: (312) 838-2069
Attention: President
as from August 14, 1995:
Midway Airlines Corporation
300 W. Morgan St.
Durham, North Carolina 27702
Tel: (919) 956-4982
Fax: (919) 956-7314
Attention: President
(2) to Lessor at:
First Security Bank of Utah, N.A.
79 South Main Street
Salt Lake City, Utah 84130-0007
Tel: (801) 246-5630
Fax: (801) 246-5053
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Attention: Corporate Trust Department with a copy
to FAUSA at:
1199 N. Fairfax Street, Suite 500
Alexandria, VA 22314
Fax: (703) 683-2233
Attention: The President
with a copy to Beneficiary at:
Stockholm Aircraft Finance IV, B.V.
Hoogoorddreef 15
Post Office Box 12222
1100 AE Amsterdam Zuidoost
The Netherlands
Attention: Vice President-Contracts
Fax: 31-20-605-7036.
or to such other address or telex or fax number as is notified by
either party to the other party to this Agreement.
19.7 This Agreement may be executed in any number of counterparts and all
of such counterparts taken together shall be deemed to constitute
one and the same instrument.
19.8 This Agreement is the sole and entire agreement between Lessor and
Lessee in relation to the leasing of the Aircraft, and supersedes
all previous agreements in relation to such leasing. Each of Lessee
and Lessor represents for itself that no broker has been retained by
it in connection with this Agreement.
19.9 This Agreement is intended by the parties to be a lease between
Lessor and Lessee. Any waivers, consents, deferrals of the payment
of Rent or Reserve Rates are not intended to be an agreement by
Lessor to make any capital contribution to the business of Lessee or
to share in or have liability for any of Lessee's losses, profits,
liabilities or obligations. Nothing contained in this Agreement or
performed by Lessor in connection herewith and any other agreement
between Lessor and Lessee whether now existing or entered into in
the future shall make Lessor a partner or a joint venturer of Lessee
and shall not for any purpose be construed as a joint-venture
between the parties hereto.
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19.10 Intentionally Omitted.
19.11 Section 1110: Lessee acknowledges that Lessor would not have entered
into this Agreement unless it had available to it the benefits of a
lessor under Section 1110 of Title 11 of the United States Code.
Lessee and Lessor hereby state that this Agreement is intended to be
a true lease for U.S. Internal Revenue Code purposes. Lessee
covenants and agrees with Lessor that to better ensure the
availability of such benefits, Lessee shall support any motion,
petition or application filed by Lessor with any bankruptcy court
having jurisdiction over Lessee, whereby Lessor seeks recovery of
Possession of the Aircraft under said Section 1110 and shall not in
any way oppose such action by Lessor unless Lessee shall have
complied with the requirements of said Section 1110 to be fulfilled
in order to entitle Lessee to continued use and Possession of the
Aircraft hereunder. In the event said Section 1110 is amended, or if
it is repealed and another statute is enacted in lieu thereof,
Lessor and Lessee agree to amend this Agreement and take such other
action not inconsistent with this Agreement as Lessor reasonably
deems necessary so as to afford to Lessor the rights and benefits as
such amended or Substituted statute confers upon owners and lessors
of aircraft similarly situated to Lessor.
19.12 First Security Bank of Utah, N.A. ("FSBU") is entering into this
Agreement solely as trustee under the Trust Agreement and not in its
individual capacity and in no case whatsoever shall FSBU (or any
entity acting as successor trustee under the Trust Agreement) be
personally liable on, or for any loss in respect of, any of the
statements, representations, warranties, agreements or obligations
of Lessor hereunder as to all of which the other party hereto agrees
to look solely to the Trust Estate, except for any loss caused by
FSBU's own willful misconduct or gross negligence. FSBU warrants
that the Aircraft shall be free of liens attributable to FSBU in its
individual capacity which do not arise from its actions as lessor
under this Agreement and that it shall be personally liable to
Lessee for any Claim against Lessee in respect of any statements,
representations, warranties, agreements or obligations contained
herein which are expressly made in its individual capacity.
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19.13 As between Lessor and Lessee, if Lessee fails to make any payment of
Rent or Reserve Rate required to be made by it hereunder or fails to
perform or comply with any of its agreements contained herein,
Lessor may itself make such payment or perform or comply with such
agreement, and the amount of such payment and the amount of the
reasonable and properly documented expenses of Lessor incurred in
connection with such payment or the performance of or compliance
with such agreement, as the case may be, together with interest
thereon at the interest rate defined in Appendix D, Article 6, shall
be deemed Supplemental Rent, payable by Lessee upon demand.
IN WITNESS whereof the parties have executed this Agreement the day and year
first herein written.
SIGNED on behalf of SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A. MIDWAY AIRLINES CORPORATION
not in its individual
capacity, except as
expressly set forth
herein, but solely
as owner trustee
By: /s/ [ILLEGIBLE] By:
------------------------- -----------------
Its: ASSISTANT VICE PRESIDENT Its:
-----------------
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19.13 As between Lessor and Lessee, if Lessee fails to make any payment of
Rent or Reserve Rate required to be made by it hereunder or fails to
perform or comply with any of its agreements contained herein,
Lessor may itself make such payment or perform or comply with such
agreement, and the amount of such payment and the amount of the
reasonable and properly documented expenses of Lessor incurred in
connection with such payment or the performance of or compliance
with such agreement, as the case may be, together with interest
thereon at the interest rate defined in Appendix D, Article 6, shall
be deemed Supplemental Rent, payable by Lessee upon demand.
IN WITNESS whereof the parties have executed this Agreement the day and year
first herein written.
SIGNED on behalf of SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A. MIDWAY AIRLINES CORPORATION
not in its individual
capacity, except as
expressly set forth
herein, but solely
as owner trustee
By: By: /s/ J. S. Waller
------------------------- ----------------------
Its: Its: Senior vice President
-------------------
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APPENDIX A
DESCRIPTION OF AIRCRAFT
Manufacturer Model Serial No. Engines Number
- ------------ ----- ---------- ------- of
Engines
-------
Fokker 100 11329 Rolls Royce Two
Tay MK 650-15
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APPENDIX B
FURTHER DEFINITIONS AND VALUES
AGREED VALUE : {***}
for the first
year of the Term through and including
the first anniversary date of the
Delivery Date, and for each subsequent
year the Agreed Value shall be:
Second Year: {***}
Third Year: {***}
Fourth Year: {***}
provided that the Agreed Value for any
of the above years may be adjusted up
to FMV (but never in excess of
{***} if Lessor provides to Lessee
an independent appraisal (at Lessor's
cost) prior to the beginning of any
such year. If Lessee does not agree to
such appraised value, Lessee may
follow the Appraisal Procedure by
giving Lessor written notice of
election to so proceed within 20 days
of receipt of Lessor's independent
appraisal.
DEPOSIT : {***}
PARTIAL LOSS AMOUNT : $250,000
RENT : {***}
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RESERVE RATE : (a) {***}
to be adjusted in conformance to
Appendix D, Article 3.
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APPENDIX C
CERTIFICATE OF ACCEPTANCE
This Certificate of Acceptance is delivered, on and as of the date set forth
below, by Midway Airlines Corporation (herein referred to as "Lessee") to First
Security Bank of Utah, N.A., not in its individual capacity but solely as
trustee, (herein referred to as "Lessor") pursuant to that Aircraft Operating
Lease Agreement No. 135 dated as of July 20, 1995 between Lessor and Lessee
(herein referred to as the "Agreement"):
1. Details of Acceptance
Lessee hereby indicates and confirms to Lessor, its successors and
assigns, that the Lessee has at ______ o'clock on this ______ day of
______ 1995 at _________ accepted the following from Transwede and
concurrently therewith from Lessor, in accordance with the provisions of
the Agreement:
(a) Fokker 100 airframe, Manufacturer's serial Number 11329
(b) Rolls Royce Tay Mk 650-15 Engines (each of which engines has 750 or
more rated takeoff horsepower).
Engine Number Manufacturer's S/N
1. 17650
2. 17651
(c) Fuel Status: ______ kilos; ______ liters
(d) Loose Equipment Check List: as per list inserted or referred to, as
the case may, in Section 11 of Appendix E of the Agreement.
2. Confirmation of Undertakings
The terms used in this Certificate shall have the meanings given to such
terms in the Agreement.
The Lessee confirms that today being the Delivery Date as defined in the
Agreement:
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(i) the Aircraft is duly accepted by the Lessee in accordance with and
subject to the provisions of the Agreement and the execution and
delivery of this Certificate constitutes the acceptance of the
Aircraft by the Lessee for all purposes of the Agreement. DELIVERY
BY LESSEE TO LESSOR OF THIS CERTIFICATE OF ACCEPTANCE SHALL
CONSTITUTE CONCLUSIVE PROOF AS BETWEEN LESSOR AND LESSEE THAT ON THE
DELIVERY DATE LESSEE'S TECHNICAL EXPERTS EXAMINED AND INVESTIGATED
THE AIRCRAFT AND EVERY PART THEREOF ARE AIRWORTHY AND IN GOOD
WORKING ORDER AND REPAIR, WITHOUT DEFECT WHETHER OR NOT DISCOVERABLE
AS AT THE DELIVERY DATE AND IN EVERY WAY SATISFACTORY TO LESSEE;
(ii) the Lessee is obliged to pay to the Lessor the amount provided for
in the Agreement with respect to the Aircraft;
(iii) the Aircraft is insured in accordance with the Agreement;
(iv) the representations and warranties contained in Article 13 of the
Agreement remain, and if made at the date of this Certificate of
Acceptance, would be, true and correct in all respects;
(v) there have been affixed to the Aircraft and the Engines the fire
resistant notices required by Article 4.3 of the Agreement;
(vi) the Lessee has no right of set-off, deduction, withholding or
counterclaim against the Lessor whatsoever; and
(vii) no Default is subsisting.
IN WITNESS WHEREOF, Lessee has caused this Certificate of Acceptance to be
executed in its name, by its duly authorized officer(s) or representative(s),
pursuant to due corporate authority, all as of the date written in Paragraph 1
above.
MIDWAY AIRLINES CORPORATION
By:
------------------------------
Title:
---------------------------
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APPENDIX D
CHARGES*
{*Intentionally omitted for FAA filing purposes. The parties deem information
contained to be confidential financial information.}
<PAGE>
APPENDIX D
1. Deposit
Lessee shall pay to Lessor {***} as a Deposit for the Aircraft prior to
the Delivery Date.
The Deposit shall be held by Lessor during the Term as security for the
full and punctual performance of all of Lessee's obligations to Lessor
under this Agreement. Lessor may, but shall not be obliged to, apply the
Deposit in whole or in part for the payment of any rent, maintenance
accruals, indemnities, attorneys fees and other expenses, insurance and
other casualty payments and any other amount owing from time to time by
Lessee hereunder or any other Operative Document, between Beneficiary or
its affiliate companies, and Lessee, or for the payment of any loss or
damage suffered by Lessor as a result of any Event of Default or utilize
the Deposit in whole or in part to perform any of Lessee's obligations
under this Agreement or otherwise remedy any other Event of Default,
including, without limitation, in the redelivery condition for the
Aircraft without prejudice to any other remedy of Lessor. In any such
event Lessee shall on demand restore the Deposit to the full amount
provided for herein by payment to Lessor of an amount in cash equal to the
amount applied or utilized. Lessee shall not attempt to subject the
Deposit to any other lien, security interest, charge or other encumbrance
or assign any interest therein to any other person and, to the extent of
its interest therein, if any, Lessee hereby grants to Lessor a security
interest in the Deposit and assigns and transfers to Lessor any and all of
Lessee's right, title and interest therein, if any, as security as
provided above, and Lessor shall be entitled to the remedy of offset
against and application of the Deposit, without any notice to or demand
against Lessee, all of which are hereby waived. Lessee further agrees that
the Deposit may be, without derogating from the terms of this Agreement,
assigned as security to the Bank or transferred to any other transferee of
Lessor. Should any Event of Default hereunder occur, the Deposit shall
automatically be applied to any sum due to Lessor or as a prepayment of
any sum to become payable to Lessor, unless Lessor thereafter elects
otherwise by notice to Lessee.
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Any remaining Deposit shall be repaid by Lessor to Lessee ten (10) days
following the Expiry Date or other date after redelivery of the Aircraft
in accordance with this Agreement. In the event there is a dispute as to
whether Lessee is entitled to a return of any portion of the Deposit,
Lessor shall so return the undisputed amount of the Deposit. Upon a
repayment of such Deposit or portion thereof, Lessor's security interest
in and assignment of such Deposit or portion thereof being repaid shall be
deemed released.
Lessor's obligations in respect of the return of the Deposit shall be
those of debtor of Lessee, not of a trustee or other fiduciary.
The Deposit shall bear interest on the amounts then held at a rate of
interest per annum yielding $10,500 (Dollars Ten Thousand Five Hundred)
per year payable annually commencing on the first anniversary of the
Delivery Date, and on each anniversary thereafter unless the Deposit and
interest thereon shall have been applied pursuant to this Agreement. Any
reference to the Deposit in this Agreement shall include the interest
accumulated thereon and not paid to Lessee
2. Rent
2.1 Rent shall be due and payable on each Rent Date and, with respect to
the final Rent date, shall be prorated through and including the
Expiry Date based upon the actual number of days and a thirty-day
month. If such date is not a Business Day then Rent shall be due and
payable on the last Business Day preceding such date.
2.2 The monthly Rent shall be adjusted upward by an amount equal to $875
(Dollars Eight Hundred Seventy Five) per month which shall be
payable to Lessor by check annually commencing on the first
anniversary of the Delivery Date, and on each anniversary
thereafter, with the balance due at the Expiry Date. Lessee may
elect to authorize Lessor in writing to set-off amounts payable
pursuant to this Article against interest on the Deposit which is
payable by Lessor pursuant to Article 1 of this Appendix D
irrespective of whether or not an Event of Default shall have
occurred and be continuing.
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2.3 Intentionally omitted.
2.4 Intentionally omitted.
2.5 Intentionally omitted.
2.6 Intentionally omitted.
2.7 Intentionally omitted.
3. Reserve Rate
3.1 In addition to installments of Rent, Lessee shall pay to Lessor the
Reserve Rate as follows:
(a) by way of an Airframe maintenance accrual, the sum of {***}
hours check until the 12,000 hours check shall have been
executed. After execution of such check, 100% (one hundred
percent) of the Airframe Maintenance Accrual shall be accrued
for the 24,000 hours check for each Flight Hour the Aircraft
is operated during the Term ("Airframe Maintenance Accrual");
and
(b) by way of an Engine maintenance accrual, in respect of each
Engine the sum of {***} for each Flight Hour operated by each
Engine during the Term ("Engine Maintenance Accrual"). The
percentage of the various maintenance activities shall be
agreed between the parties after signing of this Agreement;
and
(c) by way of a landing gear maintenance accrual, the sum of
{***} for each Cycle operated by the landing gear during the
Term ("Landing Gear Maintenance Accrual").
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<PAGE>
The Airframe, Engine and Landing Gear Maintenance Accruals
accruing in any Rental Period shall be paid by Lessee to
Lessor not later than ten (10) days after the end of the
calendar month in which such Rental Period shall end; provided
that Lessee shall be relieved of its obligation to pay the
Engine Maintenance Accrual or Landing Gear Maintenance Accrual
with respect to any Engine or Landing Gear, as the case may
be, during any period that an Aircraft Maintenance Agreement
is in effect with respect to such Engine or Landing Gear.
Concurrently with the payment thereof, Lessee shall report to
Lessor (in accordance with Article 7.1 (e)) the number of
Flight Hours and Cycles accumulated in respect of the period
for which payment is being made.
The Reserve Rate will be subject to adjustment every six (6)
months during the Term by reference for 65% to the Employment
and Earnings Index for U.S.A. labor cost average hourly
earnings of production (Aircraft Equipment) SIC 3728, table
C-2 and for 35% to the Producer Price Index for U.S.A.
material cost commodity groupings (Machinery and Equipment)
Code 11/table 6. In addition the Engine Maintenance Accrual,
if any, will be subject to adjustment every six (6) months
during the Term having regard to the Engine Manufacturer
recommendations, industry experience and any change in the
operational environment of the Aircraft.
Any Reserve Rate shall, if requested by either Lessor or
(unless an Event of Default shall have occurred and be
continuing) Lessee, be adjusted to take into account any
changes in the maintenance intervals upon which Reserve Rates
are based.
3.2 Maintenance Accruals as defined in paragraph 3.1 above and
received by Lessor shall respectively be credited to funds
(collectively "Maintenance Funds") to be known as the
"Airframe Maintenance Fund", the "Engine Maintenance Fund" and
the "Landing Gear Maintenance Fund" which funds shall reduce
as monies are released to Lessee therefrom in accordance with
Article 7.4.1.
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<PAGE>
3.3 The monies in the Maintenance Funds under the Transwede Lease
held by Beneficiary at the date of termination thereof shall
be transferred by Beneficiary to the respective Maintenance
Funds under this Agreement in accordance with the provisions
of the Tripartite Agreement.
3.4 The Reserve Rates shall accrue interest at a rate which will
be 1% (one percent) less than six (6) months LIBOR applicable
to each six (6) months over which the rate will be calculated.
For the determination of such rate of interest the first such
6 (Six) month period shall Start at the Delivery Date and
subsequent 6 (Six) month periods shall start at expiry of the
previous 6 (Six) month period. Such interest shall accrue in
the relevant Maintenance Fund and shall be paid to Lessee at
the moment and to the extent any "Excess" as described in
Paragraph 3.6 of this Appendix D shall be paid out to Lessee.
3.5 Intentionally deleted.
3.6 On the Expiry Date, if there is any Excess (as defined below)
in any Maintenance Fund, such Excess shall, unless a Default
shall have occurred and be continuing (in which case only
after termination, return of the Aircraft and payment of all
amounts due following exercise of remedies under Article 15),
be paid to Lessee, and on such date, if there is any Shortfall
(as defined below) in any Maintenance Fund, Lessee shall pay
such Shortfall to Lessor.
"Excess" in any Maintenance Fund on the Expiry Date shall mean
any positive difference obtained by subtracting (x) from (y)
for the Airframe, Engines, Landing Gears or A.P.U., as the
case may be;
(x) shall mean the product of (I) the then market cost from an
independent Authorized Maintenance Performer in the United
States and corrected for the experience of all United States
based operators of Fokker 100 aircraft for the relevant item:
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with respect to the Aircraft, to perform a scheduled airframe
heavy maintenance as defined in the Maintenance Program for
12,000 hours and 24,000 hours inspections or any equivalent
thereof with more or less hours ("Airframe Maintenance"), or
with respect to any Engine, to perform a scheduled shop visit
engine maintenance and repair, other than (i) repairs arising
as a result of foreign object damage or operations mishandling
and/or (ii) maintenance and repair of QEC (Quick Engine
Change) kits ("Engine Maintenance"), or
with respect to any nose or main landing gear to perform a
schedule shop visit nose and main landing gear maintenance and
repair, other than repairs arising as a result of foreign
object damage or operational mishandling ("Landing Gear
Maintenance"), and
(II) a fraction of which (a) the numerator shall be the difference
between the actual number of hours or cycles (as to landing gear),
as the case may be, of operation remaining on the Airframe, Engine
or Landing Gear, as the case may be, to the next such Airframe
Maintenance, Engine Maintenance or Landing Gear Maintenance, as the
case may be, and the total number of hours or cycles, as the case
may be, of operation allowable between such Maintenance and (b) the
denominator shall be the total number of hours or cycles, as the
case may be, of operation allowable between such Maintenance.
(y) shall mean the actual dollar amount remaining in the respective
Maintenance Fund.
"Shortfall" in any Maintenance Fund on the Expiry Date shall mean
any negative difference obtained by subtracting (x) above from (y)
above and, for the avoidance of doubt, shall include any shortfall
created by Lessee having been relieved, by reason of an Aircraft
Maintenance Agreement pursuant to Article 3.1 of this Appendix D, of
its obligation to pay any element of the Maintenance Accrual.
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4. Payments
All payments of Rent due hereunder shall be effected by Lessee to Lessor
by transfer to Chemical Bank in New York, New York, in favor of the
Beneficiary, account number 544-0-46285, Ref. Aircraft MSN 11329, LA135,
and all payments of Reserve Rate and Supplemental Rent due hereunder shall
be effected by Lessee to Lessor by transfer to Chemical Bank in New York,
New York, in favor of the Beneficiary, account number 544-0-46285, Ref.
Reserve Rate Aircraft MSN 11329, and all such payments shall be in Dollars
and in immediately available funds, and all such payments shall be
initiated adequately in advance of the due dates to ensure that Lessor
receives credit for the full amount of such payment on the due dates. All
such payments shall be made in full without any deduction or withholding
(whether in respect of set-off, counterclaim, duties, taxes, charges or
otherwise howsoever) unless Lessee is prohibited by Law from doing so, in
which event Lessee shall (a) ensure that the deduction or withholding does
not exceed the minimum amount legally required; (b) forthwith pay to
Lessor such additional amount as shall result in the net amount received
by Lessor being equal to the amount which would have been received by
Lessor had such a deduction or withholding not been made; (c) pay to the
relevant taxation or other authorities within the period for payment
permitted by applicable Law the full amount of the deduction or
withholding; and (d) upon request in writing from Lessor to Lessee furnish
to Lessor, within the period for payment permitted by applicable Law, an
official receipt of the relevant taxation or other authorities involved
for all amounts deducted or withheld as aforesaid.
5. Currencies
If under any applicable Law, whether as a result of judgment against
Lessee or the liquidation of Lessee or for any other reason, any payment
under or in connection with this Agreement is made or recovered in a
currency other than United States Dollars then, to the extent that the
payment (when converted to United States Dollars at the rate of exchange
on the date of payment or, in the case of the liquidation, the latest date
for the determination of liability permitted by the applicable Law) falls
short of the amount unpaid under this Agreement, Lessee shall, as a
separate and independent obligation, fully indemnify Lessor against the
amount of the short fall; for the purposes of this paragraph, "rate of
exchange" means the rate at which
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Lessor is able on the relevant date to purchase United States Dollars in
London with that other currency.
6. Default Interest
If any amount payable pursuant to this Agreement is not paid by Lessee on
the due date, Lessee shall pay to Lessor interest (after as well as before
judgment) on such amount, at the rate of 6-month LIBOR (as applicable two
Business Days before the date of Default)), plus four per cent (4%) per
annum from the due date to the date of payment in full by Lessee to
Lessor, but in the event such rate shall be in excess of the highest rate
permitted by applicable law, then it shall mean the highest rate allowed
by applicable law. All amounts of interest payable hereunder shall be
calculated on the basis of the actual number of days elapsed and a 360-day
year.
7. Set-off
At any time after an Event of Default shall have occurred and be
continuing, Lessor shall be entitled to set-off or withhold from any
amount due and payable to Lessee under this Agreement or any Other
Aircraft Agreement, or any amount standing to the credit of Lessee on any
account, in or towards the satisfaction of any amounts from time to time
due and payable by Lessee under this Agreement or any Other Aircraft
Agreement or any liability or obligation of Lessee under this Agreement or
any Other Aircraft Agreement, and shall be entitled to do so
notwithstanding that any such amount or amounts may not be expressed in
the same currency.
8. Time at which payments are due
Supplemental Rent shall be due and payable on demand unless otherwise
expressly stated herein.
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9. Purchase Option
Lessor grants to Lessee the right to purchase and to take delivery of the
Aircraft on the Expiry Date of this Agreement for a price equal to the
greater of the fair market value (as deferred to the penultimate sentence
of this paragraph, "FMV") of the Aircraft on the Expiry Date and {***}
such price being the "Option Price"). If Lessee elects to exercise its
right to purchase the Aircraft, Lessee shall do so by giving to Lessor
written notice of such election at least two hundred seventy (270) days
prior to the Expiry Date. The FMV of the Aircraft on the Expiry Date
shall be established by an independent internationally reputed aircraft
appraiser appointed by mutual agreement of Lessor and Lessee within one
(1) month of the date of receipt by Lessor of Lessee's notice of election
to purchase. If Lessor and Lessee shall be unable to agree on such
aircraft appraiser, FMV shall be established by a mutually agreed
appraisal prepared and delivered by two independent internationally
reputed aircraft appraisers, one of which shall be chosen by
Lessor and one by Lessee. If such appraisers shall be unable
to agree on FMV, FMV shall be equal to the average of the fair
market values established by such appraisers. Any appraisal shall
meet internationally accepted standards and shall be binding upon
Lessee and Lessor. The appraisal procedure outlined in this Article 9
shall be referred to herein as the "Appraisal Procedure". The FMV shall
be equal in amount to the value that would be obtained as of the Expiry
Date in an arms'-length transaction between an informed and willing
purchaser under no compulsion to buy and an informed and willing seller
under no compulsion to sell with the Aircraft assumed to be in the
condition required upon the return thereof at the end of the Term in
accordance with Article 16 without considering the encumbrance of this
Agreement. All costs and expenses of the FMV appraisal shall be shared
equally by Lessor and Lessee. Upon receipt by Lessor of the Option Price,
Lessor will pay to Lessee any remaining amounts in the Maintenance Funds
and it will transfer to Lessee title to the Aircraft on an "AS IS--WHERE
IS" basis without any warranty or recourse (except as to the absence of
Lessor's Liens) and will also transfer any surviving warranty given by
Manufacturer. Lessor shall execute and deliver to Lessee on such
scheduled purchase date a bill of sale to the Aircraft.
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APPENDIX E
CONDITION AT RE-DELIVERY
Upon redelivery of the Aircraft to Lessor, the Aircraft shall, subject to
ordinary wear and tear generally:
1. General Condition
(a) Be clean by airline standards;
(b) Have installed the Engines, and other equipment, Parts and
accessories and loose equipment as would remain installed in such
Aircraft, and shall be in a condition suitable for operation in
commercial service;
(c) Have in existence a valid Certificate of Airworthiness with respect
to the Aircraft issued by the Air Authority of the State of
Registration with a validity of at least nine (9) months after the
date of redelivery of the Aircraft to Lessor;
(d) Comply with the manufacturer's original specifications therefor;
(e) Have undergone, immediately prior to redelivery, a 3000 Check or any
subsequent higher inspection, if due within 3000 hrs, in accordance
with the Approved Maintenance Program, shall be free of any waivers,
and all deferred maintenance, if any, shall have been accomplished;
each engine and A.P.U. shall have had an inspection in accordance
with Article 16 confirming release for its remaining operational
life;
(f) All outstanding airworthiness directives and mandatory orders
affecting such model of Aircraft issued by the Air Authority which
require compliance during the Term shall have been accomplished;
(g) Have installed all applicable vendors' and manufacturers' service
bulletin kits theretofore received by Lessee free of charge that are
appropriate for the Aircraft and to the extent not installed, such
kits shall be furnished free of charge to Lessor;
(h) Stripped of all Lessee's paint scheme and repainted through an
Authorized Maintenance Performer with
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Manufacturer approved paints in white or any other basic color
requested by Lessor; and
(i) Have been inspected and treated with respect to corrosion as defined
in the Approved Maintenance Program.
2. Airframe and major components
The Airframe and major components shall have not less than the following
hours/cycles/months expected life remaining to the next Major Check and/or
overhaul:
-Airframe : 3000 hours and 12 months to next Major
Check;
-Engine : half life on average to next Engine
shop visit but in no event less than
3000 hours;
-Main Landing Gear : 3000 cycles to next overhaul;
-Nose Landing Gear : 3000 cycles to next overhaul;
*The records as to remaining engine life shall be certified by Lessee in
writing to Lessor upon redelivery of the Aircraft to Lessor.
3. Components
(a) Each life-limited Part shall have not less than 3000 (Three
Thousand) flight hours or cycles of the total approved life
remaining to the scheduled replacement, in accordance with the
Approved Maintenance Program;
(b) Each hard-time controlled component shall have not less than 3000
(Three Thousand) Flight Hours or 3000 (Three Thousand) Cycles or 12
(twelve) months whatever is applicable, remaining to the next
scheduled overhaul/inspection, in accordance with the Approved
Maintenance Program;
(c) "On-condition" and "Condition Monitored" components shall be
serviceable;
(d) The A.P.U. shall be serviceable.
4. Fuselage, Windows and Doors
(a) Fuselage shall be free of major dents and abrasions, scab patches
and loose or pulled or missing rivets;
95
<PAGE>
(b) Windows shall be free of delamination, blemishes, crazing and shall
be properly sealed;
(c) Doors shall be free moving, correctly rigged and be fitted with
serviceable seals.
5. Wings and Empennage
(a) All leading edges shall be free from damage;
(b) All unpainted cowlings, fairings and other surfaces shall be
polished;
(c) Wings shall be free of fuel leaks.
6. Interior
(a) Ceilings, sidewalls and bulkhead panels shall be clean and free of
cracks and stains;
(b) All carpets and seat covers shall be in good condition, clean and
stain free and meet Air Authority fire resistance regulations;
(c) All seats shall be serviceable, in good condition and repainted as
necessary;
(d) All signs and decals shall be clean and legible;
(e) All emergency equipment having a calendar life shall have a minimum
of one year or one hundred per cent of its total approved life,
whichever is less, remaining.
7. Cockpit
(a) All decals shall be clean, secure and legible;
(b) All fairing panels shall be free of stains and cracks, shall be
clean, secure and repainted as necessary;
(c) Floor coverings shall be clean and effectively sealed;
(d) Seat covers shall be in good condition, clean and shall conform to
Air Authority fire resistance regulations;
(e) Seats shall be fully serviceable and shall be repainted as
necessary.
96
<PAGE>
8. Cargo Compartments
(a) All panels shall be in good condition;
(b) All nets shall be in good condition.
9. Landing Gear and Wheel Wells
(a) Shall be clean, free of leaks and repaired as necessary;
(b) All decals shall be clean, secure and legible.
10. Corrosion
(a) Entire fuselage shall be substantially free from corrosion and shall
be adequately treated and an approved corrosion prevention program
shall be in operation;
(b) Fuel tanks shall be free from contamination and corrosion and a tank
treatment program shall be in operation.
11. Specification
The Aircraft shall conform to its specification at the Delivery Date,
including the following:
1. The Aircraft Configuration as defined in Appendix A of the Transwede
Lease as attached hereto.
2. Specification changes performed by or on behalf of Transwede in
accordance with the provisions of the Tripartite Agreement as
follows:
a. Modification to install Flight Management System Airline
Option No. 5; Ref. Fokker SCN 34-62.S008.
b. Modification to change from CAA certification to FAA
Certification; Ref. Fokker SCN 02-20.C004.
c. Modification to change indicators from Kilograms to Pounds;
Ref. Fokker SCN 28-40.C003.
d. Modification to install TCAS; Ref. Fokker SCN 34-46.C004.
97
<PAGE>
e. Modification of Pitot Heat System in accordance with Service
Bulletin F100-30-017.
f. Installation of Galley Door Viewer in accordance with Service
Bulletin F100-52-053.
g. Any and all modifications necessary to obtain a Swedish Export
Certificate of Airworthiness and the issuance of a Certificate
of Airworthiness by the FAA including completion of all
Airworthiness Directives required by the FAA, the BLA or other
relevant authority.
3. The Loose Equipment Checklist attached hereto.
98
<PAGE>
{LOGO} FOKKER
AIRCRAFT
SERVICES LOOSE EQUIPMENT CHECKLIST
Woensdrecht-Holland -------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Serialno.: 11329 RECORD OF CHECKING
NO TOTAL ARM INDEX ------------------
REQ. WEIGHT CHANGE 17-03
description kg mm dI 1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Escape rope (in ceiling) Fok.D86227-401 1 0.45 2750 -0.066 v
Life vest S21850-7300 1 0.62 2750 -0.090 v oper. Item
Smoke goggle Eros MXP210-00 1 0.20 2743 -0.029 v
Fire FFE BA51015G3 1 2.07 2794 -0.301 v
extinguisher BCF
Escape rope (in ceiling) Fok.D86227-401 1 0.45 2750 -0.066 v
Life vest S21850-7300 1 0.62 2750 -0.090 v oper. Item
Life vest S21850-7300 1 0.62 2795 -0.090 v oper. Item
Side panels (RH + LH)
Microphone Telex 63333-007 2 0.36 1762 -0.056 v
handheld(RH+LH)
Smoke goggle (RH+LH) Eros MXP210-00 2 0.40 1762 -0.062 v
Oxygen mask (RH+LH) Eros MC10-04-109 2 0.23 1890 -0.036 v
Flashlight(c/w pwr.pack) DME EF-2C1 2 1.10 2285 -0.166 v
Boomtype headset(RH+LH) Telex 64333-005 2 0.23 2920 -0.033 v
Spare lamp box D48383-409 2 0.28 2850 -0.041 v
(LH)
Sunvisor Magee 141-31020 2 0.91 2900 -0.131 v
Pair of gloves 817-168-13 2 0.22 2850 -0.032 v
(RH)
LH
aft-wall
Boomtype headset Telex 64300-005 1 0.12 2970 -0.017 v
Flash DME 1 0.38 2970 -0.055 v
light EF-1
v = IN AIRPLANE WHEN WEIGHTED
- = NOT IN AIRPLANE WHEN WEIGHED
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
{LOGO} FOKKER
AIRCRAFT
SERVICES LOOSE EQUIPMENT CHECKLIST
Woensdrecht-Holland -------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Serialno.: 11329 NO TOTAL ARM INDEX RECORD OF CHECKING
REQ. WEIGHT CHANGE 17-03
description kg mm dI 1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cockpit compartment
(cont'd):
RH aft
wall
- -Ogygen bottle PUR 176225 1 5.23 2903 -0.755 v
(fixed)
- -Crash-axe Gemtor 42D8331 1 1.00 2952 -0.144 v
- -Oxygen bottle Scott 5600-1C1AE23A 1 4.07 2882 -0.588 v
- -Full face mask Scott 10100C1A 1 0.97 2882 -0.14 v
- -Pitot head FOK 28.0.2493 3 0.29 3000 -0.042 v
covers
- -Lockpin thrust reverser FOK 28.0.4591 2 0.13 3000 -0.019 v
- -Groundlocks FOK 28.0.1233 3 0.76 3000 -0.109 -
- -Groundlocks (installed) FOK 28.0.1233 3 0.76 13022 -0.033 v
- -Oxygen mask (in gangway Eros MC10-04-109 1 0.11 3050 -0.016 -
LH)
Fwd. C/A station
Microphone (pass.addr.) SENN MD 430-16TAK 1 0.17 3937 -0.023 v
Flashlight DME EF-1 2 0.76 3937 -0.102 v
Handset incl. AH 2542D 1 1.36 3937 -0.182 v
Cradle
Life vest S21850-7300 2 1.24 3937 -0.166 v oper. Item
V = IN AIRPLANE WHEN WEIGHED
- = NOT IN AIRPLANE WHEN WEIGHED
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
{LOGO} FOKKER
AIRCRAFT
SERVICES
Woensdrecht-Holland
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Serialno.: 11329 NO TOTAL ARM INDEX RECORD OF CHECKING
REQ. WEIGHT CHANGE 17-03
description kg mm dI 1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Entrance compartment continued
- ------------------------------
Curtain Galley 1 - 2 FOK D89285-403 1 4283 V
Escape slide (S/E door) FOK D31873-101 1 12.40 4240 -1.623 V
Escape slide cover FOK D15505-103 1 1.59 4240 -0.208 V
Lockpin S/E door FOK D87766-401 2 0.06 4240 -0.008 V
Escape slide (pax door) AC 60049-101 1 12.90 4355 -1.674 V
Escape slide cover AC 60750-101 1 1.10 4355 -0.008 V
In stowage of galley 3 at entrance side:
Fire extiguisher 892480 MODX 1 2.90 5125 -0.354 V
Pass. entert. recorder RDAX 7351 1 2.28 4925 -0.283 V
Curtain Galley 2 - 3 FOK D89285-429 1 5611 V
V = IN AIRPLANE WHEN WEIGHED
- - = NOT IN AIRPLANCE WHEN WEIGHED
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
{LOGO} FOKKER
AIRCRAFT
SERVICES
Woensdrecht-Holland
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Serialno.: 11329 NO TOTAL ARM INDEX RECORD OF CHECKING
REQ. WEIGHT CHANGE 17-03
description kg mm dI 1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cabin compartment
- -----------------
In second LH luggage bin
Megaphone ACR EMIA2204 1 6531 V
Smoke hood PUR 119003 1 1.98 6711 +0.120 V
Fire extinguisher (BCF) FFE BA20703G3 1 2.07 6071 -0.233 V
Pair of gloves 817-168-13 1 0.22 6491 -0.024 V
Life vest exfant MK22 5 2.35 6661 -0.251 V oper. Item
In second RH luggage bin
First aid kit MISC25-001 1 1.73 6481 -0.188 v
Oxygen bottle c/w mask SCOTT 5500B1UBF23A 1 3.73 6361 -0.409 V
Aft LH luggage bin:
Fire extinguisher (BCF) FFE BA20703G3 1 2.07 22796 +0.113 V
Pair of gloves 817-168-13 1 0.22 22936 +0.012 V
Megaphone ACR-EMIA2204 1 23076
Infant life vest MK22 5 2.35 22486 +0.121 V oper. Item
Smoke hood 119003 1 1.98 22676 +0.106 V
Infant seat belt 502755-101-2258 2 0.22 23246 +0.013 V oper. Item
Aft RH luggage bin:
First aid kit MISC 25-001 1 0.73 23400 +0.106 V
Oxygen bottle c/w mask 5500BIUBF23A 2 6.74 23400 +0.409 V
V = IN AIRPLANE WHEN WEIGHED
- - = NOT IN AIRPLANCE WHEN WEIGHED
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
{LOGO} FOKKER
AIRCRAFT
SERVICES
Woensdrecht-Holland
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Serialno.: 11329 NO TOTAL ARM INDEX RECORD OF CHECKING
REQ. WEIGHT CHANGE 17-03
description dI 1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Rear cabin compartment
- ----------------------
Handset incl. cradle AH2542D/B 1 1.36 24880 +0.103 V
Microphone (pass. addr.) SENN MD430-16TAK 1 0.17 24880 +0.013 V
Flashlight DME EF-1 2 0.76 24880 +0.057 V
Life vest S21580-7300 2 1.24 24880 +0.094 V oper. item
Toilet compartments:
Toilet bucket 12201-404 (405) 2 25.60 24305 +1.785 V
Mirror FOK 2 2.98 25000 +0.229 V
Automatic toilet waste 30100022-20 2 0.72 24990 +0.057 V
V = IN AIRPLANE WHEN WEIGHED
- - = NOT IN AIRPLANCE WHEN WEIGHED
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
APPENDIX F
AIRCRAFT DOCUMENTS
FOKKER 100 AIRCRAFT 11329
Aircraft Documents shall include the following documents:
Type Quantity/
---- Number
------
1. Airplane Flight Manual book
(volumes 1 & 2) 1
2. Aircraft Operating Manual book 1
3. Quick Reference Handbook book 2
4. Weight and Balance Manual book 1
5. Master Minimum Equipment List book 1
6. Aircraft Maintenance Manual film 1
7. Illustrated Parts Catalogue film 1
8. Wiring Diagram Manual film 1
(parts 1, 2 & 3)
9. Trouble Shooting Systems film 1
Manual
10. Aircraft Logbook book 1
11. Engine Logbooks book 2
12. APU logbook book 1
13. Delivery Document book 1
(at delivery to Transwede)
14. Certificate of Airworthiness 1
15. Certificate of Registration 1
16. Radio Station License 1
99
<PAGE>
Aircraft Documents shall also include all logs, certificates and data, and
inspection, modification and overhaul records, relating to the Aircraft and
required to be maintained by the Air Authority and/or by the Approved
Maintenance Program.
Upon Expiry Date or upon earlier termination of the Agreement all Aircraft
Documents shall be redelivered by Lessee to Lessor complete and fully updated
simultaneously with the redelivery of the Aircraft.
100
<PAGE>
APPENDIX G
FAA POWER OF ATTORNEY
Form used for Midway Closings to be Substituted
This POWER OF ATTORNEY in favor of LESSOR {HEAD LESSOR} ("Lessor")
dated ____________, 199_ from MIDWAY AIRLINES CORPORATION ("Lessee") {is
consented to by BANK ("Bank")}.
RECITALS:
A. Lessor and Lessee have entered into an Aircraft Operating Lease
Agreement 135 dated as of ________, 1995(the "Lease Agreement") with
respect to the Fokker 100 aircraft, serial no. ______, U.S.
registration no.________ (the "Aircraft").
B. Capitalized terms used herein and not otherwise defined shall have
the respective meanings ascribed to such terms in the Lease
Agreement.
NOW, THEREFORE, for good and valuable consideration, the adequacy of
which is hereby acknowledged, it is hereby agreed as follows:
Lessee hereby irrevocably constitutes and appoints Lessor, with full
power of substitution, for and in the name and on behalf of Lessee, as the act
and deed or otherwise of Lessee:
to direct, authorize and instruct the insurer or insurance broker
with respect to the Aircraft, as if Lessor were policy holder,
pursuant to Article 11.6 of the Lease Agreement, in order to
initiate, process and settle any insurance claim with respect to the
Aircraft, Engines or Parts;
to execute, sign, deliver, authorize and file such instruments
legally necessary for any and all actions necessary to take
possession and effect redelivery of the Aircraft, Engines or Parts
upon termination of the Lease Agreement due to an Event of Default;
101
<PAGE>
to execute, sign, deliver and file all such instruments requested by
Lessor {Head Lessor} that may be required to deregister the Aircraft
from the FAA, or to terminate the Lease for the Aircraft that is
recorded at the FAA, or that may be deemed proper in or in
connection with all or any of the purposes aforesaid, and to appoint
substitutes or agents to take any such action on its behalf;
provided, however, that such power shall not be exercisable by or on
behalf of the Lessor until an Event of Default shall have occurred
and is continuing.
Lessee hereby ratifies and confirms and agrees to ratify and confirm
any direction, authorization and instruction of Lessor {Head Lessor} taken
pursuant to this Power of Attorney.
This Power of Attorney shall expire the date one year following the
Expiry Date or earlier termination of the Lease.
IN WITNESS WHEREOF, Lessee has duly caused this Power of Attorney to
be executed on the date first set forth above.
MIDWAY AIRLINES CORPORATION
By:
----------------------------
Name:
Title:
Consented and Agreed:
{BANK}
By:
--------------------------
Name:
Title:
{CERTIFIED RESOLUTIONS OF LESSEE AUTHORIZING THIS
POWER OF ATTORNEY TO BE ATTACHED}
102
<PAGE>
AIRCRAFT CONFIGURATION
relating to
Fokker 100 aircraft
PART Page
---- ----
PART A: Type Specification 63
Attachment A to Part A 64
PART B: Installed additional equipment 65
PART C: Lessee's additional requirements 85
Emergency Equipment Lay-out 89
PART D: List of Mandatory Modifications 90
Initials:
Lessor: {ILLEGIBLE} Lessee: {ILLEGIBLE}
<PAGE>
AIRCRAFT CONFIGURATION
relating to
Fokker 100 aircraft
PART A: TYPE SPECIFICATION
- ------- ------------------
1) Type Specification per printed copy supplied
by Fokker Aircraft B.V. to
TRANSWEDE AIRWAYS AB.
Document Reference: TD F.28:PL-004
Date of issue: February 01, 1983
Date of amendment: February 15, 1988
2) Engine Specification: Rolls Royce Tay Mk 650-15 as described in
the Rolls Royce Contract Specification 3004
issue 1, printed February 1986, including
the Design Change Orders executed by Rolls
Royce.
Initials:
Lessor: {ILLEGIBLE} Lessee: {ILLEGIBLE}
<PAGE>
NUMBER DESCRIPTION
FO 02-52.80 Fokker Company Logo.
FO 03-10.80 Incorrect flying hours for the economic repair life Fokker
100.
FO 03-65.80 Correction to maximum design towing load given in the Type
Specification.
FO 03-70.80 Floor panel loading - Correction to baseline Type
Specification.
FO 12-13.80 Update the approved lubrication oils info given in the
baseline Type Spec.
FO 14-00.81 Amendment to Chapter 14 of the baseline Type Spec.
FO 14-13.80 Interchangeability - add "cable wheels and removable pulley
brakets".
FO 21-22.80 Introd. of larger ventilation louvres and extra adjustable air
outlets.
FO 21-26.80 Equipment cooling - additional fan assembly.
FO 22-10.80 Profile mode - certification.
FO 22.10.81 Speed protection for FMS profile mode.
FO 23-40.80 Amend the Fokker 100 baseline Type Spec. to reflect ATA 100
breakdown.
FO 23-51.80 Jack panel location in the flight compartment.
FO 23-62.81 Electrostatic jack socket.
FO 25-50.80 Logitudinal track spacing incorrect in Type Spec.
FO 27-35.81 Stall protection - new PSRS control law.
FO 27-56.80 Flap indication availability.
FO 28-10.80 Fuel system - CWT usable capacity.
FO 28-10.81 Fuel system - main tank usable capacity.
FO 28-15.80 Fuel venting system water ingress.
FO 28-22.80 Engine fire shut-off valve - closed indication.
FO 29-12.80 Hydraulic fluid transfer.
FO 30-31.82 Relocation of Flight Data Recorder.
FO 31-41.80 Proximity switching system.
FO 32-10.80 Main Landing Gear - torque link damper.
FO 32-10.81 Main Landing Gear - Water deflectors.
FO 33-41.80 Tires - Bias tires as standard.
FO 33-23.80 Toilet area lighting baseline Type Spec.
FO 34-43.80 GPWS - Glideslope warning inhibit annunciator.
FO 34-51.80 Type Spec. correction with respect to location of RDMI
description.
FO 38-10.80 Water tank installation.
FO 38-30.80 Electr. heated waste water drain masts and floor drain check
valves.
FO 49-00.80 APU "AVAIL" lamp function.
FO 49-50.80 APU - Fireproof inlet duct.
FO 49-60.80 APU automatic shutdown in flight.
FO 56-11.81 Windshield dry sealing.
FO 74-30.80 Ignition - Unit 1 deactivated. unit 2 activated.
FO 78-33.80 Thrust reverser - Electrical power supply.
FO 80-12.80 Engine starter circuit cutout.
Initials
Lessor: {ILLEGIBLE} Lessee: {ILLEGIBLE}
<PAGE>
FIRST ISSUE FEB 01/83 AND AMENDED UP TO FEBRUARY 1988
- --------------------------------------------------------------------------------
ATA l00 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
02 MISCELLANEOUS
02-21 CAA Certification
The aircraft shall include all hardware modifications
resulting from the Special conditions as applicable to the UK
CAA Type Certification of the Fokker 100 aircraft. Operational
requirements are not included
02-70 Pin Programmable Options
Flight Management System (FMS)
1. Units
a. weight related items kg
b. lenght distance meters
c. baro correction mB
2. ATA/IATA departure profile ATA
3. Fuel option **) No. 1
4. Airline Type Option No. 2
Electronic Flight Instrument System (EFIS)
1. Bearing pointers on ND rose both ADF
2. ADF in ND MAP & ARC no ADF
3. Flap position on PFD disabled
4. Baro reference mB
5. FD presentation cross-bar
Multi Function Display System
1. Engine Oil Quantity liters
2. Temperature Reference (degree) Celcius
3. Fuel Mass kg
4. Fuel Flow sec. page
5. WX Display on MFDS disabled
Automatic Flight Control & Augmentation
System (AFCAS)
1. C-chord disabled
Flight Warning Computer
1. C-chord disabled
Initials:
Lessor: {ILLEGIBLE} Lessee: {ILLEGIBLE}
<PAGE>
65
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
02-7O Pin Programmable Options (cont'd)
**) Buyer shall specify the following fuel options under
option No. 1 to it's Navigation Base Vendor.
- Taxi fuel
- Route reserve
- Upper limit route reserve
- Lower limit route reserve
- Final/Time
03 STRUCTURAL DESIGN CRITERIA
03-20 Increase in MTOW
The aircraft shall be certified according to the following
operating weights:
Maximum Ramp Weight :98.500 lbs
Maximum Take-Off Weight :98.000 lbs
Maximum Zero Fuel Weight :81.000 lbs
Maximum Landing Weight :88.000 lbs
03-50 Design Speeds
Increase of Mmo to M077
Introduction of this change is accomplished by software
changes to AFCAS.FMS and ADC.
The speed limitation placard on the main instrument panel
shall be changed to reflect the correct Vmo and Mmo. This
change shall also be reflected in all applicable manuals.
11 PLACARDS AND MARKINGS
11-10 Exterior Colour Schemes and Markings
Exterior placards and markings in English.
Placarding shall reflect the use of
Mobil Jet Oil II for engine. APU.IDG AND cooling turbines.
Initials:
Lessor: {ILLEGIBLE} Lessee: {ILLEGIBLE}
<PAGE>
66
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
11-30 Interior Placards and Markings
Cabin placards and markings in English/Spanish.
Cockpit placards in English.
12 SERVICING
12-00 Servicing
Fuel contents table in kilograms (kg).
Oil :Mobil Jet Oil II
i.l.o. ESSO 2380
Fuel :JP1.JP4 and JP5
Hydr.Fluid :Skydrol 500 B4
22 AUTOFLIGHT
22-10 Extended Autoland (capability cat. 3B)
Installation of a fail-operational three channel Autoland.
Automatic Flight Control and Agumentation System suitable for
automatic landings down to 15 ft DH and 150 m RVR
weather conditions.
During high speed roll-out after touch down the AFCAS provides
lateral control via the aircraft rudder.
Installation adds to the standard system:
FCC 3, ILs 3 (ref. 34-32). LRRA 3 (ref. 34-42) and static
inverter (ref. 24.26).
- (01) FCC 100 Collins
23 COMMUNICATIONS
23-11 Single HF Communication System
The aircraft shall be provided with full provisions for a
single Collins HFS-700 HF communication system.
Initials:
Lessor: {ILLEGIBLE} Lessee: {ILLEGIBLE}
<PAGE>
67
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
To arrive at an operational system the following equipment is
to be supplied by Buyer.
- (01) Tranceiver, Collins HFS-700
- (01) Antenna tuner, Collins 4905-1
- (01) HF Control panel, Gables
23-12 VHF Communication
Installation of a Bendix VHF Communication system i.l.o. the
standard Collins system.
The installation comprises the following Seller Furnished
units.
- (02) Transceiver, Bendix RTA-44A
- (02) Antenna, Sensor
- (02) VHF Control panel, Gables
Third VHF Communications
Additionally the Aircraft shall be provided with full
provisions for a third VHF Communication system. This third
VHF will be dedicated to and fully interfaced with the
provisions for the ACARS system.
To arrive at an operational system the following equipment is
to be supplied by Buyer.
- (0l) Transceiver, Bendix RTA-44A
- (01) Antenna, Sensor
- (01) VHF Control panel, Gables
23-21 Selective Calling (Selecal) - ARINC 714
The Aircraft shall be provided with full provisions for a
Selcal system in acc. with ARINC 714.
The Selcal system shall be interfaced with VHF1, VHF2 and the
provisions for HF communication. The Selcal system shall be
reset if the appropriate VHF or HF system is keyed.
Initials:
Lessor: {ILLEGIBLE} Lessee: {ILLEGIBLE}
<PAGE>
68
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
To arrive at an operational system the following equipment is
to be supplied by Buyer.
- (01) Selcal unit. TEAM
23-22 ACARS
Installation of full provisions for ACARS in addition to the
space provisions provided in the baseline aircraft. The ACARS
shall provide OOOI information. The ACARS shall have a
dedicated VHF Comm system (ref. 23-12). The ACARS shall be
hooked-up to the DFDAU for report downlink purposes which are
formed via the standard parameter information connected to the
DFDAU, when a second CPU will be installed.
To arrive at an operational system the following equipment is
to be supplied by Buyer.
- (01) Management Unit (MU) with internal GMT clock,
powered from batteries, Teledyne
- (01) Interactive Display Unit (IDU) on the pedestal,
Teledyne
Wiring provisions will be available for:
- (01) Cabin Management Terminal at Flight Attendant
Panel, Teledyne
- (01) Printer, to be installed in column of maintenance
and test panel, Datametric
- (01) Voice go-ahead to FWC from MU
- (01) Remote voice/data switch, on the
pedestal
23-22 ACARS (cont'd)
The voice-mode shall be selectable via the IDU (pin
programmable)
The OOOI information generated by the flight warning computer
will be transferred via a databus to ACARS Management Unit.
In additional, the OOOI and ground/flight info will be also
hardwired.
Initials:
Lessor: {ILLEGIBLE} Lessee: {ILLEGIBLE}
<PAGE>
69
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
The aircraft ident. information will be provided via the ACARS
- MU hardwired.
The ACARS - IDU and MU shall be hardwired connected to the
DFDAU.
Installation of the standard Flight Data Acquisition Unit
DFDAU with a single CPU.
23-32 Passenger Entertainment
Installation of a pre-recorded announcement and boarding music
system. The system comprises a Matsushita RDAX 7351 recorder
system.
The recorder with build-in control panel shall be installed in
Galley 3.
The installation comprise the following Seller Furnished unit:
- (01) Recorder. Matsushita RD-AX7351
23-51 Audio Management
Audio control panels in the pedestal shall be relocated to the
LH and RH flightdeck side panels, as a result the jack box
panels will be installed in the sidewalls. Audio control
panels will be with provisions for VHF Com-3 and single HF Com
facilities.
Because of the full provisions for VHF3 and HF, switches for
these functions are installed on the Audio Control Panels. As
these switches are not functional they must be provided with
an "INOP" sticker in accordance with JAR 25.1523.
24 ELECTRICAL POWER
24-26 Static Inverter
Installation of a single-phase autoland static inverter to
provide a source of AC power to the essential autoland 3 bus
(350 VA).
Initials:
Lessor: {ILLEGIBLE} Lessee: {ILLEGIBLE}
<PAGE>
70
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ATA 100 DESCRIPTION
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24-33 Batteries
Batteries with an increased Amp. hr. rating will be installed
resulting from CAA special conditions applicable to Fokker 100
aircraft.
25 EQUIPMENT AND FURNISHINGS
25-12 Sunvisors
Installation of two sunvisors and rail system in the flight
compartment. The visors can be locked at various angles.
25-20 Passenger Compartment
Interior lay-out in for 109 Passengers in accordance with
drawing F100-04-088 sheet 1, issue -.
Accommodation shall be provided for 109 seats at 31 inch (787
mm) pitch. Triple seats RH and double seats LH.
25-21 Passenger and Attendant seats
Installation of 109 passenger seats including covers,
seatbelts, tables etc. The fully dressed passenger seats are
supplied by Seller.
Double Cabin Attendant Seat
Installation of a rear facing double cabin attendants seat in
entrance against forward wardrobe/stowage wall on floor
hardpoints and a third top-point.
- (01) Double cabin attendant seat. Socea
Installation of a double cabin attendants seats i.l.o. a
single at the aft pressure bulkhead.
- (01) Double cabin attendant seat. Socea
Initials:
Lessor: {ILLEGIBLE} Lessee: {ILLEGIBLE}
<PAGE>
71
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ATA 100 DESCRIPTION
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25-23 Sidewall Panels and Window Shades
Installation of a rolling blind in each window of the
passenger compartment.
- (66) Window blind, Magee
25-25 Floor Covering
Carpet material or the passenger's compartment shall be
supplied by Seller. Installation of protection cover below the
floor over the avionics rack.
25-26 Movable Cabin Divider
The aircraft shall be provide with full provisions for a
movable class divider, from approx. Sta.6200 to Sta. 22320,
which is throughout the cabin.
Cabin backwall LH/RH incl. lintel.
25-26 Passenger Compartment Curtains
The Aircraft's passenger compartment shall be provided with
curtains and curtain rails in the following locations:
- between Galley 1 and Galley 2
- between Galley 2 and Galley 3
The required curtain material Buyer's choice shall be supplied
by Seller
25-27 Rail on Overhead Luggage Bins
Installation of a seat-placard rail on the luggage bins. An
extruded metal rail is fitted to the RH and LH luggage bins
throughout the cabin. The rail incorporates the facility to
easily fit and remove seat row placards.
Initials:
Lessor: {ILLEGIBLE} Lessee: {ILLEGIBLE}
<PAGE>
72
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ATA 100 DESCRIPTION
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25-29 Stowage unit/Wardrobe
Deletion of the standard RH forward stowage unit behind Galley
2.
Deletion of the standard LH forward stowage unit aft of the LH
passenger door.
25-29 Trolley Stowage rear cabin
The standard wardrobes in the rear of the Aircraft's cabin
(forward of the lavatories) shall be made suitable for stowage
of one half size trolley (one at each side) and a standard
unit. The stowage shall be closed by means of a door. A
folding panel shall allow the use of the compartment as
wardrobe. Trolleys and standard units are Buyer Furnished
Equipment.
25-31 Galleys
All Galleys and galley inserts are supplied by Seller as
Seller Furnished Equipment.
25-31 Galley 1
Installation on Galley 1 (22" deep) of the standard location
forward of the RH S/E door.
- (01) Galley, Rumbold
System provision for galley inserts:
- (03) Coffee makers, Rumbold
- (03) Half size trolley, Driessen
- (01) Ice drawer, Rumbold
- (01) Standard unit, Rumbold
Ref. Fokker drawing F28-04-143 sheet 1, issue: A.1.
Initials:
Lessor: {ILLEGIBLE} Lessee: {ILLEGIBLE}
<PAGE>
73
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ATA 100 DESCRIPTION
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25-32 Galley 2
Installation of a Galley 2 (35" deep) at the standard location
aft of the RH S/E door.
- (01) Galley. Rumbold
System provisions for galley inserts:
- (01) Large oven, Rumbold
- (04) Hall size trolley, Driessen
- (02) Oven Control panel, Rumbold
- (01) Waste bin, Rumbold
Ref. Fokker drawing F28-04-l43 sheet 2, issue: A proposal 1.
25-33 Galley 3
Installation of a Galley 3 (29" deep) on structural provisions
(hardpoints) on the floor and top for a galley. Location aft
of the LH passenger door, between Sta. 4875 and 5611.
- (01) Galley, Rumbold
System provisions for galley inserts:
- (02) Standard units, Driessen
- (04) Half size trolley, Driessen
The front wall shall be equipped with the cabin attendant
control panel, passenger entertainment panel and shall have
wiring provisions for an ACARS cabin management terminal (Ref.
23-22).
25-60 Emergency Equipment
The BCF fire-extinguisher, the megaphone and oxygen bottle
will be installed as described in the type specification.
Initials:
Lessor: {ILLEGIBLE} Lessee: {ILLEGIBLE}
<PAGE>
74
NUMBER DESCRIPTION
FO 02-52.80 Fokker Company Logo
FO 03-10.80 Incorrect flying hours for the economic repair life Fokker
100.
FO 03-65.80 Correction to maximum design towing load given in the Type
Specification.
FO 03-70.80 Floor panel loading - Correction to baseline Type
Specification.
FO 12-13.80 Update the approved lubrication oils info given in the
baseline Type Spec.
FO 14-00.81 Amendment to Chapter 14 of the baseline Type Spec.
FO 14-13.80 Interchangeability - add "cable wheels and removable pulley
brackets".
FO 21-22.80 Introd. of larger ventilation louvres and extra adjustable air
outlets.
FO 21-26.80 Equipment cooling - additional fan assembly.
FO 22-10.80 Profile mode - certification.
FO 22-10.81 Speed protection for FMS profile mode.
FO 23-40.80 Amend the Fokker 100 baseline Type Spec. to reflect ATA 100
breakdown.
FO 23-51.80 Jack panel location in the flight compartment.
FO 23-62.81 Electrostatic jack socket.
FO 25-50.80 Logitudinal track spacing incorrect in Type Spec.
FO 27-35.81 Stall protection - new PSRS control law.
FO 27-56.80 Flap indication availability.
FO 28-10.80 Fuel system - CWT usable capacity.
FO 28-10.81 Fuel system - main tank usable capacity.
FO 28-15.80 Fuel venting system water ingress.
FO 28-22.80 Engine fire shut-off valve - closed indication.
FO 29-12.80 Hydraulic fluid transfer.
FO 31-31.82 Relocation of Flight Data Recorder.
FO 31-41.80 Proximity switching system.
FO 32-10.80 Main Landing Gear - Torque link damper.
FO 32-10.81 Main Landing Gear - Water deflectors.
FO 33-41.80 Tires - Bias tires as standard.
FO 33-23.80 Toilet area lighting baseline Type Spec.
FO 34-43.80 GPWS - Glideslope warning inhibit annunciator.
FO 34-51.80 Type Spec. correction with respect to location of RDMI
description.
FO 38-10.80 Water tank installation.
FO 38-30.80 Electr. heated waste water drain masts and floor drain check
valves.
FO 49-00.80 APU "AVAIL" lamp function.
FO 49-50.80 APU - Fireproof inlet duct.
FO 49-60.80 APU automatic shutdown in flight.
FO 56-11.81 Windshield dry sealing.
FO 74-30.80 Ignition - Unit 1 deactivated, unit 2 activated.
FO 78-33.80 Thrust reverser - Electrical power supply.
FO 80-12.80 Engine starter circuit cutout.
Initials:
Lessor: {ILLEGIBLE} Lessee: {ILLEGIBLE}
<PAGE>
75 APPENDIX A, PART B
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ATA l00 DESCRIPTION
CHAPTER
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26 FIRE PROTECTION
26-12 APU Fire Detection and Warning
Installation of a warning horn in the nosewheel bay to provide
an audible APU fire warning during APU ground operation.
The function of the warning horn will be inhibited during an
APU fire warning test.
31 INDICATING/RECORDING SYSTEMS
31-21 Flight Deck Clocks
Installation of alternate p/n clocks
- (02) Clock. Smith Industries p/n 2610-07-1
31-31 Flight Data Recorder alternate Source - ARINC 573
Installation of an alternate source FDR (Sundstrand) i.l.o.
standard unit (Fairchild). The optional equipment shall be
installed above stowage unit section (in the position
allocated to the standard equipment).
- (01) FDR, Sundstrand
- (01) Acclerometer, Sundstrand
- (01) Mounting tray
32 LANDING GEAR
32-48 Autobrakes
Installation of an Automatic Braking System in addition of the
standard brake- and analog anti-skid system. The system
provides pilot selectable decelleration rates: low, med, max
and RTO.
For take-off, use of the maximum setting shall result in
maximum braking if the take-off is required from a speed of 80
knots.
Initials:
Lessor: {ILLEGIBLE} Lessee: {ILLEGIBLE}
<PAGE>
76 APPENDIX A, PART B
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33 LIGHTS
33-24 Illuminated Signs
Installation of a lintel in the forward passenger compartment
with legend EXIT in English/Spanish due to the installation of
a curtain between Galley 2 and Galley 3.
33-26 Entrance Lighting
Wiring provisions for a galley area light installed in Galley
3, to be connected to the entrance light.
33-28 Galley Area Lighting
Installation of a galley area light in the ceiling between
Galley 1 and 2. Switch will be installed on Galley 1.
33-46 Logo Lights
Installation of lighting fixtures in the LH and RH flap track
fairings for illumination of both sides of the vertical
stabilizer.
Installation of a ON/OFF switch for NAV/LOGO light switching
on the external-light switch panel in the overhead panel of
the flight compartment.
33-47 Strobe Lights
Installation of high intensity strobe lights in each wingtip
and one in the tailcone. Control of the system is via a rotary
switch panel in the overhead panel of the flight compartment.
Switch identification is by STROBE, printed below the switch.
Switch operation designation are as follows:
Initials:
Lessor: {ILLEGIBLE} Lessee: {ILLEGIBLE}
<PAGE>
77 APPENDIX A, PART B
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ATA 100 DESCRIPTION
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- OFF = strobe lights are off
- ON = strobe lights will be switched on by this selection.
- AUTO = strobe lights are activated to come on via the
landing gear switch at take-off.
34 NAVIGATION
34-13 Air Data Instruments
A combined standby altimeter and airspeed indicator i.l.o. the
standard separate standby altimeter and standby airspeed
indicator.
The following Seller Furnished equipment shall be deleted from
the baseline configuration:
- (01) Standby altimeter, Smiths Industries
- (01) Standby airspeed indicator, Smiths Industries
The following unit shall be supplied as Seller Furnished
Equipment:
- (01) Combined standby altimeter and airspeed indicator,
Smiths Industries
34-16 Windshear
Installation of a windshear detection, alerting and recovery
guidance system.
During flight near the ground (below 1500 A.G.L.) the system
will:
- detect the presence of potentially hazardous windshear
conditions.
- alert the flight crew when the airmass motions reach
potentially hazardous levels.
- provide flight director guidance to the crew to maximize
the probability of ground avoidance.
- provide automatic recovery guidance through the AFCAS
when selected.
Initials:
Lessor: {ILLEGIBLE} Lessee: {ILLEGIBLE}
<PAGE>
78 APPENDIX A, PART B
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ATA 100 DESCRIPTION
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o Detection: Implementation in FMC via software changes.
All sensor data are available via existing
interfaces, as are the discrete outputs to
the AFCAS/EFIS, GPWS and other subsystems.
o Guidance: implemented in AFCAS (FCC's) via software
changes using all existing interfaces.
o Alerts: Aural alerts will be produced within the
GPWS. Primary display of detection alerts
and guidance is on the PFD of EFIS.
Wiring changes for the following functions:
- To add discrete for the following functions:
o TOGA/SPE
o Max. TLA/SPE
o FCC/GPWS
- Changes of speedbrake auto retract logic
- Change pin option FCC and FWC windshear enable
34-28 Inertial Reference System
Installation of a triple inertial reference system (IRS)
i.l.o. the std triple attitude and heading reference system
(AHRS).
The following Seller Furnished Equipment shall be deleted from
the baseline configuration:
- (03) AHRS unit, Litton
- (02) Magnetic sensor unit, Sperry
- (02) Magnetic compensator, Litton
Structural provisions for the magnetic sensor units remain in
the Aircraft. The installation comprises the following Seller
Furnished units:
Initials:
Lessor: {ILLEGIBLE} Lessee: {ILLEGIBLE}
<PAGE>
79 APPENDIX A, PART B
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ATA 100 DESCRIPTION
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- (03) IRS Unit, Honeywell HG
- (03) Mode selector panel, Honeywell
- (01) Inertial system display unit, Honeywell CG
34-32 Instrument Landing System
Installation of a triple Bendix system i.l.o. the standard
dual Collins system (ARINC 710) as part of the three channel
Autoland AFCAS (Ref. ATA 22-10).
The installation comprises the following Seller Furnished
units:
- (03) Receiver, Bendix RIA-35A
- (03) G/S Antenna, Sensor
34-41 Weather Radar (WXR)
Installation of a Bendix weather radar system i.l.o. the std
Collins system.
The installation comprises the following Seller Furnished
units:
- (01) Tranceiver, Bendix RTA-4A
- (01) Control panel, Bendix CON-4A
- (01) Antenna pedestal, Bendix DAA-4A
- (01) Antenna, Bendix REA-4A
34-42 Radio Altimeter
Installation of a triple TRT AHV 530 LRRA system i.l.o. the
standard dual system (ARINC 707) as a part of the three
channel Autoland AFCAS (ref. ATA 22-10).
Initials:
Lessor: {ILLEGIBLE} Lessee: {ILLEGIBLE}
<PAGE>
80 APPENDIX A, PART B
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ATA 100 DESCRIPTION
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The following Seller Furnished units are deleted:
- (04) Antenna, TRT AHV 5
The installation comprises the following Seller Furnished
units:
- (03) Transceiver, TRT AHV 530
- (06) Antenna, Sensor
34-43 Ground Proximity Warning
The installation of a GPWS/GS annunciator on the main
instrument panel LH and RH.
34-51 VHF Omni Range(VOR) - ARINC 711
Installation of two Bendix VOR/M receivers i.l.o. the two
standard Collins receivers. The equipment shall be installed
in the aft rack of the avionics bay.
The installation comprises the following Seller Furnished
units:
- (02) Transceiver, Bendix RVA-36A
34-52 Distance Measuring Equipment
Installation of two Bendix DME interrogators i.l.o. the two
std Collins interrogators. The equipment shall be installed in
the aft rack or the avionics bay (in the position allocated
for the standard equipment).
The installation comprises the following Seller Furnished
units:
- (02) DME Interrogators, Bendix DMA-37A
34-53 Automatic Direction Finding (ADF)
Installation of two Bendix ADF receivers i.l.o. the two std
Collins receivers. The equipment shall be installed in the aft
rack of the avionics bay (in the positions allocated for the
standard equipment).
Initials:
Lessor: {ILLEGIBLE} Lessee: {ILLEGIBLE}
<PAGE>
81 APPENDIX A, PART B
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ATA 100 DESCRIPTION
CHAPTER
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The installation comprises the following Seller Furnished
units:
- (02) Receiver, Bendix DFA-75A
34-54 Air Traffic Control
Installation of a dual Bendix ATC system with S-mode i.l.o.
the standard, single, Collins system with C-mode. The
transponders shall be installed in the aft rack of the
avionics bay and the control panel shall be installed in the
center pedestal (replacing the standard units).
Two mode S ATC antennae will be installed at bottom of
fuselage and 2 antennae on top of the fuselage.
The following Seller Furnished Equipment shall be deleted from
the baseline configuration:
- (01) Control panel. Gables
The installation comprises the following Seller Furnished
units:
- (02) ATC S-mode transponders, Bendix TRA-67A
- (01) Control panel, Bendix CNA-67A
- (04) ATC antenna, Sensor
34-61 Flight Management System
ATA departure profile i.l.o. IATA airline Type option no. 2
i.l.o. European FMS.
35 OXYGEN
35-20 Passenger Oxygen System
The RH luggage bins shall be equipped with oxygen panels
containing four oxygen masks, the LH luggage bins shall be
equipped with oxygen panels containing three oxygen masks.
Initials:
Lessor: {ILLEGIBLE} Lessee: {ILLEGIBLE}
<PAGE>
82 APPENDIX A, PART B
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ATA 100 DESCRIPTION
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The following units shall be deleted from the baseline
aircraft:
- (43) 3 mask panels
The following units shall be installed:
- (22) 4 mask panels
- (22) 3 mask panels
38 WATER/WASTE
38-12 Water heater in aft toilet compartments
Installation of a water heater and a dual timed faucet in both
aft toilet compartments.
The installation comprises the following Seller Furnished
units:
- (02) Heater, Inventum
- (02) Faucet, Adams Rite
38-30 Waste Disposal
To change the material of toilet waste ducts from titanium to
stainles steel to allow suction draining
52 DOORS
52-13 Forward Opening Passenger Door
Installation of a forward opening pax/crew door on the LH side
of the fuselage between Sta. 3845 and 4875. The door will
allow connecting the airplane to boarding bridges as presently
in use and will provide an available entry height of 1850 mm
(73 inches). Installation of the door will not comprise the
installation of an integral staircase.
Initials:
Lessor: {ILLEGIBLE} Lessee: {ILLEGIBLE}
<PAGE>
83 APPENDIX A, PART B
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ATA 100 DESCRIPTION
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The door shall be outward and forward opening and shall be
provided with a locking mechanism comprising C-latches. An
escape slide will be mounted on the inboard side of the door.
(01) Escape slide, Air Cruisers Co
52-31 Enlarged Cargo Compartment Doors
Installation of upward opening, enlarged cargo doors, two in
the forward cargo compartment and one in the aft cargo
compartment. The door sills are flush mounted with the cargo
compartment floor to facilitate ease of loading.
52-70 Avionics Bay Access Hatch Warning
Installation of two micro switches on each of the two avionics
access doors to detect an unlocked condition. Separate
warnings, on each door, are fed to the Multifunction Display
Units located on the main instrument panel. The warning is fed
to the MFDS via the flight warning computer.
The warning is a level 2 category warning which is also
accompanied by an aural single chime.
53 FUSELAGE
53-73 Door Protection Plates
Scuff plates made of corrosion resistant steel shall be
provided on the external fuselage at the sills of the
passenger and service/emergency doors.
56 WINDOWS
56-00 Windows
Due to Gallery 3 installation the first cabin window on the LH
side will be blanked off.
Initials:
Lessor: {ILLEGIBLE} Lessee: {ILLEGIBLE}
<PAGE>
84 APPENDIX A, PART B
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ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
72 ENGINES
72-00 Tay Mk 650-15 i.l.o. 620-15 engines
Changes to the airframe structure, airframe systems and system
software for the installation of Rolls-Royce Tay Mk 650-15
engines. (Exclusive engines).
1. Structural Hardware
o New nacelle inlet (fan diameter increased by 0.8"
o Increased anti-icing valve access doors
- LH fixed cowl
- RH cowl door
o Reinforced thrust strut bracked back-up structure.
72-00 Tay Mk 650-15 i.l.o. Mk 620-15 engines (cont'd)
System Hardware
o Throttle controls and fuel shut-off
o Control: geometry change
o New igniter lead cables. Penetration point on engine on
bottom dead center
o Engine ident plug (delivered C.W. engine)
o Inlet anti-icing: Goemetery changed
o Standby engine indicator (new p/n)
o Electrical harness
o Fuel lines: geometry change
o Hydraulic lines: geometry change
3. Avionics Software
o AFCAS : Installation of a new FCC
(the FCC is pin programmable)
o MFDS : Installation of a new MFDS
o FMC : Installation of a new FMC
(the FMC is pin programmable)
o FWC : Installation of a new FWC
(the FWC is pin programmable)
4. Performance
o Noise
o Handbooks (o.a. AFM)
(Standard Option SO 72-00.01
Initials:
Lessor: {ILLEGIBLE} Lessee: {ILLEGIBLE}
<PAGE>
APPENDIX A, PART C
LESSEE'S ADDITIONAL REQUIREMENTS
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
02 MISCELLANEOUS
02-20 Certification
The aircraft shall be certified for operation on the Swedish
register.
11 PLACARDS AND MARKINGS
11-10 Exterior Colour Schemes
The outboard painting shall be as specified by customer.
11-20 Exterior Placards and Markings
Exterior placards and markings shall be in English, as
specified by customer.
11-30 Interior Placards and Markings
Interior placards and markings shall be in English/Swedish, as
specified by customer.
12 SERVICING
12-13 * Servicing
The oil for engine, IDG and APU shall be Mobil Jet Oil 254
25 EQUIPMENT AND FURNISHINGS
25-20 Passenger compartment.
Interior lay-out for 107 pax in accordance with drawing
W98251. Interior colors and materials as specified by
customer.
25-31 Galleys
Galley parts that are now red shall be painted dark blue, as
specified by customer.
25-31 * Galley 1
Galley 1 shall be made suitable for KSSU trolleys, including
numbering
** Add:
(03) Trolley Hallsize Driessen DLH573-009
Initials:
Lessor: {ILLEGIBLE} Lessee: {ILLEGIBLE}
<PAGE>
86 APPENDIX A, PART C
LESSEES ADDITIONAL REQUIREMENTS
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ATA 100 DESCRIPTION
CHAPTER
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25-31 GALLEY 2
Galley 2 shall be made suitable for KSSU trolleys. Deletion of
frame in order to have additional stowage of 1 full size
trolley, including numbering. Provisions for installation of 3
ATLAS type ovens, p/n 62755. Provisions for the attachment of
a baby cradle.
Add:
* (03) ATLAS type ovens, p/n 67255.
** (03) Trolley Fullsize Driessen DLH621-029
(01) Magazine holder C15018-001-001
25-31 * Galley 3
Galley 3 shall be made suitable for KSSU trolleys, including
numbering. Provisions for the attachment of a baby cradle.
Installation of compartment doors at position 303 and 305.
Add:
** (04) Trolley Halfsize Driessen DLH573-009
25-31 * Galley 4
Installation of a seat rail mounted stowage for 4 half size
trolleys, at RH aft of the cabin, in stead of a double seat,
and including numbering, p/n C10119-001-004 (Rumbold). Fokker
will do best effort to certify this at delivery date of first
a/c.
Add:
** (04) Trolley Halfsize Driessen DLH573-009
25-31 ** Aft stowage
The aft stowage shall be modified to accept KSSU trolleys, the
top part of aft stowage shall be modified to accept a KSSU
container.
** (02) Trolley Halfsize Driessen DLH573-009
25-61 * Emergency equipment
The following additional evacuation equipment shall be
installed:
(02) Fire extinguishers. Walter Kidde 892480MODX
(04) Smoke hoods. Puritan Bennet. 119003
(07) Life vests, orange. Svithk S21850-7300
A complete lay out of the emergency equipment is attached to
this Part C
Initials:
Lessor: {ILLEGIBLE} Lessee: {ILLEGIBLE}
<PAGE>
87 APPENDIX A, PART C
LESSEE'S ADDITIONAL REQUIREMENTS
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ATA 100 DESCRIPTION
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25-63 * Emergency Locator Transmitter
An emergency locator transmitter shall be installed,
comprising the following components:
(01) Transmitter. Dorne & Margolin DMELT8-1
located in the ceiling at the rear of the passenger
compartment.
(02) Antenna. Sensor S65-8280-7
(03) Test switch panel. Fokker A42730-403
located on the overhead panel in the flight compartment
33-24 Illuminated Signs
All signs shall be in english, as specified by customer.
Installation of white covers on overwing escape hatches.
34-26 * EFIS
ADF pointers shall be available in ARC/MAP mode.
Initials:
Lessor: {ILLEGIBLE} Lessee: {ILLEGIBLE}
<PAGE>
(a) The price for the items marked with * totals an amount of $95.640;
(b) The price for the items marked with ** will be determined before delivery
of the Aircraft;
(c) The total of the prices mentioned in (a) and (b) above shall, at delivery
of the Aircraft, be deducted from the credit for start-up costs mentioned
in SL01 648.005 and SL02 648.013 to the Aircraft Support Services
Agreement ASSA 648.004, concluded between Lessee and Fokker on even date
herewith.
Initials:
Lessor: {ILLEGIBLE} Lessee: {ILLEGIBLE}
<PAGE>
EMERGENCY EQUIPMENT LAY-OUT
{GRAPHIC DESCRIPTION}
Layout of emergency equipment and locations.
Initials:
Lessor: {ILLEGIBLE} Lessee: {ILLEGIBLE}
<PAGE>
PART D
<TABLE>
<CAPTION>
LIST OF MANDATORY MODIFICATIONS TO BE
INSTALLED IN THE AIRCRAFT PRIOR TO DELIVERY
A (This list includes all mandatory service bulletins issued
at the time of delivery of the aircraft)
T
<S> <C> <C>
| A | SERV. PUBLIC | DESCRIPTION |
| . . . | . |
| 22 | SBF100-22-026 | INTRODUCTION FACVI3RI |
| | SBF100-22-029 | INTRODUCTION FACVI3RI |
| | SBF100-22-031 | REPLACEMENT FLIGHT MODE PANEL |
| | SBF100-22-032 | INTRODUCTION FAC MOD II |
| 23 | SBF100-23-017 | THE MODIFICATION OF THE PASSENGER ADDRESS SYSTEM |
| 24 | SBF100-24-024 | THE CHANGE OF THE LOCATION OF THE HP BLEED CIRCUIT BREAKERS |
| 25 | SBF100-25-064 | MOD. OF THE COVER OF THE ESCAPE SLIDE ON THE PASS. DOOR |
| 26 | SBF100-26-002 | NEWS SAFETY CATCH OR HALON 1211 PORTABLE FIRE EXTINGUISHERS |
| 27 | SBF100-27-032 | MODIFICATION HORIZONTAL STABILIZER ACTUATOR |
| | SBF100-27-041 | INSPECTION RUDDER AUTOPILOT INPUT BRACKETS |
| | SBF100-27-043 | CONNECT OF A NUMB. OF SHIELDINGS WITHIN THE LIFTD. SYS. TO GROUND |
| | SBF100-27-047 | ONE TIME INSPECTION OF THE RUDDER PEDAL ASSEMBLIES |
| | SBF100-27-051 | MOD. OF FLIGHT CONTROL LOCK HANDLE AND SWITCH |
| | SBF100-27-052 | REPETITIVE CHECK ELEVATOR BOOSTER CONTROL UNIT BACKLASH REMOVER |
| 28 | SBF100-28-022 | ONE TIME INSP. IF NECESSARY INSTAL.A NEW APU FUEL SUP. TUBE ASSY |
| | SBF100-28-026 | ONE TIME INSP. LH AND RH ENGINE FUEL SUPPLY LINE |
| 29 | SBF100-29-021 | REPL. OF SYSTEMS 1 & 2 RETURN FILTER BY PASS ASSY'S |
| | SBF100-29-022 | NEW HYDR. HOSE ASSEMBLIES IN SYS. 1 ENG. DRIVEN PUMP |
| 31 | SBF100-31-020 | INSTALLATION FWC VS |
| 31 | SBF100-31-036 A SOFTWARE MODIFICATION TO THE MFDU (DRAFT) |
| 32 | SBF100-32-044 | INTRODUCTION OF IMPROVED MAIN WHEELS. |
| | SBF100-32-058 | INTRODUCTION OF AN IMPROVED MAIN LANDING GEAR DOOR SEQUENCE VALVE |
| | SBF100-32-061 | INSPECT. OF THE BOLTS IN THE PRESSURE REDUCER VALVE |
| | SBF100-32-064 | NLG RETRACTION TIME OUT OF TOLERANCE |
| | SBF100-32-068 | THE INTRODUCTION OF A LOWER AXLE NUT TORQUE |
| | SBF100-32-070 | INSPECTION AND SHOT PEENING OF THE MAIN WHEELS |
| | SBF100-32-071 THE INSPECTION OF CORRECT GREASING OF THE TELEFLEX SYSTEMS (DRAFT) |
| | SBF100-32-073 | INSPECTION AND SHOT PEENING OF THE MAIN WHEELS. |
| | SBF100-32-074 | THE REPLACEMENT OF THE MAIN LANDING GEAR DOWNLOCK ACTIVATOR. |
| 35 | SBF 100-35-003 | MODIF. OF THE OXYGEN DROP OUT PANELS |
| 38 | SBF 100-38-024 | MODIFICATION TO THE CHECK VALVE AND TUBE ASSEMBLY |
| 49 | SBF 100-49-015 | T2 BIAS SYSTEM IN THE ELECTRONIC CONTROL UNIT |
| | SBF100-49-016 | THE MODIFICATION OF THE WIRING OF THE T2 BIAS SYSTEM |
| | SBF100-49-022 | ONE TIME INSPEC. FOR DRAIN HOLE IN APU MOUNT. FRAME. |
| | SBF100-49-023 | INTRO. OF TWO ADD CLAMPS ON APU FUEL SUPPLY LINE |
| 52 | SBF100-52-039 | REPL. OF NYLON BUSHES FOR THE C-LATCHES OF THE S/E DOORS |
SL123 THE REPLACEMENT OF GAS SPRINGS IN LARGE CARGO DOORS |
| 55 | SBF100-55-018 | MODIFICATION OF RIB 5.0 |
| | SBF100-55-019 | INSPECTION OF RIB 5.0 FLANGES AND FINGER STRIPS |
| | SBF100-55-021REV1 | STRUCTURAL MOD. HORIZONTAL STABILIZER. INCL. BRACKETS (DRAFT) |
| 57 | SBF100-57-021REV1 | REWORK OF THE SIDE STAY BRACKET AN THE UPLOCK MECH. BRACKET (DRAFT) |
SBF100-57-027 THE REPLACEMENT OF THE WING ACCESS PANELS (DRAFT) |
| 71 | SBF100-71-012 | THE MODIF. OF THE ENGINE MOUNT SHEAR SHELF WEB |
76 SBF100-76-011 ENG. CONTROL MOD TO{ILLEGIBLE} THE NEW 52 MAX. SETTING (DRAFT)
78 SBF100-78-010 INTRODUCTION OF INLARGED {ILLEGIBLE} ST REVERSER DOOR WEDGES (DRAFT)
</TABLE>
The items marked with "Draft" will be installed by retrofit and free of charge
as soon as they will be available.
<PAGE>
DESPATCH RELATED SERVICE BULLETINS TO BE
INSTALLED IN THE AIRCRAFT PRIOR TO DELIVERY
<TABLE>
<CAPTION>
A
T
A SEV. PUBLIC DESCRIPTION
<C> <C> <C>
21 SBF100-21-032 INTRODUCTION NEW SEALS MFDU TRAYS EQUIPMENT
SBF100-21-035REV1 INSTALLATION NEW FLEX PIPE EQUIPMENT COOLING
SBF100-21-038REV1 INSTALLATION STOP PLUGS NEAR CABIN TEMP SENSOR
SBF100-21-041 AIR CONDITIONING, IF THIRD COOLING FAN IS INSTALLED
SBF100-21-056 AUGMENTATION OF THE FLOW THROUGH THE TURB. BYPASS VALVES (DRAFT)
22 SBF100-22-037 INTROD. OF SOFTWARE VERSION V13a TO AUTOFLIGHT COMPUTERS (DRAFT)
27 SBF100-27-034 INTROD. IMPROVED FLAP CONTROL DATA UNIT
SBF100-27-038 INTROD. NEW PROXIMITY SENSOR BELL- CRANCK 2
SBF100-27-039 INTROD. NEW RUDDER LIMIT MONITOR UNIT {ILLEGIBLE} (DRAFT)
SBF100-27-046 INTROD. OF ROT LIM RING ON NEW MFDU
SBF100-27-048 THE MOD. OF THE FLEX DRIVE SHAFT OF THE LEFT FLAP ACT.
SL 073 IMPROVED ADJUSTMENT OF LIFTDUMPER MECH. CONTROL SYSTEM
28 SBF100-28-019 INTROD. OF VENTILATION- DRAIN FLOAT- VALVE WITH AN IMPROVED HEAD
SL 119 INTRODUCTION OF SOFTWARE CHANGE TO COMB. PROC. TOTALIZER
SL 105 REPLACEMENT OF SYS LAND 2 HYDRAULIC TUBES
30 SBF100-30-013 MODIF. WINDOW TEMP. CONTR. UNIT FROM-407 INTO -409 (DRAFT)
31 SL 057 INTRO SEVERAL MODS FOR FFIS AND MFDU DISPLAY UNITS
32 SBF100-32-050 INTROD. NEW SPRING & WIRING ROUTE TO IMPROVE RELIAB. OF ANTI RETR. SOL.
SBF100-32-059 ENLARGED TARGETS ON MLG UP SENSORS
SBF100-32-065 REPLACEMENT OF THE PARKING BRAKE MECHANISM
SBF100-32-069 INTRO OF NEW PROXIMITY SWITCHES FOR MLG DOOR UPLOCK MECHANISMS
36 SBF100-36-012 INTRO OF NEW APU INLET DUCT OVERHEAT SAW
SBF100-36-015REV1 INSTALLATION OF IMPROVED HEAT INSULATION BLANKETS
SBF100-36-018 A CHANGE TO THE BLEED AIR CONTROL CIRCUIT OF THE TAY 650-15
SBF100-36-022 INSP. THE CHECK-VALVE ON PRES. SWITCH/AFT BLEED AIR SENSE LINE (DRAFT)
38 SBF100-38-026 INTRO OF AN EXTENDED DUMP OUTLET FOR THE PRESSURE REGULATOR
49 SBF100-49-017 A NEW RELAY TO PREVENT ELECTRO MAGNETIC INTERFERENCE
SBF100-49-020 MOD FOR WIRING TO THE APU CONTROL BUS RELAY
VENDOR SB MODIFICATION OF THE APU INLET PLENUM
VENDOR SB T2 BIAS MODIFICATION
VENDOR SB INTRODUCTION OF AN {ILLEGIBLE}
77 SL 137 INTRODUCTION OF NEW EMUX
</TABLE>
The items marked with "Draft" will be installed by retrofit and free of charge
as soon as they will be available.
<PAGE>
AMENDMENT NO. 1
dated as of February 26, 1996
to
AIRCRAFT OPERATING LEASE AGREEMENT
No. 135
dated as of July 20, 1995
between
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee, as
Lessor
and
MIDWAY AIRLINES CORPORATION
as
Lessee
Aircraft: Fokker 100
Serial No./RN: 11329/N130ML
<PAGE>
THIS AMENDMENT No. 1 dated as of February 26, 1996 (this
"Amendment"), is between FIRST SECURITY BANK OF UTAH, N.A., a national banking
association existing pursuant to the laws of the United States, having its
principal place of business at 79 South Main Street, Salt Lake City, Utah
84130-0007, not in its individual capacity (except as expressly set forth in the
Lease) but solely as Owner Trustee under the Trust Agreement ("Lessor"), and
MIDWAY AIRLINES CORPORATION, a company incorporated under the laws of the State
of Delaware, having its principal place of business at 300 West Morgan Street,
Durham, North Carolina 27702 ("Lessee")
WHEREAS, Lessor and Lessee are parties to that certain Aircraft
Operating Lease Agreement No. 135, dated as of July 20, 1995, and recorded by
the Federal Aviation Administration on August 28, 1995, under conveyance number
YY012272 (as amended hereby, the "Lease"; capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to them in the Lease);
WHEREAS, debis AirFinance B.V. ("debis") is the beneficial owner of
the Aircraft;
WHEREAS, Lessee is in default under the Lease by reason of its
failure to make certain Rent payments due thereunder in December 1995 and
January and February 1996; and
WHEREAS, Lessor and Lessee desire to amend the Lease as hereinafter
set forth.
NOW THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Definitions.
(a) Section 1 of the Lease is hereby amended by deleting
sub-sections 1.10 and 1.48 thereof in their entirety and replacing them with the
following:
"1.10 Beneficiary shall mean, Stockholm Aircraft Finance IV, B.V., which
is (i) a company incorporated under the laws of the Netherlands,
(ii) wholly-owned by debis and (iii) the beneficiary under the Trust
Agreement, together with its successors and permitted assigns.
"1.48 Other Aircraft Agreements shall mean all other aircraft operating
lease agreements relating to other aircraft so long as such other
aircraft are leased to Lessee by a lessor for the benefit, directly
or indirectly, of debis or any affiliate of debis.
For purposes of this definition,
<PAGE>
affiliate shall mean any corporation or other entity that, directly
or indirectly, controls, is controlled by or is under common control
with debis."
(b) Section 1 of the Lease is hereby further amended by deleting
"Fokker" and "FAUSA" from the definition of Indemnitee (Subsection 1.36 thereof)
and adding "debis" in their stead. In addition, the references to "Fokker" and
"FAUSA" in Section 11.2(c)(ii) of the Lease are hereby deleted and replaced with
"debis".
2. Inspection.
Section 7 of the Lease is hereby amended by adding a new sub-section
7.6 thereto as follows:
"7.6 Lessee hereby acknowledges that the inspection rights and
rights to information and notice pursuant to this Section 7
shall extend to debis as well as Lessor. In addition, without
in any way limiting the rights contained elsewhere in the Lease,
debis shall have the right to have observers (who may or
may not be employees of debis) on site at Lessee's premises
(provided such observers do not unreasonably interfere with
Lessee's business or operations) and, provided the recipients
of any financial and operational information of Lessee
(which recipients may include employees or other
representatives of debis or any of its affiliates, or
agents, attorneys or accountants of debis or any of its
affiliates) keep strictly confidential any such information,
debis shall have the right to inspect and review any internal
financial and operational information of Lessee as debis may
reasonably request (provided such request is made to Lessee's
controller or to a vice president, senior vice president or the
president of Lessee) including, without limitation, cash
flow statements, financial books and records, and any other
records relating to the operation of Lessee's fleet. Lessee
covenants that it will fully cooperate with debis regarding any
inspection of Lessee's fleet and records pursuant to the terms of
the Lease."
3. Default by Lessee.
Section 15 of the Lease is hereby amended as follows:
2
<PAGE>
(a) Sub-section 15.1 is hereby amended by deleting paragraph (n)
thereof in its entirety and replacing it with the following:
"(n) if an event of default (however defined) occurs under (i) any
of the Other Aircraft Agreements, (ii) any other lease
agreements between Lessee and a lessor for the benefit,
directly or indirectly, of Fokker, FAUSA, Daimler-Benz
Aerospace A.G. or any affiliate of any of them, relating to
other aircraft ("Fokker Aircraft Agreements") or (iii) any
aircraft maintenance agreement or other agreement entered into
by Lessee in lieu of Reserve Rate payments ("Maintenance
Agreements"), which event permits acceleration or termination;
or"
(b) Sub-section 15.1 is further amended by adding new paragraphs
(o), (p) and (q) thereto as follows:
"(o) if Lessee's financial performance deviates in any material
adverse way (as determined by debis in its sole, but
reasonable discretion) from the projections set forth on
Lessee's Business Plan for calendar year 1996 (attached hereto
as Exhibit A), taken as a whole, and such deviation is not the
result of a natural disaster which effectively makes it
impossible for Lessee to meet such projections; or
(p) if, prior to satisfaction of Lessee's obligation to pay
Default Payments pursuant to Section 6 of this Amendment,
Lessee shall make (i) any payment of principal or interest on
any amounts owed by Lessee to Zell/Chilmark Fund, L.P.
("Zell") or any affiliate of Zell, (ii) any redemption of, or
any dividend or distribution with respect to, any shares of
Lessee owned by Zell or any affiliate of Zell, (iii) any
prepayment of principal or interest with respect to any other
subordinated debt owed by Lessee or (iv) any redemption of, or
any dividend or other distribution with respect to, any other
shares of Lessee; or
(q) if Lessee shall fail to fulfill any of the obligations set
forth in paragraphs (c) or (d) of Section 6 of this
Amendment."
3
<PAGE>
(c) Sub-section 15.2 is hereby amended by adding "(a), (n), (q)" to
clause (i) of paragraph (b) thereof following the word "paragraphs"; it being
understood that the effect of this amendment is to include payment defaults,
cross-defaults with Other Aircraft Agreements, Fokker Aircraft Agreements and
Maintenance Agreements and failure to fulfill any of the obligations set forth
in paragraphs (c) or (d) of Section 6 of this Amendment as events giving rise to
automatic termination of the Lease without the necessity of any service of
notice thereof upon Lessee; provided, however, that such automatic termination
shall not apply with respect to defaults of the type referred to in paragraphs
(a) or (n) of sub-section 15.1 of the Lease prior to the date hereof or for
payment defaults for Rent Dates occurring in February and March 1996, for so
long as Lessee fulfills the obligations set forth in paragraphs (c) and (d) of
Section 6 of this Amendment.
4. Return of Aircraft.
Section 16 of the Lease is hereby amended by adding a new
sub-section 16.9 thereto as follows:
"16.9 Notwithstanding anything to the contrary contained in the Lease, on
the Expiry Date or upon earlier termination of the Term including,
without limitation, any termination of the Lease pursuant to Section
15 (unless a Casualty Occurrence shall have occurred with respect to
the Aircraft), Lessee shall immediately deliver possession of the
Aircraft to Lessor at Schiphol Airport, the Netherlands (or such
other location as Lessor may require) and hereby covenants that it
will not interpose any defense to any action commenced by Lessor to
regain possession of the Aircraft. The foregoing shall apply whether
or not Lessee is or shall subsequently become a debtor in a case
under Title 11, U.S.C., and in such event, Lessee covenants that it
will not oppose, and will join in, any application by Lessor seeking
to regain possession of the Aircraft."
5. Notice.
Section 19 of the Lease is hereby amended by deleting clause (2) of
paragraph (d) of sub-section 19.6 thereof in its entirety and replacing it with
the following:
4
<PAGE>
"(2) to Lessor at:
First Security Bank of Utah, N.A.
79 South Main Street
Salt Lake City, Utah 84130-0007
Tel: (801) 246-5630
Fax: (801) 246-5053
Attention: Corporate Trust Department with a copy to debis at:
Evert van de Beekstraat 22,
NL-1118 CL Luchthaven Schiphol,
Amsterdam Airport Schiphol
Tel: 011 3120 316-1431
Fax: 011 3120 653-5419"
6. Forbearance. Execution of this Amendment shall serve as Lessor's
agreement to forebear from exercising its rights (including, without limitation,
its rights under Section 15 of the Lease) with respect to:
(a) Lessee's failure to make payments of Rent or security deposit
amounts due under the Lease prior to the date of this Amendment and for the Rent
Date occurring in March 1996; and
(b) Lessee's failure to make payment of Reserve Rate constituting
Engine Maintenance Accruals due under the Lease and the Other Aircraft
Agreements identified as AOLAF 524 and AOLAF 525 on account of Flight Hours
and/or Cycles operated prior to February 1, 1996;
provided, however, that Lessor's agreement to forbear shall be
effective for so long, and only so long, as Lessee otherwise complies with all
the terms of the Lease, as amended, and fulfills the obligations set forth in
paragraphs (c) and (d) of this Section 6, as follows:
(c) Lessee shall pay to Lessor the following amounts (which amounts
Lessee hereby agrees to pay):
(i) {***} on the Rent Date occurring in February 1996;
(ii) {***} on the Rent Date occurring in March 1996; an
(iii) Amounts identified on Exhibit B to this Amendment ("Default
Payments") on the Rent Date occurring in April 1996 and for
the next
5
<PAGE>
succeeding forty-seven (47) Rent Dates thereafter; it being
understood that Lessee shall pay such Default Payments
together with Rent and any other amounts otherwise due
pursuant to the Lease. Lessee may satisfy its obligations to
pay the Default Payments at any time by paying the portion of
all such Default Payments which constitutes principal,
together with the portion of such Default Payments which
constitutes interest accrued and unpaid as of the date of
payment, all as reflected on Exhibit B to this Amendment.
(d) On or before March 7, 1996, Lessee shall pay all unpaid Reserve
Rate owed with respect to the Lease and Other Aircraft Agreements identified as
AOLAF 524 and 525, or shall enter into a maintenance agreement reasonably
satisfactory to debis providing for the maintenance of the engines of the
Aircraft which are the subject of the Lease and such Other Aircraft Agreements.
Execution of this Amendment shall not constitute a waiver of any Rent payment
defaults or of any other defaults which may have occurred and be continuing or
which may occur in the future. Lessor's agreement to forbear shall terminate
automatically if Lessee fails to fulfill any of the obligations set forth in
paragraphs (c) or (d) of Section 6 of this Amendment or if any Event of Default
occurs or has occurred and is continuing under the Lease (other than an Event of
Default to which the forbearance agreement set forth in Section 6 of this
Amendment applies). For so long, and only so long as Lessor's agreement to
forbear has not terminated, and provided that the obligation set forth in
paragraph (d) of Section 6 of this Amendment has been fulfilled (i) Lessee shall
be entitled to exercise its rights and privileges under Sections 5.1.2(b),
5.1.3, 7.4.1 and 13.3 of the Lease and (ii) Lessor shall be deemed to have
elected not to apply the Deposit to sums due or to become due to Lessor pursuant
to Section 1 of Appendix D of the Lease, notwithstanding the occurrence and
continuation of a Default or Event of Default under the Lease.
7. Payments
Paragraph 4 of Exhibit D to the Lease is hereby amended by deleting
the first sentence thereof and replacing it with the following:
"All payments due hereunder shall be effected by Lessee to Lessor to
Bank of New York, in New York, New York, ABA # 021-000-018, Account
No. 802-6002-533 in
6
<PAGE>
favor of Rabobank Nederland, New York Branch, Account No. 14102, in
favor of Stockholm Aircraft Finance IV, B.V., or to such other
account as debis may designate in writing, and all such payments
shall be in Dollars and in immediately available funds, and all such
payments shall be initiated adequately in advance of the due dates
to ensure that Lessor receives credit for the full amount of such
payment on the due dates."
8. Governing Law. This Amendment shall be governed by and construed
in accordance with the internal laws of the State of New York and without regard
to any conflict of law rules. This Amendment is being delivered in the State of
New York.
9. Miscellaneous. Except as specifically amended or supplemented by
this Amendment, the Lease is hereby ratified, approved, confirmed and continued
in all respects and all provisions of the Lease as heretofore amended shall
remain in full force and effect. The parties hereto acknowledge and confirm that
the Lease is intended to be a true lease and not a financing arrangement. This
Amendment may be executed in any number of counterparts, and all of such
counterparts taken together shall be deemed and constitute one and the same
instrument.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee
By: /s/ {ILLEGIBLE}
----------------------------
Title: Asst Vice President
SIGNED on behalf of
MIDWAY AIRLINES CORPORATION
By:
----------------------------
Title:
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee
By:
-----------------------------
Title:
SIGNED on behalf of
MIDWAY AIRLINES CORPORATION
By: /s/ Johathan S. Waller
-----------------------------
Title: Johathan S. WALLER
SENIOR VICE PRESIDENT
GENERAL COUNSEL
8
<PAGE>
EXHIBIT A
{***} (2 pages omitted)
<PAGE>
EXHIBIT B
{***} (2 pages omitted)
<PAGE>
AOLAF 135
AMENDMENT No. 2 AND CONSENT
THIS AMENDMENT No. 2 AND CONSENT dated as of May ___, 1996 (this
"Amendment"), is between FIRST SECURITY BANK OF UTAH, N.A., a national banking
association existing pursuant to the laws of the United States, having its
principal place of business at 79 South Main Street, Salt Lake City, Utah
84130-0007, not in its individual capacity (except as expressly set forth in the
Lease) but solely as Owner Trustee under the Trust Agreement ("Lessor"), and
MIDWAY AIRLINES CORPORATION, a company incorporated under the laws of the State
of Delaware, having its principal place of business at 300 West Morgan Street,
Durham, North Carolina 27702 ("Lessee").
WHEREAS, Lessor and Lessee are parties to that certain Aircraft
Operating Lease Agreement No. 135, dated as of July 20, 1995, and recorded by
the Federal Aviation Administration on August 28, 1995, under conveyance number
YY012272 as amended by Amendment No. 1 thereto dated as of February 26, 1996 and
recorded by the Federal Aviation Administration on April 16, 1996 under
conveyance number K08472 (as amended hereby, the "Lease"; capitalized terms used
herein and not otherwise defined herein shall have the meanings ascribed to them
in the Lease);
WHEREAS, debis AirFinance B.V. ("debis") is the beneficial owner of
the Aircraft;
WHEREAS, pursuant to the Lease, Lessee may satisfy its obligation to
pay the Engine Maintenance Accrual portion of the Reserve Rate by entering into
a Maintenance Agreement, the terms and conditions of such being subject to the
prior written consent of the Beneficiary; and
WHEREAS, Lessor and Lessee desire to amend the Lease as hereinafter
set forth and the Beneficiary desires to consent to the Agreement between
Rolls-Royce Aero Engine Services Limited and Midway Airlines Corporation
Relating to Repair and Overhaul of Rolls-Royce Tay Engines, dated May 10, 1996
(the "Approved Maintenance Agreement"), a copy of which, certified by lessee as
true and complete, is attached hereto as Exhibit A.
NOW THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Notwithstanding anything to the contrary contained in the Lease,
Lessee agrees that it shall remit to Lessor as Reserve Rate, on the date when
Reserve Rate is due under the Lease (in addition to all other amounts due and
<PAGE>
owing under the Lease), an amount equal to the difference between (i) the
Engine Maintenance Accrual due pursuant to the Lease for the preceding
calendar month, or partial calendar month, as the case may be (assuming the
absence of the Approved Maintenance Agreement), and (ii) the amount paid
under the Approved Maintenance Agreement with respect to such preceding
calendar month, or partial calendar month, as the case may be (the "Reduced
Engine Maintenance Accrual"). In order to ensure Lessee's compliance with the
foregoing, the Beneficiary may request, and Lessee shall so provide, the
information and calculations used in determining the Reduced Engine
Maintenance Accrual. Lessee's obligations to pay other amounts of Reserve
Rate owing under the Lease are not in any way reduced or otherwise effected
other than as hereinabove provided with respect to the Engine Maintenance
Accrual portion of Reserve Rate.
2. Lessee hereby acknowledges that, pursuant to the terms of the
Lease, an event of default by Lessee under the Approved Maintenance Agreement,
or any failure by Lessee to make any payment required under the Lease
(including, without limitation, any failure to pay the portion of Reserve Rate
which constitutes Reduced Engine Maintenance Accrual) constitutes an Event of
Default under the Lease giving rise to automatic termination of the Lease
without the necessity of any service of notice thereof upon Lessee. Lessee
further acknowledges that if the Approved Maintenance Agreement is amended in
any respect without the written consent of the Beneficiary, the consent being
given hereby by the Beneficiary to the Approved Maintenance Agreement shall be
void and of no effect, and that such event shall constitute an Event of Default
under the Lease giving rise to automatic termination of the Lease.
3. This Amendment shall be governed by and construed in accordance
with the internal laws of the State of New York and without regard to any
conflict of law rules. This Amendment is being delivered in the State of New
York.
4. Except as specifically amended or supplemented by this Amendment,
the Lease is hereby ratified, approved, confirmed and continued in all respects
and all provisions of the Lease as heretofore amended shall remain in full force
and effect. The parties hereto acknowledge and confirm that the Lease is
intended to be a true lease and not a financing arrangement. This Amendment may
be executed in any number of counterparts, and all of such counterparts taken
together shall be deemed and constitute one and the same instrument.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee
By: /s/ {ILLEGIBLE}
-----------------------------
Title: Vice President
SIGNED on behalf of
MIDWAY AIRLINES CORPORATION
By:
-----------------------------
Title:
MAINTENANCE AGREEMENT CONSENTED TO:
STOCKHOLM AIRCRAFT FINANCE IV, B.V.
By:
-----------------------------
Title:
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee
By:
-----------------------------
Title:
SIGNED on behalf of
MIDWAY AIRLINES CORPORATION
By: /s/ Jonathan S. Waller
-----------------------------
JONATHAN S. WALLER
SENIOR VICE PRESIDENT
GENERAL COUNSEL
MAINTENANCE AGREEMENT CONSENTED TO:
STOCKHOLM AIRCRAFT FINANCE IV, B.V.
By:
-----------------------------
Title:
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee
By:
-----------------------------
Title:
SIGNED on behalf of
MIDWAY AIRLINES CORPORATION
By:
-----------------------------
Title:
MAINTENANCE AGREEMENT CONSENTED TO:
STOCKHOLM AIRCRAFT FINANCE IV, B.V.
By: /s/ {ILLEGIBLE}
-----------------------------
Title:
3
<PAGE>
EXHIBIT A
<PAGE>
AGREEMENT
BETWEEN
ROLLS-ROYCE AERO ENGINE SERVICES LIMITED
AND
MIDWAY AIRLINES CORPORATION
RELATING TO REPAIR AND OVERHAUL OF
ROLLS-ROYCE TAY ENGINES
<PAGE>
THIS AGREEMENT is made this 10th day of May 1996
BETWEEN
ROLLS-ROYCE AERO ENGINE whose registered office is at Moor Lane, Derby,
SERVICES LIMITED DE24 8BJ, England on its own behalf and as agent
on behalf of ROLLS-ROYCE plc (hereinafter called
"RRAES") of the first part.
AND
MIDWAY AIRLINES CORPORATION whose registered office is at 300 West Morgan
Street, Suit 1200 Durham, North Carolina, USA,
27701 (hereinafter called "MIDWAY") of the second
part.
WHEREAS
A. MIDWAY has acquired certain ROLLS-ROYCE TAY engines for use by MIDWAY In
Fokker 100 aircraft manufactured by Fokker BV.
B. ROLLS-ROYCE and MIDWAY have entered into a Warranty Agreement reference
CE117 incorporated in Fleet Support Agreement reference ISE dated
_____________ which is hereinafter called the "WARRANTY".
C. MIDWAY desires that RRAES shall undertake certain WORK on TAY engines used
in the operation of its aircraft.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
<PAGE>
INDEX
RECITALS
- --------
Clause 1 Definitions
Clause 2 Exclusion of Other Terms and Previous Understandings
Clause 3 Subject of Contract
Clause 4 Delivery
Clause 5 Standard
Clause 6 Charges
Clause 7 Payment
Clause 8 Turn Round Time and Delay in Delivery
Clause 9 General Provisions
Clause 10 Warranty and Liability
Clause 11 Patents
Clause 12 Additional Levies
Clause 13 Assignment
Clause 14 Termination
Clause 15 Amendment
Clause 16 Conflict
Clause 17 Notices
Clause 18 Headings
Clause 19 Survival
Clause 20 Law
Appendix 'A' Description and List of Engines
Appendix `B' Planned Operating Parameters
Appendix 'C' Aircraft Lean Periods
<PAGE>
Clause 1 DEFINITIONS
In this AGREEMENT unless the context otherwise requires:
1.1 "ENGINES" shall mean all the ROLLS-ROYCE engines listed
and described in Appendix 'A' to this AGREEMENT.
1.2 "PART" shall mean any part of an ENGINE acquired from
ROLLS-ROYCE or from a source approved by ROLLS-ROYCE.
1.3 "SUPPLIES" shall mean ENGINES, PARTS and any other items
of associated equipment delivered to RRAES by MIDWAY.
1.4 "RUNNING TIME" shall mean the number of hours flown by
an ENGINE as logged under the standards and procedures
employed by MIDWAY at the date of this AGREEMENT and
acceptable to the Federal Aviation Authority.
1.5 "TAKE-OFFS" shall mean the number of take-offs by an
ENGINE as logged under the standards and procedures
employed by MIDWAY at the date of this AGREEMENT and
acceptable to the Federal Aviation Authority.
1.6 "FLIGHT CYCLE" shall mean one operation of an ENGINE to
achieve one aircraft take-off and subsequent landing.
1.7 "ENGINE MANAGEMENT PROGRAMME" shall mean MIDWAY'S
approved Engine Management Programme which may be
amended from time to time by MIDWAY in accordance with
all applicable laws and regulations. This programme will
define the Engineering responsibilities and practices.
1.8 "SCHEDULED OVERHAUL" shall mean the WORK required in an
Overhaul Base following the removal of an ENGINE, PART
or assembly of PARTS to comply with the ENGINE
MANAGEMENT PROGRAMME and such other WORK as may then be
necessary to enable such ENGINE, PART or assembly of
PARTS to be released for further operation in service.
1.9 "UNSCHEDULED OVERHAUL" shall mean work other than
SCHEDULED OVERHAUL which is required when an ENGINE,
PART or assembly of PARTS has become unserviceable and
which enables such ENGINE, PART or assembly of PARTS to
be released for further operation in service.
1.10 "OVERHAUL" shall mean SCHEDULED OVERHAUL or UNSCHEDULED
OVERHAUL as the case may be.
<PAGE>
Clause 1 DEFINITIONS (Continued)
1.11 "REPAIR" shall mean work other than OVERHAUL which is
required when an ENGINE, PART or assembly of PARTS has
become unserviceable and which is necessary to render
the ENGINE, PART or assembly of PARTS serviceable such
that it can continue in service.
1.12 "WORK" shall mean OVERHAUL, REPAIR or any other work in
respect of which in each case RRAES accepts orders from
MIDWAY pursuant to this Agreement.
1.13 "OVERHAUL BASE" shall mean the Overhaul Base Stipulated
by RRAES from time to time during the period of this
AGREEMENT.
1.14 "AIRCRAFT LEASE PERIOD" shall mean the period of lease
of each aircraft as detailed in Appendix 'C'.
Clause 2 EXCLUSION OF OTHER TERMS AND PREVIOUS UNDERSTANDINGS
2.1 This AGREEMENT contains the only provisions governing
REPAIR or OVERHAUL of SUPPLIES and shall apply to the
exclusion of any other provisions on or attached to or
otherwise forming part of any order form of MIDWAY or
any acknowledgement or acceptance by RRAES or of any
other document which may be issued by either party
relating to REPAIR or OVERHAUL of SUPPLIES.
2.2 The parties have negotiated this AGREEMENT on the basis
that its provisions represent their entire agreement
relating to REPAIR or OVERHAUL by RRAES of SUPPLIES.
This AGREEMENT shall supersede all representations,
agreements, statements and understandings made prior to
the execution of this AGREEMENT whether orally or in
writing relating to REPAIR or OVERHAUL by RRAES of
SUPPLIES. The parties further agree that neither of them
has placed any reliance whatsoever on any such
representations, agreements, statements or
understandings other than those expressly incorporated
in this AGREEMENT.
<PAGE>
Clause 3 SUBJECT OF CONTRACT
3.1 The parties hereto agree that RRAES will carry out
REPAIR or OVERHAUL described in clauses 6.2.1 through
6.2.5 to all ENGINES and PARTS which develop a
requirement for OVERHAUL or an OVERHAUL BASE REPAIR
during the AIRCRAFT LEASE PERIOD and which are delivered
to the OVERHAUL BASE not later than 30 (thirty) days
after expiry of that period.
Clause 4 DELIVERY
4.1 MIDWAY will deliver ENGINES and PARTS requiring REPAIR
or OVERHAUL to the OVERHAUL BASE at its own expense.
4.2 MIDWAY will not later than the time of delivery of
ENGINES and PARTS pursuant to Sub-clause 4.1 above, also
deliver to RRAES the completed ENGINE Log Book (or such
other Log Book as may be applicable).
4.3 MIDWAY will notify RRAES in writing at least 1 (one)
week before the time for re-delivery of its instructions
as to the marking and shipping of the SUPPLIES after
notification from RRAES of scheduled redelivery.
4.4 Following WORK, RRAES will re-deliver SUPPLIES to MIDWAY
fas (Incoterms 1990) Great Britain port or any other
destination in Great Britain as specified by MIDWAY.
4.5 A sufficient number of packing cases, stands and
transportation parts for use in transporting SUPPLIES to
and from the OVERHAUL BASE shall be procured and
maintained in usable condition by MIDWAY at MIDWAY'S
expense.
Clause 5 STANDARD
5.1 Unless otherwise mutually agreed, RRAES will carry out
WORK on SUPPLIES in accordance with the ENGINE
MANAGEMENT PROGRAMME in a professional and workmanlike
manner.
5.2 Unless otherwise agreed, RRAES will carry out REPAIRS or
OVERHAULS to the modification standard generally
recommended by ROLLS-ROYCE for ENGINES of the same type
and model as the ENGINES.
<PAGE>
Clause 5 STANDARD (Continued)
5.3 MIDWAY shall have the right to appoint a representative
at the OVERHAUL BASE to consult with RRAES
representatives with respect to technical matters
arising in the course of the WORK to be performed by
RRAES hereunder.
5.4 In the event that ENGINES are delivered to RRAES by
MIDWAY which do not contain each PART described in the
Engine Receipt List attached hereto as Part 1, Section 1
in Sub-clause 1.1 (Appendix 'A') above, then RRAES will
advise MIDWAY of those missing PARTS exceeding US
Dollars 500 at the then current RRAES Catalogue value
and unless otherwise instructed by MIDWAY, RRAES
reserves the right to replace any missing PARTS and
shall be entitled to charge MIDWAY for the same at the
RRAES commercial prices and rates current at the date of
presentation of RRAES' invoice.
5.5 Any PARTS incorporated in the course of REPAIR or
OVERHAUL pursuant to this AGREEMENT shall be deemed to
have been sold to the owner of the SUPPLIES, and title
to and risk of loss of and damage to such PARTS subject
to the terms of Clause 10 below, shall pass to the owner
of the SUPPLIES upon re-delivery of the SUPPLIES by
RRAES to MIDWAY pursuant to Sub-clause 4.4 above.
5.6 RRAES reserves the right at its sole discretion to fit
new or repaired replacement PARTS in the course of
REPAIR or OVERHAUL pursuant to this AGREEMENT at no
additional cost to MIDWAY unless pursuant to Clause 5.4
above. Such new or replacement PARTS to be in as good
operating condition, have substantially similar hours
available until the next SCHEDULED OVERHAUL and have the
same interchangeable modification standard. Title to and
risk of loss or damage to any PARTS so replaced whether
scrap or repairable shall pass to RRAES upon removal
from the ENGINE or from the assembly of PARTS.
5.7 The REPAIR or OVERHAUL of SUPPLIES shall be deemed to
have been accepted by MIDWAY on its signature of the
relevant Release Note/Approved Certificate of
Inspection. Such acceptance shall not be deemed a waiver
of any rights or remedies of MIDWAY including without
limitation any claim for warranty under Clause 10
hereof.
<PAGE>
Clause 6 CHARGES
6.1 In respect of RUNNING TIME and TAKE-OFFS of the ENGINES
during the period of this AGREEMENT, MIDWAY shall pay to
RRAES: (as adjusted in accordance with the provisions of
sub-clause 6.6) multiplied by the RUNNING TIME of the
ENGINES.
6.1.1 an amount equal to {***} United States Dollars for
the period 01 September 1995 to 31 August 1997 (24
payments)
6.1.2 an amount equal to {***} United States Dollars for
the period 01 September 1997 to 31 May 1999 (21
payments)
6.2 The Basic Charges under clause 6.1 above are in
consideration of RRAES undertaking to carry out:
6.2.1 SCHEDULED OVERHAULS, and
6.2.2 REPAIRS and UNSCHEDULED OVERHAULS arising from
failures of ENGINES and PARTS caused by the
breakdown or deterioration of the ENGINES or PARTS
due to defects in design, material or workmanship
in the manufacture, REPAIR or OVERHAUL of the
ENGINE or PART, and;
6.2.3 REPAIRS and UNSCHEDULED OVERHAULS arising from
failures of ENGINES and PARTS caused by the
breakdown or deterioration of the ENGINES or PARTS
due to foreign object damage.
6.2.4 REPAIRS arising from the introduction of mandatory
modifications required by RRAES and/or
airworthiness directives issued by any
governmental authority.
6.2.5 REPAIRS and OVERHAULS arising from ENGINE removals
generally recommended by ROLLS-ROYCE with respect
to the same type and model of ENGINE as the
ENGINES.
6.3 MIDWAY shall pay RRAES at the RRAES normal commercial
rates current at the date of presentation of RRAES
invoice for REPAIRS and UNSCHEDULED OVERHAULS arising
from failures of ENGINES and PARTS due to causes outside
the reasonable control of RRAES including but not
limited to failures of ENGINES and PARTS, which:
6.3.1 have been caused by MIDWAY'S failure to operate an
ENGINE In accordance with the procedures laid down
in Appendix 'D' to the WARRANTY, or
6.3.2 have been caused by misuse, negligence, improper
operation or failures due to negligent foreign
object damage.
<PAGE>
Clause 6 CHARGES (Continued)
6.3.3 have been caused by MIDWAY failure to properly store,
install, maintain, utilise or pack for transport such
ENGINE and/or PART in accordance with the then current
RRAES written recommendations, or
6.3.4 have been caused by the primary breakdown or
deterioration of any constituent or component which was
not acquired by MIDWAY from RRAES or through channels
specifically approved in writing by ROLLS-ROYCE, unless
such constituent or component PART was installed by
RRAES.
6.4 With the exception of the obligation provided for in Clause
10.5, RRAES shall not be liable for any expenses, costs or
liabilities sustained in connection with the removal of an
ENGINE or PART from, or the replacement in an aircraft or the
removal of a part from, or the replacement in an ENGINE other
than those sustained by RRAES in carrying out REPAIRS and
OVERHAULS pursuant to this AGREEMENT at the OVERHAUL BASE.
6.5 In respect of PARTS supplied pursuant to sub-clause 5.4 above,
MIDWAY shall pay RRAES at the RRAES commercial prices and
rates current at the installation of such PARTS.
6.6 The Basic Charges shown in sub-clause 6.1 are based on 1995
values and will be subject to annual variation prospectively
on 01 September 1996 and each 01 September thereafter in
accordance with the formula:
C = Co (0.35 L +0.65 P)
Lo Po
Where C = The charge per hour of RUNNING TIME or the
charge per TAKE-OFF as the case may be.
Co = Basic charge per hour of RUNNING TIME or the
basic charge per TAKE-OFF as the case may be.
Lo = All employees: By Industry for Mechanical
Engineering (Table 5.3) "Index Number of
Average Earnings" published by the British
Government for the month of February 1995.
L = The corresponding Index Number published for
the month of February preceding the year for
which the adjustment is to be made.
<PAGE>
6.6 (Continued)
P = The index of Rolls-Royce Tay Parts Prices
current on 01 September for the year for
which the adjustment is to be made relative
to the Base Prices as at 01 September 1995.
Po = The index relative to the Base Level of
Rolls-Royce Tay Parts as at 01 September
1995, ie 100.
If the indices herein specified be discontinued or should the
basis of their calculations be modified proper and
substantially equivalent indices shall be substituted by
mutual agreement of the parties.
6.7 It is understood that the charges specified in sub-clause 6.1
above have been calculated with regard to the overall
operation of the ENGINES by MIDWAY as detailed in Appendix
'B'.
In the event that MIDWAY should take any action or any event
should occur which is reasonably likely to materially change
the overall operation of the ENGINES such that the basis upon
which such charges were calculated no longer remains the same,
including without limitation the sale or other disposition of
any of the ENGINES or the use of the ENGINES on routes other
than as described in Appendix 'B', then RRAES may at its
discretion reasonably revise the charges specified in
sub-clause 6.1 in accordance with its customary standards.
Clause 7 PAYMENT
7.1 Within ten days of the end of each month of operation of the
ENGINES, MIDWAY will supply to RRAES a certified statement of
actual RUNNING TIME and TAKE-OFFS by ENGINE serial number for
the previous month.
7.2 Payment of charges pursuant to clause 6.1:
7.2.1 shall be made in US Dollars within 14 days of the end of
the month to which the charges apply and for any amount
due pursuant to clause 6.3 or 6.5 within 14 days of
redelivery of the ENGINE or PART concerned.
<PAGE>
Clause 7 PAYMENT (Continued)
7.2.2 which became due prior to signature of this AGREEMENT
shall be made on 17th May 1996, subject to the deduction
of an amount equal to the engine maintenance reserve
paid by Midway to the aircraft lessors at that date.
7.3 Subject to Clause 12 below, MIDWAY undertakes that RRAES shall
receive in the United Kingdom, the full amount of payments
falling due under this AGREEMENT without any withholding or
deduction whatsoever.
7.4 All payments under clause 7.3 above shall be made by
telegraphic transfer to the following address:
National Westminster Bank, plc
Overseas Branch
LONDON
for telephone credit to:
Rolls-Royce CD Account Number
140-2-00772224
at 15 Bishopsgate Office
Clause 8 TURN ROUND TIME AND DELAY IN DELIVERY
8.1 Subject to sub-clause 8.2 below and provided MIDWAY delivers
ENGINES and if the WORK is to be performed on a PART, then
such PART to the OVERHAUL BASE for WORK at a reasonably
consistent rate, RRAES will carry out WORK in accordance with
the following turn round times which will commence when the
ENGINE or PART reaches the OVERHAUL BASE and which will end
when such ENGINE or PART is available fully prepared for
dispatch ex-works at the OVERHAUL BASE.
8.1.1 ENGINES returned for REPAIR or OVERHAUL not requiring
defect investigation - 8 (eight) weeks.
8.1.2 ENGINES returned for REPAIR or OVERHAUL due to unusual
failures requiring defect investigation or life
development purposes - 10 (ten) weeks.
8.1.3 ENGINES returned for REPAIR not requiring disassembly of
any MODULE - 4 (four) weeks.
8.1.4 PARTS returned for REPAIR or OVERHAUL - to be quoted by
RRAES on request.
<PAGE>
Clause 8 TURN ROUND TIME AND DELAY IN DELIVERY (Continued)
8.2 In the event that the actual turn round time in respect of any
ENGINE exceeds the turn round time agreed pursuant to
Sub-clause 8.1 above (as such period may be extended pursuant
to Sub-clause 8.3 below) and MIDWAY is unable to operate an
aircraft due to such delay, RRAES will either provide a lease
engine subject to availability and waive any daily rental
charges or be responsible for charges incurred by MIDWAY for
the daily rental of a lease engine until such times as such
delayed ENGINE is returned to MIDWAY. Such responsibility for
charges incurred by MIDWAY will not exceed those generally
charged by Rolls-Royce Leasing Limited, provided that MIDWAY
proves that it has suffered such damage and provided that
MIDWAY makes claims hereunder within three (3) months after
redelivery
8.3 If RRAES is hindered or prevented from carrying out WORK or
redelivering any of the SUPPLIES within the time for
re-delivery specified in Sub-clause 8.1 above by reason of:
8.3.1 Any cause beyond the reasonable control of RRAES, or
8.3.2 fires or industrial disputes or introduction of
mandatory modifications,
the time for re-delivery shall be extended by a period equal
to the period during which the WORK or re-delivery shall have
been so hindered or prevented and provided RRAES uses its best
efforts to promptly complete the WORK, RRAES shall be under no
liability whatsoever in respect of such delay.
Clause 9 GENERAL PROVISIONS
9.1 MIDWAY shall keep records of ENGINE operation, maintenance,
RUNNING TIME and TAKE-OFFS and shall permit RRAES to inspect
such records. MIDWAY shall submit to RRAES each month a
certified statement of RUNNING TIME and TAKE-OFFS listed by
ENGINE serial number in respect of the previous month.
9.2 If any SUPPLIES delivered to RRAES are lost, destroyed or
damaged during the time between such delivery and return by
RRAES to MIDWAY then RRAES will either:
9.2.1 repair such damage free of charge, or
9.2.2 pay to MIDWAY the value of such SUPPLIES which has been
agreed between RRAES and MIDWAY provided that in the
absence of agreement the liability of RRAES shall not
exceed the original RRAES sale price of the SUPPLIES.
<PAGE>
Clause 9 GENERAL PROVISIONS
9.2 (Continued)
provided always that RRAES will at MIDWAY'S request use its
best endeavours to provide an adequate replacement for any
such SUPPLIES lost or destroyed. In the event that a
replacement ENGINE is provided, such ENGINE shall be
substituted for the ENGINE lost or destroyed and Appendix 'A'
hereto shall be amended accordingly.
9.3 MIDWAY shall operate the ENGINES in accordance with the
Flexible Take-off Thrust Procedures as recommended by Fokker
BV.
Clause 10 WARRANTY AND LIABILITY
10.1 Subject to sub-clause 10.2 below in respect of all PARTS
incorporated in the course of OVERHAUL or REPAIR pursuant to
this or any other AGREEMENT or incorporate as spares in
service, the WARRANTY shall apply subject to all the
provisions contained therein.
10.2 MIDWAY shall not be entitled to receive any benefit whatsoever
whether by way of repair, replacement, parts cost allowance,
labour charges or otherwise under the WARRANTY in relation to
SCHEDULED OVERHAULS and any failures of ENGINES or PARTS which
are covered by the charges under sub-clause 6.1 above and are
specified in sub-clause 6.2 above, but save as expressly
provided above the WARRANTY shall remain in full force and
effect.
10.3 MIDWAY accepts that the express benefits provided to MIDWAY by
virtue of the charges under sub-clause 6.1 above, together
with the express remedies provided to MIDWAY in respect of the
SUPPLIES in accordance with this AGREEMENT and WARRANTY
represent the entire responsibility and liability of RRAES to
MIDWAY in respect of all terms, conditions and warranties
express or implied whether statutory or otherwise and any
other obligations and liabilities whatsoever of RRAES relating
to the OVERHAUL and REPAIR of SUPPLIES or any other goods or
services to be supplied pursuant to this AGREEMENT.
<PAGE>
Clause 10 WARRANTY AND LIABILITY (Continued)
10.4 The following Notional Warranty benefits will be applied for
the purposes of sub-clause 6.1 hereof:
10.4.1 In respect of all PARTS incorporated in the course of
WORK pursuant to this AGREEMENT, the WARRANTY shall
apply subject to all the provisions contained therein.
10.4.2 Subject to the 'Governing Conditions' section of the
WARRANTY, if it is shown to the reasonable satisfaction
of RRAES that before the expiration of twelve months
from the date of redelivery or within six months or
1,500 hours flown from the date of installation of an
ENGINE or PART into an aircraft, whichever is the
sooner, a defect, deficiency, failure, malfunction or
failure to function shall have become apparent in an
ENGINE or PART due in all or in part to the use by RRAES
of faulty workmanship during the last REPAIR or OVERHAUL
then RRAES shall REPAIR such ENGINE OR part and grant
MIDWAY a 100% credit against the REPAIR costs.
10.5 In the event of a valid WARRANTY claim, RRAES will be
responsible for reasonable charges incurred by MIDWAY for
removal, installation and transportation from and to MIDWAY'S
base in Raleigh, North Carolina, USA for ENGINES removed
pursuant to clause 10.4 above.
Clause 11 PATENTS
11.1 Subject to the conditions set out in this Clause 11, RRAES
shall indemnify MIDWAY against any claim that the use by
MIDWAY of any of the PARTS supplied hereunder infringes any
patent, design or model duly granted or registered provided,
however, that RRAES shall not be liable to MIDWAY for any
consequential damages or any loss of use of such PARTS or the
ENGINE or aircraft in which such PARTS may be incorporated
arising as a result directly or indirectly of any such claim.
11.2 MIDWAY will give immediate notice in writing to RRAES of any
such claim whereupon RRAES shall have the right at its own
expense to assume the defense of or to dispose of or to settle
such claim in its sole discretion and MIDWAY will give RRAES
all reasonable assistance and will not by any act or omission
do anything which may directly or indirectly prejudice RRAES
in this connection.
<PAGE>
Clause 11 PATENTS (Continued)
11.3 RRAES shall have the right to substitute for any allegedly
infringing PARTS substantially equivalent non-infringing
PARTS.
11.4 The indemnity contained in Sub-clause 11.1 above shall not
apply to and RRAES shall have no liability in respect of
claims for infringement in respect of:
11.4.1 PARTS manufactured to the specific design instructions
of MIDWAY, or
11.4.2 PARTS not of RRAES design but RRAES shall, in the event
of any claim for infringement, pass on to MIDWAY so far
as it has the right to do so the benefits of any
indemnity given to RRAES by the designer, manufacturer
or supplier of such PARTS, or
11.4.3 the manner or method in which any of the PARTS is
installed in the aircraft, or
11.4.4 any combination of any of the PARTS with any item or
items other than PARTS.
Clause 12 ADDITIONAL LEVIES
12.1 Subject to Sub-clause 12.2 below, RRAES shall pay all imposts,
duties, fees, taxes and other like charges levied by the
United Kingdom Government or any agency thereof in connection
with the OVERHAUL or REPAIR of ENGINES and PARTS prior to
their redelivery.
12.2 MIDWAY shall pay all other imposts, duties, fees, taxes and
other like charges levied by the United States of America or
any sub-division thereof.
Clause l3 ASSIGNMENT
Neither party may assign any of its rights or obligations hereunder
without the written consent of the other party except that:
13.1 RRAES may assign its rights to receive money hereunder and
13.2 RRAES reserves the right in its discretion, to sub-contract
any part of the WORK required to be performed by it hereunder.
<PAGE>
Clause 14 TERMINATION
If MIDWAY makes any agreement with creditors compounding debts,
enters into liquidation whether compulsory or voluntary (otherwise
than for the purpose of amalgamation or re-construction) becomes
insolvent, suffers a receiver of the whole or part of its assets to
be appointed, or commits a breach of any of its obligations under
this AGREEMENT (provided that, except in the case of breach in
respect of payment obligations, MIDWAY shall be allowed 30 (thirty)
days in which to remedy such breach) RRAES shall have the right,
without prejudice to its other rights or remedies:
14.1 to stop any REPAIR or OVERHAUL already commenced and to refuse
to commence any further REPAIR or OVERHAUL, and
14.2 to revise the charges under sub-clause 6.1 to take account of
any cessation or change in the overall operation of the
ENGINES resulting from any of the events covered by this
Clause 14, and
14.3 to declare and require that notwithstanding Clause 7 above,
all amounts due on the date of termination referred to in
Sub-clause 6.1 shall become immediately due end payable.
Clause 15 AMENDMENT
This AGREEMENT shall not be amended in any way other than by
agreement in writing executed by the parties hereto after the date
of this AGREEMENT, which is expressly stated to amend this
AGREEMENT.
Clause 16 CONFLICT
In the event of any conflict or discrepancy between the Appendices
forming part of this AGREEMENT and any other part of this AGREEMENT,
then the latter shall prevail.
<PAGE>
Clause l7 NOTICES
Any notice to be served pursuant to this AGREEMENT is to be sent by
registered post or by telex:
in the case of RRAES to:
Rolls-Royce Aero Engine Services Limited
Repair and Overhaul Manager - Spey and Tay
EAST KILBRIDE
Glasgow G74 4PY
Scotland
or such other place of business as may be notified in writing by
RRAES to MIDWAY from time to time.
In this case of MIDWAY to:
Midway Airlines Corporation
300 West Morgan Street
Suite 1100
DURHAM
North Carolina USA 27701
for the attention of Vice President Maintenance
or such other place of business as may be notified in writing by
MIDWAY to RRAES from time to time.
Clause 18 HEADINGS
The clause 'Headings' and the index do not form part of this
AGREEMENT and shall not affect the interpretation of this AGREEMENT.
Clause 19 SURVIVAL
The provisions of Clauses 10, 15, 20 and 21 hereof shall survive and
continue to have effect after termination for any reason whatsoever
of this AGREEMENT or after this AGREEMENT becomes impossible of
performance or is otherwise frustrated.
Clause 20 LAW
This AGREEMENT shall be subject to and interpreted and construed in
accordance with the laws of England.
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this AGREEMENT to be entered
into on the day and year first before written.
For ROLLS-ROYCE AERO ENGINE /s/ {ILLEGIBLE} MARKETING MANAGER
SERVICES LIMITED --------------------------------------
in the presence of /s/ A. Lynus Vice President Marketing
--------------------------------------
10 May 1996
For MIDWAY AIRLINES CORPORATION /s/ J. S. Waller
--------------------------------------
JONATHAN S. WALLER
SENIOR VICE PRESIDENT
GENERAL COUNSEL
In the presence of /s/ {ILLEGIBLE}
--------------------------------------
<PAGE>
APPENDIX 'A'
DESCRIPTION AND LIST OF THE ENGINES
<PAGE>
APPENDIX 'A'
1. LIST OF ENGINES
The following RRAES Tay Mk 650-15 ENGINES serially numbered:
17288
17289
17290
17291
17650
17651
17667
17668
A. DESCRIPTION OF ENGINES
Rolls-Royce Tay Mk 650-15 ENGINES
Description: Turbofan Engine incorporating a single fan and a three stage
intermediate compressor driven by a three stage turbine, a
twelve stage high pressure compressor driven by a two stage
turbine, and a turbo annular split combustion chamber
containing ten straight flow flame tubes and an internal
mixer unit.
MODULES
Each Engine comprises the following modules:
01 LP compressor
02 IP compressor
03 HP compressor
04 Combustion assembly and HP turbine
O5 LP turbine
O6 High speed gearbox
07 Intermediate casing
Together with these items the definitive basic specification includes the
following:
<PAGE>
ENGINE RECEIPT LIST
TAY ENGINE
PART 1 SECTION 1
Item
Fig Number Description Qty ATA Ref
- --- ------ ----------- --- -------
1 1 AFCR assembly 1 75-32-02
1 2 TCPL phial assembly 1 25-32-40
1 3 Micro switch and actuator 1 36-11-01
1 4 12th stage BV micro switch housing assy 1 75-32-33
1 5 12th stage air off-take cover 1 72-71-01
1 6 7th stage air off-take cover 1 72-71-01
1 7 Fuel temp transmitter 1 77-42-02
1 8 Oil cooler case assembly 1 79-22-01
1 9 Oil temperature transmitter 1 77-47-02
1 10 HP filter housing assembly 1 79-21-01
1 11 LP FWS assembly 1 73-34-01
1 12 Fuel filter assembly 1 73-11-03
1 13 LP tacho generator 1 77-43-01
2 14 Throttle relay lever transmitter 1 76-11-02
2 15 Fuel flow regulator 1 73-21-01
2 16 LP governor assembly 1 73-21-02
2 17 HP fuel shut-off valve assembly 1 73-11-07
2 18 AFC rpm signal transmitter assembly 1 75-32-20
2 19 Fuel diff pressure switch 1 77-42-03
2 20 HP fuel pump 1 73-11-05
2 21 Oil tank assembly 1 79-10-01
2 22 Oil tank level indicator 1 79-10-01
2 23 LP warning switch 1 79-32-01
2 24 Oil pressure trans assembly 1 77-47-01
2 25 Ejector pump unit 1 73-11-01
2 26 Fuel drain tank collector assembly 1 71-71-01
2 27 IDG surface oil cooler 1 24-13-01
2 28 Thermocouple terminal 1 77-45-03
2 29 Cooling air outlet switch assembly 1 75-21-02
2 30 Oil diff pressure switch 1 77-47-02
2 31 Oil diff pressure switch housing 1 77-47-02
2 32 Oil pump assembly 1 72-61-30
2 33 HP tacho penerator 1 77-43-01
2 34 LP fuel pump assembly 1 73-11-04
2 35 Fuel inlet tube to LP fuel pump clamp assy 1 73-21-06
2 36 Fuel solenoid valve assembly 1 73-21-06
3 39 Engine rating, ID plug 1 72-71-03
3 40 Electrical harness 1 71-50-01
<PAGE>
APPENDIX 'B'
PLANNED OPERATING PARAMETERS
<PAGE>
PLANNED OPERATING PARAMETERS
Fleet Utilisation: A minimum of 92,000 FLIGHT HOURS in the aggregate for
all ENGINES during the affective period of the
AGREEMENT.
Stage Length: Average (take-off to touch down) of not less than 1.30
hours.
Environment: East Coast and Mid-West North America for 90% of FLIGHT
HOURS of the ENGINES.
<PAGE>
APPENDIX 'C'
AIRCRAFT LEASE PERIODS
<PAGE>
AIRCRAFT LEASE PERIODS
Aircraft Designation Period of Lease
- -------------------- ---------------
MSN 13329 24 August 1995 to 22 March 1999
MSN 11323 03 October 1995 to 30 November 1998
MSN 11321 13 November 1995 to 31 October 1998
MSN 11330 20 December 1995 to 03 May 1999
<PAGE>
EXHIBIT A
{Intentionally omitted for FAA filing purposes.}
<PAGE>
135
AMENDMENT NO. 3
dated as of January 31, 1997
to
AIRCRAFT OPERATING LEASE AGREEMENT
NO. 135
dated as of July 20, 1995
between
FIRST SECURITY BANK, N.A., formerly known as
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity but solely as owner
trustee, as
Lessor
and
MIDWAY AIRLINES CORPORATION, as
lessee
Aircraft: Fokker 100
Serial No./RN: 11329/N130ML
<PAGE>
135
THIS AMENDMENT NO. 3 dated as of January 31, 1997 (this
"Amendment"), is between FIRST SECURITY BANK, N.A., formerly known as First
Security Bank of Utah, N.A., a national banking association existing pursuant to
the laws of the United States, having its principal place of business at 79
South Main Street, Salt Lake City, Utah 8413O-0007, not in its individual
capacity (except as expressly set forth in the Lease) but solely as Owner
Trustee under the Trust Agreement ("Lessor"), and MIDWAY AIRLINES CORPORATION, a
company incorporated under the laws of the State of Delaware, having its
principal place of business at 300 West Morgan Street, Durham, North Carolina
27701 ("Lessee").
WHEREAS, Lessor and Lessee are parties to that certain Aircraft
Operating Lease Agreement No. 135, dated as of July 20, 1995 (as amended from
time to time, the "Lease"; capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the Lease);
WHEREAS, Lessor and Lessee entered into Amendment No. 1 to the
Lease, dated as of February 26, 1996 ("Amendment No. 1") and entered into
Amendment No. 2 to the Lease, dated May, 1996 ("Amendment No. 2");
WHEREAS, debis AirFinance B.V. ("debis AF") is the beneficial owner
of the Aircraft;
WHEREAS, debis AF, Lessee, and Lessor entered into a Deferral
Agreement dated as of October 25, 1996 ("Deferral Agreement"), which provided
for the deferral of certain payments due under the Lease, and amended the Lease
in certain other respects;
WHEREAS, debis AF and Lessee entered into an Amendment to Deferral
Agreements dated as of December 30, 1996, which modified the Deferral Agreement
in certain respects (the "Amendment to Deferral Agreements");
WHEREAS, Lessee has entered into an Agreement and Plan of Merger
dated as of January 17, 1997 (as amended, the "Merger Agreement") with GoodAero,
Inc., a Delaware corporation ("GoodAero") and Zell/Chilmark Fund, L.P., a
Delaware limited partnership, whereby it is proposed that GoodAero will be
merged into Lessee to effect a recapitalization of Lessee (the "Merger"),
subject to certain conditions precedent having been satisfied; and
WHEREAS, Lessor and Lessee desire to amend the Lease to become
effective upon the consummation of the Merger and to enter into further
agreements as hereinafter set forth.
NOW THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Amendment of Lease. The Lease is hereby amended as follows:
<PAGE>
135
(a) Section 1 of the Lease is amended by eliminating the
period at the end of Subsection 1.25 thereof, and by inserting in lieu
thereof the following clause:
"or such earlier date as may be specified by Lessor pursuant
to notice given in accordance with, and subject to the terms
of Section 16.10 hereof."
(b) Section 1.48 of the Lease is amended by deleting the
period at the end of the first sentence and by inserting the following in lieu
thereof: "or any successor or assign thereof."
(c) Section 6.4 of the Lease is amended as follows: (a) by
deleting subsection (i) thereof in its entirety and by inserting in lieu thereof
the following: "(i) any financial reports or projections supplied to the
majority shareholder of Lessee"; and (b) by deleting the words "upon Lessor
requesting the same" from subsection (ii) thereof.
(d) Section 11.1(a) of the Lease is amended by deleting the
period at the end thereof and by inserting the following clause:
provided, however, that the deductible may be $500,000 (Dollars Five
Hundred Thousand) for each accident, but only if Lessee procures and
maintains in favor of debis AirFinance B.V. for the benefit of the
Beneficiary and/or the Lessor under each of the Leases identified on
Schedule 16.10 hereof (as those terms are defined therein) an
irrevocable letter of credit (the "Letter of Credit") in the face
amount of $800,000 (Dollars Eight Hundred Thousand) issued by
Wachovia Bank or another banking institution reasonably acceptable
to debis AirFinance B.V. and in a form reasonably acceptable to
debis AirFinance B.V. containing the terms set forth in Schedule
11.1(a).1 of this Lease; provided, however, that Lessee may reduce
the amount of the Letter of Credit to $400,000 in any year where
Lessee's audited financial statements for the prior year show that
Lessee had net income (as determined in accordance with generally
accepted accounting principles ("Net Income")) greater than the
amount for such prior year identified as "Net Income (1)" on
Schedule 11.1(a).2, but less than the amount for such prior year
identified as "Net Income (2)" on Schedule 11.1(a).2; and Lessee
shall not be required to maintain the Letter of Credit in any year
where Lessee's audited financial statements for the prior year show
that Lessee had Net Income for such prior year greater than the
amount for such prior year identified as "Net Income (2)" on
Schedule 11.1(a).2; and provided, further, that notwithstanding any
reduction or cancellation of the Letter of Credit in accordance with
the terms hereof, Lessee shall be required to restore the Letter of
Credit in any year where Lessee's audited financial statements for
the immediately preceding year show that Lessee's Net Income was
less than the threshold set by Schedule 11.1(a).2 for such prior
year for reduction of the Letter of Credit or in any year in which
audited financials for Lessee for the immediately preceding year
have not been certified on or before April 15 of that year. For
-2-
<PAGE>
135
purposes of determining the amount required for the Letter of Credit
in any year, reductions, if any, shall not be permitted until 30
days after receipt by debis AirFinance B.V. of the audited financial
statements of Lessee for the prior year and, in the event that the
Letter of Credit is to be reinstated or increased in any year as
aforedescribed, such Letter of Credit shall be required on or before
April 15 of such year. Any failure by Lessee to comply with the
provisions of this Section 11.1(a) shall be an Event of Default
under Section 15.1(b) of the Lease.
(e) Intentionally Omitted.
(f) Section 14.1(p) is amended by deleting the same in its
entirety and by inserting in lieu thereof the following:
"not become the surviving corporation of a merger with any
other entity, or itself consolidate with, or merge into, any
other corporation, or convey, transfer or lease substantially
all of its assets as entirety to any person, without the prior
written consent of Lessor (such consent not to be unreasonably
withheld) and the execution and delivery to Lessor of such
agreements, certificates and legal opinions as Lessor may
reasonably request with respect thereto."
(g) Intentionally Omitted.
(h) Intentionally Omitted.
(i) Section 15.1(e) of the Lease is deleted in its entirety
and the following is inserted in lieu thereof:
"if (i) if Lessee or any of its subsidiaries is in default
under any lease, hire-purchase, conditional sale or credit
sale agreement for equipment having a casualty value in excess
of {***} and such default is not cured or waived within
the applicable grace period or five (5) Business Days
(whichever is greater); (ii) (regardless of the amount of
money involved), any event occurs which with or without notice
or lapse of time or both would constitute a default under any
agreement between Lessee and, or promissory note executed by
Lessee in favor of, (a) {***} (b)Zell/Chilmark Fund, L.P.;
(C) {***}; (e) any affiliate of any of the foregoing; unless
such default or event of default is cured or waived within
the applicable grace period or five (5) Business Days
(whichever is greater); or (iii) any indebtedness owed by
Lessee or any of its subsidiaries in an amount in excess of
{***} is not paid when due or becomes due or capable of being
declared due prior to the date when it would otherwise become
due provided, however, the failure of Lessee to pay amounts
-3-
<PAGE>
135
{***} (and any accrued interest thereon)
shall not be deemed a Default or an Event of Default
hereunder."
(j) Section 15.1(n) is modified by inserting the following
clause after the word "affiliate": ", successor or assign"
(k) Sections 15.1(o), (p))and (q) are deleted in their
entirety and the following new Sections 15.1(o) and (p) are inserted in lieu
thereof:
"(o) if, an Event of Default shall occur under and as defined
in that certain Promissory Note dated as of January 31, 1997
from the Lessee to debis AirFinance B.V. or under, and as
defined in that certain Promissory Note dated as of January
31, 1997 from the Lessee to DASA Aircraft Finance XVI, B.V.
(each, a "Note" and collectively, the "Notes");
(p) if, prior to satisfaction of Lessee's obligations pursuant
to the Notes, Lessee shall make (i) any payment of principal
or interest on any debt owed by Lessee to Zell/Chilmark Fund,
L.P. or to any holder of equity in Lessee representing the
right to vote twenty percent (20%) or more of the stock in
Lessee on any matter presented for vote to the shareholders of
Lessee (an "Insider") or any affiliate of an Insider; or (ii)
any redemption of, or any dividend or distribution with
respect to, any shares of Lessee owned by an Insider or any
affiliate thereof."
(l) Section 15.2 is amended by deleting clause (i) of
paragraph (b) thereof in its entirety and inserting the following new clause (i)
in lieu thereof:
"(i) serving notice of such termination on Lessee specifying
the occurrence giving rise to such Event of Default or Events
of Default, provided that such notice shall be deemed to have
been served without the necessity of actual service and this
Lease shall terminate automatically without the necessity of
any service of notice thereof upon Lessee upon the occurrence
of any Event of Default described in paragraphs (a), (f), (g),
(h), (n) or (o) of Section 15.1 of this Lease; provided,
however, that actual service of notice of such termination on
Lessee shall be required where an Event of Default described
in paragraph (n) of Section 15.1 of the Lease has occurred
solely by reason of occurrence of an event of default under an
Other Aircraft Agreement or under a Fokker Aircraft Agreement,
which event of default does not, under the terms of such Other
Aircraft Agreement or
-4-
<PAGE>
135
Fokker Aircraft Agreement, result in automatic termination of
such Other Aircraft Agreement or such Fokker Aircraft
Agreement."
(m) Article 16 of the Lease is amended by adding a new Section
16.10 as follows:
"(a) Notwithstanding anything to the contrary contained in
this Lease, Lessor may terminate this Lease by giving not less
than six (6) months' prior written notice of the termination
date to Lessee provided that in no event may Lessor choose a
termination date earlier than September 15, 1998 ("Lessor's
Termination Option") and the termination date specified in
such notice shall become the Expiry Date; provided, however,
that (subject to the following sentence) Lessor shall not be
entitled to exercise Lessor's Termination Option with respect
to this Lease where the same would result in the termination
of four (4) or more of the aircraft operating lease agreements
identified in Schedule 16.10 to the Lease in any twelve (12)
month period, taking into account the scheduled or actual
Expiry Date of each such aircraft operating lease agreement.
Nothing herein shall be construed to limit the Lessor's rights
upon the occurrence of any Default or Event of Default or upon
the termination of this Lease as a result thereof or upon the
expiration of any Lease in the absence of the exercise of
Lessor's Termination Option.
(b) Lessee shall in no event be liable for any costs,
expenses, liabilities, losses, damages or amounts incurred by
Lessor which arise solely from the Lessor exercising Lessor's
Termination Option hereunder such as the loss of any tax
benefit, or fees or penalties arising from the breakage of any
contract or agreement. Except as expressly provided in
subsection (c) below, Lessor shall in no event be liable for
any costs, expenses, liabilities, losses, damages or amounts
incurred by Lessee as a result of Lessor exercising Lessor's
Termination Option in accordance with this Section 16.10.
(c) Notwithstanding the terms of clause (b) above, if Lessor
exercises Lessor's Termination Option hereunder in accordance
with this Section 16.10, then Lessee shall be responsible for
performing all of its obligations under and in accordance with
the terms of this Article 16, subject to the following:
(i) the Lessor shall pay or cause to be paid to Lessee
for Lessee's application against the "C Check" completed
pursuant to Appendix E, Item 1(e), an amount equal to
the lesser of (x) $100,000 or (y) an amount equal to the
product of the full cost of the "C Check" completed by
Lessee pursuant to Appendix E, Item 1(e) on the Aircraft
multiplied
-5-
<PAGE>
135
by a fraction, the numerator of which is the number of
hours (including fractions of an hour) remaining on the
Aircraft until Lessee's next scheduled "C Check" for the
Aircraft (assuming Lessor had not exercised Lessor's
Termination Option hereunder) and the denominator of
which is 3000; and
(ii) for purposes of Section 7.4.1(b) and (c), any shop
visit required to meet the conditions of Appendix E
shall be deemed a "scheduled" shop visit."
(n) Section 18.6 of the Lease is amended by deleting the firm
of "Haight, Gardner, Poor & Havens, Attn: Bonny L.Y. Kwoh, 195 Broadway, New
York, NY 10007" as agent for Lessor and by inserting in lieu thereof the new
agent for Lessor as follows: "Hertzog, Calamari & Gleason, Attn: Carla Craig,
100 Park Avenue, New York, New York 10017".
(o) Appendix B to the Lease is hereby amended as follows:
(i) The amount set forth as the "AGREED VALUE" is
deleted in its entirety and the amount of {***}
is substituted therefor.
(ii) The Amount set forth as "RENT" is deleted in its
entirety and the amount of {***} is substituted
therefor.
(p) Appendix D to the Lease is hereby amended by deleting
Sections 2.2 through 2.7 in their entirety and by deleting Section 1 in its
entirety and inserting the following in lieu thereof:
"1. Deposit. Lessee has paid to Lessor the amount set
forth on Schedule B.1 as a Deposit for the Aircraft
prior to January 31, 1997. Lessor has applied such
Deposit (plus all accrued interest thereon) to the
Default Payments (as defined in Section 6 of Amendment
No. 1 to this Lease) and/or to Default Payments (as
defined in Section 6 of Amendment No. 1 to the Other
Aircraft Agreements)."
(q) Schedule 16.10 attached to this Amendment is hereby
attached to the Lease as Schedule 16.10 thereto and is incorporated therein.
2. Waiver of Default. Lessor agrees that any Default or Event of
Default under Sections 15.1(a), 15.1(e), 15.1(g) or 15.1(o) of the Lease (prior
to the amendment of any such Sections hereunder) which occurred prior to the
date of this Amendment is hereby deemed to have
-6-
<PAGE>
135
been cured by Lessee and Lessor waives any rights or remedies it may have had
with respect to the occurrence of any such Default or Event of Default.
3. Representations, Warranties and Covenants
The following shall be, as applicable, representations, warranties
or covenants of Lessee pursuant to Articles 13 and 14 of the Lease:
(a) Representations
(i) This Amendment and the Notes have been duly entered into
and delivered by Lessee, and each constitutes a valid, legal and binding
obligation of Lessee enforceable against Lessee in accordance with its terms.
(ii) As of the date of this Amendment, Lessee has entered,
or will contemporaneously herewith enter, into an agreement with {***}
having terms which are substantially in accordance with the terms set forth
under the heading {***} in Exhibit 6.02(k) to the Agreement and Plan of
Merger dated as of January 17, 1997 by and among GoodAero, Inc., James H.
Goodnight, John P. Sall, Midway Airlines Corporation and Zell/Chilmark Fund,
L.P., as amended, except to the extent otherwise specifically set forth in
the letter dated as of February 10, 1997, from Lessee to Lessor.
(b) Covenants
Lessee covenants that it will not make any prepayment in
respect of the Promissory Note dated February 7, 1997 in the amount of
{***} to provide for terms more favorable to the payee thereof (including,
without limitation, any increase in the interest rate or acceleration of
payment).
4. Deferral Agreement. Lessor and Lessee agree that the Deferral
Agreement and the Amendment to Deferral Agreements are hereby declared null and
void and shall have no further force or effect with respect to the Lease.
5. Merger. Lessor hereby consents to the Merger.
6. Governing Law. This Amendment shall be governed by and construed
in accordance with the internal laws of the State of New York and without regard
to any conflict of law rules. This Amendment is being delivered in the State of
New York.
7. Miscellaneous. Except as specifically amended or supplemented by
this Amendment, the Lease is hereby ratified, approved, confirmed and continued
in all respects and all provisions of the Lease as heretofore amended shall
remain in full force and effect. The parties hereto acknowledge and confirm that
the Lease is intended to be a true lease and not a financing arrangement. This
Amendment may be executed in any number of counterparts, and all of such
counterparts taken together shall be deemed and constitute one and the same
instrument.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
on the day and year first above written.
FIRST SECURITY BANK, N.A., formerly known as
First Security Bank of Utah, N.A. not in its
individual capacity but solely as owner trustee
By: /s/ Greg A. Hawley
-------------------------------
Name: Greg A. Hawley
-----------------------------
Title: Vice President
----------------------------
MIDWAY AIRLINES CORPORATION
By: /s/ J. S. Waller
-------------------------------
Name: J. S. Waller
-----------------------------
Title:
----------------------------
<PAGE>
135
Schedule 11.1(a).1
The Letter of Credit shall contain the following terms:
debis AirFinance B.V. shall be entitled to draw amounts under the Letter of
Credit upon notice to the issuing bank signed by debis AirFinance B.V.
stating that amounts are due under one or more of the following, and that
such amounts remain unpaid:
Promissory Note dated as of January 31, 1997 executed by Midway
Airlines Corporation in favor of debis AirFinance B.V.
Promissory Note dated as of January 31, 1997 executed by Midway
Airlines Corporation in favor of Daimler-Benz Aerospace A.G.
Aircraft Operating Lease Agreement No. 111 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 112 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 113 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 114 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 135 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 136 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 524 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 525 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
<PAGE>
135
Aircraft Operating Lease Agreement No. 115-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
Aircraft Operating Lease Agreement No. 116-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
Aircraft Operating Lease Agreement No. 117-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
Aircraft Operating Lease Agreement No. 118-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
<PAGE>
135
Schedule 11.1(a).2
Midway Airlines
Net Income Thresholds for Reduction in Amount of Letter of Credit Pursuant to
Section 11.1(a)
US$ millions
Year 1997 1998 1999 2000 2001
Net Income(2) 12.0 18.0 25.2 32.8 41.0
Net Income(1) 8.0 12.0 16.8 21.8 27.3
Year 2002 2003 2004 2005 2006
Net Income(2) 49.1 57.7 67.8 67.8 67.8
Net Income(1) 32.8 38.5 45.2 45.2 45.2
Year 2007 2008 2009 2010 2011
Net Income(2) 67.8 67.8 67.8 67.8 67.8
Net Income(1) 45.2 45.2 45.2 45.2 45.2
Year 2012 2013 2014
Net Income(2) 67.8 67.8 67.8
Net Income(1) 45.2 45.2 45.2
Amount of
Letter of Credit
$800,000 If actual Net Income is less than or equal to Net Income(1)
$400,000 If actual Net Income is greater than Net Income(1) but less
than or equal to Net Income(2)
0 If actual Net Income is greater than Net Income(2)
<PAGE>
135
Schedule 16.10
1. Aircraft Operating Lease Agreement No. 111, dated as of November 11,
1993, between First Security Bank, N.A. and Midway Airlines Corporation.
2. Aircraft Operating Lease Agreement No. 112, dated as of November 11,
1993, between First Security Bank, N.A. and Midway Airlines Corporation.
3. Aircraft Operating Lease Agreement No. 113, dated as of November 11,
1993, between First Security Bank, N.A. and Midway Airlines Corporation.
4. Aircraft Operating Lease Agreement No. 114, dated as of November 11,
1993, between First Security Bank, N.A. and Midway Airlines Corporation.
5. Aircraft Operating Lease Agreement No. AOLAF-115-A, dated as of July
10, 1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
6. Aircraft Operating Lease Agreement No. AOLAF-116-A, dated as of July
10, 1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
7. Aircraft Operating Lease Agreement No. AOLAF-117-A, dated as of July
10, 1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
8. Aircraft Operating Lease Agreement No. AOLAF-118-A, dated as of July
10, 1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
9. Aircraft Operating Lease Agreement No. 135, dated as of July 20, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
10. Aircraft Operating Lease Agreement No. 136, dated as of December 15,
1995, between First Security Bank, N.A. and Midway Airlines Corporation.
11. Aircraft Operating Lease Agreement No. 524, dated as of August 1, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
12. Aircraft Operating Lease Agreement No. 525, dated as of October 15,
1995, between First Security Bank, N.A. and Midway Airlines Corporation.
<PAGE>
135
Schedule B. 1
Security Deposits Paid by Midway
Aircraft AOLAF Deposit
MSN No. Paid
------- ----- -------
11321 525 {***}
-----------
11323 524 {***}
-----------
11329 135 {***}
-----------
11330 136 {***}
-----------
11444 111 {***}
-----------
11445 112 {***}
-----------
11475 113 {***}
-----------
11477 114 {***}
-----------
11450 115 {***}
-----------
11484 116 {***}
-----------
11485 117 {***}
-----------
11486 118 {***}
-----------
<PAGE>
EXHIBIT 10.12
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY [***]. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
F-100 LEASE #524
(TAIL # N131ML)
<PAGE>
[LETTERHEAD OF DEBIS AIRFINANCE B.V.]
16 October 1996
By fax: + 1 919 956 4801 / + 1 919 956 8619
Midway Airlines Corporation
300 W. Morgan St.
Durham, North Carolina 27702
Attention: President
Copy to: Steven Westberg, Senior Vice President Finance and Planning &
Lyn Dorman, Finance Department
Notification of Change of Bank Account
Re: Change of bank account in relation to all payments under Aircraft
Operating Lease Agreement No. 524 dated as of August 1, 1995, as amended
from time to time, relating to one (1) Fokker 100 aircraft bearing
manufacturer's serial number: 11323 (the "Lease").
Beneficiary: Stockholm Aircraft Finance III B.V.
Dear Sirs,
We refer to the Lease and the Amendment No. 1 thereto, dated as of February 26,
1996 (the "Amendment"), each agreement between First Security Bank of Utah,
N.A., not in its individual capacity, but solely as owner trustee under the
trust agreement ("Lessor") and Midway Airlines Corporation ("Lessee").
In accordance with Section 7 (Payments) of the Amendment, debis AirFinance B.V.
herewith formally designates for all payments the following new account:
Rabobank International, Utrecht, the Netherlands, account number 1010.56.958
Please note that payment of the invoices effective from November 1996 has to be
effected to this new account.
1
<PAGE>
[LOGO] debis
AirFinance B.V.
For the avoidance of doubt, save for the change of account nothing in this
notification shall have the effect of supplementing or amending the Lease and
the Amendment and all provisions of the Lease as heretofore amended, shall
remain in full force and effect.
Yours sincerely,
debis AirFinance B.V.
/s/ F. Haspel /s/ S. Engels
- -------------------------- --------------------------
F. Haspel S. Engels
Managing Director (CEO) Managing Director
- ----------
Acknowledged for receipt on behalf of Midway Airlines Corporation by:
Name:
Its:
2
<PAGE>
DUPLICATE ORIGINAL
THE SINGLE EXECUTED ORIGINAL OF THIS AGREEMENT MARKED "ORIGINAL" SHALL BE THE
"ORIGINAL" AND ALL OTHER COUNTERPARTS OF THIS AGREEMENT SHALL BE DUPLICATES AND
MARKED "DUPLICATE" OR "DUPLICATE ORIGINAL". TO THE EXTENT THAT THIS AGREEMENT
AND CERTIFICATE OF ACCEPTANCE RELATED THERETO CONSTITUTES CHATTEL PAPER, AS SUCH
TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE
JURISDICTION, NO SECURITY INTEREST MAY BE CREATED THROUGH TRANSFER OR POSSESSION
OF ANY COUNTERPART OTHER THAN THE "ORIGINAL".
AIRCRAFT OPERATING LEASE AGREEMENT
No. 524
Dated as of
August 1, 1995
between
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual
capacity but solely as trustee,
as
Lessor
and
MIDWAY AIRLINES CORPORATION
as
Lessee
Aircraft: Fokker 100
Serial No: 11323/N131ML
<PAGE>
INDEX
ARTICLE PAGE
- ------- ----
1. Definitions ....................................... 1
2. Agreement to Lease ................................ 13
3. Term; Delivery; Acceptance; Delay ................. 17
4. Registration and Title ............................ 18
5. Possession and Use ................................ 20
6. Charges, Method of Payment and Financial
Information ....................................... 26
7. Maintenance ....................................... 27
8. Taxes, Duties, and Expenses ....................... 33
9. Liens ............................................. 38
10. Indemnification ................................... 38
11. Insurance ......................................... 40
12. Assignment and Subletting ......................... 48
13. Disclaimer, Representations and Warranties ........ 52
14. Covenants of Lessee ............................... 57
15. Default by Lessee ................................. 60
16. Return of Aircraft ................................ 67
17. Casualty Occurrences .............................. 69
18. Governing Law and Jurisdiction .................... 72
19. Miscellaneous ..................................... 73
i
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APPENDICES PAGE
- ---------- ----
A. Description of Aircraft 79
B. Further Definitions and Values 80
C. Certificate of Acceptance 82
D. Charges 84
E. Operating Condition at Re-Delivery 93
F. Aircraft Documents 98
G. FAA Power of Attorney 100
ii
<PAGE>
AIRCRAFT OPERATING LEASE AGREEMENT
No. 524
THIS AIRCRAFT OPERATING LEASE AGREEMENT No. 524 is made as of the
1st day of August, 1995 between FIRST SECURITY BANK OF UTAH, N.A., a national
banking association existing pursuant to the laws of the United States, having
its principal place of business at 79 South Main Street, Salt Lake City, Utah
84130-0007, not in its individual capacity (except as expressly herein set
forth) but solely as Owner Trustee under the Trust Agreement (as defined in
Article 1 hereof) and its permitted successors and assigns (herein referred to
as "Lessor") and MIDWAY AIRLINES CORPORATION a company incorporated under the
laws of the State of Delaware, having its principal place of business at 5713
South Central Avenue, Chicago, Illinois 60638 and its permitted successors and
assigns (herein referred to as "Lessee").
WHEREAS, subject to fulfillment of the conditions precedent stated
in Article 2.2 (viii), (ix) and (x), Lessor has the right to possess, use and
lease the Aircraft; and
WHEREAS Lessee desires to lease the Aircraft from Lessor; and
WHEREAS Lessor is willing to lease the Aircraft to Lessee upon the
terms and conditions set out herein.
NOW THEREFORE, in consideration of the mutual promises herein
contained, Lessor and Lessee agree as follows:
1. DEFINITIONS
The following terms shall have the following respective meanings for
all purposes of this Agreement:
1.1 Air Authority shall mean the Federal Aviation Administration of the United
States Department of Transportation and any successor.
1.2 Aircraft shall mean the aircraft identified and described in Appendix A,
including any Engine, Part, or component thereof, and/or ancillary and
loose equipment or devices installed in or on the Aircraft at the Delivery
Date (or which having been removed therefrom remain the property of the
Lessor pursuant to this Agreement) and Aircraft Documents furnished
therewith under this Agreement, or any substitutions, renewals
<PAGE>
and replacements from time to time made in or on the said Aircraft in
accordance with this Agreement, whether or not for the time being
installed on or in the said Aircraft or any other aircraft.
1.3 Aircraft Documents shall mean the items identified in Appendix F.
1.4 Aircraft Maintenance Agreement shall mean a Flight Hour Agreement entered
into between Lessee and an overhaul /repair agency relating to the Engines
and the landing gear and any modification, amendment or substitution
therefor consented to by Beneficiary. The terms and conditions of such
Aircraft Maintenance Agreement and the overhaul/repair agency shall be
subject to the prior written consent of Beneficiary.
1.5 Airframe shall mean the Aircraft, excluding the Engines.
1.6 Appraisal Procedure shall mean the procedure for determining the FMV of
the Aircraft set forth Article 9 of Appendix D.
1.7 Approved Maintenance Program shall mean the Maintenance Program in effect
on the Delivery Date with respect to the aircraft which are the subject of
the Other Aircraft Agreements or such other Maintenance Program as Lessor
shall from time to time approve in writing, such approval not to be
unreasonably withheld.
1.8 Authorized Maintenance Performer shall mean Lessee, American Airlines,
Inc., U.S. Air, Aviall, Rolls Royce Canada or any Air Authority approved
provider.
1.9 Bank shall mean the financial institution(s) and/or other provider(s) of
finance (other than Lender) from whom finance respecting the acquisition
or continued ownership of the Aircraft by Lessor is to be, or is for the
time being, obtained and/or in whose favor or for whose benefit security
over, or rights with respect to the Aircraft is to be, or is for the time
being, granted by Lessor or at its request and shall include any financial
institution providing finance to the Head Lessor in respect of Head
Lessor's acquisition of the Aircraft by whatever means, including without
limitation by way of loan or by way of non-recourse sale of lease
receivables.
2
<PAGE>
1.10 Beneficiary shall mean, Stockholm Aircraft Finance III, B.V., which is (i)
a company incorporated under the laws of the Netherlands, (ii)
wholly-owned by Fokker and (iii) the beneficiary under the Trust
Agreement, together with its successors and permitted assigns.
1.11 Business Day shall mean a day (other than a Saturday or Sunday) on which
banks are open for business in New York.
1.12 Casualty Occurrence shall have the meaning set forth in Article 17.1.
1.13 Certificate of Acceptance shall mean the Certificate of Acceptance given
in the form of Exhibit C.
1.14 Certificated Air Carrier means any person (except the United States
Government) that is a citizen of the United States of America (as defined
in Section 40102 of Title 49 of the United States Code) holding an air
carrier operating certificate issued by the Secretary of Transportation
pursuant to Chapter 447 of Title 49 of the United States Code (or any
predecessor thereof) for aircraft capable of carrying ten or more
individuals or 6,000 pounds or more cargo, which is also certificated so
as to entitle Lessor, as lessor, to the benefits of Section 1110 of Title
11 of the United States Code with respect to the Aircraft.
1.15 Credit and Security Agreement shall mean the Credit and Security Agreement
dated as of October 29, 1993 therein between FAUSA and Lessee.
1.16 Cycle shall mean one take-off and landing of the Aircraft.
1.17 Default shall mean an Event of Default or any event which, with the giving
of notice and/or lapse of time and/or the making of any relevant
determination, would constitute an Event of Default.
1.18 Delivery Date shall mean the Midway Technical Acceptance Date as such term
is defined in the Tripartite Agreement which will be the date on which the
Aircraft is delivered to and accepted by the Lessee for the purposes of
this Agreement.
1.19 Delivery Location shall mean the location at which Transwede delivers the
Aircraft to Lessor and identified in the Certificate of Acceptance.
3
<PAGE>
1.20 Dollars and $ shall mean the lawful currency of the United States of
America and in respect of all payments to be made under this Agreement in
Dollars shall mean funds which are for same day settlement in the New York
Clearing House Interbank Payments System (or such other US Dollar funds as
may at the relevant time be customary for the settlement of international
banking transactions denominated in United States Dollars).
1.21 Engine shall mean (i) any engine installed on or furnished with the
Aircraft on the Delivery Date, such Engines being identified as to
manufacturer and type in Appendix A and as to serial numbers in the
Certificate of Acceptance executed by Lessee on the Delivery Date and (ii)
any substitute or replacement engine title to which has, or should have,
transferred to and vested in Lessor in accordance with this Agreement, in
each case including all modules or Parts from time to time belonging to or
installed in that engine and irrespective of whether or not the same shall
for the time being be installed on the Aircraft or on any other aircraft.
The term "Engine" shall exclude any properly replaced engine title to
which has, or should have, passed to Lessee pursuant to this Agreement.
1.22 Equipment Change shall have the meaning set forth in Article 17.3(a).
1.23 Event of Default shall mean any of the events specified in Article 15.1.
1.24 Intentionally omitted.
1.25 Expiry Date shall mean November 30, 1998.
1.26 Fair Market Rental Value shall be equal in amount to the value that would
be obtained in an arms'-length transaction between an informed and willing
lessee under no compulsion to lease and an informed and willing lessor
under no compulsion to lease, in accordance with a lease to a lessee
similarly situated with Lessee, for a term equal to the relevant period
and on conditions as herein provided, any such determination (made for
purposes of Article 15.3(b)) to be made on the basis of the then actual
condition of the Aircraft, to be determined pursuant to an Independent
Appraisal and to be the average of the two determinations obtained
thereunder.
4
<PAGE>
1.27 FAUSA shall mean Fokker Aircraft U.S.A., Inc., a company incorporated
under the laws of the State of Delaware, with its principal office at
Alexandria, Virginia.
1.28 First Rent Date shall mean the Delivery Date.
1.29 Flight Hour shall mean each hour or part thereof elapsing from the moment
at which the wheels of the Aircraft leave the ground on the take off of
the Aircraft until the wheels of the Aircraft touch the ground on the
landing of the Aircraft following such flight.
1.30 FMV shall have the meaning set forth in Appendix D.
1.31 Fokker shall mean Fokker Aircraft B.V., a Netherlands corporation with its
principal office at Amsterdam Zuid-Oost, The Netherlands, together with
its successors.
1.32 Intentionally omitted.
1.33 Governing Law shall mean the law of the state of New York.
1.34 Government Entity shall mean and include (i) any national or state
government, political subdivision thereof, or local jurisdiction therein;
(ii) any board, commission, department, division, organ, instrumentality,
court, or agency of any thereof, however constituted; and (iii) any
association, organization, or institution of which any thereof is a member
or to whose jurisdiction any thereof is subject or in whose activities any
thereof is a participant.
1.35 Head Lessor shall mean any person or persons to whom title to the Aircraft
is vested or transferred in accordance with Article 12.3(e).
1.36 Indemnitees shall mean Lessor (in its trust and individual capacities),
the Voting Trustee (in its trust and individual capacities), the Mortgagee
(in its trust and individual capacities), the Lender, the Beneficiary, the
Head Lessor, the Bank, Fokker, FAUSA, including any of their respective
successors and assigns and their respective shareholders, subsidiaries,
affiliates, directors, officers, agents and employees.
5
<PAGE>
1.36A Indenture shall mean the Trust Indenture and Security Agreement, dated the
Delivery Date between Mortgagee and First Security Bank of Utah, National
Association, as owner trustee, as it may be amended, modified or
supplemented from time to time or any such security agreement created over
the Aircraft in accordance with the terms thereof.
1.37 Independent Appraisal shall mean a determination of Fair Market Rental
Value of the Aircraft by two independent aircraft appraisers, selected by
Lessor, the costs and expenses of the appraisal to be paid by Lessee.
1.38 Law shall mean and include (i) any law, statute, decree, constitution,
regulation, order or any directive of any Government Entity; (ii) any
treaty, pact, compact or other agreement to which any Government Entity is
a signatory or party; (iii) any judicial or administrative interpretation
or application of any thereof; and (iv) any amendment or revision of any
thereof.
1.38A Lender shall mean Kreditanstalt fur Wiederaufbau, together with its
permitted successors and assigns.
1.39 Lessor or Lessee shall have the meanings respectively ascribed to them in
the first paragraph of this Agreement and shall include their respective
assignees or successors.
1.40 Lessor Liens shall mean:
(a) the Indenture, the Security Assignment and any security or leasehold
interest whatsoever from time to time created by or through Lessor
and/or Head Lessor in connection with the financing of the Aircraft;
(b) any other security interest or other lien in respect of the Aircraft
or this Agreement, which results from acts of or omissions to act or
claims against Lessor and/or Head Lessor or any of their respective
affiliates not related to the transactions contemplated by or
permitted under this Agreement; and
(c) liens in respect of the Aircraft for Lessor Taxes.
6
<PAGE>
1.41 Lessor Taxes shall mean Taxes:
(a) imposed as a direct result of activities of a Tax Indemnitee in any
jurisdiction imposing a liability unrelated to that Tax Indemnitee's
dealings with Lessee, to the transactions contemplated by this
Agreement or the operation of the Aircraft by Lessee; or
(b) imposed on or measured by net income, profits or gains, or capital
or net worth (excluding, however, in each case, Taxes that are, or
are in the nature of, license, sales, use, rental, value-added, or
property taxes) of a Tax Indemnitee, by (A) any Governmental Entity
by or in which that Tax Indemnitee would be subject to tax without
regard to the transactions contemplated by this Lease, or (B) the
Federal Government of the United States of America (including,
without limitation, any withholding taxes imposed by such
government); or
(c) imposed with respect to any period or event occurring prior to the
date of this Agreement or after the Expiry Date or earlier
termination of this Agreement in accordance with the terms hereof,
provided that such Tax is unrelated to a Tax Indemnitee's dealings
with Lessee or to the transactions contemplated by this Agreement;
or
(d) for which Transwede is liable under the Tripartite Agreement.
(e) imposed as a result of any voluntary sale, assignment, transfer or
other disposition by the Lessor (including to the Head Lessor) or
any other Tax Indemnitee of any interest in the Aircraft or any part
thereof or this Agreement unless such transfer or disposition occurs
(1) in connection with a Tax Indemnitee's pursuing its remedies
while an Event of Default by Lessee is continuing or otherwise
resulting from an Event of Default, or (2) pursuant to Lessee's
exercise of its option to purchase the Aircraft under Article 9 of
Appendix D (it being understood and agreed that Lessor and Lessee
will cooperate with each other to minimize any Taxes resulting from
any sale pursuant to this clause (2)).
7
<PAGE>
1.42 LIBOR shall mean the rate of interest per cent per annum (rounded upward,
if not already such a multiple, to the nearest whole multiple of 1/16th.
of one per cent) at which, at or about 11.00 a.m. (London time) on the day
two Business Days before the beginning of the relevant period deposits in
Dollars are offered for the duration of such relevant period on the
REUTERS "LIBO" page (or such other page as may replace it from time to
time).
1.43 Maintenance Program shall mean an Air Authority approved maintenance
program for the Aircraft encompassing scheduled maintenance (including
block maintenance), condition monitored maintenance, and on-condition
maintenance of Airframe, Engines and Parts, including but not limited to,
servicing, testing, preventive maintenance, repairs, structural,
inspections, system checks, overhauls, approved modifications, service
bulletins, engineering orders, airworthiness directives, corrosion
control, inspections and treatments.
1.44 Major Checks shall mean any 12,000 hours Check, 24,000 hours Check or
Intersupplementary Check or segment thereof or any equivalent thereof with
more or less hours, however denominated, to the extent set out in the
Approved Maintenance Program from time to time.
1.45 Manufacturer shall mean Fokker.
1.46 Mortgagee shall mean Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity but solely as trustee pursuant
to the Indenture, and its successors and permitted assigns.
1.47 Note shall mean the Secured Promissory Note executed and delivered to
FAUSA by the Lessee and secured by the Credit and Security Agreement.
1.47A Operative Documents shall mean the Lease, the Certificate of Acceptance,
the Indenture, the Trust Agreement and the Voting Trust Agreement.
1.48 Other Aircraft Agreements shall mean Aircraft Operating Lease Agreements
relating to other Fokker 100 aircraft so long as leased to Lessee by a
lessor for the benefit of Fokker, FAUSA or any affiliate thereof
(including Wings Aircraft Finance, Inc.), as Beneficiary and the Support
Services Agreement, the Credit and Security Agreement and the Note or any
other agreement between Lessee and Lessor for the benefit of Fokker, FAUSA
or any affiliate thereof, including Wings Aircraft Finance, Inc., provided
that, for the purpose of this definition, the word "affiliate" shall mean
any
8
<PAGE>
corporation or other entity that, directly or indirectly, controls, is
controlled by or is under common control with, Fokker.
1.49 Part shall mean, whether or not installed on the Aircraft:
(a) any component, furnishing or equipment (other than a complete
Engine) furnished with the Aircraft on the Delivery Date; and
(b) any other component, furnishing or equipment (other than a complete
Engine) title to which has, or should have, passed to Lessor
pursuant to this Agreement
but excludes any such items title to which has, or should have, passed to
(i) Lessee pursuant to this Agreement or (ii) any person pursuant to any
agreement relating to the financing of spare parts for the Aircraft,
including, but not limited to, FAUSA pursuant to the Credit and Security
Agreement and the Note.
1.50 Permitted Lien shall mean:
(a) liens of repairers, mechanics, material men, carriers,
hangarkeepers, employees or other similar liens arising in the
ordinary course of business by statute or by operation of law in
respect of obligations which are either not overdue or are being
contested in good faith by appropriate proceedings;
(b) any lien for Taxes of any kind either not assessed or, if assessed,
not yet due and payable or being contested in good faith by
appropriate proceedings, and
(c) any lien arising out of a judgment against Lessee with respect to
which at the time an appeal is being prosecuted in good faith and
with respect to which there shall have been secured a stay of
execution pending such appeal,
provided that in the case of these subclauses (a), (b) and (c)
(i) adequate reserves for the payment of such obligations have
been provided by Lessee;
9
<PAGE>
(ii) such proceedings, or the continued existence of such lien, do
not give rise to any likelihood of the sale, forfeiture or
other loss of the Aircraft or any Engine or any Part or any
interest therein; and
(iii) any such lien does not arise as a result of any default on the
part of Lessee in respect of its obligations under this
Agreement;
(d) any Lessor Lien and the lien of this Agreement; and
(e) any lien for Lessor Taxes.
1.51 Redelivery Location shall mean Schiphol Airport, The Netherlands.
1.52 Rent Date shall mean the First Rent Date and the numerically corresponding
date of each and every subsequent month during the Term, or (if there is
no corresponding date in any month), the last day of such month.
1.53 Rental Period shall mean the period from and including any Rent Date to
and including the day preceding the next Rent Date.
1.54 Security Assignment shall mean an assignment or pledge in favor of the
Head Lessor or the Bank of the benefit of all or any part of Lessor's
rights hereunder.
1.55 Security Interest shall mean any mortgage, charge, pledge, lien,
assignment, hypothecation, right of set-off or any agreement or
arrangement having the effect of creating a security interest.
1.56 State of Incorporation shall mean the State of Delaware.
1.57 State of Registration shall mean United States of America.
1.58 Supplemental Rent shall mean Agreed Value and any other amount which by
the terms of this Agreement is payable by Lessee to Lessor other than Rent
and the Reserve Rate.
10
<PAGE>
1.59 Support Services Agreement shall mean the Aircraft Support Services
Agreement No. ASSAF-ll0 between FAUSA and Lessee.
1.60 Taxes shall mean any and all present and future sales, use, property,
customs, value-added, turnover, stamp, interest equalization, income,
gross or net receipts, franchise, excise, net worth, capital or other
taxes, fees, withholdings, imposts, duties, levies, or other charges of
any nature, together with any penalties, fines, or interest thereon,
imposed, levied, or assessed by, or otherwise payable to, any Governmental
Entity and "Tax" shall be construed accordingly.
1.61 Tax Indemnitee shall mean each of the Lessor, Voting Trustee, Beneficiary
and the Head Lessor, including any of their respective successors and
assigns.
1.62 Term shall bear the meaning ascribed to it in Article 3.4.
1.63 Transwede shall mean Transwede Airways A.B., a corporation organized under
the laws of Sweden.
1.64 Transwede Lease shall mean Aircraft Operating Lease Agreement No. AOLA
648.017 between Beneficiary, as lessor, and Transwede.
1.65 Tripartite Agreement means Tripartite Agreement No. TA-518, dated as of
July 7, 1995 among Transwede, Fokker, Beneficiary and Lessee.
1.66 Trust Agreement shall mean the Trust Agreement dated as of August 1, 1995
between the Beneficiary and the Lessor in its individual capacity, as the
same may be amended from time to time.
1.67 Trust Estate shall mean the "Trust Estate" as defined in the Trust
Agreement.
1.68 Voting Trust Agreement shall mean the Voting Trust Agreement dated as of
July 17, 1993 between the Beneficiary and the Voting Trustee, as the same
may be amended from time to time.
1.69 Voting Trustee shall mean First Security Bank of Idaho, N.A., a national
banking association, and its permitted successors and assigns.
11
<PAGE>
1.70 The terms:
Agreed Value,
Deposit,
Partial Loss Amount,
Rent,
Reserve Rate,
shall have the meanings and values set forth in Appendix B.
1.71 References in this Agreement to:
(a) Articles or Appendices are, unless otherwise specified, references
to Articles of, and Appendices to, this Agreement and references to
this Agreement include its Appendices;
(b) any statute or other legislative provision shall be read to include
any statutory or legislative modification or re-enactment thereof,
or any substitution therefor;
(c) the Aircraft include any Part of the Aircraft, and, where the
context so admits, any of the Aircraft Documents and references to
any part of the Aircraft include any part of any Engine;
(d) the word "person" or "persons" or to words importing persons
include, without limitation, individuals, firms, partnerships, joint
ventures, trusts, Government Entities, organizations, associations,
corporations, government agencies, committees, departments,
authorities and other bodies, corporate or incorporate, whether
having distinct legal personality or not, or any member of any of
the same;
(e) words importing the plural include the singular and vice versa;
(f) any agreement or instrument include such agreement or instrument as
it may from time to time be amended or supplemented; and
(g) headings in this Agreement are for ease of reference only.
12
<PAGE>
2. AGREEMENT TO LEASE
2.1 Lessor will lease the Aircraft to Lessee and Lessee will take the Aircraft
on lease from Lessor in "AS-IS--WHERE-IS" condition, in accordance with
the terms and conditions of this Agreement.
2.2 Lessor's obligation to deliver the Aircraft on the Delivery Date to Lessee
shall be subject to:
(i) the receipt by Lessor from Lessee on or prior to the Delivery Date
of the following, all of which shall be in the English language and
be satisfactory in form and substance to Lessor:
(a) copies of Lessee's certificate of incorporation and/or
memorandum and articles of association and/or by-laws and/or
other constitutional documents, certified to be true and up to
date copies by a duly authorized officer of Lessee;
(b) copies of resolutions of Lessee's board of directors
authorizing Lessee to enter into and perform this Agreement
and the transactions contemplated hereby, certified to be true
and in full force and effect by a duly authorized officer of
Lessee;
(c) evidence that each approval, license and consent which may be
required in relation to, or in connection with the performance
by Lessee of any of its obligations hereunder has been granted
by or obtained from the applicable Government Entity in the
State of Registration;
(d) copies of Lessee's air transport license, certificate of
public convenience and necessity, and any other air operator
certificates and other licenses, certificates and permits
required by a Governmental Authority enabling Lessee to
operate as an air carrier, certified to be true copies and to
be in full force and effect by a duly authorized officer of
Lessee;
(e) evidence of appointment of Lessee's agent for service of
process in the State of New York;
13
<PAGE>
(f) a power of attorney in the form of Appendix G authorizing
Lessor and/or the Head Lessor/and/or the Bank to take action
at the Air Authority and a certified resolution authorizing
same;
(g) such other documents as Lessor may reasonably request;
(ii) the receipt by Lessor from Lessee on or before the Delivery Date of:
(a) opinion satisfactory in form and substance to Lessor of
counsel to Lessee, addressed to Lessor, Beneficiary, Mortgagee
and Lender;
(b) all sums due to Lessor pursuant to this Agreement;
(c) a certificate of insurance, a broker's letter of undertaking
and other evidence, all in form and substance satisfactory to
Lessor, that Lessee is taking the required steps to ensure due
compliance with the provisions of this Agreement as to
Insurances with effect on and after the Delivery Date;
(d) evidence that the representations and warranties of Lessee set
forth in Article 13.4 are true and correct; and
(e) an acknowledgement by Lessee of the transfer and assignment of
the Indenture Estate (as defined in the Indenture),
substantially in the form attached as Annex A to the
Indenture.
(iii) Intentionally omitted;
(iv) Intentionally omitted;
(v) evidence (including satisfactory opinions of Crowe & Dunlevy,
special Air Authority aviation counsel, as to Air Authority
registration and recordation
14
<PAGE>
matters) that on the Delivery Date the Aircraft has been validly
registered under the laws of the State of Registration and that all
filings, registrations, recordings and other actions have been or
will be undertaken which are necessary or advisable to ensure the
validity, effectiveness and enforceability of this Agreement and to
protect the property rights of Lessor in the Aircraft or any Part
and any Security Interest of the Mortgagee therein;
(vi) Lessor being satisfied that no default shall have occurred under any
Other Aircraft Agreement;
(vii) the Certificate of Acceptance shall have been duly authorized,
executed and delivered by Lessee, shall be satisfactory in form and
substance to Lessor, and shall be in full force and effect;
(viii) all of Transwede's rights and interest in the Aircraft shall have
been terminated to the satisfaction of Beneficiary, including the
termination of the Transwede Lease and the fulfillment of all
conditions precedent and obligations of Lessee and Transwede with
respect to the Aircraft under the Tripartite Agreement;
(ix) the Beneficiary shall have consented to the termination of the
Transwede Lease and its mortgage on the Aircraft under Swedish law;
and
(x) Lessee shall have accepted the Aircraft from Transwede in accordance
with the terms and conditions of the Tripartite Agreement and
simultaneously therewith Transwede has redelivered the Aircraft to
Lessor.
2.3 The conditions specified in Article 2.2 are inserted for the sole benefit
of Lessor and may be waived or deferred in whole or in part and with or
without conditions by Lessor. If any of the said conditions are
outstanding on the Delivery Date and Lessor (in its absolute discretion)
nonetheless agrees to deliver the Aircraft to Lessee, Lessee shall ensure
that such outstanding conditions are fulfilled within fifteen (15) days
after the Delivery Date and Lessor shall be entitled to treat the failure
of Lessee to perform such outstanding conditions as an Event of Default.
15
<PAGE>
2.4 The obligation of Lessee to accept delivery of the Aircraft from Lessor is
subject to the satisfaction of the following conditions precedent on or
before the Delivery Date:
(i) each of the Operative Documents to which Lessor is a party shall
have been duly authorized, executed and delivered by Lessor and
shall be in full force and effect, and executed counterparts shall
have been delivered to Lessee;
ii) Lessee shall have received the following:
(a) an incumbency certificate of each of Lessor as to the persons
authorized to execute and deliver the Operative Documents to
which Lessor is a party and each other document to be executed
on behalf of Lessor in connection with the transactions
contemplated by the Operative Documents, including the
signatures of such persons; and
(b) such other documents and evidence with respect to Lessor and
the transactions contemplated by the Operative Documents as
Lessee may reasonably request in order to establish the
consummation of the transactions contemplated by the Operative
Documents to be performed by Lessor, the taking of all
corporate proceedings in connection with such transactions and
compliance with the conditions set forth herein;
(iii) on the Delivery Date, the representations and warranties of Lessor
contained in Article 13.6 shall be true and accurate as though made
on and as of such date;
(iv) Lessee shall have received the favorable opinion, addressed to it
and reasonably satisfactory in form and substance to it, from Crowe
& Dunlevy, special Air Authority aviation counsel; and
(v) the Aircraft shall meet the delivery conditions specified in Article
3.6.
16
<PAGE>
3. TERM; DELIVERY; ACCEPTANCE; DELAY
3.1. Subject to Articles 2.1, 2.2 and 3.3, Lessor shall deliver the Aircraft on
the Delivery Date. Subject to Article 2.4 only, Lessee shall accept the
Aircraft and the delivery thereof on the Delivery Date. Lessee
acknowledges that Lessor's sole obligation with respect to delivery of the
Aircraft is (i) to deliver it to Lessee upon acceptance of the Aircraft by
Lessee from Transwede on the Midway Technical Acceptance Date as such term
is defined in the Tripartite Agreement pursuant to the terms and
conditions of the Tripartite Agreement, and (ii) that Lessor is delivering
the Aircraft to Lessee "AS IS--WHERE IS."
3.2 Intentionally omitted.
3.3 If for any reason (including any failure of the conditions specified in
Article 2.2, Clauses (viii), (ix) and (x)), the Aircraft has not been
delivered by Lessor by August 7, 1995, (as such date may be amended,
pursuant to the provisions of the Tripartite Agreement), either party may
terminate this Agreement by written notice to the other party. Upon any
such termination by Lessee, if the Aircraft has not been delivered by
Lessor due to Lessee's breach of its obligations hereunder or under the
Tripartite Agreement, Lessor may retain the Deposit. Otherwise, Lessor
shall return the Deposit to Lessee.
3.4 The term of the lease shall commence on the Delivery Date and shall
continue until the Expiry Date unless earlier terminated or extended as
herein provided (such period being herein referred to as the "Term").
3.5 The Aircraft shall be delivered to and accepted by Lessee at the Delivery
Location or such other location as is mutually acceptable to the parties.
3.6 Simultaneously with Lessee's technical acceptance of the Aircraft from
Transwede under the Tripartite Agreement, Lessee shall indicate and
confirm its acceptance of the Aircraft by the execution and delivery to
Lessor of the Certificate of Acceptance.
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4. REGISTRATION AND TITLE
4.1 As from the Delivery Date Lessee shall cooperate with Lessor or Head
Lessor, to effect and maintain registration of the Aircraft in the name of
Lessor or Head Lessor, as the case may be, under the Laws of the State of
Registration during the Term, such registration to reflect the interests
of Lessor or Head Lessor, as the case may be, and Mortgagee and to obtain
and maintain all licenses, permits and approvals, including, without
limitation, a certificate of airworthiness from the Air Authority, as may
be requisite in connection with operation of the Aircraft under this
Agreement.
4.2 Lessee shall at its own expense and responsibility cause this Agreement to
be kept, filed and recorded at all times during the Term, in such office
or offices for the registration of the Aircraft in the State of
Registration and in such other offices (in the United States but not in
any jurisdiction outside of the United States unless directly required due
to Lessee's operation) as may be necessary, to protect Lessor's, Head
Lessor's, Mortgagee's and the Bank's rights in any state in which the
Aircraft may operate including the State of Registration of the Aircraft
and the State of Incorporation or as Lessor may reasonably request to
protect and preserve Lessor's, Head Lessor's, Mortgagee's and the Bank's
rights hereunder, and shall on request furnish to Lessor an opinion of
counsel or other evidence satisfactory to Lessor of such filing and
recording.
4.3 Title to and ownership of the Aircraft as between Lessor, Head Lessor and
Lessee shall at all times remain in Lessor or Head Lessor, as the case may
be, and Lessee shall have no right, title or interest in or to the
Aircraft or any part thereof except as expressly provided by this
Agreement. Lessee shall identify and specify the interest of Lessor, Head
Lessor, Mortgagee and the Bank and shall affix or keep affixed (i) in a
reasonably prominent position on the flight-deck of the Aircraft and on
each Engine a metal name plate (having dimensions of not less than 10 cm x
7 cm) bearing the inscription (in fireproof and legible characters)
stating:
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"NOTICE OF OWNERSHIP
THIS AIRCRAFT/ENGINE IS OWNED BY
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION, NOT IN ITS INDIVIDUAL
CAPACITY BUT SOLELY AS OWNER TRUSTEE AND LESSOR AND IS SUBJECT TO A FIRST
PRIORITY MORTGAGE IN FAVOR OF WILMINGTON TRUST COMPANY, NOT IN ITS INDIVIDUAL
CAPACITY BUT SOLELY AS TRUSTEE."
The proper completion of the metal name plate shall be advised by
Lessor at its earliest convenience. Lessee shall not remove or
deface evidence of ownership of the Aircraft and shall not do or
permit to be done or omitted any act or thing which would jeopardize
the rights of Lessor, Head Lessor, Mortgagee or the Bank in the
Aircraft. Lessee will on all occasions when the ownership of the
Aircraft or any Part is relevant make clear to third parties that
title to the same is held by Lessor, Head Lessor or the Head Lessor,
as the case may be.
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4.4 Lessee acknowledges that the Aircraft may from time to time be owned by
Head Lessor or the Bank and/or be subject to the Security Assignment, in
favor of Head Lessor or the Bank. Lessee undertakes to Lessor (both for
itself and as agent for each of Mortgagee, Head Lessor and the Bank) at
Lessee's expense (except for the expense of assignments pursuant to
Article 12 after the first refinancing and first assignment described
therein) to, from time to time, cooperate with Lessor, Head Lessor,
Mortgagee and the Bank to cause this Agreement, the Indenture, the
Security Assignment and such other documents as may be necessary or
advisable to give effect to the transactions contemplated hereby or
thereby, to be kept, recorded or filed in such office or offices in the
State of Incorporation and in the State of Registration as may be
necessary or advisable to protect and perfect the interests of Lessor,
Head Lessor, Mortgagee and the Bank in the Aircraft, this Agreement, the
Indenture and the Security Assignment, and to do, from time to time, all
other things which the Bank, Head Lessor, Mortgagee and/or Lessor may
reasonably require in order to protect and perfect their rights.
5. POSSESSION AND USE
5.1 Lessee shall not transfer possession of the Aircraft, the Engines or any
Part to any person or any legal entity or remove any Engine or Part from
the Airframe other than in accordance with the provisions of this Article
5 or of Article 12.1; provided, however, that so long as no Default shall
have occurred and be continuing, Lessee may, without the prior written
consent of Lessor deliver possession of the Aircraft, the Engines or Parts
to the manufacturer thereof for testing or other similar purposes, or to
an Authorized Maintenance Performer for service, repair, maintenance or
overhaul work on the Aircraft, the Engines or Parts, or for alterations,
modifications, or additions thereto, to the extent required or permitted
by the terms of Article 7.3.
5.1.1 Lessee will ensure that no Engine or Part installed on the Aircraft is at
any time removed from the Aircraft other than:
(a) if replaced as expressly permitted by this Agreement; or
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(b) if the removal is of an obsolete item and is in accordance with the
Approved Maintenance Program; or
(c) (i) during the course of maintaining, servicing, repairing,
overhauling or testing that Engine or Part or the Aircraft, as
the case may be; or
(ii) as part of a normal engine or part rotation program; or
(iii) for the purpose of making such modification to the Engine or
Part, or the Aircraft, as the case may be, as are permitted
under this Agreement,
and then in each case only if it is reinstalled or replaced by an engine
or part complying with Article 5.1.2(a) as soon as practicable (or in the
case of Article 5.1.1(c) (ii) in the ordinary course of such program) and
in any event no later than the Expiry Date.
5.1.2 (a) Lessee will ensure that, except as permitted by this Agreement, no
engine or part is installed on the Aircraft unless:
(i) in the case of an engine, it is an engine of the same model
as, or an improved or advanced version of the Engine it
replaces, which is in similar or better operating condition,
and in the case only of a Casualty Occurrence, has
substantially similar hours available until the next scheduled
checks, inspections, overhauls and shop visits and has the
same or greater value and utility as the replaced Engine;
(ii) in the case of a part, it is in as good operating condition,
is of similar or a more advanced make and model and is of the
same interchangeable modification status as the replaced Part;
(iii) in the case of any part, it has become and remains the
property of Lessor free from Security Interests and on
installation on the Aircraft will without further act be
subject to this Agreement and the Indenture; and
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(iv) in each case, Lessee has full details as to its source and
maintenance records.
(b) Provided no Default has occurred and is continuing, Lessee shall be
entitled to install any engine or part on the Aircraft by way of
replacement notwithstanding Article 5.1.2(a) if:
(i) there is not available to Lessee at the time and in the place
that 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 Article 5.1.2(a); and
(ii) it would result in an unreasonable disruption of the operation
of the Aircraft and/or the business of Lessee to ground the
Aircraft until an engine or part, as the case may be,
complying with Article 5.1.2(a) becomes available for
installation on the Aircraft; and
(iii) as soon as reasonably practicable after installation of the
same on the Aircraft, Lessee removes any such engine or part
and replaces it with the Engine or Part replaced by it or by
an engine or part, as the case may be, complying with Article
5.1.2(a).
5.1.3 Lessee will:
(a) ensure that any Engine or Part which is not installed on the
Aircraft (or any other aircraft as permitted by this Agreement) is,
except as expressly permitted by this Agreement, properly and safely
stored, and kept free from Security Interests;
(b) from time to time on request, notify Lessor in writing as to the
location of any Engine and on request shall use its reasonable
efforts to procure that any person to whom possession of an Engine
is given acknowledges in writing to Lessor in terms satisfactory to
Lessor, that it will respect the interest of the Mortgagee and
Lessor (or, as the case may be, Head Lessor) as owner and lessor of
the Engine and will not seek
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to exercise any rights whatsoever in relation to it;
(c) (notwithstanding the foregoing provisions of this Article 5.1.3), be
permitted, if no Default has occurred and is continuing, to install
any Engine or Part on an aircraft, or in the case of a Part, on an
engine:
(i) owned and operated by Lessee free from Security Interests; or
(ii) leased or hired to Lessee pursuant to a lease or conditional
sale agreement on a long-term basis and on terms whereby
Lessee has full operational control of that aircraft or
engine; or
(iii) acquired by Lessee and/or financed or refinanced, and operated
by Lessee, on terms that ownership of that aircraft or engine,
as the case may be, pursuant to a lease or conditional sale
agreement, or a Security Interest therein, is vested in or
held by any other person; provided that in the case of (ii)
and (iii):
(1) the terms of any such lease, conditional sale agreement or Security
Interest will not have the effect of prejudicing the interests of
the Bank as mortgagee or Lessor (or, as the case may be, Head
Lessor) as owner and lessor of that Engine or Part; and
(2) the lessor under such lease, the seller under such conditional sale
agreement or the holder of such Security Interest, as the case may
be, has confirmed and acknowledged in writing to Lessor, in form and
substance satisfactory to Lessor, or has otherwise agreed in writing
that it will respect the interest of Lessor (or, as the case may be,
Head Lessor) or, generally (without naming such parties) the owner
and/or lessor as owner and lessor and the Mortgagee, or generally
(without naming the person) any mortgagee as mortgagee of that
Engine or Part and that it will not seek to exercise any rights
whatsoever in relation thereto; and, to the extent such an
acknowledgment has been given, Lessor hereby agrees, for the benefit
of the lessor, the seller, or secured
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party, as the case may be, of any engine or part (other than an
Engine or a Part) leased to Lessee or owned by Lessee subject to a
conditional sale or other security agreement, that Lessor will not
acquire or claim, as against such lessor, seller or secured party,
any right, title or interest in any engine or engines owned by the
lessor under such lease or subject to a security interest in favor
of the seller or secured party under such conditional sale or other
security agreement as the result of such engine or engines being
installed on the Airframe at any time while such engine or engines
are subject to such lease or conditional sale or other security
agreement.
5.1.4 Lessee will not enter into nor permit any pooling agreement or arrangement
in respect of an Engine or Part without the prior written consent of
Lessor, which shall not be unreasonably withheld.
5.2 Lessee shall use the Aircraft solely in commercial or other operations for
which Lessee is duly authorized by the Laws of the State of Registration
and/or any jurisdiction to whose Laws Lessee's operation of the Aircraft
is subject and shall not use or permit the Aircraft to be used for any
purpose for which the Aircraft is not designed or reasonably suitable.
Lessee shall not use the Aircraft for the carriage of (i) whole animals
living or dead except in the cargo compartments according to the United
States Department of Transportation ("DOT") (or for international flights,
International Civil Aviation Organization ("ICAO")) regulations, and
except domestic pet animals carried in a suitable container to prevent the
escape of any liquid and to ensure the welfare of the animal; (ii) acids,
toxic chemicals, other corrosive materials, explosives, nuclear fuels,
wastes, or any nuclear assemblies or components, except as permitted for
passenger aircraft under the "Restriction of Goods" schedule issued by the
DOT (or for international flights, ICAO) from time to time and provided
that all the requirements for packaging or otherwise contained therein are
fulfilled; or (iii) any other goods, materials or items of cargo which
could reasonably be expected to cause damage to the Aircraft and which
would not be adequately covered by the insurance required by or obtained
pursuant to Article 11.
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5.3 Lessee shall not permit the Aircraft to be maintained, used, or operated
in violation of any Law of any Government Entity having jurisdiction, or
contrary to any manufacturer's operating manuals and instructions, or in
violation of any airworthiness certificate, license or registration
relating to the Aircraft issued by any such Government Entity. In the
event that such Laws require alteration of the Aircraft during the Term,
Lessee shall conform therewith at its own expense and shall maintain the
same in proper condition for operation under such Laws. Lessee agrees not
to operate the Aircraft or to permit or suffer the Aircraft to be operated
(i) contrary to applicable Law, and/or (ii) within or into any geographic
area unless the Aircraft is covered by insurance as required by the
provisions of Article 11 or insurance or an indemnity in lieu of such
insurance from the United States government against the risks and in the
amounts required by Article 11 covering such area, and/or (iii) contrary
to the terms of such insurance as required by the provisions of Article
11.
5.4 Throughout the Term and until re-delivery of the Aircraft to Lessor in
accordance with the provisions of this Agreement, the Aircraft and every
part thereof shall be in every respect at the sole risk of Lessee, who
shall bear all risks of loss, theft, damage or destruction to the Aircraft
from any cause whatsoever. Lessor shall not be liable for any liability,
claim, loss, damage or expense of any kind or nature caused directly or
indirectly by the Aircraft or any part thereof by any inadequacy thereof
for any purpose or any deficiency or defect therein, by the use or
performance thereof, by any repairs or servicing thereto or any delay in
providing or failure to provide any thereof, by any interruption or loss
of service or use thereof, or by any loss of business or other
consequential damage or any damage whatsoever and howsoever caused prior
to re-delivery of the Aircraft to Lessor.
5.5 Lessee shall ensure that such crew and engineers as are employed by it in
connection with the operation and maintenance of the Aircraft shall have
such qualifications and hold such licenses as are required by the Air
Authority and by all applicable Laws and regulations.
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6. CHARGES, METHOD OF PAYMENT AND FINANCIAL INFORMATION
6.1 Lessee shall punctually pay to Lessor, when due, the Rent, Reserve Rate
and Supplemental Rent expressed to be payable by the Lessee to the Lessor
hereunder including the monies specified and calculated in accordance with
the provisions of Appendix D at the time and in the manner therein
specified, and shall punctually and duly observe and perform Lessee's
obligations under the said Appendix D which forms an integral part of this
Agreement. The time stipulated in this Agreement for all payments payable
by Lessee to Lessor and for the performance of Lessee's other obligations
under this Agreement shall be of the essence of this Agreement.
6.2 Lessee shall not be entitled to any abatement, compensation, reduction or
set-off against any installment of Rent, the Reserve Rate or Supplemental
Rent, including but not limited to, abatements, compensations, reductions
or set offs, by reason of any past, present or future claims of Lessee
against Lessor or any other person under this Agreement or otherwise.
6.3 Lessee's obligation to pay Rent and make other payments in accordance with
this Agreement, until Lessee shall have redelivered the Aircraft to Lessor
in accordance with Article 16 and shall have complied with its other
obligations hereunder, shall be absolute and unconditional irrespective of
any contingency whatsoever including (but not limited to) (i) any right of
set-off, counterclaim, recoupment, defense or other right which either
party may have against the other, (ii) any unavailability of the Aircraft
for any reason, including, but not limited to, any defect in the
airworthiness, merchantability, fitness for any purpose, condition,
design, or operation of any kind or nature of the Aircraft, or the
ineligibility of the Aircraft for any particular use or trade, or for
registration or documentation under the laws of any relevant jurisdiction,
or (save as herein provided) any Casualty Occurrence in respect of or any
damage to the Aircraft, (iii) any insolvency, bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution, liquidation or similar
proceedings by or against Lessor or Lessee, (iv) any invalidity or
unenforceability or lack of due authorization of, or other defect in this
Agreement, (v) any failure of Lessee to obtain any required license,
certificate,
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authorization or other approval of any Governmental Entity having
jurisdiction over the operation by Lessee of the Aircraft or the operation
by Lessee in any airport and (vi) any other cause which, but for this
provision, would or might have the effect of terminating, frustrating or
in any way affecting any obligation of Lessee hereunder, it being the
declared intention of the parties that the provisions of this Article and
the obligations of Lessee to pay the Rent, the Reserve Rate and
Supplemental Rent provided for by this Agreement shall survive any
frustration and that, save as expressly provided in this Agreement, no
monies payable hereunder by Lessee to Lessor shall in any event or
circumstance be repayable to Lessee.
6.4 Lessee agrees to furnish Lessor during the Term:
(i) Intentionally omitted;
(ii) upon Lessor requesting the same a quarterly unaudited balance sheet
of Lessee prepared by it as of the close of the most recent previous
financial quarter, together with the related profit and loss
statement for such period;
(iii) within ninety (90) days after the close of each financial year of
Lessee, an audited balance sheet and profit and loss statement as of
the close of such financial year;
(iv) from time to time such other non-confidential information as Lessor
may reasonably request; and
(v) copies of all notices sent by Lessee (A) to its shareholders or
creditors as a group in their respective capacities as such relating
to major business or financial developments of Lessee; or (B) to the
Securities and Exchange Commission in connection with or following a
public offering of the equity shares of Lessee.
7. MAINTENANCE
7.1 Lessee, during the Term, at its own cost and expense shall:
(a) service, repair, maintain, overhaul, test, or cause the same to be
done to the Aircraft in accordance with the Approved Maintenance
Program
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so as to keep the Aircraft in as good operating condition as when
delivered to Lessee on the Delivery Date, ordinary wear and tear
excepted, and such operating condition as may be necessary to enable
the airworthiness certificate of the Aircraft to be maintained in
good standing at all times under applicable Law, and Lessee shall at
all times maintain current certificates of airworthiness (except in
each case if Fokker 100 aircraft with similar engines are grounded
by the Air authority other than as a result of the acts and
omissions of Lessee) and Air Authority required records of
maintenance in respect of the Aircraft and produce copies thereof to
Lessor upon request;
(b) maintain in the English language all Aircraft Documents, records,
logs, and other materials required by applicable Laws and best
airline practice to be maintained in respect of the Aircraft
including engine trend monitoring data;
(c) perform, or cause to be performed, all airworthiness directives and
mandatory notes and mandatory bulletins affecting the Aircraft
having a compliance date during the Term and issued by (a) the Air
Authority and/or (b) Fokker or any other manufacturer of any part of
the Aircraft (except that, in the event of a conflict, those
required by the Air Authority shall prevail);
(d) maintain the Aircraft in conformity with Air Authority Regulations
and such other rules and regulations of the Air Authority as may
from time to time be applicable to passenger category airline
aircraft;
(e) provide Lessor by telex or fax message with a monthly summation
(which may utilize Air Authority forms) of Flight Hours and Cycles
accumulated on the Airframe, Engines, A.P.U. and Landing Gear and
details of all modifications and material component changes within
five (5) days after the end of each month.
Such maintenance shall be performed by Lessee or by an Authorized
Maintenance Performer.
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7.2 Except as otherwise provided herein, Lessee, at its own cost and expense,
shall promptly replace all Engines or Parts which may from time to time
become worn out, lost, stolen, destroyed, seized, confiscated, damaged
beyond repair, or unserviceable with an engine or part meeting the
requirements of Article 5.1.2(a).
7.3 (a) Save as expressly herein provided the Aircraft shall not be modified,
altered, converted or added to (each such action in relation to the
Aircraft being herein referred to as an "Equipment Change"), provided
that Lessee may, at its own expense and subject to the prior written
approval of Lessor (such approval not to be unreasonably withheld),
make such Equipment Changes to the Aircraft as Lessee may deem
desirable in the proper conduct of its business, provided that no such
Equipment Change diminishes the value, utility, condition or
airworthiness of the Aircraft below the value, utility, condition and
airworthiness thereof immediately prior to such Equipment Change,
assuming the Aircraft was then in the condition required to be
maintained by the provisions of this Agreement.
(b) Title to all Parts incorporated or installed in or attached or added
to the Aircraft as the result of such Equipment Change shall,
without further act, vest in Lessor free and clear of all liens,
charges and encumbrances. Lessee shall at its own expense take all
such steps and execute, and procure the execution of, all such
instruments as Lessor may require and which are necessary to ensure
that title to any such replacement Part as aforesaid passes to
Lessor according to the Governing Law and the lex situs, provided,
however, that so long as a Default shall not have occurred and be
continuing, at any time during the Term, Lessee may remove any such
Part if (A) (i) such Part is in addition to, and not in replacement
of or in substitution for, any Part originally incorporated or
installed in or attached to the Aircraft at the time of the delivery
thereof hereunder, (ii) such Part is not required to be incorporated
or installed in or attached or added to the Aircraft pursuant to the
provisions of Article 7.1 and (iii) such Part can be removed from
the Aircraft without diminishing or impairing the value, utility or
airworthiness which the Aircraft would have had at such time,
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had such Equipment Change not occurred. Or (B) such Part is deemed
by Lessee to be obsolete or no longer suitable or appropriate for use
in the Airframe or Engines (an "Obsolete Part") and its removal shall
not materially decrease the value or adversely affect the utility or
remaining useful life of the Airframe or Engines, or impair the
condition or airworthiness thereof below the value, utility or
remaining useful life, condition or airworthiness thereof immediately
prior to such removal (assuming the Aircraft was then in the condition
required to be maintained by the terms of the Lease), except that the
value (but not the utility, remaining useful life, condition or
airworthiness) of the Airframe or the Engines may be reduced, to the
extent resulting from the removal of Obsolete Parts, if the aggregate
original cost of all Obsolete Parts removed from such Aircraft and not
replaced shall not exceed $70,000.
(c) Upon the removal by Lessee of any such Part as above provided, title
thereto shall, without further act, vest in Lessee and such Part shall
no longer be deemed a part of the Aircraft. Any Part not removed by
Lessee as above provided prior to the return of the Aircraft to Lessor
hereunder shall remain the property of Lessor (save as the parties may
otherwise agree in writing) provided that Lessor may require Lessee,
prior to the end of the Term, to remove any Parts incorporated or
installed in the Aircraft as a result of an Equipment Change and to
restore the Aircraft to its condition prior to an Equipment Change.
7.4.1 Upon submission by Lessee to Lessor of invoices or receipts reasonably
satisfactory to Lessor evidencing the performance in accordance with the
provisions of this Agreement by or at the direction of Lessee of:
(a) with respect to the Airframe, the accomplishment of those items of
maintenance characterized as scheduled airframe heavy maintenance as
defined in the Approved Maintenance Program for 12,000 hours and
24,000 hours inspections or any equivalent thereof with more or less
hours ("Airframe Maintenance"), or
(b) with respect to any Engine, the performance of all scheduled shop
visit engine maintenance and re-
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pair, other than (i) repairs arising as a result of foreign object
damage or operational mishandling and/or (ii) maintenance and repair
of QEC (Quick Engine Change) kits ("Engine Maintenance"), or
(c) with respect to any nose or main landing gear ("Landing Gear"), the
performance of all scheduled shop visit nose and main landing gear
maintenance and repair, other than repairs arising as a result of
foreign object damage or operational mishandling ("Landing Gear
Maintenance"),
Lessor shall, subject to Article 3.6 of Appendix D and provided that a
Default shall not have occurred and be continuing, release to Lessee, from
the relevant Maintenance Fund as defined in paragraph 3.2 of Appendix D, a
sum equal to the aggregate amount evidenced by such invoices or receipts
for such relevant maintenance, to the extent there are sufficient sums in
the relevant Maintenance Fund at the date of the start of the relevant
maintenance. Lessee agrees to use its reasonable efforts to ensure that
the relevant invoices or receipts are received by Lessor as promptly as
possible after completion of the relevant maintenance. All sums remaining
in any Maintenance Fund at the expiration or other termination of this
Agreement shall be retained by Lessor, except (i) upon payment in full of
Agreed Value and any other amounts due to Lessor or otherwise hereunder
after a Casualty Occurrence pursuant to Article 17.2(b), in which case all
sums remaining in any Maintenance Fund shall be paid to Lessee and (ii)
under the circumstances and to the extent described in Article 3.6 or 9 of
Appendix D.
For the avoidance of doubt, Lessor shall not refuse to release monies from
the Maintenance Fund on the ground that maintenance was required due to
operational mishandling, provided that Lessee can demonstrate that Lessee
complied with the original equipment manufacturer's written instructions.
7.4.2 Lessor shall be entitled to delay the release or payment of funds from any
Maintenance Fund (to the extent related to any disputed amounts) to Lessee
provided for by this Article 7 until such time as it shall in its opinion
be in a position to determine (which Lessor agrees to use reasonable
efforts to do as promptly as possible) the amount to be released or paid,
but in any event release all undisputed amounts
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from the relevant Maintenance Fund (but where insufficient funds are in
such maintenance Fund the lesser pro rata portion of such funds which
corresponds to the undisputed amount) upon request unless a Default shall
have occurred and be continuing.
7.5.1 During the Term, Lessee shall furnish to Lessor such information
concerning the location, condition, use and operation of the Aircraft as
Lessor may reasonably request. The right of Lessor, or its designated
representatives, to inspect the Aircraft during any Major Checks performed
by or on behalf of Lessee during the Term, shall be absolute and Lessee
shall inform Lessor by providing sixty (60) days' written notice as to
time and location of all Major Checks. During such Major Checks, Lessee
agrees to provide sufficient manpower to allow Lessor, or its authorized
representatives, to inspect any area of the Aircraft which Lessor requests
to inspect and which would normally be required during such a Major Check,
provided that such inspection is to be made only at the time that Lessee
opens up such area in accordance with the Approved Maintenance Program.
Lessee also shall permit any persons designated by Lessor to visit and
inspect the Aircraft, its condition, use and operation, and the records
maintained in connection therewith.
7.5.2 Lessor shall have the right at any time on reasonable notice to inspect or
survey the Aircraft or any part thereof, or instruct a duly authorized
surveyor to carry out a survey on its behalf, to ascertain the condition
of the Aircraft or any part thereof and satisfy itself that the Aircraft
is being properly repaired and maintained in accordance with the terms of
this Agreement. The cost of any such inspection or survey shall be borne
by Lessor unless an Event of Default has occurred and is continuing.
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7.5.3 Lessor shall have no duty to make any such inspection as is referred to in
Article 7.5.1 and 7.5.2 and shall not incur any liability or obligation by
reason of not making any such inspection. Except in connection with any
Event of Default, no exercise of any inspection right under Articles
7.5.1, 7.5.2 or any other provision of this Agreement shall interfere with
the normal operation or maintenance of the Aircraft or the business of
Lessee and shall be conducted during normal maintenance or business hours.
In connection with any such inspection, Lessee shall allow Lessor or any
persons designated by Lessor to copy, at Lessor's cost and expense, any
Aircraft Documents or other records relating to maintenance and operation
of the Aircraft. Lessee shall not be liable for the use of any such
Aircraft Documents or other records by Lessor or any other person or
entity which use is unrelated to Lessee's compliance with the terms of
this Agreement.
8. TAXES, DUTIES AND EXPENSES
8.1 Lessee agrees promptly to pay and indemnify and hold Lessor and Head
Lessor harmless against all Taxes (other than Lessor Taxes) levied or
imposed against or upon or otherwise payable by any Tax Indemnitee or
Lessee and relating to or attributable to Lessee, this Agreement, the
Aircraft and/or the importation, exportation, registration, ownership,
leasing, subleasing, delivery, possession, use, operation, reregistration,
repair, maintenance, overhaul, replacement, improvement, modification,
alteration, transportation, landing, storage, presence or re-delivery of
or addition to, the Aircraft or any Engine or any Part thereof or any
rent, receipts, insurance proceeds or income arising therefrom, or any sum
payable by Lessee to a Tax Indemnitee under this Agreement or any other
transactions or activities contemplated by this Agreement. If Lessee is
required by any applicable Law or regulation to deliver or furnish any
report or return in connection with any such Taxes, Lessee shall complete
the same in a manner satisfactory to the relevant Tax Indemnitee and in
particular shall state therein that Lessor or Head Lessor, as the case may
be, is the owner of the Aircraft and that the Lessee is exclusively
responsible for the use and operation of the Aircraft and for any such
Taxes and Lessee shall supply a copy of such report or return to the
relevant Tax Indemnitee.
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All payments by Lessee hereunder to Lessor shall be free of withholdings
of any nature whatsoever (and at the time Lessee is required to make any
payment upon which any withholding is required, Lessee shall pay an
additional amount such that the net amount actually received by the Lessor
will, after such withholding, equal the full amount of the payment then
due) and shall be free of expense for collection or other charges.
If Lessee shall have paid any additional amount pursuant to the first
sentence of this paragraph with respect to Taxes not subject to
indemnification pursuant to the provisions of this Section 8.1, the Lessor
for whose benefit such Taxes were paid shall reimburse Lessee within 10
Business Days of written demand therefor for the amount of such Taxes so
paid by Lessee. For the purpose of Article 1.10 and Article 8, the terms,
"Lessor" and "Head Lessor" shall include each group of corporations (and
each member thereof) that includes Lessor or Head Lessor and for which
consolidated, combined, unitary or other group tax returns are filed.
8.2 Except as otherwise specifically provided herein, Lessee shall pay to
Lessor on or after Delivery Date (unless otherwise agreed to be financed
by Lessor or to be paid by Transwede pursuant to the Tripartite Agreement)
upon demand:
(a) all reasonable expenses paid to third parties (including legal,
printing and out-of-pocket expenses) incurred or payable by Lessor
(i) in connection with the negotiation, preparation and execution of
this Agreement and all related documents, including reasonable
out-of-pocket expenses in connection with this Agreement and (ii)
related to any amendment to or extension of, or the granting of any
waiver or consent under, this Agreement, resulting from a request of
Lessee;
(b) all reasonable expenses paid to third parties (including legal fees
and disbursements but excluding surveyor costs) payable or incurred
by Lessor in connection with, the enforcement of or preservation of
any rights of Lessor under this Agreement or otherwise in respect of
moneys owing under this Agreement by Lessee or in respect of
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any breach of Lessee of any representation, warranty, covenant or
undertaking herein contained; and
(c) the ongoing annual fees and reasonable out-of-pocket expenses
related to this Agreement of the Owner Trustee, the Voting Trustee
and Mortgagee (other than those incurred pursuant to a change in any
of such trustees which was not requested by Lessee);
8.3 Lessee shall pay all stamp, documentary, registration or other like duties
or taxes (including any such duties or taxes payable by a Tax Indemnitee
but excluding all Lessor Taxes) imposed on or in connection with this
Agreement and shall indemnify that Tax Indemnitee against any liability
arising by reason of any delay or omission by Lessee to pay such duties or
taxes.
8.4 If and to the extent that any sum (the "indemnity sum") constituting
(directly or indirectly) an indemnity to one or more Tax Indemnitees paid
by Lessee to any person other than that Tax Indemnitee shall be treated as
taxable in the hands of the relevant Tax Indemnitee, Lessee shall pay to
the relevant Tax Indemnitee a sum as (after taking into account any
taxation suffered by the relevant Tax Indemnitee on the indemnity sum)
shall reimburse the relevant Tax Indemnitee for the net amount of any
Taxes suffered by them in respect of the indemnity sum (after taking into
account any current tax savings or other benefits to the relevant Tax
Indemnitee resulting from the payment or accrual of the indemnified
expense).
8.5 If and to the extent that any sums payable to a Tax Indemnitee by Lessee
under this Agreement by way of indemnity are insufficient, by reason of
any Taxes payable in respect of those sums, for that Tax Indemnitee to
discharge the corresponding liability to the relevant third party
(including any taxation authority), or to reimburse that Tax Indemnitee
for the cost incurred by it to a third party (including any taxation
authority), Lessee will pay to that Tax Indemnitee such sum as will after
the tax liability has been fully satisfied leave that Tax Indemnitee with
the same net amount (after taking into account any current tax savings or
other benefits to the that Tax Indemnitee resulting from the payment or
accrual of the indemnified expense) as it would have been entitled to
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receive in the absence of that liability. For the purpose of computing the
amount of an indemnity payment pursuant to this Article 8.5 and the amount
of any payment to Lessee under Article 8, it shall be assumed that the
relevant Tax Indemnitee is subject to tax on the amount of each indemnity
it receives or accrues under this Agreement and can use any tax savings to
offset Taxes at the highest marginal statutory rates of tax applicable to
that Tax Indemnitee (as certified to Lessee by an officer of that Tax
Indemnitee) at the time such indemnity or tax savings is received or
accrued.
8.6 If, as a result of any indemnity paid by Lessee or any event giving rise
to an indemnity obligation of Lessee, a Tax Indemnitee at any time
realizes any tax savings, refunds or other reductions in taxes not
previously taken into account in computing the amount of the indemnity,
that Tax Indemnitee shall promptly pay to the Lessee the amount of such
tax savings, refunds or other reductions in taxes; provided, however, that
no Tax Indemnitee will be required to make any payment to Lessee pursuant
to this Article 8.6 so long as a Default shall be continuing or if Lessee
shall not have theretofore made all payments due to all Tax Indemnitees
under this Agreement, or to the extent that the amount of such payment
would exceed the amount of all prior payments by Lessee to the relevant
Tax Indemnitee pursuant to this Article 8 less the amount of all prior
payments by the relevant Tax Indemnitee to Lessee pursuant to this Article
8.6. The relevant Tax Indemnitee shall estimate the amount of such tax
savings, refunds and other reductions in Taxes and shall use reasonable
efforts to take such actions in filing its tax returns and in dealing with
taxing authorities to seek and claim each such tax savings, refund and
other reduction in Taxes, but shall not be obligated to take any such
action that it determines in its sole discretion to involve the imposition
or risk of any material unindemnified cost or expense, and in no event
will any person have any right to inspect the books, records, tax returns
or other documents of any Tax Indemnitee, and the positions to be taken by
any Tax Indemnitee on or with respect to its tax returns and in any tax
proceedings shall be within their sole control.
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8.7 Lessee's, and each Tax Indemnitee's obligations under this Article 8 shall
continue in full force and effect, notwithstanding the expiration or
earlier termination of the Term hereunder.
8.8 If Lessee disputes the payment of any Taxes payable by a Tax Indemnitee
for which Lessee is responsible under this Agreement, that Tax Indemnitee
will take such action as Lessee may reasonably request at Lessee's expense
to contest that payment but that Tax Indemnitee will not be obliged to
take any such action:
(a) which that Tax Indemnitee considers in good faith may result in the
imposition or risks of any material liability cost, or expense for
which that Tax Indemnitee is not indemnified to its satisfaction; or
(b) which that Tax Indemnitee considers not to have a reasonable
prospect of success; or
(c) for which Lessee has not made adequate provision to the satisfaction
of that Tax Indemnitee in respect of the expense concerned.
8.9 Lessor covenants and agrees to deliver to Lessee, (a) within 30 days prior
to January 1, 1996 and each January 1 falling every three years thereafter
(or at such other date as prescribed by United States Treasury
Regulations) as long as this Agreement has not been terminated, two
accurate and complete original copies of Internal Revenue Service Form
1001 (or any successor form), dated the date hereof or January 1, 1996 (or
such subsequent January 1 or other date) signed by Beneficiary, as
appropriate, and such other related forms (including any certificate with
respect thereto) as Lessee may reasonably request, or (b) within 30 days
of the signing of this Agreement (but in all events prior to the date of
the first payment of Rent to Lessor under this Agreement) and within 30
days prior to the beginning of each taxable year of Lessor beginning
subsequent to the date of this Agreement (or at such other date as
prescribed by United States Treasury Regulations), two accurate and
complete original copies of Internal Revenue Service Form 4224 (or any
successor form), signed by Beneficiary, dated as appropriate, and such
other related forms (including any certificate with respect thereto) as
Lessee may reasonably request. In addition, Lessor shall deliver
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to Lessee two accurate and complete original copies of Form 1001 or Form
4224 signed by Beneficiary, at any time that a change in circumstances
renders the previous form inaccurate in any material respect. Nothing in
this Article 8.9 shall be construed as imposing on the Lessee any
obligation whatsoever, including, without limitation, to indemnify Lessor
or any other party for U.S. withholding taxes.
9. LIENS
9.1 Lessee, during the Term, shall not create or suffer to exist any lien,
attachment, mortgage or other encumbrance upon or against the Aircraft, or
any of its rights under this Agreement, other than Permitted Liens. If at
any time a lien, attachment, mortgage, or other encumbrance except as
permitted above shall be created or suffered to exist by Lessee, or be
levied upon the Aircraft or any of its rights under this Agreement, Lessee
shall forthwith notify Lessor and cause the same forthwith to be
discharged by bond or otherwise. In the event Lessee shall fail to
discharge any such lien, attachment, mortgage or other encumbrance,
Lessor, Head Lessor, Mortgagee, Lender or the Bank shall be entitled (but
not bound) to discharge the same, in which event Lessee shall pay to
Lessor, on demand, the amount paid by Lessor, Head Lessor, Mortgagee,
Lender or the Bank, together with Lessor's, Head Lessor's, Mortgagee's,
Lender's or the Bank's losses, costs and expenses, including reasonable
legal fees and expenses.
10. INDEMNIFICATION
10.1 LESSEE SHALL RELEASE AND DEFEND, HOLD HARMLESS AND INDEMNIFY ANY AND/OR
ALL OF THE INDEMNITEES, FROM AND AGAINST ANY AND ALL CLAIMS, PROCEEDINGS,
SUITS, JUDGMENTS, COSTS, EXPENSES, PENALTIES, FINES AND LIABILITIES,
DIRECT AND CONSEQUENTIAL DAMAGES AND LOSSES, INCLUDING WITHOUT LIMITATION
COSTS AND EXPENSES INCIDENTAL THERETO, OF WHATSOEVER KIND AND NATURE, AND
INCLUDING REASONABLE LEGAL FEES AND EXPENSES BUT EXCLUDING ANY TAXES,
INDEMNITY FOR WHICH IS ENCOMPASSED SOLELY IN ARTICLE 4.1 AND ARTICLE 8
(EACH A "CLAIM"), ATTRIBUTABLE TO ACTS OR OMISSIONS OCCURRING DURING THE
TERM OF THIS AGREEMENT, WHICH MAY BE SUFFERED BY, ASSERTED AGAINST,
CHARGED TO OR RECOVERABLE FROM, DIRECTLY OR INDIRECTLY, ANY AND/OR ALL OF
THE INDEMNITEES:
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(A) RELATING TO, ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE
POSSESSION, DELIVERY, PERFORMANCE, MANAGEMENT, OWNERSHIP,
REGISTRATION, CONTROL, MAINTENANCE, CONDITION, SERVICE,
REPAIR, OVERHAUL, LEASING, USE, OPERATION OR RETURN OF THE
AIRCRAFT, ANY ENGINE OR ANY PART, OR THE PERFORMANCE OR
NON-PERFORMANCE OF ANY AND/OR ALL OF THE INDEMNITEES OF
SERVICES OR DELIVERY OF ANY THINGS IN CONNECTION WITH THE
AIRCRAFT DURING THE TERM, OR OTHERWISE IN CONNECTION WITH THIS
AGREEMENT, WHETHER OR NOT ARISING IN TORT OR OCCASIONED IN
WHOLE OR IN PART BY THE FAULT OR NEGLIGENCE OF ANY AND/OR ALL
OF THE INDEMNITEES; OR
(B) AS A CONSEQUENCE OF ANY DESIGN, ARTICLE OR MATERIAL IN THE
AIRCRAFT, ANY ENGINE OR ANY PART OR ITS OPERATION OR USE
CONSTITUTING AN INFRINGEMENT OF PATENT (TO THE EXTENT AND
SCOPE AND SUBJECT TO THE LIMITATIONS SET FORTH IN PART C OF
EXHIBIT G OF THE SUPPORT SERVICES AGREEMENT), COPYRIGHT,
TRADEMARK, DESIGN OR OTHER PROPRIETARY RIGHT OR A BREACH BY
LESSEE OF ANY OBLIGATION OF CONFIDENTIALITY OWED TO ANY
PERSON;
EXCLUDING, HOWEVER, FROM THE FOREGOING ANY SUCH CLAIM TO THE
EXTENT THAT SUCH CLAIM RESULTS FROM (I) THE FAILURE OF
TRANSWEDE TO SATISFY ANY OF ITS OBLIGATIONS TOWARDS
BENEFICIARY AND/OR FOKKER UNDER THE TRIPARTITE AGREEMENT, OR
(II) THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH
INDEMNITEE, OR (III) FROM ANY MISREPRESENTATION BY SUCH
INDEMNITEE CONTAINED IN THIS AGREEMENT OR ANY BREACH BY SUCH
INDEMNITEE OF ANY COVENANT SET FORTH IN THIS AGREEMENT.
10.2 The indemnities contained in this Article 10 shall continue in full force
and effect notwithstanding the expiration or other termination of this
Agreement or of the letting of the Aircraft hereunder.
10.3 The indemnities contained in this Article 10 are given to the Lessor for
itself and as agent and trustee on behalf of the other Indemnitees.
10.4 Notwithstanding anything to the contrary contained herein, Lessee does not
release and does not agree to defend, hold harmless or indemnify under
this Agreement (and without limiting any obligations or indemnities
contained in any other agreement with Lessee) Fokker or
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any other Indemnitee in its capacity as manufacturer or seller of the
Aircraft from or against (i) claims of third parties made directly against
Fokker or such Indemnitee, based on its product liability or its status as
manufacturer or seller, or (ii) claims made against Fokker or such
Indemnitee based on the warranties or indemnities contained in the Product
Assurance Document which is Exhibit G of the Support Services Agreement,
or (iii) the matters described in Article 10.1(B).
10.5 If any Indemnitee has knowledge of the occurrence of any Claim, liability
or other matter for which it is or may be entitled to be indemnified
hereunder, it shall give prompt written notice thereof to the Lessee. Each
Indemnitee shall cooperate in good faith with Lessee and supply such
information as may reasonably be requested by Lessee to enable Lessee to
investigate, defend or contest any Claim, liability or other matter for
which Lessee may be required to indemnify an Indemnitee hereunder. In the
event that Lessee pays any amount to an Indemnitee pursuant to this
Article 10, Lessee shall be subrogated to all rights of the Indemnitee in
respect of the Claim, liability or other matter indemnified against giving
rise to such payment. Lessee or its insurers shall have the right, unless
an Event of Default shall have occurred and be continuing and such matter
is not covered by insurance, to investigate or (provided that Lessee or
its insurers shall agree not to dispute liability hereunder or under any
insurance policies pursuant to which coverage is sought and provided that
Lessee shall have consulted with Lessor prior thereto), defend or
compromise any Claim, and Lessor shall cooperate with Lessee with respect
thereto.
11. INSURANCE
11.1 On or before the Delivery Date of the Aircraft and throughout the Term,
Lessee shall carry and maintain in full force and effect, at its own cost
and expense, in such forms, on such conditions and with such insurers and,
if requested, reinsurers and through such insurance and, if requested,
reinsurance brokers as are satisfactory to Lessor, the following
insurances with respect to the Aircraft, Engines and Parts (herein
referred to as "the Insurances"):
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(a) All Risks Aircraft Hull insurance of the type usually insured
against by commercial airlines engaged in the same or similar
business and owning or operating similar aircraft (including
Engines and Parts while not installed on the Aircraft and
including Extended Coverage Endorsement (Aircraft Hull) AVN5l
or equivalent on the Agreed Value. The insurance may be
subject to a deductible in respect of losses other than total
loss, arranged total loss or constructive total loss of not
more than $100,000.00 (Dollars One Hundred Thousand) for each
accident.
(b) If operated outside the United States and Canada, Aircraft
Hull War and Allied Perils insurance covering the risks
excluded from the All Risks Aircraft Hull insurance specified
in paragraph (a) above by the terms of the War, Hi-Jacking and
Other Perils Exclusion Clause AVN.48B except paragraph (b)
thereof and shall include cover in respect of confiscation,
nationalization, seizure, restraint, detention, appropriation
for title or use by or under the order of any Government
Entity of the State of Registration.
(c) Comprehensive Airline Liability insurance (including without
limitation aircraft Third Party Liability, Passenger and Crew
Liability (including Baggage and Personal Effects)), Cargo
Liability, Mail Liability, Personal Injury Liability,
Contractual Liability, Hangar Keeper's Liability, Aircraft
Products Liability and General Third Party Liability of the
types usually insured against by commercial airlines engaged
in the same or similar business and owning or operating
similar (but not necessarily Fokker-manufactured) aircraft in
an amount of not less than $500,000,000.00 (Dollars Five
Hundred Million) Combined Single Limit any one occurrence each
Aircraft but limited in respect of Personal Injury to the
equivalent of $25,000,000.00 (Dollars Twenty Five Million) any
one offense and in the aggregate.
Such insurance shall include cover in respect of the risks
excluded by War, Hi-Jacking and Other Perils Exclusion Clause
AVN.48B except paragraph (b) thereof.
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This insurance may be subject to deductibles in respect of
passengers baggage and personal effects of not more than
$1,250.00 (Dollars One Thousand Two Hundred Fifty) any one
claim and in respect of cargo and mail of not more than
$5,000.00 (Dollars Five Thousand) any one claim. Such
deductibles shall not apply to claims arising from accidents
to the carrying aircraft.
(d) All Risks insurance on Engines and Parts while any such items
are not installed on the Aircraft and in respect of which
cover is not provided under the All Risks Aircraft Hull
insurance and/or Aircraft Hull War and Allied Perils insurance
(respectively specified in paragraphs (a) and (b) above) of
the type usually insured against by commercial airlines
engaged in the same or similar business and owning or
operating similar aircraft for not less than full replacement
value. If Engines and Parts are located outside the United
States and Canada, such insurance shall include War and Allied
Perils to the extent that such insurance is customarily
available in the international insurance market for this type
of insurance.
This insurance may be subject to a deductible of not more than
$10,000.00 (Dollars Ten Thousand).
The Lessor will accept a United States government indemnity (as referred
to in Article 5.3) in lieu of the foregoing or as otherwise required under
this Article 11. Lessor's current requirements as at the date of this
Agreement as to the Insurances are as specified in this Article and in
Appendices H and I. Lessor reserves the right to amend, and will cooperate
with Lessee reasonably to amend, the insurance requirements of this
Article 11 to reflect changes in insurance practice.
If required by the first paragraph of Article 11.1, the Lessee shall
procure that the insurers effect reinsurances in the same form and
conditions through such reinsurance brokers and with such reinsurers and
for such proportions as are satisfactory to Lessor.
11.2 All Insurances to be carried in accordance with Article 11.1 above shall:
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(a) in respect of All Risks Aircraft Hull insurance, Aircraft Hull War
and Allied Perils insurance and All Risks insurance on Engines and
Parts:
(i) name the Lessor, Head Lessor, the Mortgagee, the Lender and
the Bank and their respective successors and assigns as
additional assureds;
(ii) provide that all claims in respect of the Aircraft, Engines
and Parts shall be payable to the Mortgagee for so long as the
lien of the Indenture shall be in effect and thereafter to
Lessor or as it may direct, such payee to be named Loss Payee;
provided, that partial loss amounts up to the Partial Loss
Amount set forth in Appendix B shall be payable to Lessee
unless the insurers have been given notice that a Default has
occurred; and
(iii) if applicable, provide in respect of Hull All Risks and Hull
War and Allied Perils for a 50/50 Claims Settlement Clause in
the form of AVS.l03;
(b) in respect of Comprehensive Airline Liability insurance:
(i) name the Lessor, its successors and assigns and its
shareholders, subsidiaries, directors, officers, agents,
employees and the Indemnitees as additional assureds; and
(ii) provide that the insurance shall operate in all respects as if
a separate policy had been issued covering each party insured
thereunder, but this provision shall not operate to include
any claim howsoever arising in respect of loss or damage to
the Aircraft, Engines and Parts insured under the All Risks
Hull, Hull War and Allied Perils or All Risks insurance of the
assured. Notwithstanding the foregoing the total liability of
insurers in respect of any and all assureds shall not exceed
the limits of liability stated in the policy;
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(c) in respect of all Insurances:
(i) be effective worldwide except for territories approved in
writing by the Lessor;
(ii) provide that insurers waive all rights of subrogation against
the Lessor, its subcontractors, FAUSA, Fokker, the Mortgagee,
the Lender, the Head Lessor, the Bank, and their respective
officers, directors, employees, servants, agents, successors
and assigns;
(iii) provide that in the event that the Insurances are canceled
(including cancellation for non-payment of premium) or are
materially changed such cancellation or change shall not be
effective as to the interest of the Lessor until thirty (30)
days (but seven (7) days or such lesser period as is
customarily available in accordance with policy conditions in
respect of war and allied perils) after confirmed receipt by
Lessor of written notice by insurers of such cancellation or
change;
(iv) provide that in respect of the interests of the Additional
Assureds, the Insurances shall not be invalidated by any act,
neglect, omission, misrepresentation or non-disclosure on the
part of the Lessee or any other party other than the
Additional Assured seeking to make a claim thereunder, and
shall insure each Additional Assured regardless of any breach
or violation of any warranties, declarations or conditions
contained in such policies by the Lessee or any other party
other than the Additional Assured seeking to make a claim
thereunder;
(v) provide that the Additional Assureds shall have no
responsibility for premium and insurers shall waive any right
of set-off or counterclaim against the Additional Assureds
except in respect of outstanding premium in respect of the
Aircraft, Engines and Parts subject of a claim;
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(vi) not provide for any deductible or self insurance other than
the deductibles allowed under the terms of Article 11.1 above;
(vii) be primary without right of contribution from any other
insurance carried by Lessor, Lessee or any other person; and
(viii) be denominated in Dollars.
11.3 If required by the first paragraph of Article 11.1, the re-insurance
policies shall:
(a) provide that cover shall be identical to the cover provided by the
original insurances and be subject to the same terms and conditions
as the original insurances;
(b) provide that so far as the respective interests of the Additional
Assureds are concerned the reinsurance shall not be invalidated by
any act, neglect, omission, misrepresentation or non-disclosure on
the part of the reinsured party;
(c) confirm the insurers' agreement to the provision of paragraph (d)
below;
(d) include a "cut-through" clause in the following terms or in such
other terms as may be satisfactory to Lessor.
"In respect of All Risks Aircraft Hull insurance, Aircraft Hull War
Risk and Allied Perils insurance as described in Article 11.1(a) and
(b) above and All Risks insurance on any Engine and Parts as
described in Article 11.1(d) above, the reinsurers and the reassured
hereby agree that in the event of any claim arising under the
relevant reinsurances the reinsurers shall in lieu of payment to the
reassured, its successors in interest and assigns pay to the Loss
Payee specified in the primary insurances all sums payable under or
in connection with such reinsurances by virtue of any reinsured loss
of, or damage to, the Aircraft, Engines and Parts, without any
deduction or deductions whatsoever, other than any outstanding
premium in respect of the Aircraft, Engines or Parts the subject of
the claim, it being understood and agreed that any such payment by
the reinsurers shall fully
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discharge and release the reinsurers from any and all further
liability in connection therewith.
In respect of Comprehensive Airline Liability insurance as described
in Article 11.1(c) above, the reinsurers and reassured hereby agree
that in the event of any claim arising under the relevant
reinsurances, the reinsurers shall in lieu of payment to the
reassured, its successors in interest and assigns pay to the person
or party who has sustained the relevant loss (or as reimbursement of
any payment made by any Additional Assureds) all sums payable under
such reinsurances by virtue of such reinsured loss, without any
deduction or deductions whatsoever, it being understood and agreed
that any such payment by the reinsurers shall fully discharge and
release the reinsurers from any and all further liability in
connection therewith"; and
(e) provide that the reinsurers and reassured agree that in the event
that the reassured, its successors in interest and assigns shall at
any time be or become insolvent or suspend business or file a
petition in bankruptcy or be adjudicated insolvent or bankrupt or
admit in writing its inability to pay its debts as they become due,
or make a general assignment for the benefit of creditors or that a
receiver or liquidator or assignee or trustee or state commissioner
of insurance be appointed in respect of the reassured its successors
in interest or assigns or any substantial part of its property for
the purpose of liquidation on account of insolvency, then the
reinsurers, in lieu of payment to the reassured, its successors in
interest or assigns, shall pay upon demand that portion of any loss
due to the party entitled thereto under the terms of the original
insurance for which such reinsurers would under the terms of the
reinsurance be liable to pay the reassured, its successors in
interest or assigns, less any amounts already paid, it being
understood and agreed that any such direct payment by reinsurers
shall fully discharge and release the reinsurers from any and all
further liability for such payment made.
11.4 Prior to the Delivery Date and thereafter during the Term, at least five
(5) Business Days prior to the renewal date of any Insurance required or
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maintained by Lessee under Article 11.1 but in no event less than once in
each 12 month period, Lessee shall furnish or cause to be furnished to
Lessor by the insurer or insurance broker and the reinsurance broker
1) a certificate of insurance describing in detail the insurance then
carried and maintained, and certifying that such insurance complies
with the terms of this Agreement, including:
(i) confirmation that the insurance/ reinsurance has been placed
with the insurers/reinsurers required (giving the name of such
insurers reinsurers), the insured/reinsured amount and the
period of the policy and
(ii) confirmation that all premiums due to insurers/reinsurers have
been paid,
and
2) a letter of undertaking from Lessee's brokers and, if required, from
the reinsurance brokers.
Such certificate(s) of insurance and letter(s) of undertaking shall
be in form and substance satisfactory to Lessor.
In the event that Lessee shall fail to effect, maintain or cause to be
effected or maintained, insurance as required by this Article 11, Lessor,
Head Lessor, Mortgagee or the Bank may at its option, but without any
obligation to do so, and without prejudice to Lessor's, Mortgagee's, Head
Lessor's and the Bank's other rights or remedies hereunder, maintain such
insurance or provide such or a similar insurance, and, in such event,
Lessee shall, upon demand, promptly reimburse to Lessor, Head Lessor,
Mortgagee or the Bank the cost thereof, including interest thereon at the
rate referred to in paragraph 6 of Appendix D.
11.5 In the event of any damage to the Aircraft, Engines or Parts during the
Term not constituting a Casualty Occurrence, Lessee shall, if so consented
to by Lessor (such consent not to be unreasonably withheld), repair, or
cause the same to be repaired by an Authorized Maintenance Performer at
its sole cost and expense. Except as otherwise provided in Section
11.2(a)(ii), Lessor and Lessee agree that all insurance proceeds payable
in connection with any such damage shall be
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payable as provided in Article 11.2(a)(ii). In such event any
insurance proceeds received by Lessor shall be applied to reimburse
Lessee for such cost and expense. Any excess remaining shall,
unless a Default shall have occurred and be continuing, be paid
over to Lessee.
11.6 INTENTIONALLY OMITTED.
11.7 When used in this Article 11, the expression Additional Assured(s)
denotes:
(a) in relation to those insurances referred to in Article 11.2(a),
those persons referred to in subparagraph (i) of Article 11.2(a);
and
(b) in relation to those insurances referred to in Article 11.2(b),
those persons referred to in subparagraph (i) of Article 11.2(b).
12. ASSIGNMENT AND SUBLETTING
12.1 Lessee shall not assign any of its rights or obligations or delegate any
of its duties under this Agreement and, except as permitted by Article 5.1
above, Lessee shall not sublet or otherwise part with possession of the
Aircraft or any Part thereof unless previously approved by Lessor in
writing (such consent not to be unreasonably withheld). Lessee may wet
lease the Aircraft whereby the term "wet lease" shall mean an agreement
whereby Lessee at all times retains operational control of the cockpit and
the Aircraft including all of its maintenance.
12.2 This Agreement, the Aircraft and Lessor's interest in each thereof is
freely assignable and alienable by Lessor upon written notice to Lessee in
accordance with Article 12.3, provided, however, that so long as the
Aircraft shall be leased to Lessee under this Lease, Lessor will not sell,
assign, convey or otherwise transfer absolutely (and not for security) any
of its right, title, or interest in and to this Agreement or the Aircraft
to any person unless Lessor and the proposed transferee (the "Transferee")
have complied with the following conditions:
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(i) Lessor shall give Lessee written notice of such transfer at
least 3 Business Days before the date of such transfer,
specifying the name and address of the proposed Transferee;
(ii) the Transferee shall not be an airline or a commercial air
carrier or person controlling, controlled by or under common
control with an airline or a commercial air carrier which is
in direct competition with Lessee in the United States;
(iii) the Transferee shall qualify as a "citizen of the United
States" within the meaning of Section 40102(a)(15) of Title 49
of the United States Code by a Voting Trust Agreement or
otherwise; and
(iv) on the transfer date the Lessor and the Transferee shall enter
into an agreement or agreements in which the Transferee
confirms that it shall be deemed a party to this Lease and
agrees to be bound by all the terms of, and to undertake all
of the obligations of, the Lessor contained in this Agreement
and shall deliver a certificate of quiet enjoyment to Lessee
in a form and substance reasonably acceptable to it and Lessee
shall receive an opinion of counsel to the Transferee stating,
with the customary assumptions and exceptions, that such
agreement or agreements has been duly authorized, executed and
delivered and constitute the legal, valid and binding
obligations of the Transferee enforceable in accordance with
their terms and that the entry into such agreement(s) does not
violate any laws or agreements applicable to such Transferee.
The agreements, covenants, obligations and liabilities contained herein,
including but not limited to all obligations to pay Rent and indemnify
Lessor, are made for the benefit of Lessor, Beneficiary, Mortgagee,
Lender, any assignee including the Head Lessor and/or the Bank as security
assignee, and their respective successors and assigns, notwithstanding the
possibility that any such person was not originally a party to this
Agreement or may, at the time any enforcement is
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sought, no longer be a party to this Agreement. Lessee shall comply, at
Lessor's cost and expense, with all reasonable requests of Lessor, its
successors and assigns respecting the assignment and Lessee's
acknowledgment of the assignee as Lessor. Notwithstanding anything
contained in this paragraph to the contrary, no assignment of Lessor's
interest in this Agreement or the Aircraft or Beneficiary's interest in
the Trust Estate shall alter the terms of this Agreement in so far as the
costs to Lessee of the performance of its obligations to pay Rent, Reserve
Rate, and Deposits hereunder and, except as otherwise expressly provided
in this Agreement, the rights and liabilities of Lessee under this
Agreement are concerned. Lessee's rights under this Agreement shall not be
subject or subordinate to any Security Assignment or Mortgage executed by
Lessor or Beneficiary (which Security Assignment or Mortgage shall be
subject to this Agreement).
12.3 It is acknowledged and agreed that:
(a) Lessor has the right to assign all of its right, title and interest
in and to this Agreement and the Aircraft to the Head Lessor and/or
the Bank. In order to comply with its obligations in relation
thereto, Lessor will, upon such assignment, give Lessee a notice of
assignment and it is agreed that Lessee shall forthwith acknowledge
the same by executing and delivering to Lessor on behalf of Head
Lessor and/or the Bank a consent to assignment in form and substance
reasonably acceptable to Head Lessor and/or the Bank;
(b) Lessor may be required by Head Lessor and/or the Bank to assign to
Head Lessor and/or the Bank all of its rights, title and interest in
and to the Insurances (other than liability insurances). In order to
comply with its obligations in relation thereto, Lessor, upon
assignment of this Agreement pursuant to Article 12.3 (a), shall
give the insurers a notice of assignment of Insurances and the
Lessee shall procure that such insurers forthwith acknowledge the
same by executing and delivering to Lessor an acknowledgment in form
and substance acceptable to Head Lessor and/or the Bank;
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(c) Lessor may from time to time require to amend, modify or replace the
security arrangements in respect of the financing or refinancing of
the Aircraft and Lessee agrees to cooperate with Lessor in
connection therewith and, in particular (but without limiting the
generality of the foregoing), to change the plates provided for in
Article 4.3 and to execute and deliver such other or further
acknowledgments of assignment or other documents and to do such
other things as Lessor may reasonably require to be executed and
delivered;
(d) Upon any financing or refinancing of the Aircraft as contemplated by
this Article 12.3, Lessee will promptly and duly execute and deliver
to Lessor, Head Lessor, Mortgagee or Lender or the Bank such other
documents and assurances and take such further action as may from
time to time be reasonably requested in order more effectively to
carry out the intent and purpose of this Agreement, the Indenture
and the Security Assignment. Lessee will procure on request of
Lessor that the independent counsel will confirm to the Head Lessor
and the Bank that the Head Lessor and the Bank may rely on the terms
of the opinion provided pursuant to Article 2.2 as if the Head
Lessor and the Bank were each addressees of such opinion;
(e) Title to the Aircraft may be transferred by Lessor to the Head
Lessor to be indicated by Lessor or Beneficiary's interest in the
Trust Estate may be transferred by Beneficiary, in either case for
the purpose of enabling Lessor to raise finance in relation to the
Aircraft. In such event either a lease agreement shall be executed
in respect of the Aircraft between the Head Lessor and Lessor ("Head
Lease") in order to enable Lessor to continue to lease the Aircraft
to Lessee in accordance with this Agreement or Lessor may assign all
or part of its rights, title and interest in and to this Agreement
and the Aircraft to Head Lessor pursuant to Article 12.2 or
Beneficiary may assign all of its right, title and interest in and
to the Trust Estate and Lessee agrees to cooperate with Lessor in
connection therewith and, in particular (but without limiting the
generality of the foregoing), to cooperate in the execution of any
documents, agreements and
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amendments to this Agreement that are necessary in connection with
such Head Lease or such assignment and to do such other things as
Lessor may require to be executed and delivered so long as any such
amendments to this Agreement do not adversely affect Lessee; and
(f) Lessee shall not be liable to (1) any Transferee or (2) any
assignee, purchaser, or transferee of the beneficial interest of the
Trust Estate (a "Beneficiary Transferee") for any payment of Taxes
pursuant to this Agreement in excess of the amount that would have
been payable to the Lessor or the Beneficiary originally party
hereto, as the case may be, if that party had remained as the Lessor
or the Beneficiary, respectively.
13. DISCLAIMER, REPRESENTATIONS AND WARRANTIES
13.1 NONE OF LESSOR, BENEFICIARY, MORTGAGEE OR LENDER IS A MANUFACTURER OF THE
AIRCRAFT OR OTHER AIRCRAFT OR A DEALER IN SIMILAR AIRCRAFT AND HAS NOT
INSPECTED THE AIRCRAFT PRIOR TO DELIVERY TO AND ACCEPTANCE BY LESSEE.
LESSEE (I) ACKNOWLEDGES AND AGREES THAT THE AIRCRAFT IS BEING DELIVERED BY
LESSOR TO LESSEE "AS IS" AND "WHERE IS"' AND THAT NO CONDITION, WARRANTY
OR REPRESENTATION OF ANY KIND WHATSOEVER HAS BEEN OR IS GIVEN BY OR IS TO
BE IMPLIED ON THE PART OF LESSOR, BENEFICIARY, MORTGAGEE OR LENDER IN
RELATION TO THE AIRCRAFT, AND (II) HEREBY WAIVES AS BETWEEN ITSELF AND
LESSOR, BENEFICIARY, MORTGAGEE OR LENDER ALL ITS RIGHTS, EXPRESS OR
IMPLIED (WHETHER STATUTORY OR OTHERWISE), TO MAKE CLAIMS IN RESPECT OF THE
AIRCRAFT RELATING TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION, DESIGN,
OPERATION, CONFORMITY TO SAMPLES OR MODELS, COMPLIANCE WITH
SPECIFICATIONS, MERCHANTABILITY OR FITNESS OR SUITABILITY FOR USE FOR A
PARTICULAR PURPOSE OF THE AIRCRAFT OR ANY PART THEREOF, QUALITY OF THE
MATERIAL OR WORKMANSHIP, ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR
NOT DISCOVERABLE, ABSENCE OR ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR
COPYRIGHT, REMEDY IN TORT, BASED ON STRICT LIABILITY OR NEGLIGENCE, ACTUAL
OR IMPUTED, AND LESSEE HEREBY WAIVES ANY OTHER REPRESENTATION OR WARRANTY
WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT, IT BEING
UNDERSTOOD THAT ALL SUCH RISKS, AS BETWEEN LESSEE AND LESSOR, BENEFICIARY,
MORTGAGEE OR LENDER ARE TO BE BORNE BY LESSEE.
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Nothing in this Agreement shall afford Lessor or any Indemnitee any wider
or greater exclusion of liability for death or bodily injury than would be
permitted by the Governing Law.
This paragraph shall not be modified except by a written agreement signed
on behalf of Lessor and Lessee by their respective duly authorized
representatives.
13.2 Lessor and Lessee agree that this Article 13 has been the subject of
discussion and negotiation and is fully understood by the parties, and
that the amount of the Rent and other mutual agreements of the parties set
forth in this Agreement were arrived at in consideration of the provisions
of this Article 13 specifically including the waiver by Lessee set forth
in Article 13.1.
13.3 So long as no Event of Default has occurred and is continuing Lessor
agrees to assign or otherwise make available to Lessee for the duration of
the Term such rights as Lessor may have under any warranty, express or
implied, with respect to the Aircraft made by the Manufacturer of the
Aircraft, any subcontractor or supplier thereof, or any other seller
thereof, to the extent that the same may be assigned or otherwise made
available to Lessee and without warranty by Lessor as to enforceability of
any of the rights so assigned.
To the extent that the same may not be assigned or otherwise made
available to Lessee, Lessor agrees to exert its reasonable efforts, at
Lessee's expense, to enforce such rights as Lessor may have with respect
thereto for the benefit of Lessee; provided however, that upon an Event of
Default all such rights shall immediately revert to Lessor including all
claims thereunder, whether or not perfected, unless such Event of Default
has forthwith been remedied by Lessee.
13.4 Lessee represents and warrants that:
(a) Lessee is a corporation organized and existing in good standing, in
accordance with the Laws of the State of Incorporation, and has the
corporate power and authority to carry on its business as presently
conducted and to perform its obligations under this Agreement, is a
Certificated Air Carrier operating under a certificate of public
convenience and necessity issued by the Secretary of Transportation
and is the holder of all
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necessary licenses issued by all Government Entities having
jurisdiction to authorize or permit Lessee to engage in air
transportation and to perform and comply with its obligations
hereunder;
(b) This Agreement has been duly authorized by all necessary corporate
action on the part of Lessee, and neither the execution and delivery
nor the consummation of the transactions contemplated hereby nor
compliance by Lessee with the provisions of this Agreement will
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;
(c) The execution and delivery by Lessee of this Agreement, and all of
the transactions by Lessee contemplated hereby, have received, and
Lessee has complied with, every necessary consent, approval, order,
or authorization of, or registration with, or the giving of prior
notice to, any Government Entity having jurisdiction with respect to
the execution and delivery of this Agreement or the validity and
enforceability of this Agreement or the satisfaction of all monetary
and other obligations hereunder;
(d) This Agreement has been duly entered into and delivered by Lessee
and constitutes the valid, legal and binding obligations of Lessee,
enforceable in accordance with their terms subject to principles of
equity, laws relating to bankruptcy, insolvency or liquidation or
any other laws or legal procedures generally affecting the
enforcement of creditor's rights or the rights of contracting
parties;
(e) Assuming the proper deregistration of the Aircraft and any
mortgage(s) placed thereon from the Swedish aircraft registry, it is
not necessary or advisable under the Laws of the State of
Registration in order to ensure the validity,
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effectiveness and enforceability of this Agreement, the Indenture or
the Security Assignment or to protect the property rights of Lessor,
Beneficiary, Head Lessor, Mortgagee, Lender or the Bank in the
Aircraft and under the this Agreement, the Indenture and Security
Assignment that this Agreement, the Indenture, the Security
Assignment or any other instrument relating thereto be filed,
registered or recorded or that any other action be taken under the
Laws of the State of Incorporation and the State of Registration to
perfect the property rights of Lessor, Head Lessor, Mortgagee,
Lender and the Bank in the Aircraft and this Agreement other than
the filing of all such instruments with the Air Authority, the
filing of UCC-l financing statements in relevant jurisdictions, and
the Indenture and Security Assignment will have priority in all
respects over the claims of all creditors of Lessee in or against
the Aircraft, except for Permitted Liens;
(f) Under the Laws of the State of Incorporation and the State of
Registration, Lessee will not be required to make any deduction or
withholding from any payment it may make under this Agreement. There
is no withholding or other tax to be deducted from any payment to be
made by Lessee under this Agreement;
(g) There are no suits or legal proceedings (including any
administrative proceeding) pending or threatened before any court or
administrative agency against Lessee which, if adversely determined,
would have a material adverse effect upon its financial condition or
business or its ability to perform its obligations hereunder;
(h) There has been no material adverse change in the financial position
of Lessee or in the consolidated financial position of Lessee and
its subsidiaries from that set forth in the financial statements
last furnished pursuant to Article 6.4 and neither Lessee nor any of
its subsidiaries have any significant liabilities (contingent or
otherwise) which are not disclosed by, or reserved against in such
financial statements; and
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(i) The chief executive office (as such term is used in Sections 9-103
and 9-401 of the Uniform Commercial Code) of Lessee is at the date
hereof located at Chicago, Illinois, and commencing August 14,
1995 shall be located in Durham, North Carolina and Lessee agrees
to give at least 30 days' prior notice to Lessor of any relocation
of said chief executive office or place where such records are kept
and of any change in its name.
13.5 The representations and warranties in Article 13.4 (other than in clauses
(f), (g) and (h)) shall be deemed to be repeated by Lessee on and as of
each Rent Date as if made with reference to the facts and circumstances
existing on each such date.
13.6 Lessor represents, warrants and covenants that:
(a) Lessor is a national banking association duly organized and validly
existing in good standing under the laws of the United States of
America, qualifies as a "citizen of the United States" within the
meaning of Section 40102(a) (15) of Title 49 of the United States
Code and has the corporate power and authority to carry on its
business as presently conducted and to perform its obligations under
this Agreement; if at any time Lessor shall have actual knowledge
that it has ceased to qualify as such a citizen, it will, if such
citizenship is then necessary to maintain the eligibility of the
Aircraft for United States registration, take such action as may be
necessary to maintain such United States registration;
(b) This Agreement has been duly authorized by all necessary corporate
action on the part of Lessor, has been duly entered into and
delivered by Lessor in accordance with the Trust Agreement and
constitutes the valid, legal and binding obligations of Lessor,
enforceable in accordance with their respective terms subject to
principles of equity, laws relating to bankruptcy, insolvency or
liquidation or any other laws or legal procedures generally
affecting the enforcement of creditor's rights or the rights of
contracting parties;
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(c) Neither the execution and delivery nor the consummation of the
transactions contemplated hereby nor compliance by Lessor with the
provisions of this Agreement will result in any breach of, or
constitute any default under, any indenture or any 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;
and
(d) Except for the registration of the Aircraft and the issuance of the
licenses described in Article 4.1, neither the execution and
delivery nor the consummation of the transactions contemplated
hereby nor compliance by Lessor with the provisions of this
Agreement requires the consent or approval of, the giving of notice
to, or the registration with, or the taking of any other action in
respect of any Government Entity.
The representations and warranties contained in clauses (a), (b) and (c)
of this Article 13.6 are made by Lessor in its individual capacity.
13.7 Lessor undertakes that, so long as no Event of Default shall have occurred
and be continuing, Lessor will not interfere with the peaceful and quiet
use and enjoyment of the Aircraft by Lessee in accordance with the terms
of this Agreement. Lessor shall procure from Mortgagee a letter confirming
that Mortgagee shall not take or cause to be taken any action interfering
with Lessee's quiet enjoyment and use and possession of the Aircraft,
provided that no Event of Default shall have occurred and be continuing.
14. COVENANTS OF LESSEE
14.1 Lessee hereby covenants with Lessor that from the Delivery Date and during
the Term and until redelivery of the Aircraft to Lessor in accordance with
Article 16 it will:
(a) remain in and continue to operate as a Certificated Air Carrier
holding a valid certificate of public convenience and necessity
issued by the Secretary of Transportation, to preserve its corporate
existence and to satisfy its debts and obligations as they fall due;
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(b) comply with all Laws and regulations for the time being in force in
the State of Incorporation, the State of Registration and in any
country to, from, in or over which the Aircraft is flown, the
failure with which to comply is likely to have a material adverse
effect on Lessee; provided, however, that such failure shall have no
adverse effect on the Aircraft or on the interests of Lessor,
Mortgagee, Lender, Head Lessor or the Bank therein or in this
Agreement or on the Insurances required to be maintained pursuant to
Article 11;
(c) (i) at its own expense from time to time do and perform such other
and further acts and execute and deliver any and all further
instruments as may be required by Law (in the United States but not
in any jurisdiction outside the United States unless directly
required due to Lessee's operation), and (ii) at Lessor's expense
(insofar as not covered in Article 8.2(a)) from time to time do and
perform such other and further acts and execute and deliver any and
all further instruments as may be reasonably requested by Lessor to
establish, maintain and protect the respective rights and remedies
of Lessor, Head Lessor and the Bank and to carry out and give effect
to the intents and purposes of this Agreement and the parties;
(d) notify Lessor immediately of the occurrence of any Default;
(e) obtain and maintain all necessary government and other certificates,
consents, licenses, permits and authorizations and take all action
which may be necessary for the continued due performance of Lessee's
obligations under this Agreement and for the use and operation of
the Aircraft;
(f) not do or permit to be done any act or thing which might impair the
respective interests of Lessor, Head Lessor, Mortgagee, Lender and
the Bank in the Aircraft, or the registration of the Aircraft;
(g) notify Lessor as soon as practicable after becoming aware of any
loss, theft, damage or destruction of or to the Aircraft or any part
thereof if the potential cost of repair or replacement is likely to
exceed $100,000.00 (Dollars One Hundred Thousand);
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(h) not do anything which is likely to subject the Aircraft or any part
thereof to penalty, forfeiture, seizure, arrest, impounding,
detention, confiscation, taking in execution, appropriation or
destruction nor abandon the Aircraft or any part thereof;
(i) not represent or hold out Lessor, Head Lessor, Mortgagee, Lender or
the Bank as carrying goods or passengers on the Aircraft or as being
in any way connected or associated with any operation or carriage
(whether for hire or reward or gratuitously) which Lessee may
undertake;
(j) not pledge the credit of Lessor, Head Lessor or the Bank for any
maintenance, overhauls, replacements, repairs or modifications to
the Aircraft;
(k) keep Lessor and the insurers, as referred to in Article 11, informed
as to current serial numbers of the Engines and any engine installed
on the Aircraft in accordance with the provisions of this Agreement,
and the location of any Engine for the time being not installed on
the Aircraft; and shall notify such insurers of any renewal,
replacement or substitution, or the location of any Engine not
installed on the Aircraft;
(l) discharge all fees, charges and expenses payable to any third party
in relation to the use or operation of the Aircraft or any premises
where the Aircraft is situated;
(m) in the event of any forfeiture, impounding or detention of the
Aircraft or any part thereof not constituting a Casualty Occurrence,
use all reasonable endeavors to procure the immediate release
therefrom of the same;
(n) keep accurate, complete and current records of all flights made by
the Aircraft. Such records shall be kept in such manner as the Air
Authority may from time to time require and in accordance with the
Approved Maintenance Program. Lessee shall permit Lessor or its
authorized representatives to examine such records upon giving
reasonable notice not involving delay to the Aircraft and, subject
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to the terms of Article 7.5.3, at the expense of Lessor or such
person, to copy such records;
(o) on request, provide Lessor with evidence satisfactory to Lessor that
all Taxes and charges incurred by Lessee with respect to the
Aircraft, including without limitation any payments due to any
relevant air traffic control authorities and airport authorities,
have been paid and discharged in full or duly provided for; and
(p) not consolidate with, or merge into, any other corporation, convey,
transfer or lease substantially all of its assets as an entirety to
any person without the prior written consent of Lessor (such consent
not to be unreasonably withheld) and the execution and delivery to
Lessor of such agreements, certificates and legal opinions as Lessor
may request with respect thereto.
15. DEFAULT BY LESSEE
15.1 Each of the following events shall constitute an "Event of Default":
(a) if default shall be made by Lessee in the making of any Rent,
Reserve Rate, or Supplemental Rent payment within five (5) Business
Days after the date when such payment is due and payable under this
Agreement; or
(b) (i) if default shall be made by Lessee at any time in the
procurement or maintenance of any insurance coverage prescribed
herein or (ii) any insurance which may be maintained by Lessor, Head
Lessor, Mortgagee, Lender or the Bank under Article 11.4 is canceled
or terminated or notice of cancellation is given; or
(c) if default shall be made by Lessee in the observance or performance
of any of the other obligations of Lessee contained in this
Agreement and, if such default is in the opinion of Lessor capable
of remedy, such default shall continue for a period of fifteen (15)
Business Days after notice from Lessor to Lessee specifying the
default and requiring that the same be remedied; or
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(d) if any representation or warranty made (or deemed to be repeated) by
Lessee in or pursuant to this Agreement or in any document or
certificate or statement referred to in or delivered under this
Agreement is or proves to have been incorrect in any material
respect when made or deemed to be repeated and such incorrectness,
if capable of being cured, shall continue for fifteen (15) Business
Days after notice from Lessor specifying such incorrectness; or
(e) if any borrowed money of Lessee or any of its subsidiaries having an
outstanding principal amount in excess of $4,000,000 (Dollars Four
Million) is not paid when due, or by reason of breach or default
under the terms of any instrument evidencing or guaranteeing the
same on the part of Lessee or any of its subsidiaries any such
borrowed money having an outstanding principal amount in excess of
$4,000,000 of Lessee or any of its subsidiaries becomes due or
capable of being declared due prior to the date when it would
otherwise have become due, or the security for any such borrowed
money or any guarantee in respect thereof becomes enforceable; or
(f) if an encumbrancer takes possession or a receiver, administrator,
administrative receiver, trustee, liquidator or similar officer is
appointed of the whole or any substantial part of the assets, rights
or revenues of Lessee or any of its subsidiaries or a distress,
execution, sequestration or other process is levied or enforced upon
or sued out against all or a substantial part of the assets, rights
or revenues of Lessee or any of its subsidiaries and is not
discharged within fourteen days, or Lessee applies for or consents
to the appointment of a receiver, administrator, administrative
receiver, trustee, liquidator or similar officer for it or for all
or any part of its assets, rights or revenues; or
(g) if Lessee or any of its subsidiaries suspends payment of its debts,
or is unable or admits its inability to pay its debts as they fall
due, or shall be adjudicated or found, or becomes, bankrupt or
insolvent, or proposes or enters into any composition or other
arrangement for the benefit of its creditors generally, or Lessee or
any
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of its subsidiaries shall, by voluntary petition, answer or consent,
seek relief under the provisions of any bankruptcy, insolvency or
other similar law providing for the reorganization, liquidation,
administration, dissolution or winding-up of corporations, or
providing for an agreement, composition, extension or adjustment
with its creditors; or
(h) if a petition against Lessee in a proceeding under applicable
bankruptcy or other insolvency laws shall be filed and shall not be
withdrawn or dismissed within 30 days thereafter, or if any order
shall be made by any competent court or resolution passed by Lessee
or any of its subsidiaries or their respective board of management
or supervisory board, whichever is competent to pass such resolution
for the winding-up or dissolution of Lessee or any of its
subsidiaries or for the appointment of a liquidator, trustee or
conservator, save for winding-up or dissolution for the purposes of
amalgamation or reorganization (not involving or arising out of
insolvency) the terms of which shall have received the prior written
approval of Lessor; or
(i) if Lessee or any of its subsidiaries disposes of all or a material
part of its assets, whether by one or a series of transactions,
related or not, other than for the purpose of a reconstruction or
amalgamation the terms of which have received the previous consent
in writing of Lessor; or
(j) if any action shall be taken by Lessee which shall impair the title
or ownership of Lessor (or Head Lessor), or the Security Interest of
the Mortgagee (or the Bank), in the Aircraft or this Agreement is or
becomes wholly or partly invalid, ineffective or unenforceable by
reason of any act or omission of Lessee; or
(k) if any consent, authorization, license, certificate or approval of
or registration with or declaration to any Government Entity in
connection with this Agreement including, without limitation:
(i) any Certificate of Public Convenience and Necessity; or
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(ii) required by Lessee or as a condition precedent required by
Lessor pursuant to Article 2.3 to authorize, or in connection
with, the execution, delivery, validity, enforceability or
admissibility in evidence of this Agreement or the performance
by Lessee of its obligations under this Agreement; or
(iii) the registration of the Aircraft; or
(iv) any airline license or air transport license;
is changed such that it materially impairs the ability of Lessee to
perform its obligations hereunder, or is withheld, or is revoked,
suspended, canceled, withdrawn, terminated or not renewed, or
otherwise ceases to be in full force; or
(m) if any circumstances analogous to any of the circumstances described
in paragraphs (f), (g) or (h) above arise under the Law of any
applicable jurisdiction; or
(n) if an event of default (however defined) occurs under any of the
Other Aircraft Agreements which event permits acceleration or
termination.
15.2 If one or more Events of Default shall have occurred and be continuing, at
Lessor's option and subject to any mandatory requirement of Law:
(a) For Lessee's account Lessor may do anything that may reasonably be
required to cure any Event of Default and recover from Lessee all
costs including legal expenses incurred in so doing, and/or
(b) Lessor may accept such Event of Default as a repudiation of this
Agreement and terminate the lease of the Aircraft to Lessee
hereunder by:
(i) serving notice of such termination on Lessee specifying the
occurrence giving rise to such Event of Default or Events of
Default, provided that such notice shall be deemed to have
been served without the necessity of actual service upon the
occurrence of any
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Event of Default described in paragraphs (f), (g) and (h) of
Article 15.1.
Thereafter (if the Term shall have commenced) Lessee shall
redeliver possession of the Aircraft to Lessor at Schiphol
Airport, The Netherlands (or such other location as Lessor may
require); or (at Lessor's election)
(ii) taking possession of the Aircraft for which purpose Lessor by
its servants or agents may enter upon Lessee's premises where
the Aircraft may be located, or cause the same to be
redelivered to Lessor at Schiphol Airport, The Netherlands,
(or such other location as Lessor may require Lessee to
assemble and deliver the Aircraft to Lessor, and Lessor shall
be entitled to act as attorney for Lessee in causing such
redelivery and shall have all the powers and authorizations
legally necessary for taking such action. In the event of
exercise by Lessor of its powers under this sub-paragraph (ii)
such termination shall be deemed to take effect on such taking
of possession by Lessor or such redelivery of the Aircraft to
Lessor at the said airport; and/or
(c) Lessor may proceed by appropriate court action or actions to enforce
performance of Article 15.2(b) or to recover damages for the breach
thereof; and/or
(d) all rights of Lessee hereunder shall, in the event the Term shall be
terminated pursuant to Article 15.2(b) henceforth absolutely cease
and terminate but without prejudice to Lessee's obligations under
this Agreement all of which shall continue in full force and effect
except for obligations to pay Rent and Reserve Rate after the
Aircraft is returned to Lessor, and is in the condition required by
Article 16; and Lessee shall take all steps necessary to effect
deregistration of the Aircraft in the State of Registration and
Lessor shall be entitled to sell or otherwise deal with the Aircraft
as if this Agreement had never been made. Without prejudice to the
foregoing, Lessee hereby appoints Lessor as its attorney to do any
act or thing required in connection with such deregistration of the
Aircraft.
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15.3 If an Event of Default occurs, Lessor shall have the right to demand that:
(a) Lessee pay all amounts which may be then due and unpaid hereunder,
and
(b) at Lessor's option whether or not Lessor shall have exercised, or
shall thereafter at any time exercise, any of its rights under
Article 15.2, by thirty (30) days written notice to Lessee from
Lessor specifying a payment date, Lessee pay Lessor, and Lessee
shall pay Lessor, on the payment date specified in such notice, as
liquidated damages for loss of bargain and not as a penalty (in lieu
of the Rent due for the Aircraft covered by such notice for the
period commencing after the date specified for payment in such
notice), any unpaid Rent for the Aircraft (prorated in the case of
Rent on a daily basis) to and including the payment date specified
in such notice, plus the amount, if any, by which the aggregate Rent
for the Aircraft for the remainder of the Term for the Aircraft,
discounted periodically (equal to installment frequency) to present
worth at the interest rate of six percent (6%) per annum, exceeds
the Fair Market Rental Value of the Aircraft for the remainder of
the Term, after discounting such Fair Market Rental Value
periodically (equal to installment frequency) to present worth as of
the payment date specified in such notice at the interest rate of
six percent (6%) per annum.
Lessee shall fully indemnify Lessor on its own behalf and on behalf of the
Beneficiary, Mortgagee, Lender, Head Lessor and the Bank on demand against
any loss (including loss of profit), damage, expense (including without
limitation attorneys' fees), cost or liability which Lessor, Beneficiary,
Mortgagee, Lender, Head Lessor or the Bank may sustain or incur as a
consequence of the occurrence of any Event of Default and/or termination
of the letting of the Aircraft pursuant to this Agreement, including but
not limited to (i) any loss of profit suffered by Lessor and/or the Head
Lessor because of Lessor's inability to place the Aircraft on lease with
another lessee on terms as favorable to Lessor as the terms of this
Agreement or because whatever use, if any, to which Lessor is able to put
the Aircraft upon its return to Lessor, or the
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funds arising upon a sale or other disposal thereof, is not as profitable
to Lessor as letting the Aircraft in accordance with the terms of this
Agreement would have been to the extent the foregoing loss of profit shall
not be recovered under Article 15.3(b), (ii) any amount of interest, fees
or other sums whatsoever paid or payable on account of funds borrowed in
order to carry any unpaid amount, (iii) any loss, premium, penalty or
expense which may be incurred repaying funds raised to finance the
Aircraft or in unwinding any swap, forward interest rate agreement or
other financial instrument relating in whole to Lessor's financing of the
Aircraft and/or the Aircraft under the Other Aircraft Agreement, and (iv)
any loss, cost, expense or liability sustained or incurred by Lessor owing
to Lessee's failure to redeliver the Aircraft in the condition required by
this Agreement.
15.4 No remedy referred to in this Article 15 is exclusive, but each remedy
shall be cumulative and in addition to any other remedy referred to herein
or otherwise available to Lessor. The exercise by Lessor of any of its
remedies hereunder shall not preclude or estop the exercise or beginning
of exercise by Lessor of any or more of such other remedies.
No express or implied waiver by Lessor of any Event of Default, or failure
or delay of Lessor in exercising any right hereunder shall operate as
waiver thereof unless an express waiver is executed and delivered to
Lessee.
15.5 Prior to the Delivery Date Lessee shall deliver to Lessor a duly
authorized consent, undated and in form and substance acceptable to
Lessor, addressed to the Federal Aviation Administration consenting to the
release of this Agreement in connection with the termination of this
Agreement pursuant to the terms hereof and, if so requested by Lessor, the
deregistration of the Aircraft from the register of civil aviation in the
State of Registration.
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16. RETURN OF AIRCRAFT
16.1 On the Expiry Date or upon earlier termination of the Term (unless a
Casualty Occurrence shall have occurred with respect to the Aircraft),
Lessee shall, at its own expense, redeliver the Aircraft to Lessor at the
Re-Delivery Location or such other airport as is mutually acceptable to
the parties, in a condition complying with the provisions of Appendix E,
free and clear of all liens and encumbrances (including Permitted Liens
other than Lessor Liens) and thereupon cause the Aircraft to be removed
from the Register of Civil Aircraft in the State of Registration and
Lessee shall return the Aircraft to Lessor together with the Aircraft
Documents and all equipment and records supplied pursuant to this
Agreement when the Aircraft was delivered to Lessee hereunder.
16.2 Immediately prior to such redelivery of the Aircraft, Lessee, at its own
expense, shall make the Aircraft, Aircraft Documents and other records
available to Lessor for inspection ("Final Inspection") in order to verify
that the condition of the Aircraft complies with the provisions of this
Agreement. Such inspection shall not unreasonably interfere with the
operation of the Aircraft. The period will be long enough for the Final
Inspection to permit the conduct by Lessor of the following:
(a) Inspection of the Aircraft Documents;
(b) Inspection of the Aircraft structure and Parts;
(c) Inspection of the Engines and Auxiliary Power Unit ("A.P.U."),
including without limitation, a boroscope inspection or any other
equivalent inspection method supported by Rolls Royce, inspection of
the compressor and turbine area, and, if reasonably requested based
on evidence that it is required, the Engine and A.P.U. condition
runs confirming release of each Engine and A.P.U for its remaining
operational life;
(d) A one-hour to two-hour test flight with Lessor's representatives on
board as observers and, if any non compliance is found, a subsequent
test flight to check compliance after rectification.
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16.3 To the extent that, upon such Final Inspection, the condition of the
Aircraft and Aircraft Documents does not comply with the provisions of
this Agreement, Lessee, at its own expense, shall cause such noncompliance
to be promptly rectified and to the extent such rectification extends
beyond the Expiry Date, the Term shall, at Lessor's sole option, be deemed
to be automatically extended and the provisions of this Agreement shall
remain in full force and effect until such rectification has been
accomplished. During such extension of the Term the Lessee shall be liable
to pay Rent at a daily pro rata rate equal to the Rent payable during the
last Rental Period of the Term.
16.4 Upon redelivery Lessee shall provide to Lessor all necessary assistance to
enable Lessor to obtain any required documents in relation to the export
of the Aircraft from the State of Registration, and if different, from the
State of Incorporation (including a valid and subsisting export license
for the Aircraft), and shall reassign to Lessor, at the expense of Lessee,
the benefit of any indemnity or warranty which has been assigned to Lessee
pursuant to Article 13.3 above to the extent such indemnity or warranty is
assignable.
16.5 Prior to the Expiry Date or upon any earlier termination of the Term and
upon Lessor's request, Lessee will provide Lessor or its agent reasonable
access to the Approved Maintenance Program and the Aircraft Documents in
order to facilitate the Aircraft's integration into any subsequent
operator's fleet.
Lessee will, if requested by Lessor to do so, upon return of the Aircraft
deliver to Lessor a certified true current and complete copy of the
Approved Maintenance Program. Lessor agrees that it will not disclose the
contents of the Approved Maintenance Program to any person or entity
except to the extent necessary to monitor Lessee's compliance with this
Agreement and/or to bridge the maintenance program for the Aircraft from
the Approved Maintenance Program to another program.
16.6 Upon redelivery of the Aircraft to Lessor, an adjustment shall be made in
respect of fuel on board on the Delivery Date and on redelivery at the
price then prevailing at the Redelivery Location.
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16.7 If Lessor shall request that Lessee paint the Aircraft any other basic
color as contemplated by Section 1(h) of Appendix E, Lessor agrees that it
shall bear the cost and expense of the difference between white paint and
such other basic color.
16.8 Upon written request of Lessor given to Lessee not later than thirty (30)
days prior to the Expiry Date or termination of the Lease, Lessee, at the
Expiry Date or upon termination of the Lease, will provide, or will cause
to be provided, up to thirty (30) days' storage of the Aircraft at
Lessee's premises, at Lessor's cost and expense. During such period of
storage, Lessee will arrange for insurance and maintenance at Lessor's
cost and expense. Lessee shall allow Lessor or any representatives of any
prospective purchaser or user of the Aircraft to inspect the same at all
reasonable times.
17. CASUALTY OCCURRENCES
17.1 In this Agreement "Casualty Occurrence" shall mean any of the following
events with respect to the Aircraft, the Airframe or an Engine:
(a) the actual, agreed, constructive, arranged or compromised total loss
or destruction of the Aircraft, the Airframe or an Engine, or damage
to the Aircraft, Airframe or Engine rendering repair impracticable
or uneconomical, or the Aircraft, Airframe or Engine being rendered
permanently unfit for normal use;
(b) requisition of title or other compulsory acquisition, requisition,
capture, seizure, deprivation, confiscation or detention for any
reason of the Aircraft, the Airframe or an Engine by any Government
Entity of the State of Registration or by any other government or
other competent authority, whether de jure or de facto, but
excluding requisition for use or hire not involving requisition of
title by any Governmental Entity for a temporary period ending on
the date fifteen (15) days (or the Expiry Date) if the requisition
for use or hire is by the United States) after such requisition, or
the Expiry Date, whichever first occurs; and
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(c) the hijacking, theft, disappearance, condemnation, confiscation or
seizure of the Aircraft, the Airframe or an Engine other than in the
circumstances referred to in (b) above which deprives Lessee of the
use thereof for more than fifteen (15) consecutive days.
17.2 (a) In the event of a Casualty Occurrence with respect to the Aircraft
or Airframe prior to the Delivery Date, this Agreement shall
immediately terminate with respect to such Aircraft and neither
party shall have any further obligation or liability hereunder, save
that Lessor shall return to Lessee the Deposit or such part thereof
as Lessor shall have received from Lessee and Lessee shall remain
liable to reimburse Lessor for any amounts specified in Article
8.2(a).
(b) In the event of a Casualty Occurrence with respect to the Aircraft
or Airframe after delivery to Lessee hereunder, Lessee shall pay the
Agreed Value to Lessor on or prior to the earlier of (i) 45 days
after the Casualty Occurrence and (ii) the Business Day after the
date of receipt of the insurance proceeds in respect of the Casualty
Occurrence and, provided all other amounts which are then due and
payable by Lessee under this Agreement have been paid in full to
Lessor, Lessee's obligation hereunder for payment of Rent shall
cease as from the date on which Lessor receives payment in full of
the Agreed Value. Rent paid in advance for any days which occur
after such Agreed Value is paid shall be repaid to Lessee, so long
as no Default has occurred and is continuing, on a pro rata basis
for each day beyond such date of payment of Agreed Value. Any excess
insurance proceeds from the insurance obtained by Lessee pursuant to
Article 11 remaining after payment of the foregoing amounts shall,
unless a Default shall have occurred and be continuing, be paid over
to Lessee.
(c) Subject to the rights of any insurers and reinsurers or other third
party, upon irrevocable payment in full to Lessor of the Agreed
Value and all other amounts which may be or become payable to Lessor
under this Agreement, Lessor will without recourse or warranty
(except as to title and Lessor's Liens) and without further act, be
deemed to have transferred to Lessee all of
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Lessor's rights to any Engines and Parts not installed when the
Casualty occurrence occurred, all on an as-is where-is basis, and
will at Lessee's expense, execute and deliver such bills of sale and
other documents and instruments as Lessee may reasonably request to
evidence (on the public record or otherwise) the transfer and the
vesting of Lessor's rights in such Engines and Parts in Lessee, free
and clear of all rights of Lessor and Lessor Liens.
17.3 Upon the Casualty Occurrence with respect to any Engine not involving a
Casualty Occurrence of the Aircraft, Lessee shall give Lessor prompt
written notice thereof and Lessee shall replace such Engine as soon as
reasonably possible with a replacement Engine in accordance with Article
5.1.2(a). Such replacement shall be deemed an "Engine" as defined herein.
Lessee agrees to take such action as Lessor may reasonably request in
order that any such replacement Engine shall be duly and properly titled
in Lessor or the Bank and leased hereunder and subject to the Mortgage to
the same extent as the Engine replaced thereby. Lessee's obligation to pay
the Rent hereunder shall continue in full force and effect, but Lessee
shall be entitled to be reimbursed by Lessor the amount of insurance or
condemnation proceeds, if any, received by Lessor with respect to such
replaced Engine.
17.4 In the event of requisition for hire of the Aircraft any part thereof not
constituting a Casualty Occurrence, then, subject to the proviso herein
contained, the Rent and other charges payable under this Agreement shall
not be suspended or abated either in whole or in part, and Lessee shall
not be released from any of its other obligations (as to payment,
indemnity or otherwise) hereunder (other than operational obligations with
which Lessee is unable to comply solely by virtue of such confiscation or
requisition).
If Lessee shall duly comply with all its obligations under this Agreement,
Lessee shall during the Term be entitled to any hire paid by the
requisitioning or confiscating authority and Lessee shall, as soon as
practicable after the end of any requisition or confiscation, cause the
Aircraft to be put into the condition required by this Agreement. Lessor
shall be entitled to all compensation payable by the requisitioning or
confiscating authority in respect of
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any change in the structure, state or condition of the Aircraft arising
during the period of requisition or confiscation, and Lessor shall apply
such compensation in reimbursing Lessee for the cost of complying with its
obligations as aforesaid, but so that, if any Default has occurred and is
continuing, Lessor shall be entitled to apply such compensation in or
towards settlement of any amounts owing by Lessee under this Agreement
PROVIDED ALWAYS that if following such requisition or confiscation the
Aircraft is treated as an agreed, constructive, arranged or compromised
total loss by the insurers, then the provisions of Article 17.1 shall
apply with effect from the date on which the insurer so determines.
18. GOVERNING LAW AND JURISDICTION
18.1 This Agreement and further agreements resulting herefrom shall be governed
by and construed in accordance with the internal Laws of the State of New
York and without regard to any conflict of law rules. This Agreement is
being delivered in the State of New York.
18.2 Lessor and Lessee hereby irrevocably agree to submit to the non-exclusive
jurisdiction of, and to waive any objection to the laying of venue in, the
County of New York and that any suit, action or proceedings (collectively,
"Proceedings") may be brought by Lessor in any court of the State of New
York or any U.S. Federal court located in New York County, New York.
18.3 Nothing contained in this Article 18 shall limit the right of either party
to this Agreement to take Proceedings against the other in any other court
of competent jurisdiction, nor shall the taking of Proceedings in one or
more jurisdictions preclude the taking of Proceedings in any other
jurisdiction, whether concurrently or not.
18.4 Promptly after service of any process the Lessor or Lessee shall dispatch
a copy thereof to Lessee or Lessor, as the case may be, by registered
mail, postage prepaid but failure of Lessee or Lessor, as the case may be,
to receive such copy shall not invalidate the service of such process.
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18.5 To the extent that the parties may in any jurisdiction claim for their or
their assets immunity from suit, execution, attachment (whether in aid of
execution, before judgment or otherwise) or other legal process and to the
extent that in any such jurisdiction there may be attributed to themselves
or their assets such immunity (whether or not claimed) the parties hereby
irrevocably agree not to claim and hereby irrevocably waive any immunity
to the fullest extent permitted by the laws of such jurisdiction with the
intent, inter alia, that the foregoing waiver shall have effect for the
purposes of the Foreign Sovereign Immunities Act of 1976 of the United
States of America.
18.6 Lessee and Lessor shall each at all times maintain an agent for service of
process in the New York, New York. For Lessee, such agent shall be Paul,
Hastings, Janofsky & Walker, Attn: John Howitt, Esq., 399 Park Avenue, New
York, NY 10022-4697. For Lessor, such agent shall be Haight, Gardner, Poor
& Havens, Attn: Bonny L. Y. Kwoh, 195 Broadway, New York, NY 10007. Any
writ, judgment or other notice of legal process shall be sufficiently
served on Lessee or Lessor if delivered to such agent at its address for
the time being. Each of Lessee and Lessor undertakes that if it shall
revoke the authority of its above agent or if for any reason any such
agent no longer serves as agent to receive service of process, Lessee or
Lessor, as the case may be, shall promptly appoint another such agent and
advise Lessor or Lessee, as the case may be, thereof.
19. MISCELLANEOUS
19.1 The rights of each of Lessor and Lessee under this Agreement are
cumulative, may be exercised as often as it considers appropriate and are
in addition to its rights under general law. The rights of Lessor against
the Lessee or in relation to the Aircraft (whether arising under this
Agreement or the general law) shall not, as against or in favor of Lessor,
be capable of being waived or varied otherwise than by an express waiver
or variation in writing; and in particular any failure to exercise or
delay in exercising any of such rights shall not operate as a waiver or
variation of any other such right; and defective or partial exercise of
any such rights shall not preclude any other or further exercise of that
or any other such right; and no act or course of conduct or negotiation on
Lessor's
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part or on Lessor's behalf shall in any way preclude Lessor from
exercising any such right or constitute a suspension or any variation of
any such right.
19.2 Save where expressly provided in this Agreement, any certificate or
determination by Lessor as to any rate of interest or as to any other
amount payable under this Agreement shall, in the absence of manifest
error, be conclusive and binding on Lessee.
19.3 If any sum paid or recovered in respect of the liabilities of Lessee under
this Agreement is less than the amount then due, Lessor may apply such sum
to rental, interest, fees or any other amount due under this Agreement in
such proportions and order and generally in such manner as Lessor shall
determine.
19.4 The terms and conditions of this Agreement shall not be varied otherwise
than by an instrument in writing executed by or on behalf of Lessor and
Lessee.
19.5 If any of the provisions of this Agreement becomes invalid, illegal or
unenforceable in any respect under any law, the validity, legality and
enforceability of the remaining provisions shall not in any way be
affected or impaired.
19.6 Every notice, request, demand or other communication under this Agreement
shall:
(a) be in English;
(b) be in writing and made by mail or by fax or telex transmission or by
reputable courier service;
(c) be deemed to have been received, subject as otherwise provided in
this Agreement, in the case of a telex transmission, at the time of
dispatch with confirmed answerback of the addressee appearing at the
beginning and the end of the communication, in the case of a fax
transmission, at the time safe receipt is confirmed by the addressee
provided that if the date of dispatch is not a business day in the
country of the addressee any telex or fax transmission shall be
deemed to have been received at the opening of business on the next
such business day, in the case of a letter five days after being
deposited in the mail first class postage prepaid and in the case of
a courier three days after being sent; and
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(d) be sent:
(1) to Lessee at:
Midway Airlines Corporation
300 W. Morgan St.
Durham, North Carolina 27702
Tel: (919) 956-4800
Fax: (919) 956-4801
Attention: President
(2) to Lessor at:
First Security Bank of Utah, N.A.
79 South Main Street
Salt Lake City, Utah 84130-0007
Tel: (801) 246-5630
Fax: (801) 246-5053
Attention: Corporate Trust Department
with a copy to FAUSA at:
1199 N. Fairfax Street, Suite 500
Alexandria, VA 22314
Fax: (703) 683-2233
Attention: The President
with a copy to Beneficiary at:
Stockholm Aircraft Finance III, B.V.
Hoogoorddreef 15
Post Office Box 12222
1100 AE Amsterdam Zuidoost
The Netherlands
Attention: Vice President-Contracts
Fax: 31-20-605-7036.
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or to such other address or telex or fax number as is notified by either
party to the other party to this Agreement.
19.7 This Agreement may be executed in any number of counterparts and all of
such counterparts taken together shall be deemed to constitute one and the
same instrument.
19.8 This Agreement is the sole and entire agreement between Lessor and Lessee
in relation to the leasing of the Aircraft, and supersedes all previous
agreements in relation to such leasing. Each of Lessee and Lessor
represents for itself that no broker has been retained by it in connection
with this Agreement.
19.9 This Agreement is intended by the parties to be a lease between Lessor and
Lessee. Any waivers, consents, deferrals of the payment of Rent or Reserve
Rates are not intended to be an agreement by Lessor to make any capital
contribution to the business of Lessee or to share in or have liability
for any of Lessee's losses, profits, liabilities or obligations. Nothing
contained in this Agreement or performed by Lessor in connection herewith
and any other agreement between Lessor and Lessee whether now existing or
entered into in the future shall make Lessor a partner or a joint venturer
of Lessee and shall not for any purpose be construed as a joint-venture
between the parties hereto.
19.10 Intentionally Omitted.
19.11 Section 1110: Lessee acknowledges that Lessor would not have entered into
this Agreement unless it had available to it the benefits of a lessor
under Section 1110 of Title 11 of the United States Code. Lessee and
Lessor hereby state that this Agreement is intended to be a true lease for
U.S. Internal Revenue Code purposes. Lessee covenants and agrees with
Lessor that to better ensure the availability of such benefits, Lessee
shall support any motion, petition or application filed by Lessor with any
bankruptcy court having jurisdiction over Lessee, whereby Lessor seeks
recovery of possession of the Aircraft under said Section 1110 and shall
not in any way oppose such action by Lessor unless Lessee shall have
complied with the requirements of said Section 1110 to be fulfilled in
order to entitle Lessee to continued use and possession of the Aircraft
hereunder. In the event said Section 1110 is amended, or if it is repealed
and
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another statute is enacted in lieu thereof, Lessor and Lessee agree to
amend this Agreement and take such other action not inconsistent with this
Agreement as Lessor reasonably deems necessary so as to afford to Lessor
the rights and benefits as such amended or substituted statute confers
upon owners and lessors of aircraft similarly situated to Lessor.
19.12 First Security Bank of Utah, N.A. ("FSBU") is entering into this Agreement
solely as trustee under the Trust Agreement and not in its individual
capacity and in no case whatsoever shall FSBU (or any entity acting as
successor trustee under the Trust Agreement) be personally liable on, or
for any loss in respect of, any of the statements, representations,
warranties, agreements or obligations of Lessor hereunder as to all of
which the other party hereto agrees to look solely to the Trust Estate,
except for any loss caused by FSBU's own willful misconduct or gross
negligence. FSBU warrants that the Aircraft shall be free of liens
attributable to FSBU in its individual capacity which do not arise from
its actions as lessor under this Agreement and that it shall be personally
liable to Lessee for any Claim against Lessee in respect of any
statements, representations, warranties, agreements or obligations
contained herein which are expressly made in its individual capacity.
19.13 As between Lessor and Lessee, if Lessee fails to make any payment of Rent
or Reserve Rate required to be made by it hereunder or fails to perform or
comply with any of its agreements contained herein, Lessor may itself make
such payment or perform or comply with such agreement, and the amount of
such payment and the amount of the reasonable and properly documented
expenses of Lessor incurred in connection with such payment or the
performance of or compliance with such agreement, as the case may be,
together with interest thereon at the interest rate defined in Appendix D,
Article 6, shall be deemed Supplemental Rent, payable by Lessee upon
demand.
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IN WITNESS whereof the parties have executed this Agreement the day and year
first herein written.
SIGNED on behalf of SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A. MIDWAY AIRLINES CORPORATION
not in its individual
capacity, except as
expressly set forth
herein, but solely
as owner trustee
By: /s/ [ILLEGIBLE] By:
- ------------------------------------- -----------------------------------
Its: Asst. Vice President Its:
-----------------------------------
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IN WITNESS whereof the parties have executed this Agreement the day and year
first herein written.
SIGNED on behalf of SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A. MIDWAY AIRLINES CORPORATION
not in its individual
capacity, except as
expressly set forth
herein, but solely
as owner trustee
By: By: /s/ J. S. Waller
- ------------------------------------- -----------------------------------
Its: Its: Senior Vice President
---------------------------------
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APPENDIX A
DESCRIPTION OF AIRCRAFT
-----------------------
Number
------
of
--
Manufacturer Model Serial No. Engines Engines
- ------------ ----- ---------- ------- -------
Fokker P28 MK0100 11323 Rolls Royce Two
Tay MK 650-15
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APPENDIX B
FURTHER DEFINITIONS AND VALUES*
[*Intentionally omitted for FAA filing purposes. The parties deem information
contained to be confidential financial information.]
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APPENDIX C
CERTIFICATE OF ACCEPTANCE
This Certificate of Acceptance is delivered, on and as of the date set forth
below, by Midway Airlines Corporation (herein referred to as "Lessee") to First
Security Bank of Utah, N.A., not in its individual capacity but solely as
trustee, (herein referred to as "Lessor") pursuant to that Aircraft Operating
Lease Agreement No. 524 dated as of August 1, 1995 between Lessor and Lessee
(herein referred to as the "Agreement"):
1. Details of Acceptance
Lessee hereby indicates and confirms to Lessor, its successors and
assigns, that the Lessee has at ______ o'clock on this ______ day of
______ 1995 at _________ accepted the following from Transwede and
concurrently therewith from Lessor, in accordance with the provisions of
the Agreement:
(a) Fokker 100 airframe, Manufacturer's Serial Number 11323.
(b) Rolls Royce Tay Mk 650-15 Engines (each of which engines has 750 or
more rated takeoff horsepower).
Engine Number Manufacturer's S/N
1. 17290
2. 17291
(c) Fuel Status: ______ kilos; ______ litres
(d) Loose Equipment Check List: as per list inserted or referred to, as
the case may be, in Section 11 of Appendix E of the Agreement.
2. Confirmation of Undertakings
The terms used in this Certificate shall have the meanings given to such
terms in the Agreement.
The Lessee confirms that today being the Delivery Date as defined in the
Agreement:
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(i) the Aircraft is duly accepted by the Lessee in accordance with and
subject to the provisions of the Agreement and the execution and
delivery of this Certificate constitutes the acceptance of the
Aircraft by the Lessee for all purposes of the Agreement. DELIVERY
BY LESSEE TO LESSOR OF THIS CERTIFICATE OF ACCEPTANCE SHALL
CONSTITUTE CONCLUSIVE PROOF AS BETWEEN LESSOR AND LESSEE THAT ON THE
DELIVERY DATE LESSEE'S TECHNICAL EXPERTS EXAMINED AND INVESTIGATED
THE AIRCRAFT AND EVERY PART THEREOF ARE AIRWORTHY AND IN GOOD
WORKING ORDER AND REPAIR, WITHOUT DEFECT WHETHER OR NOT DISCOVERABLE
AS AT THE DELIVERY DATE AND IN EVERY WAY SATISFACTORY TO LESSEE;
(ii) the Lessee is obliged to pay to the Lessor the amount provided for
in the Agreement with respect to the Aircraft;
(iii) the Aircraft is insured in accordance with the Agreement;
(iv) the representations and warranties contained in Article 13 of the
Agreement remain, and if made at the date of this Certificate of
Acceptance, would be, true and correct in all respects;
(v) there have been affixed to the Aircraft and the Engines the fire
resistant notices required by Article 4.3 of the Agreement;
(vi) the Lessee has no right of set-off, deduction, withholding or
counterclaim against the Lessor whatsoever; and
(vii) no Default is subsisting.
IN WITNESS WHEREOF, Lessee has caused this Certificate of Acceptance to be
executed in its name, by its duly authorized officer(s) or representative(s),
pursuant to due corporate authority, all as of the date written in Paragraph 1
above.
MIDWAY AIRLINES CORPORATION
By:
--------------------------------
Title:
-----------------------------
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APPENDIX D
CHARGES*
[*Intentionally omitted for FAA filing purposes. The parties deem information
contained to be confidential financial information.]
<PAGE>
APPENDIX E
CONDITION AT RE-DELIVERY
Upon redelivery of the Aircraft to Lessor, the Aircraft shall, subject to
ordinary wear and tear generally:
1. General Condition
(a) Be clean by airline standards;
(b) Have installed the Engines, and other equipment, Parts and
accessories and loose equipment as would remain installed in such
Aircraft, and shall be in a condition suitable for operation in
commercial service;
(c) Have in existence a valid Certificate of Airworthiness with respect
to the Aircraft issued by the Air Authority of the State of
Registration with a validity of at least nine (9) months after the
date of redelivery of the Aircraft to Lessor;
(d) Comply with the manufacturer's original specifications therefor;
(e) Have undergone, immediately prior to redelivery, a 3000 Check or any
subsequent higher inspection, if due within 3000 hrs, in accordance
with the Approved Maintenance Program, shall be free of any waivers,
and all deferred maintenance, if any, shall have been accomplished;
each engine and A.P.U. shall have had an inspection in accordance
with Article 16 confirming release for its remaining operational
life;
(f) All outstanding airworthiness directives and mandatory orders
affecting such model of Aircraft issued by the Air Authority which
require compliance during the Term shall have been accomplished;
(g) Have installed all applicable vendors' and manufacturers' service
bulletin kits theretofore received by Lessee free of charge that are
appropriate for the Aircraft and to the extent not installed, such
kits shall be furnished free of charge to Lessor;
(h) Stripped of all Lessee's paint scheme and repainted through an
Authorized Maintenance Performer with Manufacturer approved paints
in white or any other basic color requested by Lessor; and
93
<PAGE>
(i) Have been inspected and treated with respect to corrosion as defined
in the Approved Maintenance Program.
2. Airframe and major components
The Airframe and major components shall have not less than the following
hours/cycles/months expected life remaining to the next Major Check and/or
overhaul:
-Airframe : 3000 hours and 12 months to next Major Check;
-Engine : half life on average to next Engine shop visit but in
no event less than 3000 hours;
-Main Landing Gear : 3000 cycles to next overhaul;
-Nose Landing Gear : 3000 cycles to next overhaul;
*The records as to remaining engine life shall be certified by Lessee in
writing to Lessor upon redelivery of the Aircraft to Lessor.
3. Components
(a) Each life-limited Part shall have not less than 3000 (Three
Thousand) flight hours or cycles of the total approved life
remaining to the scheduled replacement, in accordance with the
Approved Maintenance Program;
(b) Each hard-time controlled component shall have not less than 3000
(Three Thousand) Flight Hours or 3000 (Three Thousand) Cycles or 12
(twelve) months whatever is applicable, remaining to the next
scheduled overhaul/inspection, in accordance with the Approved
Maintenance Program;
(c) "On-condition" and "Condition Monitored" components shall be
serviceable;
(d) The A.P.U. shall be serviceable.
4. Fuselage, Windows and Doors
(a) Fuselage shall be free of major dents and abrasions, scab patches
and loose or pulled or missing rivets;
(b) Windows shall be free of delamination, blemishes, crazing and shall
be properly sealed;
94
<PAGE>
(c) Doors shall be free moving, correctly rigged and be fitted with
serviceable seals.
5. Wings and Empennage
(a) All leading edges shall be free from damage;
(b) All unpainted cowlings, fairings and other surfaces shall be
polished;
(c) Wings shall be free of fuel leaks.
6. Interior
(a) Ceilings, sidewalls and bulkhead panels shall be clean and free of
cracks and stains;
(b) All carpets and seat covers shall be in good condition, clean and
stain free and meet Air Authority fire resistance regulations;
(c) All seats shall be serviceable, in good condition and repainted as
necessary;
(d) All signs and decals shall be clean and legible;
(e) All emergency equipment having a calendar life shall have a minimum
of one year or one hundred per cent of its total approved life,
whichever is less, remaining.
7. Cockpit
(a) All decals shall be clean, secure and legible;
(b) All fairing panels shall be free of stains and cracks, shall be
clean, secure and repainted as necessary;
(c) Floor coverings shall be clean and effectively sealed;
(d) Seat covers shall be in good condition, clean and shall conform to
Air Authority fire resistance regulations;
(e) Seats shall be fully serviceable and shall be repainted as
necessary.
8. Cargo Compartments
(a) All panels shall be in good condition;
(b) All nets shall be in good condition.
95
<PAGE>
9. Landing Gear and Wheel Wells
(a) Shall be clean, free of leaks and repaired as necessary;
(b) All decals shall be clean, secure and legible.
10. Corrosion
(a) Entire fuselage shall be substantially free from corrosion and shall
be adequately treated and an approved corrosion prevention program
shall be in operation;
(b) Fuel tanks shall be free from contamination and corrosion and a tank
treatment program shall be in operation.
11. Specification
The Aircraft shall conform to its specification at the Delivery Date,
including the following:
1. The Aircraft Configuration as defined in Appendix A of the Transwede
Lease attached hereto as Appendix A to this Appendix E.
2. Specification changes performed by or on behalf of Transwede in
accordance with the provisions of the Tripartite Agreement as
follows:
a. Modification to install Flight Management System Airline
Option No. 5; Ref. Fokker SCN 34-62.S008.
b. Modification to change from CAA certification to FAA
Certification; Ref. Fokker SCN 02-20.C004.
c. Modification to change indicators from Kilograms to Pounds;
Ref. Fokker SCN 28-40.C003.
d. Modification to install TCAS; Ref. Fokker SCN 34-46.C004.
e. Modification of Pitot Heat System in accordance with Service
Bulletin F100-30-017.
f. Installation of Galley Door Viewer in accordance with Service
Bulletin F100-52-053.
96
<PAGE>
g. Any and all modifications necessary to obtain a Swedish Export
Certificate of Airworthiness and the issuance of a Certificate
of Airworthiness by the FAA including completion of all
Airworthiness Directives required by the FAA, the BLA or other
relevant authority.
3. The Loose Equipment Checklist attached hereto as Appendix B to this
Appendix E.
97
<PAGE>
APPENDIX A
TO APPENDIX G
FOKKER 100
AIRCRAFT CONFIGURATION
BETWEEN
FOKKER AIRCRAFT B.V.
AND
TRANSWEDE AIRWAYS AB
<PAGE>
AIRCRAFT CONFIGURATION
----------------------
relating to
-----------
Fokker 100 aircraft
-------------------
PART
- ----
PART A: Type Specification
Attachment A to Part A
PART B: Installed additional equipment
PART C: Lessee's additional requirements
Emergency Equipment Lay-out
PART D: List of Mandatory Modifications
<PAGE>
AIRCRAFT CONFIGURATION
----------------------
relating to
-----------
Fokker 100 aircraft
-------------------
PART A: TYPE SPECIFICATION
- ------- ------------------
1) Type Specification as per printed copy supplied by Fokker Aircraft
B.V. to TRANSWEDE AIRWAYS AB.
Document Reference: TD F.28:PL-004
Date of issue: February 01,1983
Date of amendment: February 15,1988
2) Engine Specification: Rolls Royce Tay Mk 650-15 as described in
the Rolls Royce Contract Specification 3004
issue 1, printed February 1986, including
the Design Change Orders as executed by
Rolls Royce.
<PAGE>
ATTACHMENT A TO PART A
NUMBER DESCRIPTION
FO 02-52.80 Fokker Company Logo.
FO 03-10.80 Incorrect flying hours for the economic repair life
Fokker 100.
FO 03-65.80 Correction to maximum design towing load given in the Type
Specification.
FO 03-70.80 Floor panel loading - Correction to baseline Type Specification.
FO 12-13.80 Update the approved lubrication oils info given in the
baseline Type Spec.
FO l4-00.81 Amendment to Chapter 14 of the baseline Type Spec.
FO 14-13.80 Interchangeability - add "cable wheels and removable
pulley brackets".
FO 21-22.80 Introd. of larger ventilation louvres and extra adjustable
air outlets.
FO 21-26.80 Equipment cooling - additional fan assembly.
FO 22-10.80 Profile mode - certification.
FO 22-10.81 Speed protection for FMS profile mode.
FO 23-40.80 Amend the Fokker 100 baseline Type Spec. to reflect ATA 100
breakdown.
FO 23-51.80 Jack panel location in the flight compartment.
FO 23-62.81 Electrostatic jack socket.
FO 25-50.80 Logitudinal track spacing incorrect in Type Spec.
FO 27-35.81 Stall protection - new PSRS control law.
FO 27-56.80 Flap indication availability.
FO 28-10.80 Fuel system - CWT usable capacity.
FO 28-10.81 Fuel system - main tank usable capacity.
FO 28-15.80 Fuel venting system water ingress.
FO 28-22.80 Engine fire shut-off valve - closed indication.
FO 29-12.80 Hydraulic fluid transfer.
FO.31-31.82 Relocation of Flight Data Recorder.
FO 31-41.80 Proximity switching system.
FO 32-10.80 Main Landing Gear - Torque link damper.
FO 32-10.81 Main Landing Gear - Water deflectors.
FO 33-41.80 Tires - Bias tires as standard.
FO 33-23.80 Toilet area lighting baseline Type Spec.
FO 34-43.80 GPWS - Glideslope warning inhibit annunciator.
FO 34-51.80 Type Spec. correction with respect to location of RDMI
desciption.
FO 38-10.80 Water tank installation.
FO 38-30.80 Electr. heated waste water drain masts and floor drain check
valves.
FO 49-00.80 APU "AVAIL" lamp function.
FO 49-50.80 APU - Fireproof inlet duct.
FO 49-60.80 APU automatic shutdown in flight.
FO.56-11.81 Windshield dry sealing.
FO.74-30.80 Ignition - Unit I deactivated, unit 2 activated.
FO 78-33.80 Thrust reverser - Electrical power supply.
FO 80-12.80 Engine starter circuit cutout.
<PAGE>
APPENDIX A, PART B
INSTALLED ADDITIONAL EQUIPMENT OVER AND ABOVE THE
TYPE SPECIFICATION DOC.: TD F28:PL-004
FIRST ISSUE: FEB 01/83 AND AMENDED UP TO FEBRUARY 1988
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
02 MISCELLANEOUS
-------------
02-21 CAA Certification
-----------------
The aircraft shall include all hardware modifications
resulting from the Special Conditions as applicable to the UK
CAA Type Certification of the Fokker 100 aircraft. Operational
requirements are not included
02-70 Pin Programmable Options
------------------------
Flight Management System (FMS)
-----------------------------
1. Units
a. weight related items kg
b. lenght distance meters
c. baro correction mB
2. ATA/IATA departure profile ATA
3. Fuel option **) No. 1
4. Airline Type Option No. 2
Electronic Flight Instrument System (EFIS)
-----------------------------------------
1. Bearing pointers on ND rose both ADF
2. ADF in ND MAP & ARC no ADF
3. Flap position on PFD disabled
4. Baro reference mB
5. FD presentation cross-bar
Multi Function Display System
-----------------------------
1. Engine Oil Quantity liters
2. Temperature Reference (degrees) Celcius
3. Fuel Mass kg
4. Fuel Flow sec. page
5. WX Display On MFDS disabled
Automatic Flight Control & Augmentation
---------------------------------------
System (AFCAS)
-------------
1. C-chord disabled
Flight Warning Computer
-----------------------
1. C-chord disabled
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
02-70 Pin Programable Options (cont'd)
-------------------------------
**) Buyer shall specify the following fuel options under
option No. 1 to it's Navigation Base Vendor.
- Taxi fuel
- Route reserve
- Upper limit route reserve
- Lower limit route reserve
- Final/Time
03 STRUCTURAL DESIGN CRITERIA
--------------------------
03-20 Increase in MTOW
----------------
The aircraft shall be certified according to the following
operating weights:
Maximum Ramp Weight : 98.500 lbs
Maximum Take-Off Weight : 98.000 lbs
Maximum Zero Fuel Weight : 81.000 lbs
Maximum Landing Weight : 88.000 lbs
03-50 Design Speeds
-------------
Increase of Mmo to M077.
Introduction of this change is accomplished by software
changes to AFCAS, FMS and ADC.
The speed limitation placard on the main instrument panel
shall be changed to reflect the correct Vmo and Mmo. This
change shall also be reflected in all applicable manuals.
11 PLACARDS AND MARKINGS
---------------------
11-10 Exterior Colour Schemes and Markings
------------------------------------
Exterior placards and markings in English. Placarding shall
reflect the use of Mobil Jet Oil II for engine, APU, IDG and
cooling turbines.
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
11-30 Interior Placards and Markings
Cabin placards and markings in English/Spanish
Cockpit placards in English.
12 SERVICING
---------
12-00 Servicing
---------
Fuel contents table in kilograms (kg).
Oil : Mobil Jet Oil II
i.l.o. ESSO 2380
Fuel : JP1, JP4 and JP5
Hydr.Fluid : Skydrol 500 B4
22 AUTOFLIGHT
----------
22-10 Extended Autoland (capability cat. 3B)
-------------------------------------
Installation of a fail-operational three channel Autoland,
Automatic Flight Control and Augmentation System suitable for
automatic landings down to 15 ft DH and 150 m RVR
weather conditions.
During high speed roll-out after touch down the AFCAS provides
lateral control via the aircraft rudder.
Installation adds to the standard system:
FCC 3, ILS 3 (ref. 34-32), LRRA 3 (ref.
34-42) and static inverter (ref. 24.26).
- (01) FCC l000 Collins
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
23 COMMUNICATIONS
--------------
23-11 Single HF Communication System
------------------------------
The aircraft shall be provided with full provisions for a
single Collins HFS-700 HF communication system.
To arrive at an operational system the following equipment is
to be supplied by Buyer.
- (01) Transceiver, Collins HFS-700
- (01) Antenna tuner, Collins 4905-1
- (01) HF Control panel, Gables
23-12 VHF Communication
------------------
Installation of a Bendix VHF Communication system i.l.o.
the standard Collins system.
The installation comprises the following Seller Furnished
units.
- (02) Transceiver, Bendix RTA-44A
- (02) Antenna, Sensor
- (02) VHF Control panel, Gables
Third VHF Communications
Additionally the Aircraft shall be provided with full
provisions for a third VHF Communication system. This third
VHF will be dedicated to and fully interfaced with the
provisions for the ACARS system.
To arrive at an operational system the following equipment is
to be supplied by Buyer.
- (01) Transceiver, Bendix RTA-44A
- (01) Antenna, Sensor
- (01) VHF Control panel, Gables
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
23-21 Selective Calling (Selcal) - ARINC 714
--------------------------------------
The Aircraft shall be provided with full provisions for a
Selcal system in acc. with ARINC 714.
The Selcal system shall be interfaced with VHF1, VHF2 and the
provisions for HF communication. The Selcal system shall be
reset if the appropriate VHF or HF system is keyed.
To arrive at an operational system the following equipment is
to be supplied by Buyer.
- (01) Selcal unit, TEAM
23-22 ACARS
-----
Installation of full provisions for ACARS in addition to the
space provisions provided in the baseline aircraft. The ACARS
shall provide OOOI information. The ACARS shall have a
dedicated VHF Comm system (ref. 23-12). The ACARS shall be
hooked-up to the DFDAU for report downlink purposes which are
formed via the standard parameter information connected to the
DFDAU, when a Second CPU will be installed.
To arrive at an operational system the following equipment is
to be supplied by Buyer.
- (01) Management Unit (MU) with Internal GMT clock, powered
from batteries, Teledyne
- (01) Interactive Display Unit (IDU) on the pedestal,
Teledyne
Wiring provisions will be available for:
- (01) Cabin Management Terminal at Flight Attendant Panel,
Teledyne
- (01) Printer, to be installed in column of maintenance and
test panel, Datametric
- (01) Voice go-ahead to FWC from MU
- (01) Remote voice/data switch, on the pedestal
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
23-22 ACARS (cont'd)
-------------
The voice-mode shall be selectable via the IDU (pin
programmable)
The OOOI information generated by the flight warning computer
will be transferred via a databus to ACARS Management Unit. In
addition, the OOOI and ground/flight info will be also
hardwired.
The aircraft ident. information will be provided via the
ACARS - MU hardwired.
The ACARS - IDU and MU shall be hardwired connected to the
DFDAU.
Installation of the standard Flight Data Acquisition Unit
DFDAU with a single CPU.
23-32 Passenger Entertainment
-----------------------
Installation of a pre-recorded announcement and boarding music
system. The system comprises a Matsushita RDAX 7351 recorder
system.
The recorder with build-in control panel shall be installed in
Galley 3.
The installation comprises the following Seller Furnished
unit:
- (01) Recorder, Matsushita RD-AX7351
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
23-51 Audio Management
----------------
Audio control panels in the pedestal shall be relocated to the
LH and RH flightdeck side panels, as a result the jack box
panels will be installed in the sidewalls. Audio control
panels will be with provisions for VHF Com-3 and single HF Com
facilities.
Because of the full provisions for VHF3 and HF, switches for
these functions are installed on the Audio Control Panels. As
these switches are not functional they must be provided with
an "INOP" sticker in accordance with JAR 25.1523.
24 ELECTRICAL POWER
----------------
24-26 Static Inverter
---------------
Installation of a single-phase autoland static inverter to
provide a source of AC power to the essential autoland 3 bus
(350 VA).
24-33 Batteries
---------
Batteries with an increased Amp. hr. rating
will be installed resulting from CAA
special conditions applicable to Fokker
100 aircraft.
25 EQUIPMENT AND FURNISHINGS
-------------------------
25-12 Sunvisors
---------
Installation of two sunvisors and rail system in the flight
compartment. The visors can be locked at various angles.
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
25-20 Passenger Compartment
---------------------
Interior lay-out is for 109 passengers in accordance with
drawing F100-04-088 sheet 1, issue -.
Accomodation shall be provided for 109 seats at 31 inch (787
mm) pitch. Triple seats RH and double seats LH.
25-21 Passenger and Attendant seats
-----------------------------
Installation of 109 passenger seats including covers,
seatbelts, tables etc. The fully dressed passenger seats are
supplied by Seller.
Double Cabin Attendant Seat
---------------------------
Installation of a rear facing double cabin attendants seat in
entrance against forward wardrobe/stowage wall on floor
hardpoints and a third top-point.
- (01) Double cabin attendant seat, Socea
Installation of a double cabin attendants seats i.l.o. a
single at the aft pressure bulkhead.
- (01) Double cabin attendant seat, Socea
25-23 Sidewall Panels and Window Shades
---------------------------------
Installation of a rolling blind in each window of the
passenger compartment.
- (66) Window blind, Magee
25-25 Floor Covering
--------------
Carpet material or the passenger's compartment shall be
supplied by Seller. Installation of protection covers below
the floor over the avionics rack.
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
25-26 Movable Cabin Divider
---------------------
The aircraft shall be provided with full provisions for a
movable class divider, from approx. Sta.6200 to Sta. 22320,
which is throughout the cabin.
Cabin backwall LH/RH incl. lintel.
25-26 Passenger Compartment Curtains
------------------------------
The Aircraft's passenger compartment shall be provided with
curtains and curtain rails in the following locations:
- between Galley 1 and Galley 2
- between Galley 2 and Galley 3
The required curtain material of Buyer's choice shall be
supplied by Seller
25-27 Rail on Overhead Luggage Bins
-----------------------------
Installation of a seat-placard rail on the luggage bins. An
extruded metal rail is fitted to the RH and LH luggage bins
throughout the cabin. The rail incorporates the facility to
easily fit and remove seat row placards.
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
25-29 Stowage unit/Wardrobe
---------------------
Deletion of the standard RH forward stowage unit behind Galley
2.
Deletion of the standard LH forward stowage unit aft of the LH
passenger door.
25-29 Trolley Stowage rear cabin
--------------------------
The standard wardrobes in the rear of the Aircraft's cabin
(forward of the lavatories) shall be made suitable for stowage
of one half size trolley (one at each side) and a standard
unit. The stowage shall be closed by means of a door. A
folding panel shall allow the use of the compartment as
wardrobe. Trolleys and standard units are Buyer Furnished
Equipment.
25-31 Galleys
-------
All galleys and galley inserts are supplied by Seller as
Seller Furnished Equipment.
25-31 Galley 1
--------
Installation of Galley 1 (22" deep) of the standard location
forward of the RH S/E door.
- (01) Galley, Rumbold
System provisions for galley inserts:
- (03) Coffee makers, Rumbold
- (03) Half size trolley, Driessen
- (01) Ice drawer, Rumbold
- (01) Standard unit, Rumbold
Ref. Fokker drawing F28-04-143 sheet 1, issue: A.1.
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
25-32 Galley 2
--------
Installation of a Galley 2 (35" deep) at the standard location
aft of the RH S/E door.
- (01) Galley, Rumbold
System provisions for galley inserts:
- (01) Large oven, Rumbold
- (04) Half size trolley, Driessen
- (02) Oven control panel, Rumbold
- (01) Waste bin, Rumbold
Ref. Fokker drawing F28-04-143 sheet 2,
issue: A proposal 1.
25-33 Galley 3
--------
Installation of a Galley 3 (29" deep) on structural provisions
(hardpoints) on the floor and top for a galley. Location aft
of the LH passenger door, between Sta. 4875 and 5611.
- (01) Galley, Rumbold
System provisions for galley inserts:
- (02) Standard units, Driessen
- (04) Half size trolley, Driessen
The front wall shall be equipped with the cabin attendant
control panel, passenger entertainment panel and shall have
wiring provisions for an ACARS cabin management terminal (Ref.
23-22).
25-60 Emergency Equipment
-------------------
The BCF fire-extinguisher, the megaphone and oxygen bottle
will be installed as described in the type specification.
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
26 FIRE PROTECTION
---------------
26-12 APU Fire Detection and Warning
------------------------------
Installation of a warning horn in the nosewheel bay to provide
an audible APU fire warning during APU ground operation.
The function of the warning horn will be inhibited during an
APU fire warning test.
31 INDICATING/RECORDING SYSTEMS
----------------------------
31-21 Flight Deck Clocks
------------------
Installation of alternate p/n clocks
- (02) Clock, Smiths Industries
p/n 2610-07-1
31-31 Flight Data Recorder Alternate Source - ARINC 573
-------------------------------------------------
Installation of an alternate source FDR (Sundstrand) i.l.o.
standard unit (Fairchild). The optional equipment shall be
installed above stowage unit section (in the position
allocated to the standard equipment).
- (01) FDR, Sundstrand
(01) Accelerometer, Sundstrand
(01) Mounting tray
32 LANDING GEAR
------------
32-48 Autobrakes
----------
Installation of an Automatic Braking System in addition of the
standard brake- and analog anti-skid system. The system
provides pilot selectable decelleration rates:
low, med, max and RTO.
For take-off, use of the maximum setting shall result in
maximum braking if the take-off is required from a speed of 8O
knots.
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
33 LIGHTS
------
33-24 Illuminated Signs
-----------------
Installation of a lintel in the forward passenger compartment
with legend EXIT in English/Spanish due to the installation of
a curtain between Galley 2 and Galley 3.
33-26 Entrance Lighting
-----------------
Wiring provisions for a galley area light installed in Galley
3, to be connected to the entrance light.
33-28 Galley Area Lighting
--------------------
Installation of a galley area light in the ceiling between
Galley 1 and 2. Switch will be installed on Galley 1.
33-46 Logo Lights
-----------
Installation of lighting fixtures in the LH and RH flap track
fairings for illumination of both sides of the vertical
stabilizer.
Installation of a ON/OFF switch for NAV/LOGO light switching
on the external-light switch panel in the overhead panel of
the flight compartment.
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
33-47 Strobe Lights
-------------
Installation of high intensity strobe lights in each wingtip
and one in the tailcone. Control of the system is via a rotary
switch panel in the overhead panel of the flight compartment.
Switch identification is by STROBE, printed below the switch.
Switch operation designation are as follows:
- OFF = strobe lights are off
- ON = strobe lights will be switched on by this selection.
- AUTO = strobe lights are activated to come on via the
landing gear switch at take-off.
34 NAVIGATION
----------
34-13 Air Data Instruments
--------------------
A combined standby altimeter and airspeed indicator i.l.o. the
standard separate standby altimeter and standby airspeed
indicator.
The following Seller Furnished equipment shall be deleted from
the baseline configuration:
- (01) Standby altimeter, Smiths Industries
- (01) Standby airspeed indicator, Smiths Industries
The following unit shall be supplied as Seller Furnished
Equipment:
- (01) Combined standby altimeter and airspeed indicator,
Smiths Industries
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
34-l6 Windshear
---------
Installation of a windshear detection, alerting and recovery
guidance system.
During flight near the ground (below 1500 A.G.L) the system
will:
- detect the presence of potentially hazardous windshear
conditions.
- alert the flight crew when the airmass motions reach
potentially hazardous levels.
- provide flight director guidance to the crew to maximize the
probability of ground avoidance.
- provide automatic recovery guidance through the AFCAS when
selected.
o Detection: implementation in FMC via software changes. All
sensor data are available via existing
interfaces, as are the discrete outputs to the
AFCAS/EFIS, GPWS and other subsystems
o Guidance: implemented in AFCAS (FCCs) via software changes
using all existing interfaces.
o Alerts: Aural alerts will be produced within the GPWS.
Primary display of detection alerts and guidance
is on the PFD of EFIS.
Wiring changes for the following functions:
- To add discrete for the following functions:
o TOGA/SPE
o Max. TLA/SPE
o FCC/GPWS
- Changes of speedbrake auto retract logic
- Change pin option FCC and FWC windshear enable
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
34-28 Inertial Reference System
-------------------------
Installation of a triple inertial reference system (IRS)
i.l.o. the std triple attitude and heading reference system
(AHRS).
The following Seller Furnished Equipment shall be deleted from
the baseline configuration:
- (03) AHRS unit, Litton
- (02) Magnetic sensor unit, Sperry
- (02) Magnetic compensator, Litton
Structural provisions for the magnetic sensor units remain in
the Aircraft. The installation comprises the following Seller
Furnished units:
- (03) IRS unit, Honeywell HG
- (03) Mode selector panel, Honeywell
- (01) Inertial system display unit, Honeywell CG
34-32 Instrument Landing System
-------------------------
Installation of a triple Bendix system i.l.o. the standard
dual Collins system (ARINC 710) as part of the three channel
Autoland AFCAS (Ref. ATA 22-10).
The installation comprises the following Seller Furnished
units:
- (03) Receiver, Bendix RIA-35A
- (03) G/S Antenna, Sensor
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
34-41 Weather Radar (WXR)
-------------------
Installation of a Bendix weather radar system i.l.o. the std
Collins system.
The installation comprises the following Seller Furnished
units:
- (01) Transceiver, Bendix RTA-4A
- (01) Control panel, Bendix CON-4A
- (01) Antenna pedestal, Bendix DAA-4A
- (01) Antenna, Bendix REA-4A
34-42 Radio Altimeter
---------------
Installation of a triple TRT AHV 530 LRRA system i.l.o. the
standard dual system (ARINC 707) as a part of the three
channel Autoland AFCAS (ref. ATA 22-10).
The following Seller Furnished units are deleted:
- (04) Antenna, TRT AHV S
The installation comprises the following Seller Furnished
units:
- (03) Transceiver, TRT AHV 530
- (06) Antenna, Sensor
34-43 Ground Proximity Warning
------------------------
The installation of a GPWS/GS annunciator on the main
instrument panel LH and RH.
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
34-51 VHF Omni Range (VOR) - ARINC 711
--------------------------------
Installation of two Bendix VOR/M receivers i.l.o. the two
standard Collins receivers. The equipment shall be installed
in the aft rack of the avionics bay.
The installation comprises the following Seller Furnished
units:
- (02) Transceiver, Bendix RVA-36A
34-52 Distance Measuring Equipment
----------------------------
Installation of two Bendix DME interrogators i.l.o. the two
std Collins interrogators. The equipment shall be installed in
the aft rack of the avionics bay (in the positions allocated
for the standard equipment).
The installation comprises the following Seller Furnished
units:
- (02) DME Interrogators, Bendix DMA-37A
34-53 Automatic Direction Finding (ADF)
---------------------------------
Installation of two Bendix ADF receivers i.l.o. the two std
Collins receivers. The equipment shall be installed in the aft
rack of the avionics bay (in the positions allocated for the
standard equipment).
The installation comprises the following Seller Furnished
units:
- (02) Receiver, Bendix DFA-75A
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
34-54 Air Traffic Control
-------------------
Installation of a dual Bendix ATC system with S-mode i.l.o.
the standard, single, Collins system with C-mode. The
transponders shall be installed in the aft rack of the
avionics bay and the control panel shall be installed in the
center pedestal (replacing the standard units). Two mode S ATC
antennae will be installed at bottom of fuselage and 2
antennae on top of the fuselage.
The following Seller Furnished Equipment shall be deleted from
the baseline configuration:
- (01) Control panel, Gables
The installation comprises the following Seller Furnished
units:
- (02) ATC S-mode transponders,
Bendix TRA-67A
- (01) Control panel, Bendix CNA-67A
- (04) ATC antenna, Sensor
34-61 Flight Management System
------------------------
ATA departure profile i.l.o. IATA airline
Type option no. 2 i.l.o. European FMS.
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
35 OXYGEN
------
35-20 Passenger Oxygen System
-----------------------
The RH luggage bins shall be equipped with oxygen panels
containing four oxygen masks, the LH luggage bins shall be
equipped with oxygen panels containing three oxygen masks.
The following units shall be deleted from the baseline
aircraft:
- (43) 3 mask panels
The following units shall be installed:
- (22) 4 mask panels
- (22) 3 mask panels
38 WATER/WASTE
-----------
38-12 Water heater in aft toilet compartments
---------------------------------------
Installation of a water heater and a dual timed faucet in both
aft toilet compartments.
The installation comprises the following Seller Furnished
units:
- (02) Heater, Inventum
- (02) Faucet, Adams Rite
38-30 Waste Disposal
--------------
To change the material of toilet waste ducts from titanium to
stainless steel to allow suction draining
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
52 DOORS
-----
52-13 Forward Opening Passenger Door
------------------------------
Installation of a forward opening pax/crew door on the LH
side of the fuselage between Sta. 3845 and 4875. The door will
allow connecting the airplane to boarding bridges as presently
in use and will provide an available entry height of 1850 mm
(73 inches). Installation of the door will not comprise the
installation of an integral staircase.
The door shall be outward and forward opening and shall be
provided with a locking mechanism comprising C-latches. An
escape slide will be mounted on the inboard side of the door.
(01) Escape slide, Air Cruisers Co
52-31 Enlarged Cargo Compartment Doors
--------------------------------
Installation of upward opening, enlarged cargo doors, two in
the forward cargo compartment and one in the aft cargo
compartment. The door sills are flush mounted with the cargo
compartment floor to facilitate ease of loading.
52-70 Avionics Bay Access Hatch Warning
---------------------------------
Installation of two micro switches on each of the two avionics
access doors to detect an unlocked condition. Separate
warnings, on each door, are fed to the Multifunction Display
Units located on the main instrument panel. The warning is fed
to the MFDS via the flight warning computer.
The warning is a level 2 category warning which is also
accompanied by an aural single chime.
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
53 FUSELAGE
--------
53-73 Door Protection Plates
----------------------
Scuff plates made of corrosion resistant steel shall be
provided on the external fuselage at the sills of the
passenger and service/emergency doors.
56 WINDOWS
-------
56-00 Windows
-------
Due to Galley 3 installation the first cabin window on the LH
side will be blanked off.
72 ENGINES
-------
72-00 Tay Mk 650-15 i.l.o. Mk 620-15 engines
--------------------------------------
Changes to the airframe structure, airframe systems and system
software for the installation of Rolls-Royce Tay Mk 650-15
engines (Exclusive engines).
1. Structural Hardware
o New nacelle inlet (fan diameter increased by 0.8"
o Increased anti-icing valve access doors
- LH fixed cowl
- RH cowl door
o Reinforced thrust strut bracked back-up structure.
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
72-00 Tay Mk 650-15 i.l.o. Mk 620-15 engines (cont'd)
-----------------------------------------------
System Hardware
---------------
o Throttle controls and fuel shut-off
o Control: geometry change
o New igniter lead cables. Penetration point
on engine on bottom dead center
o Engine ident plug (delivered C.W. engine)
o Inlet anti-icing: Geometry changed
o Standby engine indicator (new p/n)
o Electrical harness
o Fuel lines: geometry change
o Hydraulic lines: geometry change
3. Avionics Software
-----------------
o AFCAS : Installation of a new FCC
(the FCC is pin programmable)
o MFDS : Installation of a new MFDS
o FMC : Installation of a new FMC
(the FMC is pin programmable)
o FWC : Installation of a new FWC
(the FWC is pin programmable)
4. Performance
-----------
o Noise
o Handbooks (o.a. AFM)
(Standard Option SO 72-00.01)
<PAGE>
APPENDIX A, PART C
LESSEE'S ADDITIONAL REQUIREMENTS
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
02 MISCELLANEOUS
-------------
02-20 Certification
-------------
The aircraft shall be certified for operation on the Swedish
register.
11 PLACARDS AND MARKINGS
---------------------
11-10 Exterior Colour Schemes
-----------------------
The outboard painting shall be as specified by customer.
11-20 Exterior Plackards and Markings
-------------------------------
Exterior placards and markings shall be in English, as
specified by customer.
11-30 Interior Placards and Markings
------------------------------
Interior placards and markings shall be in English/Swedish, as
specified by customer.
12 SERVICING
---------
12-13 Servicing
---------
The oil for engine, IDG and APU shall be Mobil Jet Oil 254
25 EQUIPMENT AND FURNISHINGS
-------------------------
25-20 Passenger compartment
---------------------
Interior lay-out for l07 pax in accordance with drawing
W98251. Interior colors and materials as specified by
customer.
<PAGE>
APPENDIX A, PART C
LESSEE'S ADDITIONAL REQUIREMENTS
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
25-31 Galleys
-------
Galley parts that are now red shall be painted dark blue, as
specified by customer.
25-31 * Galley 1
--------
Galley 1 shall be made suitable for KSSU trolleys,
including numbering
** Add:
(03) Trolley Halfsize Driessen DLH573-009
25-31 * Galley 2
--------
Galley 2 shall be made suitable for KSSU trolleys. Deletion of
frame in order to have additional stowage of 1 full size
trolley, including numbering. Provisions for installation of 3
ATLAS type ovens, p/n 62755. Provisions for the attachment of
a baby cradle.
* (03) ATLAS type ovens, p/n 67255.
** (03) Trolley Fullsize Driessen DLH621-029
(01) Magazine holder C15018-001-001
25-31 * Galley 3
--------
Galley 3 shall be made suitable for KSSU trolleys, including
numbering. Provisions for the attachment of a baby cradle.
Installation of compartment doors at positions 303 and 305.
Add:
** (04) Trolley Halfsize Driessen DLH573-009
25-31 * Galley 4
--------
Installation of a seat rail mounted stowage for 4 half size
trolleys, at RH aft of the cabin, instead of a double seat,
and including numbering, p/n C10119-001-004 (Rumbold). Fokker
will do best effort to certify this at delivery date of first
a/c.
Add:
** (04) Trolley Halfsize Driessen DLH573-009
<PAGE>
APPENDIX A, PART C
LESSEE'S ADDITIONAL REQUIREMENTS
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
25-31 ** Aft stowage
-----------
The aft stowages shall be modified to accept KSSU trolleys,
the top part of aft stowages shall be modified to accept a
KSSU container.
** (02) Trolley Halfsize Driessen DLH573-009
25-61 * Emergency equipment
-------------------
The following additional evacuation equipment shall be
installed:
(02) Fire extinguishers, Walter Kiddie 892480MODX
(04) Smoke hoods, Puritan Bennet, 119003
(07) Life vests, orange, Svitlik S21850-7300
A complete lay out of the emergency equipment is
attached to this Part C
25-63 * Emergency Locator Transmitter
-----------------------------
An emergency locator transmitter shall be installed,
comprising the following components:
(01) Transmitter, Dorne & Margolin DMELT8-1
located in the ceiling at the rear of the
passenger compartment
(02) Antenna, Sensor S65-8280-7
mounted on the upper fuselage
(03) Test switch panel, Fokker A42730-403
located on the overhead panel in the flight
compartment
33-24 Illuminated Signs
-----------------
All signs shall be in english, as specified by customer.
Installation of white covers on overwing escape hatches.
34-26 * EFIS
----
ADF pointers shall be available in ARC/MAP mode.
<PAGE>
APPENDIX A, PART C
(a) The price for the items marked with * totals an amount of $95,640;
(b) The price for the items marked with ** will be determined before delivery
of the Aircraft;
(c) The total of the prices mentioned in (a) and (b) above shall, at delivery
of the Aircraft, be deducted from the credit for start-up costs mentioned
in SL01 648.005 and SL02 648.013 to the Aircraft Support Services
Agreement ASSA 648.004, concluded between Lessee and Fokker on even date
herewith.
<PAGE>
APPENDIX A, PART C
EMERGENCY EQUIPMENT LAY-OUT
[GRAPHIC DESCRIPTION]
Layout of emergency equipment and locations.
<PAGE>
PART D
LIST OF MANDATORY MODIFICATIONS TO BE
INSTALLED IN THE AIRCRAFT PRIOR TO DELIVERY
A (This list includes all mandatory service bulletins
issued at the time of delivery of the Aircraft)
T
A SERV. PUBLIC. DESCRIPTION
22 SBF100-22-026 INTRODUCTION FAC V13R1
SBF100-22-029 INTRODUCTION FCC V13R1
SBF100-22-031 REPLACEMENT FLIGHT MODE PANEL
SBF100-22-032 INTRODUCTION FAC MOD 11
23 SBF100-23-017 THE MODIFICATION OF THE PASSENGER ADDRESS
SYSTEM
24 SBF100-24-024 THE CHANGE OF THE LOCATION OF THE HP BLEED
CIRCUIT BREAKERS.
25 SBF100-25-064 MOD. OF THE COVER OF THE ESCAPE SLIDE ON THE
PASS. DOOR
26 SBF100-26-002 NEW SAFETY CATCH FOR HALON 1211 PORTABLE FIRE
EXTINGUISHERS
27 SBF100-27-032 MODIFICATION HORIZONTAL STABILIZER ACTUATOR
SBF100-27-041 INSPECTION RUDDER AUTOPILOT INPUT BRACKETS
SBF100-27-043 CONNECT OF A NUMB. OF SHIELDINGS WITHIN THE
LIFTD. SYS. TO GROUND
SBF100-27-047 ONE TIME INSPECTION OF THE RUDDER PEDAL
ASSEMBLIES
SBF100-27-051 MOD. OF FLIGHT CONTROL LOCK HANDLE AND SWITCH.
SBF100-27-052 REPETITIVE CHECK ELEVATOR BOOSTER CONTROL UNIT
BACKLASH REMOVER
28 SBF100-28-022 ONE TIME INSP.: IF NECESSERY INSTAL A NEW APU
FUEL SUP. TUBE ASSY
SBF100-28-026 ONE TIME INSP. LH AND RH ENGINE FUEL SUPPLY
LINE
29 SBF100-29-021 REPL. OF SYSTEMS 1 & 2 RETURN FILTER BY-PASS
ASSY'S
SBF100-29-022 NEW HYDR. HOSE ASSEMBLIES IN SYS. 1 ENG.
DRIVEN PUMP
31 SBF100-31-020 INSTALLATION FWC V8
31 SBF100-31-036 A SOFTWARE MODIFICATION TO THE MFDU (DRAFT)
32 SBF100-32-044 INTRODUCTION OF IMPROVED MAIN WHEELS.
SBF100-32-058 INTRODUCTION OF AN IMPROVED MAIN LANDING GEAR
DOOR SEQUENCE VALVE
SBF100-32-061 INSPECT. OF THE BOLTS IN THE PRESSURE REDUCER
VALVE
SBF100-32-064 NLG RETRACTION TIME OUT OF TOLERANCE
SBF100-32-068 THE INTRODUCTION OF A LOWER AXLE NUT TORQUE
SBF100-32-070 INSPECTION AND SHOT PEENING OF THE MAIN WHEELS
SBF100-32-071 THE INSPECTION OF CORRECT GREASINGOF THE
TELEFLEX SYSTEM (DRAFT)
SBF100-32-073 THE INSPECTION AND SHOT PEENING OF THE MAIN
WHEELS.
SBF100-32-074 THE REPLACEMENT OF THE MAIN LANDING GEAR
DOWNLOCK ACTUATOR.
35 SBF100-35-003 MODIF. OF THE OXYGEN DROP OUT PANELS
38 SBF100-38-024 MODIFICATION TO THE CHECK VALVE AND TUBE
ASSEMBLY
49 SBF100-49-015 T2 BIAS SYSTEM IN THE ELECTRONIC CONTROL UNIT
SBF100-49-016 THE MODIFICATION OF THE WIRING OF THE T2 BIAS
SYSTEM
SBF100-49-022 ONE TIME INSPEC. FOR DRAIN HOLE IN APU MOUNT.
FRAME.
SBF100-49-023 INTRO. OF TWO ADD CLAMPS ON APU FUEL SUPPLY
LINE
52 SBF100-52-039 REPL. OF NYLON BUSHES FOR THE C-LATCHES OF THE
S/E DOORS
SL123 THE REPLACEMENT OF GAS SPRINGS IN LARGE CARGO
DOORS
55 SBF100-55-018 MODIFICATION OF RIB 5.0
SBF100-55-019 INSPECTION OF RIB 5.0 FLANGES AND FINGER
STRIPS.
SBF100-55-021REV1 STRUCTURAL MOD. HORIZONTAL STABILIZER. (INCL.
BRACKETS)(DRAFT)
57 SBF100-57-021REV1 REWORK OF THE SIDE STAY BRACKET AN THE UPLOCK
MECH. BRACKET (DRAFT)
SBF100-57-027 THE REPLACEMENT OF THE WING ACCESS PANELS (DRAFT)
71 SBF100-71-012 THE MODIF. OF THE ENGINEMOUNT SHEAR SHELF WEB
76 SBF100-76-011 ENG. CONTROL MOD. TO IMPLEMENT THE NEW 52 MAX.
SETTING (DRAFT)
78 SBF100-78-010 INTRODUCTION OF ENLARGED THRUST REVERSER DOOR
WEDGES (DRAFT)
The items marked with "Draft" will be installed by retrofit and free of charge
as soon as they will be available.
<PAGE>
DESPATCH RELATED SERVICE BULLETINS TO BE
INSTALLED IN THE AIRCRAFT PRIOR TO DELIVERY
A
T
A SERV. PUBLIC. DESCRIPTION
21 SBF100-21-032 INTRODUCTION NEW SEALS MFDU TRAYS EQUIPMENT
SBF100-21-035REV1 INSTALLATION NEW FLEX PIPE EQUIPMENT COOLING
SBF100-21-038REV1 INSTALLATION STOP PLUGS NEAR CABIN TEMP SENSOR
SBF100-21-041 AIR CONDITIONING, IF THIRD COOLING FAN IS
INSTALLED
SBF100-21-056 AUGMENTATION OF THE FLOW THROUGH THE TURB. BYPASS
VALVES (DRAFT)
22 SBF100-22-037 INTROD. OF SOFTWARE VERSION V13a TO AUTOFLIGHT
COMPUTERS (DRAFT)
27 SBF100-27-034 INTROD. IMPROVED FLAP CONTROL DATA UNIT
SBF100-27-038 INTROD. NEW PROXIMITY SENSOR BELL-CRANCK 2
SBF100-27-039 INTROD. NEW RUDDER LIMIT MONITOR UNIT (-413)
(DRAFT)
SBF100-27-046 INTROD. OF ROT LIM RING ON NEW MFDU
SBF100-27-048 THE MOD. OF THE FLEX DRIVE SHAFT OF THE LEFT
FLAP ACT.
SL 073 IMPROVED ADJUSTMENT OF LIFTDUMPER MECH. CONTROL
SYSTEM
28 SBF100-28-019 INTROD. OF VENTILATION-DRAIN FLOAT-VALVE WITH AN
IMPROVED HEAD
SL 119 INTRODUCTION OF SOFTWARE CHANGE TO COMB. PROC.
TOTALIZER
SL 105 REPLACEMENT OF SYS 1 AND 2 HYDRAULIC TUBES
30 SBF100-30-013 MODIF. WINDOW TEMP. CONTR. UNIT FROM -407 INTO
-409 (DRAFT)
31 SL 057 INTRO SEVERAL MODS FOR EFIS AND MFDU DISPLAY UNITS
32 SBF100-32-050 INTROD. NEW SPRING & WIRING ROUTE TO IMPROVE
RELIAB. OF ANTI RETR. SOL.
SBF100-32-059 ENLARGED TARGETS ON MLG UP SENSORS
SBF100-32-065 REPLACEMENT OF THE PARKING BRAKE MECHANISM
SBF100-32-069 INTRO OF NEW PROXIMITY SWITCHES FOR MLG DOOR
UPLOCK MECHANISMS
36 SBF100-36-012 INTRO OF NEW APU INLET DUCT OVERHEAT S/W
SBF100-36-O15 REV 1 INSTALLATION OF IMPROVED HEAT INSULATION BLANKETS
SBF100-36-O18 A CHANGE TO THE BLEED AIR CONTROL CIRCUIT OF THE
TAY 650-15
SBF100-36-O22 INSP. THE CHECK-VALVE ON PRES. SWITCH/AFT BLEED
AIR SENSE LINE (DRAFT)
38 SBF100-38-026 INTRO OF AN EXTENDED DUMP OUTLET FOR THE PRESSURE
REGULATOR
49 SBF100-49-017 A NEW RELAY TO PREVENT ELECTRO MAGNETIC
INTERFERENCE
SBF100-49-020 MOD FOR WIRING TO THE APU CONTROL BUS RELAY
VENDOR SB MODIFICATION OF THE APU INLET PLENUM
VENDOR SB T2 BIAS MODIFICATION
VENDOR SB INTRODUCTION OF AN FCU -04
77 SL 137 INTRODUCTION OF NEW EMUX
The items marked with "Draft" will be installed by retrofit and free of
charge as soon as they will be available.
<PAGE>
APPENDIX B TO APPENDIX E
REPORT/BASIC CHECKLIST
report no : E100-201/A323
[LOGO] issue date: 30 Nov-93 issue no: 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
total Index record of
no. weight arm change checking
description req. kg mm (delta) I ------------------
[ILLEGIBLE]
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cockpit compartment
- -------------------
- - Pilot seat c.w. shoulder harness Ipeco 3A088-0003-01-2 1 28,95 2490 - 4,297 |X|
- - Escape rope (in ceiling) FOK D86227-401 1 0,45 2750 - 0,066 |X|
- - Life vest Switlik S21850-7300 1 0,62 2750 - 0,090 - oper. item
- - Co-pilot seat c.w. shoulder harness Ipeco 3A088-0004-01-2 1 29,00 2490 - 4,304 |X|
- - Smoke goggle Eros MXP 210-00 1 0,20 2743 - 0,029 |X|
- - Fire extinguisher BCF FFE BA20703G3 1 2,07 2794 - 0,301 |X|
- - Escape rope (in ceiling) FOK D86227-401 1 0,45 2750 - 0,066 |X|
- - Life vest Switlik S21850-7300 2 1,24 2773 - 0,181 - oper. item
Side panels (RH+LH)
- - Microphone handheld (RH+LH) Telex 63333-007 2 0,36 1762 - 0,056 |X|
- - Smoke goggle (RH+LH) Eros MXP210-00 2 0,40 1762 - 0,062 |X|
- - Oxygen mask (RH+LH) Eros MC10-04-109 2 0,23 1890 - 0,036 |X|
- - Flashlight (c/w pwr.pack) DME EF-2C 2 1,10 2285 - 0,166 |X|
- - Boomtype headset (RH+LH) Telex 64300-005 2 0,23 2920 - 0,033 |X|
- - Spare bulb box (LH) D48383-409 1 0,28 2850 - 0,041 |X|
- - Sunvisors Magee 141-31020 2 0,91 2900 - 0,131 |X|
- - Pair of gloves (RH) FKK7-35 1 0,22 2850 - 0,032 |X|
LH aft-wall
- - Boomtype headset Telex 64300-005 1 0,12 2970 - 0,017 |X|
- - Flashlight DME EF-1 1 0,38 2970 - 0,055 |X|
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
page 1 |X| = in airplane when weighed
- = not in airplane when weighed
All rights reserved. Reproduction or disclosure to third parties of this
document or any part thereof, or the use of any information contained therein
for purposes other than provided for by this document is not permitted except
with prior and express written permission.
<PAGE>
REPORT/BASIC CHECKLIST
report no : E100-201/A323
[LOGO] issue date: 30 Nov-93 issue no: 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
total Index record of
no. weight arm change checking
description req. kg mm (delta) I ------------------
[ILLEGIBLE]
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cockpit compartment (cont'd)
- -------------------
RH aft. wall
- - Oxygen bottle (fixed) PUR 176225 1 5,23 2903 - 0,755 |X|
- - Crash axe Gemtor 42D8331 1 1,00 2952 - 0,144 |X|
- - Oxygen bottle Scott 5600-1C1AE23A 1 4,07 2882 - 0,588 |X|
- - Full face mask Scott 10100CIA 1 0,97 2882 - 0,140 |X|
- - Pilot head covers FOK 28.0.2493 3 0,29 3000 - 0,042 |X|
- - Lockpin thrust reverser FOK 28.0.4591 2 0,13 3000 - 0,019 |X|
- - Groundlocks FOK 28.0.1233 3 0,76 3000 - 0,109 -
- - Groundlocks (installed) FOK 28.0.1233 3 0,76 13022 - 0,033 |X|
- - Folding observer seat FOK D86007 1 8,50 3180 - 1,203 |X|
- - Safety belt + sh harness 502422-403 1 1,20 2985 - 0,172 |X|
- - Oxygen mask (in gangway LH) Eros MC10-04-109 1 0,11 3050 - 0,016 |X|
Entrance compartment
- --------------------
Fwd. C/A station:
- - C/A seat NCFK 1-200001-21 1 24,00 3962 - 3,209 |X|
- - Microphone (pass. address) SENN MD 430-16TAK 1 1,17 3937 - 0,023 |X|
- - Flashlight (c/w batteries) DME EF-1 2 0,76 3937 - 0,102 |X|
- - Handset incl. cradle AH2542D 1 1,36 3937 - 0,182 |X|
- - Life vest Switik S21850-7300 2 1,24 3937 - 0,166 - oper. item
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
page 2 |X| = in airplane when weighed
- = not in airplane when weighed
All rights reserved. Reproduction or disclosure to third parties of this
document or any part thereof, or the use of any information contained therein
for purposes other than provided for by this document is not permitted except
with prior and express written permission.
<PAGE>
REPORT/BASIC CHECKLIST
report no : E100-201/A323
[LOGO] issue date: 30 Nov-93 issue no: 1
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
total Index record of
no. weight arm change checking
description req. kg mm (delta) I ------------------
[ILLEGIBLE]
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Entrance compartment (cont'd)
- --------------------
- - Galley 1: structure (incl waste bin) Rumbold C11221-001-001 1 89,0 3535 - 12,279 |X|
ice drawer Rumbold C11221-097-001 1 17,1 3535 - 2,359 - oper. item
coffee maker (incl. can) Rumbold 64752 3 21,7 3609 - 2,978 - oper. item
HS trolley Driessen DLH 573-009 3 3609 - oper. item
- - Curtain galley 1 - galley 2 FOK D89285-403 1 4283 |X|
- - Escape slide (S/E door) FOK D31873-101 1 12,40 4240 - 1,623 |X|
- - Escape slide cover FOK D15505-103 1 1,59 4240 - 0,208 |X|
- - Lockpin S/E door FOK D87766-401 2 0,06 4240 - 0,008 |X|
- - Escape slide (pax door) AC 60049-101 1 12,9 4355 - 1,674 |X|
- - Escape slide cover AC 60750-101 1 1,1 4355 - 0,143 |X|
- - Galley 2: structure (incl. waste bin) Rumbold C11274-001 1 102,0 5216 - 12,358 |X|
oven Rumbold 67255 3 58,2 5140 - 7,096 - oper. item
FS trolley Driessen DLH 621-029 3 5140 - oper. item
- - Galley 3: structure Rumbold C11223-001-001 1 56,5 5243 - 6,830 |X|
HS trolley Driessen DLH 573-009 4 5247 - oper. item
In stowage of galley 3 at entrance side:
- - Fire extinguisher (water) 892480 MODX 1 2,90 5125 - 0,354 |X|
- - Passenger entertainment recorder RDAX 7351 1 2,28 4925 - 0,283 |X|
- - Curtain galley 2 - 3 FOK D89285-429 1 5611 |X|
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
page 3 |X| = in airplane when weighed
- = not in airplane when weighed
All rights reserved. Reproduction or disclosure to third parties of this
document or any part thereof, or the use of any information contained therein
for purposes other than provided for by this document is not permitted except
with prior and express written permission.
<PAGE>
REPORT/BASIC CHECKLIST
report no : E100-201/A323
[LOGO] issue date: 30 Nov-93 issue no: 1
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
total Index record of
no. weight arm change checking
description req. kg mm (delta) I ------------------
[ILLEGIBLE]
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cabin compartment
- -----------------
- - Passenger seats, Rumbold M10000
series.
row 1 LH Double seat, in arm table M10249-001 1 30,38 6449 - 3,306 |X|
row 2 LH " " M10251-001 1 24,56 7262 - 2,473 |X|
row 3 LH " " " - " 1 24,56 8049 - 2,280 |X|
row 4 LH " " M10247-001 1 24,58 8837 - 2,088 |X|
row 5 LH " " " - " 1 24,58 9624 - 1,895 |X|
row 6 LH " " " - " 1 24,58 10411 - 1,701 |X|
row 7 LH " " " - " 1 24,58 11199 - 1,507 |X|
row 8 LH " " " - " 1 24,58 11986 - 1,314 |X|
row 9 LH " " " - " 1 24,58 12774 - 1,120 |X|
row 10 LH " " " - " 1 24,58 13561 - 0,927 |X|
row 11 LH " " " - " 1 24,58 14348 - 0,733 |X|
row 12 LH " " M10255-001 1 24,68 15136 - 0,542 |X|
row 13 LH " " M10259-001 1 23,52 15949 - 0,325 |X|
row 14 LH " " M10253-001 1 23,98 16761 - 0,137 |X|
row 15 LH " " M10247-001 1 24,58 17549 0,053 |X|
row 16 LH " " " - " 1 24,58 18336 0,247 |X|
row 17 LH " " " - " 1 24,58 19124 0,440 |X|
row 18 LH " " " - " 1 24,58 19911 0,634 |X|
row 19 LH " " " - " 1 24,58 20698 0,827 |X|
row 20 LH " " " - " 1 24,58 21486 1,021 |X|
row 21 LH " " " - " 1 24,58 22273 1,214 |X|
row 22 LH " " M10261-001 1 22,46 23061 1,287 |X|
Life vests per seats MK20 107 61,92 14517 - 1,743 |X| oper. item
Note: all seats incl. belts
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
page 4 |X| = in airplane when weighed
- = not in airplane when weighed
All rights reserved. Reproduction or disclosure to third parties of this
document or any part thereof, or the use of any information contained therein
for purposes other than provided for by this document is not permitted except
with prior and express written permission.
<PAGE>
REPORT/BASIC CHECKLIST
report no : E100-201/A323
[LOGO] issue date: 30 Nov-93 issue no: 1
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
total Index record of
no. weight arm change checking
description req. kg mm (delta) I ------------------
[ILLEGIBLE]
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cabin compartment (cont'd)
- -----------------
row 1RH Triple seat, in arm table M10240-001 1 42,72 6449 - 4,649 |X|
row 2 RH " " M10242-001 1 34,00 7262 - 3,424 |X|
row 3 RH " " " - " 1 34,00 8049 - 3,156 |X|
row 4 RH " " M10238-001 1 34,14 8837 - 2,900 |X|
row 5 RH " " " - " 1 34,14 9624 - 2,632 |X|
row 6 RH " " " - " 1 34,14 10411 - 2,363 |X|
row 7 RH " " " - " 1 34,14 11199 - 2,094 |X|
row 8 RH " " " - " 1 34,14 11986 - 1,825 |X|
row 9 RH " " " - " 1 34,14 12774 - 1,556 |X|
row 10 RH " " " - " 1 34,14 13561 - 1,287 |X|
row 11 RH " " " - " 1 34,14 14348 - 1,019 |X|
row 12 RH " " M10246-001 1 34,18 15136 - 0,751 |-|
row 13 RH " " M10258-001 1 32,74 15949 - 0,453 |X|
row 14 RH " " M10244-001 1 34,48 16761 - 0,197 |X|
row 15 RH " " M10238-001 1 34,14 17549 0,074 |X|
row 16 RH " " " - " 1 34,14 18336 0,343 |X|
row 17 RH " " " - " 1 34,14 19124 0,612 |X|
row 18 RH " " " - " 1 34,14 19911 0,880 |X|
row 19 RH " " " - " 1 34,14 20698 1,149 |X|
row 20 RH " " " - " 1 34,14 21486 1,418 |X|
row 21 RH " " M10238-001 1 34,14 22273 1,687 |X|
Note: all seats incl. belts
- - Carpet FOK - 14570 |X|
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
page 5 |X| = in airplane when weighed
- = not in airplane when weighed
All rights reserved. Reproduction or disclosure to third parties of this
document or any part thereof, or the use of any information contained therein
for purposes other than provided for by this document is not permitted except
with prior and express written permission.
<PAGE>
REPORT/BASIC CHECKLIST
report no : E100-201/A323
[LOGO] issue date: 30 Nov-93 issue no: 1
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
total Index record of
no. weight arm change checking
description req. kg mm (delta) I ------------------
[ILLEGIBLE]
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cabin compartment (cont'd)
- -----------------
In second LH luggage bin:
- - Megaphone ACR-EMIA2204 1 6531 |X|
- - Smoke hood PUR 119003 1 1,98 6711 - 0,210 |X|
- - Fire Extinguisher (BCF) FFE BA20703G3 1 2,07 6071 - 0,233 |X|
- - Pair of gloves FKK7-35 1 0,22 6491 - 0,024 |X|
- - Infants life jackets MK22 5 2,35 6661 - 0,251 - oper. item
In second RH luggage bin:
- - First aid kit MISC25-001 1 1,73 6481 - 0,188 |X|
- - Oxygen bottle Scott 5500B1UBF23A 1 3,73 6361 - 0,409 |X|
In aft LH luggage bin:
- - Fire Extinguisher (BCF) FFE BA20703G3 1 2,07 22796 - 0,113 |X|
- - Pair of gloves FKK7-35 1 0,22 22936 - 0,012 |X|
- - Megaphone ACR-EMIA2204 1 23076 |X|
- - Infant life jackets MK22 5 2,35 22486 - 0,121 - oper. item
- - Smoke hood PUR 119003 1 1,98 22676 - 0,106 |X|
- - Infant seat belt 502755-101-2258 2 0,22 23246 - 0,013 - oper. item
In aft RH luggage bin:
- - First aid kit MISC25-001 1 1,73 23046 0,099 |X|
- - Oxygen bottle Scott 5500B1UBF23A 1 3,73 23156 0,217 |X|
Gallery 4 (RH): structure Rumbold C10119-001-004 1 50,8 23159 - 2,690 |X|
HS trolley Driessen DLH 573-009 2 22994 - oper. item
HS trolley Driessen DLH 573-009 2 23324 - oper. item
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
page 6 |X| = in airplane when weighed
- = not in airplane when weighed
All rights reserved. Reproduction or disclosure to third parties of this
document or any part thereof, or the use of any information contained therein
for purposes other than provided for by this document is not permitted except
with prior and express written permission.
<PAGE>
REPORT/BASIC CHECKLIST
report no : E100-201/A323
[LOGO] issue date: 30 Nov-93 issue no: 1
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
total Index record of
no. weight arm change checking
description req. kg mm (delta) I ------------------
[ILLEGIBLE]
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Rear cabin compartment
- ----------------------
- - C/A seat Socea 2510-161-00-21 1 28,07 24880 + 2,119 |X|
- - Handset incl. cradle AH2542D 1 1,36 24880 + 0,103 |X|
- - Microphone (pass. address) SENN MD430-16TAK 1 0,17 24880 + 0,013 |X|
- - Flashlight (c/w batteries) DME EF-1
(=P2-07-0001-201S) 2 0,76 24880 + 0,057 |X|
- - Life vest Switlik S21850-7300 2 1,24 24880 + 0,094 - oper. item
Above RH trolley stowage:
- - Flight data recorder SDC 980-4100-DXUS 1 12,70 23828 + 0,825 |X|
Toilet compartments:
- - Toilet bucket 12201-404 (405) 2 25,60 24305 + 1,785 |X|
- - Mirror FOK D94149 2 2,98 25000 + 0,229 |X|
- - Automatic toilet waste bin HTL 30100022-20 2 0,75 24990 + 0,057 |X|
fire extinguisher
In trolley stowage (RH+LH):
- - HS trolley Driessen DLH573-009 2 23828 - oper. item
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
page 7 |X| = in airplane when weighed
- = not in airplane when weighed
All rights reserved. Reproduction or disclosure to third parties of this
document or any part thereof, or the use of any information contained therein
for purposes other than provided for by this document is not permitted except
with prior and express written permission.
<PAGE>
REPORT/BASIC CHECKLIST
report no : E100-201/A323
[LOGO] issue date: 30 Nov-93 issue no: 1
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
total Index record of
no. weight arm change checking
description req. kg mm (delta) I ------------------
[ILLEGIBLE]
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Other equipment
- ---------------
- - Main wheel assy G00 5008131-4 4 162,40 17751 + 0,680 |X|
- - Main wheel tyres (Bias) G00 409K02G1 4 217,69 17751 + 0,912 |X|
- - Brake assy (carbon) G00 5008132-6 4 236,08 17751 + 0,989 |X|
- - Nose wheel assy G00 5008133 2 12,20 3745 - 1,658 |X|
- - Nose wheel tyres G00 247F02G1 2 27,40 3745 - 3,723 |X|
Cargo compartment
- -----------------
- - Separation net fwd cargo FOK D85719-401 1 2,19 8805 - 0,186 |X|
- - " " " " FOK " - " 1 2,19 11257 - 0,133 |X|
- - " " aft " FOK " - " 1 2,19 20778 + 0,075 -
- - " " " " FOK " - " 1 2,19 22236 + 0,107 -
- - Door barrier net fwd cargo door FOK D85776-401 1 2,58 8076 - 0,239 |X|
- - " " " mid " " FOK " - " 1 2,58 12062 - 0,136 |X|
- - " " " aft " " FOK " - " 1 2,58 21507 + 0,108 |X|
- - Battery 4608-1 1 41,0 7565 - 4,001 |X|
- - Battery 4608-1 1 41,0 9045 - 3,398 |X|
- - LRRA 1 Transceiver TRT ERT530 1 4,28 11541 - 0,184 |X|
- - " 2&3 Transceiver " " 2 8,56 13041 - 0,367 |X|
- - Rudder control unit FOK EARLM8504 1 1,98 11541 - 0,115 |X|
- - CVR FAD 93A100-80 1 10,50 22576 + 0,551 |X|
- - Engine vibration processor VMA 241-196-000-021 1 3,28 22576 + 0,172 |X|
- - APU controller ALS 2118802-3 1 21007 |X|
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
page 8 |X| = in airplane when weighed
- = not in airplane when weighed
All rights reserved. Reproduction or disclosure to third parties of this
document or any part thereof, or the use of any information contained therein
for purposes other than provided for by this document is not permitted except
with prior and express written permission.
<PAGE>
REPORT/BASIC CHECKLIST
report no : E100-201/A323
[LOGO] issue date: 30 Nov-93 issue no: 1
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
total Index record of
no. weight arm change checking
description req. kg mm (delta) I ----------------------
[ILLEGIBLE]
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Avionics bay
- ------------
Fwd. rack (from left to right
in D.O.F.):
Shelf 1:
- - Flap pos. control FOK EAFCD8518 1 3,19 5305 - 0,383 |X|
- - Maintenance control comp. CRC MCC 1000 1 6,55 5305 - 0,788 |X|
- - ILS 1 receiver BID RIA-35A 1 5,0 5305 - 0,601 |X|
- - Dig. air data computer 1 HON 4045053-912 1 5,81 5305 - 0,698 |X|
- - Flight control computer 1 CRC FCC 1000 1 11,80 5305 - 1,419 |X|
Shelf 2:
- - Dig. air data computer 2 HON 4045053-912 1 5,81 5305 - 0,698 |X|
- - Flight control computer 2 CRC FCC 1000 1 11,80 5305 - 1,419 |X|
- - Flight augmentation comp. CRC FAC 1000 1 13,30 5305 - 1,600 |X|
- - VHF com 3 transceiver BID RTA-44A 1 4,3 5305 -0,517 - Full prov. only
Shelf 3:
- - IRS 3 unit HON HG1050AD05 1 19,0 5305 - 2,285 |X|
- - IRS 1 unit HON HG1050AD05 1 19,0 5305 - 2,285 |X|
- - Stalt warning comp. FOK EASPC 8503 1 2,00 5305 - 0,241 |X|
Shelf 4:
- - IRS 2 unit HON HG1050ADO5 1 19,0 5305 - 2,285 |X|
- - ILS 2 receiver BID RIA-35A 1 5,0 5305 - 0,601 |X|
- - Weather radar transceiver BID RTA-4A 1 11,3 5305 - 1,359 |X|
Aft rack (from left to right
against D.O.F.):
Shelf 6:
- - ADF 2 receiver BID DFA-75A 1 4,0 6305 - 0,441 |X|
- - Audio management unit Gables G6938-11 1 5,20 6305 - 0,573 |X|
- - VOR 2 receiver BID RVA-36A 1 4,4 6305 - 0,485 |X|
- - GPW computer MkV SDC 965-0676-003 1 2,63 6305 - 0,290 |X|
- - DME 2 interrogator BID DMA-37A 1 5,9 6305 - 0,651 |X|
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
page 9 |X| = in airplane when weighed
- = not in airplane when weighed
All rights reserved. Reproduction or disclosure to third parties of this
document or any part thereof, or the use of any information contained therein
for purposes other than provided for by this document is not permitted except
with prior and express written permission.
<PAGE>
REPORT/BASIC CHECKLIST
report no : E100-201/A323
[LOGO] issue date: 30 Nov-93 issue no: 1
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
total Index record of
no. weight arm change checking
description req. kg mm (delta) I ----------------------
[ILLEGIBLE]
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Avionics bay (cont'd)
- ------------
Shelf 6 (cont'd):
- - ATC 2 transponder BID TRA-67A 1 6,3 6305 - 0,695 |X|
- - PIP Janco 24153 1 0,3 6305 - 0,033 |X|
- - Anti skid control box GOO 6004272-4 1 2,16 6305 - 0,238 |X|
Shelf 5:
- - PIP Janco 24153 1 0,3 6305 - 0,033 |X|
- - ATC 1 transponder BID TRA-67A 1 6,3 6305 - 0,695 |X|
- - DME 1 interrogator BID DMA-37A 1 5,9 6305 - 0,651 |X|
- - Flight control computer 3 CRC FCC 1000 1 11,8 6305 - 1,301 |X|
- - VOR 1 receiver BID RVA-36A 1 4,4 6305 - 0,485 |X|
- - Emergency power supply 171BS101-1 1 2,04 6305 - 0,225 |X|
Shelf 8:
- - ACARS management unit TEL 2229385-41 1 6305 - Full prov. only
- - Passenger address amplifier CRC PAU 700 1 3,27 6305 - 0,361 |X|
- - VHF com. 2 transceiver BID RTA-44A 1 4,3 6305 - 0,474 |X|
- - Flight management computer 2 HON 4052502-953 1 14,85 6305 - 1,638 |X|
- - Prox SW Eldec 8-582-02 1 8,05 6305 - 0,868 |X|
Shelf 7:
- - Flight data acquisition unit TEL 2227000-25-B-1 1 8,5 6305 - 0,937 |X|
- - Flight management computer 1 HON 4052502-953 1 14,85 6305 - 1,638 |X|
- - ILS com. 3 receiver BID RIA-35A 1 5,0 6305 - 0,551 |X|
- - VHF com. 1 transceiver BID RTA-44A 1 4,3 6305 - 0,474 |X|
- - SELCAL TEAM SC 2253A 1 1,6 6305 - 0,176 -
- - ADF 1 receiver BID DFA-75A 1 4,0 6305 - 0,441 |X|
Shelf 10:
- - FWC test box FOK 1 - 6305 - - Full prov. only
- - Flight warning computer Grimes 80-0610-3-31 1 7,40 6305 -,0,816 |X|
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
page 10 |X| = in airplane when weighed
- = not in airplane when weighed
All rights reserved. Reproduction or disclosure to third parties of this
document or any part thereof, or the use of any information contained therein
for purposes other than provided for by this document is not permitted except
with prior and express written permission.
<PAGE>
REPORT/BASIC CHECKLIST
report no : E100-201/A323
[LOGO] issue date: 30 Nov-93 issue no: 1
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
total Index record of
no. weight arm change checking
description req. kg mm (delta) I ----------------------
[ILLEGIBLE]
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Avionics bay (cont'd)
- ------------
Shelf 9:
- - Cabin airco. control 1 Garr 2118526-4 1 3,27 6305 0,360 |X|
- - " " " 2 " " 1 3,27 6305 0,360 |X|
Electrical bay
- --------------
Shelf 12: (Between STA 3870 and
STA 6876)
- - HF com 1 transceiver CRC HFS-700 1 12,1 4288 - 1,578 - full prov. only
- - Autobrake control box FOK EAABC8615 1 1,65 4681 - 0,209 |X|
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
page 11 |X| = in airplane when weighed
- = not in airplane when weighed
All rights reserved. Reproduction or disclosure to third parties of this
document or any part thereof, or the use of any information contained therein
for purposes other than provided for by this document is not permitted except
with prior and express written permission.
<PAGE>
APPENDIX F
AIRCRAFT DOCUMENTS
FOKKER 100 AIRCRAFT 11323
Aircraft Documents shall include the following documents:
Quantity/
--------
Type Number
---- ------
1. Airplane Flight Manual book
(volumes 1 & 2) 1
2. Aircraft Operating Manual book 1
3. Quick Reference Handbook book 2
4. Weight and Balance Manual book 1
5. Master Minimum Equipment List book 1
6. Aircraft Maintenance Manual film 1
7. Illustrated Parts Catalogue film 1
8. Wiring Diagram Manual film 1
(parts 1, 2, & 3)
9. Trouble Shooting Systems film 1
Manual
10. Aircraft Logbook book 1
11. Engine Logbooks book 2
12. APU logbook book 1
13. Delivery Document book 1
(at delivery to Transwede)
14. Certificate of Airworthiness 1
15. Certificate of Registration 1
16. Radio Station License 1
98
<PAGE>
Aircraft Documents shall also include all logs, certificates and data, and
inspection, modification and overhaul records, relating to the Aircraft and
required to be maintained by the Air Authority and/or by the Approved
Maintenance Program. Upon Expiry Date or upon earlier termination of the
Agreement all Aircraft Documents shall be redelivered by Lessee to Lessor
complete and fully updated simultaneously with the redelivery of the Aircraft.
99
<PAGE>
APPENDIX G
FAA POWER OF ATTORNEY
Form used for Midway Closings to be Substituted
This POWER OF ATTORNEY in favor of LESSOR [HEAD LESSOR] ("Lessor")
dated ____________ 199_ from MIDWAY AIRLINES CORPORATION ("Lessee") [(is
consented to by BANK ("Bank")].
RECITALS:
A. Lessor and Lessee have entered into an Aircraft Operating Lease Agreement
135 dated as of _______, 1995(the "Lease Agreement") with respect to the
Fokker 100 aircraft, serial no. ______, U.S. registration no. _______ (the
"Aircraft").
B. Capitalized terms used herein and not otherwise defined shall have the
respective meanings ascribed to such terms in the Lease Agreement.
NOW, THEREFORE, for good and valuable consideration, the adequacy of
which is hereby acknowledged, it is hereby agreed as follows:
Lessee hereby irrevocably constitutes and appoints Lessor, with full
power of substitution, for and in the name and on behalf of Lessee, as the act
and deed or otherwise of Lessee:
to direct, authorize and instruct the insurer or insurance broker
with respect to the Aircraft, as if Lessor were policy holder,
pursuant to Article 11.6 of the Lease Agreement, in order to
initiate, process and settle any insurance claim with respect to the
Aircraft, Engines or Parts;
to execute, sign, deliver, authorize and file such instruments
legally necessary for any and all actions necessary to take
possession and effect redelivery of the Aircraft, Engines or Parts
upon termination of the Lease Agreement due to an Event of Default;
to execute, sign, deliver and file all such instruments requested by
Lessor [Head Lessor] that may be required to deregister the Aircraft
from the FAA, or to terminate the Lease for the Aircraft that is
recorded at the FAA, or that may be deemed proper in or in
connection with all or any of the purposes aforesaid,
100
<PAGE>
and to appoint substitutes or agents to take any such action on its
behalf; provided, however, that such power shall not be exercisable
by or on behalf of the Lessor until an Event of Default shall have
occurred and is continuing.
Lessee hereby ratifies and confirms and agrees to ratify and confirm
any direction, authorization and instruction of Lessor [Head Lessor] taken
pursuant to this Power of Attorney.
This Power of Attorney shall expire the date one year following the
Expiry Date or earlier termination of the Lease.
IN WITNESS WHEREOF, Lessee has duly caused this Power of Attorney to
be executed on the date first set forth above.
MIDWAY AIRLINES CORPORATION
By:
-------------------------------
Name:
Title:
Consented and Agreed:
[BANK]
By:
-------------------------------
Name:
Title:
[CERTIFIED RESOLUTIONS OF LESSEE AUTHORIZING THIS
POWER OF ATTORNEY TO BE ATTACHED]
101
<PAGE>
CERTIFICATE OF ACCEPTANCE
This Certificate of Acceptance is delivered, on and as of the date set forth
below, by Midway Airlines Corporation (herein referred to as "Lessee") to First
Security Bank of Utah, N.A., not in its individual capacity but solely as
trustee, (herein referred to as "Lessor") pursuant to that Aircraft Operating
Lease Agreement No. 524, between Lessor and Lessee (herein referred to as the
"Agreement"):
1. Details of Acceptance
Lessee hereby indicates and confirms to Lessor, its successors and
assigns, that the Lessee has at 9 o'clock on this 3rd day of October 1995,
at Greensboro, North Carolina, accepted the following from Transwede and
concurrently therewith from Lessor, in accordance with the provisions of
the Agreement:
(a) One Fokker F28 Mk0100 airframe,
Manufacturer's Serial Number 11323;
(b) Rolls Royce Tay Mk 650-15 Engines (each of which engines has 750 or
more rated take-off horsepower);
Engine Number Manufacturer's S/N
1. Lefthand 17291
2. Righthand 17290*
(c) 12,100 kilos; (13,590 litres) [ILLEGIBLE]
(d) Loose Equipment: as per Loose Equipment Check List per Appendix E
Section 11 of the Agreement.
2. Confirmation of Undertakings
The terms used in this Certificate shall have the meanings given to such
terms in the Agreement.
The Lessee confirms that today being the Delivery Date as defined in the
Agreement:
(i) the Aircraft is duly accepted by the Lessee in accordance with and
subject to the provisions of the Agreement and the execution and
delivery of this Certificate constitutes the acceptance of the
Aircraft by the Lessee for all purposes of the Agreement.
DELIVERY BY LESSEE TO LESSOR OF THIS CERTIFICATE OF ACCEPTANCE SHALL
CONSTITUTE CONCLUSIVE PROOF AS BETWEEN LESSOR AND LESSEE THAT ON THE
DELIVERY DATE LESSEE'S TECHNICAL EXPERTS EXAMINED AND INVESTIGATED THE
AIRCRAFT AND EVERY PART THEREOF ARE AIRWORTHY AND IN GOOD WORKING ORDER
AND REPAIR, WITHOUT DEFECT WHETHER OR NOT DISCOVERABLE AS AT THE DELIVERY
DATE, AND IN EVERY WAY SATISFACTORY TO LESSEE;
* This engine is currently off-wing and at maintenance performance facility.
Technical acceptance of the engine is conditional upon satisfactory completion
of the maintenance work being performed.
<PAGE>
CERTIFICATE OF ACCEPTANCE
(ii) the Lessee is obliged to pay to the Lessor the amount provided for
in the Agreement with respect to the Aircraft;
(iii) the Aircraft is insured in accordance with the Agreement;
(iv) the representations and warranties contained in Article 13 of the
Agreement remain, and if made at the date of this Certificate of
Acceptance, would be, true and correct in all respects;
(v) there have been affixed to the Aircraft and the Engines the fire
resistant notices required by Article 4.3 of the Agreement;
(vi) the Lessee has no right of set-off, deduction, withholding or
counterclaim against the Lessor whatsoever; and
(vii) no Default is subsisting.
IN WITNESS WHEREOF, Lessee has caused this Certificate of Acceptance to be
executed in its name, by its duly authorized officer(s) or representative(s),
pursuant to due corporate authority, all as of the date written in Paragraph 1
above.
MIDWAY AIRLINES CORPORATION
By: Jonathan S. Waller
Title: Senior Vice President
Signature: /s/ Jonathan S. Waller
-------------------------
<PAGE>
AMENDMENT NO. 1
dated as of February 26, 1996
to
AIRCRAFT OPERATING LEASE AGREEMENT
No. 524
dated as of August 1, 1995
between
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee, as
Lessor
and
MIDWAY AIRLINES CORPORATION
as
Lessee
Aircraft: Fokker 100
Serial No./RN: 11323/N131ML
<PAGE>
THIS AMENDMENT No. 1 dated as of February 26, 1996 (this
"Amendment"), is between FIRST SECURITY BANK OF UTAH, N.A., a national banking
association existing pursuant to the laws of the United States, having its
principal place of business at 79 South Main Street, Salt Lake City, Utah
84130-0007, not in its individual capacity (except as expressly set forth in the
Lease) but solely as Owner Trustee under the Trust Agreement ("Lessor"), and
MIDWAY AIRLINES CORPORATION, a company incorporated under the laws of the State
of Delaware, having its principal place of business at 300 West Morgan Street,
Durham, North Carolina 27702 ("Lessee").
WHEREAS, Lessor and Lessee are parties to that certain Aircraft
Operating Lease Agreement No. 524, dated as of August 1, 1995, and recorded by
the Federal Aviation Administration on October 1, 1995, under conveyance
number 2A267793 (as amended hereby, the "Lease"; capitalized terms used herein
and not otherwise defined herein shall have the meanings ascribed to them in the
Lease);
WHEREAS, debis AirFinance B.V. ("debis") is the beneficial owner of
the Aircraft;
WHEREAS, Lessee is in default under the Lease by reason of its
failure to make certain Rent payments due thereunder in January and February
1996; and
WHEREAS, Lessor and Lessee desire to amend the Lease as hereinafter
set forth.
NOW THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Definitions.
(a) Section 1 of the Lease is hereby amended by deleting
sub-sections 1.10 and 1.48 thereof in their entirety and replacing them with the
following:
"1.10 Beneficiary shall mean, Stockholm Aircraft Finance II, B.V., which is (i)
a company incorporated under the laws of the Netherlands, (ii)
wholly-owned by debis and (iii) the beneficiary under the Trust Agreement,
together with its successors and permitted assigns."
"1.48 Other Aircraft Agreements shall mean all other aircraft operating lease
agreements relating to other aircraft so long as such other aircraft are
leased to Lessee by a lessor for the benefit, directly or indirectly, of
debis or any affiliate of debis. For purposes of this definition,
<PAGE>
affiliate shall mean any corporation or other entity that, directly or
indirectly, controls, is controlled by or is under common control with
debis."
(b) Section 1 of the Lease is hereby further amended by deleting
"Fokker" and "FAUSA" from the definition of Indemnitee (subsection 1.39 thereof)
and adding "debis" in their stead. In addition, the references to "Fokker" and
"FAUSA" in Section 1l.2(c)(ii) of the Lease are hereby deleted and replaced with
"debis".
2. Inspection.
Section 7 of the Lease is hereby amended by adding a new
sub-section 7.6 thereto as follows:
"7.6 Lessee hereby acknowledges that the inspection rights and rights to
information and notice pursuant to this Section 7 shall extend to debis as
well as Lessor. In addition, without in any way limiting the rights
contained elsewhere in the Lease, debis shall have the right to have
observers (who may or may not be employees of debis) on site at Lessee's
premises (provided such observers do not unreasonably interfere with
Lessee's business or operations) and, provided the recipients of any
financial and operational information of Lessee (which recipients may
include employees or other representatives of debis or any of its
affiliates, or agents, attorneys or accountants of debis or any of its
affiliates) keep strictly confidential any such information, debis shall
have the right to inspect and review any internal financial and
operational information of Lessee as debis may reasonably request
(provided such request is made to Lessee's controller or to a vice
president, senior vice president or the president of Lessee) including,
without limitation, cash flow statements, financial books and records, and
any other records relating to the operation of Lessee's fleet. Lessee
covenants that it will fully cooperate with debis regarding any inspection
of Lessee's fleet and records pursuant to the terms of the Lease."
3. Default by Lessee
Section 15 of the Lease is hereby amended as follows:
2
<PAGE>
(a) Sub-section 15.1 is hereby amended by deleting paragraph (n)
thereof in its entirety and replacing it with the following:
"(n) if an event of default (however defined) occurs under (i) any
of the Other Aircraft Agreements, (ii) any other lease
agreements between Lessee and a lessor for the benefit,
directly or indirectly, of Fokker, FAUSA, Daimler-Benz
Aerospace A.G. or any affiliate of any of them, relating to
other aircraft ("Fokker Aircraft Agreements") or (iii) any
aircraft maintenance agreement or other agreement entered into
by Lessee in lieu of Reserve Rate payments ("Maintenance
Agreements"), which event permits acceleration or termination;
or"
(b) Sub-section 15.1 is further amended by adding new paragraphs
(o), (p) and (q) thereto as follows:
"(o) if Lessee's financial performance deviates in any material
adverse way (as determined by debis in its sole, but
reasonable discretion) from the projections set forth on
Lessee's Business Plan for calendar year 1996 (attached hereto
as Exhibit A), taken as a whole, and such deviation is not the
result of a natural disaster which effectively makes it
impossible for Lessee to meet such projections; or
(p) if, prior to satisfaction of Lessee's obligation to pay
Default Payments pursuant to Section 6 of this Amendment,
Lessee shall make (i) any payment of principal or interest on
any amounts owed by Lessee to Zell/Chilmark Fund, L.P.
("Zell") or any affiliate of Zell, (ii) any redemption of, or
any dividend or distribution with respect to, any shares of
Lessee owned by Zell or any affiliate of Zell, (iii) any
prepayment of principal or interest with respect to any other
subordinated debt owed by Lessee or (iv) any redemption of, or
any dividend or other distribution with respect to, any other
shares of Lessee; or
(q) if Lessee shall fail to fulfill any of the obligations set
forth in paragraphs (c) or (d) of Section 6 of this
Amendment."
3
<PAGE>
(c) Sub-section 15.2 is hereby amended by adding "(a), (n), (q)" to
clause (i) of paragraph (b) thereof following the word "paragraphs"; it being
understood that the effect of this amendment is to include payment defaults,
cross-defaults with Other Aircraft Agreements, Fokker Aircraft Agreements and
Maintenance Agreements, and failure to fulfill any of the obligations set forth
in paragraphs (c) or (d) of Section 6 of this Amendment as events giving rise to
automatic termination of the Lease without the necessity of any service of
notice thereof upon Lessee; provided, however, that such automatic termination
shall not apply with respect to defaults of the type referred to in paragraphs
(a) or (n) of sub-section 15.1 of the Lease prior to the date hereof or for
payment defaults for Rent Dates occurring in March and April 1996, for so long
as Lessee fulfills the obligations set forth in paragraphs (c) or (d) of Section
6 of this Amendment.
4. Return of Aircraft.
Section 16 of the Lease is hereby amended by adding a new
sub-section 16.9 thereto as follows:
"16.9 Notwithstanding anything to the contrary contained in the Lease, on the
Expiry Date or upon earlier termination of the Term including, without
limitation, any termination of the Lease pursuant to Section 15 (unless a
Casualty Occurrence shall have occurred with respect to the Aircraft),
Lessee shall immediately deliver possession of the Aircraft to Lessor at
Schiphol Airport, the Netherlands (or such other location as Lessor may
require) and hereby covenants that it will not interpose any defense to
any action commenced by Lessor to regain possession of the Aircraft. The
foregoing shall apply whether or not Lessee is or shall subsequently
become a debtor in a case under Title 11, U.S.C., and in such event,
Lessee covenants that it will not oppose, and will join in, any
application by Lessor seeking to regain possession of the Aircraft."
5. Notice.
Section 19 of the Lease is hereby amended by deleting clause (2) of
paragraph (d) of sub-section 19.6 thereof in its entirety and replacing it with
the following:
4
<PAGE>
"(2) to Lessor at:
First Security Bank of Utah, N.A.
79 South Main Street
Salt Lake City, Utah 84130-0007
Tel: (801) 246-5630
Fax: (801) 246-5053
Attention: Corporate Trust Department
with a copy to debis at:
Evert van de Beekstraat 22,
NL-1118 CL Luchthaven Schiphol,
Amsterdam Airport Schiphol
Tel: 011 3120 316-1431
Fax: 011 3120 653-5419"
6. Forbearance. Execution of this Amendment shall serve as Lessor's
agreement to forebear from exercising its rights (including, without limitation,
its rights under Section 15 of the Lease) with respect to:
(a) Lessee's failure to make payments of Rent or security deposit
amounts due under the Lease prior to the date of this Amendment and for Rent
Dates occurring in March and April 1996; and
(b) Lessee's failure to make payment of Reserve Rate constituting
Engine Maintenance Accruals due under the Lease and the Other Aircraft
Agreements identified as AOLAF 135 and AOLAF 524 on account of Flight Hours
and/or Cycles operated prior to February 1, 1996;
provided, however, that Lessor's agreement to forbear shall be
effective for so long, and only so long, as Lessee otherwise complies with all
the terms of the Lease, as amended, and fulfills the obligations set forth in
paragraphs (c) and (d) of this Section 6, as follows:
(c) Lessee shall pay to Lessor the following amounts (which amounts
Lessee hereby agrees to pay):
(i) [***] on the Rent Date occurring in February 1996;
(ii) [***] on the Rent Date occurring in March 1996;
(iii) [***] on the Rent Date occurring in April 1996; and
5
<PAGE>
(iv) Amounts identified on Exhibit B to this Amendment ("Default
Payments") on the Rent Date occurring in May 1996 and for the
next succeeding forty-seven (47) Rent Dates thereafter; it
being understood that Lessee shall pay such Default Payments
together with Rent and any other amounts otherwise due
pursuant to the Lease. Lessee may satisfy its obligations to
pay the Default Payments at any time by paying the portion of
all such Default Payments which constitutes principal,
together with the portion of such Default Payments which
constitutes interest accrued and unpaid as of the date of
payment, all as reflected on Exhibit B to this Amendment.
(d) On or before March 7, 1996, Lessee shall pay all unpaid Reserve
Rate owed with respect to the Lease and Other Aircraft Agreements identified as
AOLAF 135 and 525, or shall enter into a maintenance agreement reasonably
satisfactory to debis providing for the maintenance of the engines of the
Aircraft which are the subject of the Lease and such Other Aircraft Agreements.
Execution of this Amendment shall not constitute a waiver of any Rent payment
defaults or of any other defaults which may have occurred and be continuing or
which may occur in the future. Lessor's agreement to forbear shall terminate
automatically if Lessee fails to fulfill any of the obligations set forth in
paragraphs (c) or (d) of Section 6 of this Amendment or if any Event of Default
occurs or has occurred and is continuing under the Lease (other than an Event of
Default to which this forbearance agreement set forth in Section 6 of this
Amendment applies). For so long, and only so long as Lessor's agreement to
forbear has not terminated, and provided that the obligation set forth in
paragraph (d) of Section 6 of this Amendment has been fulfilled (i) Lessee shall
be entitled to exercise its rights and privileges under Sections 5.1.2(b),
5.1.3, 7.4.1 and 13.3 of the Lease and (ii) Lessor shall be deemed to have
elected not to apply the Deposit to sums due or to become due to Lessor pursuant
to Section 1 of Appendix D of the Lease, notwithstanding the occurrence and
continuation of a Default or Event of Default under the Lease.
6
<PAGE>
7. Payments
Paragraph 4 of Exhibit D to the Lease is hereby amended by deleting
the first sentence thereof and replacing it with the following:
"All payments due hereunder shall be effected by Lessee to Lessor to
Generale Bank Nederland BV, in Amsterdam, in favor of Stockholm
Aircraft Finance III, B.V., account number 64.26.09.632, or to such
other account as debis may designate in writing, and all such
payments shall be in Dollars and in immediately available funds, and
all such payments shall be initiated adequately in advance of the
due dates to ensure that Lessor receives credit for the full amount
of such payment on the due dates."
8. Governing Law. This Amendment shall be governed by and construed
in accordance with the internal laws of the State of New York and without regard
to any conflict of law rules. This Amendment is being delivered in the State of
New York.
9. Miscellaneous. Except as specifically amended or supplemented by
this Amendment, the Lease is hereby ratified, approved, confirmed and continued
in all respects and all provisions of the Lease as heretofore amended shall
remain in full force and effect. The parties hereto acknowledge and confirm that
the Lease is intended to be a true lease and not a financing arrangement. This
Amendment may be executed in any number of counterparts, and all of such
counterparts taken together shall be deemed and constitute one and the same
instrument.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee
By: /s/ [ILLEGIBLE]
--------------------------------------
Title: Asst. Vice President
SIGNED on behalf of
MIDWAY AIRLINES CORPORATION
By:
--------------------------------------
Title:
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A.
not in its individual capacity
but solely as owner trustee
By:
--------------------------------------
Title:
SIGNED on behalf of
MIDWAY AIRLINES CORPORATION
By: /s/ Jonathan S. Waller
--------------------------------------
Title: JONATHAN S. WALKER
SENIOR VICE PRESIDENT
GENERAL COUNSEL
8
<PAGE>
EXHIBIT A
1996 Business Plan
[***] (4 pages omitted)
<PAGE>
EXHIBIT B
Default Payments
{***} (2 pages omitted)
<PAGE>
AOLAF 524
AMENDMENT No. 2 AND CONSENT
THIS AMENDMENT No. 2 AND CONSENT dated as of May ___, 1996 (this
"Amendment"), is between FIRST SECURITY BANK OF UTAH, N.A., a national banking
association existing pursuant to the laws of the United States, having its
principal place of business at 79 South Main Street, Salt Lake City, Utah
84130-0007, not in its individual capacity (except as expressly set forth in the
Lease) but solely as Owner Trustee under the Trust Agreement ("Lessor"), and
MIDWAY AIRLINES CORPORATION, a company incorporated under the laws of the State
of Delaware, having its principal place of business at 300 West Morgan Street,
Durham, North Carolina 27702 ("Lessee").
WHEREAS, Lessor and Lessee are parties to that certain Aircraft
Operating Lease Agreement No. 524, dated as of August 1, 1995, and recorded by
the Federal Aviation Administration on October 4, 1995, under conveyance number
2A267793 as amended by Amendment No. 1 thereto dated as of February 26, 1996 and
recorded by the Federal Aviation Administration on April 16, 1996 under
conveyance number K08473 (as amended hereby, the "Lease"; capitalized terms used
herein and not otherwise defined herein shall have the meanings ascribed to them
in the Lease);
WHEREAS, debis AirFinance B.V. ("debis") is the beneficial owner of
the Aircraft;
WHEREAS, pursuant to the Lease, Lessee may satisfy its obligation to
pay the Engine Maintenance Accrual portion of the Reserve Rate by entering into
a Maintenance Agreement, the terms and conditions of such being subject to the
prior written consent of the Beneficiary; and
WHEREAS, Lessor and Lessee desire to amend the Lease as hereinafter
set forth and the Beneficiary desires to consent to the Agreement between
Rolls-Royce Aero Engine Services Limited and Midway Airlines Corporation
Relating to Repair and Overhaul of Rolls-Royce Tay Engines, dated May 10, 1996
(the "Approved Maintenance Agreement"), a copy of which, certified by lessee as
true and complete, is attached hereto as Exhibit A.
NOW THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Notwithstanding anything to the contrary contained in the Lease,
Lessee agrees that it shall remit to Lessor as Reserve Rate, on the date when
Reserve Rate is due under the Lease (in addition to all other amounts due and
<PAGE>
owing under the Lease), an amount equal to the difference between (i) the Engine
Maintenance Accrual due pursuant to the Lease for the preceding calendar month,
or partial calendar month, as the case may be (assuming the absence of the
Approved Maintenance Agreement), and (ii) the amount paid under the Approved
Maintenance Agreement with respect to such preceding calendar month, or partial
calendar month, as the case may be (the "Reduced Engine Maintenance Accrual").
In order to ensure Lessee's compliance with the foregoing, the Beneficiary may
request, and Lessee shall so provide, the information and calculations used in
determining the Reduced Engine Maintenance Accrual. Lessee's obligations to pay
other amounts of Reserve Rate owing under the Lease are not in any way reduced
or otherwise effected other than as hereinabove provided with respect to the
Engine Maintenance Accrual portion of Reserve Rate.
2. Lessee hereby acknowledges that, pursuant to the terms of the
Lease, an event of default by Lessee under the Approved Maintenance Agreement,
or any failure by Lessee to make any payment required under the Lease
(including, without limitation, any failure to pay the portion of Reserve Rate
which constitutes Reduced Engine Maintenance Accrual) constitutes an Event of
Default under the Lease giving rise to automatic termination of the Lease
without the necessity of any service of notice thereof upon Lessee. Lessee
further acknowledges that if the Approved Maintenance Agreement is amended in
any respect without the written consent of the Beneficiary, the consent being
given hereby by the Beneficiary to the Approved Maintenance Agreement shall be
void and of no effect, and that such event shall constitute an Event of Default
under the Lease giving rise to automatic termination of the Lease.
3. This Amendment shall be governed by and construed in accordance
with the internal laws of the State of New York and without regard to any
conflict of law rules. This Amendment is being delivered in the State of New
York.
4. Except as specifically amended or supplemented by this Amendment,
the Lease is hereby ratified, approved, confirmed and continued in all respects
and all provisions of the Lease as heretofore amended shall remain in full force
and effect. The parties hereto acknowledge and confirm that the Lease is
intended to be a true lease and not a financing arrangement. This Amendment may
be executed in any number of counterparts, and all of such counterparts taken
together shall be deemed and constitute one and the same instrument.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee
By: /s/ [ILLEGIBLE]
--------------------------------------
Title: Vice President
SIGNED on behalf of
MIDWAY AIRLINES CORPORATION
By:
--------------------------------------
Title:
MAINTENANCE AGREEMENT CONSENTED TO:
STOCKHOLM AIRCRAFT FINANCE III, B.V.
By:
--------------------------------------
Title:
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee
By:
--------------------------------------
Title:
SIGNED on behalf of
MIDWAY AIRLINES CORPORATION
By: /s/ Jonathan S. Waller
--------------------------------------
Title: JONATHAN S. WALLER
SENIOR VICE PRESIDENT
GENERAL COUNSEL
MAINTENANCE AGREEMENT CONSENTED TO:
STOCKHOLM AIRCRAFT FINANCE III, B.V.
By:
--------------------------------------
Title:
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee
By:
--------------------------------------
Title:
SIGNED on behalf of
MIDWAY AIRLINES CORPORATION
By:
--------------------------------------
Title:
MAINTENANCE AGREEMENT CONSENTED TO:
STOCKHOLM/AIRCRAFT FINANCE III, B.V.
By: /s/ [ILLEGIBLE]
--------------------------------------
Title:
3
<PAGE>
EXHIBIT A
<PAGE>
EXHIBIT A
[Intentionally omitted for FAA filing purposes.]
<PAGE>
AGREEMENT
BETWEEN
ROLLS-ROYCE AERO ENGINE SERVICES LIMITED
AND
MIDWAY AIRLINES CORPORATION
RELATING TO REPAIR AND OVERHAUL OF
ROLLS-ROYCE TAY ENGINES
<PAGE>
This AGREEMENT is made this 10th day of May 1996
BETWEEN
ROLLS-ROYCE AERO ENGINE whose registered office is at Moor Lane,
SERVICES LIMITED Derby, DE24 8BJ, England on its own
behalf and as agent on behalf of
ROLLS-ROYCE plc (hereinafter called
"RRAES") of the first part,
AND
MIDWAY AIRLINES CORPORATION whose registered office is 300 West
Morgan Street, Suite 1200 Durham, North
Carolina, USA, 27701 (hereinafter called
"MIDWAY") of the second part.
WHEREAS
A. MIDWAY has acquired certain ROLLS-ROYCE TAY engines for use by MIDWAY in
Fokker 100 aircraft manufactured by Fokker BV.
B. ROLLS-ROYCE and MIDWAY have entered into a Warranty Agreement reference
CE117 incorporated in Fleet Support Agreement reference ISE dated
__________ which is hereinafter called the "WARRANTY".
C. MIDWAY desires that RRAES shall undertake certain WORK on TAY engines used
in the operation of its aircraft.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
<PAGE>
INDEX
-----
RECITALS
- --------
Clause 1 Definitions
Clause 2 Exclusion Of Other Terms and Previous Understandings
Clause 3 Subject of Contracts
Clause 4 Delivery
Clause 5 Standard
Clause 5 Charges
Clause 7 Payment
Clause 8 Turn Round Time and Delay in Delivery
Clause 9 General Provisions
Clause 10 Warranty and Liability
Clause 11 Patents
Clause 12 Additional Levies
Clause 13 Assignment
Clause 14 Termination
Clause 15 Amendment
Clause 16 Conflict
Clause 17 Notices
Clause 18 Headings
Clause 19 Survival
Clause 20 Law
Appendix 'A' Description and List of Engines
Appendix 'B' Planned Operating Parameters
Appendix 'C' Aircraft Lease Periods
<PAGE>
Clause 1 DEFINITIONS
In this AGREEMENT unless the context otherwise requires:
1.1 "ENGINES" shall mean all the ROLLS-ROYCE engines listed and
described in Appendix 'A' to this AGREEMENT.
1.2 "PART" shall mean any part of an ENGINE acquired from ROLLS-ROYCE or
from a source approved by ROLLS-ROYCE.
1.3 "SUPPLIES" shall mean ENGINES, PARTS and any other items of
associated equipment delivered to RRAES by MIDWAY.
1.4 "RUNNING TIME" shall mean the number of hours flown by an ENGINE as
logged under the standards and procedures employed by MIDWAY at the
date of this AGREEMENT and acceptable to the Federal Aviation
Authority.
1.5 "TAKE-OFFS" shall mean the number of take-offs by an ENGINE as
logged under the standards and procedures employed by MIDWAY at the
date of this AGREEMENT and acceptable to the Federal Aviation
Authority.
1.6 "FLIGHT CYCLE" shall mean one operation of an ENGINE to achieve one
aircraft take-off and subsequent landing.
1.7 "ENGINE MANAGEMENT PROGRAMME" shall mean Midway's approved Engine
Management Programme which may be amended from time to time by
Midway in accordance with all applicable laws and regulations. This
programme will define the Engineering responsibilities and
practices.
1.8 "SCHEDULED OVERHAUL" shall mean the WORK required in an Overhaul
Base following the removal of an ENGINE, PART or assembly of PARTS
to comply with the ENGINE MANAGEMENT PROGRAMME and such other WORK
as may then be necessary to enable such ENGINE, PART or assembly of
PARTS to be released for further operation in service.
1.9 "UNSCHEDULED OVERHAUL" shall mean work other than SCHEDULED OVERHAUL
which is required when an ENGINE, PART or assembly of PARTS has
become unserviceable and which enables such ENGINE, PART or assembly
of PARTS to be released for further operation in service.
1.10 "OVERHAUL" shall mean SCHEDULED OVERHAUL or UNSCHEDULED OVERHAUL as
the case may be.
<PAGE>
Clause 1 DEFINITIONS (Continued)
1.11 "REPAIR" shall mean work other than OVERHAUL which is required when
an ENGINE, PART or assembly of PARTS has become unserviceable and
which is necessary to render the ENGINE, PART or assembly of PARTS
serviceable such that it can continue in service.
1.12 "WORK" shall mean OVERHAUL, REPAIR or any other work in respect of
which in each case RRAES accepts orders from MIDWAY pursuant to this
Agreement.
1.13 "OVERHAUL BASE" shall mean the Overhaul Base stipulated by RRAES
from time to time during the period of this AGREEMENT.
1.14 "AIRCRAFT LEASE PERIOD" shall mean the period of lease of each
aircraft as detailed in Appendix 'C'.
Clause 2 EXCLUSION OF OTHER TERMS AND PREVIOUS UNDERSTANDINGS
2.1 This AGREEMENT contains the only provisions governing REPAIR or
OVERHAUL of SUPPLIES and shall apply to the exclusion of any other
provisions on or attached to or otherwise forming part of any order
form of MIDWAY or any acknowledgment or acceptance by RRAES or of
any other document which may be issued by either party relating to
REPAIR or OVERHAUL of SUPPLIES.
2.2 The parties have negotiated this AGREEMENT on the basis that its
provisions represent their entire agreement relating to REPAIR or
OVERHAUL by RRAES of SUPPLIES. This AGREEMENT shall supercede all
representations, agreements, statements and understandings made
prior to the execution of this AGREEMENT whether orally or in
writing relating to REPAIR or OVERHAUL by RRAES of SUPPLIES. The
parties further agree that neither of them has placed any reliance
whatsoever on any such representations, agreements, statements or
understandings other than those expressly incorporated in this
AGREEMENT.
<PAGE>
Clause 3 SUBJECT OF THE CONTRACT
3.1 The parties hereto agree that RRAES will carry out REPAIR or
OVERHAUL described in clauses 6.2.1 through 6.2.5 to all ENGINES and
PARTS which develop a requirement for OVERHAUL or an OVERHAUL BASE
REPAIR during the AIRCRAFT LEASE PERIOD and which are delivered to
the OVERHAUL BASE no later than 30 (thirty) days after expiry of
that period.
Clause 4 DELIVERY
4.1 MIDWAY will deliver ENGINES and PARTS requiring REPAIR or OVERHAUL
to the OVERHAUL BASE at its own expense.
4.2 MIDWAY will not later than the time of delivery of ENGINES and PARTS
pursuant to Sub-clause 4.1 above, also deliver to RRAES the
completed ENGINE Log Book (or such other Log Book as may be
applicable).
4.3 MIDWAY will notify RRAES in writing at least 1 (one) week before the
time for re-delivery of its instructions as to the marking and
shipping of the SUPPLIES after notification from RRAES of scheduled
redelivery.
4.4 Following WORK, RRAES will re-deliver SUPPLIES to MIDWAY fas
(Incoterms 1990) Great Britain port or any other destination in
Great Britain as specified by MIDWAY.
4.5 A sufficient number of packing cases, stands and transportation
parts for use in transporting SUPPLIES to and from the OVERHAUL BASE
shall be procured and maintained in usable condition by MIDWAY at
MIDWAY'S expense.
Clause 5 STANDARD
5.1 Unless otherwise mutually agreed, RRAES will carry out WORK on
SUPPLIES in accordance with the ENGINE MANAGEMENT PROGRAMME in a
professional and workmanlike manner.
5.2 Unless otherwise agreed, RRAES will carry out REPAIRS or OVERHAULS
to the modification standard generally recommended by ROLLS-ROYCE
for ENGINES of the same type and model as the ENGINES.
<PAGE>
Clause 5 STANDARD (Continued)
5.3 MIDWAY shall have the right to appoint a representative at the
OVERHAUL BASE to consult with RRAES representatives with respect to
technical matters arising in the course of the WORK to be performed
by RRAES hereunder.
5.4 In the event that ENGINES are delivered to RRAES by MIDWAY which do
not contain each PART described in the Engine Receipt List attached
hereto as Part 1, Section 1 in Sub-clause 1.1 (Appendix 'A') above,
then RRAES will advise MIDWAY of those missing PARTS exceeding US
Dollars 500 at the then current RRAES Catalogue value and unless
otherwise instructed by MIDWAY, RRAES reserves the right to replace
any missing PARTS and shall be entitled to charge MIDWAY for the
same at the RRAES commercial prices and rates current at the date of
presentation of RRAES' invoice.
5.5 Any PARTS incorporated in the course of REPAIR or OVERHAUL pursuant
to this AGREEMENT shall be deemed to have been sold to the owner of
the SUPPLIES, and title to and risk of loss of and damage to such
PARTS subject to the terms of Clause 10 below, shall pass to the
owner of the SUPPLIES upon re-delivery of the SUPPLIES by RRAES to
MIDWAY pursuant to Sub-clause 4.4 above.
5.6 RRAES reserves the right at its sole discretion to fit new or
repaired replacement PARTS in the course of REPAIR or OVERHAUL
pursuant to this AGREEMENT at no additional cost to MIDWAY unless
pursuant to Clause 5.4 above. Such new or replacement PARTS to be in
as good operating condition, have substantially similar hours
available until the next SCHEDULED OVERHAUL and have the same
interchangeable modification standard. Title to and risk of loss or
damage to any PARTS so replaced whether scrap or repairable shall
pass to RRAES upon removal from the ENGINE or from the assembly of
PARTS.
5.7 The REPAIR or OVERHAUL of SUPPLIES shall be deemed to have been
accepted by MIDWAY on its signature of the relevant Release
Note/Approved Certificate of Inspection. Such acceptance shall not
be deemed a waiver of any rights or remedies of MIDWAY including
without limitation any claim for warranty under Clause 10 hereof
<PAGE>
Clause 6 CHARGES
6.1 In respect of RUNNING TIME and TAKE-OFFS of the ENGINES during the
period of this AGREEMENT, MIDWAY shall pay to RRAES: (as adjusted in
accordance with the provisions of sub-clause 6.6) multiplied by the
RUNNING TIME of the ENGINES.
6.1.1 an amount equal to [***] United States Dollars for the period
01 September 1995 to 31 August 1997 (24 payments)
6.1.2 an amount equal to [***] United States Dollars for the period
01 September 1997 to 31 May 1999 (21 payments)
6.2 The Basic Charges under clause 6.1 above are in consideration of
RRAES undertaking to carry out:
6.2.1 SCHEDULED OVERHAULS, and
6.2.2 REPAIRS and UNSCHEDULED OVERHAULS arising from failures of
ENGINES and PARTS caused by the breakdown or deterioration of
the ENGINES or PARTS due to defects in design, material or
workmanship in the manufacture, REPAIR or OVERHAUL of the
ENGINE or PART, and:
6.2.3 REPAIRS and UNSCHEDULED OVERHAULS arising from failures of
ENGINES and PARTS caused by the breakdown or deterioration of
the ENGINES or PARTS due to foreign object damage.
6.2.4 REPAIRS arising from the introduction of mandatory
modifications required by RRAES and/or airworthiness
directives issued by any governmental authority.
6.2.5 REPAIRS and OVERHAULS arising from ENGINE removals generally
recommended by ROLLS-ROYCE with respect to the same type and
model of ENGINE as the ENGINES.
6.3 MIDWAY shall pay RRAES at the RRAES normal commercial rates current
at the date of presentation of RRAES invoice for REPAIRS and
UNSCHEDULED OVERHAULS arising from failures of ENGINES and PARTS due
to causes outside the reasonable control of RRAES including but not
limited to failures of ENGINES and PARTS, which:
6.3.1 have been caused by MIDWAY's failure to operate an ENGINE in
accordance with the procedures laid down in Appendix 'D' to
the WARRANTY, or
6.3.2 have been caused by misuse, negligence, improper operation or
failures due to negligent foreign object damage.
<PAGE>
Clause 6 CHARGES (Continued)
6.3.3 have been caused by MIDWAY failure to properly store, install,
maintain, utilise or pack for transport such ENGINE and/or
PART in accordance with the then current RRAES written
recommendations, or
6.3.4 have been caused by the primary breakdown or deterioration of
any constituent or component which was not acquired by MIDWAY
from RRAES or through channels specifically approved in
writing by ROLLS-ROYCE, unless such constituent or component
PART was installed by RRAES.
6.4 With the exception of the obligation provided for in Clause 10.5,
RRAES shall not be liable for any expenses, costs or liabilities
sustained in connection with the removal of an ENGINE or PART from,
or the replacement in an aircraft or the removal of a PART from, or
the replacement in an ENGINE other than those sustained by RRAES in
carrying out REPAIRS and OVERHAULS pursuant to this AGREEMENT at the
OVERHAUL BASE.
6.5 In respect of PARTS supplied pursuant to sub-clause 5.4 above,
MIDWAY shall pay RRAES at the RRAES commercial prices and rates
current at the installation of such PARTS.
6.6 The Basic Charges shown in sub-clause 6.1 are based on 1995 values
and will be subject to annual variation prospectively on 01
September 1996 and each 01 September thereafter in accordance with
the formula:
C = Co(0.35L/Lo + 0.65P/Po)
Where C = The charge per hour of RUNNING TIME or the charge per
TAKE-OFF as the case may be.
Co = Basic charge per hour of RUNNING TIME or the basic
charge per TAKE-OFF as the case may be.
Lo = All employees: By Industry for Mechanical Engineering
(Table 5.3) "Index Number of Average Earnings" published
by the British Government for the month of February
1995.
L = The corresponding Index Number published for the month
of February preceding the year for which the adjustment
is to be made.
<PAGE>
6.6 (Continued)
P = The Index of Rolls-Royce Tay Parts Prices current on 01
September for the year for which the adjustment is to be
made relative to the Base Prices as at 01 September
1995.
Po = The index relative to the Base Level of Rolls-Royce Tay
Parts as of 01 September 1995, ie 100.
If the indices herein specified be discontinued or should the basis
of their calculations be modified proper and substantially
equivalent indices shall be substituted by mutual agreement of the
parties.
6.7 It is understood that the charges specified in sub-clause 6.1 above
have been calculated with regard to the overall operation of the
ENGINES by MIDWAY as detailed in Appendix 'B'.
In the event that MIDWAY should take any action or any event should
occur which is reasonably likely to materially change the overall
operation of the ENGINES such that the basis upon which such charges
were calculated no longer remains the same, including without
limitation the sale or other disposition of any of the ENGINES or
the use of the ENGINES on routes other than as described in Appendix
'B', then RRAES may at its discretion reasonably revise the charges
specified in sub-clause 6.1 in accordance with its customary
standards.
Clause 7 PAYMENT
7.1 Within ten days of the end of each month of operation of the
ENGINES, MIDWAY will supply to RRAES a certified statement of actual
RUNNING TIME and TAKE-OFFS by ENGINE serial number for the previous
month.
7.2 Payment of charges pursuant to clause 6.1:
7.2.1 shall be made in US Dollars within 14 days of the end of the
month to which the charges apply and for any amount due
pursuant to clause 6.3 or 6.5 within 14 days of redelivery of
the ENGINE or PART concerned.
<PAGE>
Clause 7 PAYMENT (Continued)
7.2.2 which became due prior to signature of this AGREEMENT shall be
made on 17 May 1996, subject to the deduction of an amount
equal to the engine maintenance reserve paid by Midway to the
aircraft lessors at that date.
7.3 Subject to Clause 12 below, MIDWAY undertakes that RRAES shall
receive in the United Kingdom, the full amount of payments falling
due under this AGREEMENT without any withholding or deduction
whatsoever.
7.4 All payments under clause 7.3 above shall be made by telegraphic
transfer to the following address:
National Westminster Bank plc
Overseas Branch
LONDON
for telephone credit to:
Rolls-Royce CD Account Number
140-2-00772224
at 15 Bishopsgate Office
Clause 8 TURN ROUND TIME AND DELAY IN DELIVERY
8.1 Subject to sub-clause 82 below and provided MIDWAY delivers ENGINES
and if the WORK is to be performed on a PART, then such PART to the
OVERHAUL BASE for WORK at a reasonably consistent rate, RRAES will
carry out WORK in accordance with the following turn round times
which will commence when the ENGINE or PART reaches the OVERHAUL
BASE and which will end when such ENGINE or PART is available fully
prepared for despatch ex-works at the OVERHAUL BASE.
8.1.1 ENGINES returned for REPAIR or OVERHAUL not requiring defect
investigation - 8 (eight) weeks.
8.1.2 ENGINES returned for REPAIR or OVERHAUL due to unusual
failures requiring defect investigation or life development
purposes - 10 (ten) weeks.
8.1.3 ENGINES returned for REPAIR not requiring disassembly of any
MODULE - 4 (four) weeks.
8.1.4 PARTS returned for REPAIR or OVERHAUL - to be quoted by RRAES
on request.
<PAGE>
Clause 8 TURN ROUND TIME AND DELAY IN DELIVERY (Continued)
8.2 In the event that the actual turn round time in respect of any
ENGINE exceeds the turn round time agreed pursuant to Sub-clause 8.1
above (as such period may be extended pursuant to Sub-clause 8.3
below) and MIDWAY is unable to operate an aircraft due to such
delay, RRAES will either provide a lease engine subject to
availability and waive any daily rental charges or be responsible
for charges incurred by MIDWAY for the daily rental of a lease
engine until such times as such delayed ENGINE is returned to
MIDWAY. Such responsibility for charges incurred by MIDWAY will not
exceed those generally charged by Rolls-Royce Leasing Limited,
provided that MIDWAY proves that it has suffered such damage and
provided that MIDWAY makes claims hereunder within three (3) months
after redelivery.
8.3 If RRAES is hindered or prevented from carrying out WORK or
re-delivering any of the SUPPLIES within the time for re-delivery
specified in Sub-clause 8.1 above by reason of:
8.3.1 any cause beyond the reasonable control of RRAES, or
8.3.2 fires or industrial disputes or introduction of mandatory
modifications,
the time for re-delivery shall be extended by a period equal to the
period during which the WORK or re-delivery shall have been so
hindered or prevented and provided RRAES uses its best efforts to
promptly complete the WORK, RRAES shall be under no liability
whatsoever in respect of such delay.
Clause 9 GENERAL PROVISIONS
9.1 MIDWAY shall keep records of ENGINE operation, maintenance, RUNNING
TIME and TAKE-OFFS and shall permit RRAES to inspect such records.
MIDWAY shall submit to RRAES each month a certified statement of
RUNNING TIME and TAKE-OFFS listed by ENGINE serial number in respect
of the previous month.
9.2 If any SUPPLIES delivered to RRAES are lost, destroyed or damaged
during the time between such delivery and return by RRAES to MIDWAY
then RRAES will either:
9.2.1 repair such damage free of charge, or
9.2.2 pay to MIDWAY the value of such SUPPLIES which has been agreed
between RRAES and MIDWAY provided that in the absence of
agreement the liability of RRAES shall not exceed the
originals RRAES sale price of the SUPPLIES.
<PAGE>
Clause 9 GENERAL PROVISIONS
9.2 (Continued)
provided always that RRAES will at MIDWAY'S request use its best
endeavours to provide an adequate replacement for any such SUPPLIES
lost or destroyed. In the event that a replacement ENGINE is
provided, such ENGINE shall be substituted for the ENGINE lost or
destroyed and Appendix 'A' hereto shall be amended accordingly.
9.3 MIDWAY shall operate the ENGINES in accordance with the Flexible
Take-off Thrust Procedures as recommended by Fokker BV.
Clause 10 WARRANTY AND LIABILITY
10.1 Subject to sub-clause 10.2 below in respect of all PARTS
incorporated in the course of OVERHAUL or REPAIR pursuant to this or
any other AGREEMENT or incorporate as spares in service, the
WARRANTY shall apply subject to all the provisions contained
therein.
10.2 MIDWAY shall not be entitled to receive any benefits whatsoever
whether by way of repair, replacement, parts cost allowance, labour
charges or otherwise under the WARRANTY in relation to SCHEDULED
OVERHAULS and any failures of ENGINES or PARTS which are covered by
the charges under sub-clause 6.1 above and are specified in
sub-clause 6.2 above, but save as expressly provided above the
WARRANTY shall remain in full force and effect.
10.3 MIDWAY accepts that the express benefits provided to MIDWAY by
virtue of the charges under sub-clause 6.1 above, together with the
express remedies provided to MIDWAY in respect of the SUPPLIES in
accordance with this AGREEMENT and WARRANTY represent the entire
responsibility and liability of RRAES to MIDWAY in respect of all
terms, conditions and warranties express or implied whether
statutory or otherwise and any other obligations and liabilities
whatsoever of RRAES relating to the OVERHAUL and REPAIR of SUPPLIES
or any other goods and services to be supplied pursuant to this
AGREEMENT.
<PAGE>
Clause 10 WARRANTY AND LIABILITY ( Continued)
10.4 The following Notional Warranty benefits will be applied for the
purposes of sub-clause 6.1 hereof:
10.4.1 In respect of all PARTS incorporated in the course of WORK
pursuant to this AGREEMENT, the WARRANTY shall apply subject
to all the provisions contained therein.
10.4.2 Subject to the 'Governing Conditions' section of the
WARRANTY, if it is shown to the reasonable satisfaction of
RRAES that before the expiration of twelve months from the
date of redelivery or within six months or 1,500 hours flown
from the date of installation of an ENGINE or PART into an
aircraft, whichever is the sooner, a defect, deficiency,
failure, malfunction or failure to function shall have become
apparent in an ENGINE or PART due in all or in part to the
use by RRAES of faulty workmanship during the last REPAIR or
OVERHAUL then RRAES shall REPAIR such ENGINE OR part and
grant MIDWAY a 100% credit against the REPAIR costs.
10.5 In the event of the valid WARRANTY claim, RRAES will be responsible
for reasonable charges incurred by MIDWAY for removal, installation
and transportation from and to MIDWAY'S base in Raleigh, North
Carolina, USA for ENGINES removed pursuant to clause 10.4 above.
Clause 11 PATENTS
11.1 Subject to the conditions set out in the Clause 11, RRAES shall
indemnify MIDWAY against any claim that the use by MIDWAY of any
PARTS supplied hereunder infringes any patent, design or model duly
granted or registered provided, however, that RRAES shall not be
liable to MIDWAY for any consequential damages or any loss of use of
such PARTS or of the ENGINE or aircraft in which such PARTS may be
incorporated arising as a result directly or indirectly of any such
claim.
11.2 MIDWAY will give immediate notice in writing to RRAES of any such
claim whereupon RRAES shall have the right at its own expenses to
assume the defence of or to dispose of or to settle such claim in
its sole discretion and MIDWAY will give RRAES all reasonable
assistance and will not by any act or omission do anything which
directly or indirectly prejudice RRAES in this connection.
<PAGE>
Clause 11 PATENTS (Continued)
11.3 RRAES shall have the right to substitute for any allegedly
infringing PARTS substantially equivalent non-infringing PARTS.
11.4 The indemnity contained in Sub-clause 11.1 above shall not apply to
and RRAES shall have no liability in respect of claims for
infringement in respect of:
11.4.1 PARTS manufactured to the specific design instructions of
MIDWAY, or
11.4.2 PARTS not of RRAES design but RRAES shall, in the event of
any claim for infringement, pass on to MIDWAY so far as it
has the right to do so the benefits of any indemnity given to
RRAES by the designer, manufacturer or supplier of such
PARTS, or
11.4.3 the manner or method in which any of the PARTS is installed
in the aircraft, or
11.4.4 any combination of any of the PARTS with any item or items
other than PARTS.
Clause 12 ADDITIONAL LEVIES
12.1 Subject to Sub-clause 12.2 below, RRAES shall pay all imposts,
duties, fees, taxes and other like charges levied by the United
Kingdom Government or any agency thereof in connection with the
OVERHAUL or REPAIR of ENGINES and PARTS prior to their re-delivery.
12.2 MIDWAY shall pay all other imposts, duties, fees, taxes and other
like charges levied by the United States of America or any
subdivision thereof.
Clause 13 ASSIGNMENT
Neither party may assign any of its rights or obligations hereunder
without the written consent of the other party except that:
13.1 RRAES may assign its rights to receive money hereunder and
13.2 RRAES reserves the right, in its discretion, to sub-contract any
part of the WORK required to be performed by it hereunder.
<PAGE>
Clause 14 TERMINATION
If MIDWAY makes any agreement with creditors compounding debts, enters
into liquidation whether compulsory or voluntary (otherwise than for the
purpose of amalgamation or re-construction) becomes insolvent, suffers a
receiver of the whole or part of its assets to be appointed, or commits a
breach of any of its obligations under this AGREEMENT (provided that,
except in the case of breach in respect of payment obligations, MIDWAY
shall be allowed 30 (thirty) days in which to remedy such breach) RRAES
shall have the right, without prejudice to its other rights or remedies:
14.1 to stop any REPAIR or OVERHAUL already commenced and to refuse to
commence any further REPAIR or OVERHAUL, and
14.2 to revise the charges under Sub-clause 6.1 to take account of any
cessation or change in the overall operation of the ENGINES
resulting from any of the event covered by this Clause 14, and
14.3 to declare and require that notwithstanding Clause 7 above, all
amounts due on the date of termination referred to in Sub-clause 6.1
shall become immediately due and payable.
Clause 15 AMENDMENT
This AGREEMENT shall not be amended in any way other than by agreement in
writing executed by the parties hereto after the date of this AGREEMENT,
which is expressly stated to amend this AGREEMENT.
Clause 16 CONFLICT
In the event of any conflict or discrepancy between the Appendices forming
part of this AGREEMENT and any other part of this AGREEMENT, than the
latter shall prevail.
<PAGE>
Clause 17 NOTICES
Any notice to be served pursuant to this AGREEMENT is to be sent by
registered post or by telex:
In the case of RRAES to:
Rolls-Royce Aero Engine Services Limited
Repair and Overhaul Manager - Spey and Tay
EAST KILBRIDE
Glasgow G74 4PY
Scotland
or such other place of business as may be notified in writing
by RRAES to MIDWAY from time to time.
In this case of MIDWAY to:
Midway Airlines Corporation
300 West Morgan Street
Suite 1100
DURHAM
North Carolina USA 27701
for the attention of Vice President Maintenance
or such other place of business as may be notified in writing
by MIDWAY to RRAES from time to time.
Clause 18 HEADINGS
The clause 'Headings' and the Index do not form part of this AGREEMENT and
shall not affect the interpretation of this AGREEMENT.
Clause 19 SURVIVAL
The provisions of Clauses 10, 15, 20 and 21 hereof shall survive and
continue to have effect after termination for any reason whatsoever of
this AGREEMENT or after this AGREEMENT becomes impossible of performance
or is otherwise frustrated.
Clause 20 LAW
This AGREEMENT shall be subject to any interpreted and construed in
accordance with the Laws of England.
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this AGREEMENT to be entered
into on the day and year first before written.
For ROLLS-ROYCE AERO ENGINE /s/ [ILLEGIBLE] Marketing Manager
SERVICES LIMITED ----------------------------------------
In the presence of /s/ [ILLEGIBLE] Vice President Marketing
----------------------------------------
10 May 1996
For MIDWAY AIRLINES CORPORATION /s/ Jonathan S. Waller
----------------------------------------
JONATHAN S. WALLER
SENIOR VICE PRESIDENT
GENERAL COUNSEL
In the presence of /s/ Thomas Duffy, Jr.
----------------------------------------
THOMAS DUFFY, JR.
<PAGE>
APPENDIX 'A'
DESCRIPTION AND LIST OF THE ENGINES
<PAGE>
APPENDIX 'A'
1. LIST OF ENGINES
The following RRAES Tay Mk 650-15 ENGINES serially numbered:
17288
17289
17290
17291
17650
17651
17667
17668
A. DESCRIPTION OF ENGINES
Rolls-Royce Tay Mk 650-15 ENGINES
Description: Turbofan Engine incorporating a single fan and a three stage
intermediate compressor driven by a three stage turbine, a
twelve stage high pressure compressor driven by a two stage
turbine, and a turbo annular split combustion chamber
containing ten straight flow flame tubes and an internal
mixer unit.
MODULES
Each Engine comprises the following modules:
01 LP compressor
02 IP compressor
03 HP compressor
04 Combustion assembly and HP turbine
05 LP turbine
06 High speed gearbox
07 Intermediate casing
Together with these items the definitive basic specification includes the
following:
<PAGE>
ENGINE RECEIPT LIST
TAY ENGINE
PART 1 SECTION 1
Item
Fig Number Description Qty ATA Ref
- --- ------ ----------- --- -------
1 1 AFCR assembly 1 75-32-02
1 2 TCPL phial assembly 1 75-32-40
1 3 Micro switch and actuator 1 36-11-01
1 4 12th stage BV micro switch housing assy 1 75-32-33
1 5 12th stage air off-take cover 1 72-71-01
1 6 7th stage air off-take cover 1 72-71-01
1 7 Fuel temp transmitter 1 77-42-02
1 8 Oil cooler case assembly 1 79-22-01
1 9 Oil temperature transmitter 1 77-47-02
1 10 HP filter housing assembly 1 79-21-01
1 11 LP FWS assembly 1 73-34-01
1 12 Fuel filter assembly 1 73-11-03
1 13 LP tacho generator 1 77-43-01
2 14 Throttle relay lever transmitter 1 76-11-02
2 15 Fuel flow regulator 1 73-21-01
2 16 LP governor assembly 1 73-21-02
2 17 HP fuel shut-off valve assembly 1 73-11-07
2 18 AFC rpm signal transmitter assembly 1 75-32-20
2 19 Fuel diff pressure switch 1 77-42-03
2 20 HP fuel pump 1 73-11-05
2 21 Oil tank assembly 1 79-10-01
2 22 Oil tank level indicator 1 79-10-01
2 23 LP warning switch 1 79-32-01
2 24 Oil pressure trans assembly 1 77-47-01
2 25 Ejector pump unit 1 73-11-01
2 26 Fuel drain tank collector assembly 1 71-71-01
2 27 IDG surface oil cooler 1 24-13-01
2 28 Thermocouple terminal 1 77-45-03
2 29 Cooling air outlet switch assembly 1 75-21-02
2 30 Oil diff pressure switch 1 77-47-02
2 31 Oil diff pressure switch housing 1 77-47-02
2 32 Oil pump assembly 1 72-61-30
2 33 HP tacho generator 1 77-43-01
2 34 LP fuel pump assembly 1 73-11-04
2 35 Fuel inlet tube to LP fuel pump clamp assy 1 73-21-06
2 36 Fuel solenoid valve assembly 1 73-21-06
2 39 Engine rating, ID plug 1 72-71-03
2 40 Electrical harness 1 71-50-01
<PAGE>
APPENDIX 'B'
PLANNED OPERATING PARAMETERS
<PAGE>
PLANNED OPERATING PARAMETERS
Fleet Utilisation: A minimum of 92,000 FLIGHT HOURS in
the aggregate for all ENGINES during
the effective period of the AGREEMENT.
Stage Length: Average (take-off to touch down) of
not less than 1.30 hours.
Environment: East Coast and Mid-West North
America for 90% of FLIGHT HOURS of the
ENGINES.
<PAGE>
APPENDIX 'C'
AIRCRAFT LEASE PERIODS
<PAGE>
AIRCRAFT LEASE PERIODS
Aircraft Designation Period of Lease
- -------------------- ---------------
MSN 13329 24 August 1995 to 22 March 1999
MSN 11323 03 October 1995 to 30 November 1998
MSN 11321 13 November 1995 to 31 October 1998
MSN 11330 20 December 1995 to 03 May 1999
<PAGE>
EXHIBIT A
[Intentionally omitted for FAA filing purposes.]
<PAGE>
524
AMENDMENT NO. 3
dated as of January 31, 1997
to
AIRCRAFT OPERATING LEASE AGREEMENT
NO. 524
dated as of August 1, 1995
between
FIRST SECURITY BANK, N.A., formerly known as
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee, as
Lessor
and
MIDWAY AIRLINES CORPORATION, as
Lessee
Aircraft: Fokker 100
Serial No./RN: 11323/N131ML
<PAGE>
524
THIS AMENDMENT NO 3 dated as of January 31, 1997 (this "Amendment"),
is between FIRST SECURITY BANK, N.A., formerly known as First Security Bank of
Utah, N.A., a national banking association existing pursuant to the laws of the
United States, having its principal place of business at 79 South Main Street,
Salt Lake City, Utah 84130-0007, not in its individual capacity (except as
expressly set forth in the Lease) but solely as Owner Trustee under the Trust
Agreement ("Lessor"), and MIDWAY AIRLINES CORPORATION, a company incorporated
under the laws of the State of Delaware, having its principal place of business
at 300 West Morgan Street, Durham, North Carolina 27701 ("Lessee").
WHEREAS, Lessor and Lessee are parties to that certain Aircraft
Operating Lease Agreement No. 524, dated as of August 1, 1995 (as amended from
time to time, the "Lease"; capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the Lease);
WHEREAS, Lessor and Lessee entered into Amendment No. 1 to the
Lease, dated as of February 26, 1996 ("Amendment No. 1") and entered into
Amendment No. 2 to the Lease, dated May, 1996 ("Amendment No. 2");
WHEREAS, debis AirFinance B.V. ("debis AF") is the beneficial owner
of the Aircraft;
WHEREAS, debis AF, Lessee, and Lessor entered into a Deferral
Agreement dated as of October 25, 1996 ("Deferral Agreement"), which provided
for the deferral of certain payments due under the Lease, and amended the Lease
in certain other respects;
WHEREAS, debis AF and Lessee entered into an Amendment to Deferral
Agreements dated as of December 30, 1996, which modified the Deferral Agreement
in certain respects (the "Amendment to Deferral Agreements");
WHEREAS, Lessee has entered into an Agreement and Plan of Merger
dated as of January 17, 1997 (as amended, the "Merger Agreement") with
GoodAero, Inc., a Delaware corporation ("GoodAero") and Zell/Chilmark Fund,
L.P., a Delaware limited partnership, whereby it is proposed that GoodAero will
be merged into Lessee to effect a recapitalization of Lessee (the "Merger"),
subject to certain conditions precedent having been satisfied; and
WHEREAS, Lessor and Lessee desire to amend the lease to become
effective upon the consummation of the Merger and to enter into further
agreements as hereinafter set forth.
NOW THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Amendment of Lease. The Lease is hereby amended as follows:
<PAGE>
524
(a) Section 1 of the Lease is amended by eliminating the
period at the end of Subsection 1.25 thereof, and by inserting in lieu thereof
the following clause:
"or such earlier date as may be specified by Lessor pursuant
to notice given in accordance with, and subject to the terms
of Section 16.10 hereof."
(b) Section 1.48 of the Lease is amended by deleting the
period at the end of the first sentence and by inserting the following in lieu
thereof: "or any successor or assign thereof."
(c) Section 6.4 of the Lease is amended as follows: (a) by
deleting subsection (i) thereof in its entirety and by inserting in lieu thereof
the following: "(i) any financial reports or projections supplied to the
majority shareholder of Lessee"; and (b) by deleting the words "upon Lessor
requesting the same" from subsection (ii) thereof.
(d) Section 11.1(a) of the Lease is amended by deleting the
period at the end thereof and by inserting the following clause:
provided, however, that the deductible may be $500,000 (Dollars Five
Hundred Thousand) for each accident, but only if Lessee procures
and maintains in favor of debis AirFinance B.V. for the benefit of
the Beneficiary and/or the Lessor under each of the Leases
identified on Schedule 16.10 hereof (as those terms are defined
therein) an irrevocable letter of credit (the "Letter of Credit") in
the face amount of $800,000 (Dollars Eight Hundred Thousand) issued
by Wachovia Bank or another banking institution reasonably
acceptable to debis AirFinance B.V. and in a form reasonably
acceptable to debis AirFinance B.V. containing the terms set forth
in Schedule 11.1(a).1 of this Lease; provided, however, that Lessee
may reduce the amount of the Letter of Credit to $400,000 in any
year where Lessee's audited financial statements for the prior year
show that Lessee had net income (as determined in accordance with
generally accepted accounting principles ("Net Income")) greater
than the amount for such prior year identified as "Net Income (1)"
on Schedule 11.1(a).2, but less than the amount for such prior year
identified as "Net Income (2)" on Schedule 11.1(a).2; and Lessee
shall not be required to maintain the Letter of Credit in any year
where Lessee's audited financial statements for the prior year show
that Lessee had Net Income for such prior year greater than the
amount for such prior year identified as "Net Income (2)" on
Schedule 11.1(a).2; and provided, further, that notwithstanding any
reduction or cancellation of the Letter of Credit in accordance with
the terms hereof, Lessee shall be required to restore the Letter of
Credit in any year where Lessee's audited financial statements for
the immediately preceding year show that Lessee's Net Income was
less than the threshold set by Schedule 11.1(a).2 for such prior
year for reduction of the Letter of Credit or in any year in which
audited financials for Lessee for the immediately preceding year
have not been certified on or before April 15 of that year. For
-2-
<PAGE>
524
purposes of determining the amount required for the Letter of Credit
in any year, reductions, if any, shall not be permitted until 30
days after receipt by debis AirFinance B.V. of the audited financial
statements of Lessee for the prior year and, in the event that the
Letter of Credit is to be reinstated or increased in any year as
aforedescribed, such Letter of Credit shall be required on or before
April 15 of such year. Any failure by Lessee to comply with the
provisions of this Section 11.1(a) shall be an Event of Default
under Section 15.1(b) of the Lease.
(e) Intentionally Omitted.
(f) Section 14.1(p) is amended by deleting the same in its
entirety and by inserting in lieu thereof the following:
"not become the surviving corporation of a merger with any
other entity, or itself consolidate with, or merge into, any
other corporation, or convey, transfer or lease substantially
all of its assets as entirety to any person, without the prior
written consent of Lessor (such consent not to be unreasonably
withheld) and the execution and delivery to Lessor of such
agreements, certificates and legal opinions as Lessor may
reasonably request with respect thereto."
(g) Intentionally Omitted.
(h) Intentionally Omitted.
(i) Section 15.1(e) of the Lease is deleted in its entirety
and the following is inserted in lieu thereof:
"if (i) if Lessee or any of its subsidiaries is in default
under any lease, hire-purchase, conditional sale or credit
sale agreement for equipment having a casualty value in excess
of [***] and such default is not cured or waived within
the applicable grace period or five (5) Business Days
(whichever is greater); (ii) (regardless of the amount of
money involved), any event occurs which with or without notice
or lapse of time or both would constitute a default under any
agreement between Lessee and, or promissory note executed by
Lessee in favor of, [***]; (b)Zell/Chilmark Fund, L.P.;
[***]; (d) [***]; (e) any affiliate of any of the
foregoing; unless such default or event of default is
cured or waived within the applicable grace period or five (5)
Business Days (whichever is greater); or (iii) any
indebtedness owed by Lessee or any of its subsidiaries in an
amount in excess of [***] is not paid when due or becomes
due or capable of being declared due prior to the date when it
would otherwise become due provided, however, the failure of
Lessee to pay amounts
-3-
<PAGE>
524
[***] (and any accrued interest thereon) [***] shall not be
deemed a Default or an Event of Default hereunder.*
(j) Section 15.1(n) is modified by inserting the following
clause after the word "affiliate": ", successor or assign"
(k) Sections 15.1(o), (p) and (q) are deleted in their
entirety and the following new Sections 15.1(o) and (p) are inserted in lieu
thereof:
"(o) if, an Event of Default shall occur under and as defined
in that certain Promissory Note dated as of January 31, 1997
from the Lessee to debis AirFinance B.V. or under, and as
defined in that certain Promissory Note dated as of January
31, 1997 from the Lessee to DASA Aircraft Finance XVI, B.V.
(each, a "Note" and collectively, the "Notes");
(p) if, prior to satisfaction of Lessee's obligations pursuant
to the Notes, Lessee shall make (i) any payment of principal
or interest on any debt owed by Lessee to Zell/Chilmark Fund,
L.P. or to any holder of equity in Lessee representing the
right to vote twenty percent (20%) or more of the stock in
Lessee on any matter presented for vote to the shareholders
of Lessee (an "Insider") or any affiliate of an Insider; or
(ii) any redemption of, or any dividend or distribution with
respect to, any shares of Lessee owned by an Insider or any
affiliate thereof."
(l) Section 15.2 is amended by deleting clause (i) of
paragraph (b) thereof in its entirety and inserting the following new clause (i)
in lieu thereof:
"(i) serving notice of such termination on Lessee specifying
the occurrence giving rise to such Event of Default or Events
of Default, provided that such notice shall be deemed to have
been served without the necessity of actual service and this
Lease shill terminate automatically without the necessity of
any service of notice thereof upon Lessee upon the occurrence
of any Event if Default described in paragraphs (a), (f), (g),
(h), (n) or (o) of Section 15.1 of this Lease; provided,
however, that actual service of notice of such termination on
Lessee shall be required where an Event of Default described
in paragraph (n) of Section 15.1 of the Lease has occurred
solely by reason of occurrence of an event of default under an
Other Aircraft Agreement or under a Fokker Aircraft Agreement,
which event of default does not, under the terms of such Other
Aircraft Agreement or
-4-
<PAGE>
524
Fokker Aircraft Agreement, result in automatic termination of
such Other Aircraft Agreement or such Fokker Aircraft
Agreement."
(m) Article 16 of the Lease is amended by adding a new Section
16.10 as follows:
"(a) Notwithstanding anything to the contrary contained in
this Lease, Lessor may terminate this Lease by giving not less
than six (6) months' prior written notice of the termination
date to Lessee provided that in no event may Lessor choose a
termination date earlier than September 15, 1998 ("Lessor's
Termination Option") and the termination date specified in
such notice shall become the Expiry Date; provided, however,
that (subject to the following sentence) Lessor shall not be
entitled to exercise Lessor's Termination Option with respect
to this Lease where the same would result in the termination
of four (4) or more of the aircraft operating lease agreements
identified in Schedule 16.10 to the Lease in any twelve (12)
month period, taking into account the scheduled or actual
Expiry Date of each such aircraft operating lease agreement.
Nothing herein shall be construed to limit the Lessor's rights
upon the occurrence of any Default or Event of Default or upon
the termination of this Lease as a result thereof or upon the
expiration of any Lease in the absence of the exercise of
Lessor's Termination Option.
(b) Lessee shall in no event be liable for any costs,
expenses, liabilities, losses, damages or amounts incurred by
Lessor which arise solely from the Lessor exercising Lessor's
Termination Option hereunder such as the loss of any tax
benefit, or fees or penalties arising from the breakage of any
contract or agreement. Except as expressly provided in
subsection (c) below, Lessor shall in no event be liable for
any costs, expenses, liabilities, losses, damages or amounts
incurred by Lessee as a result of Lessor exercising Lessor's
Termination Option in accordance with this Section 16.10.
(c) Notwithstanding the terms of clause (b) above, if Lessor
exercises Lessor's Termination Option hereunder in accordance
with this Section 16.10, then Lessee shall be responsible for
performing all of its obligations under and in accordance with
the terms of this Article 16, subject to the following:
(i) the Lessor shall pay or cause to be paid to Lessee
for Lessee's application against the "C Check" completed
pursuant to Appendix E, Item 1(e), an amount equal to
the lesser of (x) $100,000 or (y) an amount equal to the
product of the full cost of the "C Check" completed by
Lessee pursuant to Appendix E, Item 1(e) on the Aircraft
multiplied
-5-
<PAGE>
524
by a fraction, the numerator of which is the number of
hours (including fractions of an hour) remaining on the
Aircraft until Lessee's next scheduled "C Check" for the
Aircraft (assuming Lessor had not exercised Lessor's
Termination Option hereunder) and the denominator of
which is 3000; and
(ii) for purposes of Section 7,4.1(b) and (c), any shop
visit required to meet the conditions of Appendix E
shall be deemed a "scheduled" shop visit."
(n) Section 18.6 of the Lease is amended by deleting the
firm of "Haight, Gardner, Poor & Havens, Attn: Bonny L.Y. Kwoh, 195 Broadway,
New York, NY 10007" as agent for Lessor and by inserting in lieu thereof the new
agent for Lessor as follows: "Hertzog, Calamari & Gleason, Attn: Carla Craig,
100 Park Avenue, New York, New York 10017".
(o) Appendix B to the Lease is hereby amended as
follows:
(i) The amount set forth as the "AGREED VALUE" is
deleted in its entirety and the amount of [***]
is substituted therefor.
(ii) The Amount set forth as "RENT" is deleted in its
entirety and the amount or [***] is substituted
therefor.
(p) Appendix D to the Lease is hereby amended by
deleting Sections 2.2 through 2.7 in their entirety and by deleting Section 1 in
its entirety and inserting the following in lieu thereof:
"1. Deposit. Lessee has paid to Lessor the amount set
forth on Schedule B.1 as a Deposit for the Aircraft prior to
January 31, 1997. Lessor has applied such Deposit (plus all
accrued interest thereon) to the Default Payments (as defined
in Section 6 of Amendment No. 1 to this Lease) and/or to
Default Payments (as defined in Section 6 of Amendment No. 1
to the Other Aircraft Agreements)."
(q) Schedule 16.10 attached to this Amendment is hereby
attached to the Lease as Schedule 16.10 thereto and is incorporated therein.
2. Waiver of Default. Lessor agrees that any Default or Event of
Default under Sections 15.1(a), 15.1(e), 15.1(g) or 15.1(o) of the Lease (prior
to the amendment of any such Sections hereunder) which occurred prior to the
date of this Amendment is hereby deemed to have
-6-
<PAGE>
524
been cured by Lessee and Lessor waives any rights or remedies it may have had
with respect to the occurrence of any such Default or Event of Default.
3. Representations, Warranties and Covenants
The following shall be, as applicable, representations, warranties
or covenants of Lessee pursuant to Articles 13 and 14 of the Lease:
(a) Representations
(i) This Amendment and the Notes have been duly entered into
and delivered by Lessee, and each constitutes a valid, legal and binding
obligation of Lessee enforceable against Lessee in accordance with its terms.
(ii) As of the date of this Amendment, Lessee has entered, or
will contemporaneously herewith enter, into an agreement with [***] having
terms which are substantially in accordance with the terms set forth under
the heading [***] in Exhibit 6.02(k) to the Agreement and Plan of Merger dated
as of January 17, 1997 by and among GoodAero, Inc., James H. Goodnight, John P.
Sall, Midway Airlines Corporation and Zell/Chilmark Fund, L.P., as amended,
except to the extent otherwise specifically set forth in the letter dated as of
February 10, 1997, from Lessee to Lessor.
(b) Covenants
Lessee covenants that it will not make any prepayment in
respect of the Promissory Note dated February 7, 1997 in the amount of
[***] to provide for terms more favorable to the payee thereof (including,
without limitation, any increase in the interest rate or acceleration of
payment).
4. Deferral Agreement. Lessor and Lessee agree that the Deferral
Agreement and the Amendment to Deferral Agreements are hereby declared null and
void and shall have no further force or effect with respect to the Lease.
5. Merger. Lessor hereby consents to the Merger.
6. Governing Law. This Amendment shall be governed by and construed
in accordance with the internal laws of the State of New York and without regard
to any conflict of law rules. This Amendment is being delivered in the State of
New York.
7. Miscellaneous. Except as specifically amended or supplemented by
this Amendment, the Lease is hereby ratified, approved, confirmed and continued
in all respects and all provisions of the Lease as heretofore amended shall
remain in full force and effect. The parties hereto acknowledge and confirm that
the Lease is intended to be a true lease and not a financing arrangement. This
Amendment may be executed in any number of counterparts, and all of such
counterparts taken together shall be deemed and constitute one and the same
instrument.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
on the day and year first above written.
FIRST SECURITY BANK, N.A., formerly
known as First Security Bank of Utah, N.A.
not in its individual capacity but solely as
owner trustee
By: /s/ Greg A. Hawley
----------------------------------------------
Name: Greg A. Hawley
Title: Vice President
MIDWAY AIRLINES CORPORATION
By: /s/ JS Waller
----------------------------------------------
Name:
--------------------------------------------
Title:
-------------------------------------------
<PAGE>
524
Schedule 11.1(a).1
The Letter of Credit shall contain the following terms:
debis AirFinance B.V. shall be entitled to draw amounts under the Letter of
Credit upon notice to the issuing bank signed by debis AirFinance B.V. stating
that amounts are due under one or more of the following, and that such amounts
remain unpaid:
Promissory Note dated as of January 31, 1997 executed by Midway
Airlines Corporation in favor of debis AirFinance B.V.
Promissory Note dated as of January 31, 1997 executed by Midway
Airlines Corporation in favor of Daimler-Benz Aerospace A.G.
Aircraft Operating Lease Agreement No. 111 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 112 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 113 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 114 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 135 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 136 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 524 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 525 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
<PAGE>
524
Aircraft Operating Lease Agreement No. 115-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
Aircraft Operating Lease Agreement No. 116-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
Aircraft Operating Lease Agreement No. 117-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
Aircraft Operating Lease Agreement No. 118-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
<PAGE>
524
Schedule 11.1(a).2
Midway Airlines
Net Income Thresholds for Reduction in Amount of Letter of Credit Pursuant to
Section 11.1(a)
US$ millions
Year 1997 1998 1999 2000 2001
Net Income(2) 12.0 18.0 25.2 32.8 41.0
Net Income(1) 8.0 12.0 16.8 21.8 27.3
Year 2002 2003 2004 2005 2006
Net Income(2) 49.1 57.7 67.8 67.8 67.8
Net Income(1) 32.8 38.5 45.2 45.2 45.2
Year 2007 2008 2009 2010 2011
Net Income(2) 67.8 67.8 67.8 67.8 67.8
Net Income(1) 45.2 45.2 45.2 45.2 45.2
Year 2012 2013 2014
Net Income(2) 67.8 67.8 67.8
Net Income(1) 45.2 45.2 45.2
Amount of
Letter of Credit
- ----------------
$800,000 If actual Net Income is less than or equal to Net
Income(1)
$400,000 If actual Net Income is greater than Net Income(1)
but less than or equal to Net Income(2)
0 If actual Net Income is greater than Net Income(2)
<PAGE>
524
Schedule 16.10
1. Aircraft Operating Lease Agreement No. 111, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
2. Aircraft Operating Lease Agreement No. 112, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
3. Aircraft Operating Lease Agreement No. 113, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
4. Aircraft Operating Lease Agreement No. 114, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
5. Aircraft Operating Lease Agreement No. AOLAF-115-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
6. Aircraft Operating Lease Agreement No. AOLAF-116-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
7. Aircraft Operating Lease Agreement No. AOLAF-117-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
8. Aircraft Operating Lease Agreement No. AOLAF-118-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
9. Aircraft Operating Lease Agreement No. 135, dated as of July 20, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
10. Aircraft Operating Lease Agreement No. 136, dated as of December 15, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
11. Aircraft Operating Lease Agreement No. 524, dated as of August 1, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
12. Aircraft Operating Lease Agreement No. 525, dated as of October 15, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
<PAGE>
524
Schedule B.1
Security Deposits Paid by Midway
Aircraft AOLAF Deposit
MSN No. Paid
- -------- ----- ------------
11321 525 [***]
11323 524 [***]
11329 135 [***]
11330 136 [***]
11444 111 [***]
11445 112 [***]
11475 113 [***]
11477 114 [***]
11450 115 [***]
11484 116 [***]
11485 117 [***]
11486 118 [***]
<PAGE>
EXHIBIT 10.13
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY [***]. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
F-100 LEASE #525
(TAIL # N132ML)
<PAGE>
[LETTERHEAD OF DEBIS AIRFINANCE B.V.]
16 October 1996
By fax: + 1 919 956 4801 / + 1 919 956 8619
Midway Airlines Corporation
300 W. Morgan St.
Durham, North Carolina 27702
Attention: President
Copy to: Steven Westberg, Senior Vice President Finance and Planning &
Lyn Dorman, Finance Department
Notification of Change of Bank Account
Re: Change of bank account in relation to all payments under Aircraft
Operating Lease Agreement No. 525 dated as of October 15, 1995, as amended
from time to time, relating to one (1) Fokker 100 aircraft bearing
manufacturer's serial number: 11321 (the "Lease").
Beneficiary: Stockholm Aircraft Finance II B.V.
Dear Sirs,
We refer to the Lease and the Amendment No. 1 thereto, dated as of February 26,
1996 (the "Amendment"), each agreement between First Security Bank of Utah,
N.A., not in its individual capacity, but solely as owner trustee under the
trust agreement ("Lessor") and Midway Airlines Corporation ("Lessee").
In accordance with Section 7 (Payments) of the Amendment, debis AirFinance B.V.
herewith formally designates for all payments the following new account:
Rabobank International, Utrecht, the Netherlands, account number 1010.56.931
Please note that payment of the invoices effective from November 1996 has to be
effected to this new account.
1
<PAGE>
[LOGO] debis
AirFinance B.V.
For the avoidance of doubt, save for the change of account nothing in this
notification shall have the effect of supplementing or amending the Lease and
the Amendment and all provisions of the Lease as heretofore amended, shall
remain in full force and effect.
Yours sincerely,
debis AirFinance B.V.
/s/ F. Haspel /s/ S. Engels
- -------------------------- --------------------------
F. Haspel S. Engels
Managing Director (CEO) Managing Director
- ----------
Acknowledged for receipt on behalf of Midway Airlines Corporation by:
Name:
Its:
2
<PAGE>
DUPLICATE ORIGINAL
THE SINGLE EXECUTED ORIGINAL OF THIS AGREEMENT MARKED "ORIGINAL" SHALL BE THE
"ORIGINAL" AND ALL OTHER COUNTERPARTS OF THIS AGREEMENT SHALL BE DUPLICATES AND
MARKED "DUPLICATE" OR "DUPLICATE ORIGINAL". TO THE EXTENT THAT THIS AGREEMENT
AND CERTIFICATE OF ACCEPTANCE RELATED THERETO CONSTITUTES CHATTEL PAPER, AS SUCH
TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE
JURISDICTION, NO SECURITY INTEREST MAY BE CREATED THROUGH TRANSFER OR POSSESSION
OF ANY COUNTERPART OTHER THAN THE "ORIGINAL".
AIRCRAFT OPERATING LEASE AGREEMENT
No. 525
Dated as of
October 15, 1995
between
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual
capacity but solely as trustee,
as
Lessor
and
MIDWAY AIRLINES CORPORATION
as
Lessee
Aircraft: Fokker 100
Serial No: 11321/N132ML
<PAGE>
INDEX
ARTICLE PAGE
- ------- ----
1. Definitions ....................................... 1
2. Agreement to Lease ................................ 13
3. Term; Delivery; Acceptance; Delay ................. 17
4. Registration and Title ............................ 18
5. Possession and Use ................................ 20
6. Charges, Method of Payment and Financial
Information ....................................... 26
7. Maintenance ....................................... 27
8. Taxes, Duties, and Expenses ....................... 33
9. Liens ............................................. 38
10. Indemnification ................................... 38
11. Insurance ......................................... 40
12. Assignment and Subletting ......................... 48
13. Disclaimer, Representations and Warranties ........ 52
14. Covenants of Lessee ............................... 57
15. Default by Lessee ................................. 60
16. Return of Aircraft ................................ 67
17. Casualty Occurrences .............................. 69
18. Governing Law and Jurisdiction .................... 72
19. Miscellaneous ..................................... 73
i
<PAGE>
APPENDICES PAGE
- ---------- ----
A. Description of Aircraft 79
B. Further Definitions and Values 80
C. Certificate of Acceptance 82
D. Charges 84
E. Operating Condition at Re-Delivery 93
F. Aircraft Documents 98
G. FAA Power of Attorney 100
ii
<PAGE>
AIRCRAFT OPERATING LEASE AGREEMENT
No. 525
THIS AIRCRAFT OPERATING LEASE AGREEMENT No. 525 is made as of the
15th day of October, 1995 between FIRST SECURITY BANK OF UTAH, N.A., a national
banking association existing pursuant to the laws of the United States, having
its principal place of business at 79 South Main Street, Salt Lake City, Utah
84130-0007, not in its individual capacity (except as expressly herein set
forth) but solely as Owner Trustee under the Trust Agreement (as defined in
Article 1 hereof) and its permitted successors and assigns (herein referred to
as "Lessor") and MIDWAY AIRLINES CORPORATION a company incorporated under the
laws of the State of Delaware, having its principal place of business at 300
West Morgan Street, Durham, North Carolina 27702 and its permitted successors
and assigns (herein referred to as "Lessee").
WHEREAS, subject to fulfillment of the conditions precedent stated
in Article 2.2 (viii), (ix) and (x), Lessor has the right to possess, use and
lease the Aircraft; and
WHEREAS Lessee desires to lease the Aircraft from Lessor; and
WHEREAS Lessor is willing to lease the Aircraft to Lessee upon the
terms and conditions set out herein.
NOW THEREFORE, in consideration of the mutual promises herein
contained, Lessor and Lessee agree as follows:
1. DEFINITIONS
The following terms shall have the following respective meanings for
all purposes of this Agreement:
1.1 Air Authority shall mean the Federal Aviation Administration of the United
States Department of Transportation and any successor.
1.2 Aircraft shall mean the aircraft identified and described in Appendix A,
including any Engine, Part, or component thereof, and/or ancillary and
loose equipment or devices installed in or on the Aircraft at the Delivery
Date (or which having been removed therefrom remain the property of the
Lessor pursuant to this Agreement) and Aircraft Documents furnished
therewith
<PAGE>
under this Agreement, or any substitutions, renewals and replacements from
time to time made in or on the said Aircraft in accordance with this
Agreement, whether or not for the time being installed on or in the said
Aircraft or any other aircraft.
1.3 Aircraft Documents shall mean the items identified in Appendix F.
1.4 Aircraft Maintenance Agreement shall mean a Flight Hour Agreement entered
into between Lessee and an overhaul/repair agency relating to the Engines
and the landing gear and any modification, amendment or substitution
therefor consented to by Beneficiary. The terms and conditions of such
Aircraft Maintenance Agreement and the overhaul/repair agency shall be
subject to the prior written consent of Beneficiary.
1.5 Airframe shall mean the Aircraft, excluding the Engines.
1.6 Appraisal Procedure shall mean the procedure for determining the FMV of
the Aircraft set forth Article 9 of Appendix D.
1.7 Approved Maintenance Program shall mean the Maintenance Program in effect
on the Delivery Date with respect to the aircraft which are the subject of
the Other Aircraft Agreements or such other Maintenance Program as Lessor
shall from time to time approve in writing, such approval not to be
unreasonably withheld.
1.8 Authorized Maintenance Performer shall mean Lessee, American Airlines,
Inc., U.S. Air, Aviall, Rolls Royce Canada or any Air Authority approved
provider.
1.9 Bank shall mean the financial institution(s) and/or other provider(s) of
finance (other than Lender) from whom finance respecting the acquisition
or continued ownership of the Aircraft by Lessor is to be, or is for the
time being, obtained and/or in whose favor or for whose benefit security
over, or rights with respect to the Aircraft is to be, or is for the time
being, granted by Lessor or at its request and shall include any financial
institution providing finance to the Head Lessor in respect of Head
Lessor's acquisition of the Aircraft by whatever means, including without
limitation by way of loan or by way of non-recourse sale of lease
receivables.
2
<PAGE>
1.10 Beneficiary shall mean, Stockholm Aircraft Finance II, B.V., which is (i)
a company incorporated under the laws of the Netherlands, (ii)
wholly-owned by Fokker and (iii) the beneficiary under the Trust
Agreement, together with its successors and permitted assigns.
1.11 Business Day shall mean a day (other than a Saturday or Sunday) on which
banks are open for business in New York.
1.12 Casualty Occurrence shall have the meaning set forth in Article 17.1.
1.13 Certificate of Acceptance shall mean the Certificate of Acceptance given
in the form of Exhibit C.
1.14 Certificated Air Carrier means any person (except the United States
Government) that is a citizen of the United States of America (as defined
in Section 40102 of Title 49 of the United States Code) holding an air
carrier operating certificate issued by the Secretary of Transportation
pursuant to Chapter 447 of Title 49 of the United States Code (or any
predecessor thereof) for aircraft capable of carrying ten or more
individuals or 6,000 pounds or more cargo, which is also certificated so
as to entitle Lessor, as lessor, to the benefits of Section 1110 of Title
11 of the United States Code with respect to the Aircraft.
1.15 Credit and Security Agreement shall mean the Credit and Security Agreement
dated as of October 29, 1993 therein between FAUSA and Lessee.
1.16 Cycle shall mean one take-off and landing of the Aircraft.
1.17 Default shall mean an Event of Default or any event which, with the giving
of notice and/or lapse of time and/or the making of any relevant
determination, would constitute an Event of Default.
1.18 Delivery Date shall mean the Midway Technical Acceptance Date as such term
is defined in the Tripartite Agreement which will be the date on which the
Aircraft is delivered to and accepted by the Lessee for the purposes of
this Agreement.
3
<PAGE>
1.19 Delivery Location shall mean the location at which Transwede delivers the
Aircraft to Lessor and identified in the Certificate of Acceptance.
1.20 Dollars and $ shall mean the lawful currency of the United States of
America and in respect of all payments to be made under this Agreement in
Dollars shall mean funds which are for same day settlement in the New York
Clearing House Interbank Payments System (or such other US Dollar funds as
may at the relevant time be customary for the settlement of international
banking transactions denominated in United States Dollars).
1.21 Engine shall mean (i) any engine installed on or furnished with the
Aircraft on the Delivery Date, such Engines being identified as to
manufacturer and type in Appendix A and as to serial numbers in the
Certificate of Acceptance executed by Lessee on the Delivery Date and (ii)
any substitute or replacement engine title to which has, or should have,
transferred to and vested in Lessor in accordance with this Agreement, in
each case including all modules or Parts from time to time belonging to or
installed in that engine and irrespective of whether or not the same shall
for the time being be installed on the Aircraft or on any other aircraft.
The term "Engine" shall exclude any properly replaced engine title to
which has, or should have, passed to Lessee pursuant to this Agreement.
1.22 Equipment Change shall have the meaning set forth in Article 17.3(a).
1.23 Event of Default shall mean any of the events specified in Article 15.1.
1.24 Intentionally omitted.
1.25 Expiry Date shall mean October 31, 1998.
1.26 Fair Market Rental Value shall be equal in amount to the value that would
be obtained in an arms'-length transaction between an informed and willing
lessee under no compulsion to lease and an informed and willing lessor
under no compulsion to lease, in accordance with a lease to a lessee
similarly situated with Lessee, for a term equal to the relevant period
and on conditions as herein provided, any such determination (made for
purposes of Article 15.3(b)) to be made on the basis of the then actual
condition of the Aircraft, to be determined pursuant to an
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Independent Appraisal and to be the average of the two determinations
obtained thereunder.
1.27 FAUSA shall mean Fokker Aircraft U.S.A., Inc., a company incorporated
under the laws of the State of Delaware, with its principal office at
Alexandria, Virginia.
1.28 First Rent Date shall mean the Delivery Date.
1.29 Flight Hour shall mean each hour or part thereof elapsing from the moment
at which the wheels of the Aircraft leave the ground on the take off of
the Aircraft until the wheels of the Aircraft touch the ground on the
landing of the Aircraft following such flight.
1.30 FMV shall have the meaning set forth in Appendix D.
1.31 Fokker shall mean Fokker Aircraft B.V., a Netherlands corporation with its
principal office at Amsterdam Zuid-Oost, The Netherlands, together with
its successors.
1.32 Intentionally omitted.
1.33 Governing Law shall mean the law of the state of New York.
1.34 Government Entity shall mean and include (i) any national or state
government, political subdivision thereof, or local jurisdiction therein;
(ii) any board, commission, department, division, organ, instrumentality,
court, or agency of any thereof, however constituted; and (iii) any
association, organization, or institution of which any thereof is a member
or to whose jurisdiction any thereof is subject or in whose activities any
thereof is a participant.
1.35 Head Lessor shall mean any person or persons to whom title to the Aircraft
is vested or transferred in accordance with Article 12.3(e).
1.36 Indemnitees shall mean Lessor (in its trust and individual capacities),
the Voting Trustee (in its trust and individual capacities), the Mortgagee
(in its trust and individual capacities), the Lender, the Beneficiary, the
Head Lessor, the Bank, Fokker, FAUSA, including any of their respective
successors and assigns and their respective shareholders,
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subsidiaries, affiliates, directors, officers, agents and employees.
1.36A Indenture shall mean the Trust Indenture and Security Agreement, dated the
Delivery Date between Mortgagee and First Security Bank of Utah, National
Association, as owner trustee, as it may be amended, modified or
supplemented from time to time or any such security agreement created over
the Aircraft in accordance with the terms thereof.
1.37 Independent Appraisal shall mean a determination of Fair Market Rental
Value of the Aircraft by two independent aircraft appraisers, selected by
Lessor, the costs and expenses of the appraisal to be paid by Lessee.
1.38 Law shall mean and include (i) any law, statute, decree, constitution,
regulation, order or any directive of any Government Entity; (ii) any
treaty, pact, compact or other agreement to which any Government Entity is
a signatory or party; (iii) any judicial or administrative interpretation
or application of any thereof; and (iv) any amendment or revision of any
thereof.
1.38A Lender shall mean Kreditanstalt fur Wiederaufbau, together with its
permitted successors and assigns.
1.39 Lessor or Lessee shall have the meanings respectively ascribed to them in
the first paragraph of this Agreement and shall include their respective
assignees or successors.
1.40 Lessor Liens shall mean:
(a) the Indenture, the Security Assignment and any security or leasehold
interest whatsoever from time to time created by or through Lessor
and/or Head Lessor in connection with the financing of the Aircraft;
(b) any other security interest or other lien in respect of the Aircraft
or this Agreement, which results from acts of or omissions to act or
claims against Lessor and/or Head Lessor or any of their respective
affiliates not related to the transactions contemplated by or
permitted under this Agreement; and
(c) liens in respect of the Aircraft for Lessor Taxes.
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1.41 Lessor Taxes shall mean Taxes:
(a) imposed as a direct result of activities of a Tax Indemnitee in any
jurisdiction imposing a liability unrelated to that Tax Indemnitee's
dealings with Lessee, to the transactions contemplated by this
Agreement or the operation of the Aircraft by Lessee; or
(b) imposed on or measured by net income, profits or gains, or capital
or net worth (excluding, however, in each case, Taxes that are, or
are in the nature of, license, sales, use, rental, value-added, or
property taxes) of a Tax Indemnitee, by (A) any Governmental Entity
by or in which that Tax Indemnitee would be subject to tax without
regard to the transactions contemplated by this Lease, or (B) the
Federal Government of the United States of America (including,
without limitation, any withholding taxes imposed by such
government); or
(c) imposed with respect to any period or event occurring prior to the
date of this Agreement or after the Expiry Date or earlier
termination of this Agreement in accordance with the terms hereof,
provided that such Tax is unrelated to a Tax Indemnitee's dealings
with Lessee or to the transactions contemplated by this Agreement;
or
(d) for which Transwede is liable under the Tripartite Agreement.
(e) imposed as a result of any voluntary sale, assignment, transfer or
other disposition by the Lessor (including to the Head Lessor) or
any other Tax Indemnitee of any interest in the Aircraft or any part
thereof or this Agreement unless such transfer or disposition occurs
(1) in connection with a Tax Indemnitee's pursuing its remedies
while an Event of Default by Lessee is continuing or otherwise
resulting from an Event of Default, or (2) pursuant to Lessee's
exercise of its option to purchase the Aircraft under Article 9 of
Appendix D (it being understood and agreed that Lessor and Lessee
will cooperate with each other to minimize any Taxes resulting from
any sale pursuant to this clause (2)).
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1.42 LIBOR shall mean the rate of interest per cent per annum (rounded upward,
if not already such a multiple, to the nearest whole multiple of 1/16th.
of one per cent) at which, at or about 11.00 a.m. (London time) on the day
two Business Days before the beginning of the relevant period deposits in
Dollars are offered for the duration of such relevant period on the
REUTERS "LIBO" page (or such other page as may replace it from time to
time).
1.43 Maintenance Program shall mean an Air Authority approved maintenance
program for the Aircraft encompassing scheduled maintenance (including
block maintenance), condition monitored maintenance, and on-condition
maintenance of Airframe, Engines and Parts, including but not limited to,
servicing, testing, preventive maintenance, repairs, structural,
inspections, system checks, overhauls, approved modifications, service
bulletins, engineering orders, airworthiness directives, corrosion
control, inspections and treatments.
1.44 Major Checks shall mean any 12,000 hours Check, 24,000 hours Check or
Intersupplementary Check or segment thereof or any equivalent thereof with
more or less hours, however denominated, to the extent set out in the
Approved Maintenance Program from time to time.
1.45 Manufacturer shall mean Fokker.
1.46 Mortgagee shall mean Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity but solely as trustee pursuant
to the Indenture, and its successors and permitted assigns.
1.47 Note shall mean the Secured Promissory Note executed and delivered to
FAUSA by the Lessee and secured by the Credit and Security Agreement.
1.47A Operative Documents shall mean the Lease, the Certificate of Acceptance,
the Indenture, the Trust Agreement and the Voting Trust Agreement.
1.48 Other Aircraft Agreements shall mean Aircraft Operating Lease Agreements
relating to other Fokker 100 aircraft so long as leased to Lessee by a
lessor for the benefit of Fokker, FAUSA or any affiliate thereof
(including Wings Aircraft Finance, Inc.), as Beneficiary and the Support
Services Agreement, the Credit and Security Agreement and the Note or any
other agreement between Lessee and Lessor for the benefit of Fokker, FAUSA
or any affiliate thereof, including Wings Aircraft Finance, Inc., provided
that, for the purpose of this definition, the word "affiliate" shall mean
any corporation or other entity that, directly or indirectly, controls, is
controlled by or is under common control with, Fokker.
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1.49 Part shall mean, whether or not installed on the Aircraft:
(a) any component, furnishing or equipment (other than a complete
Engine) furnished with the Aircraft on the Delivery Date; and
(b) any other component, furnishing or equipment (other than a complete
Engine) title to which has, or should have, passed to Lessor
pursuant to this Agreement
but excludes any such items title to which has, or should have, passed to
(i) Lessee pursuant to this Agreement or (ii) any person pursuant to any
agreement relating to the financing of spare parts for the Aircraft,
including, but not limited to, FAUSA pursuant to the Credit and Security
Agreement and the Note.
1.50 Permitted Lien shall mean:
(a) liens of repairers, mechanics, material men, carriers,
hangarkeepers, employees or other similar liens arising in the
ordinary course of business by statute or by operation of law in
respect of obligations which are either not overdue or are being
contested in good faith by appropriate proceedings;
(b) any lien for Taxes of any kind either not assessed or, if assessed,
not yet due and payable or being contested in good faith by
appropriate proceedings, and
(c) any lien arising out of a judgment against Lessee with respect to
which at the time an appeal is being prosecuted in good faith and
with respect to which there shall have been secured a stay of
execution pending such appeal,
provided that in the case of these subclauses (a), (b) and (c)
(i) adequate reserves for the payment of such obligations have
been provided by Lessee;
(ii) such proceedings, or the continued existence of such lien, do
not give rise to any likelihood of the sale, forfeiture or
other
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loss of the Aircraft or any Engine or any Part or any interest
therein; and
(iii) any such lien does not arise as a result of any default on the
part of Lessee in respect of its obligations under this
Agreement;
(d) any Lessor Lien and the lien of this Agreement; and
(e) any lien for Lessor Taxes.
1.51 Redelivery Location shall mean Schiphol Airport, The Netherlands.
1.52 Rent Date shall mean the First Rent Date and the numerically corresponding
date of each and every subsequent month during the Term, or (if there is
no corresponding date in any month), the last day of such month.
1.53 Rental Period shall mean the period from and including any Rent Date to
and including the day preceding the next Rent Date.
1.54 Security Assignment shall mean an assignment or pledge in favor of the
Head Lessor or the Bank of the benefit of all or any part of Lessor's
rights hereunder.
1.55 Security Interest shall mean any mortgage, charge, pledge, lien,
assignment, hypothecation, right of set-off or any agreement or
arrangement having the effect of creating a security interest.
1.56 State of Incorporation shall mean the State of Delaware.
1.57 State of Registration shall mean United States of America.
1.58 Supplemental Rent shall mean Agreed Value and any other amount which by
the terms of this Agreement is payable by Lessee to Lessor other than Rent
and the Reserve Rate.
1.59 Support Services Agreement shall mean the Aircraft Support Services
Agreement No. ASSAF-ll0 between FAUSA and Lessee.
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1.60 Taxes shall mean any and all present and future sales, use, property,
customs, value-added, turnover, stamp, interest equalization, income,
gross or net receipts, franchise, excise, net worth, capital or other
taxes, fees, withholdings, imposts, duties, levies, or other charges of
any nature, together with any penalties, fines, or interest thereon,
imposed, levied, or assessed by, or otherwise payable to, any Governmental
Entity and "Tax" shall be construed accordingly.
1.61 Tax Indemnitee shall mean each of the Lessor, Voting Trustee, Beneficiary
and the Head Lessor, including any of their respective successors and
assigns.
1.62 Term shall bear the meaning ascribed to it in Article 3.4.
1.63 Transwede shall mean Transwede Airways A.B., a corporation organized under
the laws of Sweden.
1.64 Transwede Lease shall mean Aircraft Operating Lease Agreement No. AOLA
648.016 between Beneficiary, as lessor, and Transwede.
1.65 Tripartite Agreement means Tripartite Agreement No. TA-526, dated as of
July 26, 1995 among Transwede, Fokker, Beneficiary and Lessee.
1.66 Trust Agreement shall mean the Trust Agreement dated as of October 15,
1995 between the Beneficiary and the Lessor in its individual capacity, as
the same may be amended from time to time.
1.67 Trust Estate shall mean the "Trust Estate" as defined in the Trust
Agreement.
1.68 Voting Trust Agreement shall mean the Voting Trust Agreement dated as of
October 15, 1995 between the Beneficiary and the Voting Trustee, as the
same may be amended from time to time.
1.69 Voting Trustee shall mean First Security Bank of Idaho, N.A., a national
banking association, and its permitted successors and assigns.
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1.70 The terms:
Agreed Value,
Deposit,
Partial Loss Amount,
Rent,
Reserve Rate,
shall have the meanings and values set forth in Appendix B.
1.71 References in this Agreement to:
(a) Articles or Appendices are, unless otherwise specified, references
to Articles of, and Appendices to, this Agreement and references to
this Agreement include its Appendices;
(b) any statute or other legislative provision shall be read to include
any statutory or legislative modification or re-enactment thereof,
or any substitution therefor;
(c) the Aircraft include any Part of the Aircraft, and, where the
context so admits, any of the Aircraft Documents and references to
any part of the Aircraft include any part of any Engine;
(d) the word "person" or "persons" or to words importing persons
include, without limitation, individuals, firms, partnerships, joint
ventures, trusts, Government Entities, organizations, associations,
corporations, government agencies, committees, departments,
authorities and other bodies, corporate or incorporate, whether
having distinct legal personality or not, or any member of any of
the same;
(e) words importing the plural include the singular and vice versa;
(f) any agreement or instrument include such agreement or instrument as
it may from time to time be amended or supplemented; and
(g) headings in this Agreement are for ease of reference only.
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2. AGREEMENT TO LEASE
2.1 Lessor will lease the Aircraft to Lessee and Lessee will take the Aircraft
on lease from Lessor in "AS-IS--WHERE-IS" condition, in accordance with
the terms and conditions of this Agreement.
2.2 Lessor's obligation to deliver the Aircraft on the Delivery Date to Lessee
shall be subject to:
(i) the receipt by Lessor from Lessee on or prior to the Delivery Date
of the following, all of which shall be in the English language and
be satisfactory in form and substance to Lessor:
(a) copies of Lessee's certificate of incorporation and/or
memorandum and articles of association and/or by-laws and/or
other constitutional documents, certified to be true and up to
date copies by a duly authorized officer of Lessee;
(b) copies of resolutions of Lessee's board of directors
authorizing Lessee to enter into and perform this Agreement
and the transactions contemplated hereby, certified to be true
and in full force and effect by a duly authorized officer of
Lessee;
(c) evidence that each approval, license and consent which may be
required in relation to, or in connection with the performance
by Lessee of any of its obligations hereunder has been granted
by or obtained from the applicable Government Entity in the
State of Registration;
(d) copies of Lessee's air transport license, certificate of
public convenience and necessity, and any other air operator
certificates and other licenses, certificates and permits
required by a Governmental Authority enabling Lessee to
operate as an air carrier, certified to be true copies and to
be in full force and effect by a duly authorized officer of
Lessee;
(e) evidence of appointment of Lessee's agent for service of
process in the State of New York;
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(f) a power of attorney in the form of Appendix G authorizing
Lessor and/or the Head Lessor/and/or the Bank to take action
at the Air Authority and a certified resolution authorizing
same;
(g) such other documents as Lessor may reasonably request;
(ii) the receipt by Lessor from Lessee on or before the Delivery Date of:
(a) opinion satisfactory in form and substance to Lessor of
counsel to Lessee, addressed to Lessor, Beneficiary, Mortgagee
and Lender;
(b) all sums due to Lessor pursuant to this Agreement;
(c) a certificate of insurance, a broker's letter of undertaking
and other evidence, all in form and substance satisfactory to
Lessor, that Lessee is taking the required steps to ensure due
compliance with the provisions of this Agreement as to
Insurances with effect on and after the Delivery Date;
(d) evidence that the representations and warranties of Lessee set
forth in Article 13.4 are true and correct; and
(e) an acknowledgement by Lessee of the transfer and assignment of
the Indenture Estate (as defined in the Indenture),
substantially in the form attached as Annex A to the
Indenture.
(iii) Intentionally omitted;
(iv) Intentionally omitted;
(v) evidence (including satisfactory opinions of Crowe & Dunlevy,
special Air Authority aviation counsel, as to Air Authority
registration and recordation
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<PAGE>
matters) that on the Delivery Date the Aircraft has been validly
registered under the laws of the State of Registration and that all
filings, registrations, recordings and other actions have been or
will be undertaken which are necessary or advisable to ensure the
validity, effectiveness and enforceability of this Agreement and to
protect the property rights of Lessor in the Aircraft or any Part
and any Security Interest of the Mortgagee therein;
(vi) Lessor being satisfied that no default shall have occurred under any
Other Aircraft Agreement;
(vii) the Certificate of Acceptance shall have been duly authorized,
executed and delivered by Lessee, shall be satisfactory in form and
substance to Lessor, and shall be in full force and effect;
(viii) all of Transwede's rights and interest in the Aircraft shall have
been terminated to the satisfaction of Beneficiary, including the
termination of the Transwede Lease and the fulfillment of all
conditions precedent and obligations of Lessee and Transwede with
respect to the Aircraft under the Tripartite Agreement;
(ix) the Beneficiary shall have consented to the termination of the
Transwede Lease and its mortgage on the Aircraft under Swedish law;
and
(x) Lessee shall have accepted the Aircraft from Transwede in accordance
with the terms and conditions of the Tripartite Agreement and
simultaneously therewith Transwede has redelivered the Aircraft to
Lessor.
2.3 The conditions specified in Article 2.2 are inserted for the sole benefit
of Lessor and may be waived or deferred in whole or in part and with or
without conditions by Lessor. If any of the said conditions are
outstanding on the Delivery Date and Lessor (in its absolute discretion)
nonetheless agrees to deliver the Aircraft to Lessee, Lessee shall ensure
that such outstanding conditions are fulfilled within fifteen (15) days
after the Delivery Date and Lessor shall be entitled to treat the failure
of Lessee to perform such outstanding conditions as an Event of Default.
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2.4 The obligation of Lessee to accept delivery of the Aircraft from Lessor is
subject to the satisfaction of the following conditions precedent on or
before the Delivery Date:
(i) each of the Operative Documents to which Lessor is a party shall
have been duly authorized, executed and delivered by Lessor and
shall be in full force and effect, and executed counterparts shall
have been delivered to Lessee;
ii) Lessee shall have received the following:
(a) an incumbency certificate of each of Lessor as to the persons
authorized to execute and deliver the Operative Documents to
which Lessor is a party and each other document to be executed
on behalf of Lessor in connection with the transactions
contemplated by the Operative Documents, including the
signatures of such persons; and
(b) such other documents and evidence with respect to Lessor and
the transactions contemplated by the Operative Documents as
Lessee may reasonably request in order to establish the
consummation of the transactions contemplated by the Operative
Documents to be performed by Lessor, the taking of all
corporate proceedings in connection with such transactions and
compliance with the conditions set forth herein;
(iii) on the Delivery Date, the representations and warranties of Lessor
contained in Article 13.6 shall be true and accurate as though made
on and as of such date;
(iv) Lessee shall have received the favorable opinion, addressed to it
and reasonably satisfactory in form and substance to it, from Crowe
& Dunlevy, special Air Authority aviation counsel; and
(v) the Aircraft shall meet the delivery conditions specified in Article
3.6.
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3. TERM; DELIVERY; ACCEPTANCE; DELAY
3.1. Subject to Articles 2.1, 2.2 and 3.3, Lessor shall deliver the Aircraft on
the Delivery Date. Subject to Article 2.4 only, Lessee shall accept the
Aircraft and the delivery thereof on the Delivery Date. Lessee
acknowledges that Lessor's sole obligation with respect to delivery of the
Aircraft is (i) to deliver it to Lessee upon acceptance of the Aircraft by
Lessee from Transwede on the Midway Technical Acceptance Date as such term
is defined in the Tripartite Agreement pursuant to the terms and
conditions of the Tripartite Agreement, and (ii) that Lessor is delivering
the Aircraft to Lessee "AS IS--WHERE IS."
3.2 Intentionally omitted.
3.3 If for any reason (including any failure of the conditions specified in
Article 2.2, Clauses (viii), (ix) and (x)), the Aircraft has not been
delivered by Lessor by October 16, 1995, (as such date may be amended,
pursuant to the provisions of the Tripartite Agreement), either party may
terminate this Agreement by written notice to the other party. Upon any
such termination by Lessee, if the Aircraft has not been delivered by
Lessor due to Lessee's breach of its obligations hereunder or under the
Tripartite Agreement, Lessor may retain the Deposit. Otherwise, Lessor
shall return the Deposit to Lessee.
3.4 The term of the lease shall commence on the Delivery Date and shall
continue until the Expiry Date unless earlier terminated or extended as
herein provided (such period being herein referred to as the "Term").
3.5 The Aircraft shall be delivered to and accepted by Lessee at the Delivery
Location or such other location as is mutually acceptable to the parties.
3.6 Simultaneously with Lessee's technical acceptance of the Aircraft from
Transwede under the Tripartite Agreement, Lessee shall indicate and
confirm its acceptance of the Aircraft by the execution and delivery to
Lessor of the Certificate of Acceptance.
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4. REGISTRATION AND TITLE
4.1 As from the Delivery Date Lessee shall cooperate with Lessor or Head
Lessor, to effect and maintain registration of the Aircraft in the name of
Lessor or Head Lessor, as the case may be, under the Laws of the State of
Registration during the Term, such registration to reflect the interests
of Lessor or Head Lessor, as the case may be, and Mortgagee and to obtain
and maintain all licenses, permits and approvals, including, without
limitation, a certificate of airworthiness from the Air Authority, as may
be requisite in connection with operation of the Aircraft under this
Agreement.
4.2 Lessee shall at its own expense and responsibility cause this Agreement to
be kept, filed and recorded at all times during the Term, in such office
or offices for the registration of the Aircraft in the State of
Registration and in such other offices (in the United States but not in
any jurisdiction outside of the United States unless directly required due
to Lessee's operation) as may be necessary, to protect Lessor's, Head
Lessor's, Mortgagee's and the Bank's rights in any state in which the
Aircraft may operate including the State of Registration of the Aircraft
and the State of Incorporation or as Lessor may reasonably request to
protect and preserve Lessor's, Head Lessor's, Mortgagee's and the Bank's
rights hereunder, and shall on request furnish to Lessor an opinion of
counsel or other evidence satisfactory to Lessor of such filing and
recording.
4.3 Title to and ownership of the Aircraft as between Lessor, Head Lessor and
Lessee shall at all times remain in Lessor or Head Lessor, as the case may
be, and Lessee shall have no right, title or interest in or to the
Aircraft or any part thereof except as expressly provided by this
Agreement. Lessee shall identify and specify the interest of Lessor, Head
Lessor, Mortgagee and the Bank and shall affix or keep affixed (i) in a
reasonably prominent position on the flight-deck of the Aircraft and on
each Engine a metal name plate (having dimensions of not less than 10 cm x
7 cm) bearing the inscription (in fireproof and legible characters)
stating:
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"NOTICE OF OWNERSHIP
THIS AIRCRAFT/ENGINE IS OWNED BY
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION, NOT IN ITS INDIVIDUAL
CAPACITY BUT SOLELY AS OWNER TRUSTEE AND LESSOR AND IS SUBJECT TO A FIRST
PRIORITY MORTGAGE IN FAVOR OF WILMINGTON TRUST COMPANY, NOT IN ITS INDIVIDUAL
CAPACITY BUT SOLELY AS TRUSTEE."
The proper completion of the metal name plate shall be advised by
Lessor at its earliest convenience. Lessee shall not remove or
deface evidence of ownership of the Aircraft and shall not do or
permit to be done or omitted any act or thing which would jeopardize
the rights of Lessor, Head Lessor, Mortgagee or the Bank in the
Aircraft. Lessee will on all occasions when the ownership of the
Aircraft or any Part is relevant make clear to third parties that
title to the same is held by Lessor, Head Lessor or the Head Lessor,
as the case may be.
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4.4 Lessee acknowledges that the Aircraft may from time to time be owned by
Head Lessor or the Bank and/or be subject to the Security Assignment, in
favor of Head Lessor or the Bank. Lessee undertakes to Lessor (both for
itself and as agent for each of Mortgagee, Head Lessor and the Bank) at
Lessee's expense (except for the expense of assignments pursuant to
Article 12 after the first refinancing and first assignment described
therein) to, from time to time, cooperate with Lessor, Head Lessor,
Mortgagee and the Bank to cause this Agreement, the Indenture, the
Security Assignment and such other documents as may be necessary or
advisable to give effect to the transactions contemplated hereby or
thereby, to be kept, recorded or filed in such office or offices in the
State of Incorporation and in the State of Registration as may be
necessary or advisable to protect and perfect the interests of Lessor,
Head Lessor, Mortgagee and the Bank in the Aircraft, this Agreement, the
Indenture and the Security Assignment, and to do, from time to time, all
other things which the Bank, Head Lessor, Mortgagee and/or Lessor may
reasonably require in order to protect and perfect their rights.
5. POSSESSION AND USE
5.1 Lessee shall not transfer possession of the Aircraft, the Engines or any
Part to any person or any legal entity or remove any Engine or Part from
the Airframe other than in accordance with the provisions of this Article
5 or of Article 12.1; provided, however, that so long as no Default shall
have occurred and be continuing, Lessee may, without the prior written
consent of Lessor deliver possession of the Aircraft, the Engines or Parts
to the manufacturer thereof for testing or other similar purposes, or to
an Authorized Maintenance Performer for service, repair, maintenance or
overhaul work on the Aircraft, the Engines or Parts, or for alterations,
modifications, or additions thereto, to the extent required or permitted
by the terms of Article 7.3.
5.1.1 Lessee will ensure that no Engine or Part installed on the Aircraft is at
any time removed from the Aircraft other than:
(a) if replaced as expressly permitted by this Agreement; or
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(b) if the removal is of an obsolete item and is in accordance with the
Approved Maintenance Program; or
(c) (i) during the course of maintaining, servicing, repairing,
overhauling or testing that Engine or Part or the Aircraft,
as the case may be; or
(ii) as part of a normal engine or part rotation program; or
(iii) for the purpose of making such modification to the Engine or
Part, or the Aircraft, as the case may be, as are permitted
under this Agreement,
and then in each case only if it is reinstalled or replaced by an engine
or part complying with Article 5.1.2(a) as soon as practicable (or in the
case of Article 5.1.1(c) (ii) in the ordinary course of such program) and
in any event no later than the Expiry Date.
5.1.2 (a) Lessee will ensure that, except as permitted by this Agreement, no
engine or part is installed on the Aircraft unless:
(i) in the case of an engine, it is an engine of the same model
as, or an improved or advanced version of the Engine it
replaces, which is in similar or better operating condition,
and in the case only of a Casualty Occurrence, has
substantially similar hours available until the next scheduled
checks, inspections, overhauls and shop visits and has the
same or greater value and utility as the replaced Engine;
(ii) in the case of a part, it is in as good operating condition,
is of similar or a more advanced make and model and is of the
same interchangeable modification status as the replaced Part;
(iii) in the case of any part, it has become and remains the
property of Lessor free from Security Interests and on
installation on the Aircraft will without further act be
subject to this Agreement and the Indenture; and
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(iv) in each case, Lessee has full details as to its source and
maintenance records.
(b) Provided no Default has occurred and is continuing, Lessee shall be
entitled to install any engine or part on the Aircraft by way of
replacement notwithstanding Article 5.1.2(a) if:
(i) there is not available to Lessee at the time and in the place
that 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 Article 5.1.2(a); and
(ii) it would result in an unreasonable disruption of the operation
of the Aircraft and/or the business of Lessee to ground the
Aircraft until an engine or part, as the case may be,
complying with Article 5.1.2(a) becomes available for
installation on the Aircraft; and
(iii) as soon as reasonably practicable after installation of the
same on the Aircraft, Lessee removes any such engine or part
and replaces it with the Engine or Part replaced by it or by
an engine or part, as the case may be, complying with Article
5.1.2(a).
5.1.3 Lessee will:
(a) ensure that any Engine or Part which is not installed on the
Aircraft (or any other aircraft as permitted by this Agreement) is,
except as expressly permitted by this Agreement, properly and safely
stored, and kept free from Security Interests;
(b) from time to time on request, notify Lessor in writing as to the
location of any Engine and on request shall use its reasonable
efforts to procure that any person to whom possession of an Engine
is given acknowledges in writing to Lessor in terms satisfactory to
Lessor, that it will respect the interest of the Mortgagee and
Lessor (or, as the case may be, Head Lessor) as owner and lessor of
the Engine and will not seek
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to exercise any rights whatsoever in relation to it;
(c) (notwithstanding the foregoing provisions of this Article 5.1.3), be
permitted, if no Default has occurred and is continuing, to install
any Engine or Part on an aircraft, or in the case of a Part, on an
engine:
(i) owned and operated by Lessee free from Security Interests; or
(ii) leased or hired to Lessee pursuant to a lease or conditional
sale agreement on a long-term basis and on terms whereby
Lessee has full operational control of that aircraft or
engine; or
(iii) acquired by Lessee and/or financed or refinanced, and operated
by Lessee, on terms that ownership of that aircraft or engine,
as the case may be, pursuant to a lease or conditional sale
agreement, or a Security Interest therein, is vested in or
held by any other person; provided that in the case of (ii)
and (iii):
(1) the terms of any such lease, conditional sale agreement or Security
Interest will not have the effect of prejudicing the interests of
the Bank as mortgagee or Lessor (or, as the case may be, Head
Lessor) as owner and lessor of that Engine or Part; and
(2) the lessor under such lease, the seller under such conditional sale
agreement or the holder of such Security Interest, as the case may
be, has confirmed and acknowledged in writing to Lessor, in form and
substance satisfactory to Lessor, or has otherwise agreed in writing
that it will respect the interest of Lessor (or, as the case may be,
Head Lessor) or, generally (without naming such parties) the owner
and/or lessor as owner and lessor and the Mortgagee, or generally
(without naming the person) any mortgagee as mortgagee of that
Engine or Part and that it will not seek to exercise any rights
whatsoever in relation thereto; and, to the extent such an
acknowledgment has been given, Lessor hereby agrees, for the benefit
of the lessor, the seller, or secured
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party, as the case may be, of any engine or part (other than an
Engine or a Part) leased to Lessee or owned by Lessee subject to a
conditional sale or other security agreement, that Lessor will not
acquire or claim, as against such lessor, seller or secured party,
any right, title or interest in any engine or engines owned by the
lessor under such lease or subject to a security interest in favor
of the seller or secured party under such conditional sale or other
security agreement as the result of such engine or engines being
installed on the Airframe at any time while such engine or engines
are subject to such lease or conditional sale or other security
agreement.
5.1.4 Lessee will not enter into nor permit any pooling agreement or arrangement
in respect of an Engine or Part without the prior written consent of
Lessor, which shall not be unreasonably withheld.
5.2 Lessee shall use the Aircraft solely in commercial or other operations for
which Lessee is duly authorized by the Laws of the State of Registration
and/or any jurisdiction to whose Laws Lessee's operation of the Aircraft
is subject and shall not use or permit the Aircraft to be used for any
purpose for which the Aircraft is not designed or reasonably suitable.
Lessee shall not use the Aircraft for the carriage of (i) whole animals
living or dead except in the cargo compartments according to the United
States Department of Transportation ("DOT") (or for international flights,
International Civil Aviation Organization ("ICAO")) regulations, and
except domestic pet animals carried in a suitable container to prevent the
escape of any liquid and to ensure the welfare of the animal; (ii) acids,
toxic chemicals, other corrosive materials, explosives, nuclear fuels,
wastes, or any nuclear assemblies or components, except as permitted for
passenger aircraft under the "Restriction of Goods" schedule issued by the
DOT (or for international flights, ICAO) from time to time and provided
that all the requirements for packaging or otherwise contained therein are
fulfilled; or (iii) any other goods, materials or items of cargo which
could reasonably be expected to cause damage to the Aircraft and which
would not be adequately covered by the insurance required by or obtained
pursuant to Article 11.
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5.3 Lessee shall not permit the Aircraft to be maintained, used, or operated
in violation of any Law of any Government Entity having jurisdiction, or
contrary to any manufacturer's operating manuals and instructions, or in
violation of any airworthiness certificate, license or registration
relating to the Aircraft issued by any such Government Entity. In the
event that such Laws require alteration of the Aircraft during the Term,
Lessee shall conform therewith at its own expense and shall maintain the
same in proper condition for operation under such Laws. Lessee agrees not
to operate the Aircraft or to permit or suffer the Aircraft to be operated
(i) contrary to applicable Law, and/or (ii) within or into any geographic
area unless the Aircraft is covered by insurance as required by the
provisions of Article 11 or insurance or an indemnity in lieu of such
insurance from the United States government against the risks and in the
amounts required by Article 11 covering such area, and/or (iii) contrary
to the terms of such insurance as required by the provisions of Article
11.
5.4 Throughout the Term and until re-delivery of the Aircraft to Lessor in
accordance with the provisions of this Agreement, the Aircraft and every
part thereof shall be in every respect at the sole risk of Lessee, who
shall bear all risks of loss, theft, damage or destruction to the Aircraft
from any cause whatsoever. Lessor shall not be liable for any liability,
claim, loss, damage or expense of any kind or nature caused directly or
indirectly by the Aircraft or any part thereof by any inadequacy thereof
for any purpose or any deficiency or defect therein, by the use or
performance thereof, by any repairs or servicing thereto or any delay in
providing or failure to provide any thereof, by any interruption or loss
of service or use thereof, or by any loss of business or other
consequential damage or any damage whatsoever and howsoever caused prior
to re-delivery of the Aircraft to Lessor.
5.5 Lessee shall ensure that such crew and engineers as are employed by it in
connection with the operation and maintenance of the Aircraft shall have
such qualifications and hold such licenses as are required by the Air
Authority and by all applicable Laws and regulations.
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6. CHARGES, METHOD OF PAYMENT AND FINANCIAL INFORMATION
6.1 Lessee shall punctually pay to Lessor, when due, the Rent, Reserve Rate
and Supplemental Rent expressed to be payable by the Lessee to the Lessor
hereunder including the monies specified and calculated in accordance with
the provisions of Appendix D at the time and in the manner therein
specified, and shall punctually and duly observe and perform Lessee's
obligations under the said Appendix D which forms an integral part of this
Agreement. The time stipulated in this Agreement for all payments payable
by Lessee to Lessor and for the performance of Lessee's other obligations
under this Agreement shall be of the essence of this Agreement.
6.2 Lessee shall not be entitled to any abatement, compensation, reduction or
set-off against any installment of Rent, the Reserve Rate or Supplemental
Rent, including but not limited to, abatements, compensations, reductions
or set offs, by reason of any past, present or future claims of Lessee
against Lessor or any other person under this Agreement or otherwise.
6.3 Lessee's obligation to pay Rent and make other payments in accordance with
this Agreement, until Lessee shall have redelivered the Aircraft to Lessor
in accordance with Article 16 and shall have complied with its other
obligations hereunder, shall be absolute and unconditional irrespective of
any contingency whatsoever including (but not limited to) (i) any right of
set-off, counterclaim, recoupment, defense or other right which either
party may have against the other, (ii) any unavailability of the Aircraft
for any reason, including, but not limited to, any defect in the
airworthiness, merchantability, fitness for any purpose, condition,
design, or operation of any kind or nature of the Aircraft, or the
ineligibility of the Aircraft for any particular use or trade, or for
registration or documentation under the laws of any relevant jurisdiction,
or (save as herein provided) any Casualty Occurrence in respect of or any
damage to the Aircraft, (iii) any insolvency, bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution, liquidation or similar
proceedings by or against Lessor or Lessee, (iv) any invalidity or
unenforceability or lack of due authorization of, or other defect in this
Agreement, (v) any failure of Lessee to obtain any required license,
certificate,
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authorization or other approval of any Governmental Entity having
jurisdiction over the operation by Lessee of the Aircraft or the operation
by Lessee in any airport and (vi) any other cause which, but for this
provision, would or might have the effect of terminating, frustrating or
in any way affecting any obligation of Lessee hereunder, it being the
declared intention of the parties that the provisions of this Article and
the obligations of Lessee to pay the Rent, the Reserve Rate and
Supplemental Rent provided for by this Agreement shall survive any
frustration and that, save as expressly provided in this Agreement, no
monies payable hereunder by Lessee to Lessor shall in any event or
circumstance be repayable to Lessee.
6.4 Lessee agrees to furnish Lessor during the Term:
(i) Intentionally omitted;
(ii) upon Lessor requesting the same a quarterly unaudited balance sheet
of Lessee prepared by it as of the close of the most recent previous
financial quarter, together with the related profit and loss
statement for such period;
(iii) within ninety (90) days after the close of each financial year of
Lessee, an audited balance sheet and profit and loss statement as of
the close of such financial year;
(iv) from time to time such other non-confidential information as Lessor
may reasonably request; and
(v) copies of all notices sent by Lessee (A) to its shareholders or
creditors as a group in their respective capacities as such relating
to major business or financial developments of Lessee; or (B) to the
Securities and Exchange Commission in connection with or following a
public offering of the equity shares of Lessee.
7. MAINTENANCE
7.1 Lessee, during the Term, at its own cost and expense shall:
(a) service, repair, maintain, overhaul, test, or cause the same to be
done to the Aircraft in accordance with the Approved Maintenance
Program
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so as to keep the Aircraft in as good operating condition as when
delivered to Lessee on the Delivery Date, ordinary wear and tear
excepted, and such operating condition as may be necessary to enable
the airworthiness certificate of the Aircraft to be maintained in
good standing at all times under applicable Law, and Lessee shall at
all times maintain current certificates of airworthiness (except in
each case if Fokker 100 aircraft with similar engines are grounded
by the Air authority other than as a result of the acts and
omissions of Lessee) and Air Authority required records of
maintenance in respect of the Aircraft and produce copies thereof to
Lessor upon request;
(b) maintain in the English language all Aircraft Documents, records,
logs, and other materials required by applicable Laws and best
airline practice to be maintained in respect of the Aircraft
including engine trend monitoring data;
(c) perform, or cause to be performed, all airworthiness directives and
mandatory notes and mandatory bulletins affecting the Aircraft
having a compliance date during the Term and issued by (a) the Air
Authority and/or (b) Fokker or any other manufacturer of any part of
the Aircraft (except that, in the event of a conflict, those
required by the Air Authority shall prevail);
(d) maintain the Aircraft in conformity with Air Authority Regulations
and such other rules and regulations of the Air Authority as may
from time to time be applicable to passenger category airline
aircraft;
(e) provide Lessor by telex or fax message with a monthly summation
(which may utilize Air Authority forms) of Flight Hours and Cycles
accumulated on the Airframe, Engines, A.P.U. and Landing Gear and
details of all modifications and material component changes within
five (5) days after the end of each month.
Such maintenance shall be performed by Lessee or by an Authorized
Maintenance Performer.
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7.2 Except as otherwise provided herein, Lessee, at its own cost and expense,
shall promptly replace all Engines or Parts which may from time to time
become worn out, lost, stolen, destroyed, seized, confiscated, damaged
beyond repair, or unserviceable with an engine or part meeting the
requirements of Article 5.1.2(a).
7.3 (a) Save as expressly herein provided the Aircraft shall not be modified,
altered, converted or added to (each such action in relation to the
Aircraft being herein referred to as an "Equipment Change"), provided
that Lessee may, at its own expense and subject to the prior written
approval of Lessor (such approval not to be unreasonably withheld),
make such Equipment Changes to the Aircraft as Lessee may deem
desirable in the proper conduct of its business, provided that no such
Equipment Change diminishes the value, utility, condition or
airworthiness of the Aircraft below the value, utility, condition and
airworthiness thereof immediately prior to such Equipment Change,
assuming the Aircraft was then in the condition required to be
maintained by the provisions of this Agreement.
(b) Title to all Parts incorporated or installed in or attached or added
to the Aircraft as the result of such Equipment Change shall,
without further act, vest in Lessor free and clear of all liens,
charges and encumbrances. Lessee shall at its own expense take all
such steps and execute, and procure the execution of, all such
instruments as Lessor may require and which are necessary to ensure
that title to any such replacement Part as aforesaid passes to
Lessor according to the Governing Law and the lex situs, provided,
however, that so long as a Default shall not have occurred and be
continuing, at any time during the Term, Lessee may remove any such
Part if (A) (i) such Part is in addition to, and not in replacement
of or in substitution for, any Part originally incorporated or
installed in or attached to the Aircraft at the time of the delivery
thereof hereunder, (ii) such Part is not required to be incorporated
or installed in or attached or added to the Aircraft pursuant to the
provisions of Article 7.1 and (iii) such Part can be removed from
the Aircraft without diminishing or impairing the value, utility or
airworthiness which the Aircraft would have had at such time,
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had such Equipment Change not occurred. Or (B) such Part is deemed
by Lessee to be obsolete or no longer suitable or appropriate for use
in the Airframe or Engines (an "Obsolete Part") and its removal shall
not materially decrease the value or adversely affect the utility or
remaining useful life of the Airframe or Engines, or impair the
condition or airworthiness thereof below the value, utility or
remaining useful life, condition or airworthiness thereof immediately
prior to such removal (assuming the Aircraft was then in the condition
required to be maintained by the terms of the Lease), except that the
value (but not the utility, remaining useful life, condition or
airworthiness) of the Airframe or the Engines may be reduced, to the
extent resulting from the removal of Obsolete Parts, if the aggregate
original cost of all Obsolete Parts removed from such Aircraft and not
replaced shall not exceed $70,000.
(c) Upon the removal by Lessee of any such Part as above provided, title
thereto shall, without further act, vest in Lessee and such Part shall
no longer be deemed a part of the Aircraft. Any Part not removed by
Lessee as above provided prior to the return of the Aircraft to Lessor
hereunder shall remain the property of Lessor (save as the parties may
otherwise agree in writing) provided that Lessor may require Lessee,
prior to the end of the Term, to remove any Parts incorporated or
installed in the Aircraft as a result of an Equipment Change and to
restore the Aircraft to its condition prior to an Equipment Change.
7.4.1 Upon submission by Lessee to Lessor of invoices or receipts reasonably
satisfactory to Lessor evidencing the performance in accordance with the
provisions of this Agreement by or at the direction of Lessee of:
(a) with respect to the Airframe, the accomplishment of those items of
maintenance characterized as scheduled airframe heavy maintenance as
defined in the Approved Maintenance Program for 12,000 hours and
24,000 hours inspections or any equivalent thereof with more or less
hours ("Airframe Maintenance"), or
(b) with respect to any Engine, the performance of all scheduled shop
visit engine maintenance and re-
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pair, other than (i) repairs arising as a result of foreign object
damage or operational mishandling and/or (ii) maintenance and repair
of QEC (Quick Engine Change) kits ("Engine Maintenance"), or
(c) with respect to any nose or main landing gear ("Landing Gear"), the
performance of all scheduled shop visit nose and main landing gear
maintenance and repair, other than repairs arising as a result of
foreign object damage or operational mishandling ("Landing Gear
Maintenance"),
Lessor shall, subject to Article 3.6 of Appendix D and provided that a
Default shall not have occurred and be continuing, release to Lessee, from
the relevant Maintenance Fund as defined in paragraph 3.2 of Appendix D, a
sum equal to the aggregate amount evidenced by such invoices or receipts
for such relevant maintenance, to the extent there are sufficient sums in
the relevant Maintenance Fund at the date of the start of the relevant
maintenance. Lessee agrees to use its reasonable efforts to ensure that
the relevant invoices or receipts are received by Lessor as promptly as
possible after completion of the relevant maintenance. All sums remaining
in any Maintenance Fund at the expiration or other termination of this
Agreement shall be retained by Lessor, except (i) upon payment in full of
Agreed Value and any other amounts due to Lessor or otherwise hereunder
after a Casualty Occurrence pursuant to Article 17.2(b), in which case all
sums remaining in any Maintenance Fund shall be paid to Lessee and (ii)
under the circumstances and to the extent described in Article 3.6 or 9 of
Appendix D.
For the avoidance of doubt, Lessor shall not refuse to release monies from
the Maintenance Fund on the ground that maintenance was required due to
operational mishandling, provided that Lessee can demonstrate that Lessee
complied with the original equipment manufacturer's written instructions.
7.4.2 Lessor shall be entitled to delay the release or payment of funds from any
Maintenance Fund (to the extent related to any disputed amounts) to Lessee
provided for by this Article 7 until such time as it shall in its opinion
be in a position to determine (which Lessor agrees to use reasonable
efforts to do as promptly as possible) the amount to be released or paid,
but in any event release all undisputed amounts
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from the relevant Maintenance Fund (but where insufficient funds are in
such maintenance Fund the lesser pro rata portion of such funds which
corresponds to the undisputed amount) upon request unless a Default shall
have occurred and be continuing.
7.5.1 During the Term, Lessee shall furnish to Lessor such information
concerning the location, condition, use and operation of the Aircraft as
Lessor may reasonably request. The right of Lessor, or its designated
representatives, to inspect the Aircraft during any Major Checks performed
by or on behalf of Lessee during the Term, shall be absolute and Lessee
shall inform Lessor by providing sixty (60) days' written notice as to
time and location of all Major Checks. During such Major Checks, Lessee
agrees to provide sufficient manpower to allow Lessor, or its authorized
representatives, to inspect any area of the Aircraft which Lessor requests
to inspect and which would normally be required during such a Major Check,
provided that such inspection is to be made only at the time that Lessee
opens up such area in accordance with the Approved Maintenance Program.
Lessee also shall permit any persons designated by Lessor to visit and
inspect the Aircraft, its condition, use and operation, and the records
maintained in connection therewith.
7.5.2 Lessor shall have the right at any time on reasonable notice to inspect or
survey the Aircraft or any part thereof, or instruct a duly authorized
surveyor to carry out a survey on its behalf, to ascertain the condition
of the Aircraft or any part thereof and satisfy itself that the Aircraft
is being properly repaired and maintained in accordance with the terms of
this Agreement. The cost of any such inspection or survey shall be borne
by Lessor unless an Event of Default has occurred and is continuing.
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7.5.3 Lessor shall have no duty to make any such inspection as is referred to in
Article 7.5.1 and 7.5.2 and shall not incur any liability or obligation by
reason of not making any such inspection. Except in connection with any
Event of Default, no exercise of any inspection right under Articles
7.5.1, 7.5.2 or any other provision of this Agreement shall interfere with
the normal operation or maintenance of the Aircraft or the business of
Lessee and shall be conducted during normal maintenance or business hours.
In connection with any such inspection, Lessee shall allow Lessor or any
persons designated by Lessor to copy, at Lessor's cost and expense, any
Aircraft Documents or other records relating to maintenance and operation
of the Aircraft. Lessee shall not be liable for the use of any such
Aircraft Documents or other records by Lessor or any other person or
entity which use is unrelated to Lessee's compliance with the terms of
this Agreement.
8. TAXES, DUTIES AND EXPENSES
8.1 Lessee agrees promptly to pay and indemnify and hold Lessor and Head
Lessor harmless against all Taxes (other than Lessor Taxes) levied or
imposed against or upon or otherwise payable by any Tax Indemnitee or
Lessee and relating to or attributable to Lessee, this Agreement, the
Aircraft and/or the importation, exportation, registration, ownership,
leasing, subleasing, delivery, possession, use, operation, reregistration,
repair, maintenance, overhaul, replacement, improvement, modification,
alteration, transportation, landing, storage, presence or re-delivery of
or addition to, the Aircraft or any Engine or any Part thereof or any
rent, receipts, insurance proceeds or income arising therefrom, or any sum
payable by Lessee to a Tax Indemnitee under this Agreement or any other
transactions or activities contemplated by this Agreement. If Lessee is
required by any applicable Law or regulation to deliver or furnish any
report or return in connection with any such Taxes, Lessee shall complete
the same in a manner satisfactory to the relevant Tax Indemnitee and in
particular shall state therein that Lessor or Head Lessor, as the case may
be, is the owner of the Aircraft and that the Lessee is exclusively
responsible for the use and operation of the Aircraft and for any such
Taxes and Lessee shall supply a copy of such report or return to the
relevant Tax Indemnitee.
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All payments by Lessee hereunder to Lessor shall be free of withholdings
of any nature whatsoever (and at the time Lessee is required to make any
payment upon which any withholding is required, Lessee shall pay an
additional amount such that the net amount actually received by the Lessor
will, after such withholding, equal the full amount of the payment then
due) and shall be free of expense for collection or other charges.
If Lessee shall have paid any additional amount pursuant to the first
sentence of this paragraph with respect to Taxes not subject to
indemnification pursuant to the provisions of this Section 8.1, the Lessor
for whose benefit such Taxes were paid shall reimburse Lessee within 10
Business Days of written demand therefor for the amount of such Taxes so
paid by Lessee. For the purpose of Article 1.10 and Article 8, the terms,
"Lessor" and "Head Lessor" shall include each group of corporations (and
each member thereof) that includes Lessor or Head Lessor and for which
consolidated, combined, unitary or other group tax returns are filed.
8.2 Except as otherwise specifically provided herein, Lessee shall pay to
Lessor on or after Delivery Date (unless otherwise agreed to be financed
by Lessor or to be paid by Transwede pursuant to the Tripartite Agreement)
upon demand:
(a) all reasonable expenses paid to third parties (including legal,
printing and out-of-pocket expenses) incurred or payable by Lessor
(i) in connection with the negotiation, preparation and execution of
this Agreement and all related documents, including reasonable
out-of-pocket expenses in connection with this Agreement and (ii)
related to any amendment to or extension of, or the granting of any
waiver or consent under, this Agreement, resulting from a request of
Lessee;
(b) all reasonable expenses paid to third parties (including legal fees
and disbursements but excluding surveyor costs) payable or incurred
by Lessor in connection with, the enforcement of or preservation of
any rights of Lessor under this Agreement or otherwise in respect of
moneys owing under this Agreement by Lessee or in respect of
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any breach of Lessee of any representation, warranty, covenant or
undertaking herein contained; and
(c) the ongoing annual fees and reasonable out-of-pocket expenses
related to this Agreement of the Owner Trustee, the Voting Trustee
and Mortgagee (other than those incurred pursuant to a change in any
of such trustees which was not requested by Lessee);
8.3 Lessee shall pay all stamp, documentary, registration or other like duties
or taxes (including any such duties or taxes payable by a Tax Indemnitee
but excluding all Lessor Taxes) imposed on or in connection with this
Agreement and shall indemnify that Tax Indemnitee against any liability
arising by reason of any delay or omission by Lessee to pay such duties or
taxes.
8.4 If and to the extent that any sum (the "indemnity sum") constituting
(directly or indirectly) an indemnity to one or more Tax Indemnitees paid
by Lessee to any person other than that Tax Indemnitee shall be treated as
taxable in the hands of the relevant Tax Indemnitee, Lessee shall pay to
the relevant Tax Indemnitee a sum as (after taking into account any
taxation suffered by the relevant Tax Indemnitee on the indemnity sum)
shall reimburse the relevant Tax Indemnitee for the net amount of any
Taxes suffered by them in respect of the indemnity sum (after taking into
account any current tax savings or other benefits to the relevant Tax
Indemnitee resulting from the payment or accrual of the indemnified
expense).
8.5 If and to the extent that any sums payable to a Tax Indemnitee by Lessee
under this Agreement by way of indemnity are insufficient, by reason of
any Taxes payable in respect of those sums, for that Tax Indemnitee to
discharge the corresponding liability to the relevant third party
(including any taxation authority), or to reimburse that Tax Indemnitee
for the cost incurred by it to a third party (including any taxation
authority), Lessee will pay to that Tax Indemnitee such sum as will after
the tax liability has been fully satisfied leave that Tax Indemnitee with
the same net amount (after taking into account any current tax savings or
other benefits to the that Tax Indemnitee resulting from the payment or
accrual of the indemnified expense) as it would have been entitled to
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receive in the absence of that liability. For the purpose of computing the
amount of an indemnity payment pursuant to this Article 8.5 and the amount
of any payment to Lessee under Article 8, it shall be assumed that the
relevant Tax Indemnitee is subject to tax on the amount of each indemnity
it receives or accrues under this Agreement and can use any tax savings to
offset Taxes at the highest marginal statutory rates of tax applicable to
that Tax Indemnitee (as certified to Lessee by an officer of that Tax
Indemnitee) at the time such indemnity or tax savings is received or
accrued.
8.6 If, as a result of any indemnity paid by Lessee or any event giving rise
to an indemnity obligation of Lessee, a Tax Indemnitee at any time
realizes any tax savings, refunds or other reductions in taxes not
previously taken into account in computing the amount of the indemnity,
that Tax Indemnitee shall promptly pay to the Lessee the amount of such
tax savings, refunds or other reductions in taxes; provided, however, that
no Tax Indemnitee will be required to make any payment to Lessee pursuant
to this Article 8.6 so long as a Default shall be continuing or if Lessee
shall not have theretofore made all payments due to all Tax Indemnitees
under this Agreement, or to the extent that the amount of such payment
would exceed the amount of all prior payments by Lessee to the relevant
Tax Indemnitee pursuant to this Article 8 less the amount of all prior
payments by the relevant Tax Indemnitee to Lessee pursuant to this Article
8.6. The relevant Tax Indemnitee shall estimate the amount of such tax
savings, refunds and other reductions in Taxes and shall use reasonable
efforts to take such actions in filing its tax returns and in dealing with
taxing authorities to seek and claim each such tax savings, refund and
other reduction in Taxes, but shall not be obligated to take any such
action that it determines in its sole discretion to involve the imposition
or risk of any material unindemnified cost or expense, and in no event
will any person have any right to inspect the books, records, tax returns
or other documents of any Tax Indemnitee, and the positions to be taken by
any Tax Indemnitee on or with respect to its tax returns and in any tax
proceedings shall be within their sole control.
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8.7 Lessee's, and each Tax Indemnitee's obligations under this Article 8 shall
continue in full force and effect, notwithstanding the expiration or
earlier termination of the Term hereunder.
8.8 If Lessee disputes the payment of any Taxes payable by a Tax Indemnitee
for which Lessee is responsible under this Agreement, that Tax Indemnitee
will take such action as Lessee may reasonably request at Lessee's expense
to contest that payment but that Tax Indemnitee will not be obliged to
take any such action:
(a) which that Tax Indemnitee considers in good faith may result in the
imposition or risks of any material liability cost, or expense for
which that Tax Indemnitee is not indemnified to its satisfaction; or
(b) which that Tax Indemnitee considers not to have a reasonable
prospect of success; or
(c) for which Lessee has not made adequate provision to the satisfaction
of that Tax Indemnitee in respect of the expense concerned.
8.9 Lessor covenants and agrees to deliver to Lessee, (a) within 30 days prior
to January 1, 1996 and each January 1 falling every three years thereafter
(or at such other date as prescribed by United States Treasury
Regulations) as long as this Agreement has not been terminated, two
accurate and complete original copies of Internal Revenue Service Form
1001 (or any successor form), dated the date hereof or January 1, 1996 (or
such subsequent January 1 or other date) signed by Beneficiary, as
appropriate, and such other related forms (including any certificate with
respect thereto) as Lessee may reasonably request, or (b) within 30 days
of the signing of this Agreement (but in all events prior to the date of
the first payment of Rent to Lessor under this Agreement) and within 30
days prior to the beginning of each taxable year of Lessor beginning
subsequent to the date of this Agreement (or at such other date as
prescribed by United States Treasury Regulations), two accurate and
complete original copies of Internal Revenue Service Form 4224 (or any
successor form), signed by Beneficiary, dated as appropriate, and such
other related forms (including any certificate with respect thereto) as
Lessee may reasonably request. In addition, Lessor shall deliver
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to Lessee two accurate and complete original copies of Form 1001 or Form
4224 signed by Beneficiary, at any time that a change in circumstances
renders the previous form inaccurate in any material respect. Nothing in
this Article 8.9 shall be construed as imposing on the Lessee any
obligation whatsoever, including, without limitation, to indemnify Lessor
or any other party for U.S. withholding taxes.
9. LIENS
9.1 Lessee, during the Term, shall not create or suffer to exist any lien,
attachment, mortgage or other encumbrance upon or against the Aircraft, or
any of its rights under this Agreement, other than Permitted Liens. If at
any time a lien, attachment, mortgage, or other encumbrance except as
permitted above shall be created or suffered to exist by Lessee, or be
levied upon the Aircraft or any of its rights under this Agreement, Lessee
shall forthwith notify Lessor and cause the same forthwith to be
discharged by bond or otherwise. In the event Lessee shall fail to
discharge any such lien, attachment, mortgage or other encumbrance,
Lessor, Head Lessor, Mortgagee, Lender or the Bank shall be entitled (but
not bound) to discharge the same, in which event Lessee shall pay to
Lessor, on demand, the amount paid by Lessor, Head Lessor, Mortgagee,
Lender or the Bank, together with Lessor's, Head Lessor's, Mortgagee's,
Lender's or the Bank's losses, costs and expenses, including reasonable
legal fees and expenses.
10. INDEMNIFICATION
10.1 LESSEE SHALL RELEASE AND DEFEND, HOLD HARMLESS AND INDEMNIFY ANY AND/OR
ALL OF THE INDEMNITEES, FROM AND AGAINST ANY AND ALL CLAIMS, PROCEEDINGS,
SUITS, JUDGMENTS, COSTS, EXPENSES, PENALTIES, FINES AND LIABILITIES,
DIRECT AND CONSEQUENTIAL DAMAGES AND LOSSES, INCLUDING WITHOUT LIMITATION
COSTS AND EXPENSES INCIDENTAL THERETO, OF WHATSOEVER KIND AND NATURE, AND
INCLUDING REASONABLE LEGAL FEES AND EXPENSES BUT EXCLUDING ANY TAXES,
INDEMNITY FOR WHICH IS ENCOMPASSED SOLELY IN ARTICLE 4.1 AND ARTICLE 8
(EACH A "CLAIM"), ATTRIBUTABLE TO ACTS OR OMISSIONS OCCURRING DURING THE
TERM OF THIS AGREEMENT, WHICH MAY BE SUFFERED BY, ASSERTED AGAINST,
CHARGED TO OR RECOVERABLE FROM, DIRECTLY OR INDIRECTLY, ANY AND/OR ALL OF
THE INDEMNITEES:
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(A) RELATING TO, ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE
POSSESSION, DELIVERY, PERFORMANCE, MANAGEMENT, OWNERSHIP,
REGISTRATION, CONTROL, MAINTENANCE, CONDITION, SERVICE,
REPAIR, OVERHAUL, LEASING, USE, OPERATION OR RETURN OF THE
AIRCRAFT, ANY ENGINE OR ANY PART, OR THE PERFORMANCE OR
NON-PERFORMANCE OF ANY AND/OR ALL OF THE INDEMNITEES OF
SERVICES OR DELIVERY OF ANY THINGS IN CONNECTION WITH THE
AIRCRAFT DURING THE TERM, OR OTHERWISE IN CONNECTION WITH THIS
AGREEMENT, WHETHER OR NOT ARISING IN TORT OR OCCASIONED IN
WHOLE OR IN PART BY THE FAULT OR NEGLIGENCE OF ANY AND/OR ALL
OF THE INDEMNITEES; OR
(B) AS A CONSEQUENCE OF ANY DESIGN, ARTICLE OR MATERIAL IN THE
AIRCRAFT, ANY ENGINE OR ANY PART OR ITS OPERATION OR USE
CONSTITUTING AN INFRINGEMENT OF PATENT (TO THE EXTENT AND
SCOPE AND SUBJECT TO THE LIMITATIONS SET FORTH IN PART C OF
EXHIBIT G OF THE SUPPORT SERVICES AGREEMENT), COPYRIGHT,
TRADEMARK, DESIGN OR OTHER PROPRIETARY RIGHT OR A BREACH BY
LESSEE OF ANY OBLIGATION OF CONFIDENTIALITY OWED TO ANY
PERSON;
EXCLUDING, HOWEVER, FROM THE FOREGOING ANY SUCH CLAIM TO THE
EXTENT THAT SUCH CLAIM RESULTS FROM (I) THE FAILURE OF
TRANSWEDE TO SATISFY ANY OF ITS OBLIGATIONS TOWARDS
BENEFICIARY AND/OR FOKKER UNDER THE TRIPARTITE AGREEMENT, OR
(II) THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH
INDEMNITEE, OR (III) FROM ANY MISREPRESENTATION BY SUCH
INDEMNITEE CONTAINED IN THIS AGREEMENT OR ANY BREACH BY SUCH
INDEMNITEE OF ANY COVENANT SET FORTH IN THIS AGREEMENT.
10.2 The indemnities contained in this Article 10 shall continue in full force
and effect notwithstanding the expiration or other termination of this
Agreement or of the letting of the Aircraft hereunder.
10.3 The indemnities contained in this Article 10 are given to the Lessor for
itself and as agent and trustee on behalf of the other Indemnitees.
10.4 Notwithstanding anything to the contrary contained herein, Lessee does not
release and does not agree to defend, hold harmless or indemnify under
this Agreement (and without limiting any obligations or indemnities
contained in any other agreement with Lessee) Fokker or
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any other Indemnitee in its capacity as manufacturer or seller of the
Aircraft from or against (i) claims of third parties made directly against
Fokker or such Indemnitee, based on its product liability or its status as
manufacturer or seller, or (ii) claims made against Fokker or such
Indemnitee based on the warranties or indemnities contained in the Product
Assurance Document which is Exhibit G of the Support Services Agreement,
or (iii) the matters described in Article 10.1(B).
10.5 If any Indemnitee has knowledge of the occurrence of any Claim, liability
or other matter for which it is or may be entitled to be indemnified
hereunder, it shall give prompt written notice thereof to the Lessee. Each
Indemnitee shall cooperate in good faith with Lessee and supply such
information as may reasonably be requested by Lessee to enable Lessee to
investigate, defend or contest any Claim, liability or other matter for
which Lessee may be required to indemnify an Indemnitee hereunder. In the
event that Lessee pays any amount to an Indemnitee pursuant to this
Article 10, Lessee shall be subrogated to all rights of the Indemnitee in
respect of the Claim, liability or other matter indemnified against giving
rise to such payment. Lessee or its insurers shall have the right, unless
an Event of Default shall have occurred and be continuing and such matter
is not covered by insurance, to investigate or (provided that Lessee or
its insurers shall agree not to dispute liability hereunder or under any
insurance policies pursuant to which coverage is sought and provided that
Lessee shall have consulted with Lessor prior thereto), defend or
compromise any Claim, and Lessor shall cooperate with Lessee with respect
thereto.
11. INSURANCE
11.1 On or before the Delivery Date of the Aircraft and throughout the Term,
Lessee shall carry and maintain in full force and effect, at its own cost
and expense, in such forms, on such conditions and with such insurers and,
if requested, reinsurers and through such insurance and, if requested,
reinsurance brokers as are satisfactory to Lessor, the following
insurances with respect to the Aircraft, Engines and Parts (herein
referred to as "the Insurances"):
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(a) All Risks Aircraft Hull insurance of the type usually insured
against by commercial airlines engaged in the same or similar
business and owning or operating similar aircraft (including
Engines and Parts while not installed on the Aircraft and
including Extended Coverage Endorsement (Aircraft Hull) AVN51
or equivalent on the Agreed Value. The insurance may be
subject to a deductible in respect of losses other than total
loss, arranged total loss or constructive total loss of not
more than $100,000.00 (Dollars One Hundred Thousand) for each
accident.
(b) If operated outside the United States and Canada, Aircraft
Hull War and Allied Perils insurance covering the risks
excluded from the All Risks Aircraft Hull insurance specified
in paragraph (a) above by the terms of the War, Hi-Jacking and
Other Perils Exclusion Clause AVN.48B except paragraph (b)
thereof and shall include cover in respect of confiscation,
nationalization, seizure, restraint, detention, appropriation
for title or use by or under the order of any Government
Entity of the State of Registration.
(c) Comprehensive Airline Liability insurance (including without
limitation aircraft Third Party Liability, Passenger and Crew
Liability (including Baggage and Personal Effects)), Cargo
Liability, Mail Liability, Personal Injury Liability,
Contractual Liability, Hangar Keeper's Liability, Aircraft
Products Liability and General Third Party Liability of the
types usually insured against by commercial airlines engaged
in the same or similar business and owning or operating
similar (but not necessarily Fokker-manufactured) aircraft in
an amount of not less than $500,000,000.00 (Dollars Five
Hundred Million) Combined Single Limit any one occurrence each
Aircraft but limited in respect of Personal Injury to the
equivalent of $25,000,000.00 (Dollars Twenty Five Million) any
one offense and in the aggregate.
Such insurance shall include cover in respect of the risks
excluded by War, Hi-Jacking and Other Perils Exclusion Clause
AVN.48B except paragraph (b) thereof.
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This insurance may be subject to deductibles in respect of
passengers baggage and personal effects of not more than
$1,250.00 (Dollars One Thousand Two Hundred Fifty) any one
claim and in respect of cargo and mail of not more than
$5,000.00 (Dollars Five Thousand) any one claim. Such
deductibles shall not apply to claims arising from accidents
to the carrying aircraft.
(d) All Risks insurance on Engines and Parts while any such items
are not installed on the Aircraft and in respect of which
cover is not provided under the All Risks Aircraft Hull
insurance and/or Aircraft Hull War and Allied Perils insurance
(respectively specified in paragraphs (a) and (b) above) of
the type usually insured against by commercial airlines
engaged in the same or similar business and owning or
operating similar aircraft for not less than full replacement
value. If Engines and Parts are located outside the United
States and Canada, such insurance shall include War and Allied
Perils to the extent that such insurance is customarily
available in the international insurance market for this type
of insurance.
This insurance may be subject to a deductible of not more than
$10,000.00 (Dollars Ten Thousand).
The Lessor will accept a United States government indemnity (as referred
to in Article 5.3) in lieu of the foregoing or as otherwise required under
this Article 11. Lessor's current requirements as at the date of this
Agreement as to the Insurances are as specified in this Article and in
Appendices H and I. Lessor reserves the right to amend, and will cooperate
with Lessee reasonably to amend, the insurance requirements of this
Article 11 to reflect changes in insurance practice.
If required by the first paragraph of Article 11.1, the Lessee shall
procure that the insurers effect reinsurances in the same form and
conditions through such reinsurance brokers and with such reinsurers and
for such proportions as are satisfactory to Lessor.
11.2 All Insurances to be carried in accordance with Article 11.1 above shall:
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(a) in respect of All Risks Aircraft Hull insurance, Aircraft Hull War
and Allied Perils insurance and All Risks insurance on Engines and
Parts:
(i) name the Lessor, Head Lessor, the Mortgagee, the Lender and
the Bank and their respective successors and assigns as
additional assureds;
(ii) provide that all claims in respect of the Aircraft, Engines
and Parts shall be payable to the Mortgagee for so long as the
lien of the Indenture shall be in effect and thereafter to
Lessor or as it may direct, such payee to be named Loss Payee;
provided, that partial loss amounts up to the Partial Loss
Amount set forth in Appendix B shall be payable to Lessee
unless the insurers have been given notice that a Default has
occurred; and
(iii) if applicable, provide in respect of Hull All Risks and Hull
War and Allied Perils for a 50/50 Claims Settlement Clause in
the form of AVS.l03;
(b) in respect of Comprehensive Airline Liability insurance:
(i) name the Lessor, its successors and assigns and its
shareholders, subsidiaries, directors, officers, agents,
employees and the Indemnitees as additional assureds; and
(ii) provide that the insurance shall operate in all respects as if
a separate policy had been issued covering each party insured
thereunder, but this provision shall not operate to include
any claim howsoever arising in respect of loss or damage to
the Aircraft, Engines and Parts insured under the All Risks
Hull, Hull War and Allied Perils or All Risks insurance of the
assured. Notwithstanding the foregoing the total liability of
insurers in respect of any and all assureds shall not exceed
the limits of liability stated in the policy;
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(c) in respect of all Insurances:
(i) be effective worldwide except for territories approved in
writing by the Lessor;
(ii) provide that insurers waive all rights of subrogation against
the Lessor, its subcontractors, FAUSA, Fokker, the Mortgagee,
the Lender, the Head Lessor, the Bank, and their respective
officers, directors, employees, servants, agents, successors
and assigns;
(iii) provide that in the event that the Insurances are canceled
(including cancellation for non-payment of premium) or are
materially changed such cancellation or change shall not be
effective as to the interest of the Lessor until thirty (30)
days (but seven (7) days or such lesser period as is
customarily available in accordance with policy conditions in
respect of war and allied perils) after confirmed receipt by
Lessor of written notice by insurers of such cancellation or
change;
(iv) provide that in respect of the interests of the Additional
Assureds, the Insurances shall not be invalidated by any act,
neglect, omission, misrepresentation or non-disclosure on the
part of the Lessee or any other party other than the
Additional Assured seeking to make a claim thereunder, and
shall insure each Additional Assured regardless of any breach
or violation of any warranties, declarations or conditions
contained in such policies by the Lessee or any other party
other than the Additional Assured seeking to make a claim
thereunder;
(v) provide that the Additional Assureds shall have no
responsibility for premium and insurers shall waive any right
of set-off or counterclaim against the Additional Assureds
except in respect of outstanding premium in respect of the
Aircraft, Engines and Parts subject of a claim;
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(vi) not provide for any deductible or self insurance other than
the deductibles allowed under the terms of Article 11.1 above;
(vii) be primary without right of contribution from any other
insurance carried by Lessor, Lessee or any other person; and
(viii) be denominated in Dollars.
11.3 If required by the first paragraph of Article 11.1, the re-insurance
policies shall:
(a) provide that cover shall be identical to the cover provided by the
original insurances and be subject to the same terms and conditions
as the original insurances;
(b) provide that so far as the respective interests of the Additional
Assureds are concerned the reinsurance shall not be invalidated by
any act, neglect, omission, misrepresentation or non-disclosure on
the part of the reinsured party;
(c) confirm the insurers' agreement to the provision of paragraph (d)
below;
(d) include a "cut-through" clause in the following terms or in such
other terms as may be satisfactory to Lessor.
"In respect of All Risks Aircraft Hull insurance, Aircraft Hull War
Risk and Allied Perils insurance as described in Article 11.1(a) and
(b) above and All Risks insurance on any Engine and Parts as
described in Article 11.1(d) above, the reinsurers and the reassured
hereby agree that in the event of any claim arising under the
relevant reinsurances the reinsurers shall in lieu of payment to the
reassured, its successors in interest and assigns pay to the Loss
Payee specified in the primary insurances all sums payable under or
in connection with such reinsurances by virtue of any reinsured loss
of, or damage to, the Aircraft, Engines and Parts, without any
deduction or deductions whatsoever, other than any outstanding
premium in respect of the Aircraft, Engines or Parts the subject of
the claim, it being understood and agreed that any such payment by
the reinsurers shall fully
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discharge and release the reinsurers from any and all further
liability in connection therewith.
In respect of Comprehensive Airline Liability insurance as described
in Article 11.1(c) above, the reinsurers and reassured hereby agree
that in the event of any claim arising under the relevant
reinsurances, the reinsurers shall in lieu of payment to the
reassured, its successors in interest and assigns pay to the person
or party who has sustained the relevant loss (or as reimbursement of
any payment made by any Additional Assureds) all sums payable under
such reinsurances by virtue of such reinsured loss, without any
deduction or deductions whatsoever, it being understood and agreed
that any such payment by the reinsurers shall fully discharge and
release the reinsurers from any and all further liability in
connection therewith"; and
(e) provide that the reinsurers and reassured agree that in the event
that the reassured, its successors in interest and assigns shall at
any time be or become insolvent or suspend business or file a
petition in bankruptcy or be adjudicated insolvent or bankrupt or
admit in writing its inability to pay its debts as they become due,
or make a general assignment for the benefit of creditors or that a
receiver or liquidator or assignee or trustee or state commissioner
of insurance be appointed in respect of the reassured its successors
in interest or assigns or any substantial part of its property for
the purpose of liquidation on account of insolvency, then the
reinsurers, in lieu of payment to the reassured, its successors in
interest or assigns, shall pay upon demand that portion of any loss
due to the party entitled thereto under the terms of the original
insurance for which such reinsurers would under the terms of the
reinsurance be liable to pay the reassured, its successors in
interest or assigns, less any amounts already paid, it being
understood and agreed that any such direct payment by reinsurers
shall fully discharge and release the reinsurers from any and all
further liability for such payment made.
11.4 Prior to the Delivery Date and thereafter during the Term, at least five
(5) Business Days prior to the renewal date of any Insurance required or
maintained by
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Lessee under Article 11.1 but in no event less than once in each 12 month
period, Lessee shall furnish or cause to be furnished to Lessor by the
insurer or insurance broker and the reinsurance broker
1) a certificate of insurance describing in detail the insurance then
carried and maintained, and certifying that such insurance complies
with the terms of this Agreement, including:
(i) confirmation that the insurance/ reinsurance has been placed
with the insurers/reinsurers required (giving the name of such
insurers reinsurers), the insured/reinsured amount and the
period of the policy and
(ii) confirmation that all premiums due to insurers/reinsurers have
been paid,
and
2) a letter of undertaking from Lessee's brokers and, if required, from
the reinsurance brokers.
Such certificate(s) of insurance and letter(s) of undertaking shall
be in form and substance satisfactory to Lessor.
In the event that Lessee shall fail to effect, maintain or cause to be
effected or maintained, insurance as required by this Article 11, Lessor,
Head Lessor, Mortgagee or the Bank may at its option, but without any
obligation to do so, and without prejudice to Lessor's, Mortgagee's, Head
Lessor's and the Bank's other rights or remedies hereunder, maintain such
insurance or provide such or a similar insurance, and, in such event,
Lessee shall, upon demand, promptly reimburse to Lessor, Head Lessor,
Mortgagee or the Bank the cost thereof, including interest thereon at the
rate referred to in paragraph 6 of Appendix D.
11.5 In the event of any damage to the Aircraft, Engines or Parts during the
Term not constituting a Casualty Occurrence, Lessee shall, if so consented
to by Lessor (such consent not to be unreasonably withheld), repair, or
cause the same to be repaired by an Authorized Maintenance Performer at
its sole cost and expense. Except as otherwise provided in Section
11.2(a)(ii), Lessor and Lessee agree that all insurance proceeds payable
in connection with any such damage shall be
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payable as provided in Article 11.2(a) (ii). In such event any insurance
proceeds received by Lessor shall be applied to reimburse Lessee for such
cost and expense. Any excess remaining shall, unless a Default shall have
occurred and be continuing, be paid over to Lessee.
11.6 INTENTIONALLY OMITTED.
11.7 When used in this Article 11, the expression Additional Assured(s)
denotes:
(a) in relation to those insurances referred to in Article 11.2(a),
those persons referred to in subparagraph (i) of Article 11.2(a);
and
(b) in relation to those insurances referred to in Article 11.2(b),
those persons referred to in subparagraph (i) of Article 11.2(b).
12. ASSIGNMENT AND SUBLETTING
12.1 Lessee shall not assign any of its rights or obligations or delegate any
of its duties under this Agreement and, except as permitted by Article 5.1
above, Lessee shall not sublet or otherwise part with possession of the
Aircraft or any Part thereof unless previously approved by Lessor in
writing (such consent not to be unreasonably withheld). Lessee may wet
lease the Aircraft whereby the term "wet lease" shall mean an agreement
whereby Lessee at all times retains operational control of the cockpit and
the Aircraft including all of its maintenance.
12.2 This Agreement, the Aircraft and Lessor's interest in each thereof is
freely assignable and alienable by Lessor upon written notice to Lessee in
accordance with Article 12.3, provided, however, that so long as the
Aircraft shall be leased to Lessee under this Lease, Lessor will not sell,
assign, convey or otherwise transfer absolutely (and not for security) any
of its right, title, or interest in and to this Agreement or the Aircraft
to any person unless Lessor and the proposed transferee (the "Transferee")
have complied with the following conditions:
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(i) Lessor shall give Lessee written notice of such transfer at
least 3 Business Days before the date of such transfer,
specifying the name and address of the proposed Transferee;
(ii) the Transferee shall not be an airline or a commercial air
carrier or person controlling, controlled by or under common
control with an airline or a commercial air carrier which is
in direct competition with Lessee in the United States;
(iii) the Transferee shall qualify as a "citizen of the United
States" within the meaning of Section 40102(a)(15) of Title 49
of the United States Code by a Voting Trust Agreement or
otherwise; and
(iv) on the transfer date the Lessor and the Transferee shall enter
into an agreement or agreements in which the Transferee
confirms that it shall be deemed a party to this Lease and
agrees to be bound by all the terms of, and to undertake all
of the obligations of, the Lessor contained in this Agreement
and shall deliver a certificate of quiet enjoyment to Lessee
in a form and substance reasonably acceptable to it and Lessee
shall receive an opinion of counsel to the Transferee stating,
with the customary assumptions and exceptions, that such
agreement or agreements has been duly authorized, executed and
delivered and constitute the legal, valid and binding
obligations of the Transferee enforceable in accordance with
their terms and that the entry into such agreement(s) does not
violate any laws or agreements applicable to such Transferee
The agreements, covenants, obligations and liabilities contained herein,
including but not limited to all obligations to pay Rent and indemnify
Lessor, are made for the benefit of Lessor, Beneficiary, Mortgagee,
Lender, any assignee including the Head Lessor and/or the Bank as security
assignee, and their respective successors and assigns, notwithstanding the
possibility that any such person was not originally a party to this
Agreement or may, at the time any enforcement is
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sought, no longer be a party to this Agreement. Lessee shall comply, at
Lessor's cost and expense, with all reasonable requests of Lessor, its
successors and assigns respecting the assignment and Lessee's
acknowledgment of the assignee as Lessor. Notwithstanding anything
contained in this paragraph to the contrary, no assignment of Lessor's
interest in this Agreement or the Aircraft or Beneficiary's interest in
the Trust Estate shall alter the terms of this Agreement in so far as the
costs to Lessee of the performance of its obligations to pay Rent, Reserve
Rate, and Deposits hereunder and, except as otherwise expressly provided
in this Agreement, the rights and liabilities of Lessee under this
Agreement are concerned. Lessee's rights under this Agreement shall not be
subject or subordinate to any Security Assignment or Mortgage executed by
Lessor or Beneficiary (which Security Assignment or Mortgage shall be
subject to this Agreement).
12.3 It is acknowledged and agreed that:
(a) Lessor has the right to assign all of its right, title and interest
in and to this Agreement and the Aircraft to the Head Lessor and/or
the Bank. In order to comply with its obligations in relation
thereto, Lessor will, upon such assignment, give Lessee a notice of
assignment and it is agreed that Lessee shall forthwith acknowledge
the same by executing and delivering to Lessor on behalf of Head
Lessor and/or the Bank a consent to assignment in form and substance
reasonably acceptable to Head Lessor and/or the Bank;
(b) Lessor may be required by Head Lessor and/or the Bank to assign to
Head Lessor and/or the Bank all of its rights, title and interest in
and to the Insurances (other than liability insurances). In order to
comply with its obligations in relation thereto, Lessor, upon
assignment of this Agreement pursuant to Article 12.3 (a), shall
give the insurers a notice of assignment of Insurances and the
Lessee shall procure that such insurers forthwith acknowledge the
same by executing and delivering to Lessor an acknowledgment in form
and substance acceptable to Head Lessor and/or the Bank;
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(c) Lessor may from time to time require to amend, modify or replace the
security arrangements in respect of the financing or refinancing of
the Aircraft and Lessee agrees to cooperate with Lessor in
connection therewith and, in particular (but without limiting the
generality of the foregoing), to change the plates provided for in
Article 4.3 and to execute and deliver such other or further
acknowledgments of assignment or other documents and to do such
other things as Lessor may reasonably require to be executed and
delivered;
(d) Upon any financing or refinancing of the Aircraft as contemplated by
this Article 12.3, Lessee will promptly and duly execute and deliver
to Lessor, Head Lessor, Mortgagee or Lender or the Bank such other
documents and assurances and take such further action as may from
time to time be reasonably requested in order more effectively to
carry out the intent and purpose of this Agreement, the Indenture
and the Security Assignment. Lessee will procure on request of
Lessor that the independent counsel will confirm to the Head Lessor
and the Bank that the Head Lessor and the Bank may rely on the terms
of the opinion provided pursuant to Article 2.2 as if the Head
Lessor and the Bank were each addressees of such opinion;
(e) Title to the Aircraft may be transferred by Lessor to the Head
Lessor to be indicated by Lessor or Beneficiary's interest in the
Trust Estate may be transferred by Beneficiary, in either case for
the purpose of enabling Lessor to raise finance in relation to the
Aircraft. In such event either a lease agreement shall be executed
in respect of the Aircraft between the Head Lessor and Lessor ("Head
Lease") in order to enable Lessor to continue to lease the Aircraft
to Lessee in accordance with this Agreement or Lessor may assign all
or part of its rights, title and interest in and to this Agreement
and the Aircraft to Head Lessor pursuant to Article 12.2 or
Beneficiary may assign all of its right, title and interest in and
to the Trust Estate and Lessee agrees to cooperate with Lessor in
connection therewith and, in particular (but without limiting the
generality of the foregoing), to cooperate in the execution of any
documents, agreements and
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amendments to this Agreement that are necessary in connection with
such Head Lease or such assignment and to do such other things as
Lessor may require to be executed and delivered so long as any such
amendments to this Agreement do not adversely affect Lessee; and
(f) Lessee shall not be liable to (1) any Transferee or (2) any
assignee, purchaser, or transferee of the beneficial interest of the
Trust Estate (a "Beneficiary Transferee") for any payment of Taxes
pursuant to this Agreement in excess of the amount that would have
been payable to the Lessor or the Beneficiary originally party
hereto, as the case may be, if that party had remained as the Lessor
or the Beneficiary, respectively.
13. DISCLAIMER, REPRESENTATIONS AND WARRANTIES
13.1 NONE OF LESSOR, BENEFICIARY, MORTGAGEE OR LENDER IS A MANUFACTURER OF THE
AIRCRAFT OR OTHER AIRCRAFT OR A DEALER IN SIMILAR AIRCRAFT AND HAS NOT
INSPECTED THE AIRCRAFT PRIOR TO DELIVERY TO AND ACCEPTANCE BY LESSEE.
LESSEE (I) ACKNOWLEDGES AND AGREES THAT THE AIRCRAFT IS BEING DELIVERED BY
LESSOR TO LESSEE "AS IS" AND "WHERE IS"' AND THAT NO CONDITION, WARRANTY
OR REPRESENTATION OF ANY KIND WHATSOEVER HAS BEEN OR IS GIVEN BY OR IS TO
BE IMPLIED ON THE PART OF LESSOR, BENEFICIARY, MORTGAGEE OR LENDER IN
RELATION TO THE AIRCRAFT, AND (II) HEREBY WAIVES AS BETWEEN ITSELF AND
LESSOR, BENEFICIARY, MORTGAGEE OR LENDER ALL ITS RIGHTS, EXPRESS OR
IMPLIED (WHETHER STATUTORY OR OTHERWISE), TO MAKE CLAIMS IN RESPECT OF THE
AIRCRAFT RELATING TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION, DESIGN,
OPERATION, CONFORMITY TO SAMPLES OR MODELS, COMPLIANCE WITH
SPECIFICATIONS, MERCHANTABILITY OR FITNESS OR SUITABILITY FOR USE FOR A
PARTICULAR PURPOSE OF THE AIRCRAFT OR ANY PART THEREOF, QUALITY OF THE
MATERIAL OR WORKMANSHIP, ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR
NOT DISCOVERABLE, ABSENCE OR ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR
COPYRIGHT, REMEDY IN TORT, BASED ON STRICT LIABILITY OR NEGLIGENCE, ACTUAL
OR IMPUTED, AND LESSEE HEREBY WAIVES ANY OTHER REPRESENTATION OR WARRANTY
WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT, IT BEING
UNDERSTOOD THAT ALL SUCH RISKS, AS BETWEEN LESSEE AND LESSOR, BENEFICIARY,
MORTGAGEE OR LENDER ARE TO BE BORNE BY LESSEE.
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Nothing in this Agreement shall afford Lessor or any Indemnitee any wider
or greater exclusion of liability for death or bodily injury than would be
permitted by the Governing Law.
This paragraph shall not be modified except by a written agreement signed
on behalf of Lessor and Lessee by their respective duly authorized
representatives.
13.2 Lessor and Lessee agree that this Article 13 has been the subject of
discussion and negotiation and is fully understood by the parties, and
that the amount of the Rent and other mutual agreements of the parties set
forth in this Agreement were arrived at in consideration of the provisions
of this Article 13 specifically including the waiver by Lessee set forth
in Article 13.1.
13.3 So long as no Event of Default has occurred and is continuing Lessor
agrees to assign or otherwise make available to Lessee for the duration of
the Term such rights as Lessor may have under any warranty, express or
implied, with respect to the Aircraft made by the Manufacturer of the
Aircraft, any subcontractor or supplier thereof, or any other seller
thereof, to the extent that the same may be assigned or otherwise made
available to Lessee and without warranty by Lessor as to enforceability of
any of the rights so assigned.
To the extent that the same may not be assigned or otherwise made
available to Lessee, Lessor agrees to exert its reasonable efforts, at
Lessee's expense, to enforce such rights as Lessor may have with respect
thereto for the benefit of Lessee; provided however, that upon an Event of
Default all such rights shall immediately revert to Lessor including all
claims thereunder, whether or not perfected, unless such Event of Default
has forthwith been remedied by Lessee.
13.4 Lessee represents and warrants that:
(a) Lessee is a corporation organized and existing in good standing, in
accordance with the Laws of the State of Incorporation, and has the
corporate power and authority to carry on its business as presently
conducted and to perform its obligations under this Agreement, is a
Certificated Air Carrier operating under a certificate of public
convenience and necessity issued by the Secretary of Transportation
and is the holder of all
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necessary licenses issued by all Government Entities having
jurisdiction to authorize or permit Lessee to engage in air
transportation and to perform and comply with its obligations
hereunder;
(b) This Agreement has been duly authorized by all necessary corporate
action on the part of Lessee, and neither the execution and delivery
nor the consummation of the transactions contemplated hereby nor
compliance by Lessee with the provisions of this Agreement will
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;
(c) The execution and delivery by Lessee of this Agreement, and all of
the transactions by Lessee contemplated hereby, have received, and
Lessee has complied with, every necessary consent, approval, order,
or authorization of, or registration with, or the giving of prior
notice to, any Government Entity having jurisdiction with respect to
the execution and delivery of this Agreement or the validity and
enforceability of this Agreement or the satisfaction of all monetary
and other obligations hereunder;
(d) This Agreement has been duly entered into and delivered by Lessee
and constitutes the valid, legal and binding obligations of Lessee,
enforceable in accordance with their terms subject to principles of
equity, laws relating to bankruptcy, insolvency or liquidation or
any other laws or legal procedures generally affecting the
enforcement of creditor's rights or the rights of contracting
parties;
(e) Assuming the proper deregistration of the Aircraft and any
mortgage(s) placed thereon from the Swedish aircraft registry, it is
not necessary or advisable under the Laws of the State of
Registration in order to ensure the validity,
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effectiveness and enforceability of this Agreement, the Indenture or
the Security Assignment or to protect the property rights of Lessor,
Beneficiary, Head Lessor, Mortgagee, Lender or the Bank in the
Aircraft and under the this Agreement, the Indenture and Security
Assignment that this Agreement, the Indenture, the Security
Assignment or any other instrument relating thereto be filed,
registered or recorded or that any other action be taken under the
Laws of the State of Incorporation and the State of Registration to
perfect the property rights of Lessor, Head Lessor, Mortgagee,
Lender and the Bank in the Aircraft and this Agreement other than
the filing of all such instruments with the Air Authority, the
filing of UCC-l financing statements in relevant jurisdictions, and
the Indenture and Security Assignment will have priority in all
respects over the claims of all creditors of Lessee in or against
the Aircraft, except for Permitted Liens;
(f) Under the Laws of the State of Incorporation and the State of
Registration, Lessee will not be required to make any deduction or
withholding from any payment it may make under this Agreement. There
is no withholding or other tax to be deducted from any payment to be
made by Lessee under this Agreement;
(g) There are no suits or legal proceedings (including any
administrative proceeding) pending or threatened before any court or
administrative agency against Lessee which, if adversely determined,
would have a material adverse effect upon its financial condition or
business or its ability to perform its obligations hereunder;
(h) There has been no material adverse change in the financial position
of Lessee or in the consolidated financial position of Lessee and
its subsidiaries from that set forth in the financial statements
last furnished pursuant to Article 6.4 and neither Lessee nor any of
its subsidiaries have any significant liabilities (contingent or
otherwise) which are not disclosed by, or reserved against in such
financial statements; and
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(i) The chief executive office (as such term is used in Sections
9-103 and 9-401 of the Uniform Commercial Code) of Lessee is
at the date hereof located at Durham, North Carolina and
Lessee agrees to give at least 30 days' prior notice to Lessor
of any relocation of said chief executive office or place
where such records are kept and of any change in its name.
13.5 The representations and warranties in Article 13.4 (other than in clauses
(f), (g) and (h)) shall be deemed to be repeated by Lessee on and as of
each Rent Date as if made with reference to the facts and circumstances
existing on each such date.
13.6 Lessor represents, warrants and covenants that:
(a) Lessor is a national banking association duly organized and validly
existing in good standing under the laws of the United States of
America, qualifies as a "citizen of the United States" within the
meaning of Section 40102(a) (15) of Title 49 of the United States
Code and has the corporate power and authority to carry on its
business as presently conducted and to perform its obligations under
this Agreement; if at any time Lessor shall have actual knowledge
that it has ceased to qualify as such a citizen, it will, if such
citizenship is then necessary to maintain the eligibility of the
Aircraft for United States registration, take such action as may be
necessary to maintain such United States registration;
(b) This Agreement has been duly authorized by all necessary corporate
action on the part of Lessor, has been duly entered into and
delivered by Lessor in accordance with the Trust Agreement and
constitutes the valid, legal and binding obligations of Lessor,
enforceable in accordance with their respective terms subject to
principles of equity, laws relating to bankruptcy, insolvency or
liquidation or any other laws or legal procedures generally
affecting the enforcement of creditor's rights or the rights of
contracting parties;
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(c) Neither the execution and delivery nor the consummation of the
transactions contemplated hereby nor compliance by Lessor with the
provisions of this Agreement will result in any breach of, or
constitute any default under, any indenture or any 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;
and
(d) Except for the registration of the Aircraft and the issuance of the
licenses described in Article 4.1, neither the execution and
delivery nor the consummation of the transactions contemplated
hereby nor compliance by Lessor with the provisions of this
Agreement requires the consent or approval of, the giving of notice
to, or the registration with, or the taking of any other action in
respect of any Government Entity.
The representations and warranties contained in clauses (a), (b) and (c)
of this Article 13.6 are made by Lessor in its individual capacity.
13.7 Lessor undertakes that, so long as no Event of Default shall have occurred
and be continuing, Lessor will not interfere with the peaceful and quiet
use and enjoyment of the Aircraft by Lessee in accordance with the terms
of this Agreement. Lessor shall procure from Mortgagee a letter confirming
that Mortgagee shall not take or cause to be taken any action interfering
with Lessee's quiet enjoyment and use and possession of the Aircraft,
provided that no Event of Default shall have occurred and be continuing.
14. COVENANTS OF LESSEE
14.1 Lessee hereby covenants with Lessor that from the Delivery Date and during
the Term and until redelivery of the Aircraft to Lessor in accordance with
Article 16 it will:
(a) remain in and continue to operate as a Certificated Air Carrier
holding a valid certificate of public convenience and necessity
issued by the Secretary of Transportation, to preserve its corporate
existence and to satisfy its debts and obligations as they fall due;
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(b) comply with all Laws and regulations for the time being in force in
the State of Incorporation, the State of Registration and in any
country to, from, in or over which the Aircraft is flown, the
failure with which to comply is likely to have a material adverse
effect on Lessee; provided, however, that such failure shall have no
adverse effect on the Aircraft or on the interests of Lessor,
Mortgagee, Lender, Head Lessor or the Bank therein or in this
Agreement or on the Insurances required to be maintained pursuant to
Article 11;
(c) (i) at its own expense from time to time do and perform such other
and further acts and execute and deliver any and all further
instruments as may be required by Law (in the United States but not
in any jurisdiction outside the United States unless directly
required due to Lessee's operation), and (ii) at Lessor's expense
(insofar as not covered in Article 8.2(a)) from time to time do and
perform such other and further acts and execute and deliver any and
all further instruments as may be reasonably requested by Lessor to
establish, maintain and protect the respective rights and remedies
of Lessor, Head Lessor and the Bank and to carry out and give effect
to the intents and purposes of this Agreement and the parties;
(d) notify Lessor immediately of the occurrence of any Default;
(e) obtain and maintain all necessary government and other certificates,
consents, licenses, permits and authorizations and take all action
which may be necessary for the continued due performance of Lessee's
obligations under this Agreement and for the use and operation of
the Aircraft;
(f) not do or permit to be done any act or thing which might impair the
respective interests of Lessor, Head Lessor, Mortgagee, Lender and
the Bank in the Aircraft, or the registration of the Aircraft;
(g) notify Lessor as soon as practicable after becoming aware of any
loss, theft, damage or destruction of or to the Aircraft or any part
thereof if the potential cost of repair or replacement is likely to
exceed $100,000.00 (Dollars One Hundred Thousand);
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(h) not do anything which is likely to subject the Aircraft or any part
thereof to penalty, forfeiture, seizure, arrest, impounding,
detention, confiscation, taking in execution, appropriation or
destruction nor abandon the Aircraft or any part thereof;
(i) not represent or hold out Lessor, Head Lessor, Mortgagee, Lender or
the Bank as carrying goods or passengers on the Aircraft or as being
in any way connected or associated with any operation or carriage
(whether for hire or reward or gratuitously) which Lessee may
undertake;
(j) not pledge the credit of Lessor, Head Lessor or the Bank for any
maintenance, overhauls, replacements, repairs or modifications to
the Aircraft;
(k) keep Lessor and the insurers, as referred to in Article 11, informed
as to current serial numbers of the Engines and any engine installed
on the Aircraft in accordance with the provisions of this Agreement,
and the location of any Engine for the time being not installed on
the Aircraft; and shall notify such insurers of any renewal,
replacement or substitution, or the location of any Engine not
installed on the Aircraft;
(l) discharge all fees, charges and expenses payable to any third party
in relation to the use or operation of the Aircraft or any premises
where the Aircraft is situated;
(m) in the event of any forfeiture, impounding or detention of the
Aircraft or any part thereof not constituting a Casualty Occurrence,
use all reasonable endeavors to procure the immediate release
therefrom of the same;
(n) keep accurate, complete and current records of all flights made by
the Aircraft. Such records shall be kept in such manner as the Air
Authority may from time to time require and in accordance with the
Approved Maintenance Program. Lessee shall permit Lessor or its
authorized representatives to examine such records upon giving
reasonable notice not involving delay to the Aircraft and, subject
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to the terms of Article 7.5.3, at the expense of Lessor or such
person, to copy such records;
(o) on request, provide Lessor with evidence satisfactory to Lessor that
all Taxes and charges incurred by Lessee with respect to the
Aircraft, including without limitation any payments due to any
relevant air traffic control authorities and airport authorities,
have been paid and discharged in full or duly provided for; and
(p) not consolidate with, or merge into, any other corporation, convey,
transfer or lease substantially all of its assets as an entirety to
any person without the prior written consent of Lessor (such consent
not to be unreasonably withheld) and the execution and delivery to
Lessor of such agreements, certificates and legal opinions as Lessor
may request with respect thereto.
15. DEFAULT BY LESSEE
15.1 Each of the following events shall constitute an "Event of Default":
(a) if default shall be made by Lessee in the making of any Rent,
Reserve Rate, or Supplemental Rent payment within five (5) Business
Days after the date when such payment is due and payable under this
Agreement; or
(b) (i) if default shall be made by Lessee at any time in the
procurement or maintenance of any insurance coverage prescribed
herein or (ii) any insurance which may be maintained by Lessor, Head
Lessor, Mortgagee, Lender or the Bank under Article 11.4 is canceled
or terminated or notice of cancellation is given; or
(c) if default shall be made by Lessee in the observance or performance
of any of the other obligations of Lessee contained in this
Agreement and, if such default is in the opinion of Lessor capable
of remedy, such default shall continue for a period of fifteen (15)
Business Days after notice from Lessor to Lessee specifying the
default and requiring that the same be remedied; or
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(d) if any representation or warranty made (or deemed to be repeated) by
Lessee in or pursuant to this Agreement or in any document or
certificate or statement referred to in or delivered under this
Agreement is or proves to have been incorrect in any material
respect when made or deemed to be repeated and such incorrectness,
if capable of being cured, shall continue for fifteen (15) Business
Days after notice from Lessor specifying such incorrectness; or
(e) if any borrowed money of Lessee or any of its subsidiaries having an
outstanding principal amount in excess of $4,000,000 (Dollars Four
Million) is not paid when due, or by reason of breach or default
under the terms of any instrument evidencing or guaranteeing the
same on the part of Lessee or any of its subsidiaries any such
borrowed money having an outstanding principal amount in excess of
$4,000,000 of Lessee or any of its subsidiaries becomes due or
capable of being declared due prior to the date when it would
otherwise have become due, or the security for any such borrowed
money or any guarantee in respect thereof becomes enforceable; or
(f) if an encumbrancer takes possession or a receiver, administrator,
administrative receiver, trustee, liquidator or similar officer is
appointed of the whole or any substantial part of the assets, rights
or revenues of Lessee or any of its subsidiaries or a distress,
execution, sequestration or other process is levied or enforced upon
or sued out against all or a substantial part of the assets, rights
or revenues of Lessee or any of its subsidiaries and is not
discharged within fourteen days, or Lessee applies for or consents
to the appointment of a receiver, administrator, administrative
receiver, trustee, liquidator or similar officer for it or for all
or any part of its assets, rights or revenues; or
(g) if Lessee or any of its subsidiaries suspends payment of its debts,
or is unable or admits its inability to pay its debts as they fall
due, or shall be adjudicated or found, or becomes, bankrupt or
insolvent, or proposes or enters into any composition or other
arrangement for the benefit of its creditors generally, or Lessee or
any
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of its subsidiaries shall, by voluntary petition, answer or consent,
seek relief under the provisions of any bankruptcy, insolvency or
other similar law providing for the reorganization, liquidation,
administration, dissolution or winding-up of corporations, or
providing for an agreement, composition, extension or adjustment
with its creditors; or
(h) if a petition against Lessee in a proceeding under applicable
bankruptcy or other insolvency laws shall be filed and shall not be
withdrawn or dismissed within 30 days thereafter, or if any order
shall be made by any competent court or resolution passed by Lessee
or any of its subsidiaries or their respective board of management
or supervisory board, whichever is competent to pass such resolution
for the winding-up or dissolution of Lessee or any of its
subsidiaries or for the appointment of a liquidator, trustee or
conservator, save for winding-up or dissolution for the purposes of
amalgamation or reorganization (not involving or arising out of
insolvency) the terms of which shall have received the prior written
approval of Lessor; or
(i) if Lessee or any of its subsidiaries disposes of all or a material
part of its assets, whether by one or a series of transactions,
related or not, other than for the purpose of a reconstruction or
amalgamation the terms of which have received the previous consent
in writing of Lessor; or
(j) if any action shall be taken by Lessee which shall impair the title
or ownership of Lessor (or Head Lessor), or the Security Interest of
the Mortgagee (or the Bank), in the Aircraft or this Agreement is or
becomes wholly or partly invalid, ineffective or unenforceable by
reason of any act or omission of Lessee; or
(k) if any consent, authorization, license, certificate or approval of
or registration with or declaration to any Government Entity in
connection with this Agreement including, without limitation:
(i) any Certificate of Public Convenience and Necessity; or
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(ii) required by Lessee or as a condition precedent required by
Lessor pursuant to Article 2.3 to authorize, or in connection
with, the execution, delivery, validity, enforceability or
admissibility in evidence of this Agreement or the performance
by Lessee of its obligations under this Agreement; or
(iii) the registration of the Aircraft; or
(iv) any airline license or air transport license;
is changed such that it materially impairs the ability of
Lessee to perform its obligations hereunder, or is withheld,
or is revoked, suspended, canceled, withdrawn, terminated or
not renewed, or otherwise ceases to be in full force; or
(m) if any circumstances analogous to any of the circumstances described
in paragraphs (f), (g) or (h) above arise under the Law of any
applicable jurisdiction; or
(n) if an event of default (however defined) occurs under any of the
Other Aircraft Agreements which event permits acceleration or
termination.
15.2 If one or more Events of Default shall have occurred and be continuing, at
Lessor's option and subject to any mandatory requirement of Law:
(a) For Lessee's account Lessor may do anything that may reasonably be
required to cure any Event of Default and recover from Lessee all
costs including legal expenses incurred in so doing, and/or
(b) Lessor may accept such Event of Default as a repudiation of this
Agreement and terminate the lease of the Aircraft to Lessee
hereunder by:
(i) serving notice of such termination on Lessee specifying the
occurrence giving rise to such Event of Default or Events of
Default, provided that such notice shall be deemed to have
been served without the necessity of actual service upon the
occurrence of any
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Event of Default described in paragraphs (f), (g) and (h) of
Article 15.1.
Thereafter (if the Term shall have commenced) Lessee shall
redeliver possession of the Aircraft to Lessor at Schiphol
Airport, The Netherlands (or such other location as Lessor may
require); or (at Lessor's election)
(ii) taking possession of the Aircraft for which purpose Lessor by
its servants or agents may enter upon Lessee's premises where
the Aircraft may be located, or cause the same to be
redelivered to Lessor at Schiphol Airport, The Netherlands,
(or such other location as Lessor may require Lessee to
assemble and deliver the Aircraft to Lessor, and Lessor shall
be entitled to act as attorney for Lessee in causing such
redelivery and shall have all the powers and authorizations
legally necessary for taking such action. In the event of
exercise by Lessor of its powers under this sub-paragraph (ii)
such termination shall be deemed to take effect on such taking
of possession by Lessor or such redelivery of the Aircraft to
Lessor at the said airport; and/or
(c) Lessor may proceed by appropriate court action or actions to enforce
performance of Article 15.2(b) or to recover damages for the breach
thereof; and/or
(d) all rights of Lessee hereunder shall, in the event the Term shall be
terminated pursuant to Article 15.2(b) henceforth absolutely cease
and terminate but without prejudice to Lessee's obligations under
this Agreement all of which shall continue in full force and effect
except for obligations to pay Rent and Reserve Rate after the
Aircraft is returned to Lessor, and is in the condition required by
Article 16; and Lessee shall take all steps necessary to effect
deregistration of the Aircraft in the State of Registration and
Lessor shall be entitled to sell or otherwise deal with the Aircraft
as if this Agreement had never been made. Without prejudice to the
foregoing, Lessee hereby appoints Lessor as its attorney to do any
act or thing required in connection with such deregistration of the
Aircraft.
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15.3 If an Event of Default occurs, Lessor shall have the right to demand that:
(a) Lessee pay all amounts which may be then due and unpaid hereunder,
and
(b) at Lessor's option whether or not Lessor shall have exercised, or
shall thereafter at any time exercise, any of its rights under
Article 15.2, by thirty (30) days written notice to Lessee from
Lessor specifying a payment date, Lessee pay Lessor, and Lessee
shall pay Lessor, on the payment date specified in such notice, as
liquidated damages for loss of bargain and not as a penalty (in lieu
of the Rent due for the Aircraft covered by such notice for the
period commencing after the date specified for payment in such
notice), any unpaid Rent for the Aircraft (prorated in the case of
Rent on a daily basis) to and including the payment date specified
in such notice, plus the amount, if any, by which the aggregate Rent
for the Aircraft for the remainder of the Term for the Aircraft,
discounted periodically (equal to installment frequency) to present
worth at the interest rate of six percent (6%) per annum, exceeds
the Fair Market Rental Value of the Aircraft for the remainder of
the Term, after discounting such Fair Market Rental Value
periodically (equal to installment frequency) to present worth as of
the payment date specified in such notice at the interest rate of
six percent (6%) per annum.
Lessee shall fully indemnify Lessor on its own behalf and on behalf of the
Beneficiary, Mortgagee, Lender, Head Lessor and the Bank on demand against
any loss (including loss of profit), damage, expense (including without
limitation attorneys' fees), cost or liability which Lessor, Beneficiary,
Mortgagee, Lender, Head Lessor or the Bank may sustain or incur as a
consequence of the occurrence of any Event of Default and/or termination
of the letting of the Aircraft pursuant to this Agreement, including but
not limited to (i) any loss of profit suffered by Lessor and/or the Head
Lessor because of Lessor's inability to place the Aircraft on lease with
another lessee on terms as favorable to Lessor as the terms of this
Agreement or because whatever use, if any, to which Lessor is able to put
the Aircraft upon its return to Lessor, or the
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funds arising upon a sale or other disposal thereof, is not as profitable
to Lessor as letting the Aircraft in accordance with the terms of this
Agreement would have been to the extent the foregoing loss of profit shall
not be recovered under Article 15.3(b), (ii) any amount of interest, fees
or other sums whatsoever paid or payable on account of funds borrowed in
order to carry any unpaid amount, (iii) any loss, premium, penalty or
expense which may be incurred repaying funds raised to finance the
Aircraft or in unwinding any swap, forward interest rate agreement or
other financial instrument relating in whole to Lessor's financing of the
Aircraft and/or the Aircraft under the Other Aircraft Agreement, and (iv)
any loss, cost, expense or liability sustained or incurred by Lessor owing
to Lessee's failure to redeliver the Aircraft in the condition required by
this Agreement.
15.4 No remedy referred to in this Article 15 is exclusive, but each remedy
shall be cumulative and in addition to any other remedy referred to herein
or otherwise available to Lessor. The exercise by Lessor of any of its
remedies hereunder shall not preclude or estop the exercise or beginning
of exercise by Lessor of any or more of such other remedies.
No express or implied waiver by Lessor of any Event of Default, or failure
or delay of Lessor in exercising any right hereunder shall operate as
waiver thereof unless an express waiver is executed and delivered to
Lessee.
15.5 Prior to the Delivery Date Lessee shall deliver to Lessor a duly
authorized consent, undated and in form and substance acceptable to
Lessor, addressed to the Federal Aviation Administration consenting to the
release of this Agreement in connection with the termination of this
Agreement pursuant to the terms hereof and, if so requested by Lessor, the
deregistration of the Aircraft from the register of civil aviation in the
State of Registration.
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16. RETURN OF AIRCRAFT
16.1 On the Expiry Date or upon earlier termination of the Term (unless a
Casualty Occurrence shall have occurred with respect to the Aircraft),
Lessee shall, at its own expense, redeliver the Aircraft to Lessor at the
Re-Delivery Location or such other airport as is mutually acceptable to
the parties, in a condition complying with the provisions of Appendix E,
free and clear of all liens and encumbrances (including Permitted Liens
other than Lessor Liens) and thereupon cause the Aircraft to be removed
from the Register of Civil Aircraft in the State of Registration and
Lessee shall return the Aircraft to Lessor together with the Aircraft
Documents and all equipment and records supplied pursuant to this
Agreement when the Aircraft was delivered to Lessee hereunder.
16.2 Immediately prior to such redelivery of the Aircraft, Lessee, at its own
expense, shall make the Aircraft, Aircraft Documents and other records
available to Lessor for inspection ("Final Inspection") in order to verify
that the condition of the Aircraft complies with the provisions of this
Agreement. Such inspection shall not unreasonably interfere with the
operation of the Aircraft. The period will be long enough for the Final
Inspection to permit the conduct by Lessor of the following:
(a) Inspection of the Aircraft Documents;
(b) Inspection of the Aircraft structure and Parts;
(c) Inspection of the Engines and Auxiliary Power Unit ("A.P.U."),
including without limitation, a boroscope inspection or any other
equivalent inspection method supported by Rolls Royce, inspection of
the compressor and turbine area, and, if reasonably requested based
on evidence that it is required, the Engine and A.P.U. condition
runs confirming release of each Engine and A.P.U for its remaining
operational life;
(d) A one-hour to two-hour test flight with Lessor's representatives on
board as observers and, if any non compliance is found, a subsequent
test flight to check compliance after rectification.
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16.3 To the extent that, upon such Final Inspection, the condition of the
Aircraft and Aircraft Documents does not comply with the provisions of
this Agreement, Lessee, at its own expense, shall cause such noncompliance
to be promptly rectified and to the extent such rectification extends
beyond the Expiry Date, the Term shall, at Lessor's sole option, be deemed
to be automatically extended and the provisions of this Agreement shall
remain in full force and effect until such rectification has been
accomplished. During such extension of the Term the Lessee shall be liable
to pay Rent at a daily pro rata rate equal to the Rent payable during the
last Rental Period of the Term.
16.4 Upon redelivery Lessee shall provide to Lessor all necessary assistance to
enable Lessor to obtain any required documents in relation to the export
of the Aircraft from the State of Registration, and if different, from the
State of Incorporation (including a valid and subsisting export license
for the Aircraft), and shall reassign to Lessor, at the expense of Lessee,
the benefit of any indemnity or warranty which has been assigned to Lessee
pursuant to Article 13.3 above to the extent such indemnity or warranty is
assignable.
16.5 Prior to the Expiry Date or upon any earlier termination of the Term and
upon Lessor's request, Lessee will provide Lessor or its agent reasonable
access to the Approved Maintenance Program and the Aircraft Documents in
order to facilitate the Aircraft's integration into any subsequent
operator's fleet.
Lessee will, if requested by Lessor to do so, upon return of the Aircraft
deliver to Lessor a certified true current and complete copy of the
Approved Maintenance Program. Lessor agrees that it will not disclose the
contents of the Approved Maintenance Program to any person or entity
except to the extent necessary to monitor Lessee's compliance with this
Agreement and/or to bridge the maintenance program for the Aircraft from
the Approved Maintenance Program to another program.
16.6 Upon redelivery of the Aircraft to Lessor, an adjustment shall be made in
respect of fuel on board on the Delivery Date and on redelivery at the
price then prevailing at the Redelivery Location.
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16.7 If Lessor shall request that Lessee paint the Aircraft any other basic
color as contemplated by Section 1(h) of Appendix E, Lessor agrees that it
shall bear the cost and expense of the difference between white paint and
such other basic color.
16.8 Upon written request of Lessor given to Lessee not later than thirty (30)
days prior to the Expiry Date or termination of the Lease, Lessee, at the
Expiry Date or upon termination of the Lease, will provide, or will cause
to be provided, up to thirty (30) days' storage of the Aircraft at
Lessee's premises, at Lessor's cost and expense. During such period of
storage, Lessee will arrange for insurance and maintenance at Lessor's
cost and expense. Lessee shall allow Lessor or any representatives of any
prospective purchaser or user of the Aircraft to inspect the same at all
reasonable times.
17. CASUALTY OCCURRENCES
17.1 In this Agreement "Casualty Occurrence" shall mean any of the following
events with respect to the Aircraft, the Airframe or an Engine:
(a) the actual, agreed, constructive, arranged or compromised total loss
or destruction of the Aircraft, the Airframe or an Engine, or damage
to the Aircraft, Airframe or Engine rendering repair impracticable
or uneconomical, or the Aircraft, Airframe or Engine being rendered
permanently unfit for normal use;
(b) requisition of title or other compulsory acquisition, requisition,
capture, seizure, deprivation, confiscation or detention for any
reason of the Aircraft, the Airframe or an Engine by any Government
Entity of the State of Registration or by any other government or
other competent authority, whether de jure or de facto, but
excluding requisition for use or hire not involving requisition of
title by any Governmental Entity for a temporary period ending on
the date fifteen (15) days (or the Expiry Date) if the requisition
for use or hire is by the United States) after such requisition, or
the Expiry Date, whichever first occurs; and
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(c) the hijacking, theft, disappearance, condemnation, confiscation or
seizure of the Aircraft, the Airframe or an Engine other than in the
circumstances referred to in (b) above which deprives Lessee of the
use thereof for more than fifteen (15) consecutive days.
17.2 (a) In the event of a Casualty Occurrence with respect to the Aircraft
or Airframe prior to the Delivery Date, this Agreement shall
immediately terminate with respect to such Aircraft and neither
party shall have any further obligation or liability hereunder, save
that Lessor shall return to Lessee the Deposit or such part thereof
as Lessor shall have received from Lessee and Lessee shall remain
liable to reimburse Lessor for any amounts specified in Article
8.2(a).
(b) In the event of a Casualty Occurrence with respect to the Aircraft
or Airframe after delivery to Lessee hereunder, Lessee shall pay the
Agreed Value to Lessor on or prior to the earlier of (i) 45 days
after the Casualty Occurrence and (ii) the Business Day after the
date of receipt of the insurance proceeds in respect of the Casualty
Occurrence and, provided all other amounts which are then due and
payable by Lessee under this Agreement have been paid in full to
Lessor, Lessee's obligation hereunder for payment of Rent shall
cease as from the date on which Lessor receives payment in full of
the Agreed Value. Rent paid in advance for any days which occur
after such Agreed Value is paid shall be repaid to Lessee, so long
as no Default has occurred and is continuing, on a pro rata basis
for each day beyond such date of payment of Agreed Value. Any excess
insurance proceeds from the insurance obtained by Lessee pursuant to
Article 11 remaining after payment of the foregoing amounts shall,
unless a Default shall have occurred and be continuing, be paid over
to Lessee.
(c) Subject to the rights of any insurers and reinsurers or other third
party, upon irrevocable payment in full to Lessor of the Agreed
Value and all other amounts which may be or become payable to Lessor
under this Agreement, Lessor will without recourse or warranty
(except as to title and Lessor's Liens) and without further act, be
deemed to have transferred to Lessee all of
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Lessor's rights to any Engines and Parts not installed when the
Casualty occurrence occurred, all on an as-is where-is basis, and
will at Lessee's expense, execute and deliver such bills of sale and
other documents and instruments as Lessee may reasonably request to
evidence (on the public record or otherwise) the transfer and the
vesting of Lessor's rights in such Engines and Parts in Lessee, free
and clear of all rights of Lessor and Lessor Liens.
17.3 Upon the Casualty Occurrence with respect to any Engine not involving a
Casualty Occurrence of the Aircraft, Lessee shall give Lessor prompt
written notice thereof and Lessee shall replace such Engine as soon as
reasonably possible with a replacement Engine in accordance with Article
5.1.2(a). Such replacement shall be deemed an "Engine" as defined herein.
Lessee agrees to take such action as Lessor may reasonably request in
order that any such replacement Engine shall be duly and properly titled
in Lessor or the Bank and leased hereunder and subject to the Mortgage to
the same extent as the Engine replaced thereby. Lessee's obligation to pay
the Rent hereunder shall continue in full force and effect, but Lessee
shall be entitled to be reimbursed by Lessor the amount of insurance or
condemnation proceeds, if any, received by Lessor with respect to such
replaced Engine.
17.4 In the event of requisition for hire of the Aircraft any part thereof not
constituting a Casualty Occurrence, then, subject to the proviso herein
contained, the Rent and other charges payable under this Agreement shall
not be suspended or abated either in whole or in part, and Lessee shall
not be released from any of its other obligations (as to payment,
indemnity or otherwise) hereunder (other than operational obligations with
which Lessee is unable to comply solely by virtue of such confiscation or
requisition).
If Lessee shall duly comply with all its obligations under this Agreement,
Lessee shall during the Term be entitled to any hire paid by the
requisitioning or confiscating authority and Lessee shall, as soon as
practicable after the end of any requisition or confiscation, cause the
Aircraft to be put into the condition required by this Agreement. Lessor
shall be entitled to all compensation payable by the requisitioning or
confiscating authority in respect of
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any change in the structure, state or condition of the Aircraft arising
during the period of requisition or confiscation, and Lessor shall apply
such compensation in reimbursing Lessee for the cost of complying with its
obligations as aforesaid, but so that, if any Default has occurred and is
continuing, Lessor shall be entitled to apply such compensation in or
towards settlement of any amounts owing by Lessee under this Agreement
PROVIDED ALWAYS that if following such requisition or confiscation the
Aircraft is treated as an agreed, constructive, arranged or compromised
total loss by the insurers, then the provisions of Article 17.1 shall
apply with effect from the date on which the insurer so determines.
18. GOVERNING LAW AND JURISDICTION
18.1 This Agreement and further agreements resulting herefrom shall be governed
by and construed in accordance with the internal Laws of the State of New
York and without regard to any conflict of law rules. This Agreement is
being delivered in the State of New York.
18.2 Lessor and Lessee hereby irrevocably agree to submit to the non-exclusive
jurisdiction of, and to waive any objection to the laying of venue in, the
County of New York and that any suit, action or proceedings (collectively,
"Proceedings") may be brought by Lessor in any court of the State of New
York or any U.S. Federal court located in New York County, New York.
18.3 Nothing contained in this Article 18 shall limit the right of either party
to this Agreement to take Proceedings against the other in any other court
of competent jurisdiction, nor shall the taking of Proceedings in one or
more jurisdictions preclude the taking of Proceedings in any other
jurisdiction, whether concurrently or not.
18.4 Promptly after service of any process the Lessor or Lessee shall dispatch
a copy thereof to Lessee or Lessor, as the case may be, by registered
mail, postage prepaid but failure of Lessee or Lessor, as the case may be,
to receive such copy shall not invalidate the service of such process.
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18.5 To the extent that the parties may in any jurisdiction claim for their or
their assets immunity from suit, execution, attachment (whether in aid of
execution, before judgment or otherwise) or other legal process and to the
extent that in any such jurisdiction there may be attributed to themselves
or their assets such immunity (whether or not claimed) the parties hereby
irrevocably agree not to claim and hereby irrevocably waive any immunity
to the fullest extent permitted by the laws of such jurisdiction with the
intent, inter alia, that the foregoing waiver shall have effect for the
purposes of the Foreign Sovereign Immunities Act of 1976 of the United
States of America.
18.6 Lessee and Lessor shall each at all times maintain an agent for service of
process in the New York, New York. For Lessee, such agent shall be Paul,
Hastings, Janofsky & Walker, Attn: John Howitt, Esq., 399 Park Avenue, New
York, NY 10022-4697. For Lessor, such agent shall be Haight, Gardner, Poor
& Havens, Attn: Bonny L. Y. Kwoh, 195 Broadway, New York, NY 10007. Any
writ, judgment or other notice of legal process shall be sufficiently
served on Lessee or Lessor if delivered to such agent at its address for
the time being. Each of Lessee and Lessor undertakes that if it shall
revoke the authority of its above agent or if for any reason any such
agent no longer serves as agent to receive service of process, Lessee or
Lessor, as the case may be, shall promptly appoint another such agent and
advise Lessor or Lessee, as the case may be, thereof.
19. MISCELLANEOUS
19.1 The rights of each of Lessor and Lessee under this Agreement are
cumulative, may be exercised as often as it considers appropriate and are
in addition to its rights under general law. The rights of Lessor against
the Lessee or in relation to the Aircraft (whether arising under this
Agreement or the general law) shall not, as against or in favor of Lessor,
be capable of being waived or varied otherwise than by an express waiver
or variation in writing; and in particular any failure to exercise or
delay in exercising any of such rights shall not operate as a waiver or
variation of any other such right; and defective or partial exercise of
any such rights shall not preclude any other or further exercise of that
or any other such right; and no act or course of conduct or negotiation on
Lessor's
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part or on Lessor's behalf shall in any way preclude Lessor from
exercising any such right or constitute a suspension or any variation of
any such right.
19.2 Save where expressly provided in this Agreement, any certificate or
determination by Lessor as to any rate of interest or as to any other
amount payable under this Agreement shall, in the absence of manifest
error, be conclusive and binding on Lessee.
19.3 If any sum paid or recovered in respect of the liabilities of Lessee under
this Agreement is less than the amount then due, Lessor may apply such sum
to rental, interest, fees or any other amount due under this Agreement in
such proportions and order and generally in such manner as Lessor shall
determine.
19.4 The terms and conditions of this Agreement shall not be varied otherwise
than by an instrument in writing executed by or on behalf of Lessor and
Lessee.
19.5 If any of the provisions of this Agreement becomes invalid, illegal or
unenforceable in any respect under any law, the validity, legality and
enforceability of the remaining provisions shall not in any way be
affected or impaired.
19.6 Every notice, request, demand or other communication under this Agreement
shall:
(a) be in English;
(b) be in writing and made by mail or by fax or telex transmission or by
reputable courier service;
(c) be deemed to have been received, subject as otherwise provided in
this Agreement, in the case of a telex transmission, at the time of
dispatch with confirmed answerback of the addressee appearing at the
beginning and the end of the communication, in the case of a fax
transmission, at the time safe receipt is confirmed by the addressee
provided that if the date of dispatch is not a business day in the
country of the addressee any telex or fax transmission shall be
deemed to have been received at the opening of business on the next
such business day, in the case of a letter five days after being
deposited in the mail first class postage prepaid and in the case of
a courier three days after being sent; and
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(d) be sent:
(1) to Lessee at:
Midway Airlines Corporation
300 W. Morgan St.
Durham, North Carolina 27702
Tel: (919) 956-4800
Fax: (919) 956-4801
Attention: President
(2) to Lessor at:
First Security Bank of Utah, N.A.
79 South Main Street
Salt Lake City, Utah 84130-0007
Tel: (801) 246-5630
Fax: (801) 246-5053
Attention: Corporate Trust Department
with a copy to FAUSA at:
1199 N. Fairfax Street, Suite 500
Alexandria, VA 22314
Fax: (703) 683-2233
Attention: The President
with a copy to Beneficiary at:
Stockholm Aircraft Finance II, B.V.
Hoogoorddreef 15
Post Office Box 12222
1100 AE Amsterdam Zuidoost
The Netherlands
Attention: Vice President-Contracts
Fax: 31-20-605-7036.
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or to such other address or telex or fax number as is notified by either
party to the other party to this Agreement.
19.7 This Agreement may be executed in any number of counterparts and all of
such counterparts taken together shall be deemed to constitute one and the
same instrument.
19.8 This Agreement is the sole and entire agreement between Lessor and Lessee
in relation to the leasing of the Aircraft, and supersedes all previous
agreements in relation to such leasing. Each of Lessee and Lessor
represents for itself that no broker has been retained by it in connection
with this Agreement.
19.9 This Agreement is intended by the parties to be a lease between Lessor and
Lessee. Any waivers, consents, deferrals of the payment of Rent or Reserve
Rates are not intended to be an agreement by Lessor to make any capital
contribution to the business of Lessee or to share in or have liability
for any of Lessee's losses, profits, liabilities or obligations. Nothing
contained in this Agreement or performed by Lessor in connection herewith
and any other agreement between Lessor and Lessee whether now existing or
entered into in the future shall make Lessor a partner or a joint venturer
of Lessee and shall not for any purpose be construed as a joint-venture
between the parties hereto.
19.10 Intentionally Omitted.
19.11 Section 1110: Lessee acknowledges that Lessor would not have entered into
this Agreement unless it had available to it the benefits of a lessor
under Section 1110 of Title 11 of the United States Code. Lessee and
Lessor hereby state that this Agreement is intended to be a true lease for
U.S. Internal Revenue Code purposes. Lessee covenants and agrees with
Lessor that to better ensure the availability of such benefits, Lessee
shall support any motion, petition or application filed by Lessor with any
bankruptcy court having jurisdiction over Lessee, whereby Lessor seeks
recovery of possession of the Aircraft under said Section 1110 and shall
not in any way oppose such action by Lessor unless Lessee shall have
complied with the requirements of said Section 1110 to be fulfilled in
order to entitle Lessee to continued use and possession of the Aircraft
hereunder. In the event
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said Section 1110 is amended, or if it is repealed and another statute is
enacted in lieu thereof, Lessor and Lessee agree to amend this Agreement
and take such other action not inconsistent with this Agreement as Lessor
reasonably deems necessary so as to afford to Lessor the rights and
benefits as such amended or substituted statute confers upon owners and
lessors of aircraft similarly situated to Lessor.
19.12 First Security Bank of Utah, N.A. ("FSBU") is entering into this Agreement
solely as trustee under the Trust Agreement and not in its individual
capacity and in no case whatsoever shall FSBU (or any entity acting as
successor trustee under the Trust Agreement) be personally liable on, or
for any loss in respect of, any of the statements, representations,
warranties, agreements or obligations of Lessor hereunder as to all of
which the other party hereto agrees to look solely to the Trust Estate,
except for any loss caused by FSBU's own willful misconduct or gross
negligence. FSBU warrants that the Aircraft shall be free of liens
attributable to FSBU in its individual capacity which do not arise from
its actions as lessor under this Agreement and that it shall be personally
liable to Lessee for any Claim against Lessee in respect of any
statements, representations, warranties, agreements or obligations
contained herein which are expressly made in its individual capacity.
19.13 As between Lessor and Lessee, if Lessee fails to make any payment of Rent
or Reserve Rate required to be made by it hereunder or fails to perform or
comply with any of its agreements contained herein, Lessor may itself make
such payment or perform or comply with such agreement, and the amount of
such payment and the amount of the reasonable and properly documented
expenses of Lessor incurred in connection with such payment or the
performance of or compliance with such agreement, as the case may be,
together with interest thereon at the interest rate defined in Appendix D,
Article 6, shall be deemed Supplemental Rent, payable by Lessee upon
demand.
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IN WITNESS whereof the parties have executed this Agreement the day and year
first herein written.
SIGNED on behalf of SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A. MIDWAY AIRLINES CORPORATION
not in its individual
capacity, except as
expressly set forth
herein, but solely
as owner trustee
By: /s/ [ILLEGIBLE] By:
- ------------------------------------- -----------------------------------
Its: Asst. Vice President Its:
-----------------------------------
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IN WITNESS whereof the parties have executed this Agreement the day and year
first herein written.
SIGNED on behalf of SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A. MIDWAY AIRLINES CORPORATION
not in its individual
capacity, except as
expressly set forth
herein, but solely
as owner trustee
By: By: /s/ J.S. Waller
- ------------------------------------- -----------------------------------
Its: Its: Senior Vice President
---------------------------------
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APPENDIX A
DESCRIPTION OF AIRCRAFT
-----------------------
Number
------
of
--
Manufacturer Model Serial No. Engines Engines
- ------------ ----- ---------- ------- -------
Fokker 100 11321 Rolls Royce Two
Tay MK 650-15
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APPENDIX B
FURTHER DEFINITIONS AND VALUES
AGREED VALUE : [***] for the first year of the Term
through and including the first
anniversary date of the Delivery Date,
and for each subsequent year the Agreed
Value shall be:
Second Year: [***]
Third Year: [***]
Fourth Year: [***]
provided that the Agreed Value for any
of the above years may be adjusted up to
FMV (but never in excess of [***] if
Lessor provides to Lessee an independent
appraisal (at Lessor's cost) prior to
the beginning of any such year. If
Lessee does not agree to such appraised
value, Lessee may follow the Appraisal
Procedure by giving Lessor written
notice of election to so proceed within
20 days of receipt of Lessor's
independent appraisal.
DEPOSIT : [***]
PARTIAL LOSS AMOUNT : $250,000
RENT : [***]
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RESERVE RATE : (a) [***] per flight hour plus $10.30
(Dollars Ten 30/100) per Cycle, to be
adjusted in conformance to Appendix D,
Article 3.
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APPENDIX C
CERTIFICATE OF ACCEPTANCE
This Certificate of Acceptance is delivered, on and as of the date set forth
below, by Midway Airlines Corporation (herein referred to as "Lessee") to First
Security Bank of Utah, N.A., not in its individual capacity but solely as
trustee, (herein referred to as "Lessor") pursuant to that Aircraft Operating
Lease Agreement No. 525 dated as of October 15, 1995 between Lessor and Lessee
(herein referred to as the "Agreement"):
1. Details of Acceptance
Lessee hereby indicates and confirms to Lessor, its successors and
assigns, that the Lessee has at ______ o'clock on this ______ day of
______ 1995 at _________ accepted the following from Transwede and
concurrently therewith from Lessor, in accordance with the provisions of
the Agreement:
(a) Fokker 100 airframe, Manufacturer's Serial Number 11321.
(b) Rolls Royce Tay Mk 650-15 Engines (each of which engines has 750 or
more rated takeoff horsepower).
Engine Number Manufacturer's S/N
1. 17288
2. 17289
(c) Fuel Status: ______ kilos; ______ litres
(d) Loose Equipment Check List: as per list inserted or referred to, as
the case may be, in Section 11 of Appendix E of the Agreement.
2. Confirmation of Undertakings
The terms used in this Certificate shall have the meanings given to such
terms in the Agreement.
The Lessee confirms that today being the Delivery Date as defined in the
Agreement:
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(i) the Aircraft is duly accepted by the Lessee in accordance with and
subject to the provisions of the Agreement and the execution and
delivery of this Certificate constitutes the acceptance of the
Aircraft by the Lessee for all purposes of the Agreement. DELIVERY
BY LESSEE TO LESSOR OF THIS CERTIFICATE OF ACCEPTANCE SHALL
CONSTITUTE CONCLUSIVE PROOF AS BETWEEN LESSOR AND LESSEE THAT ON THE
DELIVERY DATE LESSEE'S TECHNICAL EXPERTS EXAMINED AND INVESTIGATED
THE AIRCRAFT AND EVERY PART THEREOF ARE AIRWORTHY AND IN GOOD
WORKING ORDER AND REPAIR, WITHOUT DEFECT WHETHER OR NOT DISCOVERABLE
AS AT THE DELIVERY DATE AND IN EVERY WAY SATISFACTORY TO LESSEE;
(ii) the Lessee is obliged to pay to the Lessor the amount provided for
in the Agreement with respect to the Aircraft;
(iii) the Aircraft is insured in accordance with the Agreement;
(iv) the representations and warranties contained in Article 13 of the
Agreement remain, and if made at the date of this Certificate of
Acceptance, would be, true and correct in all respects;
(v) there have been affixed to the Aircraft and the Engines the fire
resistant notices required by Article 4.3 of the Agreement;
(vi) the Lessee has no right of set-off, deduction, withholding or
counterclaim against the Lessor whatsoever; and
(vii) no Default is subsisting.
IN WITNESS WHEREOF, Lessee has caused this Certificate of Acceptance to be
executed in its name, by its duly authorized officer(s) or representative(s),
pursuant to due corporate authority, all as of the date written in Paragraph 1
above.
MIDWAY AIRLINES CORPORATION
By:
--------------------------------
Title:
-----------------------------
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APPENDIX D
1. Deposit
Lessee shall pay to Lessor [***] as a Deposit for the Aircraft prior to the
Delivery Date.
The Deposit shall be held by Lessor during the Term as security for the full
and punctual performance of all of Lessee's obligations to Lessor under this
Agreement. Lessor may, but shall not be obliged to, apply the Deposit in
whole or in part for the payment of any rent, maintenance accruals,
indemnities, attorneys fees and other expenses, insurance and other casualty
payments and any other amount owing from time to time by Lessee hereunder or
any other Operative Document, between Beneficiary or its affiliate companies,
and Lessee, or for the payment of any loss or damage suffered by Lessor as a
result of any Event of Default or utilize the Deposit in whole or in part to
perform any of Lessee's obligations under this Agreement or otherwise remedy
any other Event of Default, including, without limitation, in the redelivery
condition for the Aircraft without prejudice to any other remedy of Lessor.
In any such event Lessee shall on demand restore the Deposit to the full
amount provided for herein by payment to Lessor of an amount in cash equal to
the amount applied or utilized. Lessee shall not attempt to subject the
Deposit to any other lien, security interest, charge or other encumbrance or
assign any interest therein to any other person and, to the extent of its
interest therein, if any, Lessee hereby grants to Lessor a security interest
in the Deposit and assigns and transfers to Lessor any and all of Lessee's
right, title and interest therein, if any, as security as provided above, and
Lessor shall be entitled to the remedy of offset against and application of
the Deposit, without any notice to or demand against Lessee, all of which are
hereby waived. Lessee further agrees that the Deposit may be, without
derogating from the terms of this Agreement, assigned as security to the Bank
or transferred to any other transferee of Lessor. Should any Event of Default
hereunder occur, the Deposit shall automatically be applied to any sum due to
Lessor or as a prepayment of any sum to become payable to Lessor, unless
Lessor thereafter elects otherwise by notice to Lessee.
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Any remaining Deposit shall be repaid by Lessor to Lessee ten (l0) days
following the Expiry Date or other date after redelivery of the Aircraft in
accordance with this Agreement. In the event there is a dispute as to whether
Lessee is entitled to a return of any portion of the Deposit, Lessor shall so
return the undisputed amount of the Deposit. Upon a repayment of such Deposit
or portion thereof, Lessor's security interest in and assignment of such
Deposit or portion thereof being repaid shall be deemed released.
Lessor's obligations in respect of the return of the Deposit shall be those
of debtor of Lessee, not of a trustee or other fiduciary.
The Deposit shall bear interest on the amounts then held at a rate of
interest per annum yielding $10,500 (Dollars Ten Thousand Five Hundred)
per year payable annually commencing on the first anniversary of the
Delivery Date, and on each anniversary thereafter unless the Deposit and
interest thereon shall have been applied pursuant to this Agreement. Any
reference to the Deposit in this Agreement shall include the interest
accumulated thereon and not paid to Lessee.
2. Rent
2.1 Rent shall be due and payable on each Rent Date and, with respect to
the final Rent date, shall be prorated through and including the
Expiry Date based upon the actual number of days and a thirty-day
month. If such date is not a Business Day then Rent shall be due and
payable on the last Business Day preceding such date.
2.2 The monthly Rent shall be adjusted upward by an amount equal to $875
(Dollars Eight Hundred Seventy Five) per month which shall be
payable to Lessor by check annually commencing on the first
anniversary of the Delivery Date, and on each anniversary
thereafter, with the balance due at the Expiry Date. Lessee may
elect to authorize Lessor in writing to set-off amounts payable
pursuant to this Article against interest on the Deposit which is
payable by Lessor pursuant to Article 1 of this Appendix D
irrespective of whether or not an Event of Default shall have
occurred and be continuing.
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2.3 Intentionally omitted.
2.4 Intentionally omitted.
2.5 Intentionally omitted.
2.6 Intentionally omitted.
2.7 Intentionally omitted.
3. Reserve Rate
3.1 In addition to installments of Rent, Lessee shall pay to Lessor the
Reserve Rate as follows:
(a) by way of an Airframe maintenance accrual, the sum of [***]
hours check until the 12,000 hours check shall have been
executed. After execution of such check, 100% (one hundred
percent) of the Airframe Maintenance Accrual shall be accrued
for the 24,000 hours check for each Flight Hour the Aircraft
is operated during the Term ("Airframe Maintenance Accrual");
and
(b) by way of an Engine maintenance accrual, in respect of each
Engine the sum of [***] for each Flight Hour operated by each
Engine during the Term ("Engine Maintenance Accrual"). The
percentage of the various maintenance activities shall be
agreed between the parties after signing of this Agreement;
and
(c) by way of a landing gear maintenance accrual, the sum of
[***] for each Cycle operated by the landing gear during the
Term ("Landing Gear Maintenance Accrual").
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The Airframe, Engine and Landing Gear Maintenance Accruals
accruing in any Rental Period shall be paid by Lessee to
Lessor not later than ten (10) days after the end of the
calendar month in which such Rental Period shall end; provided
that Lessee shall be relieved of its obligation to pay the
Engine Maintenance Accrual or Landing Gear Maintenance Accrual
with respect to any Engine or Landing Gear, as the case may
be, during any period that an Aircraft Maintenance Agreement
is in effect with respect to such Engine or Landing Gear.
Concurrently with the payment thereof, Lessee shall report to
Lessor (in accordance with Article 7.1 (e)) the number of
Flight Hours and Cycles accumulated in respect of the period
for which payment is being made.
The Reserve Rate will be subject to adjustment every six (6)
months during the Term by reference for 65% to the Employment
and Earnings Index for U.S.A. labor cost average hourly
earnings of production (Aircraft Equipment) SIC 3728, table
C-2 and for 35% to the Producer Price Index for U.S.A.
material cost commodity groupings (Machinery and Equipment)
Code 11/table 6. In addition the Engine Maintenance Accrual,
if any, will be subject to adjustment every six (6) months
during the Term having regard to the Engine Manufacturer
recommendations, industry experience and any change in the
operational environment of the Aircraft.
Any Reserve Rate shall, if requested by either Lessor or
(unless an Event of Default shall have occurred and be
continuing) Lessee, be adjusted to take into account any
changes in the maintenance intervals upon which Reserve Rates
are based.
3.2 Maintenance Accruals as defined in paragraph 3.1 above and
received by Lessor shall respectively be credited to funds
(collectively "Maintenance Funds") to be known as the
"Airframe Maintenance Fund", the "Engine Maintenance Fund" and
the "Landing Gear Maintenance Fund" which funds shall reduce
as monies are released to Lessee therefrom in accordance with
Article 7.4.1.
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3.3 The monies in the Maintenance Funds under the Transwede Lease
held by Beneficiary at the date of termination thereof shall
be transferred by Beneficiary to the respective Maintenance
Funds under this Agreement in accordance with the provisions
of the Tripartite Agreement.
3.4 The Reserve Rates shall accrue interest at a rate which will
be 1% (one percent) less than six (6) months Libor applicable
to each six (6) months over which the rate will be calculated.
For the determination of such rate of interest the first such
6 (Six) month period shall start at the Delivery Date and
subsequent 6 (Six) month periods shall start at expiry of the
previous 6 (Six) month period. Such interest shall accrue in
the relevant Maintenance Fund and shall be paid to Lessee at
the moment and to the extent any "Excess" as described in
Paragraph 3.6 of this Appendix D shall be paid out to Lessee.
3.5 Intentionally deleted.
3.6 On the Expiry Date, if there is any Excess (as defined below)
in any Maintenance Fund, such Excess shall, unless a Default
shall have occurred and be continuing (in which case only
after termination, return of the Aircraft and payment of all
amounts due following exercise of remedies under Article 15),
be paid to Lessee, and on such date, if there is any Shortfall
(as defined below) in any Maintenance Fund, Lessee shall pay
such Shortfall to Lessor.
"Excess" in any Maintenance Fund on the Expiry Date shall mean
any positive difference obtained by subtracting (x) from (y)
for the Airframe, Engines, Landing Gears or A.P.U., as the
case may be;
(x) shall mean the product of (I) the then market cost from an
independent Authorized Maintenance Performer in the United
States and corrected for the experience of all United States
based operators of Fokker 100 aircraft for the relevant item:
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with respect to the Aircraft, to perform a scheduled airframe
heavy maintenance as defined in the Maintenance Program for
12,000 hours and 24,000 hours inspections or any equivalent
thereof with more or less hours ("Airframe Maintenance"), or
with respect to any Engine, to perform a scheduled shop visit
engine maintenance and repair, other than (i) repairs arising
as a result of foreign object damage or operations mishandling
and/or (ii) maintenance and repair of QEC (Quick Engine
Change) kits ("Engine Maintenance"), or
with respect to any nose or main landing gear to perform a
schedule shop visit nose and main landing gear maintenance and
repair, other than repairs arising as a result of foreign
object damage or operational mishandling ("Landing Gear
Maintenance"), and
(II) a fraction of which (a) the numerator shall be the difference
between the actual number of hours or cycles (as to landing gear),
as the case may be, of operation remaining on the Airframe, Engine
or Landing Gear, as the case may be, to the next such Airframe
Maintenance, Engine Maintenance or Landing Gear Maintenance, as the
case may be, and the total number of hours or cycles, as the case
may be, of operation allowable between such Maintenance and (b) the
denominator shall be the total number of hours or cycles, as the
case may be, of operation allowable between such Maintenance.
(y) shall mean the actual dollar amount remaining in the respective
Maintenance Fund.
"Shortfall" in any Maintenance Fund on the Expiry Date shall mean
any negative difference obtained by subtracting (x) above from (y)
above and, for the avoidance of doubt, shall include any shortfall
created by Lessee having been relieved, by reason of an Aircraft
Maintenance Agreement pursuant to Article 3.1 of this Appendix D, of
its obligation to pay any element of the Maintenance Accrual.
89
<PAGE>
4. Payments
All payments of Rent due hereunder shall be effected by Lessee to Lessor
by transfer to Credit Lyonnais Bank Nederland in favor of the Beneficiary,
account number 64.26.09.632, Ref. Aircraft MSN 11321, LA525, and all
payments of Reserve Rate and Supplemental Rent due hereunder shall be
effected by Lessee to Lessor by transfer to Credit Lyonnais Bank
Nederland, in favor of the Beneficiary, account number 64.26.09.640, Ref.
Reserve Rate Aircraft MSN 11321, and all such payments shall be in Dollars
and in immediately available funds, and all such payments shall be
initiated adequately in advance of the due dates to ensure that Lessor
receives credit for the full amount of such payment on the due dates. All
such payments shall be made in full without any deduction or withholding
(whether in respect of set-off, counterclaim, duties, taxes, charges or
otherwise howsoever) unless Lessee is prohibited by Law from doing so, in
which event Lessee shall (a) ensure that the deduction or withholding does
not exceed the minimum amount legally required; (b) forthwith pay to
Lessor such additional amount as shall result in the net amount received
by Lessor being equal to the amount which would have been received by
Lessor had such a deduction or withholding not been made; (c) pay to the
relevant taxation or other authorities within the period for payment
permitted by applicable Law the full amount of the deduction or
withholding; and (d) upon request in writing from Lessor to Lessee furnish
to Lessor, within the period for payment permitted by applicable Law, an
official receipt of the relevant taxation or other authorities involved
for all amounts deducted or withheld as aforesaid.
5. Currencies
If under any applicable Law, whether as a result of judgment against
Lessee or the liquidation of Lessee or for any other reason, any payment
under or in connection with this Agreement is made or recovered in a
currency other than United States Dollars then, to the extent that the
payment (when converted to United States Dollars at the rate of exchange
on the date of payment or, in the case of the liquidation, the latest date
for the determination of liability permitted by the applicable Law) falls
short of the amount unpaid under this Agreement, Lessee shall, as a
separate and independent obligation, fully indemnify Lessor against the
amount of the short fall; for the purposes of this paragraph, "rate of
exchange" means the rate at which Lessor is able on the relevant date to
purchase United States Dollars in London with that other currency.
90
<PAGE>
6. Default Interest
If any amount payable pursuant to this Agreement is not paid by Lessee on
the due date, Lessee shall pay to Lessor interest (after as well as before
judgment) on such amount, at the rate of 6-month LIBOR (as applicable two
Business Days before the date of Default)), plus four per cent (4%) per
annum from the due date to the date of payment in full by Lessee to Lessor,
but in the event such rate shall be in excess of the highest rate permitted
by applicable law, then it shall mean the highest rate allowed by applicable
law. All amounts of interest payable hereunder shall be calculated on the
basis of the actual number of days elapsed and a 360-day year.
7. Set-off
At any time after an Event of Default shall have occurred and be continuing,
Lessor shall be entitled to set-off or withhold from any amount due and
payable to Lessee under this Agreement or any Other Aircraft Agreement, or
any amount standing to the credit of Lessee on any account, in or towards the
satisfaction of any amounts from time to time due and payable by Lessee under
this Agreement or any Other Aircraft Agreement or any liability or obligation
of Lessee under this Agreement or any Other Aircraft Agreement, and shall be
entitled to do so notwithstanding that any such amount or amounts may not be
expressed in the same currency.
8. Time at which payments are due
Supplemental Rent shall be due and payable on demand unless otherwise
expressly stated herein.
9. Purchase Option
Lessor grants to Lessee the right to purchase and to take delivery of the
Aircraft on the Expiry Date of this Agreement for a price equal to the
greater of the fair market value (as deferred to the penultimate sentence
of this paragraph, "FMV") of the Aircraft on the Expiry Date and [***]; such
price being the "Option Price"). If Lessee elects to exercise its right to
purchase the Aircraft, Lessee shall do so by giving to Lessor written
notice of such election at least two hundred seventy (270) days prior to
the Expiry Date. The FMV of the Aircraft on the Expiry Date shall be
established by an independent internationally reputed aircraft appraiser
appointed by mutual agreement of Lessor and Lessee within one (1) month of
the date of
91
<PAGE>
receipt by Lessor of Lessee's notice of election to purchase. If Lessor
and Lessee shall be unable to agree on such aircraft appraiser, FMV shall
be established by a mutually agreed appraisal prepared and delivered by
two independent internationally reputed aircraft appraisers, one of which
shall be chosen by Lessor and one by Lessee. If such appraisers shall be
unable to agree on FMV, FMV shall be equal to the average of the fair
market values established by such appraisers. Any appraisal shall meet
internationally accepted standards and shall be binding upon Lessee and
Lessor. The appraisal procedure outlined in this Article 9 shall be
referred to herein as the "Appraisal Procedure". The FMV shall be equal in
amount to the value that would be obtained as of the Expiry Date in an
arms'-length transaction between an informed and willing purchaser under
no compulsion to buy and an informed and willing seller under no
compulsion to sell with the Aircraft assumed to be in the condition
required upon the return thereof at the end of the Term in accordance with
Article 16 without considering the encumbrance of this Agreement. All
costs and expenses of the FMV appraisal shall be shared equally by Lessor
and Lessee. Upon receipt by Lessor of the Option Price, Lessor will pay to
Lessee any remaining amounts in the Maintenance Funds and it will transfer
to Lessee title to the Aircraft on an "AS IS--WHERE IS" basis without any
warranty or recourse (except as to the absence of Lessor's Liens) and will
also transfer any surviving warranty given by Manufacturer. Lessor shall
execute and deliver to Lessee on such scheduled purchase date a bill of
sale to the Aircraft.
92
<PAGE>
APPENDIX E
CONDITION AT RE-DELIVERY
Upon redelivery of the Aircraft to Lessor, the Aircraft shall, subject to
ordinary wear and tear generally:
1. General Condition
(a) Be clean by airline standards;
(b) Have installed the Engines, and other equipment, Parts and
accessories and loose equipment as would remain installed in such
Aircraft, and shall be in a condition suitable for operation in
commercial service;
(c) Have in existence a valid Certificate of Airworthiness with respect
to the Aircraft issued by the Air Authority of the State of
Registration with a validity of at least nine (9) months after the
date of redelivery of the Aircraft to Lessor;
(d) Comply with the manufacturer's original specifications therefor;
(e) Have undergone, immediately prior to redelivery, a 3000 Check or any
subsequent higher inspection, if due within 3000 hrs, in accordance
with the Approved Maintenance Program, shall be free of any waivers,
and all deferred maintenance, if any, shall have been accomplished;
each engine and A.P.U. shall have had an inspection in accordance
with Article 16 confirming release for its remaining operational
life;
(f) All outstanding airworthiness directives and mandatory orders
affecting such model of Aircraft issued by the Air Authority which
require compliance during the Term shall have been accomplished;
(g) Have installed all applicable vendors' and manufacturers' service
bulletin kits theretofore received by Lessee free of charge that are
appropriate for the Aircraft and to the extent not installed, such
kits shall be furnished free of charge to Lessor;
(h) Stripped of all Lessee's paint scheme and repainted through an
Authorized Maintenance Performer with Manufacturer approved paints
in white or any other basic color requested by Lessor; and
93
<PAGE>
(i) Have been inspected and treated with respect to corrosion as defined
in the Approved Maintenance Program.
2. Airframe and major components
The Airframe and major components shall have not less than the following
hours/cycles/months expected life remaining to the next Major Check and/or
overhaul:
-Airframe : 3000 hours and 12 months to next Major Check;
-Engine : half life on average to next Engine shop visit but in
no event less than 3000 hours;
-Main Landing Gear : 3000 cycles to next overhaul;
-Nose Landing Gear : 3000 cycles to next overhaul;
*The records as to remaining engine life shall be certified by Lessee in
writing to Lessor upon redelivery of the Aircraft to Lessor.
3. Components
(a) Each life-limited Part shall have not less than 3000 (Three
Thousand) flight hours or cycles of the total approved life
remaining to the scheduled replacement, in accordance with the
Approved Maintenance Program;
(b) Each hard-time controlled component shall have not less than 3000
(Three Thousand) Flight Hours or 3000 (Three Thousand) Cycles or 12
(twelve) months whatever is applicable, remaining to the next
scheduled overhaul/inspection, in accordance with the Approved
Maintenance Program;
(c) "On-condition" and "Condition Monitored" components shall be
serviceable;
(d) The A.P.U. shall be serviceable.
4. Fuselage, Windows and Doors
(a) Fuselage shall be free of major dents and abrasions, scab patches
and loose or pulled or missing rivets;
(b) Windows shall be free of delamination, blemishes, crazing and shall
be properly sealed;
94
<PAGE>
(c) Doors shall be free moving, correctly rigged and be fitted with
serviceable seals.
5. Wings and Empennage
(a) All leading edges shall be free from damage;
(b) All unpainted cowlings, fairings and other surfaces shall be
polished;
(c) Wings shall be free of fuel leaks.
6. Interior
(a) Ceilings, sidewalls and bulkhead panels shall be clean and free of
cracks and stains;
(b) All carpets and seat covers shall be in good condition, clean and
stain free and meet Air Authority fire resistance regulations;
(c) All seats shall be serviceable, in good condition and repainted as
necessary;
(d) All signs and decals shall be clean and legible;
(e) All emergency equipment having a calendar life shall have a minimum
of one year or one hundred per cent of its total approved life,
whichever is less, remaining.
7. Cockpit
(a) All decals shall be clean, secure and legible;
(b) All fairing panels shall be free of stains and cracks, shall be
clean, secure and repainted as necessary;
(c) Floor coverings shall be clean and effectively sealed;
(d) Seat covers shall be in good condition, clean and shall conform to
Air Authority fire resistance regulations;
(e) Seats shall be fully serviceable and shall be repainted as
necessary.
8. Cargo Compartments
(a) All panels shall be in good condition;
(b) All nets shall be in good condition.
95
<PAGE>
9. Landing Gear and Wheel Wells
(a) Shall be clean, free of leaks and repaired as necessary;
(b) All decals shall be clean, secure and legible.
10. Corrosion
(a) Entire fuselage shall be substantially free from corrosion and shall
be adequately treated and an approved corrosion prevention program
shall be in operation;
(b) Fuel tanks shall be free from contamination and corrosion and a tank
treatment program shall be in operation.
11. Specification
The Aircraft shall conform to its specification at the Delivery Date,
including the following:
1. The Aircraft Configuration as defined in Appendix A of the Transwede
Lease attached hereto as Appendix A to this Appendix E.
2. Specification changes performed by or on behalf of Transwede in
accordance with the provisions of the Tripartite Agreement as
follows:
a. Modification to install Flight Management System Airline
Option No. 5; Ref. Fokker SCN 34-62.S008.
b. Modification to change from CAA certification to FAA
Certification; Ref. Fokker SCN 02-20.C004.
c. Modification to change indicators from Kilograms to Pounds;
Ref. Fokker SCN 28-40.C003.
d. Modification to install TCAS; Ref. Fokker SCN 34-46.C004.
e. Modification of Pitot Heat System in accordance with Service
Bulletin F100-30-017.
f. Installation of Galley Door Viewer in accordance with Service
Bulletin F100-52-053.
96
<PAGE>
g. Any and all modifications necessary to obtain a Swedish Export
Certificate of Airworthiness and the issuance of a Certificate
of Airworthiness by the FAA including completion of all
Airworthiness Directives required by the FAA, the BLA or other
relevant authority.
3. The Loose Equipment Checklist attached hereto as Appendix B to this
Appendix E.
97
<PAGE>
Appendix A to Lease Agreement 525
FOKKER 100
AIRCRAFT CONFIGURATION
BETWEEN
FOKKER AIRCRAFT B.V.
AND
TRANSWEDE AIRWAYS AB
<PAGE>
APPENDIX A
AIRCRAFT CONFIGURATION
relating to
Fokker 100 aircraft
PART Page
- ---- ----
PART A: Type Specification 62
Attachment A to Part A 63
PART B: Installed additional equipment 64
PART C: Lessee's additional requirements 87
Emergency Equipment Lay-out 91
PART D: List of Mandatory Modifications 92
<PAGE>
AIRCRAFT CONFIGURATION
relating to
Fokker 100 aircraft
PART A: TYPE SPECIFICATION
- ------- ------------------
1) Type Specification as per printed copy supplied by Fokker Aircraft
B.V. to TRANSWEDE AIRWAYS AB.
Document Reference: TD F.28:PL-004
Date of issue: February 01,1983
Date of amendment: February 15,1988
2) Engine Specification: Rolls Royce Tay Mk 650-15 as described in
the Rolls Royce Contract Specification
3004 issue 1, printed February 1986,
including the Design Change Orders as
executed by Rolls Royce.
<PAGE>
APPENDIX A
ATTACHMENT A TO PART A
NUMBER DESCRIPTION
FO 02-52.80 Fokker Company Logo.
FO 03-10.80 Incorrect flying hours for the economic repair life
Fokker 100.
FO 03-65.80 Correction to maximum design towing load given in the Type
Specification.
FO 03-70.80 Floor panel loading - Correction to baseline Type Specification.
FO 12-13.80 Update the approved lubrication oils info given in the
baseline Type Spec.
FO l4-00.81 Amendment to Chapter 14 of the baseline Type Spec.
FO 14-13.80 Interchangeability - add "cable wheels and removable
pulley brackets".
FO 21-22.80 Introd. of larger ventilation louvres and extra adjustable
air outlets.
FO 21-26.80 Equipment cooling - additional fan assembly.
FO 22-10.80 Profile mode - certification.
FO 22-10.81 Speed protection for FMS profile mode.
FO 23-40.80 Amend the Fokker 100 baseline Type Spec. to reflect ATA 100
breakdown.
FO 23-51.80 Jack panel location in the flight compartment.
FO 23-62.81 Electrostatic jack socket.
FO 25-50.80 Logitudinal track spacing incorrect in Type Spec.
FO 27-35.81 Stall protection - new PSRS control law.
FO 27-56.80 Flap indication availability.
FO 28-10.80 Fuel system - CWT usable capacity.
FO 28-10.81 Fuel system - main tank usable capacity.
FO 28-15.80 Fuel venting system water ingress.
FO 28-22.80 Engine fire shut-off valve - closed indication.
FO 29-12.80 Hydraulic fluid transfer.
FO.31-31.82 Relocation of Flight Data Recorder.
FO 31-41.80 Proximity switching system.
FO 32-10.80 Main Landing Gear - Torque link damper.
FO 32-10.81 Main Landing Gear - Water deflectors.
FO 33-41.80 Tires - Bias tires as standard.
FO 33-23.80 Toilet area lighting baseline Type Spec.
FO 34-43.80 GPWS - Glideslope warning inhibit annunciator.
FO 34-51.80 Type Spec. correction with respect to location of RDMI
desciption.
FO 38-10.80 Water tank installation.
FO 38-30.80 Electr. heated waste water drain masts and floor drain check
valves.
FO 49-00.80 APU "AVAIL" lamp function.
FO 49-50.80 APU - Fireproof inlet duct.
FO 49-60.80 APU automatic shutdown in flight.
FO.56-11.81 Windshield dry sealing.
FO.74-30.80 Ignition - Unit I deactivated, unit 2 activated.
FO 78-33.80 Thrust reverser - Electrical power supply.
FO 80-12.80 Engine starter circuit cutout.
<PAGE>
APPENDIX A, PART B
INSTALLED ADDITIONAL EQUIPMENT OVER AND ABOVE THE
TYPE SPECIFICATION DOC.: TD F28:PL-004
FIRST ISSUE: FEB 01/83 AND AMENDED UP TO FEBRUARY 1988
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
02 MISCELLANEOUS
-------------
02-21 CAA Certification
-----------------
The aircraft shall include all hardware modifications
resulting from the Special Conditions as applicable to the UK
CAA Type Certification of the Fokker 100 aircraft. Operational
requirements are not included
02-70 Pin Programmable Options
------------------------
Flight Management System (FMS)
-----------------------------
1. Units
a. weight related items kg
b. lenght distance meters
c. baro correction mB
2. ATA/IATA departure profile ATA
3. Fuel option **) No. 1
4. Airline Type Option No. 2
Electronic Flight Instrument System (EFIS)
-----------------------------------------
1. Bearing pointers on ND rose both ADF
2. ADF in ND MAP & ARC no ADF
3. Flap position on PFD disabled
4. Baro reference mB
5. FD presentation cross-bar
Multi Function Display System
-----------------------------
1. Engine Oil Quantity liters
2. Temperature Reference (degrees) Celcius
3. Fuel Mass kg
4. Fuel Flow sec. page
5. WX Display On MFDS disabled
Automatic Flight Control & Augmentation
---------------------------------------
System (AFCAS)
-------------
1. C-chord disabled
Flight Warning Computer
-----------------------
1. C-chord disabled
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
02-70 Pin Programable Options (cont'd)
-------------------------------
**) Buyer shall specify the following fuel options under
option No. 1 to it's Navigation Base Vendor.
- Taxi fuel
- Route reserve
- Upper limit route reserve
- Lower limit route reserve
- Final/Time
03 STRUCTURAL DESIGN CRITERIA
--------------------------
03-20 Increase in MTOW
----------------
The aircraft shall be certified according to the following
operating weights:
Maximum Ramp Weight : 98.500 lbs
Maximum Take-Off Weight : 98.000 lbs
Maximum Zero Fuel Weight : 81.000 lbs
Maximum Landing Weight : 88.000 lbs
03-50 Design Speeds
-------------
Increase of Mmo to M077.
Introduction of this change is accomplished by software
changes to AFCAS, FMS and ADC.
The speed limitation placard on the main instrument panel
shall be changed to reflect the correct Vmo and Mmo. This
change shall also be reflected in all applicable manuals.
11 PLACARDS AND MARKINGS
---------------------
11-10 Exterior Colour Schemes and Markings
------------------------------------
Exterior placards and markings in English. Placarding shall
reflect the use of Mobil Jet Oil II for engine, APU, IDG and
cooling turbines.
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
11-30 Interior Placards and Markings
Cabin placards and markings in English/Spanish
Cockpit placards in English.
12 SERVICING
---------
12-00 Servicing
---------
Fuel contents table in kilograms (kg).
Oil : Mobil Jet Oil II
i.l.o. ESSO 2380
Fuel : JP1, JP4 and JP5
Hydr.Fluid : Skydrol 500 B4
22 AUTOFLIGHT
----------
22-10 Extended Autoland (capability cat. 3B)
-------------------------------------
Installation of a fail-operational three channel Autoland,
Automatic Flight Control and Augmentation System suitable for
automatic landings down to 15 ft DH and 150 m RVR
weather conditions.
During high speed roll-out after touch down the AFCAS provides
lateral control via the aircraft rudder.
Installation adds to the standard system:
FCC 3, ILS 3 (ref. 34-32), LRRA 3 (ref.
34-42) and static inverter (ref. 24.26).
- (01) FCC l000 Collins
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
23 COMMUNICATIONS
--------------
23-11 Single HF Communication System
------------------------------
The aircraft shall be provided with full provisions for a
single Collins HFS-700 HF communication system.
To arrive at an operational system the following equipment is
to be supplied by Buyer.
- (01) Tranceiver, Collins HFS-700
- (01) Antenna tuner, Collins 4905-1
- (01) HF Control panel, Gables
23-12 VHF Communication
------------------
Installation of a Bendix VHF Communication system i.l.o.
the standard Collins system.
The installation comprises the following Seller Furnished
units.
- (02) Transceiver, Bendix RTA-44A
- (02) Antenna, Sensor
- (02) VHF Control panel, Gables
Third VHF Communications
Additionally the Aircraft shall be provided with full
provisions for a third VHF Communication system. This third
VHF will be dedicated to and fully interfaced with the
provisions for the ACARS system.
To arrive at an operational system the following equipment is
to be supplied by Buyer.
- (01) Transceiver, Bendix RTA-44A
- (01) Antenna, Sensor
- (01) VHF Control panel, Gables
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
23-21 Selective Calling (Selcal) - ARINC 714
--------------------------------------
The Aircraft shall be provided with full provisions for a
Selcal system in acc. with ARINC 714.
The Selcal system shall be interfaced with VHF1, VHF2 and the
provisions for HF communication. The Selcal system shall be
reset if the appropriate VHF or HF system is keyed.
To arrive at an operational system the following equipment is
to be supplied by Buyer.
- (01) Selcal unit, TEAM
23-22 ACARS
-----
Installation of full provisions for ACARS in addition to the
space provisions provided in the baseline aircraft. The ACARS
shall provide OOOI information. The ACARS shall have a
dedicated VHF Comm system (ref. 23-12). The ACARS shall be
hooked-up to the DFDAU for report downlink purposes which are
formed via the standard parameter information connected to the
DFDAU, when a Second CPU will be installed.
To arrive at an operational system the following equipment is
to be supplied by Buyer.
- (01) Management Unit (MU) with Internal GMT clock, powered
from batteries, Teledyne
- (01) Interactive Display Unit (IDU) on the pedestal,
Teledyne
Wiring provisions will be available for:
- (01) Cabin Management Terminal at Flight Attendant Panel,
Teledyne
- (01) Printer, to be installed in column of maintenance and
test panel, Datametric
- (01) Voice go-ahead to FWC from MU
- (01) Remote voice/data switch, on the
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
pedestal
23-22 ACARS (cont'd)
-------------
The voice-mode shall be selectable via the IDU (pin
programmable)
The OOOI information generated by the flight warning computer
will be transferred via a databus to ACARS Management Unit. In
addition, the OOOI and ground/flight info will be also
hardwired.
The aircraft ident. information will be provided via the
ACARS - MU hardwired.
The ACARS - IDU and MU shall be hardwired connected to the
DFDAU.
Installation of the standard Flight Data Acquisition Unit
DFDAU with a single CPU.
23-32 Passenger Entertainment
-----------------------
Installation of a pre-recorded announcement and boarding music
system. The system comprises a Matsushita RDAX 7351 recorder
system.
The recorder with build-in control panel shall be installed in
Galley 3.
The installation comprises the following Seller Furnished
unit:
- (01) Recorder, Matsushita RD-AX7351
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
23-51 Audio Management
----------------
Audio control panels in the pedestal shall be relocated to the
LH and RH flightdeck side panels, as a result the jack box
panels will be installed in the sidewalls. Audio control
panels will be with provisions for VHF Com-3 and single HF Com
facilities.
Because of the full provisions for VHF3 and HF, switches for
these functions are installed on the Audio Control Panels. As
these switches are not functional they must be provided with
an "INOP" sticker in accordance with JAR 25.1523.
24 ELECTRICAL POWER
----------------
24-26 Static Inverter
---------------
Installation of a single-phase autoland static inverter to
provide a source of AC power to the essential autoland 3 bus
(350 VA).
24-33 Batteries
---------
Batteries with an increased Amp. hr. rating
will be installed resulting from CAA
special conditions applicable to Fokker
100 aircraft.
25 EQUIPMENT AND FURNISHINGS
-------------------------
25-12 Sunvisors
---------
Installation of two sunvisors and rail system in the flight
compartment. The visors can be locked at various angles.
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
25-20 Passenger Compartment
---------------------
Interior lay-out is for 109 passengers in accordance with
drawing F100-04-088 sheet 1, issue -.
Accomodation shall be provided for 109 seats at 31 inch (787
mm) pitch. Triple seats RH and double seats LH.
25-21 Passenger and Attendant seats
-----------------------------
Installation of 109 passenger seats including covers,
seatbelts, tables etc. The fully dressed passenger seats are
supplied by Seller.
Double Cabin Attendant Seat
---------------------------
Installation of a rear facing double cabin attendants seat in
entrance against forward wardrobe/stowage wall on floor
hardpoints and a third top-point.
- (01) Double cabin attendant seat, Socea
Installation of a double cabin attendants seats i.l.o. a
single at the aft pressure bulkhead.
- (01) Double cabin attendant seat, Socea
25-23 Sidewall Panels and Window Shades
---------------------------------
Installation of a rolling blind in each window of the
passenger compartment.
- (66) Window blind, Magee
25-25 Floor Covering
--------------
Carpet material or the passenger's compartment shall be
supplied by Seller. Installation of protection covers below
the floor over the avionics rack.
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
25-26 Movable Cabin Divider
---------------------
The aircraft shall be provided with full provisions for a
movable class divider, from approx. Sta.6200 to Sta. 22320,
which is throughout the cabin.
Cabin backwall LH/RH incl. lintel.
25-26 Passenger Compartment Curtains
------------------------------
The Aircraft's passenger compartment shall be provided with
curtains and curtain rails in the following locations:
- between Galley 1 and Galley 2
- between Galley 2 and Galley 3
The required curtain material of Buyer's choice shall be
supplied by Seller
25-27 Rail on Overhead Luggage Bins
-----------------------------
Installation of a seat-placard rail on the luggage bins. An
extruded metal rail is fitted to the RH and LH luggage bins
throughout the cabin. The rail incorporates the facility to
easily fit and remove seat row placards.
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
25-29 Stowage unit/Wardrobe
---------------------
Deletion of the standard RH forward stowage unit behind Galley
2.
Deletion of the standard LH forward stowage unit aft of the LH
passenger door.
25-29 Trolley Stowage rear cabin
--------------------------
The standard wardrobes in the rear of the Aircraft's cabin
(forward of the lavatories) shall be made suitable for stowage
of one half size trolley (one at each side) and a standard
unit. The stowage shall be closed by means of a door. A
folding panel shall allow the use of the compartment as
wardrobe. Trolleys and standard units are Buyer Furnished
Equipment.
25-31 Galleys
-------
All galleys and galley inserts are supplied by Seller as
Seller Furnished Equipment.
25-31 Galley 1
--------
Installation of Galley 1 (22" deep) of the standard location
forward of the RH S/E door.
- (01) Galley, Rumbold
System provisions for galley inserts:
- (03) Coffee makers, Rumbold
- (03) Half size trolley, Driessen
- (01) Ice drawer, Rumbold
- (01) Standard unit, Rumbold
Ref. Fokker drawing F28-04-143 sheet 1, issue: A.1.
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
25-32 Galley 2
--------
Installation of a Galley 2 (35" deep) at the standard location
aft of the RH S/E door.
- (01) Galley, Rumbold
System provisions for galley inserts:
- (01) Large oven, Rumbold
- (04) Half size trolley, Driessen
- (02) Oven control panel, Rumbold
- (01) Waste bin, Rumbold
Ref. Fokker drawing F28-04-143 sheet 2,
issue: A proposal 1.
25-33 Galley 3
--------
Installation of a Galley 3 (29" deep) on structural provisions
(hardpoints) on the floor and top for a galley. Location aft
of the LH passenger door, between Sta. 4875 and 5611.
- (01) Galley, Rumbold
System provisions for galley inserts:
- (02) Standard units, Driessen
- (04) Half size trolley, Driessen
The front wall shall be equipped with the cabin attendant
control panel, passenger entertainment panel and shall have
wiring provisions for an ACARS cabin management terminal (Ref.
23-22).
25-60 Emergency Equipment
-------------------
The BCF fire-extinguisher, the megaphone and oxygen bottle
will be installed as described in the type specification.
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
26 FIRE PROTECTION
---------------
26-12 APU Fire Detection and Warning
------------------------------
Installation of a warning horn in the nosewheel bay to provide
an audible APU fire warning during APU ground operation.
The function of the warning horn will be inhibited during an
APU fire warning test.
31 INDICATING/RECORDING SYSTEMS
----------------------------
31-21 Flight Deck Clocks
------------------
Installation of alternate p/n clocks
- (02) Clock, Smiths Industries
p/n 2610-07-1
31-31 Flight Data Recorder Alternate Source - ARINC 573
-------------------------------------------------
Installation of an alternate source FDR (Sundstrand) i.l.o.
standard unit (Fairchild). The optional equipment shall be
installed above stowage unit section (in the position
allocated to the standard equipment).
- (01) FDR, Sundstrand
(01) Accelerometer, Sundstrand
(01) Mounting tray
32 LANDING GEAR
------------
32-48 Autobrakes
----------
Installation of an Automatic Braking System in addition of the
standard brake- and analog anti-skid system. The system
provides pilot selectable decelleration rates:
low, med, max and RTO.
For take-off, use of the maximum setting shall result in
maximum braking if the take-off is required from a speed of 8O
knots.
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
33 LIGHTS
------
33-24 Illuminated Signs
-----------------
Installation of a lintel in the forward passenger compartment
with legend EXIT in English/Spanish due to the installation of
a curtain between Galley 2 and Galley 3.
33-26 Entrance Lighting
-----------------
Wiring provisions for a galley area light installed in Galley
3, to be connected to the entrance light.
33-28 Galley Area Lighting
--------------------
Installation of a galley area light in the ceiling between
Galley 1 and 2. Switch will be installed on Galley 1.
33-46 Logo Lights
-----------
Installation of lighting fixtures in the LH and RH flap track
fairings for illumination of both sides of the vertical
stabilizer.
Installation of a ON/OFF switch for NAV/LOGO light switching
on the external-light switch panel in the overhead panel of
the flight compartment.
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
33-47 Strobe Lights
Installation of high intensity strobe lights in each wingtip
and one in the tailcone. Control of the system is via a rotary
switch panel in the overhead panel of the flight compartment.
Switch identification is by STROBE, printed below the switch.
Switch operation designation are as follows:
- OFF = strobe lights are off
- ON = strobe lights will be switched on by this selection.
- AUTO = strobe lights are activated to come on via the
landing gear switch at take-off.
34 NAVIGATION
34-13 Air Data Instruments
A combined standby altimeter and airspeed indicator i.l.o. the
standard separate standby altimeter and standby airspeed
indicator.
The following Seller Furnished equipment shall be deleted from
the baseline configuration:
- (01) Standby altimeter, Smiths Industries
- (01) Standby airspeed indicator, Smiths Industries
The following unit shall be supplied as Seller Furnished
Equipment:
- (01) Combined standby altimeter and airspeed indicator,
Smiths Industries
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
34-l6 Windshear
Installation of a windshear detection, alerting and recovery
guidance system.
During flight near the ground (below 1500 A.G.L) the system
will:
- detect the presence of potentially hazardous windshear
conditions.
- alert the flight crew when the airmass motions reach
potentially hazardous levels.
- provide flight director guidance to the crew to maximize the
probability of ground avoidance.
- provide automatic recovery guidance through the AFCAS when
selected.
o Detection: implementation in FMC via software changes. All
sensor data are available via existing
interfaces, as are the discrete outputs to the
AFCAS/EFIS, GPWS and other subsystems
o Guidance: implemented in AFCAS (FCCs) via software changes
using all existing interfaces.
o Alerts: Aural alerts will be produced within the GPWS.
Primary display of detection alerts and guidance
is on the PFD of EFIS.
Wiring changes for the following functions:
- To add discrete for the following functions:
o TOGA/SPE
o Max. TLA/SPE
o FCC/GPWS
- Changes of speedbrake auto retract logic
- Change pin option FCC and FWC windshear enable
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
34-28 Inertial Reference System
Installation of a triple inertial reference system (IRS)
i.l.o. the std triple attitude and heading reference system
(AHRS).
The following Seller Furnished Equipment shall be deleted from
the baseline configuration:
- (03) AHRS unit, Litton
- (02) Magnetic sensor unit, Sperry
- (02) Magnetic compensator, Litton
Structural provisions for the magnetic sensor units remain in
the Aircraft. The installation comprises the following Seller
Furnished units:
- (03) IRS unit, Honeywell HG
- (03) Mode selector panel, Honeywell
- (01) Inertial system display unit, Honeywell CG
34-32 Instrument Landing System
Installation of a triple Bendix system i.l.o. the standard
dual Collins system (ARINC 710) as part of the three channel
Autoland AFCAS (Ref. ATA 22-10).
The installation comprises the following Seller Furnished
units:
- (03) Receiver, Bendix RIA-35A
- (03) G/S Antenna, Sensor
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
34-41 Weather Radar (WXR)
Installation of a Bendix weather radar system i.l.o. the std
Collins system.
The installation comprises the following Seller Furnished
units:
- (01) Transceiver, Bendix RTA-4A
- (01) Control panel, Bendix CON-4A
- (01) Antenna pedestal, Bendix DAA-4A
- (01) Antenna, Bendix REA-4A
34-42
Radio Altimeter
Installation of a triple TRT AHV 530 LRRA system i.l.o. the
standard dual system (ARINC 707) as a part of the three
channel Autoland AFCAS (ref. ATA 22-10).
The following Seller Furnished units are deleted:
- (04) Antenna, TRT AHV S
The installation comprises the following Seller Furnished
units:
- (03) Transceiver, TRT AHV 530
- (06) Antenna, Sensor
34-43 Ground Proximity Warning
The installation of a GPWS/GS annunciator on the main
instrument panel LH and RH.
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
34-51 VHF Omni Range (VOR) - ARINC 711
Installation of two Bendix VOR/M receivers i.l.o. the two
standard Collins receivers. The equipment shall be installed
in the aft rack of the avionics bay.
The installation comprises the following Seller Furnished
units:
- (02) Transceiver, Bendix RVA-36A
34-52 Distance Measuring Equipment
Installation of two Bendix DME interrogators i.l.o. the two
std Collins interrogators. The equipment shall be installed in
the aft rack of the avionics bay (in the positions allocated
for the standard equipment).
The installation comprises the following Seller Furnished
units:
- (02) DME Interrogators, Bendix DMA-37A
34-53 Automatic Direction Finding (ADF)
Installation of two Bendix ADF receivers i.l.o. the two std
Collins receivers. The equipment shall be installed in the aft
rack of the avionics bay (in the positions allocated for the
standard equipment).
The installation comprises the following Seller Furnished
units:
- (02) Receiver, Bendix DFA-75A
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
34-54 Air Traffic Control
Installation of a dual Bendix ATC system with S-mode i.l.o.
the standard, single, Collins system with C-mode. The
transponders shall be installed in the aft rack of the
avionics bay and the control panel shall be installed in the
center pedestal (replacing the standard units). Two mode S ATC
antennae will be installed at bottom of fuselage and 2
antennae on top of the fuselage.
The following Seller Furnished Equipment shall be deleted from
the baseline configuration:
- (01) Control panel, Gables
The installation comprises the following Seller Furnished
units:
- (02) ATC S-mode transponders,
Bendix TRA-67A
- (01) Control panel, Bendix CNA-67A
- (04) ATC antenna, Sensor
34-61 Flight Management System
ATA departure profile i.l.o. IATA airline
Type option no. 2 i.l.o. European FMS.
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
35 OXYGEN
35-20 Passenger Oxygen System
The RH luggage bins shall be equipped with oxygen panels
containing four oxygen masks, the LH luggage bins shall be
equipped with oxygen panels containing three oxygen masks.
The following units shall be deleted from the baseline
aircraft:
- (43) 3 mask panels
The following units shall be installed:
- (22) 4 mask panels
- (22) 3 mask panels
38 WATER/WASTE
38-12 Water heater in aft toilet compartments
Installation of a water heater and a dual timed faucet in both
aft toilet compartments.
The installation comprises the following Seller Furnished
units:
- (02) Heater, Inventum
- (02) Faucet, Adams Rite
38-30 Waste Disposal
To change the material of toilet waste ducts from titanium to
stainless steel to allow suction draining
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
52 DOORS
52-13 Forward Opening Passenger Door
Installation of a forward opening pax/crew door on the LH
side of the fuselage between Sta. 3845 and 4875. The door will
allow connecting the airplane to boarding bridges as presently
in use and will provide an available entry height of 1850 mm
(73 inches). Installation of the door will not comprise the
installation of an integral staircase.
The door shall be outward and forward opening and shall be
provided with a locking mechanism comprising C-latches. An
escape slide will be mounted on the inboard side of the door.
(01) Escape slide, Air Cruisers Co
52-31 Enlarged Cargo Compartment Doors
Installation of upward opening, enlarged cargo doors, two in
the forward cargo compartment and one in the aft cargo
compartment. The door sills are flush mounted with the cargo
compartment floor to facilitate ease of loading.
52-70 Avionics Bay Access Hatch Warning
Installation of two micro switches on each of the two avionics
access doors to detect an unlocked condition. Separate
warnings, on each door, are fed to the Multifunction Display
Units located on the main instrument panel. The warning is fed
to the MFDS via the flight warning computer.
The warning is a level 2 category warning which is also
accompanied by an aural single chime.
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
53 FUSELAGE
53-73 Door Protection Plates
Scuff plates made of corrosion resistant steel shall be
provided on the external fuselage at the sills of the
passenger and service/emergency doors.
56 WINDOWS
56-00 Windows
Due to Galley 3 installation the first cabin window on the LH
side will be blanked off.
72 ENGINES
72-00 Tay Mk 650-15 i.l.o. Mk 620-15 engines
Changes to the airframe structure, airframe systems and system
software for the installation of Rolls-Royce Tay Mk 650-15
engines (Exclusive engines).
1. Structural Hardware
o New nacelle inlet (fan diameter increased by 0.8"
o Increased anti-icing valve access doors
- LH fixed cowl
- RH cowl door
o Reinforced thrust strut bracked back-up structure.
<PAGE>
APPENDIX A, PART B
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
72-00 Tay Mk 650-15 i.l.o. Mk 620-15 engines (cont'd)
System Hardware
o Throttle controls and fuel shut-off
o Control: geometry change
o New igniter lead cables. Penetration point
on engine on bottom dead center
o Engine ident plug (delivered C.W. engine)
o Inlet anti-icing: Geometry changed
o Standby engine indicator (new p/n)
o Electrical harness
o Fuel lines: geometry change
o Hydraulic lines: geometry change
3. Avionics Software
o AFCAS : Installation of a new FCC
(the FCC is pin programmable)
o MFDS : Installation of a new MFDS
o FMC : Installation of a new FMC
(the FMC is pin programmable)
o FWC : Installation of a new FWC
(the FWC is pin programmable)
4. Performance
o Noise
o Handbooks (o.a. AFM)
(Standard Option SO 72-00.01)
<PAGE>
APPENDIX A, PART C
LESSEE'S ADDITIONAL REQUIREMENTS
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
02 MISCELLANEOUS
02-20 Certification
The aircraft shall be certified for operation on the Swedish
register.
11 PLACARDS AND MARKINGS
11-10 Exterior Colour Schemes
The outboard painting shall be as specified by customer.
11-20 Exterior Plackards and Markings
Exterior placards and markings shall be in English, as
specified by customer.
11-30 Interior Placards and Markings
Interior placards and markings shall be in English/Swedish, as
specified by customer.
12 SERVICING
12-13 Servicing
The oil for engine, IDG and APU shall be Mobil Jet Oil 254
25 EQUIPMENT AND FURNISHINGS
25-20 Passenger compartment.
Interior lay-out for l07 pax in accordance with drawing
W98251. Interior colors and materials as specified by
customer.
<PAGE>
APPENDIX A, PART C
LESSEE'S ADDITIONAL REQUIREMENTS
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
25-31 Galleys
Galley parts that are now red shall be painted dark blue, as
specified by customer.
25-31 * Galley 1
Galley 1 shall be made suitable for KSSU trolleys,
including numbering
** Add:
(03) Trolley Halfsize Driessen DLH573-009
25-31 * Galley 2
Galley 2 shall be made suitable for KSSU trolleys. Deletion of
frame in order to have additional stowage of 1 full size
trolley, including numbering. Provisions for installation of 3
ATLAS type ovens, p/n 62755. Provisions for the attachment of
a baby cradle.
* (03) ATLAS type ovens, p/n 67255.
** (03) Trolley Fullsize Driessen DLH621-029
(01) Magazine holder C15018-001-001
25-31 * Galley 3
Galley 3 shall be made suitable for KSSU trolleys, including
numbering. Provisions for the attachment of a baby cradle.
Installation of compartment doors at positions 303 and 305.
Add:
** (04) Trolley Halfsize Driessen DLH573-009
25-31 * Galley 4
Installation of a seat rail mounted stowage for 4 half size
trolleys, at RH aft of the cabin, instead of a double seat,
and including numbering, p/n C10119-001-004 (Rumbold). Fokker
will do best effort to certify this at delivery date of first
a/c.
Add:
** (04) Trolley Halfsize Driessen DLH573-009
<PAGE>
APPENDIX A, PART C
LESSEE'S ADDITIONAL REQUIREMENTS
- --------------------------------------------------------------------------------
ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
25-31 ** Aft stowage
The aft stowages shall be modified to accept KSSU trolleys,
the top part of aft stowages shall be modified to accept a
KSSU container.
** (02) Trolley Halfsize Driessen DLH573-009
25-61 * Emergency equipment
The following additional evacuation equipment shall be
installed:
(02) Fire extinguishers, Walter Kiddie 892480MODX
(04) Smoke hoods, Puritan Bennet, 119003
(07) Life vests, orange, Svitlik S21850-7300
A complete lay out of the emergency equipment is
attached to this Part C
25-63 * Emergency Locator Transmitter
An emergency locator transmitter shall be installed,
comprising the following components:
(01) Transmitter, Dorne & Margolin DMELT8-1
located in the ceiling at the rear of the
passenger compartment
(02) Antenna, Sensor S65-8280-7
mounted on the upper fuselage
(03) Test switch panel, Fokker A42730-403
located on the overhead panel in the flight
compartment
33-24 Illuminated Signs
All signs shall be in english, as specified by customer.
Installation of white covers on overwing escape hatches.
34-26 * EFIS
ADF pointers shall be available in ARC/MAP mode.
<PAGE>
(a) The price for the items marked with * totals an amount of $95,640;
(b) The price for the items marked with ** will be determined before delivery
of the Aircraft;
(c) The total of the prices mentioned in (a) and (b) above shall, at delivery
of the Aircraft, be deducted from the credit for start-up costs mentioned
in SL01 648.005 and SL02 648.013 to the Aircraft Support Services
Agreement ASSA 648.004, concluded between Lessee and Fokker on even date
herewith.
<PAGE>
EMERGENCY EQUIPMENT LAY-OUT
[GRAPHIC DESCRIPTION]
Layout of emergency equipment and locations.
<PAGE>
PART D
LIST OF MANDATORY MODIFICATIONS TO BE
INSTALLED IN THE AIRCRAFT PRIOR TO DELIVERY
A (This list includes all mandatory service bulletins
issued at the time of delivery of the Aircraft)
T
A SERV. PUBLIC. DESCRIPTION
22 SBF100-22-026 INTRODUCTION FAC V13R1
SBF100-22-029 INTRODUCTION FCC V13R1
SBF100-22-031 REPLACEMENT FLIGHT MODE PANEL
SBF100-22-032 INTRODUCTION FAC MOD 11
23 SBF100-23-017 THE MODIFICATION OF THE PASSENGER ADDRESS
SYSTEM
24 SBF100-24-024 THE CHANGE OF THE LOCATION OF THE HP BLEED
CIRCUIT BREAKERS.
25 SBF100-25-064 MOD. OF THE COVER OF THE ESCAPE SLIDE ON THE
PASS. DOOR
26 SBF100-26-002 NEW SAFETY CATCH FOR HALON 1211 PORTABLE FIRE
EXTINGUISHERS
27 SBF100-27-032 MODIFICATION HORIZONTAL STABILIZER ACTUATOR
SBF100-27-041 INSPECTION RUDDER AUTOPILOT INPUT BRACKETS
SBF100-27-043 CONNECT OF A NUMB. OF SHIELDINGS WITHIN THE
LIFTD. SYS. TO GROUND
SBF100-27-047 ONE TIME INSPECTION OF THE RUDDER PEDAL
ASSEMBLIES
SBF100-27-051 MOD. OF FLIGHT CONTROL LOCK HANDLE AND SWITCH.
SBF100-27-052 REPETITIVE CHECK ELEVATOR BOOSTER CONTROL UNIT
BACKLASH REMOVER
28 SBF100-28-022 ONE TIME INSP.: IF NECESSERY INSTAL A NEW APU
FUEL SUP. TUBE ASSY
SBF100-28-026 ONE TIME INSP. LH AND RH ENGINE FUEL SUPPLY
LINE
29 SBF100-29-021 REPL. OF SYSTEMS 1 & 2 RETURN FILTER BY-PASS
ASSY'S
SBF100-29-022 NEW HYDR. HOSE ASSEMBLIES IN SYS. 1 ENG.
DRIVEN PUMP
31 SBF100-31-020 INSTALLATION FWC V8
31 SBF100-31-036 A SOFTWARE MODIFICATION TO THE MFDU (DRAFT)
32 SBF100-32-044 INTRODUCTION OF IMPROVED MAIN WHEELS.
SBF100-32-058 INTRODUCTION OF AN IMPROVED MAIN LANDING GEAR
DOOR SEQUENCE VALVE
SBF100-32-061 INSPECT. OF THE BOLTS IN THE PRESSURE REDUCER
VALVE
SBF100-32-064 NLG RETRACTION TIME OUT OF TOLERANCE
SBF100-32-068 THE INTRODUCTION OF A LOWER AXLE NUT TORQUE
SBF100-32-070 INSPECTION AND SHOT PEENING OF THE MAIN WHEELS
SBF100-32-071 THE INSPECTION OF CORRECT GREASINGOF THE
TELEFLEX SYSTEM (DRAFT)
SBF100-32-073 THE INSPECTION AND SHOT PEENING OF THE MAIN
WHEELS.
SBF100-32-074 THE REPLACEMENT OF THE MAIN LANDING GEAR
DOWNLOCK ACTUATOR.
35 SBF100-35-003 MODIF. OF THE OXYGEN DROP OUT PANELS
38 SBF100-38-024 MODIFICATION TO THE CHECK VALVE AND TUBE
ASSEMBLY
49 SBF100-49-015 T2 BIAS SYSTEM IN THE ELECTRONIC CONTROL UNIT
SBF100-49-016 THE MODIFICATION OF THE WIRING OF THE TZ BIAS
SYSTEM
SBF100-49-022 ONE TIME INSPEC. FOR DRAIN HOLE IN APU MOUNT.
FRAME.
SBF100-49-023 INTRO. OF TWO ADD CLAMPS ON APU FUEL SUPPLY
LINE
52 SBF100-52-039 REPL. OF NYLON BUSHES FOR THE C-LATCHES OF THE
S/E DOORS
SL123 THE REPLACEMENT OF GAS SPRINGS IN LARGE CARGO
DOORS
55 SBF100-55-018 MODIFICATION OF RIB 5.0
SBF100-55-019 INSPECTION OF RIB 5.0 FLANGES AND FINGER
STRIPS.
SBF100-55-021REV1 STRUCTURAL MOD. HORIZONTAL STABILIZER.(INCL.
BRACKETS)(DRAFT)
57 SBF100-57-021REV1 REWORK OF THE SIDE STAY BRACKET AN THE UPLOCK
MECH. BRACKET (DRAFT)
SBF100-57-027 THE REPLACEMENT OF THE WING ACCESS PANELS (DRAFT)
71 SBF100-71-012 THE MODIF. OF THE ENGINEMOUNT SHEAR SHELF WEB
76 SBF100-76-011 ENG. CONTROL MOD. TO IMPLEMENT THE NEW 52 MAX.
SETTING (DRAFT)
78 SBF100-78-010 INTRODUCTION OF ENLARGED THRUST REVERSER DOOR
WEDGES (DRAFT)
The items marked with "Draft" will be installed by retrofit and free of charge
as soon as they will be available.
<PAGE>
DESPATCH RELATED SERVICE BULLETINS TO BE
INSTALLED IN THE AIRCRAFT PRIOR TO DELIVERY
A
T
A SERV. PUBLIC. DESCRIPTION
21 SBF100-21-032 INTRODUCTION NEW SEALS MFDU TRAYS EQUIPMENT
SBF100-21-035REV1 INSTALLATION NEW FLEX PIPE EQUIPMENT COOLING
SBF100-21-038REV1 INSTALLATION STOP PLUGS NEAR CABIN TEMP SENSOR
SBF100-21-041 AIR CONDITIONING, IF THIRD COOLING FAN IS
INSTALLED
SBF100-21-056 AUGMENTATION OF THE FLOW THROUGH THE TURB. BYPASS
VALVES (DRAFT)
22 SBF100-22-037 INTROD. OF SOFTWARE VERSION V13a TO AUTOFLIGHT
COMPUTERS (DRAFT)
27 SBF100-27-034 INTROD. IMPROVED FLAP CONTROL DATA UNIT
SBF100-27-038 INTROD. NEW PROXIMITY SENSOR BELL-CRANCK 2
SBF100-27-039 INTROD. NEW RUDDER LIMIT MONITOR UNIT (-413)
(DRAFT)
SBF100-27-046 INTROD. OF ROT LIM RING ON NEW MFDU
SBF100-27-048 THE MOD. OF THE FLEX DRIVE SHAFT OF THE LEFT
FLAP ACT.
SL 073 IMPROVED ADJUSTMENT OF LIFTDUMPER MECH. CONTROL
SYSTEM
28 SBF100-28-019 INTROD. OF VENTILATION-DRAIN FLOAT-VALVE WITH AN
IMPROVED HEAD
SL 119 INTRODUCTION OF SOFTWARE CHANGE TO COMB. PROC.
TOTALIZER
SL 105 REPLACEMENT OF SYS 1 AND 2 HYDRAULIC TUBES
30 SBF100-30-013 MODIF. WINDOW TEMP. CONTR. UNIT FROM -407 INTO
-409 (DRAFT)
31 SL 057 INTRO SEVERAL MODS FOR EFIS AND MFDU DISPLAY UNITS
32 SBF100-32-050 INTROD. NEW SPRING & WIRING ROUTE TO IMPROVE
RELIAB. OF ANTI RETR. SOL.
SBF100-32-059 ENLARGED TARGETS ON MLG UP SENSORS
SBF100-32-065 REPLACEMENT OF THE PARKING BRAKE MECHANISM
SBF100-32-069 INTRO OF NEW PROXIMITY SWITCHES FOR MLG DOOR
UPLOCK MECHANISMS
36 SBF100-36-012 INTRO OF NEW APU INLET DUCT OVERHEAT S/W
SBF100-36-O15 REV 1 INSTALLATION OF IMPROVED HEAT INSULATION BLANKETS
SBF100-36-O18 A CHANGE TO THE BLEED AIR CONTROL CIRCUIT OF THE
TAY 650-15
SBF100-36-O22 INSP. THE CHECK-VALVE ON PRES. SWITCH/AFT BLEED
AIR SENSE LINE (DRAFT)
38 SBF100-38-026 INTRO OF AN EXTENDED DUMP OUTLET FOR THE PRESSURE
REGULATOR
49 SBF100-49-017 A NEW RELAY TO PREVENT ELECTRO MAGNETIC
INTERFERENCE
SBF100-49-020 MOD FOR WIRING TO THE APU CONTROL BUS RELAY
VENDOR SB MODIFICATION OF THE APU INLET PLENUM
VENDOR SB T2 BIAS MODIFICATION
VENDOR SB INTRODUCTION OF AN FCU -04
77 SL 137 INTRODUCTION OF NEW EMUX
The items marked with "Draft" will be installed by retrofit and free of
charge as soon as they will be available.
<PAGE>
APPENDIX B TO APPENDIX E
to Lease Agreement 525
[LOGO]Fokker REPORT
E100-WBL issue date: 29 Oct. 1993 issue no.: 1
- --------------------------------------------------------------------------------
security class report no.
Restricted E100-201/A321
- --------------------------------------------------------------------------------
Flight Load Schedule
--------------------
- --------------------------------------------------------------------------------
Date: From: To
- --------------------------------------------------------------------------------
Model F28: Mk0100 Fokker serial no.: 11321 Customer: TRANSWEDE
- --------------------------------------------------------------------------------
Item Weight H-arm Index % M.A.C.
kg mm or
(delta)I
- --------------------------------------------------------------------------------
Basic Empty Weight
(ref. page 3)
- --------------------------------------------------------------------------------
Operational items:
- ------------------
Pilot 2452
Co-Pilot 2452
Observer 3060
2 Cabin Attendants (front) 4283
2 Cabin Attendants (rear) 24637
Manuals
Crew luggage
Tool kit, ground lock, vanes
Service Equipment
Water in central water system 14458
- --------------------------------------------------------------------------------
Basic Weight and index for
Balance Chart
- --------------------------------------------------------------------------------
Galley 1 inserts and stores 3609
Galley 2 inserts and stores 5140
Galley 3 inserts and stores 5247
Galley 4 inserts and stores 23159
Aft LH & RH trolley stowage
inserts and stores 23828
Index change when retracting the under
carriage (delta)I = -0,599.
Index change when extending the inner
and outer flaps (delta)I = + 2,704
- --------------------------------------------------------------------------------
Operational Empty Weight (O.E.W.)
- --------------------------------------------------------------------------------
Note: Data which are not filled in have to be established by the
customer.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
page
All rights reserved. Reproduction or disclosure to third parties of this
document or any part thereof, or the use of any information contained therein
for purposes other than provided for by this document is not permitted except
with prior and express written permission.
<PAGE>
REPORT/BASIC CHECKLIST
report no : E100-201/A321
[LOGO] Fokker issue date: 29 Oct. 1993 issue no: 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
total Index record of
no. weight arm change checking
description req. kg mm (delta) I ------------------
[ILLEGIBLE]
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cockpit compartment
- -------------------
- - Pilot seat c.w. shoulder harness Ipeco 3A088-0003-01-2 1 28,95 2490 - 4,297 |X|
- - Escape rope (in ceiling) FOK D86227-401 1 0,45 2750 - 0,066 |X|
- - Life vest Switlik S21850-7300 1 0,62 2750 - 0,090 - oper. item
- - Co-pilot seat c.w. shoulder harness Ipeco 3A088-0004-01-2 1 29,00 2490 - 4,304 |X|
- - Smoke goggle Eros MXP 210-00 1 0,20 2743 - 0,029 |X|
- - Fire extinguisher BCF FFE BA20703G3 1 2,07 2794 - 0,301 |X|
- - Escape rope (in ceiling) FOK D86227-401 1 0,45 2750 - 0,066 |X|
- - Life vest Switlik S21850-7300 2 1,24 2773 - 0,181 - oper. item
Side panels (RH+LH)
- - Microphone handheld (RH+LH) Telex 63333-007 2 0,36 1762 - 0,056 |X|
- - Smoke goggle (RH+LH) Eros MXP210-00 2 0,40 1762 - 0,062 |X|
- - Oxygen mask (RH+LH) Eros MC10-04-109 2 0,23 1890 - 0,036 |X|
- - Flashlight (c/w pwr.pack) DME EF-2C 2 1,10 2285 - 0,166 |X|
- - Boomtype headset (RH+LH) Telex 64300-005 2 0,23 2920 - 0,033 |X|
- - Spare bulb box (LH) D48383-409 1 0,28 2850 - 0,041 |X|
- - Sunvisors Magee 141-31020 2 0,91 2900 - 0,131 |X|
- - Pair of gloves (RH) FKK7-35 1 0,22 2850 - 0,032 |X|
LH aft-wall
- - Boomtype headset Telex 64300-005 1 0,12 2970 - 0,017 |X|
- - Flashlight DME EF-1 1 0,38 2970 - 0,055 |X|
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
page |X| = in airplane when weighed
- = not in airplane when weighed
All rights reserved. Reproduction or disclosure to third parties of this
document or any part thereof, or the use of any information contained therein
for purposes other than provided for by this document is not permitted except
with prior and express written permission.
<PAGE>
REPORT/BASIC CHECKLIST
report no : E100-201/A321
[LOGO] Fokker issue date: 29 Oct. 1993 issue no: 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
total Index record of
no. weight arm change checking
description req. kg mm (delta) I ------------------
[ILLEGIBLE]
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cockpit compartment (cont'd)
- -------------------
RH aft. wall
- - Oxygen bottle (fixed) PUR 176225 1 5,23 2903 - 0,755 |X|
- - Crash axe Gemtor 42D8331 1 1,00 2952 - 0,144 |X|
- - Oxygen bottle Scott 5600-1C1AE23A 1 4,07 2882 - 0,588 |X|
- - Full face mask Scott 10100CIA 1 0,97 2882 - 0,140 |X|
- - Pilot head covers FOK 28.0.2493 3 0,29 3000 - 0,042 |X|
- - Lockpin thrust reverser FOK 28.0.4591 2 0,13 3000 - 0,019 |X|
- - Groundlocks FOK 28.0.1233 3 0,76 3000 - 0,109 -
- - Groundlocks (installed) FOK 28.0.1233 3 0,76 13022 - 0,033 |X|
- - Folding observer seat FOK D86007 1 8,50 3180 - 1,203 |X|
- - Safety belt + sh harness 502422-403 1 1,20 2985 - 0,172 |X|
- - Oxygen mask (in gangway LH) Eros MC10-04-109 1 0,11 3050 - 0,016 |X|
Entrance compartment
- --------------------
Fwd. C/A station:
- - C/A seat NCFK 1-200001-21 1 24,00 3962 - 3,209 |X|
- - Microphone (pass. address) SENN MD 430-16TAK 1 1,17 3937 - 0,023 |X|
- - Flashlight (c/w batteries) DME EF-1 2 0,76 3937 - 0,102 |X|
- - Handset incl. cradle AH2542D 1 1,36 3937 - 0,182 |X|
- - Life vest Switlik S21850-7300 2 1,24 3937 - 0,166 - oper. item
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
page |X| = in airplane when weighed
- = not in airplane when weighed
All rights reserved. Reproduction or disclosure to third parties of this
document or any part thereof, or the use of any information contained therein
for purposes other than provided for by this document is not permitted except
with prior and express written permission.
<PAGE>
REPORT/BASIC CHECKLIST
report no : E100-201/A321
[LOGO] Fokker issue date: 29 Oct. 1993 issue no: 1
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
total Index record of
no. weight arm change checking
description req. kg mm (delta) I ------------------
[ILLEGIBLE]
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Entrance compartment (cont'd)
- --------------------
- - Galley 1: structure (incl waste bin) Rumbold C11221-001-001 1 89,0 3535 - 12,279 |X|
ice drawer Rumbold C11221-097-001 1 17,1 3535 - 2,359 - oper. item
coffee maker (incl. can) Rumbold 64752 3 21,7 3609 - 2,978 - oper. item
HS trolley Driessen DLH 573-009 3 3609 - oper. item
- - Curtain galley 1 - galley 2 FOK D89285-403 1 4283 |X|
- - Escape slide (S/E door) FOK D31873-101 1 12,40 4240 - 1,623 |X|
- - Escape slide cover FOK D15505-103 1 1,59 4240 - 0,208 |X|
- - Lockpin S/E door FOK D87766-401 2 0,06 4240 - 0,008 |X|
- - Escape slide (pax door) AC 60049-101 1 12,9 4355 - 1,674 |X|
- - Escape slide cover AC 60750-101 1 1,1 4355 - 0,143 |X|
- - Galley 2: structure (incl. waste bin) Rumbold C11274-001 1 102,0 5216 - 12,358 |X|
oven Rumbold 67255 3 58,2 5140 - 7,096 - oper. item
FS trolley Driessen DLH 621-029 3 5140 - oper. item
- - Galley 3: structure Rumbold C11223-001-001 1 56,5 5243 - 6,830 |X|
HS trolley Driessen DLH 573-009 4 5247 - oper. item
In stowage of galley 3 at entrance side:
- - Fire extinguisher (water) 892480 MODX 1 2,90 5125 - 0,354 |X|
- - Passenger entertainment recorder RDAX 7351 1 2,28 4925 - 0,283 |X|
- - Curtain galley 2 - 3 FOK D89285-429 1 5611 |X|
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
page |X| = in airplane when weighed
- = not in airplane when weighed
All rights reserved. Reproduction or disclosure to third parties of this
document or any part thereof, or the use of any information contained therein
for purposes other than provided for by this document is not permitted except
with prior and express written permission.
<PAGE>
REPORT/BASIC CHECKLIST
report no : E100-201/A321
[LOGO] Fokker issue date: 29 Oct. 1993 issue no: 1
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
total Index record of
no. weight arm change checking
description req. kg mm (delta) I ------------------
[ILLEGIBLE]
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cabin compartment
- -----------------
- - Passenger seats, Rumbold M10000
series.
row 1 LH Double seat, in arm table M10249-001 1 30,38 6449 - 3,306 |X|
row 2 LH " " M10251-001 1 24,56 7262 - 2,473 |X|
row 3 LH " " " - " 1 24,56 8049 - 2,280 |X|
row 4 LH " " M10247-001 1 24,58 8837 - 2,088 |X|
row 5 LH " " " - " 1 24,58 9624 - 1,895 |X|
row 6 LH " " " - " 1 24,58 10411 - 1,701 |X|
row 7 LH " " " - " 1 24,58 11199 - 1,507 |X|
row 8 LH " " " - " 1 24,58 11986 - 1,314 |X|
row 9 LH " " " - " 1 24,58 12774 - 1,120 |X|
row 10 LH " " " - " 1 24,58 13561 - 0,927 |X|
row 11 LH " " " - " 1 24,58 14348 - 0,733 |X|
row 12 LH " " M10255-001 1 24,68 15136 - 0,542 |X|
row 13 LH " " M10259-001 1 23,52 15949 - 0,325 |X|
row 14 LH " " M10253-001 1 23,98 16761 - 0,137 |X|
row 15 LH " " M10247-001 1 24,58 17549 0,053 |X|
row 16 LH " " " - " 1 24,58 18336 0,247 |X|
row 17 LH " " " - " 1 24,58 19124 0,440 |X|
row 18 LH " " " - " 1 24,58 19911 0,634 |X|
row 19 LH " " " - " 1 24,58 20698 0,827 |X|
row 20 LH " " " - " 1 24,58 21486 1,021 |X|
row 21 LH " " " - " 1 24,58 22273 1,214 |X|
row 22 LH " " M10261-001 1 22,46 23061 1,287 |X|
Note: all seats incl. belts
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
page |X| = in airplane when weighed
- = not in airplane when weighed
All rights reserved. Reproduction or disclosure to third parties of this
document or any part thereof, or the use of any information contained therein
for purposes other than provided for by this document is not permitted except
with prior and express written permission.
<PAGE>
REPORT/BASIC CHECKLIST
report no : E100-201/A321
[LOGO] Fokker issue date: 29 Oct. 1993 issue no: 1
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
total Index record of
no. weight arm change checking
description req. kg mm (delta) I ------------------
[ILLEGIBLE]
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cabin compartment (cont'd)
row 1RH Triple seat, in arm table M10240-001 1 42,72 6449 - 4,649 |X|
row 2 RH " " M10242-001 1 34,00 7262 - 3,424 |X|
row 3 RH " " " - " 1 34,00 8049 - 3,156 |X|
row 4 RH " " M10238-001 1 34,14 8837 - 2,900 |X|
row 5 RH " " " - " 1 34,14 9624 - 2,632 |X|
row 6 RH " " " - " 1 34,14 10411 - 2,363 |X|
row 7 RH " " " - " 1 34,14 11199 - 2,094 |X|
row 8 RH " " " - " 1 34,14 11986 - 1,825 |X|
row 9 RH " " " - " 1 34,14 12774 - 1,556 |X|
row 10 RH " " " - " 1 34,14 13561 - 1,287 |X|
row 11 RH " " " - " 1 34,14 14348 - 1,019 |X|
row 12 RH " " M10246-001 1 34,18 15136 - 0,751 |X|
row 13 RH " " M10258-001 1 32,74 15949 - 0,453 |X|
row 14 RH " " M10244-001 1 34,48 16761 - 0,197 |X|
row 15 RH " " M10238-001 1 34,14 17549 0,074 |X|
row 16 RH " " " - " 1 34,14 18336 0,343 |X|
row 17 RH " " " - " 1 34,14 19124 0,612 |X|
row 18 RH " " " - " 1 34,14 19911 0,880 |X|
row 19 RH " " " - " 1 34,14 20698 1,149 |X|
row 20 RH " " " - " 1 34,14 21486 1,418 |X|
row 21 RH " " M10238-001 1 34,14 22273 1,687 |X|
Note: all seats incl. belts
- - Carpet FOK - 14570 |X|
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
page |X| = in airplane when weighed
- = not in airplane when weighed
All rights reserved. Reproduction or disclosure to third parties of this
document or any part thereof, or the use of any information contained therein
for purposes other than provided for by this document is not permitted except
with prior and express written permission.
<PAGE>
REPORT/BASIC CHECKLIST
report no : E100-201/A321
[LOGO] Fokker issue date: 29 Oct. 1993 issue no: 1
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
total Index record of
no. weight arm change checking
description req. kg mm (delta) I ------------------
[ILLEGIBLE]
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cabin compartment (cont'd)
In second LH luggage bin:
- - Megaphone ACR-EMIA2204 1 6531 |X|
- - Smoke hood PUR 119003 1 1,98 6711 - 0,210 |X|
- - Fire Extinguisher (BCF) FFE BA20703G3 1 2,07 6071 - 0,233 |X|
- - Pair of gloves FKK7-35 1 0,22 6491 - 0,024 |X|
- - Infants life jackets MK22 5 2,35 6661 - 0,251 - oper. item
In second RH luggage bin:
- - First aid kit MISC25-001 1 1,73 6481 - 0,188 |X|
- - Oxygen bottle Scott 5500B1UBF23A 1 3,73 6361 - 0,409 |X|
In aft LH luggage bin:
- - Fire Extinguisher (BCF) FFE BA20703G3 1 2,07 22796 - 0,113 |X|
- - Pair of gloves FKK7-35 1 0,22 22936 - 0,012 |X|
- - Megaphone ACR-EMIA2204 1 23076 |X|
- - Infant life jackets MK22 5 2,35 22486 - 0,121 - oper. item
- - Smoke hood PUR 119003 1 1,98 22676 - 0,106 |X|
- - Infant seat belt 502755-101-2258 2 0,22 23246 - 0,013 - oper. item
In aft RH luggage bin:
- - First aid kit MISC25-001 1 1,73 23046 0,099 |X|
- - Oxygen bottle Scott 5500B1UBF23A 1 3,73 23156 0,217 |X|
Gallery 4 (RH): structure Rumbold C10119-001-004 1 50,8 23159 - 2,690 |X|
HS trolley Driessen DLH 573-009 2 22994 - oper. item
HS trolley Driessen DLH 573-009 2 23324 - oper. item
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
page |X| = in airplane when weighed
- = not in airplane when weighed
All rights reserved. Reproduction or disclosure to third parties of this
document or any part thereof, or the use of any information contained therein
for purposes other than provided for by this document is not permitted except
with prior and express written permission.
<PAGE>
REPORT/BASIC CHECKLIST
report no : E100-201/A321
[LOGO] Fokker issue date: 29 Oct. 1993 issue no: 1
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
total Index record of
no. weight arm change checking
description req. kg mm (delta) I ------------------
[ILLEGIBLE]
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Rear cabin compartment
- - C/A seat Socea 2510-161-00-21 1 28,07 24880 + 2,119 |X|
- - Handset incl. cradle AH2542D 1 1,36 24880 + 0,103 |X|
- - Microphone (pass. address) SENN MD430-16TAK 1 0,17 24880 + 0,013 |X|
- - Flashlight (c/w batteries) DME EF-1
(=P2-07-0001-201S) 2 0,76 24880 + 0,057 |X|
- - Life vest Switlik S21850-7300 2 1,24 24880 + 0,094 - oper. item
Above RH trolley stowage:
- - Flight data recorder SDC 980-4100-DXUS 1 12,70 23828 + 0,825 |X|
Toilet compartments:
- - Toilet bucket 12201-404 (405) 2 25,60 24305 + 1,785 |X|
- - Mirror FOK D94149 2 2,98 25000 + 0,229 |X|
- - Automatic toilet waste bin HTL 30100022-20 2 0,75 24990 + 0,057 |X|
fire extinguisher
In trolley stowage (RH+LH):
- - HS trolley Driessen DLH573-009 2 23828 - oper. item
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
page |X| = in airplane when weighed
- = not in airplane when weighed
All rights reserved. Reproduction or disclosure to third parties of this
document or any part thereof, or the use of any information contained therein
for purposes other than provided for by this document is not permitted except
with prior and express written permission.
<PAGE>
REPORT/BASIC CHECKLIST
report no : E100-201/A321
[LOGO] Fokker issue date: 29 Oct. 1993 issue no: 1
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
total Index record of
no. weight arm change checking
description req. kg mm (delta) I ------------------
[ILLEGIBLE]
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Other equipment
- ---------------
- - Main wheel assy G00 5008131-4 4 162,40 17751 + 0,680 |X|
- - Main wheel tyres (Bias) G00 409K02G1 4 217,69 17751 + 0,912 |X|
- - Brake assy (carbon) G00 5008132-6 4 236,08 17751 + 0,989 |X|
- - Nose wheel assy G00 5008133 2 12,20 3745 - 1,658 |X|
- - Nose wheel tyres G00 247F02G1 2 27,40 3745 - 3,723 |X|
Cargo compartment
- -----------------
- - Separation net fwd cargo FOK D85719-401 1 2,19 8805 - 0,186 |X|
- - " " " " FOK " - " 1 2,19 11257 - 0,133 |X|
- - " " aft " FOK " - " 1 2,19 20778 + 0,075 -
- - " " " " FOK " - " 1 2,19 22236 + 0,107 -
- - Door barrier net fwd cargo door FOK D85776-401 1 2,58 8076 - 0,239 |X|
- - " " " mid " " FOK " - " 1 2,58 12062 - 0,136 |X|
- - " " " aft " " FOK " - " 1 2,58 21507 + 0,108 |X|
- - Battery 4608-1 1 41,0 7565 - 4,001 |X|
- - Battery 4608-1 1 41,0 9045 - 3,398 |X|
- - LRRA 1 Transceiver TRT ERT530 1 4,28 11541 - 0,184 |X|
- - " 2&3 Transceiver " " 2 8,56 13041 - 0,367 |X|
- - Rudder control unit FOK EARLM8504 1 1,98 11541 - 0,115 |X|
- - CVR FAD 93A100-80 1 10,50 22576 + 0,551 |X|
- - Engine vibration processor VMA 241-196-000-021 1 3,28 22576 + 0,172 |X|
- - APU controller ALS 2118802-3 1 21007 |X|
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
page |X| = in airplane when weighed
- = not in airplane when weighed
All rights reserved. Reproduction or disclosure to third parties of this
document or any part thereof, or the use of any information contained therein
for purposes other than provided for by this document is not permitted except
with prior and express written permission.
<PAGE>
REPORT/BASIC CHECKLIST
report no : E100-201/A321
[LOGO] Fokker issue date: 29 Oct. 1993 issue no: 1
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
total Index record of
no. weight arm change checking
description req. kg mm (delta) I ----------------------
[ILLEGIBLE]
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Avionics bay
Fwd. rack (from left to right
in D.O.F.):
Shelf 1:
- - Flap pos. control FOK EAFCD8518 1 3,19 5305 - 0,383 |X|
- - Maintenance control comp. CRC MCC 1000 1 6,55 5305 - 0,788 |X|
- - ILS 1 receiver BID RIA-35A 1 5,0 5305 - 0,601 |X|
- - Dig. air data computer 1 HON 4045053-912 1 5,81 5305 - 0,698 |X|
- - Flight control computer 1 CRC FCC 1000 1 11,80 5305 - 1,419 |X|
Shelf 2:
- - Dig. air data computer 2 HON 4045053-912 1 5,81 5305 - 0,698 |X|
- - Flight control computer 2 CRC FCC 1000 1 11,80 5305 - 1,419 |X|
- - Flight augmentation comp. CRC FAC 1000 1 13,30 5305 - 1,600 |X|
- - VHF com 3 transceiver BID RTA-44A 1 4,3 5305 -0,517 - Full prov. only
Shelf 3:
- - IRS 3 unit HON HG1050AD05 1 19,0 5305 - 2,285 |X|
- - IRS 1 unit HON HG1050AD05 1 19,0 5305 - 2,285 |X|
- - Stalt warning comp. FOK EASPC 8503 1 2,00 5305 - 0,241 |X|
Shelf 4:
- - IRS 2 unit HON HG1050ADO5 1 19,0 5305 - 2,285 |X|
- - ILS 2 receiver BID RIA-35A 1 5,0 5305 - 0,601 |X|
- - Weather radar transceiver BID RTA-4A 1 11,3 5305 - 1,359 |X|
Aft rack (from left to right
against D.O.F.):
Shelf 6:
- - ADF 2 receiver BID DFA-75A 1 4,0 6305 - 0,441 |X|
- - Audio management unit Gables G6938-11 1 5,20 6305 - 0,573 |X|
- - VOR 2 receiver BID RVA-36A 1 4,4 6305 - 0,485 |X|
- - GPW computer MkV SDC 965-0676-003 1 2,63 6305 - 0,290 |X|
- - DME 2 interrogator BID DMA-37A 1 5,9 6305 - 0,651 |X|
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
page |X| = in airplane when weighed
- = not in airplane when weighed
All rights reserved. Reproduction or disclosure to third parties of this
document or any part thereof, or the use of any information contained therein
for purposes other than provided for by this document is not permitted except
with prior and express written permission.
<PAGE>
REPORT/BASIC CHECKLIST
report no : E100-201/A321
[LOGO] Fokker issue date: 29 Oct. 1993 issue no: 1
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
total Index record of
no. weight arm change checking
description req. kg mm (delta) I ----------------------
[ILLEGIBLE]
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Avionics bay (cont'd)
- ------------
Shelf 6 (cont'd):
- - ATC 2 transponder BID TRA-67A 1 6,3 6305 - 0,695 |X|
- - PIP Janco 24153 1 0,3 6305 - 0,033 |X|
- - Anti skid control box GOO 6004272-4 1 2,16 6305 - 0,238 |X|
Shelf 5:
- - PIP Janco 24153 1 0,3 6305 - 0,033 |X|
- - ATC 1 transponder BID TRA-67A 1 6,3 6305 - 0,695 |X|
- - DME 1 interrogator BID DMA-37A 1 5,9 6305 - 0,651 |X|
- - Flight control computer 3 CRC FCC 1000 1 11,8 6305 - 1,301 |X|
- - VOR 1 receiver BID RVA-36A 1 4,4 6305 - 0,485 |X|
- - Emergency power supply 171BS101-1 1 2,04 6305 - 0,225 |X|
Shelf 8:
- - ACARS management unit TEL 2229385-41 1 6305 - Full prov. only
- - Passenger address amplifier CRC PAU 700 1 3,27 6305 - 0,361 |X|
- - VHF com. 2 transceiver BID RTA-44A 1 4,3 6305 - 0,474 |X|
- - Flight management computer 2 HON 4052502-953 1 14,85 6305 - 1,638 |X|
- - Prox SW Eldec 8-582-02 1 8,05 6305 - 0,868 |X|
Shelf 7:
- - Flight data acquisition unit TEL 2227000-25-B-1 1 8,5 6305 - 0,937 |X|
- - Flight management computer 1 HON 4052502-953 1 14,85 6305 - 1,638 |X|
- - ILS 3 receiver BID RIA-35A 1 5,0 6305 - 0,551 |X|
- - VHF com. 1 transceiver BID RTA-44A 1 4,3 6305 - 0,474 |X|
- - SELCAL TEAM SC 2253A 1 1,6 6305 - 0,176 -
- - ADF 1 receiver BID DFA-75A 1 4,0 6305 - 0,441 |X|
Shelf 10:
- - FWC test box FOK 1 - 6305 - - Full prov. only
- - Flight warning computer Grimes 80-0610-3-31 1 7,40 6305 -,0,816 |X|
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
page |X| = in airplane when weighed
- = not in airplane when weighed
All rights reserved. Reproduction or disclosure to third parties of this
document or any part thereof, or the use of any information contained therein
for purposes other than provided for by this document is not permitted except
with prior and express written permission.
<PAGE>
REPORT/BASIC CHECKLIST
report no : E100-201/A321
[LOGO] Fokker issue date: 29 Oct. 1993 issue no: 1
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
total Index record of
no. weight arm change checking
description req. kg mm (delta) I ----------------------
[ILLEGIBLE]
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Avionics bay (cont'd)
Shelf 9:
- - Cabin airco. control 1 Garr 2118526-4 1 3,27 6305 0,360 |X|
- - " " " 2 " " 1 3,27 6305 0,360 |X|
- - Electrical bay
Shelf 12: (Between STA 3870 and
STA 6876)
- - HF com 1 transceiver CRC HFS-700 1 12,1 4288 - 1,578 - full prov. only
- - Autobrake control box FOK EAABC8615 1 1,65 4681 - 0,209 |X|
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
page |X| = in airplane when weighed
- = not in airplane when weighed
All rights reserved. Reproduction or disclosure to third parties of this
document or any part thereof, or the use of any information contained therein
for purposes other than provided for by this document is not permitted except
with prior and express written permission.
<PAGE>
APPENDIX F
AIRCRAFT DOCUMENTS
FOKKER 100 AIRCRAFT 11321
Aircraft Documents shall include the following documents:
Quantity/
--------
Type Number
---- ------
1. Airplane Flight Manual book
(volumes 1 & 2) 1
2. Aircraft Operating Manual book 1
3. Quick Reference Handbook book 2
4. Weight and Balance Manual book 1
5. Master Minimum Equipment List book 1
6. Aircraft Maintenance Manual film 1
7. Illustrated Parts Catalogue film 1
8. Wiring Diagram Manual film 1
(parts 1, 2, & 3)
9. Trouble Shooting Systems film 1
Manual
10. Aircraft Logbook book 1
11. Engine Logbooks book 2
12. APU logbook book 1
13. Delivery Document book 1
(at delivery to Transwede)
14. Certificate of Airworthiness 1
15. Certificate of Registration 1
16. Radio Station License 1
98
<PAGE>
Aircraft Documents shall also include all logs, certificates and data, and
inspection, modification and overhaul records, relating to the Aircraft and
required to be maintained by the Air Authority and/or by the Approved
Maintenance Program. Upon Expiry Date or upon earlier termination of the
Agreement all Aircraft Documents shall be redelivered by Lessee to Lessor
complete and fully updated simultaneously with the redelivery of the Aircraft.
99
<PAGE>
APPENDIX G
FAA POWER OF ATTORNEY
Form used for Midway Closings to be Substituted
This POWER OF ATTORNEY in favor of LESSOR [HEAD LESSOR] ("Lessor")
dated ____________ 199_ from MIDWAY AIRLINES CORPORATION ("Lessee") [is
consented to by BANK ("Bank")].
RECITALS:
A. Lessor and Lessee have entered into an Aircraft Operating Lease Agreement
525 dated as of _______, 1995(the "Lease Agreement") with respect to the
Fokker 100 aircraft, serial no. ______, U.S. registration no. _______ (the
"Aircraft").
B. Capitalized terms used herein and not otherwise defined shall have the
respective meanings ascribed to such terms in the Lease Agreement.
NOW, THEREFORE, for good and valuable consideration, the adequacy of
which is hereby acknowledged, it is hereby agreed as follows:
Lessee hereby irrevocably constitutes and appoints Lessor, with full
power of substitution, for and in the name and on behalf of Lessee, as the act
and deed or otherwise of Lessee:
to direct, authorize and instruct the insurer or insurance broker
with respect to the Aircraft, as if Lessor were policy holder,
pursuant to Article 11.6 of the Lease Agreement, in order to
initiate, process and settle any insurance claim with respect to the
Aircraft, Engines or Parts;
to execute, sign, deliver, authorize and file such instruments
legally necessary for any and all actions necessary to take
possession and effect redelivery of the Aircraft, Engines or Parts
upon termination of the Lease Agreement due to an Event of Default;
to execute, sign, deliver and file all such instruments requested by
Lessor [Head Lessor] that may be required to deregister the Aircraft
from the FAA, or to terminate the Lease for the Aircraft that is
recorded at the FAA, or that may be deemed proper in or in
connection with all or any of the purposes aforesaid,
100
<PAGE>
and to appoint substitutes or agents to take any such action on its
behalf; provided, however, that such power shall not be exercisable
by or on behalf of the Lessor until an Event of Default shall have
occurred and is continuing.
Lessee hereby ratifies and confirms and agrees to ratify and confirm
any direction, authorization and instruction of Lessor [Head Lessor] taken
pursuant to this Power of Attorney.
This Power of Attorney shall expire the date one year following the
Expiry Date or earlier termination of the Lease.
IN WITNESS WHEREOF, Lessee has duly caused this Power of Attorney to
be executed on the date first set forth above.
MIDWAY AIRLINES CORPORATION
By:
-------------------------------
Name:
Title:
Consented and Agreed:
[BANK]
By:
-------------------------------
Name:
Title:
[CERTIFIED RESOLUTIONS OF LESSEE AUTHORIZING THIS
POWER OF ATTORNEY TO BE ATTACHED]
101
<PAGE>
AMENDMENT NO. 1
dated as of February 26, 1996
to
AIRCRAFT OPERATING LEASE AGREEMENT
No. 525
dated as of October 15, 1995
between
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee, as
Lessor
and
MIDWAY AIRLINES CORPORATION
as
Lessee
Aircraft: Fokker 100
Serial No./RN: 11321/N132ML
<PAGE>
THIS AMENDMENT No. 1 dated as of February 26, 1996 (this
"Amendment"), is between FIRST SECURITY BANK OF UTAH, N.A., a national banking
association existing pursuant to the laws of the United States, having its
principal place of business at 79 South Main Street, Salt Lake City, Utah
84130-0007, not in its individual capacity (except as expressly set forth in the
Lease) but solely as Owner Trustee under the Trust Agreement ("Lessor"), and
MIDWAY AIRLINES CORPORATION, a company incorporated under the laws of the State
of Delaware, having its principal place of business at 300 West Morgan Street,
Durham, North Carolina 27702 ("Lessee").
WHEREAS, Lessor and Lessee are parties to that certain Aircraft
Operating Lease Agreement No. 525, dated as of October 15, 1995, and recorded by
the Federal Aviation Administration on November 14, 1995, under conveyance
number 2A268117 (as amended hereby, the "Lease"; capitalized terms used herein
and not otherwise defined herein shall have the meanings ascribed to them in the
Lease);
WHEREAS, debis AirFinance B.V. ("debis") is the beneficial owner of
the Aircraft;
WHEREAS, Lessee is in default under the Lease by reason of its
failure to make certain Rent payments due thereunder in January and February
1996; and
WHEREAS, Lessor and Lessee desire to amend the Lease as hereinafter
set forth.
NOW THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Definitions.
(a) Section 1 of the Lease is hereby amended by deleting
sub-sections 1.10 and 1.48 thereof in their entirety and replacing them with the
following:
"1.10 Beneficiary shall mean, Stockholm Aircraft Finance II, B.V., which is (i)
a company incorporated under the laws of the Netherlands, (ii)
wholly-owned by debis and (iii) the beneficiary under the Trust Agreement,
together with its successors and permitted assigns."
"1.48 Other Aircraft Agreements shall mean all other aircraft operating lease
agreements relating to other aircraft so long as such other aircraft are
leased to Lessee by a lessor for the benefit, directly or indirectly, of
debis or any affiliate of debis. For purposes of this definition,
<PAGE>
affiliate shall mean any corporation or other entity that, directly or
indirectly, controls, is controlled by or is under common control with
debis."
(b) Section 1 of the Lease is hereby further amended by deleting
"Fokker" and "FAUSA" from the definition of Indemnitee (subsection 1.39 thereof)
and adding "debis" in their stead. In addition, the references to "Fokker" and
"FAUSA" in Section 1l.2(c)(ii) of the Lease are hereby deleted and replaced with
"debis".
2. Inspection.
Section 7 of the Lease is hereby amended by adding a new
sub-section 7.6 thereto as follows:
"7.6 Lessee hereby acknowledges that the inspection rights and rights to
information and notice pursuant to this Section 7 shall extend to debis as
well as Lessor. In addition, without in any way limiting the rights
contained elsewhere in the Lease, debis shall have the right to have
observers (who may or may not be employees of debis) on site at Lessee's
premises (provided such observers do not unreasonably interfere with
Lessee's business or operations) and, provided the recipients of any
financial and operational information of Lessee (which recipients may
include employees or other representatives of debis or any of its
affiliates, or agents, attorneys or accountants of debis or any of its
affiliates) keep strictly confidential any such information, debis shall
have the right to inspect and review any internal financial and
operational information of Lessee as debis may reasonably request
(provided such request is made to Lessee's controller or to a vice
president, senior vice president or the president of Lessee) including,
without limitation, cash flow statements, financial books and records, and
any other records relating to the operation of Lessee's fleet. Lessee
covenants that it will fully cooperate with debis regarding any inspection
of Lessee's fleet and records pursuant to the terms of the Lease."
3. Default by Lessee
Section 15 of the Lease is hereby amended as follows:
2
<PAGE>
(a) Sub-section 15.1 is hereby amended by deleting paragraph (n)
thereof in its entirety and replacing it with the following:
"(n) if an event of default (however defined) occurs under (i) any
of the Other Aircraft Agreements, (ii) any other lease
agreements between Lessee and a lessor for the benefit,
directly or indirectly, of Fokker, FAUSA, Daimler-Benz
Aerospace A.G. or any affiliate of any of them, relating to
other aircraft ("Fokker Aircraft Agreements") or (iii) any
aircraft maintenance agreement or other agreement entered into
by Lessee in lieu of Reserve Rate payments ("Maintenance
Agreements"), which event permits acceleration or termination;
or"
(b) Sub-section 15.1 is further amended by adding new paragraphs
(o), (p) and (q) thereto as follows:
"(o) if Lessee's financial performance deviates in any material
adverse way (as determined by debis in its sole, but
reasonable discretion) from the projections set forth on
Lessee's Business Plan for calendar year 1996 (attached hereto
as Exhibit A), taken as a whole, and such deviation is not the
result of a natural disaster which effectively makes it
impossible for Lessee to meet such projections; or
(p) if, prior to satisfaction of Lessee's obligation to pay
Default Payments pursuant to Section 6 of this Amendment,
Lessee shall make (i) any payment of principal or interest on
any amounts owed by Lessee to Zell/Chilmark Fund, L.P.
("Zell") or any affiliate of Zell, (ii) any redemption of, or
any dividend or distribution with respect to, any shares of
Lessee owned by Zell or any affiliate of Zell, (iii) any
prepayment of principal or interest with respect to any other
subordinated debt owed by Lessee or (iv) any redemption of, or
any dividend or other distribution with respect to, any other
shares of Lessee; or
(q) if Lessee shall fail to fulfill any of the obligations set
forth in paragraphs (c) or (d) of Section 6 of this
Amendment."
3
<PAGE>
(c) Sub-section 15.2 is hereby amended by adding "(a), (n), (q)" to
clause (i) of paragraph (b) thereof following the word "paragraphs"; it being
understood that the effect of this amendment is to include payment defaults,
cross-defaults with Other Aircraft Agreements, Fokker Aircraft Agreements and
Maintenance Agreements, and failure to fulfill any of the obligations set forth
in paragraphs (c) or (d) of Section 6 of this Amendment as events giving rise to
automatic termination of the Lease without the necessity of any service of
notice thereof upon Lessee; provided, however, that such automatic termination
shall not apply with respect to defaults of the type referred to in paragraphs
(a) or (n) of sub-section 15.1 of the Lease prior to the date hereof or for
payment defaults for Rent Dates occurring in March and April 1996, for so long
as Lessee fulfills the obligations set forth in paragraphs (c) or (d) of Section
6 of this Amendment.
4. Return of Aircraft.
Section 16 of the Lease is hereby amended by adding a new
sub-section 16.9 thereto as follows:
"16.9 Notwithstanding anything to the contrary contained in the Lease, on the
Expiry Date or upon earlier termination of the Term including, without
limitation, any termination of the Lease pursuant to Section 15 (unless a
Casualty Occurrence shall have occurred with respect to the Aircraft),
Lessee shall immediately deliver possession of the Aircraft to Lessor at
Schiphol Airport, the Netherlands (or such other location as Lessor may
require) and hereby covenants that it will not interpose any defense to
any action commenced by Lessor to regain possession of the Aircraft. The
foregoing shall apply whether or not Lessee is or shall subsequently
become a debtor in a case under Title 11, U.S.C., and in such event,
Lessee covenants that it will not oppose, and will join in, any
application by Lessor seeking to regain possession of the Aircraft."
5. Notice.
Section 19 of the Lease is hereby amended by deleting clause (2) of
paragraph (d) of sub-section 19.6 thereof in its entirety and replacing it with
the following:
4
<PAGE>
"(2) to Lessor at:
First Security Bank of Utah, N.A.
79 South Main Street
Salt Lake City, Utah 84130-0007
Tel: (801) 246-5630
Fax: (801) 246-5053
Attention: Corporate Trust Department
with a copy to debis at:
Evert van de Beekstraat 22,
NL-1118 CL Luchthaven Schiphol,
Amsterdam Airport Schiphol
Tel: 011 3120 316-1431
Fax: 011 3120 653-5419"
6. Forbearance. Execution of this Amendment shall serve as Lessor's
agreement to forebear from exercising its rights (including, without limitation,
its rights under Section 15 of the Lease) with respect to:
(a) Lessee's failure to make payments of Rent or security deposit
amounts due under the Lease prior to the date of this Amendment and for Rent
Dates occurring in March and April 1996; and
(b) Lessee's failure to make payment of Reserve Rate constituting
Engine Maintenance Accruals due under the Lease and the Other Aircraft
Agreements identified as AOLAF 135 and AOLAF 524 on account of Flight Hours
and/or Cycles operated prior to February 1, 1996;
provided, however, that Lessor's agreement to forbear shall be
effective for so long, and only so long, as Lessee otherwise complies with all
the terms of the Lease, as amended, and fulfills the obligations set forth in
paragraphs (c) and (d) of this Section 6, as follows:
(c) Lessee shall pay to Lessor the following amounts (which amounts
Lessee hereby agrees to pay):
(i) [***] on the Rent Date occurring in February 1996;
(ii) [***] on the Rent Date occurring in March 1996;
(iii) [***] on the Rent Date occurring in April 1996; and
5
<PAGE>
(iv) Amounts identified on Exhibit B to this Amendment ("Default
Payments") on the Rent Date occurring in May 1996 and for the
next succeeding forty-seven (47) Rent Dates thereafter; it
being understood that Lessee shall pay such Default Payments
together with Rent and any other amounts otherwise due
pursuant to the Lease. Lessee may satisfy its obligations to
pay the Default Payments at any time by paying the portion of
all such Default Payments which constitutes principal,
together with the portion of such Default Payments which
constitutes interest accrued and unpaid as of the date of
payment, all as reflected on Exhibit B to this Amendment.
(d) On or before March 7, 1996, Lessee shall pay all unpaid Reserve
Rate owed with respect to the Lease and Other Aircraft Agreements identified as
AOLAF 135 and 524, or shall enter into a maintenance agreement reasonably
satisfactory to debis providing for the maintenance of the engines of the
Aircraft which are the subject of the Lease and such Other Aircraft Agreements.
Execution of this Amendment shall not constitute a waiver of any Rent payment
defaults or of any other defaults which may have occurred and be continuing or
which may occur in the future. Lessor's agreement to forbear shall terminate
automatically if Lessee fails to fulfill any of the obligations set forth in
paragraphs (c) or (d) of Section 6 of this Amendment or if any Event of Default
occurs or has occurred and is continuing under the Lease (other than an Event of
Default to which this forbearance agreement set forth in Section 6 of this
Amendment applies). For so long, and only so long as Lessor's agreement to
forbear has not terminated, and provided that the obligation set forth in
paragraph (d) of Section 6 of this Amendment has been fulfilled (i) Lessee shall
be entitled to exercise its rights and privileges under Sections 5.1.2(b),
5.1.3, 7.4.1 and 13.3 of the Lease and (ii) Lessor shall be deemed to have
elected not to apply the Deposit to sums due or to become due to Lessor pursuant
to Section 1 of Appendix D of the Lease, notwithstanding the occurrence and
continuation of a Default or Event of Default under the Lease.
6
<PAGE>
7. Payments
Paragraph 4 of Exhibit D to the Lease is hereby amended by deleting
the first sentence thereof and replacing it with the following:
"All payments due hereunder shall be effected by Lessee to Lessor to
Generale Bank Nederland BV, in Amsterdam, in favor of Stockholm
Aircraft Finance II, B.V., account number 64.26.09.632, or to such
other account as debis may designate in writing, and all such
payments shall be in Dollars and in immediately available funds, and
all such payments shall be initiated adequately in advance of the
due dates to ensure that Lessor receives credit for the full amount
of such payment on the due dates."
8. Governing Law. This Amendment shall be governed by and construed
in accordance with the internal laws of the State of New York and without regard
to any conflict of law rules. This Amendment is being delivered in the State of
New York.
9. Miscellaneous. Except as specifically amended or supplemented by
this Amendment, the Lease is hereby ratified, approved, confirmed and continued
in all respects and all provisions of the Lease as heretofore amended shall
remain in full force and effect. The parties hereto acknowledge and confirm that
the Lease is intended to be a true lease and not a financing arrangement. This
Amendment may be executed in any number of counterparts, and all of such
counterparts taken together shall be deemed and constitute one and the same
instrument.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee
By: /s/ [ILLEGIBLE]
--------------------------------------
Title: Asst. Vice President
SIGNED on behalf of
MIDWAY AIRLINES CORPORATION
By:
--------------------------------------
Title:
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A.
not in its individual capacity
but solely as owner trustee
By:
--------------------------------------
Title:
SIGNED on behalf of
MIDWAY AIRLINES CORPORATION
By: /s/ Jonathan S. Waller
--------------------------------------
Title: JONATHAN S. WALKER
SENIOR VICE PRESIDENT
GENERAL COUNSEL
8
<PAGE>
[***] (6 pages omitted)
<PAGE>
AOLAF 525
AMENDMENT No. 2 AND CONSENT
THIS AMENDMENT No. 2 AND CONSENT dated as of May ___, 1996 (this
"Amendment"), is between FIRST SECURITY BANK OF UTAH, N.A., a national banking
association existing pursuant to the laws of the United States, having its
principal place of business at 79 South Main Street, Salt Lake City, Utah
84130-0007, not in its individual capacity (except as expressly set forth in the
Lease) but solely as Owner Trustee under the Trust Agreement ("Lessor"), and
MIDWAY AIRLINES CORPORATION, a company incorporated under the laws of the State
of Delaware, having its principal place of business at 300 West Morgan Street,
Durham, North Carolina 27702 ("Lessee").
WHEREAS, Lessor and Lessee are parties to that certain Aircraft
Operating Lease Agreement No. 525, dated as of October 15, 1995, and recorded by
the Federal Aviation Administration on November 14, 1995, under conveyance
number 2A268117 as amended by Amendment No. 1 thereto dated as of February 26,
1996 and recorded by the Federal Aviation Administration on April 16, 1996 under
conveyance number K08473 (as amended hereby, the "Lease"; capitalized terms used
herein and not otherwise defined herein shall have the meanings ascribed to them
in the Lease);
WHEREAS, debis AirFinance B.V. ("debis") is the beneficial owner of
the Aircraft;
WHEREAS, pursuant to the Lease, Lessee may satisfy its obligation to
pay the Engine Maintenance Accrual portion of the Reserve Rate by entering into
a Maintenance Agreement, the terms and conditions of such being subject to the
prior written consent of the Beneficiary; and
WHEREAS, Lessor and Lessee desire to amend the Lease as hereinafter
set forth and the Beneficiary desires to consent to the Agreement between
Rolls-Royce Aero Engine Services Limited and Midway Airlines Corporation
Relating to Repair and Overhaul of Rolls-Royce Tay Engines, dated May 10, 1996
(the "Approved Maintenance Agreement"), a copy of which, certified by lessee as
true and complete, is attached hereto as Exhibit A.
NOW THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Notwithstanding anything to the contrary contained in the Lease,
Lessee agrees that it shall remit to Lessor as Reserve Rate, on the date when
Reserve Rate is due under the Lease (in addition to all other amounts due and
<PAGE>
owing under the Lease), an amount equal to the difference between (i) the Engine
Maintenance Accrual due pursuant to the Lease for the preceding calendar month,
or partial calendar month, as the case may be (assuming the absence of the
Approved Maintenance Agreement), and (ii) the amount paid under the Approved
Maintenance Agreement with respect to such preceding calendar month, or partial
calendar month, as the case may be (the "Reduced Engine Maintenance Accrual").
In order to ensure Lessee's compliance with the foregoing, the Beneficiary may
request, and Lessee shall so provide, the information and calculations used in
determining the Reduced Engine Maintenance Accrual. Lessee's obligations to pay
other amounts of Reserve Rate owing under the Lease are not in any way reduced
or otherwise effected other than as hereinabove provided with respect to the
Engine Maintenance Accrual portion of Reserve Rate.
2. Lessee hereby acknowledges that, pursuant to the terms of the
Lease, an event of default by Lessee under the Approved Maintenance Agreement,
or any failure by Lessee to make any payment required under the Lease
(including, without limitation, any failure to pay the portion of Reserve Rate
which constitutes Reduced Engine Maintenance Accrual) constitutes an Event of
Default under the Lease giving rise to automatic termination of the Lease
without the necessity of any service of notice thereof upon Lessee. Lessee
further acknowledges that if the Approved Maintenance Agreement is amended in
any respect without the written consent of the Beneficiary, the consent being
given hereby by the Beneficiary to the Approved Maintenance Agreement shall be
void and of no effect, and that such event shall constitute an Event of Default
under the Lease giving rise to automatic termination of the Lease.
3. This Amendment shall be governed by and construed in accordance
with the internal laws of the State of New York and without regard to any
conflict of law rules. This Amendment is being delivered in the State of New
York.
4. Except as specifically amended or supplemented by this Amendment,
the Lease is hereby ratified, approved, confirmed and continued in all respects
and all provisions of the Lease as heretofore amended shall remain in full force
and effect. The parties hereto acknowledge and confirm that the Lease is
intended to be a true lease and not a financing arrangement. This Amendment may
be executed in any number of counterparts, and all of such counterparts taken
together shall be deemed and constitute one and the same instrument.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee
By: /s/ [ILLEGIBLE]
--------------------------------------
Title: Vice President
SIGNED on behalf of
MIDWAY AIRLINES CORPORATION
By:
--------------------------------------
Title:
MAINTENANCE AGREEMENT CONSENTED TO:
STOCKHOLM AIRCRAFT FINANCE II, B.V.
By:
--------------------------------------
Title:
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee
By:
--------------------------------------
Title:
SIGNED on behalf of
MIDWAY AIRLINES CORPORATION
By: /s/ Jonathan S. Waller
--------------------------------------
Title: JONATHAN S. WALLER
SENIOR VICE PRESIDENT
GENERAL COUNSEL
MAINTENANCE AGREEMENT CONSENTED TO:
STOCKHOLM AIRCRAFT FINANCE II, B.V.
By:
--------------------------------------
Title:
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee
By:
--------------------------------------
Title:
SIGNED on behalf of
MIDWAY AIRLINES CORPORATION
By:
--------------------------------------
Title:
MAINTENANCE AGREEMENT CONSENTED TO:
STOCKHOLM/AIRCRAFT FINANCE II, B.V.
By: /s/ [ILLEGIBLE]
--------------------------------------
Title:
3
<PAGE>
EXHIBIT A
<PAGE>
AGREEMENT
BETWEEN
ROLLS-ROYCE AERO ENGINE SERVICES LIMITED
AND
MIDWAY AIRLINES CORPORATION
RELATING TO REPAIR AND OVERHAUL OF
ROLLS-ROYCE TAY ENGINES
<PAGE>
This AGREEMENT is made this 10th day of May 1996
BETWEEN
ROLLS-ROYCE AERO ENGINE whose registered office is at Moor Lane,
SERVICES LIMITED Derby, DE24 8BJ, England on its own
behalf and as agent on behalf of
ROLLS-ROYCE plc (hereinafter called
"RRAES") of the first part,
AND
MIDWAY AIRLINES CORPORATION whose registered office is 300 West
Morgan Street, Suite 1200 Durham, North
Carolina, USA, 27701 (hereinafter called
"MIDWAY") of the second part.
WHEREAS
A. MIDWAY has acquired certain ROLLS-ROYCE TAY engines for use by MIDWAY in
Fokker 100 aircraft manufactured by Fokker BV.
B. ROLLS-ROYCE and MIDWAY have entered into a Warranty Agreement reference
CE117 incorporated in Fleet Support Agreement reference ISE dated
__________ which is hereinafter called the "WARRANTY".
C. MIDWAY desires that RRAES shall undertake certain WORK on TAY engines used
in the operation of its aircraft.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
<PAGE>
INDEX
-----
RECITALS
- --------
Clause 1 Definitions
Clause 2 Exclusion Of Other Terms and Previous Understandings
Clause 3 Subject of Contracts
Clause 4 Delivery
Clause 5 Standard
Clause 5 Charges
Clause 7 Payment
Clause 8 Turn Round Time and Delay in Delivery
Clause 9 General Provisions
Clause 10 Warranty and Liability
Clause 11 Patents
Clause 12 Additional Levies
Clause 13 Assignment
Clause 14 Termination
Clause 15 Amendment
Clause 16 Conflict
Clause 17 Notices
Clause 18 Headings
Clause 19 Survival
Clause 20 Law
Appendix 'A' Description and List of Engines
Appendix 'B' Planned Operating Parameters
Appendix 'C' Aircraft Lease Periods
<PAGE>
Clause 1 DEFINITIONS
In this AGREEMENT unless the context otherwise requires:
1.1 "ENGINES" shall mean all the ROLLS-ROYCE engines listed and
described in Appendix 'A' to this AGREEMENT.
1.2 "PART" shall mean any part of an ENGINE acquired from ROLLS-ROYCE or
from a source approved by ROLLS-ROYCE.
1.3 "SUPPLIES" shall mean ENGINES, PARTS and any other items of
associated equipment delivered to RRAES by MIDWAY.
1.4 "RUNNING TIME" shall mean the number of hours flown by an ENGINE as
logged under the standards and procedures employed by MIDWAY at the
date of this AGREEMENT and acceptable to the Federal Aviation
Authority.
1.5 "TAKE-OFFS" shall mean the number of take-offs by an ENGINE as
logged under the standards and procedures employed by MIDWAY at the
date of this AGREEMENT and acceptable to the Federal Aviation
Authority.
1.6 "FLIGHT CYCLE" shall mean one operation of an ENGINE to achieve one
aircraft take-off and subsequent landing.
1.7 "ENGINE MANAGEMENT PROGRAMME" shall mean Midway's approved Engine
Management Programme which may be amended from time to time by
Midway in accordance with all applicable laws and regulations. This
programme will define the Engineering responsibilities and
practices.
1.8 "SCHEDULED OVERHAUL" shall mean the WORK required in an Overhaul
Base following the removal of an ENGINE, PART or assembly of PARTS
to comply with the ENGINE MANAGEMENT PROGRAMME and such other WORK
as may then be necessary to enable such ENGINE, PART or assembly of
PARTS to be released for further operation in service.
1.9 "UNSCHEDULED OVERHAUL" shall mean work other than SCHEDULED OVERHAUL
which is required when an ENGINE, PART or assembly of PARTS has
become unserviceable and which enables such ENGINE, PART or assembly
of PARTS to be released for further operation in service.
1.10 "OVERHAUL" shall mean SCHEDULED OVERHAUL or UNSCHEDULED OVERHAUL as
the case may be.
<PAGE>
Clause 1 DEFINITIONS (Continued)
1.11 "REPAIR" shall mean work other than OVERHAUL which is required when
an ENGINE, PART or assembly of PARTS has become unserviceable and
which is necessary to render the ENGINE, PART or assembly of PARTS
serviceable such that it can continue in service.
1.12 "WORK" shall mean OVERHAUL, REPAIR or any other work in respect of
which in each case RRAES accepts orders from MIDWAY pursuant to this
Agreement.
1.13 "OVERHAUL BASE" shall mean the Overhaul Base stipulated by RRAES
from time to time during the period of this AGREEMENT.
1.14 "AIRCRAFT LEASE PERIOD" shall mean the period of lease of each
aircraft as detailed in Appendix 'C'.
Clause 2 EXCLUSION OF OTHER TERMS AND PREVIOUS UNDERSTANDINGS
2.1 This AGREEMENT contains the only provisions governing REPAIR or
OVERHAUL of SUPPLIES and shall apply to the exclusion of any other
provisions on or attached to or otherwise forming part of any order
form of MIDWAY or any acknowledgment or acceptance by RRAES or of
any other document which may be issued by either party relating to
REPAIR or OVERHAUL of SUPPLIES.
2.2 The parties have negotiated this AGREEMENT on the basis that its
provisions represent their entire agreement relating to REPAIR or
OVERHAUL by RRAES of SUPPLIES. This AGREEMENT shall supercede all
representations, agreements, statements and understandings made
prior to the execution of this AGREEMENT whether orally or in
writing relating to REPAIR or OVERHAUL by RRAES of SUPPLIES. The
parties further agree that neither of them has placed any reliance
whatsoever on any such representations, agreements, statements or
understandings other than those expressly incorporated in this
AGREEMENT.
<PAGE>
Clause 3 SUBJECT OF THE CONTRACT
3.1 The parties hereto agree that RRAES will carry out REPAIR or
OVERHAUL described in clauses 6.2.1 through 6.2.5 to all ENGINES and
PARTS which develop a requirement for OVERHAUL or an OVERHAUL BASE
REPAIR during the AIRCRAFT LEASE PERIOD and which are delivered to
the OVERHAUL BASE no later than 30 (thirty) days after expiry of
that period.
Clause 4 DELIVERY
4.1 MIDWAY will deliver ENGINES and PARTS requiring REPAIR or OVERHAUL
to the OVERHAUL BASE at its own expense.
4.2 MIDWAY will not later than the time of delivery of ENGINES and PARTS
pursuant to Sub-clause 4.1 above, also deliver to RRAES the
completed ENGINE Log Book (or such other Log Book as may be
applicable).
4.3 MIDWAY will notify RRAES in writing at least 1 (one) week before the
time for re-delivery of its instructions as to the marking and
shipping of the SUPPLIES after notification from RRAES of scheduled
redelivery.
4.4 Following WORK, RRAES will re-deliver SUPPLIES to MIDWAY fas
(Incoterms 1990) Great Britain port or any other destination in
Great Britain as specified by MIDWAY.
4.5 A sufficient number of packing cases, stands and transportation
parts for use in transporting SUPPLIES to and from the OVERHAUL BASE
shall be procured and maintained in usable condition by MIDWAY at
MIDWAY'S expense.
Clause 5 STANDARD
5.1 Unless otherwise mutually agreed, RRAES will carry out WORK on
SUPPLIES in accordance with the ENGINE MANAGEMENT PROGRAMME in a
professional and workmanlike manner.
5.2 Unless otherwise agreed, RRAES will carry out REPAIRS or OVERHAULS
to the modification standard generally recommended by ROLLS-ROYCE
for ENGINES of the same type and model as the ENGINES.
<PAGE>
Clause 5 STANDARD (Continued)
5.3 MIDWAY shall have the right to appoint a representative at the
OVERHAUL BASE to consult with RRAES representatives with respect to
technical matters arising in the course of the WORK to be performed
by RRAES hereunder.
5.4 In the event that ENGINES are delivered to RRAES by MIDWAY which do
not contain each PART described in the Engine Receipt List attached
hereto as Part 1, Section 1 in Sub-clause 1.1 (Appendix 'A') above,
then RRAES will advise MIDWAY of those missing PARTS exceeding US
Dollars 500 at the then current RRAES Catalogue value and unless
otherwise instructed by MIDWAY, RRAES reserves the right to replace
any missing PARTS and shall be entitled to charge MIDWAY for the
same at the RRAES commercial prices and rates current at the date of
presentation of RRAES' invoice.
5.5 Any PARTS incorporated in the course of REPAIR or OVERHAUL pursuant
to this AGREEMENT shall be deemed to have been sold to the owner of
the SUPPLIES, and title to and risk of loss of and damage to such
PARTS subject to the terms of Clause 10 below, shall pass to the
owner of the SUPPLIES upon re-delivery of the SUPPLIES by RRAES to
MIDWAY pursuant to Sub-clause 4.4 above.
5.6 RRAES reserves the right at its sole discretion to fit new or
repaired replacement PARTS in the course of REPAIR or OVERHAUL
pursuant to this AGREEMENT at no additional cost to MIDWAY unless
pursuant to Clause 5.4 above. Such new or replacement PARTS to be in
as good operating condition, have substantially similar hours
available until the next SCHEDULED OVERHAUL and have the same
interchangeable modification standard. Title to and risk of loss or
damage to any PARTS so replaced whether scrap or repairable shall
pass to RRAES upon removal from the ENGINE or from the assembly of
PARTS.
5.7 The REPAIR or OVERHAUL of SUPPLIES shall be deemed to have been
accepted by MIDWAY on its signature of the relevant Release
Note/Approved Certificate of Inspection. Such acceptance shall not
be deemed a waiver of any rights or remedies of MIDWAY including
without limitation any claim for warranty under Clause 10 hereof
<PAGE>
Clause 6 CHARGES
6.1 In respect of RUNNING TIME and TAKE-OFFS of the ENGINES during the
period of this AGREEMENT, MIDWAY shall pay to RRAES: (as adjusted in
accordance with the provisions of sub-clause 6.6) multiplied by the
RUNNING TIME of the ENGINES.
6.1.1 an amount equal to [***] Dollars for the period
01 September 1995 to 31 August 1997 (24 payments)
6.1.2 an amount equal to [***] Dollars for the period
01 September 1997 to 31 May 1999 (21 payments)
6.2 The Basic Charges under clause 6.1 above are in consideration of
RRAES undertaking to carry out:
6.2.1 SCHEDULED OVERHAULS, and
6.2.2 REPAIRS and UNSCHEDULED OVERHAULS arising from failures of
ENGINES and PARTS caused by the breakdown or deterioration of
the ENGINES or PARTS due to defects in design, material or
workmanship in the manufacture, REPAIR or OVERHAUL of the
ENGINE or PART, and;
6.2.3 REPAIRS and UNSCHEDULED OVERHAULS arising from failures of
ENGINES and PARTS caused by the breakdown or deterioration of
the ENGINES or PARTS due to foreign object damage.
6.2.4 REPAIRS arising from the introduction of mandatory
modifications required by RRAES and/or airworthiness
directives issued by any governmental authority.
6.2.5 REPAIRS and OVERHAULS arising from ENGINE removals generally
recommended by ROLLS-ROYCE with respect to the same type and
model of ENGINE as the ENGINES.
6.3 MIDWAY shall pay RRAES at the RRAES normal commercial rates current
at the date of presentation of RRAES invoice for REPAIRS and
UNSCHEDULED OVERHAULS arising from failures of ENGINES and PARTS due
to causes outside the reasonable control of RRAES including but not
limited to failures of ENGINES and PARTS, which:
6.3.1 have been caused by MIDWAY's failure to operate an ENGINE in
accordance with the procedures laid down in Appendix 'D' to
the WARRANTY, or
6.3.2 have been caused by misuse, negligence, improper operation or
failures due to negligent foreign object damage.
<PAGE>
Clause 6 CHARGES (Continued)
6.3.3 have been caused by MIDWAY failure to properly store, install,
maintain, utilise or pack for transport such ENGINE and/or
PART in accordance with the then current RRAES written
recommendations, or
6.3.4 have been caused by the primary breakdown or deterioration of
any constituent or component which was not acquired by MIDWAY
from RRAES or through channels specifically approved in
writing by ROLLS-ROYCE, unless such constituent or component
PART was installed by RRAES.
6.4 With the exception of the obligation provided for in Clause 10.5,
RRAES shall not be liable for any expenses, costs or liabilities
sustained in connection with the removal of an ENGINE or PART from,
or the replacement in an aircraft or the removal of a PART from, or
the replacement in an ENGINE other than those sustained by RRAES in
carrying out REPAIRS and OVERHAULS pursuant to this AGREEMENT at the
OVERHAUL BASE.
6.5 In respect of PARTS supplied pursuant to sub-clause 5.4 above,
MIDWAY shall pay RRAES at the RRAES commercial prices and rates
current at the installation of such PARTS.
6.6 The Basic Charges shown in sub-clause 6.1 are based on 1995 values
and will be subject to annual variation prospectively on 01
September 1996 and each 01 September thereafter in accordance with
the formula:
C = Co(0.35L +0.65P)
Lo Po
Where C = The charge per hour of RUNNING TIME or the charge per
TAKE-OFF as the case may be.
Co = Basic charge per hour of RUNNING TIME or the basic
charge per TAKE-OFF as the case may be.
Lo = All employees: By Industry for Mechanical Engineering
(Table 5.3) "Index Number of Average Earnings" published
by the British Government for the month of February
1995.
L = The corresponding Index Number published for the month
of February preceding the year for which the adjustment
is to be made.
<PAGE>
6.6 (Continued)
P = The Index of Rolls-Royce Tay Parts Prices current on 01
September for the year for which the adjustment is to be
made relative to the Base Prices as at 01 September
1995.
Po = The index relative to the Base Level of Rolls-Royce Tay
Parts as of 01 September 1995, ie 100.
If the indices herein specified be discontinued or should the basis
of their calculations be modified proper and substantially
equivalent indices shall be substituted by mutual agreement of the
parties.
6.7 It is understood that the charges specified in sub-clause 6.1 above
have been calculated with regard to the overall operation of the
ENGINES by MIDWAY as detailed in Appendix 'B'.
In the event that MIDWAY should take any action or any event should
occur which is reasonably likely to materially change the overall
operation of the ENGINES such that the basis upon which such charges
were calculated no longer remains the same, including without
limitation the sale or other disposition of any of the ENGINES or
the use of the ENGINES on routes other than as described in Appendix
'B', then RRAES may at its discretion reasonably revise the charges
specified in sub-clause 6.1 in accordance with its customary
standards.
Clause 7 PAYMENT
7.1 Within ten days of the end of each month of operation of the
ENGINES, MIDWAY will supply to RRAES a certified statement of actual
RUNNING TIME and TAKE-OFFS by ENGINE serial number for the previous
month.
7.2 Payment of charges pursuant to clause 6.1:
7.2.1 shall be made in US Dollars within 14 days of the end of the
month to which the charges apply and for any amount due
pursuant to clause 6.3 or 6.5 within 14 days of redelivery of
the ENGINE or PART concerned.
<PAGE>
Clause 7 PAYMENT (Continued)
7.2.2 which became due prior to signature of this AGREEMENT shall be
made on 17 May 1996, subject to the deduction of an amount
equal to the engine maintenance reserve paid by Midway to the
aircraft lessors at that date.
7.3 Subject to Clause 12 below, MIDWAY undertakes that RRAES shall
receive in the United Kingdom, the full amount of payments falling
due under this AGREEMENT without any withholding or deduction
whatsoever.
7.4 All payments under clause 7.3 above shall be made by telegraphic
transfer to the following address:
National Westminster Bank plc
Overseas Branch
LONDON
for telephone credit to:
Rolls-Royce CD Account Number
140-2-00772224
at 15 Bishopsgate Office
Clause 8 TURN ROUND TIME AND DELAY IN DELIVERY
8.1 Subject to sub-clause 82 below and provided MIDWAY delivers ENGINES
and if the WORK is to be performed on a PART, then such PART to the
OVERHAUL BASE for WORK at a reasonably consistent rate, RRAES will
carry out WORK in accordance with the following turn round times
which will commence when the ENGINE or PART reaches the OVERHAUL
BASE and which will end when such ENGINE or PART is available fully
prepared for despatch ex-works at the OVERHAUL BASE.
8.1.1 ENGINES returned for REPAIR or OVERHAUL not requiring defect
investigation - 8 (eight) weeks.
8.1.2 ENGINES returned for REPAIR or OVERHAUL due to unusual
failures requiring defect investigation or life development
purposes - 10 (ten) weeks.
8.1.3 ENGINES returned for REPAIR not requiring disassembly of any
MODULE - 4 (four) weeks.
8.1.4 PARTS returned for REPAIR or OVERHAUL - to be quoted by RRAES
on request.
<PAGE>
Clause 8 TURN ROUND TIME AND DELAY IN DELIVERY (Continued)
8.2 In the event that the actual turn round time in respect of any
ENGINE exceeds the turn round time agreed pursuant to Sub-clause 8.1
above (as such period may be extended pursuant to Sub-clause 8.3
below) and MIDWAY is unable to operate an aircraft due to such
delay, RRAES will either provide a lease engine subject to
availability and waive any daily rental charges or be responsible
for charges incurred by MIDWAY for the daily rental of a lease
engine until such times as such delayed ENGINE is returned to
MIDWAY. Such responsibility for charges incurred by MIDWAY will not
exceed those generally charged by Rolls-Royce Leasing Limited,
provided that MIDWAY proves that it has suffered such damage and
provided that MIDWAY makes claims hereunder within three (3) months
after redelivery.
8.3 If RRAES is hindered or prevented from carrying out WORK or
re-delivering any of the SUPPLIES within the time for re-delivery
specified in Sub-clause 8.1 above by reason of:
8.3.1 any cause beyond the reasonable control of RRAES, or
8.3.2 fires or industrial disputes or introduction of mandatory
modifications,
the time for re-delivery shall be extended by a period equal to the
period during which the WORK or re-delivery shall have been so
hindered or prevented and provided RRAES uses its best efforts to
promptly complete the WORK, RRAES shall be under no liability
whatsoever in respect of such delay.
Clause 9 GENERAL PROVISIONS
9.1 MIDWAY shall keep records of ENGINE operation, maintenance, RUNNING
TIME and TAKE-OFFS and shall permit RRAES to inspect such records.
MIDWAY shall submit to RRAES each month a certified statement of
RUNNING TIME and TAKE-OFFS listed by ENGINE serial number in respect
of the previous month.
9.2 If any SUPPLIES delivered to RRAES are lost, destroyed or damaged
during the time between such delivery and return by RRAES to MIDWAY
then RRAES will either:
9.2.1 repair such damage free of charge, or
9.2.2 pay to MIDWAY the value of such SUPPLIES which has been agreed
between RRAES and MIDWAY provided that in the absence of
agreement the liability of RRAES shall not exceed the
original RRAES sale price of the SUPPLIES.
<PAGE>
Clause 9 GENERAL PROVISIONS
9.2 (Continued)
provided always that RRAES will at MIDWAY'S request use its best
endeavours to provide an adequate replacement for any such SUPPLIES
lost or destroyed. In the event that a replacement ENGINE is
provided, such ENGINE shall be substituted for the ENGINE lost or
destroyed and Appendix 'A' hereto shall be amended accordingly.
9.3 MIDWAY shall operate the ENGINES in accordance with the Flexible
Take-off Thrust Procedures as recommended by Fokker BV.
Clause 10 WARRANTY AND LIABILITY
10.1 Subject to sub-clause 10.2 below in respect of all PARTS
incorporated in the course of OVERHAUL or REPAIR pursuant to this or
any other AGREEMENT or incorporate as spares in service, the
WARRANTY shall apply subject to all the provisions contained
therein.
10.2 MIDWAY shall not be entitled to receive any benefits whatsoever
whether by way of repair, replacement, parts cost allowance, labour
charges or otherwise under the WARRANTY in relation to SCHEDULED
OVERHAULS and any failures of ENGINES or PARTS which are covered by
the charges under sub-clause 6.1 above and are specified in
sub-clause 6.2 above, but save as expressly provided above the
WARRANTY shall remain in full force and effect.
10.3 MIDWAY accepts that the express benefits provided to MIDWAY by
virtue of the charges under sub-clause 6.1 above, together with the
express remedies provided to MIDWAY in respect of the SUPPLIES in
accordance with this AGREEMENT and WARRANTY represent the entire
responsibility and liability of RRAES to MIDWAY in respect of all
terms, conditions and warranties express or implied whether
statutory or otherwise and any other obligations and liabilities
whatsoever of RRAES relating to the OVERHAUL and REPAIR of SUPPLIES
or any other goods and services to be supplied pursuant to this
AGREEMENT.
<PAGE>
Clause 10 WARRANTY AND LIABILITY ( Continued)
10.4 The following Notional Warranty benefits will be applied for the
purposes of sub-clause 6.1 hereof:
10.4.1 In respect of all PARTS incorporated in the course of WORK
pursuant to this AGREEMENT, the WARRANTY shall apply subject
to all the provisions contained therein.
10.4.2 Subject to the 'Governing Conditions' section of the
WARRANTY, if it is shown to the reasonable satisfaction of
RRAES that before the expiration of twelve months from the
date of redelivery or within six months or 1,500 hours flown
from the date of installation of an ENGINE or PART into an
aircraft, whichever is the sooner, a defect, deficiency,
failure, malfunction or failure to function shall have become
apparent in an ENGINE or PART due in all or in part to the
use by RRAES of faulty workmanship during the last REPAIR or
OVERHAUL then RRAES shall REPAIR such ENGINE OR part and
grant MIDWAY a 100% credit against the REPAIR costs.
10.5 In the event of the valid WARRANTY claim, RRAES will be responsible
for reasonable charges incurred by MIDWAY for removal, installation
and transportation from and to MIDWAY'S base in Raleigh, North
Carolina, USA for ENGINES removed pursuant to clause 10.4 above.
Clause 11 PATENTS
11.1 Subject to the conditions set out in the Clause 11, RRAES shall
indemnify MIDWAY against any claim that the use by MIDWAY of any
PARTS supplied hereunder infringes any patent, design or model duly
granted or registered provided, however, that RRAES shall not be
liable to MIDWAY for any consequential damages or any loss of use of
such PARTS or of the ENGINE or aircraft in which such PARTS may be
incorporated arising as a result directly or indirectly of any such
claim.
11.2 MIDWAY will give immediate notice in writing to RRAES of any such
claim whereupon RRAES shall have the right at its own expenses to
assume the defence of or to dispose of or to settle such claim in
its sole discretion and MIDWAY will give RRAES all reasonable
assistance and will not by any act or omission do anything which
directly or indirectly prejudice RRAES in this connection.
<PAGE>
Clause 11 PATENTS (Continued)
11.3 RRAES shall have the right to substitute for any allegedly
infringing PARTS substantially equivalent non-infringing PARTS.
11.4 The indemnity contained in Sub-clause 11.1 above shall not apply to
and RRAES shall have no liability in respect of claims for
infringement in respect of:
11.4.1 PARTS manufactured to the specific design instructions of
MIDWAY, or
11.4.2 PARTS not of RRAES design but RRAES shall, in the event of
any claim for infringement, pass on to MIDWAY so far as it
has the right to do so the benefits of any indemnity given to
RRAES by the designer, manufacturer or supplier of such
PARTS, or
11.4.3 the manner or method in which any of the PARTS is installed
in the aircraft, or
11.4.4 any combination of any of the PARTS with any item or items
other than PARTS.
Clause 12 ADDITIONAL LEVIES
12.1 Subject to Sub-clause 12.2 below, RRAES shall pay all imposts,
duties, fees, taxes and other like charges levied by the United
Kingdom Government or any agency thereof in connection with the
OVERHAUL or REPAIR of ENGINES and PARTS prior to their re-delivery.
12.2 MIDWAY shall pay all other imposts, duties, fees, taxes and other
like charges levied by the United States of America or any
subdivision thereof.
Clause 13 ASSIGNMENT
Neither party may assign any of its rights or obligations hereunder
without the written consent of the other party except that:
13.1 RRAES may assign its rights to receive money hereunder and
13.2 RRAES reserves the right, in its discretion, to sub-contract any
part of the WORK required to be performed by it hereunder.
<PAGE>
Clause 14 TERMINATION
If MIDWAY makes any agreement with creditors compounding debts, enters
into liquidation whether compulsory or voluntary (otherwise than for the
purpose of amalgamation or re-construction) becomes insolvent, suffers a
receiver of the whole or part of its assets to be appointed, or commits a
breach of any of its obligations under this AGREEMENT (provided that,
except in the case of breach in respect of payment obligations, MIDWAY
shall be allowed 30 (thirty) days in which to remedy such breach) RRAES
shall have the right, without prejudice to its other rights or remedies:
14.1 to stop any REPAIR or OVERHAUL already commenced and to refuse to
commence any further REPAIR or OVERHAUL, and
14.2 to revise the charges under Sub-clause 6.1 to take account of any
cessation or change in the overall operation of the ENGINES
resulting from any of the events covered by this Clause 14, and
14.3 to declare and require that notwithstanding Clause 7 above, all
amounts due on the date of termination referred to in Sub-clause 6.1
shall become immediately due and payable.
Clause 15 AMENDMENT
This AGREEMENT shall not be amended in any way other than by agreement in
writing executed by the parties hereto after the date of this AGREEMENT,
which is expressly stated to amend this AGREEMENT.
Clause 16 CONFLICT
In the event of any conflict or discrepancy between the Appendices forming
part of this AGREEMENT and any other part of this AGREEMENT, than the
latter shall prevail.
<PAGE>
Clause 17 NOTICES
Any notice to be served pursuant to this AGREEMENT is to be sent by
registered post or by telex:
In the case of RRAES to:
Rolls-Royce Aero Engine Services Limited
Repair and Overhaul Manager - Spey and Tay
EAST KILBRIDE
Glasgow G74 4PY
Scotland
or such other place of business as may be notified in writing
by RRAES to MIDWAY from time to time.
In this case of MIDWAY to:
Midway Airlines Corporation
300 West Morgan Street
Suite 1100
DURHAM
North Carolina USA 27701
for the attention of Vice President Maintenance
or such other place of business as may be notified in writing
by MIDWAY to RRAES from time to time.
Clause 18 HEADINGS
The clause 'Headings' and the Index do not form part of this AGREEMENT and
shall not affect the interpretation of this AGREEMENT.
Clause 19 SURVIVAL
The provisions of Clauses 10, 15, 20 and 21 hereof shall survive and
continue to have effect after termination for any reason whatsoever of
this AGREEMENT or after this AGREEMENT becomes impossible of performance
or is otherwise frustrated.
Clause 20 LAW
This AGREEMENT shall be subject to any interpreted and construed in
accordance with the Laws of England.
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this AGREEMENT to be entered
into on the day and year first before written.
For ROLLS-ROYCE AERO ENGINE /s/ [ILLEGIBLE] Marketing Manager
SERVICES LIMITED ----------------------------------------
In the presence of /s/ [ILLEGIBLE] Vice President Marketing
----------------------------------------
10 May 1996
For MIDWAY AIRLINES CORPORATION /s/ Jonathan S. Waller
----------------------------------------
JONATHAN S. WALLER
SENIOR VICE PRESIDENT
GENERAL COUNSEL
In the presence of /s/ Thomas Duffy, Jr.
----------------------------------------
THOMAS DUFFY, JR.
<PAGE>
APPENDIX 'A'
DESCRIPTION AND LIST OF THE ENGINES
<PAGE>
APPENDIX 'A'
1. LIST OF ENGINES
The following RRAES Tay Mk 650-15 ENGINES serially numbered:
17288
17289
17290
17291
17650
17651
17667
17668
A. DESCRIPTION OF ENGINES
Rolls-Royce Tay Mk 650-15 ENGINES
Description: Turbofan Engine incorporating a single fan and a three stage
intermediate compressor driven by a three stage turbine, a
twelve stage high pressure compressor driven by a two stage
turbine, and a turbo annular split combustion chamber
containing ten straight flow flame tubes and an internal
mixer unit.
MODULES
Each Engine comprises the following modules:
01 LP compressor
02 IP compressor
03 HP compressor
04 Combustion assembly and HP turbine
05 LP turbine
06 High speed gearbox
07 Intermediate casing
Together with these items the definitive basic specification includes the
following:
<PAGE>
ENGINE RECEIPT LIST
TAY ENGINE
PART 1 SECTION 1
Item
Fig Number Description Qty ATA Ref
- --- ------ ----------- --- -------
1 1 AFCR assembly 1 75-32-02
1 2 TCPL phial assembly 1 75-32-40
1 3 Micro switch and actuator 1 36-11-01
1 4 12th stage BV micro switch housing assy 1 75-32-33
1 5 12th stage air off-take cover 1 72-71-01
1 6 7th stage air off-take cover 1 72-71-01
1 7 Fuel temp transmitter 1 77-42-02
1 8 Oil cooler case assembly 1 79-22-01
1 9 Oil temperature transmitter 1 77-47-02
1 10 HP filter housing assembly 1 79-21-01
1 11 LP FWS assembly 1 73-34-01
1 12 Fuel filter assembly 1 73-11-03
1 13 LP tacho generator 1 77-43-01
2 14 Throttle relay lever transmitter 1 76-11-02
2 15 Fuel flow regulator 1 73-21-01
2 16 LP governor assembly 1 73-21-02
2 17 HP fuel shut-off valve assembly 1 73-11-07
2 18 AFC rpm signal transmitter assembly 1 75-32-20
2 19 Fuel diff pressure switch 1 77-42-03
2 20 HP fuel pump 1 73-11-05
2 21 Oil tank assembly 1 79-10-01
2 22 Oil tank level indicator 1 79-10-01
2 23 LP warning switch 1 79-32-01
2 24 Oil pressure trans assembly 1 77-47-01
2 25 Ejector pump unit 1 73-11-01
2 26 Fuel drain tank collector assembly 1 71-71-01
2 27 IDG surface oil cooler 1 24-13-01
2 28 Thermocouple terminal 1 77-45-03
2 29 Cooling air outlet switch assembly 1 75-21-02
2 30 Oil diff pressure switch 1 77-47-02
2 31 Oil diff pressure switch housing 1 77-47-02
2 32 Oil pump assembly 1 72-61-30
2 33 HP tacho generator 1 77-43-01
2 34 LP fuel pump assembly 1 73-11-04
2 35 Fuel inlet tube to LP fuel pump clamp assy 1 73-21-06
2 36 Fuel solenoid valve assembly 1 73-21-06
2 39 Engine rating, ID plug 1 72-71-03
2 40 Electrical harness 1 71-50-01
<PAGE>
APPENDIX 'B'
PLANNED OPERATING PARAMETERS
<PAGE>
PLANNED OPERATING PARAMETERS
Fleet Utilisation: A minimum of 92,000 FLIGHT HOURS in
the aggregate for all ENGINES during
the effective period of the AGREEMENT.
Stage Length: Average (take-off to touch down) of
not less than 1.30 hours.
Environment: East Coast and Mid-West North
America for 90% of FLIGHT HOURS of the
ENGINES.
<PAGE>
APPENDIX 'C'
AIRCRAFT LEASE PERIODS
<PAGE>
AIRCRAFT LEASE PERIODS
Aircraft Designation Period of Lease
- -------------------- ---------------
MSN 13329 24 August 1995 to 22 March 1999
MSN 11323 03 October 1995 to 30 November 1998
MSN 11321 13 November 1995 to 31 October 1998
MSN 11330 20 December 1995 to 03 May 1999
<PAGE>
EXHIBIT A
[Intentionally omitted for FAA filing purposes.]
<PAGE>
525
AMENDMENT NO. 3
dated as of January 31, 1997
to
AIRCRAFT OPERATING LEASE AGREEMENT
NO. 525
dated as of October 15, 1995
between
FIRST SECURITY BANK, N.A., formerly known as
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee, as
Lessor
and
MIDWAY AIRLINES CORPORATION, as
Lessee
Aircraft: Fokker 100
Serial No./RN: 11321/N132ML
<PAGE>
525
THIS AMENDMENT NO 3 dated as of January 31, 1997 (this "Amendment"),
is between FIRST SECURITY BANK, N.A., formerly known as First Security Bank of
Utah, N.A., a national banking association existing pursuant to the laws of the
United States, having its principal place of business at 79 South Main Street,
Salt Lake City, Utah 84130-0007, not in its individual capacity (except as
expressly set forth in the Lease) but solely as Owner Trustee under the Trust
Agreement ("Lessor"), and MIDWAY AIRLINES CORPORATION, a company incorporated
under the laws of the State of Delaware, having its principal place of business
at 300 West Morgan Street, Durham, North Carolina 27701 ("Lessee").
WHEREAS, Lessor and Lessee are parties to that certain Aircraft
Operating Lease Agreement No. 525, dated as of October 15, 1995 (as amended from
time to time, the "Lease"; capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the Lease);
WHEREAS, Lessor and Lessee entered into Amendment No. 1 to the
Lease, dated as of February 26, 1996 ("Amendment No. 1") and entered into
Amendment No. 2 to the Lease, dated May, 1996 ("Amendment No. 2");
WHEREAS, debis AirFinance B.V. ("debis AF") is the beneficial owner
of the Aircraft;
WHEREAS, debis AF, Lessee, and Lessor entered into a Deferral
Agreement dated as of October 25, 1996 ("Deferral Agreement"), which provided
for the deferral of certain payments due under the Lease, and amended the Lease
in certain other respects;
WHEREAS, debis AF and Lessee entered into an Amendment to Deferral
Agreements dated as of December 30, 1996, which modified the Deferral Agreement
in certain respects (the "Amendment to Deferral Agreements");
WHEREAS, Lessee has entered into an Agreement and Plan of Merger
dated as of January 17, 1997 (as amended, the "Merger Agreement") with
GoodAero, Inc., a Delaware corporation ("GoodAero") and Zell/Chilmark Fund,
L.P., a Delaware limited partnership, whereby it is proposed that GoodAero will
be merged into Lessee to effect a recapitalization of Lessee (the "Merger"),
subject to certain conditions precedent having been satisfied; and
WHEREAS, Lessor and Lessee desire to amend the Lease to become
effective upon the consummation of the Merger and to enter into further
agreements as hereinafter set forth.
NOW THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Amendment of Lease. The Lease is hereby amended as follows:
<PAGE>
525
(a) Section 1 of the Lease is amended by eliminating the
period at the end of Subsection 1.25 thereof, and by inserting in lieu thereof
the following clause:
"or such earlier date as may be specified by Lessor pursuant
to notice given in accordance with, and subject to the terms
of Section 16.10 hereof."
(b) Section 1.48 of the Lease is amended by deleting the
period at the end of the first sentence and by inserting the following in lieu
thereof: "or any successor or assign thereof."
(c) Section 6.4 of the Lease is amended as follows: (a) by
deleting subsection (i) thereof in its entirety and by inserting in lieu thereof
the following: "(i) any financial reports or projections supplied to the
majority shareholder of Lessee"; and (b) by deleting the words "upon Lessor
requesting the same" from subsection (ii) thereof.
(d) Section 11.1(a) of the Lease is amended by deleting the
period at the end thereof and by inserting the following clause:
provided, however, that the deductible may be $500,000 (Dollars Five
Hundred Thousand) for each accident, but only if Lessee procures
and maintains in favor of debis AirFinance B.V. for the benefit of
the Beneficiary and/or the Lessor under each of the Leases
identified on Schedule 16.10 hereof (as those terms are defined
therein) an irrevocable letter of credit (the "Letter of Credit") in
the face amount of $800,000 (Dollars Eight Hundred Thousand) issued
by Wachovia Bank or another banking institution reasonably
acceptable to debis AirFinance B.V. and in a form reasonably
acceptable to debis AirFinance B.V. containing the terms set forth
in Schedule 11.1(a).1 of this Lease; provided, however, that Lessee
may reduce the amount of the Letter of Credit to $400,000 in any
year where Lessee's audited financial statements for the prior year
show that Lessee had net income (as determined in accordance with
generally accepted accounting principles ("Net Income")) greater
than the amount for such prior year identified as "Net Income (1)"
on Schedule 11.1(a).2, but less than the amount for such prior year
identified as "Net Income (2)" on Schedule 11.1(a).2; and Lessee
shall not be required to maintain the Letter of Credit in any year
where Lessee's audited financial statements for the prior year show
that Lessee had Net Income for such prior year greater than the
amount for such prior year identified as "Net Income (2)" on
Schedule 11.1(a).2; and provided, further, that notwithstanding any
reduction or cancellation of the Letter of Credit in accordance with
the terms hereof, Lessee shall be required to restore the Letter of
Credit in any year where Lessee's audited financial statements for
the immediately preceding year show that Lessee's Net Income was
less than the threshold set by Schedule 11.1(a).2 for such prior
year for reduction of the Letter of Credit or in any year in which
audited financials for Lessee for the immediately preceding year
have not been certified on or before April 15 of that year. For
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<PAGE>
525
purposes of determining the amount required for the Letter of Credit
in any year, reductions, if any, shall not be permitted until 30
days after receipt by debis AirFinance B.V. of the audited financial
statements of Lessee for the prior year and, in the event that the
Letter of Credit is to be reinstated or increased in any year as
aforedescribed, such Letter of Credit shall be required on or before
April 15 of such year. Any failure by Lessee to comply with the
provisions of this Section 11.1(a) shall be an Event of Default
under Section 15.1(b) of the Lease.
(e) Intentionally Omitted.
(f) Section 14.1(p) is amended by deleting the same in its
entirety and by inserting in lieu thereof the following:
"not become the surviving corporation of a merger with any
other entity, or itself consolidate with, or merge into, any
other corporation, or convey, transfer or lease substantially
all of its assets as entirety to any person, without the prior
written consent of Lessor (such consent not to be unreasonably
withheld) and the execution and delivery to Lessor of such
agreements, certificates and legal opinions as Lessor may
reasonably request with respect thereto."
(g) Intentionally Omitted.
(h) Intentionally Omitted.
(i) Section 15.1(e) of the Lease is deleted in its entirety
and the following is inserted in lieu thereof:
"if (i) if Lessee or any of its subsidiaries is in default
under any lease, hire-purchase, conditional sale or credit
sale agreement for equipment having a casualty value in excess
of [***] and such default is not cured or waived within
the applicable grace period or five (5) Business Days
(whichever is greater); (ii) (regardless of the amount of
money involved), any event occurs which with or without notice
or lapse of time or both would constitute a default under any
agreement between Lessee and, or promissory note executed by
Lessee in favor of, [***]; (b) Zell/Chilmark Fund, L.P.; [***]
any affiliate of any of the foregoing; unless such default or
event of default is cured or waived within the applicable
grace period or five (5) Business Days (whichever is greater);
or (iii) any indebtedness owed by Lessee or any of its
subsidiaries in an amount in excess of [***] is not paid when
due or becomes due or capable of being declared due prior to
the date when it would otherwise become due provided, however,
the failure of Lessee to pay amounts
-3-
<PAGE>
525
[***] (and any accrued interest thereon) claimed by
[***] shall not be deemed a Default or an Event
of Default hereunder."
(j) Section 15.1(n) is modified by inserting the following
clause after the word "affiliate": ", successor or assign"
(k) Sections 15.1(o), (p) and (q) are deleted in their
entirety and the following new Sections 15.1(o) and (p) are inserted in lieu
thereof:
"(o) if, an Event of Default shall occur under and as defined
in that certain Promissory Note dated as of January 31, 1997
from the Lessee to debis AirFinance B.V. or under, and as
defined in that certain Promissory Note dated as of January
31, 1997 from the Lessee to DASA Aircraft Finance XVI, B.V.
(each, a "Note" and collectively, the "Notes");
(p) if, prior to satisfaction of Lessee's obligations pursuant
to the Notes, Lessee shall make (i) any payment of principal
or interest on any debt owed by Lessee to Zell/Chilmark Fund,
L.P. or to any holder of equity in Lessee representing the
right to vote twenty percent (20%) or more of the stock in
Lessee on any matter presented for vote to the shareholders
of Lessee (an "Insider") or any affiliate of an Insider; or
(ii) any redemption of, or any dividend or distribution with
respect to, any shares of Lessee owned by an Insider or any
affiliate thereof."
(l) Section 15.2 is amended by deleting clause (i) of
paragraph (b) thereof in its entirety and inserting the following new clause (i)
in lieu thereof:
"(i) serving notice of such termination on Lessee specifying
the occurrence giving rise to such Event of Default or Events
of Default, provided that such notice shall be deemed to have
been served without the necessity of actual service and this
Lease shall terminate automatically without the necessity of
any service of notice thereof upon Lessee upon the occurrence
of any Event if Default described in paragraphs (a), (f), (g),
(h), (n) or (o) of Section 15.1 of this Lease; provided,
however, that actual service of notice of such termination on
Lessee shall be required where an Event of Default described
in paragraph (n) of Section 15.1 of the Lease has occurred
solely by reason of occurrence of an event of default under an
Other Aircraft Agreement or under a Fokker Aircraft Agreement,
which event of default does not, under the terms of such Other
Aircraft Agreement or
-4-
<PAGE>
525
Fokker Aircraft Agreement, result in automatic termination of
such Other Aircraft Agreement or such Fokker Aircraft
Agreement."
(m) Article 16 of the Lease is amended by adding a new Section
16.10 as follows:
"(a) Notwithstanding anything to the contrary contained in
this Lease, Lessor may terminate this Lease by giving not less
than six (6) months' prior written notice of the termination
date to Lessee provided that in no event may Lessor choose a
termination date earlier than September 15, 1998 ("Lessor's
Termination Option") and the termination date specified in
such notice shall become the Expiry Date; provided, however,
that (subject to the following sentence) Lessor shall not be
entitled to exercise Lessor's Termination Option with respect
to this Lease where the same would result in the termination
of four (4) or more of the aircraft operating lease agreements
identified in Schedule 16.10 to the Lease in any twelve (12)
month period, taking into account the scheduled or actual
Expiry Date of each such aircraft operating lease agreement.
Nothing herein shall be construed to limit the Lessor's rights
upon the occurrence of any Default or Event of Default or upon
the termination of this Lease as a result thereof or upon the
expiration of any Lease in the absence of the exercise of
Lessor's Termination Option.
(b) Lessee shall in no event be liable for any costs,
expenses, liabilities, losses, damages or amounts incurred by
Lessor which arise solely from the Lessor exercising Lessor's
Termination Option hereunder such as the loss of any tax
benefit, or fees or penalties arising from the breakage of any
contract or agreement. Except as expressly provided in
subsection (c) below, Lessor shall in no event be liable for
any costs, expenses, liabilities, losses, damages or amounts
incurred by Lessee as a result of Lessor exercising Lessor's
Termination Option in accordance with this Section 16.10.
(c) Notwithstanding the terms of clause (b) above, if Lessor
exercises Lessor's Termination Option hereunder in accordance
with this Section 16.10, then Lessee shall be responsible for
performing all of its obligations under and in accordance with
the terms of this Article 16, subject to the following:
(i) the Lessor shall pay or cause to be paid to Lessee
for Lessee's application against the "C Check" completed
pursuant to Appendix E, Item 1(e), an amount equal to
the lesser of (x) $100,000 or (y) an amount equal to the
product of the full cost of the "C Check" completed by
Lessee pursuant to Appendix E, Item 1(e) on the Aircraft
multiplied
-5-
<PAGE>
525
by a fraction, the numerator of which is the number of
hours (including fractions of an hour) remaining on the
Aircraft until Lessee's next scheduled "C Check" for the
Aircraft (assuming Lessor had not exercised Lessor's
Termination Option hereunder) and the denominator of
which is 3000; and
(ii) for purposes of Section 7.4.1(b) and (c), any shop
visit required to meet the conditions of Appendix E
shall be deemed a "scheduled" shop visit."
(n) Section 18.6 of the Lease is amended by deleting the
firm of "Haight, Gardner, Poor & Havens, Attn: Bonny L.Y. Kwoh, 195 Broadway,
New York, NY 10007" as agent for Lessor and by inserting in lieu thereof the new
agent for Lessor as follows: "Hertzog, Calamari & Gleason, Attn: Carla Craig,
100 Park Avenue, New York, New York 10017",
(o) Appendix B to the Lease is hereby amended as
follows:
(i) The amount set forth as the "AGREED VALUE" is
deleted in its entirety and the amount of [***] is
substituted therefor.
(ii) The Amount set forth as "RENT" is deleted in its
entirety and the amount or [***] is substituted
therefor.
(p) Appendix D to the Lease is hereby amended by
deleting Sections 2.2 through 2.7 in their entirety and by deleting Section 1 in
its entirety and inserting the following in lieu thereof:
"1. Deposit. Lessee has paid to Lessor the amount set
forth on Schedule B.1 as a Deposit for the Aircraft prior to
January 31, 1997. Lessor has applied such Deposit (plus all
accrued interest thereon) to the Default Payments (as defined
in Section 6 of Amendment No. 1 to this Lease) and/or to
Default Payments (as defined in Section 6 of Amendment No. 1
to the Other Aircraft Agreements)."
(q) Schedule 16.10 attached to this Amendment is hereby
attached to the Lease as Schedule 16.10 thereto and is incorporated therein.
2. Waiver of Default. Lessor agrees that any Default or Event of
Default under Sections 15.1(a), 15.1(e), 15.1(g) or 15.1(o) of the Lease (prior
to the amendment of any such Sections hereunder) which occurred prior to the
date of this Amendment is hereby deemed to have
-6-
<PAGE>
525
been cured by Lessee and Lessor waives any rights or remedies it may have had
with respect to the occurrence of any such Default or Event of Default.
3. Representations, Warranties and Covenants
The following shall be, as applicable, representations, warranties
or covenants of Lessee pursuant to Articles 13 and 14 of the Lease:
(a) Representations
(i) This Amendment and the Notes have been duly entered into
and delivered by Lessee, and each constitutes a valid, legal and binding
obligation of Lessee enforceable against Lessee in accordance with its terms.
(ii) As of the date of this Amendment, Lessee has entered,
or will contemporaneously herewith enter, into an agreement with [***] having
terms which are substantially in accordance with the terms set forth under
the heading [***] in Exhibit 6.02(k) to the Agreement and Plan of Merger
dated as of January 17, 1997 by and among GoodAero, Inc., James H. Goodnight,
John P. Sall, Midway Airlines Corporation and Zell/Chilmark Fund, L.P., as
amended, except to the extent otherwise specifically set forth in the letter
dated as of February 10, 1997, from Lessee to Lessor.
(b) Covenants
Lessee covenants that it will not make any prepayment in
respect of the Promissory Note dated February 7, 1997 in the amount of
[***] to provide for terms more favorable to the payee thereof (including,
without limitation, any increase in the interest rate or acceleration of
payment).
4. Deferral Agreement. Lessor and Lessee agree that the Deferral
Agreement and the Amendment to Deferral Agreements are hereby declared null and
void and shall have no further force or effect with respect to the Lease.
5. Merger. Lessor hereby consents to the Merger.
6. Governing Law. This Amendment shall be governed by and construed
in accordance with the internal laws of the State of New York and without regard
to any conflict of law rules. This Amendment is being delivered in the State of
New York.
7. Miscellaneous. Except as specifically amended or supplemented by
this Amendment, the Lease is hereby ratified, approved, confirmed and continued
in all respects and all provisions of the Lease as heretofore amended shall
remain in full force and effect. The parties hereto acknowledge and confirm that
the Lease is intended to be a true lease and not a financing arrangement. This
Amendment may be executed in any number of counterparts, and all of such
counterparts taken together shall be deemed and constitute one and the same
instrument.
-7-
<PAGE>
525
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
on the day and year first above written.
FIRST SECURITY BANK, N.A., formerly
known as First Security Bank of Utah, N.A.
not in its individual capacity but solely as
owner trustee
By: /s/ Greg A. Hawley
----------------------------------------------
Name: Greg A. Hawley
Title: Vice President
MIDWAY AIRLINES CORPORATION
By: /s/ JS Waller
----------------------------------------------
Name:
--------------------------------------------
Title:
-------------------------------------------
<PAGE>
525
Schedule 11.1(a).1
The Letter of Credit shall contain the following terms:
debis AirFinance B.V. shall be entitled to draw amounts under the Letter of
Credit upon notice to the issuing bank signed by debis AirFinance B.V. stating
that amounts are due under one or more of the following, and that such amounts
remain unpaid:
Promissory Note dated as of January 31, 1997 executed by Midway
Airlines Corporation in favor of debis AirFinance B.V.
Promissory Note dated as of January 31, 1997 executed by Midway
Airlines Corporation in favor of Daimler-Benz Aerospace A.G.
Aircraft Operating Lease Agreement No. 111 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 112 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 113 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 114 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 135 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 136 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 524 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 525 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
<PAGE>
525
Aircraft Operating Lease Agreement No. 115-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
Aircraft Operating Lease Agreement No. 116-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
Aircraft Operating Lease Agreement No. 117-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
Aircraft Operating Lease Agreement No. 118-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
<PAGE>
525
Schedule 11.1(a).2
Midway Airlines
Net Income Thresholds for Reduction in Amount of Letter of Credit Pursuant to
Section 11.1(a)
US$ millions
Year 1997 1998 1999 2000 2001
Net Income(2) 12.0 18.0 25.2 32.8 41.0
Net Income(1) 8.0 12.0 16.8 21.8 27.3
Year 2002 2003 2004 2005 2006
Net Income(2) 49.1 57.7 67.8 67.8 67.8
Net Income(1) 32.8 38.5 45.2 45.2 45.2
Year 2007 2008 2009 2010 2011
Net Income(2) 67.8 67.8 67.8 67.8 67.8
Net Income(1) 45.2 45.2 45.2 45.2 45.2
Year 2012 2013 2014
Net Income(2) 67.8 67.8 67.8
Net Income(1) 45.2 45.2 45.2
Amount of
Letter of Credit
- ----------------
$800,000 If actual Net Income is less than or equal to Net
Income(1)
$400,000 If actual Net Income is greater than Net Income(1)
but less than or equal to Net Income(2)
0 If actual Net Income is greater than Net Income(2)
<PAGE>
525
Schedule 16.10
1. Aircraft Operating Lease Agreement No. 111, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
2. Aircraft Operating Lease Agreement No. 112, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
3. Aircraft Operating Lease Agreement No. 113, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
4. Aircraft Operating Lease Agreement No. 114, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
5. Aircraft Operating Lease Agreement No. AOLAF-115-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
6. Aircraft Operating Lease Agreement No. AOLAF-116-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
7. Aircraft Operating Lease Agreement No. AOLAF-117-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
8. Aircraft Operating Lease Agreement No. AOLAF-118-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
9. Aircraft Operating Lease Agreement No. 135, dated as of July 20, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
10. Aircraft Operating Lease Agreement No. 136, dated as of December 15, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
11. Aircraft Operating Lease Agreement No. 524, dated as of August 1, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
12. Aircraft Operating Lease Agreement No. 525, dated as of October 15, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
<PAGE>
525
Schedule B.1
Security Deposits Paid by Midway
Aircraft AOLAF Deposit
MSN No. Paid
- -------- ----- ------------
11321 525 [***]
11323 524 [***]
11329 135 [***]
11330 136 [***]
11444 111 [***]
11445 112 [***]
11475 113 [***]
11477 114 [***]
11450 115 [***]
11484 116 [***]
11485 117 [***]
11486 118 [***]
<PAGE>
EXHIBIT 10.14
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY [***]. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
F-100 LEASE #136
(TAIL # N133ML)
<PAGE>
DUPLICATE ORIGINAL
THE SINGLE EXECUTED ORIGINAL OF THIS AGREEMENT MARKED "ORIGINAL" SHALL BE THE
"ORIGINAL" AND ALL OTHER COUNTERPARTS OF THIS AGREEMENT SHALL BE DUPLICATES AND
MARKED "DUPLICATE" OR "DUPLICATE ORIGINAL". TO THE EXTENT THAT THIS AGREEMENT
AND CERTIFICATE OF ACCEPTANCE RELATED THERETO CONSTITUTES CHATTEL PAPER, AS SUCH
TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE
JURISDICTION, NO SECURITY INTEREST MAY BE CREATED THROUGH TRANSFER OR POSSESSION
OF ANY COUNTERPART OTHER THAN THE "ORIGINAL".
AIRCRAFT OPERATING LEASE AGREEMENT
No. 136
Dated as of
December 15, 1995
between
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual
capacity but solely as trustee,
as
Lessor
and
MIDWAY AIRLINES CORPORATION
as
Lessee
Aircraft : Fokker 100
Serial No : 11330/N133ML
<PAGE>
INDEX
ARTICLE PAGE
- ------- ----
1. Definitions.........................................................1
2. Agreement to Lease.................................................12
3. Term; Delivery; Acceptance; Delay..................................15
4. Registration and Title.............................................16
5. Possession and Use ................................................18
6. Charges, Method of Payment and Financial Information...............23
7. Maintenance........................................................25
8. Taxes, Duties and Expenses.........................................30
9. Liens..............................................................35
10. Indemnification....................................................35
11. Insurance..........................................................37
12. Assignment and Subletting..........................................44
13. Disclaimer, Representations and Warranties.........................47
14. Covenants of Lessee................................................52
15. Default by Lessee..................................................55
16. Return of Aircraft.................................................61
17. Casualty Occurrences...............................................63
18. Governing Law and Jurisdiction.....................................66
19. Miscellaneous......................................................67
i
<PAGE>
APPENDICES PAGE
- ---------- ----
A. Description of Aircraft............................................72
B. Further Definitions and Values.....................................73
C. Certificate of Acceptance..........................................74
D. Charges............................................................76
E. Operating Condition at Re-Delivery.................................84
F. Aircraft Documents.................................................88
G. FAA Power of Attorney..............................................90
ii
<PAGE>
AIRCRAFT OPERATING LEASE AGREEMENT
No. 136
THIS AIRCRAFT OPERATING LEASE AGREEMENT No. 136 is made as of the
15th day of December, 1995 between FIRST SECURITY BANK OF UTAH, N.A., a national
banking association existing pursuant to the laws of the United States, having
its principal place of business at 79 South Main Street, Salt Lake City, Utah
84130-0007, not in its individual capacity (except as expressly herein set
forth) but solely as Owner Trustee under the Trust Agreement (as defined in
Article 1 hereof) and its permitted successors and assigns (herein referred to
as "Lessor") and MIDWAY AIRLINES CORPORATION a company incorporated under the
laws of the State of Delaware, having its principal place of business at 300
West Morgan Street, Durham, North Carolina 27702 and its permitted successors
and assigns (herein referred to as "Lessee").
WHEREAS, subject to fulfillment of the conditions precedent stated
in Article 2.2(viii), (ix) and (x), Lessor has the right to possess, use and
lease the Aircraft; and
WHEREAS Lessee desires to lease the Aircraft from Lessor; and
WHEREAS Lessor is willing to lease the Aircraft to Lessee upon the
terms and conditions set out herein.
NOW THEREFORE, in consideration of the mutual promises herein
contained, Lessor and Lessee agree as follows:
1. DEFINITIONS
The following terms shall have the following respective meanings for
all purposes of this Agreement:
1.1 Air Authority shall mean the Federal Aviation Administration of the
United States Department of Transportation and any successor.
1.2 Aircraft shall mean the aircraft identified and described in
Appendix A, including any Engine, Part, or component thereof, and/or
ancillary and loose equipment or devices installed in or on the
Aircraft at the Delivery Date (or which having been removed
therefrom remain the property of the Lessor pursuant to this
<PAGE>
Agreement) and Aircraft Documents furnished therewith under this
Agreement, or any substitutions, renewals and replacements from time
to time made in or on the said Aircraft in accordance with this
Agreement, whether or not for the time being installed on or in the
said Aircraft or any other aircraft.
1.3 Aircraft Documents shall mean the items identified in Appendix F.
1.4 Aircraft Maintenance Agreement shall mean a Flight Hour Agreement
entered into between Lessee and an overhaul/repair agency relating
to the Engines and the landing gear and any modification, amendment
or substitution therefor consented to by Beneficiary.
The terms and conditions of such Aircraft Maintenance Agreement and
the overhaul/repair agency shall be subject to the prior written
consent of Beneficiary.
1.5 Airframe shall mean the Aircraft, excluding the Engines.
1.6 Appraisal Procedure shall mean the procedure for determining the FMV
of the Aircraft set forth Article 9 of Appendix D.
1.7 Approved Maintenance Program shall mean the Maintenance Program in
effect on the Delivery Date with respect to the aircraft which are
the subject of the Other Aircraft Agreements or such other
Maintenance Program as Lessor shall from time to time approve in
writing, such approval not to be unreasonably withheld.
1.8 Authorized Maintenance Performer shall mean Lessee, American
Airlines, Inc., U.S. Air, Aviall, Rolls Royce Canada or any Air
Authority approved provider.
1.9 Bank shall mean the financial institution(s) and/or other
provider(s) of finance from whom finance respecting the acquisition
or continued ownership of the Aircraft by Lessor is to be, or is for
the time being, obtained and/or in whose favor or for whose benefit
security over, or rights with respect to, the Aircraft is to be, or
is for the time being, granted by Lessor or at its request and shall
include any financial institution providing finance to the Head
Lessor in respect of Head Lessor's acquisition of the Aircraft by
whatever means, including without limitation by way of loan or by
way of non-recourse sale of lease receivables.
2
<PAGE>
1.10 Beneficiary shall mean, Stockholm Aircraft Finance V, B.V., which is
(i) a company incorporated under the laws of the Netherlands, (ii)
wholly-owned by Fokker and (iii) the beneficiary under the Trust
Agreement, together with its successors and permitted assigns.
1.11 Business Day shall mean a day (other than a Saturday or Sunday) on
which banks are open for business in New York.
1.12 Casualty Occurrence shall have the meaning set forth in Article
17.1.
1.13 Certificate of Acceptance shall mean the Certificate of Acceptance
given in the form of Exhibit C.
1.14 Certificated Air Carrier means any person (except the United States
Government) that is a citizen of the United States of America (as
defined in Section 40102 of Title 49 of the United States Code)
holding an air carrier operating certificate issued by the Secretary
of Transportation pursuant to Chapter 447 of Title 49 of the United
States Code (or any predecessor thereof) for aircraft capable of
carrying ten or more individuals or 6,000 pounds or more cargo,
which is also certificated so as to entitle Lessor, as lessor, to
the benefits of Section 1110 of Title 11 of the United States Code
with respect to the Aircraft.
1.15 Credit and Security Agreement shall mean the Credit and Security
Agreement dated as of October 29, 1993 therein between FAUSA and
Lessee.
1.16 Cycle shall mean one take-off and landing of the Aircraft.
1.17 Default shall mean an Event of Default or any event which, with the
giving of notice and/or lapse of time and/or the making of any
relevant determination, would constitute an Event of Default.
1.18 Delivery Date shall mean the Midway Technical Acceptance Date as
such term is defined in the Tripartite Agreement which will be the
date on which the Aircraft is delivered to and accepted by the
Lessee for the purposes of this Agreement.
1.19 Delivery Location shall mean the location at which Transwede
delivers the Aircraft to Lessor and identified in the Certificate of
Acceptance.
1.20 Dollars and $ shall mean the lawful currency of the United States of
America and in respect of all payments to be made under this
Agreement in Dollars shall mean
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funds which are for same day settlement in the New York Clearing
House Interbank Payments System (or such other US Dollar funds as
may at the relevant time be customary for the settlement of
international banking transactions denominated in United States
Dollars).
1.21 Engine shall mean (i) any engine installed on or furnished with the
Aircraft on the Delivery Date, such Engines being identified as to
manufacturer and type in Appendix A and as to serial numbers in the
Certificate of Acceptance executed by Lessee on the Delivery Date
and (ii) any substitute or replacement engine title to which has, or
should have, transferred to and vested in Lessor in accordance with
this Agreement, in each case including all modules or Parts from
time to time belonging to or installed in that engine and
irrespective of whether or not the same shall for the time being be
installed on the Aircraft or on any other aircraft. The term
"Engine" shall exclude any properly replaced engine title to which
has, or should have, passed to Lessee pursuant to this Agreement.
1.22 Equipment Change shall have the meaning set forth in Article
17.3(a).
1.23 Event of Default shall mean any of the events specified in Article
15.1.
1.24 Intentionally omitted..
1.25 Expiry Date shall mean May 3, 1999.
1.26 Fair Market Rental Value shall be equal in amount to the value that
would be obtained in an arms'-length transaction between an informed
and willing lessee under no compulsion to lease and an informed and
willing lessor under no compulsion to lease, in accordance with a
lease to a lessee similarly situated with Lessee, for a term equal
to the relevant period and on conditions as herein provided, any
such determination (made for purposes of Article 15.3(b)) to be made
on the basis of the then actual condition of the Aircraft, to be
determined pursuant to an Independent Appraisal and to be the
average of the two determinations obtained thereunder.
1.27 FAUSA shall mean Fokker Aircraft U.S.A., Inc., a company
incorporated under the laws of the State of Delaware, with its
principal office at Alexandria, Virginia.
1.28 First Rent Date shall mean the Delivery Date.
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1.29 Flight Hour shall mean each hour or part thereof elapsing from the
moment at which the wheels of the Aircraft leave the ground on the
take off of the Aircraft until the wheels of the Aircraft touch the
ground on the landing of the Aircraft following such flight.
1.30 FMV shall have the meaning set forth in Appendix D.
1.31 Fokker shall mean Fokker Aircraft B.V., a Netherlands corporation
with its principal office at Amsterdam Zuid-Oost, The Netherlands,
together with its successors.
1.32 Intentionally omitted.
1.33 Governing Law shall mean the law of the state of New York.
1.34 Government Entity shall mean and include (i) any national or state
government, political subdivision thereof, or local jurisdiction
therein; (ii) any board, commission, department, division, organ,
instrumentality, court, or agency of any thereof, however
constituted; and (iii) any association, organization, or institution
of which any thereof is a member or to whose jurisdiction any
thereof is subject or in whose activities any thereof is a
participant.
1.35 Head Lessor shall mean any person or persons to whom title to the
Aircraft is vested or transferred in accordance with Article
12.3(e).
1.36 Indemnitees shall mean Lessor (in its trust and individual
capacities), the Voting Trustee (in its trust and individual
capacities), the Beneficiary, the Head Lessor, the Bank, Fokker,
FAUSA, including any of their respective successors and assigns and
their respective shareholders, subsidiaries, affiliates, directors,
officers, agents and employees.
1.37 Independent Appraisal shall mean a determination of Fair Market
Rental Value of the Aircraft by two independent aircraft appraisers,
selected by Lessor, the costs and expenses of the appraisal to be
paid by Lessee.
1.38 Law shall mean and include (i) any law, statute, decree,
constitution, regulation, order or any directive of any Government
Entity; (ii) any treaty, pact, compact or other agreement to which
any Government Entity is a signatory or party; (iii) any judicial or
administrative interpretation or
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application of any thereof; and (iv) any amendment or revision of
any thereof.
1.39 Lessor or Lessee shall have the meanings respectively ascribed to
them in the first paragraph of this Agreement and shall include
their respective assignees or successors.
1.40 Lessor Liens shall mean:
(a) the Mortgage, the Security Assignment and any security
interest whatsoever from time to time created by or through
Lessor and/or Head Lessor in connection with the financing of
the Aircraft;
(b) any other security interest or other lien in respect of the
Aircraft or this Agreement, which results from acts of or
omissions to act or claims against Lessor and/or Head Lessor
or any of their respective affiliates not related to the
transactions contemplated by or permitted under this
Agreement; and
(c) liens in respect of the Aircraft for Lessor Taxes.
1.41 Lessor Taxes shall mean Taxes:
(a) imposed as a direct result of activities of a Tax Indemnitee
in any jurisdiction imposing a liability unrelated to that Tax
Indemnitee's dealings with Lessee, to the transactions
contemplated by this Agreement or the operation of the
Aircraft by Lessee; or
(b) imposed on or measured by net income, profits or gains, or
capital or net worth (excluding, however, in each case, Taxes
that are, or are in the nature of, license, sales, use,
rental, value-added, or property taxes) of a Tax Indemnitee,
by (A) any Governmental Entity by or in which that Tax
Indemnitee would be subject to tax without regard to the
transactions contemplated by this Lease, or (B) the Federal
Government of the United States of America (including, without
limitation, any withholding taxes imposed by such government);
or
(c) imposed with respect to any period or event occurring prior to
the date of this Agreement or after the Expiry Date or earlier
termination of this Agreement in accordance with the terms
hereof, provided that such Tax is unrelated to a Tax
Indemnitee's dealings with Lessee or to the transactions
contemplated by this Agreement; or
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(d) for which Transwede is liable under the Tripartite Agreement.
(e) imposed as a result of any voluntary sale, assignment,
transfer or other disposition by the Lessor (including to the
Head Lessor) or any other Tax Indemnitee of any interest in
the Aircraft or any part thereof or this Agreement unless such
transfer or disposition occurs (1) in connection with a Tax
Indemnitee's pursuing its remedies while an Event of Default
by Lessee is continuing or otherwise resulting from an Event
of Default, or (2) pursuant to Lessee's exercise of its option
to purchase the Aircraft under Article 9 of Appendix D (it
being understood and agreed that Lessor and Lessee will
cooperate with each other to minimize any Taxes resulting from
any sale pursuant to this clause (2)).
1.42 LIBOR shall mean the rate of interest per cent per annum (rounded
upward, if not already such a multiple, to the nearest whole
multiple of 1/16th. of one per cent) at which, at or about 11.00
a.m. (London time) on the day two Business Days before the beginning
of the relevant period deposits in Dollars are offered for the
duration of such relevant period on the REUTERS "LIBO" page (or such
other page as may replace it from time to time).
1.43 Maintenance Program shall mean an Air Authority approved maintenance
program for the Aircraft encompassing scheduled maintenance
(including block maintenance), condition monitored maintenance, and
on-condition maintenance of Airframe, Engines and Parts, including
but not limited to, servicing, testing, preventive maintenance,
repairs, structural, inspections, system checks, overhauls, approved
modifications, service bulletins, engineering orders, airworthiness
directives, corrosion control, inspections and treatments.
1.44 Major Checks shall mean any 12,000 hours Check, 24,000 hours Check
or Intersupplementary Check or segment thereof or any equivalent
thereof with more or less hours, however denominated, to the extent
set out in the Approved Maintenance Program from time to time.
1.45 Manufacturer shall mean Fokker.
1.46 Mortgage shall mean such mortgage or other security as from time to
time may be created over the Aircraft in favor of the Bank or over
the Beneficiary's interest in the Trust Agreement, in favor of the
Bank.
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1.47 Note shall mean the Secured Promissory Note executed and delivered
to FAUSA by the Lessee and secured by the Credit and Security
Agreement.
1.47A Operative Documents shall mean the Lease, the Certificate of
Acceptance, the Trust Agreement and the Voting Trust Agreement.
1.48 Other Aircraft Agreements shall mean Aircraft Operating Lease
Agreements relating to other Fokker 100 aircraft so long as leased
to Lessee by a lessor for the benefit of Fokker, FAUSA or any
affiliate thereof (including Wings Aircraft Finance, Inc.), as
Beneficiary and the Support Services Agreement, the Credit and
Security Agreement and the Note or any other agreement between
Lessee and Lessor for the benefit of Fokker, FAUSA or any affiliate
thereof, including Wings Aircraft Finance, Inc., provided that, for
the purpose of this definition, the word "affiliate" shall mean any
corporation or other entity that, directly or indirectly, controls,
is controlled by or is under common control with, Fokker.
1.49 Part shall mean, whether or not installed on the Aircraft:
(a) any component, furnishing or equipment (other than a complete
Engine) furnished with the Aircraft on the Delivery Date; and
(b) any other component, furnishing or equipment (other than a
complete Engine) title to which has, or should have, passed to
Lessor pursuant to this Agreement
but excludes any such items title to which has, or should have,
passed to (i) Lessee pursuant to this Agreement or (ii) any person
pursuant to any agreement relating to the financing of spare parts
for the Aircraft, including, but not limited to, FAUSA pursuant to
the Credit and Security Agreement and the Note.
1.50 Permitted Lien shall mean:
(a) liens of repairers, mechanics, material men, carriers,
hangarkeepers, employees or other similar liens arising in the
ordinary course of business by statute or by operation of law
in respect of obligations which are either not overdue or are
being contested in good faith by appropriate proceedings;
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(b) any lien for Taxes of any kind either not assessed or, if
assessed, not yet due and payable or being contested in good
faith by appropriate proceedings, and
(c) any lien arising out of a judgment against Lessee with respect
to which at the time an appeal is being prosecuted in good
faith and with respect to which there shall have been secured
a stay of execution pending such appeal,
provided that in the case of these subclauses (a), (b) and (c):
(i) adequate reserves for the payment of such obligations
have been provided by Lessee;
(ii) such proceedings, or the continued existence of such
lien, do not give rise to any likelihood of the sale,
forfeiture or other loss of the Aircraft or any Engine
or any Part or any interest therein; and
(iii) any such lien does not arise as a result of any default
on the part of Lessee in respect of its obligations
under this Agreement;
(d) any Lessor Lien and the lien of this Agreement; and
(e) any lien for Lessor Taxes.
1.51 Redelivery Location shall mean Schiphol Airport, The Netherlands.
1.52 Rent Date shall mean the First Rent Date and the numerically
corresponding date of each and every subsequent month during the
Term, or (if there is no corresponding date in any month), the last
day of such month.
1.53 Rental Period shall mean the period from and including any Rent Date
to and including the day preceding the next Rent Date.
1.54 Security Assignment shall mean an assignment or pledge in favor of
the Head Lessor or the Bank of the benefit of all or any part of
Lessor's rights hereunder.
1.55 Security Interest shall mean any mortgage, charge, pledge, lien,
assignment, hypothecation, right of set-off or any agreement or
arrangement having the effect of creating a security interest.
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1.56 State of Incorporation shall mean the State of Delaware.
1.57 State of Registration shall mean United States of America.
1.58 Supplemental Rent shall mean Agreed Value and any other amount which
by the terms of this Agreement is payable by Lessee to Lessor other
than Rent and the Reserve Rate.
1.59 Support Services Agreement shall mean the Aircraft Support Services
Agreement No. ASSAF-110 between FAUSA and Lessee.
1.60 Taxes shall mean any and all present and future sales, use,
property, customs, value-added, turnover, stamp, interest
equalization, income, gross or net receipts, franchise, excise, net
worth, capital or other taxes, fees, withholdings, imposts, duties,
levies, or other charges of any nature, together with any penalties,
fines, or interest thereon, imposed, levied, or assessed by, or
otherwise payable to, any Governmental Entity and "Tax" shall be
construed accordingly.
1.61 Tax Indemnitee shall mean each of the Lessor, Voting Trustee,
Beneficiary and the Head Lessor, including any of their respective
successors and assigns.
1.62 Term shall bear the meaning ascribed to it in Article 3.4.
1.63 Transwede shall mean Transwede Airways A.B., a corporation organized
under the laws of Sweden.
1.64 Transwede Lease shall mean Aircraft Operating Lease Agreement No.
AOLA 648.061 between Beneficiary, as lessor, and Transwede.
1.65 Tripartite Agreement means Tripartite Agreement No. TA-527, dated as
of July 26, 1995 among Transwede, Beneficiary and Lessee.
1.66 Trust Agreement shall mean the Trust Agreement dated as of December
15, 1995 between the Beneficiary and the Lessor in its individual
capacity, as the same may be amended from time to time.
1.67 Trust Estate shall mean the "Trust Estate" as defined in the Trust
Agreement.
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1.68 Voting Trust Agreement shall mean the Voting Trust Agreement dated
as of December 15, 1995 between the Beneficiary and the Voting
Trustee, as the same may be amended from time to time.
1.69 Voting Trustee shall mean First Security Bank of Idaho, N.A., a
national banking association, and its permitted successors and
assigns.
1.70 The terms:
Agreed Value,
Deposit,
Partial Loss Amount,
Rent,
Reserve Rate,
shall have the meanings and values set forth in Appendix B.
1.71 References in this Agreement to:
(a) Articles or Appendices are, unless otherwise specified,
references to Articles of, and Appendices to, this Agreement
and references to this Agreement include its Appendices;
(b) any statute or other legislative provision shall be read to
include any statutory or legislative modification or
re-enactment thereof, or any substitution therefor;
(c) the Aircraft include any Part of the Aircraft, and, where the
context so admits, any of the Aircraft Documents and
references to any part of the Aircraft include any part of any
Engine;
(d) the word "person" or "persons" or to words importing persons
include, without limitation, individuals, firms, partnerships,
joint ventures, trusts, Government Entities, organizations,
associations, corporations, government agencies, committees,
departments, authorities and other bodies, corporate or
incorporate, whether having distinct legal personality or not,
or any member of any of the same;
(e) words importing the plural include the singular and vice
versa;
(f) any agreement or instrument include such agreement or
instrument as it may from time to time be amended or
supplemented; and
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(g) headings in this Agreement are for ease of reference only.
2. AGREEMENT TO LEASE
2.1 Lessor will lease the Aircraft to Lessee and Lessee will take the
Aircraft on lease from Lessor in "AS-IS--WHERE-IS" condition, in
accordance with the terms and conditions of this Agreement.
2.2 Lessor's obligation to deliver the Aircraft on the Delivery Date to
Lessee shall be subject to:
(i) the receipt by Lessor from Lessee on or prior to the Delivery
Date of the following, all of which shall be in the English
language and be satisfactory in form and substance to Lessor:
(a) copies of Lessee's certificate of incorporation and/or
memorandum and articles of association and/or by-laws
and/or other constitutional documents, certified to be
true and up to date copies by a duly authorized officer
of Lessee;
(b) copies of resolutions of Lessee's board of directors
authorizing Lessee to enter into and perform this
Agreement and the transactions contemplated hereby,
certified to be true and in full force and effect by a
duly authorized officer of Lessee;
(c) evidence that each approval, license and consent which
may be required in relation to, or in connection with
the performance by Lessee of any of its obligations
hereunder has been granted by or obtained from the
applicable Government Entity in the State of
Registration;
(d) copies of Lessee's air transport license, certificate of
public convenience and necessity, and any other air
operator certificates and other licenses, certificates
and permits required by a Governmental Authority
enabling Lessee to operate as an air carrier, certified
to be true copies and to be in full force and effect by
a duly authorized officer of Lessee;
(e) evidence of appointment of Lessee's agent for service of
process in the State of New York;
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(f) a power of attorney in the form of Appendix G
authorizing Lessor and/or the Head Lessor/and/or the
Bank to take action at the Air Authority and a certified
resolution authorizing same;
(g) such other documents as Lessor may reasonably request;
(ii) the receipt by Lessor from Lessee on or before the Delivery
Date of:
(a) opinion satisfactory in form and substance to Lessor of
counsel to Lessee, addressed to Lessor and Beneficiary;
(b) all sums due to Lessor pursuant to this Agreement;
(c) a certificate of insurance, a broker's letter of
undertaking and other evidence, all in form and
substance satisfactory to Lessor, that Lessee is taking
the required steps to ensure due compliance with the
provisions of this Agreement as to Insurances with
effect on and after the Delivery Date;
(d) evidence that the representations and warranties of
Lessee set forth in Article 13.4 are true and correct;
(iii) Intentionally omitted;
(iv) Intentionally omitted;
(v) evidence (including satisfactory opinions of Crowe & Dunlevy,
special Air Authority aviation counsel, as to Air Authority
registration and recordation matters) that on the Delivery
Date the Aircraft has been validly registered under the laws
of the State of Registration and that all filings,
registrations, recordings and other actions have been or will
be undertaken which are necessary or advisable to ensure the
validity, effectiveness and enforceability of this Agreement
and to protect the property rights of Lessor and Head Lessor
in the Aircraft or any Part and any Security Interest of the
Bank therein;
(vi) Lessor being satisfied that no default shall have occurred
under any Other Aircraft Agreement;
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(vii) the Certificate of Acceptance shall have been duly authorized,
executed and delivered by Lessee, shall be satisfactory in
form and substance to Lessor, and shall be in full force and
effect;
(viii) all of Transwede's rights and interest in the Aircraft shall
have been terminated to the satisfaction of Beneficiary,
including the termination of the Transwede Lease and the
fulfillment of all conditions precedent and obligations of
Lessee and Transwede with respect to the Aircraft under the
Tripartite Agreement;
(ix) the Beneficiary shall have consented to the termination of the
Transwede Lease and its mortgage on the Aircraft under Swedish
law; and
(x) Lessee shall have accepted the Aircraft from Transwede in
accordance with the terms and conditions of the Tripartite
Agreement and simultaneously therewith Transwede has
redelivered the Aircraft to Lessor.
2.3 The conditions specified in Article 2.2 are inserted for the sole
benefit of Lessor and may be waived or deferred in whole or in part
and with or without conditions by Lessor. If any of the said
conditions are outstanding on the Delivery Date and Lessor (in its
absolute discretion) nonetheless agrees to deliver the Aircraft to
Lessee, Lessee shall ensure that such outstanding conditions are
fulfilled within fifteen (15) days after the Delivery Date and
Lessor shall be entitled to treat the failure of Lessee to perform
such outstanding conditions as an Event of Default.
2.4 The obligation of Lessee to accept delivery of the Aircraft from
Lessor is subject to the satisfaction of the following conditions
precedent on or before the Delivery Date:
(i) each of the Operative Documents to which Lessor is a party
shall have been duly authorized, executed and delivered by
Lessor and shall be in full force and effect, and executed
counterparts shall have been delivered to Lessee;
ii) Lessee shall have received the following:
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(a) an incumbency certificate of each of Lessor as to the
persons authorized to execute and deliver the Operative
Documents to which Lessor is a party and each other
document to be executed on behalf of Lessor in
connection with the transactions contemplated by the
Operative Documents, including the signatures of such
persons; and
(b) such other documents and evidence with respect to Lessor
and the transactions contemplated by the Operative
Documents as Lessee may reasonably request in order to
establish the consummation of the transactions
contemplated by the Operative Documents to be performed
by Lessor, the taking of all corporate proceedings in
connection with such transactions and compliance with
the conditions set forth herein;
(iii) on the Delivery Date, the representations and warranties of
Lessor contained in Article 13.6 shall be true and accurate as
though made on and as of such date;
(iv) Lessee shall have received the favorable opinion, addressed to
it and reasonably satisfactory in form and substance to it,
from Crowe & Dunlevy, special Air Authority aviation counsel;
and
(v) the Aircraft shall meet the delivery conditions specified in
Article 3.6.
3. TERM; DELIVERY; ACCEPTANCE; DELAY
3.1. Subject to Articles 2.1, 2.2 and 3.3, Lessor shall deliver the
Aircraft on the Delivery Date. Subject to Article 2.4 only, Lessee
shall accept the Aircraft and the delivery thereof on the Delivery
Date. Lessee acknowledges that Lessor's sole obligation with respect
to delivery of the Aircraft is (i) to deliver it to Lessee upon
acceptance of the Aircraft by Lessee from Transwede on the Midway
Technical Acceptance Date as such term is defined in the Tripartite
Agreement pursuant to the terms and conditions of the Tripartite
Agreement, and (ii) that Lessor is delivering the Aircraft to Lessee
"AS-IS--WHERE IS."
3.2 Intentionally Omitted.
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3.3 If for any reason (including any failure of the conditions specified
in Article 2.2, Clauses (viii), (ix) and (x)), the Aircraft has not
been delivered by Lessor by January 15, 1996, (as such date may be
amended, pursuant to the provisions of the Tripartite Agreement),
either party may terminate this Agreement by written notice to the
other party. Upon any such termination by Lessee, if the Aircraft
has not been delivered by Lessor due to Lessee's breach of its
obligations hereunder or under the Tripartite Agreement, Lessor may
retain the Deposit. Otherwise, Lessor shall return the Deposit to
Lessee.
3.4 The term of the lease shall commence on the Delivery Date and shall
continue until the Expiry Date unless earlier terminated or extended
as herein provided (such period being herein referred to as the
"Term").
3.5 The Aircraft shall be delivered to and accepted by Lessee at the
Delivery Location or such other location as is mutually acceptable
to the parties.
3.6 Simultaneously with Lessee's technical acceptance of the Aircraft
from Transwede under the Tripartite Agreement, Lessee shall indicate
and confirm its acceptance of the Aircraft by the execution and
delivery to Lessor of the Certificate of Acceptance.
4. REGISTRATION AND TITLE
4.1 As from the Delivery Date Lessee shall cooperate with Lessor or Head
Lessor, to effect and maintain registration of the Aircraft in the
name of Lessor or Head Lessor, as the case may be, under the Laws of
the State of Registration during the Term, such registration to
reflect the interests of Lessor or Head Lessor as the case may be,
and to obtain and maintain all licenses, permits and approvals,
including, without limitation, a certificate of airworthiness from
the Air Authority, as may be requisite in connection with operation
of the Aircraft under this Agreement.
4.2 Lessee shall at its own expense and responsibility cause this
Agreement to be kept, filed and recorded at all times during the
Term, in such office or offices for the registration of the Aircraft
in the State of Registration and in such other offices (in the
United States but not in any jurisdiction outside of the United
States unless directly required due to Lessee's operation) as may be
necessary, to protect Lessor's,
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Head Lessor's and the Bank's rights in any state in which the
Aircraft may operate including the State of Registration of the
Aircraft and the State of Incorporation or as Lessor may reasonably
request to protect and preserve Lessor's, Head Lessor's and the
Bank's rights hereunder, and shall on request furnish to Lessor an
opinion of counsel or other evidence satisfactory to Lessor of such
filing and recording.
4.3 Title to and ownership of the Aircraft as between Lessor, Head
Lessor and Lessee shall at all times remain in Lessor or Head
Lessor, as the case may be, and Lessee shall have no right, title or
interest in or to the Aircraft or any part thereof except as
expressly provided by this Agreement. Lessee shall identify and
specify the interest of Lessor, Head Lessor and the Bank and shall
affix or keep affixed (i) in a reasonably prominent position on the
flight-deck of the Aircraft and on each Engine a metal name plate
(having dimensions of not less than 10 cm x 7 cm) bearing the
inscription (in fireproof and legible characters) stating:
"NOTICE OF OWNERSHIP
THIS AIRCRAFT/ENGINE IS OWNED BY
FIRST SECURITY BANK OF UTAH, N.A."
The proper completion of the metal name plate shall be advised by
Lessor at its earliest convenience. Lessee shall not remove or
deface evidence of ownership of the Aircraft and shall not do or
permit to be done or omitted any act or thing which would jeopardize
the rights of Lessor, Head Lessor or the Bank in the Aircraft.
Lessee will on all occasions when the ownership of the Aircraft or
any Part is relevant make clear to third parties that title to the
same is held by Lessor, Head Lessor or the Bank as the case may be.
4.4 Lessee acknowledges that the Aircraft may from time to time be owned
by Head Lessor or the Bank and/or be subject to the Mortgage, which
shall be a first priority mortgage, and to the Security Assignment,
in favor of Head Lessor or the Bank. Lessee undertakes to Lessor
(both for itself and as agent for each of Head Lessor and the Bank)
at Lessee's expense (except for the expense of assignments pursuant
to Article 12 after the first refinancing and first assignment
described therein) to, from time to time, cooperate with Lessor or
Head Lessor to cause this Agreement, the Mortgage, the Security
Assignment and such other documents as may
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be necessary or advisable to give effect to the transactions
contemplated hereby or thereby, to be kept, recorded or filed in
such office or offices in the State of Incorporation and in the
State of Registration as may be necessary or advisable to protect
and perfect the interests of Lessor, Head Lessor and the Bank in the
Aircraft, this Agreement, the Mortgage and the Security Assignment,
and to do, from time to time, all other things which the Bank, Head
Lessor and/or Lessor may reasonably require in order to protect and
perfect their rights.
5. POSSESSION AND USE
5.1 Lessee shall not transfer possession of the Aircraft, the Engines or
any Part to any person or any legal entity or remove any Engine or
Part from the Airframe other than in accordance with the provisions
of this Article 5 or of Article 12.1; provided, however, that so
long as no Default shall have occurred and be continuing, Lessee
may, without the prior written consent of Lessor deliver possession
of the Aircraft, the Engines or Parts to the manufacturer thereof
for testing or other similar purposes, or to an Authorized
Maintenance Performer for service, repair, maintenance or overhaul
work on the Aircraft, the Engines or Parts, or for alterations,
modifications, or additions thereto, to the extent required or
permitted by the terms of Article 7.3.
5.1.1 Lessee will ensure that no Engine or Part installed on the Aircraft
is at any time removed from the Aircraft other than:
(a) if replaced as expressly permitted by this Agreement; or
(b) if the removal is of an obsolete item and is in accordance
with the Approved Maintenance Program; or
(c) (i) during the course of maintaining, servicing, repairing,
overhauling or testing that Engine or Part or the
Aircraft, as the case may be; or
(ii) as part of a normal engine or part rotation program; or
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(iii) for the purpose of making such modification to the
Engine or Part, or the Aircraft, as the case may be, as
are permitted under this Agreement,
and then in each case only if it is reinstalled or replaced by an
engine or part complying with Article 5.1.2(a) as soon as
practicable (or in the case of Article 5.1.1(c)(ii) in the ordinary
course of such program) and in any event no later than the Expiry
Date.
5.1.2 (a) Lessee will ensure that, except as permitted by this
Agreement, no engine or part is installed on the Aircraft
unless:
(i) in the case of an engine, it is an engine of the same
model as, or an improved or advanced version of the
Engine it replaces, which is in similar or better
operating condition, and in the case only of a Casualty
Occurrence, has substantially similar hours available
until the next scheduled checks, inspections, overhauls
and shop visits and has the same or greater value and
utility as the replaced Engine;
(ii) in the case of a part, it is in as good operating
condition, is of similar or a more advanced make and
model and is of the same interchangeable modification
status as the replaced Part;
(iii) in the case of any part, it has become and remains the
property of Lessor free from Security Interests and on
installation on the Aircraft will without further act be
subject to this Agreement and the Mortgage; and
(iv) in each case, Lessee has full details as to its source
and maintenance records.
(b) Provided no Default has occurred and is continuing, Lessee
shall be entitled to install any engine or part on the
Aircraft by way of replacement notwithstanding Article
5.1.2(a) if:
(i) there is not available to Lessee at the time and in the
place that 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 Article
5.1.2(a); and
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(ii) it would result in an unreasonable disruption of the
operation of the Aircraft and/or the business of Lessee
to ground the Aircraft until an engine or part, as the
case may be, complying with Article 5.1.2(a) becomes
available for installation on the Aircraft; and
(iii) as soon as reasonably practicable after installation of
the same on the Aircraft, Lessee removes any such engine
or part and replaces it with the Engine or Part replaced
by it or by an engine or part, as the case may be,
complying with Article 5.1.2(a).
5.1.3 Lessee will:
(a) ensure that any Engine or Part which is not installed on the
Aircraft (or any other aircraft as permitted by this
Agreement) is, except as expressly permitted by this
Agreement, properly and safely stored, and kept free from
Security Interests;
(b) from time to time on request, notify Lessor in writing as to
the location of any Engine and on request shall use its
reasonable efforts to procure that any person to whom
possession of an Engine is given acknowledges in writing to
Lessor, in terms satisfactory to Lessor, that it will respect
the interest of the Bank as mortgagee and Lessor (or, as the
case may be, Head Lessor) as owner and lessor of the Engine
and will not seek to exercise any rights whatsoever in
relation to it;
(c) (notwithstanding the foregoing provisions of this Article
5.1.3), be permitted, if no Default has occurred and is
continuing, to install any Engine or Part on an aircraft, or
in the case of a Part, on an engine:
(i) owned and operated by Lessee free from Security
Interests; or
(ii) leased or hired to Lessee pursuant to a lease or
conditional sale agreement on a long-term basis and on
terms whereby Lessee has full operational control of
that aircraft or engine; or
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(iii) acquired by Lessee and/or financed or refinanced, and
operated by Lessee, on terms that ownership of that
aircraft or engine, as the case may be, pursuant to a
lease or conditional sale agreement, or a Security
Interest therein, is vested in or held by any other
person; provided that in the case of (ii) and (iii):
(1) the terms of any such lease, conditional sale agreement or
Security Interest will not have the effect of prejudicing the
interests of the Bank as mortgagee or Lessor (or, as the case
may be, Head Lessor) as owner and lessor of that Engine or
Part; and
(2) the lessor under such lease, the seller under such conditional
sale agreement or the holder of such Security Interest, as the
case may be, has confirmed and acknowledged in writing to
Lessor, in form and substance satisfactory to Lessor, or has
otherwise agreed in writing that it will respect the interest
of Lessor (or, as the case may be, Head Lessor) or, generally
(without naming such parties) the owner and/or lessor as owner
and lessor and the Bank, or generally (without naming the
Bank) any mortgagee as mortgagee of that Engine or Part and
that it will not seek to exercise any rights whatsoever in
relation thereto; and, to the extent such an acknowledgment
has been given, Lessor hereby agrees, for the benefit of the
lessor, the seller, or secured party, as the case may be, of
any engine or part (other than an Engine or a Part) leased to
Lessee or owned by Lessee subject to a conditional sale or
other security agreement, that Lessor will not acquire or
claim, as against such lessor, seller or secured party, any
right, title or interest in any engine or engines owned by the
lessor under such lease or subject to a security interest in
favor of the seller or secured party under such conditional
sale or other security agreement as the result of such engine
or engines being installed on the Airframe at any time while
such engine or engines are subject to such lease or
conditional sale or other security agreement.
5.1.4 Lessee will not enter into nor permit any pooling agreement or
arrangement in respect of an Engine or Part without the prior
written consent of Lessor, which shall not be unreasonably withheld.
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5.2 Lessee shall use the Aircraft solely in commercial or other
operations for which Lessee is duly authorized by the Laws of the
State of Registration and/or any jurisdiction to whose Laws Lessee's
operation of the Aircraft is subject and shall not use or permit the
Aircraft to be used for any purpose for which the Aircraft is not
designed or reasonably suitable.
Lessee shall not use the Aircraft for the carriage of (i) whole
animals living or dead except in the cargo compartments according to
the United States Department of Transportation ("DOT") (or for
international flights, International Civil Aviation Organization
("ICAO")) regulations, and except domestic pet animals carried in a
suitable container to prevent the escape of any liquid and to ensure
the welfare of the animal; (ii) acids, toxic chemicals, other
corrosive materials, explosives, nuclear fuels, wastes, or any
nuclear assemblies or components, except as permitted for passenger
aircraft under the "Restriction of Goods" schedule issued by the DOT
(or for international flights, ICAO) from time to time and provided
that all the requirements for packaging or otherwise contained
therein are fulfilled; or (iii) any other goods, materials or items
of cargo which could reasonably be expected to cause damage to the
Aircraft and which would not be adequately covered by the insurance
required by or obtained pursuant to Article 11.
5.3 Lessee shall not permit the Aircraft to be maintained, used, or
operated in violation of any Law of any Government Entity having
jurisdiction, or contrary to any manufacturer's operating manuals
and instructions, or in violation of any airworthiness certificate,
license or registration relating to the Aircraft issued by any such
Government Entity. In the event that such Laws require alteration of
the Aircraft during the Term, Lessee shall conform therewith at its
own expense and shall maintain the same in proper condition for
operation under such Laws. Lessee agrees not to operate the Aircraft
or to permit or suffer the Aircraft to be operated (i) contrary to
applicable Law, and/or (ii) within or into any geographic area
unless the Aircraft is covered by insurance as required by the
provisions of Article 11 or insurance or an indemnity in lieu of
such insurance from the United States government against the risks
and in the amounts required by Article 11 covering such area, and/or
(iii) contrary to the terms of such insurance as required by the
provisions of Article 11.
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5.4 Throughout the Term and until re-delivery of the Aircraft to Lessor
in accordance with the provisions of this Agreement, the Aircraft
and every part thereof shall be in every respect at the sole risk of
Lessee, who shall bear all risks of loss, theft, damage or
destruction to the Aircraft from any cause whatsoever. Lessor shall
not be liable for any liability, claim, loss, damage or expense of
any kind or nature caused directly or indirectly by the Aircraft or
any part thereof by any inadequacy thereof for any purpose or any
deficiency or defect therein, by the use or performance thereof, by
any repairs or servicing thereto or any delay in providing or
failure to provide any thereof, by any interruption or loss of
service or use thereof, or by any loss of business or other
consequential damage or any damage whatsoever and howsoever caused
prior to re-delivery of the Aircraft to Lessor.
5.5 Lessee shall ensure that such crew and engineers as are employed by
it in connection with the operation and maintenance of the Aircraft
shall have such qualifications and hold such licenses as are
required by the Air Authority and by all applicable Laws and
regulations.
6. CHARGES, METHOD OF PAYMENT AND FINANCIAL INFORMATION
6.1 Lessee shall punctually pay to Lessor, when due, the Rent, Reserve
Rate and Supplemental Rent expressed to be payable by the Lessee to
the Lessor hereunder including the monies specified and calculated
in accordance with the provisions of Appendix D at the time and in
the manner therein specified, and shall punctually and duly observe
and perform Lessee's obligations under the said Appendix D which
forms an integral part of this Agreement. The time stipulated in
this Agreement for all payments payable by Lessee to Lessor and for
the performance of Lessee's other obligations under this Agreement
shall be of the essence of this Agreement.
6.2 Lessee shall not be entitled to any abatement, compensation,
reduction or set-off against any installment of Rent, the Reserve
Rate or Supplemental Rent, including but not limited to, abatements,
compensations, reductions or set offs, by reason of any past,
present or future claims of Lessee against Lessor or any other
person under this Agreement or otherwise.
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6.3 Lessee's obligation to pay Rent and make other payments in
accordance with this Agreement, until Lessee shall have redelivered
the Aircraft to Lessor in accordance with Article 16 and shall have
complied with its other obligations hereunder, shall be absolute and
unconditional irrespective of any contingency whatsoever including
(but not limited to) (i) any right of set-off, counterclaim,
recoupment, defense or other right which either party may have
against the other, (ii) any unavailability of the Aircraft for any
reason, including, but not limited to, any defect in the
airworthiness, merchantability, fitness for any purpose, condition,
design, or operation of any kind or nature of the Aircraft, or the
ineligibility of the Aircraft for any particular use or trade, or
for registration or documentation under the laws of any relevant
jurisdiction, or (save as herein provided) any Casualty Occurrence
in respect of or any damage to the Aircraft, (iii) any insolvency,
bankruptcy, reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceedings by or against Lessor
or Lessee, (iv) any invalidity or unenforceability or lack of due
authorization of, or other defect in this Agreement, (v) any failure
of Lessee to obtain any required license, certificate, authorization
or other approval of any Governmental Entity having jurisdiction
over the operation by Lessee of the Aircraft or the operation by
Lessee in any airport and (vi) any other cause which, but for this
provision, would or might have the effect of terminating,
frustrating or in any way affecting any obligation of Lessee
hereunder, it being the declared intention of the parties that the
provisions of this Article and the obligations of Lessee to pay the
Rent, the Reserve Rate and Supplemental Rent provided for by this
Agreement shall survive any frustration and that, save as expressly
provided in this Agreement, no monies payable hereunder by Lessee to
Lessor shall in any event or circumstance be repayable to Lessee.
6.4 Lessee agrees to furnish Lessor during the Term:
(i) Intentionally omitted;
(ii) upon Lessor requesting the same a quarterly unaudited balance
sheet of Lessee prepared by it as of the close of the most
recent previous financial quarter, together with the related
profit and loss statement for such period;
(iii) within ninety (90) days after the close of each financial year
of Lessee, an audited balance sheet and profit and loss
statement as of the close of such financial year;
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(iv) from time to time such other non-confidential information as
Lessor may reasonably request; and
(v) copies of all notices sent by Lessee (A) to its shareholders
or creditors as a group in their respective capacities as such
relating to major business or financial developments of Lessee
or (B) to the Securities and Exchange Commission in connection
with or following a public offering of the equity shares of
Lessee.
7. MAINTENANCE
7.1 Lessee, during the Term, at its own cost and expense shall:
(a) service, repair, maintain, overhaul, test, or cause the same
to be done to the Aircraft in accordance with the Approved
Maintenance Program so as to keep the Aircraft in as good
operating condition as when delivered to Lessee on the
Delivery Date, ordinary wear and tear excepted, and such
operating condition as may be necessary to enable the
airworthiness certificate of the Aircraft to be maintained in
good standing at all times under applicable Law, and Lessee
shall at all times maintain current certificates of
airworthiness (except in each case if Fokker 100 aircraft with
similar engines are grounded by the Air authority other than
as a result of the acts and omissions of Lessee) and Air
Authority required records of maintenance in respect of the
Aircraft and produce copies thereof to Lessor upon request;
(b) maintain in the English language all Aircraft Documents,
records, logs, and other materials required by applicable Laws
and best airline practice to be maintained in respect of the
Aircraft including engine trend monitoring data;
(c) perform, or cause to be performed, all airworthiness
directives and mandatory notes and mandatory bulletins
affecting the Aircraft having a compliance date during the
Term and issued by (a) the Air Authority and/or (b) Fokker or
any other manufacturer of any part of the Aircraft (except
that, in the event of a conflict, those required by the Air
Authority shall prevail);
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(d) maintain the Aircraft in conformity with Air Authority
Regulations and such other rules and regulations of the Air
Authority as may from time to time be applicable to passenger
category airline aircraft;
(e) provide Lessor by telex or fax message with a monthly
summation (which may utilize Air Authority forms) of Flight
Hours and Cycles accumulated on the Airframe, Engines, A.P.U.
and Landing Gear and details of all modifications and material
component changes within five (5) days after the end of each
month.
Such maintenance shall be performed by Lessee or by an Authorized
Maintenance Performer.
7.2 Except as otherwise provided herein, Lessee, at its own cost and
expense, shall promptly replace all Engines or Parts which may from
time to time become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair, or unserviceable with an engine
or part meeting the requirements of Article 5.1.2(a).
7.3 (a) Save as expressly herein provided the Aircraft shall not be
modified, altered, converted or added to (each such action in
relation to the Aircraft being herein referred to as an
"Equipment Change"), provided that Lessee may, at its own
expense and subject to the prior written approval of Lessor
(such approval not to be unreasonably withheld), make such
Equipment Changes to the Aircraft as Lessee may deem desirable
in the proper conduct of its business, provided that no such
Equipment Change diminishes the value, utility, condition or
airworthiness of the Aircraft below the value, utility,
condition and airworthiness thereof immediately prior to such
Equipment Change, assuming the Aircraft was then in the
condition required to be maintained by the provisions of this
Agreement.
(b) Title to all Parts incorporated or installed in or attached or
added to the Aircraft as the result of such Equipment Change
shall, without further act, vest in Lessor free and clear of
all liens, charges and encumbrances. Lessee shall at its own
expense take all such steps and execute, and procure the
execution of, all such instruments as Lessor may require and
which are necessary to ensure that title to any such
replacement Part as aforesaid passes to Lessor according to
the Governing Law and the lex situs, provided, however, that
so long as a Default shall not have
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occurred and be continuing, at any time during the Term,
Lessee may remove any such Part if (A) (i) such Part is in
addition to, and not in replacement of or in substitution for,
any Part originally incorporated or installed in or attached
to the Aircraft at the time of the delivery thereof hereunder,
(ii) such Part is not required to be incorporated or installed
in or attached or added to the Aircraft pursuant to the
provisions of Article 7.1 and (iii) such Part can be removed
from the Aircraft without diminishing or impairing the value,
utility or airworthiness which the Aircraft would have had at
such time, had such Equipment Change not occurred. Or (B) such
Part is deemed by Lessee to be obsolete or no longer suitable
or appropriate for use in the Airframe or Engines (an
"Obsolete Part") and its removal shall not materially decrease
the value or adversely affect the utility or remaining useful
life of the Airframe or Engines, or impair the condition or
airworthiness thereof below the value, utility or remaining
useful life, condition or airworthiness thereof immediately
prior to such removal (assuming the Aircraft was then in the
condition required to be maintained by the terms of the
Lease), except that the value (but not the utility, remaining
useful life, condition or airworthiness) of the Airframe or
the Engines may be reduced, to the extent resulting from the
removal of Obsolete Parts, if the aggregate original cost of
all Obsolete Parts removed from such Aircraft and not replaced
shall not exceed $70,000.
(c) Upon the removal by Lessee of any such Part as above provided,
title thereto shall, without further act, vest in Lessee and
such Part shall no longer be deemed a part of the Aircraft.
Any Part not removed by Lessee as above provided prior to the
return of the Aircraft to Lessor hereunder shall remain the
property of Lessor (save as the parties may otherwise agree in
writing) provided that Lessor may require Lessee, prior to the
end of the Term, to remove any Parts incorporated or installed
in the Aircraft as a result of an Equipment Change and to
restore the Aircraft to its condition prior to an Equipment
Change.
7.4.1 Upon submission by Lessee to Lessor of invoices or receipts
reasonably satisfactory to Lessor evidencing the performance in
accordance with the provisions of this Agreement by or at the
direction of Lessee of:
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(a) with respect to the Airframe, the accomplishment of those
items of maintenance characterized as scheduled airframe heavy
maintenance as defined in the Approved Maintenance Program for
12,000 hours and 24,000 hours inspections or any equivalent
thereof with more or less hours ("Airframe Maintenance"), or
(b) with respect to any Engine, the performance of all scheduled
shop visit engine maintenance and repair, other than (i)
repairs arising as a result of foreign object damage or
operational mishandling and/or (ii) maintenance and repair of
QEC (Quick Engine Change) kits ("Engine Maintenance"), or
(c) with respect to any nose or main landing gear ("Landing
Gear"), the performance of all scheduled shop visit nose and
main landing gear maintenance and repair, other than repairs
arising as a result of foreign object damage or operational
mishandling ("Landing Gear Maintenance"),
Lessor shall, subject to Article 3.6 of Appendix D and provided that
a Default shall not have occurred and be continuing, release to
Lessee, from the relevant Maintenance Fund as defined in paragraph
3.2 of Appendix D, a sum equal to the aggregate amount evidenced by
such invoices or receipts for such relevant maintenance, to the
extent there are sufficient sums in the relevant Maintenance Fund at
the date of the start of the relevant maintenance. Lessee agrees to
use its reasonable efforts to ensure that the relevant invoices or
receipts are received by Lessor as promptly as possible after
completion of the relevant maintenance. All sums remaining in any
Maintenance Fund at the expiration or other termination of this
Agreement shall be retained by Lessor, except (i) upon payment in
full of Agreed Value and any other amounts due to Lessor or
otherwise hereunder after a Casualty Occurrence pursuant to Article
17.2(b), in which case all sums remaining in any Maintenance Fund
shall be paid to Lessee and (ii) under the circumstances and to the
extent described in Article 3.6 or 9 of Appendix D.
For the avoidance of doubt, Lessor shall not refuse to release
monies from the Maintenance Fund on the ground that maintenance was
required due to operational mishandling, provided that Lessee can
demonstrate that Lessee complied with the original equipment
manufacturer's written instructions.
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7.4.2 Lessor shall be entitled to delay the release or payment of funds
from any Maintenance Fund (to the extent related to any disputed
amounts) to Lessee provided for by this Article 7 until such time as
it shall in its opinion be in a position to determine (which Lessor
agrees to use reasonable efforts to do as promptly as possible) the
amount to be released or paid, but in any event release all
undisputed amounts from the relevant Maintenance Fund (but where
insufficient funds are in such maintenance Fund the lesser pro rata
portion of such funds which corresponds to the undisputed amount)
upon request unless a Default shall have occurred and be continuing.
7.5.1 During the Term, Lessee shall furnish to Lessor such information
concerning the location, condition, use and operation of the
Aircraft as Lessor may reasonably request. The right of Lessor, or
its designated representatives, to inspect the Aircraft during any
Major Checks performed by or on behalf of Lessee during the Term,
shall be absolute and Lessee shall inform Lessor by providing sixty
(60) days' written notice as to time and location of all Major
Checks. During such Major Checks, Lessee agrees to provide
sufficient manpower to allow Lessor, or its authorized
representatives, to inspect any area of the Aircraft which Lessor
requests to inspect and which would normally be required during such
a Major Check, provided that such inspection is to be made only at
the time that Lessee opens up such area in accordance with the
Approved Maintenance Program.
Lessee also shall permit any persons designated by Lessor to visit
and inspect the Aircraft, its condition, use and operation, and the
records maintained in connection therewith.
7.5.2 Lessor shall have the right at any time on reasonable notice to
inspect or survey the Aircraft or any part thereof, or instruct a
duly authorized surveyor to carry out a survey on its behalf, to
ascertain the condition of the Aircraft or any part thereof and
satisfy itself that the Aircraft is being properly repaired and
maintained in accordance with the terms of this Agreement. The cost
of any such inspection or survey shall be borne by Lessor unless an
Event of Default has occurred and is continuing.
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7.5.3 Lessor shall have no duty to make any such inspection as is referred
to in Article 7.5.1 and 7.5.2 and shall not incur any liability or
obligation by reason of not making any such inspection. Except in
connection with any Event of Default, no exercise of any inspection
right under Articles 7.5.1, 7.5.2 or any other provision of this
Agreement shall interfere with the normal operation or maintenance
of the Aircraft or the business of Lessee and shall be conducted
during normal maintenance or business hours. In connection with any
such inspection, Lessee shall allow Lessor or any persons designated
by Lessor to copy, at Lessor's cost and expense, any Aircraft
Documents or other records relating to maintenance and operation of
the Aircraft. Lessee shall not be liable for the use of any such
Aircraft Documents or other records by Lessor or any other person or
entity which use is unrelated to Lessee's compliance with the terms
of this Agreement.
8. TAXES, DUTIES AND EXPENSES
8.1 Lessee agrees promptly to pay and indemnify and hold Lessor and Head
Lessor harmless against all Taxes (other than Lessor Taxes) levied
or imposed against or upon or otherwise payable by any Tax
Indemnitee or Lessee and relating to or attributable to Lessee, this
Agreement, the Aircraft and/or the importation, exportation,
registration, ownership, leasing, subleasing, delivery, possession,
use, operation, reregistration, repair, maintenance, overhaul,
replacement, improvement, modification, alteration, transportation,
landing, storage, presence or re-delivery of or addition to, the
Aircraft or any Engine or any Part thereof or any rent, receipts,
insurance proceeds or income arising therefrom, or any sum payable
by Lessee to a Tax Indemnitee under this Agreement or any other
transactions or activities contemplated by this Agreement. If Lessee
is required by any applicable Law or regulation to deliver or
furnish any report or return in connection with any such Taxes,
Lessee shall complete the same in a manner satisfactory to the
relevant Tax Indemnitee and in particular shall state therein that
Lessor or Head Lessor, as the case may be, is the owner of the
Aircraft and that the Lessee is exclusively responsible for the use
and operation of the Aircraft and for any such Taxes and Lessee
shall supply a copy of such report or return to the relevant Tax
Indemnitee.
All payments by Lessee hereunder to Lessor shall be free of
withholdings of any nature whatsoever (and at the time Lessee is
required to make any payment upon which any withholding is required,
Lessee shall pay an
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additional amount such that the net amount actually received by the
Lessor will, after such withholding, equal the full amount of the
payment then due) and shall be free of expense for collection or
other charges.
If Lessee shall have paid any additional amount pursuant to the
first sentence of this paragraph with respect to Taxes not subject
to indemnification pursuant to the provisions of this Section 8.1,
the Lessor for whose benefit such Taxes were paid shall reimburse
Lessee within 10 Business Days of written demand therefor for the
amount of such Taxes so paid by Lessee. For the purpose of Article
1.10 and Article 8, the terms, "Lessor" and "Head Lessor" shall
include each group of corporations (and each member thereof) that
includes Lessor or Head Lessor and for which consolidated, combined,
unitary or other group tax returns are filed.
8.2 Except as otherwise specifically provided herein, Lessee shall pay
to Lessor on or after Delivery Date (unless otherwise agreed to be
financed by Lessor or to be paid by Transwede pursuant to the
Tripartite Agreement) upon demand:
(a) all reasonable expenses paid to third parties (including
legal, printing and out-of-pocket expenses) incurred or
payable by Lessor (i) in connection with the negotiation,
preparation and execution of this Agreement and all related
documents, including reasonable out-of-pocket expenses in
connection with this Agreement and (ii) related to any
amendment to or extension of, or the granting of any waiver or
consent under, this Agreement, resulting from the first
refinancing of the Aircraft by the Bank or from a request of
Lessee; but in the case of such a refinancing, Lessee shall
not be liable for the payment of any legal fees (other than
those of its own counsel or those of Lessor's special Air
Authority counsel incurred in connection with the filing of
certain documents with the Air Authority or the issuance of an
opinion with respect thereto) or any loan or loan brokerage
fees;
(b) all reasonable expenses paid to third parties (including legal
fees and disbursements but excluding surveyor costs) payable
or incurred by Lessor in connection with, the enforcement of
or preservation of any rights of Lessor under this Agreement
or otherwise in respect of moneys owing under this Agreement
by Lessee or in respect of any breach of Lessee of any
representation,
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warranty, covenant or undertaking herein contained; and
(c) the ongoing annual fees and reasonable out-of-pocket expenses
related to this Agreement of the Owner Trustee, the Voting
Trustee and any trustee on behalf of the Bank (other than
those incurred pursuant to a change in any of such trustees
which was not requested by Lessee);
8.3 Lessee shall pay all stamp, documentary, registration or other like
duties or taxes (including any such duties or taxes payable by a Tax
Indemnitee but excluding all Lessor Taxes) imposed on or in
connection with this Agreement and shall indemnify that Tax
Indemnitee against any liability arising by reason of any delay or
omission by Lessee to pay such duties or taxes.
8.4 If and to the extent that any sum (the "indemnity sum") constituting
(directly or indirectly) an indemnity to one or more Tax Indemnitees
paid by Lessee to any person other than that Tax Indemnitee shall be
treated as taxable in the hands of the relevant Tax Indemnitee,
Lessee shall pay to the relevant Tax Indemnitee a sum as (after
taking into account any taxation suffered by the relevant Tax
Indemnitee on the indemnity sum) shall reimburse the relevant Tax
Indemnitee for the net amount of any Taxes suffered by them in
respect of the indemnity sum (after taking into account any current
tax savings or other benefits to the relevant Tax Indemnitee
resulting from the payment or accrual of the indemnified expense).
8.5 If and to the extent that any sums payable to a Tax Indemnitee by
Lessee under this Agreement by way of indemnity are insufficient, by
reason of any Taxes payable in respect of those sums, for that Tax
Indemnitee to discharge the corresponding liability to the relevant
third party (including any taxation authority), or to reimburse that
Tax Indemnitee for the cost incurred by it to a third party
(including any taxation authority), Lessee will pay to that Tax
Indemnitee such sum as will after the tax liability has been fully
satisfied leave that Tax Indemnitee with the same net amount (after
taking into account any current tax savings or other benefits to the
that Tax Indemnitee resulting from the payment or accrual of the
indemnified expense) as it would have been entitled to receive in
the absence of that liability. For the purpose of computing the
amount of an indemnity payment pursuant to this Article 8.5 and the
amount of any payment to Lessee under Article 8, it shall be assumed
that the relevant Tax Indemnitee is subject to tax on
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the amount of each indemnity it receives or accrues under this
Agreement and can use any tax savings to offset Taxes at the highest
marginal statutory rates of tax applicable to that Tax Indemnitee
(as certified to Lessee by an officer of that Tax Indemnitee) at the
time such indemnity or tax savings is received or accrued.
8.6 If, as a result of any indemnity paid by Lessee or any event giving
rise to an indemnity obligation of Lessee, a Tax Indemnitee at any
time realizes any tax savings, refunds or other reductions in taxes
not previously taken into account in computing the amount of the
indemnity, that Tax Indemnitee shall promptly pay to the Lessee the
amount of such tax savings, refunds or other reductions in taxes;
provided, however, that no Tax Indemnitee will be required to make
any payment to Lessee pursuant to this Article 8.6 so long as a
Default shall be continuing or if Lessee shall not have theretofore
made all payments due to all Tax Indemnitees under this Agreement,
or to the extent that the amount of such payment would exceed the
amount of all prior payments by Lessee to the relevant Tax
Indemnitee pursuant to this Article 8 less the amount of all prior
payments by the relevant Tax Indemnitee to Lessee pursuant to this
Article 8.6. The relevant Tax Indemnitee shall estimate the amount
of such tax savings, refunds and other reductions in Taxes and shall
use reasonable efforts to take such actions in filing its tax
returns and in dealing with taxing authorities to seek and claim
each such tax savings, refund and other reduction in Taxes, but
shall not be obligated to take any such action that it determines in
its sole discretion to involve the imposition or risk of any
material unindemnified cost or expense, and in no event will any
person have any right to inspect the books, records, tax returns or
other documents of any Tax Indemnitee, and the positions to be taken
by any Tax Indemnitee on or with respect to its tax returns and in
any tax proceedings shall be within their sole control.
8.7 Lessee's, and each Tax Indemnitee's obligations under this Article 8
shall continue in full force and effect, notwithstanding the
expiration or earlier termination of the Term hereunder.
8.8 If Lessee disputes the payment of any Taxes payable by a Tax
Indemnitee for which Lessee is responsible under this Agreement,
that Tax Indemnitee will take such action as Lessee may reasonably
request at Lessee's expense to contest that payment but that Tax
Indemnitee will not be obliged to take any such action:
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(a) which that Tax Indemnitee considers in good faith may result
in the imposition or risks of any material liability cost, or
expense for which that Tax Indemnitee is not indemnified to
its satisfaction; or
(b) which that Tax Indemnitee considers not to have a reasonable
prospect of success; or
(c) for which Lessee has not made adequate provision to the
satisfaction of that Tax Indemnitee in respect of the expense
concerned.
8.9 Lessor covenants and agrees to deliver to Lessee, (a) within 30 days
prior to January 1, 1996 and each January 1 falling every three
years thereafter (or at such other date as prescribed by United
States Treasury Regulations) as long as this Agreement has not been
terminated, two accurate and complete original copies of Internal
Revenue Service Form 1001 (or any successor form), dated the date
hereof or January 1, 1996 (or such subsequent January 1 or other
date) signed by Beneficiary, as appropriate, and such other related
forms (including any certificate with respect thereto) as Lessee may
reasonably request, or (b) within 30 days of the signing of this
Agreement (but in all events prior to the date of the first payment
of Rent to Lessor under this Agreement) and within 30 days prior to
the beginning of each taxable year of Lessor beginning subsequent to
the date of this Agreement (or at such other date as prescribed by
United States Treasury Regulations), two accurate and complete
original copies of Internal Revenue Service Form 4224 (or any
successor form), signed by Beneficiary, dated as appropriate, and
such other related forms (including any certificate with respect
thereto) as Lessee may reasonably request. In addition, Lessor shall
deliver to Lessee two accurate and complete original copies of Form
1001 or Form 4224 signed by Beneficiary, at any time that a change
in circumstances renders the previous form inaccurate in any
material respect. Nothing in this Article 8.9 shall be construed as
imposing on the Lessee any obligation whatsoever, including, without
limitation, to indemnify Lessor or any other party for U.S.
withholding taxes.
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9. LIENS
9.1 Lessee, during the Term, shall not create or suffer to exist any
lien, attachment, mortgage or other encumbrance upon or against the
Aircraft, or any of its rights under this Agreement, other than the
Mortgage, the Security Assignment and Permitted Liens. If at any
time a lien, attachment, mortgage, or other encumbrance except as
permitted above shall be created or suffered to exist by Lessee, or
be levied upon the Aircraft or any of its rights under this
Agreement, Lessee shall forthwith notify Lessor and cause the same
forthwith to be discharged by bond or otherwise. In the event Lessee
shall fail to discharge any such lien, attachment, mortgage or other
encumbrance, Lessor, Head Lessor or the Bank shall be entitled (but
not bound) to discharge the same, in which event Lessee shall pay to
Lessor, on demand, the amount paid by Lessor and/or Head Lessor
and/or the Bank, together with Lessor's and/or Head Lessor's and/or
the Bank's losses, costs and expenses, including reasonable legal
fees and expenses.
10. INDEMNIFICATION
10.1 LESSEE SHALL RELEASE AND DEFEND, HOLD HARMLESS AND INDEMNIFY ANY
AND/OR ALL OF THE INDEMNITEES, FROM AND AGAINST ANY AND ALL CLAIMS,
PROCEEDINGS, SUITS, JUDGMENTS, COSTS, EXPENSES, PENALTIES, FINES AND
LIABILITIES, DIRECT AND CONSEQUENTIAL DAMAGES AND LOSSES, INCLUDING
WITHOUT LIMITATION COSTS AND EXPENSES INCIDENTAL THERETO, OF
WHATSOEVER KIND AND NATURE, AND INCLUDING REASONABLE LEGAL FEES AND
EXPENSES BUT EXCLUDING ANY TAXES, INDEMNITY FOR WHICH IS ENCOMPASSED
SOLELY IN ARTICLE 4.1 AND ARTICLE 8 (EACH A "CLAIM"), ATTRIBUTABLE
TO ACTS OR OMISSIONS OCCURRING DURING THE TERM OF THIS AGREEMENT,
WHICH MAY BE SUFFERED BY, ASSERTED AGAINST, CHARGED TO OR
RECOVERABLE FROM, DIRECTLY OR INDIRECTLY, ANY AND/OR ALL OF THE
INDEMNITEES:
(A) RELATING TO, ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE
POSSESSION, DELIVERY, PERFORMANCE, MANAGEMENT, OWNERSHIP,
REGISTRATION, CONTROL, MAINTENANCE, CONDITION, SERVICE,
REPAIR, OVERHAUL, LEASING, USE, OPERATION OR RETURN OF THE
AIRCRAFT, ANY ENGINE OR ANY PART, OR THE PERFORMANCE OR
NON-PERFORMANCE OF ANY AND/OR ALL OF THE INDEMNITEES OF
SERVICES OR DELIVERY OF ANY THINGS IN CONNECTION WITH THE
AIRCRAFT DURING THE TERM, OR OTHERWISE IN CONNECTION WITH THIS
AGREEMENT, WHETHER OR NOT ARISING IN TORT OR OCCASIONED IN
WHOLE OR IN PART BY THE FAULT OR NEGLIGENCE OF ANY AND/OR ALL
OF THE INDEMNITEES; OR
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(B) AS A CONSEQUENCE OF ANY DESIGN, ARTICLE OR MATERIAL IN THE
AIRCRAFT, ANY ENGINE OR ANY PART OR ITS OPERATION OR USE
CONSTITUTING AN INFRINGEMENT OF PATENT (TO THE EXTENT AND
SCOPE AND SUBJECT TO THE LIMITATIONS SET FORTH IN PART C OF
EXHIBIT G OF THE SUPPORT SERVICES AGREEMENT), COPYRIGHT,
TRADEMARK, DESIGN OR OTHER PROPRIETARY RIGHT OR A BREACH BY
LESSEE OF ANY OBLIGATION OF CONFIDENTIALITY OWED TO ANY
PERSON;
EXCLUDING, HOWEVER, FROM THE FOREGOING ANY SUCH CLAIM TO THE
EXTENT THAT SUCH CLAIM RESULTS FROM (I) THE FAILURE OF
TRANSWEDE TO SATISFY ANY OF ITS OBLIGATIONS TOWARDS
BENEFICIARY AND/OR FOKKER UNDER THE TRIPARTITE AGREEMENT, OR
(II) THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH
INDEMNITEE, OR (III) FROM ANY MISREPRESENTATION BY SUCH
INDEMNITEE CONTAINED IN THIS AGREEMENT OR ANY BREACH BY SUCH
INDEMNITEE OF ANY COVENANT SET FORTH IN THIS AGREEMENT.
10.2 The indemnities contained in this Article 10 shall continue in full
force and effect notwithstanding the expiration or other termination
of this Agreement or of the letting of the Aircraft hereunder.
10.3 The indemnities contained in this Article 10 are given to the Lessor
for itself and as agent and trustee on behalf of the other
Indemnitees
10.4 Notwithstanding anything to the contrary contained herein, Lessee
does not release and does not agree to defend, hold harmless or
indemnify under this Agreement (and without limiting any obligations
or indemnities contained in any other agreement with Lessee) Fokker
or any other Indemnitee in its capacity as manufacturer or seller of
the Aircraft from or against (i) claims of third parties made
directly against Fokker or such Indemnitee, based on its product
liability or its status as manufacturer or seller, or (ii) claims
made against Fokker or such Indemnitee based on the warranties or
indemnities contained in the Product Assurance Document which is
Exhibit G of the Support Services Agreement, or (iii) the matters
described in Article 10.1(B).
10.5 If any Indemnitee has knowledge of the occurrence of any Claim,
liability or other matter for which it is or may be entitled to be
indemnified hereunder, it shall give prompt written notice thereof
to the Lessee. Each Indemnitee shall cooperate in good faith with
Lessee and supply such information as may reasonably be requested by
Lessee to enable Lessee to investigate, defend or contest any Claim,
liability or other matter
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for which Lessee may be required to indemnify an Indemnitee
hereunder. In the event that Lessee pays any amount to an Indemnitee
pursuant to this Article 10, Lessee shall be subrogated to all
rights of the Indemnitee in respect of the Claim, liability or other
matter indemnified against giving rise to such payment. Lessee or
its insurers shall have the right, unless an Event of Default shall
have occurred and be continuing and such matter is not covered by
insurance, to investigate or (provided that Lessee or its insurers
shall agree not to dispute liability hereunder or under any
insurance policies pursuant to which coverage is sought and provided
that Lessee shall have consulted with Lessor prior thereto), defend
or compromise any Claim, and Lessor shall cooperate with Lessee with
respect thereto.
11. INSURANCE
11.1 On or before the Expected Delivery Date of the Aircraft and
throughout the Term, Lessee shall carry and maintain in full force
and effect, at its own cost and expense, in such forms, on such
conditions and with such insurers and, if requested, reinsurers and
through such insurance and, if requested, reinsurance brokers as are
satisfactory to Lessor, the following insurances with respect to the
Aircraft, Engines and Parts (herein referred to as "the
Insurances"):
(a) All Risks Aircraft Hull insurance of the type usually insured
against by commercial airlines engaged in the same or similar
business and owning or operating similar aircraft (including
Engines and Parts while not installed on the Aircraft and
including Extended Coverage Endorsement (Aircraft Hull) AVN51
or equivalent on the Agreed Value. The insurance may be
subject to a deductible in respect of losses other than total
loss, arranged total loss or constructive total loss of not
more than $100,000.00 (Dollars One Hundred Thousand) for each
accident.
(b) If operated outside the United States and Canada, Aircraft
Hull War and Allied Perils insurance covering the risks
excluded from the All Risks Aircraft Hull insurance specified
in paragraph (a) above by the terms of the War, Hi-Jacking and
Other Perils Exclusion Clause AVN.48B except paragraph (b)
thereof and shall include cover in respect of confiscation,
nationalization, seizure, restraint, detention, appropriation
for title or use by or under the order of any Government
Entity of the State of Registration.
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(c) Comprehensive Airline Liability insurance (including without
limitation aircraft Third Party Liability, Passenger and Crew
Liability (including Baggage and Personal Effects)), Cargo
Liability, Mail Liability, Personal Injury Liability,
Contractual Liability, Hangar Keeper's Liability, Aircraft
Products Liability and General Third Party Liability of the
types usually insured against by commercial airlines engaged
in the same or similar business and owning or operating
similar (but not necessarily Fokker-manufactured) aircraft in
an amount of not less than $500,000,000.00 (Dollars Five
Hundred Million) Combined Single Limit any one occurrence each
Aircraft but limited in respect of Personal Injury to the
equivalent of $25,000,000.00 (Dollars Twenty Five Million) any
one offense and in the aggregate.
Such insurance shall include cover in respect of the risks
excluded by War, Hi-Jacking and Other Perils Exclusion Clause
AVN.48B except paragraph (b) thereof.
This insurance may be subject to deductibles in respect of
passengers baggage and personal effects of not more than
$1,250.00 (Dollars One Thousand Two Hundred Fifty) any one
claim and in respect of cargo and mail of not more than
$5,000.00 (Dollars Five Thousand) any one claim. Such
deductibles shall not apply to claims arising from accidents
to the carrying aircraft.
(d) All Risks insurance on Engines and Parts while any such items
are not installed on the Aircraft and in respect of which
cover is not provided under the All Risks Aircraft Hull
insurance and/or Aircraft Hull War and Allied Perils insurance
(respectively specified in paragraphs (a) and (b) above) of
the type usually insured against by commercial airlines
engaged in the same or similar business and owning or
operating similar aircraft for not less than full replacement
value. If Engines and Parts are located outside the United
States and Canada, such insurance shall include War and Allied
Perils to the extent that such insurance is customarily
available in the international insurance market for this type
of insurance.
This insurance may be subject to a deductible of not more than
$10,000.00 (Dollars Ten Thousand).
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The Lessor will accept a United States government indemnity
(as referred to in Article 5.3) in lieu of the foregoing or as
otherwise required under this Article 11. Lessor's current
requirements as at the date of this Agreement as to the
Insurances are as specified in this Article and in Appendices
H and I. Lessor reserves the right to amend, and will
cooperate with Lessee reasonably to amend, the insurance
requirements of this Article 11 to reflect changes in
insurance practice.
If required by the first paragraph of Article 11.1, the Lessee
shall procure that the insurers effect reinsurances in the
same form and conditions through such reinsurance brokers and
with such reinsurers and for such proportions as are
satisfactory to Lessor.
11.2 All Insurances to be carried in accordance with Article 11.1 above
shall:
(a) in respect of All Risks Aircraft Hull insurance, Aircraft Hull
War and Allied Perils insurance and All Risks insurance on
Engines and Parts:
(i) name the Lessor, Head Lessor and the Bank and their
respective successors and assigns as additional
assureds;
(ii) provide that all claims in respect of the Aircraft,
Engines and Parts shall be payable to Lessor or as it
may direct, such payee to be named Loss Payee; provided,
that partial loss amounts up to the Partial Loss Amount
set forth in Appendix B shall be payable to Lessee
unless the insurers have been given notice that a
Default has occurred; and
(iii) if applicable, provide in respect of Hull All Risks and
Hull War and Allied Perils for a 50/50 Claims Settlement
Clause in the form of AVS.103;
(b) in respect of Comprehensive Airline Liability insurance:
(i) name the Lessor, its successors and assigns and its
shareholders, subsidiaries, directors, officers, agents,
employees and the Indemnitees as additional assureds;
and
(ii) provide that the insurance shall operate in all respects
as if a separate policy had been issued covering each
party insured
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thereunder, but this provision shall not operate to
include any claim howsoever arising in respect of loss
or damage to the Aircraft, Engines and Parts insured
under the All Risks Hull, Hull War and Allied Perils or
All Risks insurance of the assured. Notwithstanding the
foregoing the total liability of insurers in respect of
any and all assureds shall not exceed the limits of
liability stated in the policy;
(c) in respect of all Insurances:
(i) be effective worldwide except for territories approved
in writing by the Lessor;
(ii) provide that insurers waive all rights of subrogation
against the Lessor, its subcontractors, FAUSA, Fokker,
the Head Lessor, the Bank, and their respective
officers, directors, employees, servants, agents,
successors and assigns;
(iii) provide that in the event that the Insurances are
canceled (including cancellation for nonpayment of
premium) or are materially changed such cancellation or
change shall not be effective as to the interest of the
Lessor until thirty (30) days (but seven (7) days or
such lesser period as is customarily available in
accordance with policy conditions in respect of war and
allied perils) after confirmed receipt by Lessor of
written notice by insurers of such cancellation or
change;
(iv) provide that in respect of the interests of the
Additional Assureds, the Insurances shall not be
invalidated by any act, neglect, omission,
misrepresentation or non-disclosure on the part of the
Lessee or any other party other than the Additional
Assured seeking to make a claim thereunder, and shall
insure each Additional Assured regardless of any breach
or violation of any warranties, declarations or
conditions contained in such policies by the Lessee or
any other party other than the Additional Assured
seeking to make a claim thereunder;
(v) provide that the Additional Assureds shall have no
responsibility for premium and insurers shall waive any
right of set-off or counterclaim against the Additional
Assureds
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except in respect of outstanding premium in respect of
the Aircraft, Engines and Parts subject of a claim;
(vi) not provide for any deductible or self insurance other
than the deductibles allowed under the terms of Article
11.1 above;
(vii) be primary without right of contribution from any other
insurance carried by Lessor, Lessee or any other person;
and
(viii) be denominated in Dollars.
11.3 If required by the first paragraph of Article 11.1, the re-insurance
policies shall:
(a) provide that cover shall be identical to the cover provided by
the original insurances and be subject to the same terms and
conditions as the original insurances;
(b) provide that so far as the respective interests of the
Additional Assureds are concerned the reinsurance shall not be
invalidated by any act, neglect, omission, misrepresentation
or non-disclosure on the part of the reinsured party;
(c) confirm the insurers' agreement to the provision of paragraph
(d) below;
(d) include a "cut-through" clause in the following terms or in
such other terms as may be satisfactory to Lessor:
"In respect of All Risks Aircraft Hull insurance, Aircraft
Hull War Risk and Allied Perils insurance as described in
Article 11.1(a) and (b) above and All Risks insurance on any
Engine and Parts as described in Article 11.1(d) above, the
reinsurers and the reassured hereby agree that in the event of
any claim arising under the relevant reinsurances the
reinsurers shall in lieu of payment to the reassured, its
successors in interest and assigns pay to the Loss Payee
specified in the primary insurances all sums payable under or
in connection with such reinsurances by virtue of any
reinsured loss of, or damage to, the Aircraft, Engines and
Parts, without any deduction or deductions whatsoever, other
than any outstanding premium in respect of
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the Aircraft, Engines or Parts the subject of the claim, it
being understood and agreed that any such payment by the
reinsurers shall fully discharge and release the reinsurers
from any and all further liability in connection therewith.
In respect of Comprehensive Airline Liability insurance as
described in Article 11.1(c) above, the reinsurers and
reassured hereby agree that in the event of any claim arising
under the relevant reinsurances, the reinsurers shall in lieu
of payment to the reassured, its successors in interest and
assigns pay to the person or party who has sustained the
relevant loss (or as reimbursement of any payment made by any
Additional Assureds) all sums payable under such reinsurances
by virtue of such reinsured loss, without any deduction or
deductions whatsoever, it being understood and agreed that any
such payment by the reinsurers shall fully discharge and
release the reinsurers from any and all further liability in
connection therewith"; and
(e) provide that the reinsurers and reassured agree that in the
event that the reassured, its successors in interest and
assigns shall at any time be or become insolvent or suspend
business or file a petition in bankruptcy or be adjudicated
insolvent or bankrupt or admit in writing its inability to pay
its debts as they become due, or make a general assignment for
the benefit of creditors or that a receiver or liquidator or
assignee or trustee or state commissioner of insurance be
appointed in respect of the reassured its successors in
interest or assigns or any substantial part of its property
for the purpose of liquidation on account of insolvency, then
the reinsurers, in lieu of payment to the reassured, its
successors in interest or assigns, shall pay upon demand that
portion of any loss due to the party entitled thereto under
the terms of the original insurance for which such reinsurers
would under the terms of the reinsurance be liable to pay the
reassured, its successors in interest or assigns, less any
amounts already paid, it being understood and agreed that any
such direct payment by reinsurers shall fully discharge and
release the reinsurers from any and all further liability for
such payment made.
11.4 Prior to the Expected Delivery Date and thereafter during the Term,
at least five (5) Business Days prior to the renewal date of any
Insurance required or maintained by Lessee under Article 11.1 but in
no event
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less than once in each 12 month period, Lessee shall furnish or
cause to be furnished to Lessor by the insurer or insurance broker
and the reinsurance broker
1) a certificate of insurance describing in detail the insurance
then carried and maintained, and certifying that such
insurance complies with the terms of this Agreement,
including:
(i) confirmation that the insurance/reinsurance has been
placed with the insurers/reinsurers required (giving the
name of such insurers reinsurers), the insured/reinsured
amount and the period of the policy and
(ii) confirmation that all premiums due to
insurers/reinsurers have been paid,
and
2) a letter of undertaking from Lessee's brokers and, if
required, from the reinsurance brokers.
Such certificate(s) of insurance and letter(s) of undertaking
shall be in form and substance satisfactory to Lessor.
In the event that Lessee shall fail to effect, maintain or cause to
be effected or maintained, insurance as required by this Article 11,
Lessor, Head Lessor or the Bank may at its option, but without any
obligation to do so, and without prejudice to Lessor's, Head
Lessor's and the Bank's other rights or remedies hereunder, maintain
such insurance or provide such or a similar insurance, and, in such
event, Lessee shall, upon demand, promptly reimburse to Lessor, Head
Lessor or the Bank the cost thereof, including interest thereon at
the rate referred to in paragraph 6 of Appendix D.
11.5 In the event of any damage to the Aircraft, Engines or Parts during
the Term not constituting a Casualty Occurrence, Lessee shall, if so
consented to by Lessor (such consent not to be unreasonably
withheld), repair, or cause the same to be repaired by an Authorized
Maintenance Performer at its sole cost and expense. Except as
otherwise provided in Section 11.2(a)(ii), Lessor and Lessee agree
that all insurance proceeds payable in connection with any such
damage shall be payable directly to Lessor. In such event any
insurance proceeds received by Lessor shall be applied to reimburse
Lessee for such cost and expense. Any excess remaining shall, unless
a Default shall have occurred and be continuing, be paid over to
Lessee.
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11.6 Intentionally Omitted.
11.7 When used in this Article 11, the expression Additional Assured(s)
denotes:
(a) in relation to those insurances referred to in Article
11.2(a), those persons referred to in subparagraph (i) of
Article 11.2(a); and
(b) in relation to those insurances referred to in Article
11.2(b), those persons referred to in subparagraph (i) of
Article 11.2(b).
12. ASSIGNMENT AND SUBLETTING
12.1 Lessee shall not assign any of its rights or obligations or delegate
any of its duties under this Agreement and, except as permitted by
Article 5.1 above, Lessee shall not sublet or otherwise part with
possession of the Aircraft or any Part thereof unless previously
approved by Lessor in writing (such consent not to be unreasonably
withheld).
Lessee may wet lease the Aircraft whereby the term "wet lease" shall
mean an agreement whereby Lessee at all times retains operational
control of the cockpit and the Aircraft including all of its
maintenance.
12.2 This Agreement, the Aircraft and Lessor's interest in each thereof
is freely assignable and alienable by Lessor upon written notice to
Lessee in accordance with Article 12.3, provided, however, that so
long as the Aircraft shall be leased to Lessee under this Lease,
Lessor will not sell, assign, convey or otherwise transfer
absolutely (and not for security) any of its right, title, or
interest in and to this Agreement or the Aircraft to any person
unless Lessor and the proposed transferee (the "Transferee") have
complied with the following conditions:
(i) Lessor shall give Lessee written notice of such transfer
at least 3 Business Days before the date of such
transfer, specifying the name and address of the
proposed Transferee;
(ii) the Transferee shall not be an airline or a commercial
air carrier or person controlling, controlled by or
under common control with an airline or a commercial air
carrier which is in direct competition with Lessee in
the United States;
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(iii) the Transferee shall qualify as a "citizen of the United
States" within the meaning of Section 40102(a)(15) of
Title 49 of the United States Code by a Voting Trust
Agreement or otherwise; and
(iv) on the transfer date the Lessor and the Transferee shall
enter into an agreement or agreements in which the
Transferee confirms that it shall be deemed a party to
this Lease and agrees to be bound by all the terms of,
and to undertake all of the obligations of, the Lessor
contained in this Agreement and shall deliver a
certificate of quiet enjoyment to Lessee in a form and
substance reasonably acceptable to it and Lessee shall
receive an opinion of counsel to the Transferee stating,
with the customary assumptions and exceptions, that such
agreement or agreements has been duly authorized,
executed and delivered and constitute the legal, valid
and binding obligations of the Transferee enforceable in
accordance with their terms and that the entry into such
agreement(s) does not violate any laws or agreements
applicable to such Transferee.
The agreements, covenants, obligations and liabilities contained
herein, including but not limited to all obligations to pay Rent and
indemnify Lessor, are made for the benefit of Lessor, Beneficiary,
any assignee including the Head Lessor and/or the Bank as security
assignee, and their respective successors and assigns,
notwithstanding the possibility that any such person was not
originally a party to this Agreement or may, at the time any
enforcement is sought, no longer be a party to this Agreement.
Lessee shall comply, at Lessor's cost and expense, with all
reasonable requests of Lessor, its successors and assigns respecting
the assignment and Lessee's acknowledgment of the assignee as
Lessor. Notwithstanding anything contained in this paragraph to the
contrary, no assignment of Lessor's interest in this Agreement or
the Aircraft or Beneficiary's interest in the Trust Estate shall
alter the terms of this Agreement in so far as the costs to Lessee
of the performance of its obligations to pay Rent, Reserve Rate, and
Deposits hereunder and, except as otherwise expressly provided in
this Agreement, the rights and liabilities of Lessee under this
Agreement are concerned. Lessee's rights under this Agreement shall
not be subject or subordinate to any Security Assignment or Mortgage
executed by Lessor or
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Beneficiary (which Security Assignment or Mortgage shall be subject
to this Agreement).
12.3 It is acknowledged and agreed that:
(a) Lessor has the right to assign all of its right, title and
interest in and to this Agreement and the Aircraft to the Head
Lessor and/or the Bank. In order to comply with its
obligations in relation thereto, Lessor will, upon such
assignment, give Lessee a notice of assignment and it is
agreed that Lessee shall forthwith acknowledge the same by
executing and delivering to Lessor on behalf of Head Lessor
and/or the Bank a consent to assignment in form and substance
reasonably acceptable to Head Lessor and/or the Bank;
(b) Lessor may be required by Head Lessor and/or the Bank to
assign to Head Lessor and/or the Bank all of its rights, title
and interest in and to the Insurances (other than liability
insurances). In order to comply with its obligations in
relation thereto, Lessor, upon assignment of this Agreement
pursuant to Article 12.3(a), shall give the insurers a notice
of assignment of Insurances and the Lessee shall procure that
such insurers forthwith acknowledge the same by executing and
delivering to Lessor an acknowledgment in form and substance
acceptable to Head Lessor and/or the Bank;
(c) Lessor may from time to time require to amend, modify or
replace the security arrangements in respect of the financing
or refinancing of the Aircraft and Lessee agrees to cooperate
with Lessor in connection therewith and, in particular (but
without limiting the generality of the foregoing), to change
the plates provided for in Article 4.3 and to execute and
deliver such other or further acknowledgments of assignment or
other documents and to do such other things as Lessor may
reasonably require to be executed and delivered;
(d) Upon any financing or refinancing of the Aircraft as
contemplated by this Article 12.3, Lessee will promptly and
duly execute and deliver to Lessor, Head Lessor or the Bank
such other documents and assurances and take such further
action as may from time to time be reasonably requested in
order more effectively to carry out the intent and purpose of
this Agreement, the Mortgage and the Security Assignment.
Lessee will procure on
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request of Lessor that the independent counsel will confirm to
the Head Lessor and the Bank that the Head Lessor and the Bank
may rely on the terms of the opinion provided pursuant to
Article 2.2 as if the Head Lessor and the Bank were each
addressees of such opinion;
(e) Title to the Aircraft may be transferred by Lessor to the Head
Lessor to be indicated by Lessor or Beneficiary's interest in
the Trust Estate may be transferred by Beneficiary, in either
case for the purpose of enabling Lessor to raise finance in
relation to the Aircraft. In such event either a lease
agreement shall be executed in respect of the Aircraft between
the Head Lessor and Lessor ("Head Lease") in order to enable
Lessor to continue to lease the Aircraft to Lessee in
accordance with this Agreement or Lessor may assign all or
part of its rights, title and interest in and to this
Agreement and the Aircraft to Head Lessor pursuant to Article
12.2 or Beneficiary may assign all of its right, title and
interest in and to the Trust Estate and Lessee agrees to
cooperate with Lessor in connection therewith and, in
particular (but without limiting the generality of the
foregoing), to cooperate in the execution of any documents,
agreements and amendments to this Agreement that are necessary
in connection with such Head Lease or such assignment and to
do such other things as Lessor may require to be executed and
delivered so long as any such amendments to this Agreement do
not adversely affect Lessee; and
(f) Lessee shall not be liable to (1) any Transferee or (2) any
assignee, purchaser, or transferee of the beneficial interest
of the Trust Estate (a "Beneficiary Transferee") for any
payment of Taxes pursuant to this Agreement in excess of the
amount that would have been payable to the Lessor or the
Beneficiary originally party hereto, as the case may be, if
that party had remained as the Lessor or the Beneficiary,
respectively.
13. DISCLAIMER, REPRESENTATIONS AND WARRANTIES
13.1 NEITHER LESSOR NOR BENEFICIARY IS A MANUFACTURER OF THE AIRCRAFT OR
OTHER AIRCRAFT OR A DEALER IN SIMILAR AIRCRAFT AND HAS NOT INSPECTED
THE AIRCRAFT PRIOR TO DELIVERY TO AND ACCEPTANCE BY LESSEE. LESSEE
(I) ACKNOWLEDGES AND AGREES THAT THE AIRCRAFT IS BEING DELIVERED BY
LESSOR TO LESSEE "AS IS" AND "WHERE
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IS" AND THAT NO CONDITION, WARRANTY OR REPRESENTATION OF ANY KIND
WHATSOEVER HAS BEEN OR IS GIVEN BY OR IS TO BE IMPLIED ON THE PART
OF LESSOR OR BENEFICIARY IN RELATION TO THE AIRCRAFT, AND (II)
HEREBY WAIVES AS BETWEEN ITSELF AND LESSOR OR BENEFICIARY ALL ITS
RIGHTS, EXPRESS OR IMPLIED (WHETHER STATUTORY OR OTHERWISE), TO MAKE
CLAIMS IN RESPECT OF THE AIRCRAFT RELATING TO THE TITLE,
AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION, CONFORMITY TO
SAMPLES OR MODELS, COMPLIANCE WITH SPECIFICATIONS, MERCHANTABILITY
OR FITNESS OR SUITABILITY FOR USE FOR A PARTICULAR PURPOSE OF THE
AIRCRAFT OR ANY PART THEREOF, QUALITY OF THE MATERIAL OR
WORKMANSHIP, ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE, ABSENCE OR ANY INFRINGEMENT OF ANY PATENT, TRADEMARK
OR COPYRIGHT, REMEDY IN TORT, BASED ON STRICT LIABILITY OR
NEGLIGENCE, ACTUAL OR IMPUTED, AND LESSEE HEREBY WAIVES ANY OTHER
REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH
RESPECT TO THE AIRCRAFT, IT BEING UNDERSTOOD THAT ALL SUCH RISKS, AS
BETWEEN LESSEE AND LESSOR OR BENEFICIARY ARE TO BE BORNE BY LESSEE.
Nothing in this Agreement shall afford Lessor or any Indemnitee any
wider or greater exclusion of liability for death or bodily injury
than would be permitted by the Governing Law.
This paragraph shall not be modified except by a written agreement
signed on behalf of Lessor and Lessee by their respective duly
authorized representatives.
13.2 Lessor and Lessee agree that this Article 13 has been the subject of
discussion and negotiation and is fully understood by the parties,
and that the amount of the Rent and other mutual agreements of the
parties set forth in this Agreement were arrived at in consideration
of the provisions of this Article 13 specifically including the
waiver by Lessee set forth in Article 13.1.
13.3 So long as no Event of Default has occurred and is continuing Lessor
agrees to assign or otherwise make available to Lessee for the
duration of the Term such rights as Lessor may have under any
warranty, express or implied, with respect to the Aircraft made by
the Manufacturer of the Aircraft, any subcontractor or supplier
thereof, or any other seller thereof, to the extent that the same
may be assigned or otherwise made available to Lessee and without
warranty by Lessor as to enforceability of any of the rights so
assigned.
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To the extent that the same may not be assigned or otherwise made
available to Lessee, Lessor agrees to exert its reasonable efforts,
at Lessee's expense, to enforce such rights as Lessor may have with
respect thereto for the benefit of Lessee; provided however, that
upon an Event of Default all such rights shall immediately revert to
Lessor including all claims thereunder, whether or not perfected,
unless such Event of Default has forthwith been remedied by Lessee.
13.4 Lessee represents and warrants that:
(a) Lessee is a corporation organized and existing in good
standing, in accordance with the Laws of the State of
Incorporation, and has the corporate power and authority to
carry on its business as presently conducted and to perform
its obligations under this Agreement, is a Certificated Air
Carrier operating under a certificate of public convenience
and necessity issued by the Secretary of Transportation and is
the holder of all necessary licenses issued by all Government
Entities having jurisdiction to authorize or permit Lessee to
engage in air transportation and to perform and comply with
its obligations hereunder;
(b) This Agreement has been duly authorized by all necessary
corporate action on the part of Lessee, and neither the
execution and delivery nor the consummation of the
transactions contemplated hereby nor compliance by Lessee with
the provisions of this Agreement will 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;
(c) The execution and delivery by Lessee of this Agreement, and
all of the transactions by Lessee contemplated hereby, have
received, and Lessee has complied with, every necessary
consent, approval, order, or authorization of, or registration
with, or the giving of prior notice to, any Government Entity
having jurisdiction with respect to the execution and delivery
of this Agreement or the validity and enforceability of this
Agreement or
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the satisfaction of all monetary and other obligations
hereunder;
(d) This Agreement has been duly entered into and delivered by
Lessee and constitutes the valid, legal and binding
obligations of Lessee, enforceable in accordance with their
terms subject to principles of equity, laws relating to
bankruptcy, insolvency or liquidation or any other laws or
legal procedures generally affecting the enforcement of
creditor's rights or the rights of contracting parties;
(e) Assuming the proper deregistration of the Aircraft and any
mortgage(s) placed thereon from the Swedish aircraft registry
it is not necessary or advisable under the Laws of the State
of Registration in order to ensure the validity, effectiveness
and enforceability of this Agreement, the Mortgage or the
Security Assignment or to protect the property rights of
Lessor, Beneficiary, Head Lessor or the Bank in the Aircraft
and under the Mortgage and Security Assignment that this
Agreement, the Mortgage, the Security Assignment or any other
instrument relating thereto be filed, registered or recorded
or that any other action be taken under the Laws of the State
of Incorporation and the State of Registration to perfect the
property rights of Lessor, Head Lessor and the Bank in the
Aircraft other than the filing of all such instruments with
the Air Authority, the filing of UCC-1 financing statements in
relevant jurisdictions, and the Mortgage and Security
Assignment will have priority in all respects over the claims
of all creditors of Lessee in or against the Aircraft, except
for Permitted Liens;
(f) Under the Laws of the State of Incorporation and the State of
Registration Lessee will not be required to make any deduction
or withholding from any payment it may make under this
Agreement. There is no withholding or other tax to be deducted
from any payment to be made by Lessee under this Agreement;
(g) There are no suits or legal proceedings (including any
administrative proceeding) pending or threatened before any
court or administrative agency against Lessee which, if
adversely determined, would have a material adverse effect
upon its financial condition or business or its ability to
perform its obligations hereunder;
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(h) There has been no material adverse change in the financial
position of Lessee or in the consolidated financial position
of Lessee and its subsidiaries from that set forth in the
financial statements last furnished pursuant to Article 6.4
and neither Lessee nor any of its subsidiaries have any
significant liabilities (contingent or otherwise) which are
not disclosed by, or reserved against in such financial
statements; and
(i) The chief executive office (as such term is used in Sections
9-103 and 9-401 of the Uniform Commercial Code) of Lessee is
at the date hereof located in Durham, North Carolina and
Lessee agrees to give at least 30 days' prior notice to Lessor
of any relocation of said chief executive office or place
where such records are kept and of any change in its name.
13.5 The representations and warranties in Article 13.4 (other than in
clauses (f), (g) and (h)) shall be deemed to be repeated by Lessee
on and as of each Rent Date as if made with reference to the facts
and circumstances existing on each such date.
13.6 Lessor represents, warrants and covenants that:
(a) Lessor is a national banking association duly organized and
validly existing in good standing under the laws of the United
States of America, qualifies as a "citizen of the United
States" within the meaning of Section 40102(a)(15) of Title 49
of the United States Code and has the corporate power and
authority to carry on its business as presently conducted and
to perform its obligations under this Agreement; if at any
time Lessor shall have actual knowledge that it has ceased to
qualify as such a citizen, it will, if such citizenship is
then necessary to maintain the eligibility of the Aircraft for
United States registration, take such action as may be
necessary to maintain such United States registration;
(b) This Agreement has been duly authorized by all necessary
corporate action on the part of Lessor, has been duly entered
into and delivered by Lessor in accordance with the Trust
Agreement and constitutes the valid, legal and binding
obligations of Lessor, enforceable in accordance with their
respective terms subject to principles of equity, laws
relating to bankruptcy, insolvency or liquidation or any other
laws or legal procedures generally affecting the enforcement
of
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creditor's rights or the rights of contracting parties;
(c) Neither the execution and delivery nor the consummation of the
transactions contemplated hereby nor compliance by Lessor with
the provisions of this Agreement will result in any breach of,
or constitute any default under, any indenture or any
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; and
(d) Except for the registration of the Aircraft and the issuance
of the licenses described in Article 4.1, neither the
execution and delivery nor the consummation of the
transactions contemplated hereby nor compliance by Lessor with
the provisions of this Agreement requires the consent or
approval of, the giving of notice to, or the registration
with, or the taking of any other action in respect of any
Government Entity.
The representations and warranties contained in clauses (a), (b) and
(c) of this Article 13.6 are made by Lessor in its individual
capacity.
13.7 Lessor undertakes that, so long as no Event of Default shall have
occurred and be continuing, Lessor will not interfere with the
peaceful and quiet use and enjoyment of the Aircraft by Lessee in
accordance with the terms of this Agreement.
14. COVENANTS OF LESSEE
14.1 Lessee hereby covenants with Lessor that from the Delivery Date and
during the Term and until redelivery of the Aircraft to Lessor in
accordance with Article 16 it will:
(a) remain in and continue to operate as a Certificated Air
Carrier holding a valid certificate of public convenience and
necessity issued by the Secretary of Transportation, to
preserve its corporate existence and to satisfy its debts and
obligations as they fall due;
(b) comply with all Laws and regulations for the time being in
force in the State of Incorporation, the State of Registration
and in any country to, from, in or over which the Aircraft is
flown, the failure with which to comply is likely to have a
material adverse effect on Lessee; provided,
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however, that such failure shall have no adverse effect on the
Aircraft or on the interests of Lessor, Head Lessor or the
Bank therein or in this Agreement or on the Insurances
required to be maintained pursuant to Article 11;
(c) (i) at its own expense from time to time do and perform such
other and further acts and execute and deliver any and all
further instruments as may be required by Law (in the United
States but not in any jurisdiction outside the United States
unless directly required due to Lessee's operation), and (ii)
at Lessor's expense (insofar as not covered in Article 8.2(a))
from time to time do and perform such other and further acts
and execute and deliver any and all further instruments as may
be reasonably requested by Lessor to establish, maintain and
protect the respective rights and remedies of Lessor, Head
Lessor and the Bank and to carry out and give effect to the
intents and purposes of this Agreement and the parties;
(d) notify Lessor immediately of the occurrence of any Default;
(e) obtain and maintain all necessary government and other
certificates, consents, licenses, permits and authorizations
and take all action which may be necessary for the continued
due performance of Lessee's obligations under this Agreement
and for the use and operation of the Aircraft;
(f) not do or permit to be done any act or thing which might
impair the respective interests of Lessor, Head Lessor and the
Bank in the Aircraft, or the registration of the Aircraft;
(g) notify Lessor as soon as practicable after becoming aware of
any loss, theft, damage or destruction of or to the Aircraft
or any part thereof if the potential cost of repair or
replacement is likely to exceed $100,000.00 (Dollars One
Hundred Thousand);
(h) not do anything which is likely to subject the Aircraft or any
part thereof to penalty, forfeiture, seizure, arrest,
impounding, detention, confiscation, taking in execution,
appropriation or destruction nor abandon the Aircraft or any
part thereof;
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(i) not represent or hold out Lessor, Head Lessor or the Bank as
carrying goods or passengers on the Aircraft or as being in
any way connected or associated with any operation or carriage
(whether for hire or reward or gratuitously) which Lessee may
undertake;
(j) not pledge the credit of Lessor, Head Lessor or the Bank for
any maintenance, overhauls, replacements, repairs or
modifications to the Aircraft;
(k) keep Lessor and the insurers, as referred to in Article 11,
informed as to current serial numbers of the Engines and any
engine installed on the Aircraft in accordance with the
provisions of this Agreement, and the location of any Engine
for the time being not installed on the Aircraft; and shall
notify such insurers of any renewal, replacement or
substitution, or the location of any Engine not installed on
the Aircraft;
(l) discharge all fees, charges and expenses payable to any third
party in relation to the use or operation of the Aircraft or
any premises where the Aircraft is situated;
(m) in the event of any forfeiture, impounding or detention of the
Aircraft or any part thereof not constituting a Casualty
Occurrence, use all reasonable endeavors to procure the
immediate release therefrom of the same;
(n) keep accurate, complete and current records of all flights
made by the Aircraft. Such records shall be kept in such
manner as the Air Authority may from time to time require and
in accordance with the Approved Maintenance Program. Lessee
shall permit Lessor or its authorized representatives to
examine such records upon giving reasonable notice not
involving delay to the Aircraft and, subject to the terms of
Article 7.5.3, at the expense of Lessor or such person, to
copy such records;
(o) on request, provide Lessor with evidence satisfactory to
Lessor that all Taxes and charges incurred by Lessee with
respect to the Aircraft, including without limitation any
payments due to any relevant air traffic control authorities
and airport authorities, have been paid and discharged in full
or duly provided for; and
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(p) not consolidate with, or merge into, any other corporation,
convey, transfer or lease substantially all of its assets as
an entirety to any person without the prior written consent of
Lessor (such consent not to be unreasonably withheld) and the
execution and delivery to Lessor of such agreements,
certificates and legal opinions as Lessor may request with
respect thereto.
15. DEFAULT BY LESSEE
15.1 Each of the following events shall constitute an "Event of Default":
(a) if default shall be made by Lessee in the making of any Rent,
Reserve Rate, or Supplemental Rent payment within five (5)
Business Days after the date when such payment is due and
payable under this Agreement; or
(b) (i) if default shall be made by Lessee at any time in the
procurement or maintenance of any insurance coverage
prescribed herein or (ii) any insurance which may be
maintained by Lessor, Head Lessor or the Bank under Article
11.4 is canceled or terminated or notice of cancellation is
given; or
(c) if default shall be made by Lessee in the observance or
performance of any of the other obligations of Lessee
contained in this Agreement and, if such default is in the
opinion of Lessor capable of remedy, such default shall
continue for a period of fifteen (15) Business Days after
notice from Lessor to Lessee specifying the default and
requiring that the same be remedied; or
(d) if any representation or warranty made (or deemed to be
repeated) by Lessee in or pursuant to this Agreement or in any
document or certificate or statement referred to in or
delivered under this Agreement is or proves to have been
incorrect in any material respect when made or deemed to be
repeated and such incorrectness, if capable of being cured,
shall continue for fifteen (15) Business Days after notice
from Lessor specifying such incorrectness; or
(e) if any borrowed money of Lessee or any of its subsidiaries
having an outstanding principal amount in excess of $4,000,000
(Dollars Four Million) is not paid when due, or by reason of
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breach or default under the terms of any instrument evidencing
or guaranteeing the same on the part of Lessee or any of its
subsidiaries any such borrowed money having an outstanding
principal amount in excess of $4,000,000 of Lessee or any of
its subsidiaries becomes due or capable of being declared due
prior to the date when it would otherwise have become due, or
the security for any such borrowed money or any guarantee in
respect thereof becomes enforceable; or
(f) if an encumbrancer takes possession or a receiver,
administrator, administrative receiver, trustee, liquidator or
similar officer is appointed of the whole or any substantial
part of the assets, rights or revenues of Lessee or any of its
subsidiaries or a distress, execution, sequestration or other
process is levied or enforced upon or sued out against all or
a substantial part of the assets, rights or revenues of Lessee
or any of its subsidiaries and is not discharged within
fourteen days, or Lessee applies for or consents to the
appointment of a receiver, administrator, administrative
receiver, trustee, liquidator or similar officer for it or for
all or any part of its assets, rights or revenues; or
(g) if Lessee or any of its subsidiaries suspends payment of its
debts, or is unable or admits its inability to pay its debts
as they fall due, or shall be adjudicated or found, or
becomes, bankrupt or insolvent, or proposes or enters into any
composition or other arrangement for the benefit of its
creditors generally, or Lessee or any of its subsidiaries
shall, by voluntary petition, answer or consent, seek relief
under the provisions of any bankruptcy, insolvency or other
similar law providing for the reorganization, liquidation,
administration, dissolution or winding-up of corporations, or
providing for an agreement, composition, extension or
adjustment with its creditors; or
(h) if a petition against Lessee in a proceeding under applicable
bankruptcy or other insolvency laws shall be filed and shall
not be withdrawn or dismissed within 30 days thereafter, or if
any order shall be made by any competent court or resolution
passed by Lessee or any of its subsidiaries or their
respective board of management or supervisory board, whichever
is competent to pass such resolution for the winding-up or
dissolution of Lessee or any of its subsidiaries or for the
appointment of a liquidator,
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trustee or conservator, save for winding-up or dissolution for
the purposes of amalgamation or reorganization (not involving
or arising out of insolvency) the terms of which shall have
received the prior written approval of Lessor; or
(i) if Lessee or any of its subsidiaries disposes of all or a
material part of its assets, whether by one or a series of
transactions, related or not, other than for the purpose of a
reconstruction or amalgamation the terms of which have
received the previous consent in writing of Lessor; or
(j) if any action shall be taken by Lessee which shall impair the
title or ownership of Lessor (or Head Lessor), or the Security
Interest of the Bank, in the Aircraft or this Agreement is or
becomes wholly or partly invalid, ineffective or unenforceable
by reason of any act or omission of Lessee; or
(k) if any consent, authorization, license, certificate or
approval of or registration with or declaration to any
Government Entity in connection with this Agreement including,
without limitation:
(i) any Certificate of Public Convenience and Necessity; or
(ii) required by Lessee or as a condition precedent required
by Lessor pursuant to Article 2.3 to authorize, or in
connection with, the execution, delivery, validity,
enforceability or admissibility in evidence of this
Agreement or the performance by Lessee of its
obligations under this Agreement; or
(iii) the registration of the Aircraft; or
(iv) any airline license or air transport license;
is changed such that it materially impairs the ability of
Lessee to perform its obligations hereunder, or is withheld,
or is revoked, suspended, canceled, withdrawn, terminated or
not renewed, or otherwise ceases to be in full force; or
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(m) if any circumstances analogous to any of the circumstances
described in paragraphs (f), (g) or (h) above arise under the
Law of any applicable jurisdiction; or
(n) if an event of default (however defined) occurs under any of
the Other Aircraft Agreements which event permits acceleration
or termination.
15.2 If one or more Events of Default shall have occurred and be
continuing, at Lessor's option and subject to any mandatory
requirement of Law:
(a) For Lessee's account Lessor may do anything that may
reasonably be required to cure any Event of Default and
recover from Lessee all costs including legal expenses
incurred in so doing, and/or
(b) Lessor may accept such Event of Default as a repudiation of
this Agreement and terminate the lease of the Aircraft to
Lessee hereunder by:
(i) serving notice of such termination on Lessee specifying
the occurrence giving rise to such Event of Default or
Events of Default, provided that such notice shall be
deemed to have been served without the necessity of
actual service upon the occurrence of any Event of
Default described in paragraphs (f), (g) and (h) of
Article 15.1.
Thereafter (if the Term shall have commenced) Lessee
shall redeliver possession of the Aircraft to Lessor at
Schiphol Airport, The Netherlands (or such other
location as Lessor may require); or (at Lessor's
election)
(ii) taking possession of the Aircraft for which purpose
Lessor by its servants or agents may enter upon Lessee's
premises where the Aircraft may be located, or cause the
same to be redelivered to Lessor at Schiphol Airport,
The Netherlands, (or such other location as Lessor may
require Lessee to assemble and deliver the Aircraft to
Lessor, and Lessor shall be entitled to act as attorney
for Lessee in causing such redelivery and shall have all
the powers and authorizations legally necessary for
taking such action. In the event of exercise by Lessor
of its powers
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under this sub-paragraph (ii) such termination shall be
deemed to take effect on such taking of possession by
Lessor or such redelivery of the Aircraft to Lessor at
the said airport; and/or
(c) Lessor may proceed by appropriate court action or actions to
enforce performance of Article 15.2(b) or to recover damages
for the breach thereof; and/or
(d) all rights of Lessee hereunder shall, in the event the Term
shall be terminated pursuant to Article 15.2(b) henceforth
absolutely cease and terminate but without prejudice to
Lessee's obligations under this Agreement all of which shall
continue in full force and effect except for obligations to
pay Rent and Reserve Rate after the Aircraft is returned to
Lessor, and is in the condition required by Article 16; and
Lessee shall take all steps necessary to effect deregistration
of the Aircraft in the State of Registration and Lessor shall
be entitled to sell or otherwise deal with the Aircraft as if
this Agreement had never been made. Without prejudice to the
foregoing, Lessee hereby appoints Lessor as its attorney to do
any act or thing required in connection with such
deregistration of the Aircraft.
15.3 If an Event of Default occurs, Lessor shall have the right to demand
that:
(a) Lessee pay all amounts which may be then due and unpaid
hereunder, and
(b) at Lessor's option whether or not Lessor shall have exercised,
or shall thereafter at any time exercise, any of its rights
under Article 15.2, by thirty (30) days written notice to
Lessee from Lessor specifying a payment date, Lessee pay
Lessor, and Lessee shall pay Lessor, on the payment date
specified in such notice, as liquidated damages for loss of
bargain and not as a penalty (in lieu of the Rent due for the
Aircraft covered by such notice for the period commencing
after the date specified for payment in such notice), any
unpaid Rent for the Aircraft (prorated in the case of Rent on
a daily basis) to and including the payment date specified in
such notice, plus the amount, if any, by which the aggregate
Rent for the Aircraft for the remainder of the Term for the
Aircraft, discounted periodically (equal to installment
frequency) to present worth at the interest rate of six
percent
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(6%) per annum, exceeds the Fair Market Rental Value of the
Aircraft for the remainder of the Term, after discounting such
Fair Market Rental Value periodically (equal to installment
frequency) to present worth as of the payment date specified
in such notice at the interest rate of six percent (6%) per
annum.
Lessee shall fully indemnify Lessor on its own behalf and on
behalf of the Head Lessor and the Bank on demand against any
loss (including loss of profit), damage, expense (including
without limitation attorneys' fees), cost or liability which
Lessor, Head Lessor or the Bank may sustain or incur as a
consequence of the occurrence of any Event of Default and/or
termination of the letting of the Aircraft pursuant to this
Agreement, including but not limited to (i) any loss of profit
suffered by Lessor and/or the Head Lessor because of Lessor's
inability to place the Aircraft on lease with another lessee
on terms as favorable to Lessor as the terms of this Agreement
or because whatever use, if any, to which Lessor is able to
put the Aircraft upon its return to Lessor, or the funds
arising upon a sale or other disposal thereof, is not as
profitable to Lessor as letting the Aircraft in accordance
with the terms of this Agreement would have been to the extent
the foregoing loss of profit shall not be recovered under
Article 15.3(b), (ii) any amount of interest, fees or other
sums whatsoever paid or payable on account of funds borrowed
in order to carry any unpaid amount, (iii) any loss, premium,
penalty or expense which may be incurred repaying funds raised
to finance the Aircraft or in unwinding any swap, forward
interest rate agreement or other financial instrument relating
in whole to Lessor's financing of the Aircraft and/or the
Aircraft under the Other Aircraft Agreement, and (iv) any
loss, cost, expense or liability sustained or incurred by
Lessor owing to Lessee's failure to re-deliver the Aircraft in
the condition required by this Agreement.
15.4 No remedy referred to in this Article 15 is exclusive, but each
remedy shall be cumulative and in addition to any other remedy
referred to herein or otherwise available to Lessor. The exercise by
Lessor of any of its remedies hereunder shall not preclude or estop
the exercise or beginning of exercise by Lessor of any or more of
such other remedies.
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No express or implied waiver by Lessor of any Event of Default, or
failure or delay of Lessor in exercising any right hereunder shall
operate as waiver thereof unless an express waiver is executed and
delivered to Lessee.
15.5 Prior to the Expected Delivery Date Lessee shall deliver to Lessor a
duly authorized consent, undated and in form and substance
acceptable to Lessor, addressed to the Federal Aviation
Administration consenting to the release of this Agreement in
connection with the termination of this Agreement pursuant to the
terms hereof and, if so requested by Lessor, the deregistration of
the Aircraft from the register of civil aviation in the State of
Registration.
16. RETURN OF AIRCRAFT
16.1 On the Expiry Date or upon earlier termination of the Term (unless a
Casualty Occurrence shall have occurred with respect to the
Aircraft), Lessee shall, at its own expense, redeliver the Aircraft
to Lessor at the Re-Delivery Location or such other airport as is
mutually acceptable to the parties, in a condition complying with
the provisions of Appendix E, free and clear of all liens and
encumbrances (including Permitted Liens other than Lessor Liens) and
thereupon cause the Aircraft to be removed from the Register of
Civil Aircraft in the State of Registration and Lessee shall return
the Aircraft to Lessor together with the Aircraft Documents and all
equipment and records supplied pursuant to this Agreement when the
Aircraft was delivered to Lessee hereunder.
16.2 Immediately prior to such redelivery of the Aircraft, Lessee, at its
own expense, shall make the Aircraft, Aircraft Documents and other
records available to Lessor for inspection ("Final Inspection") in
order to verify that the condition of the Aircraft complies with the
provisions of this Agreement. Such inspection shall not unreasonably
interfere with the operation of the Aircraft. The period will be
long enough for the Final Inspection to permit the conduct by Lessor
of the following:
(a) Inspection of the Aircraft Documents;
(b) Inspection of the Aircraft structure and Parts;
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(c) Inspection of the Engines and Auxiliary Power Unit ("A.P.U."),
including without limitation, a boroscope inspection or any
other equivalent inspection method supported by Rolls Royce,
inspection of the compressor and turbine area, and, if
reasonably requested based on evidence that it is required,
the Engine and A.P.U. condition runs confirming release of
each Engine and A.P.U for its remaining operational life;
(d) A one-hour to two-hour test flight with Lessor's
representatives on board as observers and, if any non-
compliance is found, a subsequent test flight to check
compliance after rectification.
16.3 To the extent that, upon such Final Inspection, the condition of the
Aircraft and Aircraft Documents does not comply with the provisions
of this Agreement, Lessee, at its own expense, shall cause such
non-compliance to be promptly rectified and to the extent such
rectification extends beyond the Expiry Date, the Term shall, at
Lessor's sole option, be deemed to be automatically extended and the
provisions of this Agreement shall remain in full force and effect
until such rectification has been accomplished. During such
extension of the Term the Lessee shall be liable to pay Rent at a
daily pro rata rate equal to the Rent payable during the last Rental
Period of the Term.
16.4 Upon redelivery Lessee shall provide to Lessor all necessary
assistance to enable Lessor to obtain any required documents in
relation to the export of the Aircraft from the State of
Registration, and if different, from the State of Incorporation
(including a valid and subsisting export license for the Aircraft),
and shall reassign to Lessor, at the expense of Lessee, the benefit
of any indemnity or warranty which has been assigned to Lessee
pursuant to Article 13.3 above to the extent such indemnity or
warranty is assignable.
16.5 Prior to the Expiry Date or upon any earlier termination of the Term
and upon Lessor's request, Lessee will provide Lessor or its agent
reasonable access to the Approved Maintenance Program and the
Aircraft Documents in order to facilitate the Aircraft's integration
into any subsequent operator's fleet.
Lessee will, if requested by Lessor to do so, upon return of the
Aircraft deliver to Lessor a certified true current and complete
copy of the Approved Maintenance Program. Lessor agrees that it will
not disclose the contents of the Approved Maintenance Program to any
person or entity except to the extent
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necessary to monitor Lessee's compliance with this Agreement and/or
to bridge the maintenance program for the Aircraft from the Approved
Maintenance Program to another program.
16.6 Upon redelivery of the Aircraft to Lessor, an adjustment shall be
made in respect of fuel on board on the Delivery Date and on
redelivery at the price then prevailing at the Redelivery Location.
16.7 If Lessor shall request that Lessee paint the Aircraft any other
basic color as contemplated by Section 1(h) of Appendix E, Lessor
agrees that it shall bear the cost and expense of the difference
between white paint and such other basic color.
16.8 Upon written request of Lessor given to Lessee not later than thirty
(30) days prior to the Expiry Date or termination of the Lease,
Lessee, at the Expiry Date or upon termination of the Lease, will
provide, or will cause to be provided, up to thirty (30) days'
storage of the Aircraft at Lessee's premises, at Lessor's cost and
expense. During such period of storage, Lessee will arrange for
insurance and maintenance at Lessor's cost and expense. Lessee shall
allow Lessor or any representatives of any prospective purchaser or
user of the Aircraft to inspect the same at all reasonable times.
17. CASUALTY OCCURRENCES
17.1 In this Agreement "Casualty Occurrence" shall mean any of the
following events with respect to the Aircraft, the Airframe or an
Engine:
(a) the actual, agreed, constructive, arranged or compromised
total loss or destruction of the Aircraft, the Airframe or an
Engine, or damage to the Aircraft, Airframe or Engine
rendering repair impracticable or uneconomical, or the
Aircraft, Airframe or Engine being rendered permanently unfit
for normal use;
(b) requisition of title or other compulsory acquisition,
requisition, capture, seizure, deprivation, confiscation or
detention for any reason of the Aircraft, the Airframe or an
Engine by any Government Entity of the State of Registration
or by any other government or other competent authority,
whether de jure or de facto, but excluding requisition for use
or hire not involving requisition of title by any Governmental
Entity for a temporary period ending on the date
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fifteen (15) days (or the Expiry Date) if the requisition for
use or hire is by the United States) after such requisition,
or the Expiry Date, whichever first occurs; and
(c) the hijacking, theft, disappearance, condemnation,
confiscation or seizure of the Aircraft, the Airframe or an
Engine other than in the circumstances referred to in (b)
above which deprives Lessee of the use thereof for more than
fifteen (15) consecutive days.
17.2 (a) In the event of a Casualty Occurrence with respect to the
Aircraft or Airframe prior to the Delivery Date, this
Agreement shall immediately terminate with respect to such
Aircraft and neither party shall have any further obligation
or liability hereunder, save that Lessor shall return to
Lessee the Deposit or such part thereof as Lessor shall have
received from Lessee and Lessee shall remain liable to
reimburse Lessor for any amounts specified in Article 8.2(a).
(b) In the event of a Casualty Occurrence with respect to the
Aircraft or Airframe after delivery to Lessee hereunder,
Lessee shall pay the Agreed Value to Lessor on or prior to the
earlier of (i) 45 days after the Casualty Occurrence and (ii)
the Business Day after the date of receipt of the insurance
proceeds in respect of the Casualty Occurrence and, provided
all other amounts which are then due and payable by Lessee
under this Agreement have been paid in full to Lessor,
Lessee's obligation hereunder for payment of Rent shall cease
as from the date on which Lessor receives payment in full of
the Agreed Value. Rent paid in advance for any days which
occur after such Agreed Value is paid shall be repaid to
Lessee, so long as no Default has occurred and is continuing,
on a pro rata basis for each day beyond such date of payment
of Agreed Value. Any excess insurance proceeds from the
insurance obtained by Lessee pursuant to Article 11 remaining
after payment of the foregoing amounts shall, unless a Default
shall have occurred and be continuing, be paid over to Lessee.
(c) Subject to the rights of any insurers and reinsurers or other
third party, upon irrevocable payment in full to Lessor of the
Agreed Value and all other amounts which may be or become
payable to Lessor under this Agreement, Lessor will without
recourse or warranty (except as to title and Lessor's Liens)
and without further act, be
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deemed to have transferred to Lessee all of Lessor's rights to
any Engines and Parts not installed when the Casualty
Occurrence occurred, all on an as-is where-is basis, and will
at Lessee's expense, execute and deliver such bills of sale
and other documents and instruments as Lessee may reasonably
request to evidence (on the public record or otherwise) the
transfer and the vesting of Lessor's rights in such Engines
and Parts in Lessee, free and clear of all rights of Lessor
and Lessor Liens.
17.3 Upon the Casualty Occurrence with respect to any Engine not
involving a Casualty Occurrence of the Aircraft, Lessee shall give
Lessor prompt written notice thereof and Lessee shall replace such
Engine as soon as reasonably possible with a replacement Engine in
accordance with Article 5.1.2(a). Such replacement shall be deemed
an "Engine" as defined herein. Lessee agrees to take such action as
Lessor may reasonably request in order that any such replacement
Engine shall be duly and properly titled in Lessor or the Bank and
leased hereunder and subject to the Mortgage to the same extent as
the Engine replaced thereby. Lessee's obligation to pay the Rent
hereunder shall continue in full force and effect, but Lessee shall
be entitled to be reimbursed by Lessor the amount of insurance or
condemnation proceeds, if any, received by Lessor with respect to
such replaced Engine.
17.4 In the event of requisition for hire of the Aircraft or any part
thereof not constituting a Casualty Occurrence, then, subject to the
proviso herein contained, the Rent and other charges payable under
this Agreement shall not be suspended or abated either in whole or
in part, and Lessee shall not be released from any of its other
obligations (as to payment, indemnity or otherwise) hereunder (other
than operational obligations with which Lessee is unable to comply
solely by virtue of such confiscation or requisition).
If Lessee shall duly comply with all its obligations under this
Agreement, Lessee shall during the Term be entitled to any hire paid
by the requisitioning or confiscating authority and Lessee shall, as
soon as practicable after the end of any requisition or
confiscation, cause the Aircraft to be put into the condition
required by this Agreement. Lessor shall be entitled to all
compensation payable by the requisitioning or confiscating authority
in respect of any change in the structure, state or condition of the
Aircraft arising during the period of requisition or confiscation,
and Lessor shall apply such compensation
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in reimbursing Lessee for the cost of complying with its obligations
as aforesaid, but so that, if any Default has occurred and is
continuing, Lessor shall be entitled to apply such compensation in
or towards settlement of any amounts owing by Lessee under this
Agreement PROVIDED ALWAYS that if following such requisition or
confiscation the Aircraft is treated as an agreed, constructive,
arranged or compromised total loss by the insurers, then the
provisions of Article 17.1 shall apply with effect from the date on
which the insurer so determines.
18. GOVERNING LAW AND JURISDICTION
18.1 This Agreement and further agreements resulting herefrom shall be
governed by and construed in accordance with the internal Laws of
the State of New York and without regard to any conflict of law
rules. This Agreement is being delivered in the State of New York.
18.2 Lessor and Lessee hereby irrevocably agree to submit to the
non-exclusive jurisdiction of, and to waive any objection to the
laying of venue in, the County of New York and that any suit, action
or proceedings (collectively, "Proceedings") may be brought by
Lessor in any court of the State of New York or any U.S. Federal
court located in New York County, New York.
18.3 Nothing contained in this Article 18 shall limit the right of either
party to this Agreement to take Proceedings against the other in any
other court of competent jurisdiction, nor shall the taking of
Proceedings in one or more jurisdictions preclude the taking of
Proceedings in any other jurisdiction, whether concurrently or not.
18.4 Promptly after service of any process the Lessor or Lessee shall
dispatch a copy thereof to Lessee or Lessor, as the case may be, by
registered mail, postage prepaid but failure of Lessee or Lessor, as
the case may be, to receive such copy shall not invalidate the
service of such process.
18.5 To the extent that the parties may in any jurisdiction claim for
their or their assets immunity from suit, execution, attachment
(whether in aid of execution, before judgment or otherwise) or other
legal process and to the extent that in any such jurisdiction there
may be attributed to themselves or their assets such immunity
(whether or not claimed) the parties hereby irrevocably agree not to
claim and hereby irrevocably waive any immunity to the fullest
extent permitted by
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the laws of such jurisdiction with the intent, inter alia, that the
foregoing waiver shall have effect for the purposes of the Foreign
Sovereign Immunities Act of 1976 of the United States of America.
18.6 Lessee and Lessor shall each at all times maintain an agent for
service of process in the New York, New York. For Lessee, such agent
shall be Paul, Hastings, Janofsky & Walker, Attn: John Howitt, Esq.,
399 Park Avenue, New York, NY 10022-4697. For Lessor, such agent
shall be Haight, Gardner, Poor & Havens, Attn: Bonny L. Y. Kwoh, 195
Broadway, New York, NY 10007. Any writ, judgment or other notice of
legal process shall be sufficiently served on Lessee or Lessor if
delivered to such agent at its address for the time being. Each of
Lessee and Lessor undertakes that if it shall revoke the authority
of its above agent or if for any reason any such agent no longer
serves as agent to receive service of process, Lessee or Lessor, as
the case may be, shall promptly appoint another such agent and
advise Lessor or Lessee, as the case may be, thereof.
19. MISCELLANEOUS
19.1 The rights of each of Lessor and Lessee under this Agreement are
cumulative, may be exercised as often as it considers appropriate
and are in addition to its rights under general law. The rights of
Lessor against the Lessee or in relation to the Aircraft (whether
arising under this Agreement or the general law) shall not, as
against or in favor of Lessor, be capable of being waived or varied
otherwise than by an express waiver or variation in writing; and in
particular any failure to exercise or delay in exercising any of
such rights shall not operate as a waiver or variation of any other
such right; and defective or partial exercise of any such rights
shall not preclude any other or further exercise of that or any
other such right; and no act or course of conduct or negotiation on
Lessor's part or on Lessor's behalf shall in any way preclude Lessor
from exercising any such right or constitute a suspension or any
variation of any such right.
19.2 Save where expressly provided in this Agreement, any certificate or
determination by Lessor as to any rate of interest or as to any
other amount payable under this Agreement shall, in the absence of
manifest error, be conclusive and binding on Lessee.
19.3 If any sum paid or recovered in respect of the liabilities of Lessee
under this Agreement is less than the amount then due, Lessor may
apply such sum to
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rental, interest, fees or any other amount due under this Agreement
in such proportions and order and generally in such manner as Lessor
shall determine.
19.4 The terms and conditions of this Agreement shall not be varied
otherwise than by an instrument in writing executed by or on behalf
of Lessor and Lessee.
19.5 If any of the provisions of this Agreement becomes invalid, illegal
or unenforceable in any respect under any law, the validity,
legality and enforceability of the remaining provisions shall not in
any way be affected or impaired.
19.6 Every notice, request, demand or other communication under this
Agreement shall:
(a) be in English;
(b) be in writing and made by mail or by fax or telex transmission
or by reputable courier service;
(c) be deemed to have been received, subject as otherwise provided
in this Agreement, in the case of a telex transmission, at the
time of dispatch with confirmed answerback of the addressee
appearing at the beginning and the end of the communication,
in the case of a fax transmission, at the time safe receipt is
confirmed by the addressee provided that if the date of
dispatch is not a business day in the country of the addressee
any telex or fax transmission shall be deemed to have been
received at the opening of business on the next such business
day, in the case of a letter five days after being deposited
in the mail first class postage prepaid and in the case of a
courier three days after being sent; and
(d) be sent:
(1) to Lessee at:
Midway Airlines Corporation
300 W. Morgan St.
Durham, North Carolina 27702
Tel: (919) 956-4800
Fax: (919) 956-4810
Attention: President
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(2) to Lessor at:
First Security Bank of Utah, N.A.
79 South Main Street
Salt Lake City, Utah 84130-0007
Tel: (801) 246-5630
Fax: (801) 246-5053
Attention: Corporate Trust Department
with a copy to FAUSA at:
1199 N. Fairfax Street, Suite 500
Alexandria, VA 22314
Fax: (703) 683-2233
Attention: The President
with a copy to Beneficiary at:
Stockholm Aircraft Finance V, B.V.
Hoogoorddreef 15
Post Office Box 12222
1100 AE Amsterdam Zuidoost
The Netherlands
Attention: Vice President-Contracts
Fax: 31-20-605-7036.
or to such other address or telex or fax number as is notified by
either party to the other party to this Agreement.
19.7 This Agreement may be executed in any number of counterparts and all
of such counterparts taken together shall be deemed to constitute
one and the same instrument.
19.8 This Agreement is the sole and entire agreement between Lessor and
Lessee in relation to the leasing of the Aircraft, and supersedes
all previous agreements in relation to such leasing. Each of Lessee
and Lessor represents for itself that no broker has been retained by
it in connection with this Agreement.
19.9 This Agreement is intended by the parties to be a lease between
Lessor and Lessee. Any waivers, consents, deferrals of the payment
of Rent or Reserve Rates are not intended to be an agreement by
Lessor to make any capital contribution to the business of Lessee or
to share in or have liability for any of Lessee's losses, profits,
liabilities or obligations. Nothing contained in this Agreement or
performed by Lessor in connection herewith and any other agreement
between Lessor and Lessee whether now existing or entered into in
the
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future shall make Lessor a partner or a joint venturer of Lessee and
shall not for any purpose be construed as a joint-venture between
the parties hereto.
19.10 Intentionally Omitted.
19.11 Section 1110: Lessee acknowledges that Lessor would not have entered
into this Agreement unless it had available to it the benefits of a
lessor under Section 1110 of Title 11 of the United States Code.
Lessee and Lessor hereby state that this Agreement is intended to be
a true lease for U.S. Internal Revenue Code purposes. Lessee
covenants and agrees with Lessor that to better ensure the
availability of such benefits, Lessee shall support any motion,
petition or application filed by Lessor with any bankruptcy court
having jurisdiction over Lessee, whereby Lessor seeks recovery of
possession of the Aircraft under said Section 1110 and shall not in
any way oppose such action by Lessor unless Lessee shall have
complied with the requirements of said Section 1110 to be fulfilled
in order to entitle Lessee to continued use and possession of the
Aircraft hereunder. In the event said Section 1110 is amended, or if
it is repealed and another statute is enacted in lieu thereof,
Lessor and Lessee agree to amend this Agreement and take such other
action not inconsistent with this Agreement as Lessor reasonably
deems necessary so as to afford to Lessor the rights and benefits as
such amended or substituted statute confers upon owners and lessors
of aircraft similarly situated to Lessor.
19.12 First Security Bank of Utah, N.A. ("FSBU") is entering into this
Agreement solely as trustee under the Trust Agreement and not in its
individual capacity and in no case whatsoever shall FSBU (or any
entity acting as successor trustee under the Trust Agreement) be
personally liable on, or for any loss in respect of, any of the
statements, representations, warranties, agreements or obligations
of Lessor hereunder as to all of which the other party hereto agrees
to look solely to the Trust Estate, except for any loss caused by
FSBU's own willful misconduct or gross negligence. FSBU warrants
that the Aircraft shall be free of liens attributable to FSBU in its
individual capacity which do not arise from its actions as lessor
under this Agreement and that it shall be personally liable to
Lessee for any Claim against Lessee in respect of any statements,
representations, warranties, agreements or obligations contained
herein which are expressly made in its individual capacity.
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19.13 As between Lessor and Lessee, if Lessee fails to make any payment of
Rent or Reserve Rate required to be made by it hereunder or fails to
perform or comply with any of its agreements contained herein,
Lessor may itself make such payment or perform or comply with such
agreement, and the amount of such payment and the amount of the
reasonable and properly documented expenses of Lessor incurred in
connection with such payment or the performance of or compliance
with such agreement, as the case may be, together with interest
thereon at the interest rate defined in Appendix D, Article 6, shall
be deemed Supplemental Rent, payable by Lessee upon demand.
IN WITNESS whereof the parties have executed this Agreement the day and year
first herein written.
SIGNED on behalf of SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A. MIDWAY AIRLINES CORPORATION
not in its individual
capacity, except as
expressly set forth
herein, but solely
as owner trustee
By: /s/ [ILLEGIBLE] By:
------------------------------- -------------------------------
Its: Asst. Vice President Its:
------------------------------ ------------------------------
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19.13 As between Lessor and Lessee, if Lessee fails to make any payment of
Rent or Reserve Rate required to be made by it hereunder or fails to
perform or comply with any of its agreements contained herein,
Lessor may itself make such payment or perform or comply with such
agreement, and the amount of such payment and the amount of the
reasonable and properly documented expenses of Lessor incurred in
connection with such payment or the performance of or compliance
with such agreement, as the case may be, together with interest
thereon at the interest rate defined in Appendix D, Article 6, shall
be deemed Supplemental Rent, payable by Lessee upon demand.
IN WITNESS whereof the parties have executed this Agreement the day and year
first herein written.
SIGNED on behalf of SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A. MIDWAY AIRLINES CORPORATION
not in its individual
capacity, except as
expressly set forth
herein, but solely
as owner trustee
By: By: /s/ J.S. Waller
------------------------------- -------------------------------
Its: Its: Senior Vice President
------------------------------ ------------------------------
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APPENDIX A
DESCRIPTION OF AIRCRAFT
Manufacturer Model Serial No. Engines Number of
- ------------ ----- ---------- ------- ---------
Engines
-------
Fokker 100 11330 Rolls Royce Two
Tay MK 650-15
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APPENDIX B
FURTHER DEFINITIONS AND VALUES
AGREED VALUE : [***], for the first year of the Term
through and including the first anniversary
date of the Delivery Date, and for each
subsequent year the Agreed Value shall be:
Second Year: [***]
Third Year: [***]
Fourth Year: [***]
provided that the Agreed Value for any of
the above years may be adjusted up to FMV
(but never in excess of [***] if Lessor
provides to Lessee an independent appraisal
(at Lessor'scost) prior to the beginning of
any such year. If Lessee does not agree to
such appraised value, Lessee may follow the
Appraisal Procedure by giving Lessor written
notice of election to so proceed within 20
days of receipt of Lessor's independent
appraisal.
DEPOSIT : [***].
PARTIAL LOSS AMOUNT : [***]
RENT : [***]
RESERVE RATE : [***] per flight hour plus $10.30 (Dollars
Ten 30/100) per Cycle, to be adjusted in
conformance to Appendix D, Article 3.
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APPENDIX C
CERTIFICATE OF ACCEPTANCE
This Certificate of Acceptance is delivered, on and as of the date set forth
below, by Midway Airlines Corporation (herein referred to as "Lessee") to First
Security Bank of Utah, N.A., not in its individual capacity but solely as
trustee, (herein referred to as "Lessor") pursuant to that Aircraft Operating
Lease Agreement No. 136 dated as of December 15, 1995 between Lessor and Lessee
(herein referred to as the "Agreement"):
1. Details of Acceptance
Lessee hereby indicates and confirms to Lessor, its successors and
assigns, that the Lessee has at ______ o'clock on this _____ day of _____
1995 at _________ accepted the following from Transwede and concurrently
therewith from Lessor, in accordance with the provisions of the Agreement:
(a) Fokker 100 airframe, Manufacturer's serial Number 11330
(b) Rolls Royce Tay Mk 650-15 Engines (each of which engines has 750 or
more rated takeoff horsepower).
Engine Number Manufacturer's S/N
1. 17667
2. 17668
(c) Fuel Status: ______ kilos; ______ liters
(d) Loose Equipment Check List: as per list inserted or referred to, as
the case may, in Section 11 of Appendix E of the Agreement.
2. Confirmation of Undertakings
The terms used in this Certificate shall have the meanings given to such
terms in the Agreement.
The Lessee confirms that today being the Delivery Date as defined in the
Agreement:
(i) the Aircraft is duly accepted by the Lessee in accordance with and
subject to the provisions of the Agreement and the execution and
delivery of this Certificate constitutes the acceptance of the
Aircraft by the Lessee for all purposes of the Agreement.
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DELIVERY BY LESSEE TO LESSOR OF THIS CERTIFICATE OF ACCEPTANCE SHALL
CONSTITUTE CONCLUSIVE PROOF AS BETWEEN LESSOR AND LESSEE THAT ON THE
DELIVERY DATE LESSEE'S TECHNICAL EXPERTS EXAMINED AND INVESTIGATED
THE AIRCRAFT AND EVERY PART THEREOF ARE AIRWORTHY AND IN GOOD
WORKING ORDER AND REPAIR, WITHOUT DEFECT WHETHER OR NOT DISCOVERABLE
AS AT THE DELIVERY DATE AND IN EVERY WAY SATISFACTORY TO LESSEE;
(ii) the Lessee is obliged to pay to the Lessor the amount provided for
in the Agreement with respect to the Aircraft;
(iii) the Aircraft is insured in accordance with the Agreement;
(iv) the representations and warranties contained in Article 13 of the
Agreement remain, and if made at the date of this Certificate of
Acceptance, would be, true and correct in all respects;
(v) there have been affixed to the Aircraft and the Engines the fire
resistant notices required by Article 4.3 of the Agreement;
(vi) the Lessee has no right of set-off, deduction, withholding or
counterclaim against the Lessor whatsoever; and
(vii) no Default is subsisting.
IN WITNESS WHEREOF, Lessee has caused this Certificate of Acceptance to be
executed in its name, by its duly authorized officer(s) or representative(s),
pursuant to due corporate authority, all as of the date written in Paragraph 1
above.
MIDWAY AIRLINES CORPORATION
By: ________________________
Title: _____________________
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APPENDIX D
CHARGES
1. Deposit
Lessee shall pay to Lessor [***] as a Deposit for the Aircraft on or
prior to January 5, 1996 in the manner specified in Paragraph 4 of
this Appendix D.
The Deposit shall be held by Lessor during the Term as security for the
full and punctual performance of all of Lessee's obligations to Lessor
under this Agreement. Lessor may, but shall not be obliged to, apply the
Deposit in whole or in part for the payment of any rent, maintenance
accruals, indemnities, attorneys fees and other expenses, insurance and
other casualty payments and any other amount owing from time to time by
Lessee hereunder or any other Operative Document, between Beneficiary or
its affiliate companies, and Lessee, or for the payment of any loss or
damage suffered by Lessor as a result of any Event of Default or utilize
the Deposit in whole or in part to perform any of Lessee's obligations
under this Agreement or otherwise remedy any other Event of Default,
including, without limitation, in the redelivery condition for the
Aircraft without prejudice to any other remedy of Lessor. In any such
event Lessee shall on demand restore the Deposit to the full amount
provided for herein by payment to Lessor of an amount in cash equal to the
amount applied or utilized. Lessee shall not attempt to subject the
Deposit to any other lien, security interest, charge or other encumbrance
or assign any interest therein to any other person and, to the extent of
its interest therein, if any, Lessee hereby grants to Lessor a security
interest in the Deposit and assigns and transfers to Lessor any and all of
Lessee's right, title and interest therein, if any, as security as
provided above, and Lessor shall be entitled to the remedy of offset
against and application of the Deposit, without any notice to or demand
against Lessee, all of which are hereby waived. Lessee further agrees that
the Deposit may be, without derogating from the terms of this Agreement,
assigned as security to the Bank or transferred to any other transferee of
Lessor. Should any Event of Default hereunder occur, the Deposit shall
automatically be applied to any sum due to Lessor or as a prepayment of
any sum to become payable to Lessor, unless Lessor thereafter elects
otherwise by notice to Lessee.
Any remaining Deposit shall be repaid by Lessor to Lessee ten (10) days
following the Expiry Date or other date after redelivery of the Aircraft
in accordance with this Agreement. In the event there is a dispute as to
whether
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Lessee is entitled to a return of any portion of the Deposit, Lessor shall
so return the undisputed amount of the Deposit. Upon a repayment of such
Deposit or portion thereof, Lessor's security interest in and assignment
of such Deposit or portion thereof being repaid shall be deemed released.
Lessor's obligations in respect of the return of the Deposit shall be
those of debtor of Lessee, not of a trustee or other fiduciary.
The Deposit shall bear interest on the amounts then held at a rate of
interest per annum yielding $10,500 (Dollars Ten Thousand Five Hundred)
per year payable annually commencing on the first anniversary of the
Delivery Date, and on each anniversary thereafter unless the Deposit and
interest thereon shall have been applied pursuant to this Agreement. Any
reference to the Deposit in this Agreement shall include the interest
accumulated thereon and not paid to Lessee.
2. Rent
2.1 Rent shall be due and payable on each Rent Date and, with respect to
the final Rent date, shall be prorated through and including the
Expiry Date based upon the actual number of days and a thirty-day
month. If such date is not a Business Day then Rent shall be due and
payable on the last Business Day preceding such date.
2.2 The monthly Rent shall be adjusted upward by an amount equal to $875
(Dollars Eight Hundred Seventy Five) per month which shall be
payable to Lessor by check annually commencing on the first
anniversary of the Delivery Date, and on each anniversary
thereafter, with the balance due at the Expiry Date. Lessee may
elect to authorize Lessor in writing to set-off amounts payable
pursuant to this Article against interest on the Deposit which is
payable by Lessor pursuant to Article 1 of this Appendix D
irrespective of whether or not an Event of Default shall have
occurred and be continuing.
2.3 Intentionally omitted.
2.4 Intentionally omitted.
2.5 Intentionally omitted.
2.6 Intentionally omitted.
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2.7 Intentionally omitted.
3. Reserve Rate
3.1 In addition to installments of Rent, Lessee shall pay to Lessor the
Reserve Rate as follows:
(a) by way of an Airframe maintenance accrual, the sum of [***]
of which [***] shall be accrued for the 12,000 hour check and
[***] shall be accrued for the 24,000 hours check until the
12,000 hours check shall have been executed. After execution
of such check, 100% (one hundred percent) of the Airframe
Maintenance Accrual shall be accrued for the 24,000 hours
check for each Flight Hour the Aircraft is operated during the
Term ("Airframe Maintenance Accrual"); and
(b) by way of an Engine maintenance accrual, in respect of each
Engine the sum of [***] for each Flight Hour operated by each
Engine during the Term ("Engine Maintenance Accrual"). The
percentage of the various maintenance activities shall be
agreed between the parties after signing of this Agreement;
and
(c) by way of a landing gear maintenance accrual, the sum of
[***] for each Cycle operated by the landing gear during the
Term ("Landing Gear Maintenance Accrual").
The Airframe, Engine and Landing Gear Maintenance Accruals accruing
in any Rental Period shall be paid by Lessee to Lessor not later
than ten (10) days after the end of the calendar month in which such
Rental Period shall end; provided that Lessee shall be relieved of
its obligation to pay the Engine Maintenance Accrual or Landing Gear
Maintenance Accrual with respect to any Engine or Landing Gear, as
the case may be, during any period that an Aircraft Maintenance
Agreement is in effect with respect to such Engine or Landing Gear.
Concurrently with the payment thereof, Lessee shall report to Lessor
(in accordance with Article 7.1(e)) the number of Flight Hours and
Cycles accumulated in respect of the period for which payment is
being made.
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The Reserve Rate will be subject to adjustment every six (6) months
during the Term by reference for 65% to the Employment and Earnings
Index for U.S.A. labor cost average hourly earnings of production
(Aircraft Equipment) SIC 3728, table C-2 and for 35% to the Producer
Price Index for U.S.A. material cost commodity groupings (Machinery
and Equipment) Code 11/table 6. In addition the Engine Maintenance
Accrual, if any, will be subject to adjustment every six (6) months
during the Term having regard to the Engine Manufacturer
recommendations, industry experience and any change in the
operational environment of the Aircraft.
Any Reserve Rate shall, if requested by either Lessor or (unless an
Event of Default shall have occurred and be continuing) Lessee, be
adjusted to take into account any changes in the maintenance
intervals upon which Reserve Rates are based.
3.2 Maintenance Accruals as defined in paragraph 3.1 above and received
by Lessor shall respectively be credited to funds (collectively
"Maintenance Funds") to be known as the "Airframe Maintenance Fund",
the "Engine Maintenance Fund" and the "Landing Gear Maintenance
Fund" which funds shall reduce as monies are released to Lessee
therefrom in accordance with Article 7.4.1.
3.3 The monies in the Maintenance Funds under the Transwede Lease held
by Beneficiary at the date of termination thereof shall be
transferred by Beneficiary to the respective Maintenance Funds under
this Agreement in accordance with the provisions of the Tripartite
Agreement.
3.4 The Reserve Rates shall accrue interest at a rate which will be 1%
(one percent) less than six (6) months LIBOR applicable to each six
(6) months over which the rate will be calculated. For the
determination of such rate of interest the first such 6 (Six) month
period shall start at the Delivery Date and subsequent 6 (Six) month
periods shall start at expiry of the previous 6 (Six) month period.
Such interest shall accrue in the relevant Maintenance Fund and
shall be paid to Lessee at the moment and to the extent any "Excess"
as described in Paragraph 3.6 of this Appendix D shall be paid out
to Lessee.
3.5 Intentionally deleted.
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3.6 On the Expiry Date, if there is any Excess (as defined below) in any
Maintenance Fund, such Excess shall, unless a Default shall have
occurred and be continuing (in which case only after termination,
return of the Aircraft and payment of all amounts due following
exercise of remedies under Article 15), be paid to Lessee, and on
such date, if there is any Shortfall (as defined below) in any
Maintenance Fund, Lessee shall pay such Shortfall to Lessor.
"Excess" in any Maintenance Fund on the Expiry Date shall mean any
positive difference obtained by subtracting (x) from (y) for the
Airframe, Engines, Landing Gears or A.P.U., as the case may be;
(x) shall mean the product of (I) the then market cost from an
independent Authorized Maintenance Performer in the United States
and corrected for the experience of all United States based
operators of Fokker 100 aircraft for the relevant item:
with respect to the Aircraft, to perform a scheduled airframe
heavy maintenance as defined in the Maintenance Program for
12,000 hours and 24,000 hours inspections or any equivalent
thereof with more or less hours ("Airframe Maintenance"), or
with respect to any Engine, to perform a scheduled shop visit
engine maintenance and repair, other than (i) repairs arising
as a result of foreign object damage or operations mishandling
and/or (ii) maintenance and repair of QEC (Quick Engine
Change) kits ("Engine Maintenance"), or
with respect to any nose or main landing gear to perform a
schedule shop visit nose and main landing gear maintenance and
repair, other than repairs arising as a result of foreign
object damage or operational mishandling ("Landing Gear
Maintenance"), and
(II) a fraction of which (a) the numerator shall be the difference
between the actual number of hours or cycles (as to landing gear),
as the case may be, of operation remaining on the Airframe, Engine
or Landing Gear, as the case may be, to the next such Airframe
Maintenance, Engine Maintenance or Landing Gear Maintenance, as the
case may be, and the total number of hours or cycles, as the
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case may be, of operation allowable between such Maintenance and (b)
the denominator shall be the total number of hours or cycles, as the
case may be, of operation allowable between such Maintenance.
(y) shall mean the actual dollar amount remaining in the respective
Maintenance Fund.
"Shortfall" in any Maintenance Fund on the Expiry Date shall mean
any negative difference obtained by subtracting (x) above from (y)
above and, for the avoidance of doubt, shall include any shortfall
created by Lessee having been relieved, by reason of an Aircraft
Maintenance Agreement pursuant to Article 3.1 of this Appendix D, of
its obligation to pay any element of the Maintenance Accrual.
4. Payments
All payments of Rent due hereunder shall be effected by Lessee to Lessor
by transfer to Chemical Bank in New York, New York, in favor of the
Beneficiary, account number 544-0-46285, Ref. Aircraft MSN 11330, LA136,
and all payments of Reserve Rate and Supplemental Rent due hereunder shall
be effected by Lessee to Lessor by transfer to Chemical Bank in New York,
New York, in favor of the Beneficiary, account number 544-0-46285, Ref.
Reserve Rate Aircraft MSN 11330, and all such payments shall be in Dollars
and in immediately available funds, and all such payments shall be
initiated adequately in advance of the due dates to ensure that Lessor
receives credit for the full amount of such payment on the due dates. All
such payments shall be made in full without any deduction or withholding
(whether in respect of set-off, counterclaim, duties, taxes, charges or
otherwise howsoever) unless Lessee is prohibited by Law from doing so, in
which event Lessee shall (a) ensure that the deduction or withholding does
not exceed the minimum amount legally required; (b) forthwith pay to
Lessor such additional amount as shall result in the net amount received
by Lessor being equal to the amount which would have been received by
Lessor had such a deduction or withholding not been made; (c) pay to the
relevant taxation or other authorities within the period for payment
permitted by applicable Law the full amount of the deduction or
withholding; and (d) upon request in writing from Lessor to Lessee furnish
to Lessor, within the period for payment permitted by applicable Law, an
official receipt of the relevant taxation or other authorities involved
for all amounts deducted or withheld as aforesaid.
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5. Currencies
If under any applicable Law, whether as a result of judgment against
Lessee or the liquidation of Lessee or for any other reason, any payment
under or in connection with this Agreement is made or recovered in a
currency other than United States Dollars then, to the extent that the
payment (when converted to United States Dollars at the rate of exchange
on the date of payment or, in the case of the liquidation, the latest date
for the determination of liability permitted by the applicable Law) falls
short of the amount unpaid under this Agreement, Lessee shall, as a
separate and independent obligation, fully indemnify Lessor against the
amount of the short fall; for the purposes of this paragraph, "rate of
exchange" means the rate at which Lessor is able on the relevant date to
purchase United States Dollars in London with that other currency.
6. Default Interest
If any amount payable pursuant to this Agreement is not paid by Lessee on
the due date, Lessee shall pay to Lessor interest (after as well as before
judgment) on such amount, at the rate of 6-month LIBOR (as applicable two
Business Days before the date of Default)), plus four per cent (4%) per
annum from the due date to the date of payment in full by Lessee to
Lessor, but in the event such rate shall be in excess of the highest rate
permitted by applicable law, then it shall mean the highest rate allowed
by applicable law. All amounts of interest payable hereunder shall be
calculated on the basis of the actual number of days elapsed and a 360-day
year.
7. Set-off
At any time after an Event of Default shall have occurred and be
continuing, Lessor shall be entitled to set-off or withhold from any
amount due and payable to Lessee under this Agreement or any Other
Aircraft Agreement, or any amount standing to the credit of Lessee on any
account, in or towards the satisfaction of any amounts from time to time
due and payable by Lessee under this Agreement or any Other Aircraft
Agreement or any liability or obligation of Lessee under this Agreement or
any Other Aircraft Agreement, and shall be entitled to do so
notwithstanding that any such amount or amounts may not be expressed in
the same currency.
8. Time at which payments are due
Supplemental Rent shall be due and payable on demand unless otherwise
expressly stated herein.
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9. Purchase Option
Lessor grants to Lessee the right to purchase and to take delivery of the
Aircraft on the Expiry Date of this Agreement for a price equal to the
greater of the fair market value (as deferred to the penultimate sentence
of this paragraph, "FMV") of the Aircraft on the Expiry Date and
[***]; such price being the "Option Price"). If Lessee elects to exercise
its right to purchase the Aircraft, Lessee shall do so by giving to
Lessor written notice of such election at least two hundred seventy (270)
days prior to the Expiry Date. The FMV of the Aircraft on the Expiry Date
shall be established by an independent internationally reputed aircraft
appraiser appointed by mutual agreement of Lessor and Lessee within one
(1) month of the date of receipt by Lessor of Lessee's notice of election
to purchase. If Lessor and Lessee shall be unable to agree on such
aircraft appraiser, FMV shall be established by a mutually agreed
appraisal prepared and delivered by two independent internationally
reputed aircraft appraisers, one of which shall be chosen by Lessor and
one by Lessee. If such appraisers shall be unable to agree on FMV, FMV
shall be equal to the average of the fair market values established by
such appraisers. Any appraisal shall meet internationally accepted
standards and shall be binding upon Lessee and Lessor. The appraisal
procedure outlined in this Article 9 shall be referred to herein as the
"Appraisal Procedure". The FMV shall be equal in amount to the value that
would be obtained as of the Expiry Date in an arms'-length transaction
between an informed and willing purchaser under no compulsion to buy and
an informed and willing seller under no compulsion to sell with the
Aircraft assumed to be in the condition required upon the return thereof
at the end of the Term in accordance with Article 16 without considering
the encumbrance of this Agreement. All costs and expenses of the FMV
appraisal shall be shared equally by Lessor and Lessee. Upon receipt by
Lessor of the Option Price, Lessor will pay to Lessee any remaining
amounts in the Maintenance Funds and it will transfer to Lessee title to
the Aircraft on an "AS IS--WHERE IS" basis without any warranty or
recourse (except as to the absence of Lessor's Liens) and will also
transfer any surviving warranty given by Manufacturer. Lessor shall
execute and deliver to Lessee on such scheduled purchase date a bill of
sale to the Aircraft.
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APPENDIX E
CONDITION AT RE-DELIVERY
Upon redelivery of the Aircraft to Lessor, the Aircraft shall, subject to
ordinary wear and tear generally:
1. General Condition
(a) Be clean by airline standards;
(b) Have installed the Engines, and other equipment, Parts and
accessories and loose equipment as would remain installed in such
Aircraft, and shall be in a condition suitable for operation in
commercial service;
(c) Have in existence a valid Certificate of Airworthiness with respect
to the Aircraft issued by the Air Authority of the State of
Registration with a validity of at least nine (9) months after the
date of redelivery of the Aircraft to Lessor;
(d) Comply with the manufacturer's original specifications therefor;
(e) Have undergone, immediately prior to redelivery, a 3000 Check or any
subsequent higher inspection, if due within 3000 hrs, in accordance
with the Approved Maintenance Program, shall be free of any waivers,
and all deferred maintenance, if any, shall have been accomplished;
each engine and A.P.U. shall have had an inspection in accordance
with Article 16 confirming release for its remaining operational
life;
(f) All outstanding airworthiness directives and mandatory orders
affecting such model of Aircraft issued by the Air Authority which
require compliance during the Term shall have been accomplished;
(g) Have installed all applicable vendors' and manufacturers' service
bulletin kits theretofore received by Lessee free of charge that are
appropriate for the Aircraft and to the extent not installed, such
kits shall be furnished free of charge to Lessor;
(h) Stripped of all Lessee's paint scheme and repainted through an
Authorized Maintenance Performer with Manufacturer approved paints
in white or any other basic color requested by Lessor; and
(i) Have been inspected and treated with respect to corrosion as defined
in the Approved Maintenance Program.
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2. Airframe and major components
The Airframe and major components shall have not less than the following
hours/cycles/months expected life remaining to the next Major Check and/or
overhaul:
-Airframe : 3000 hours and 12 months to next
Major Check;
-Engine : half life on average to next Engine
shop visit but in no event less than
3000 hours;
-Main Landing Gear : 3000 cycles to next overhaul;
-Nose Landing Gear : 3000 cycles to next overhaul;
* The records as to remaining engine life shall be certified by Lessee in
writing to Lessor upon redelivery of the Aircraft to Lessor.
3. Components
(a) Each life-limited Part shall have not less than 3000 (Three
Thousand) flight hours or cycles of the total approved life
remaining to the scheduled replacement, in accordance with the
Approved Maintenance Program;
(b) Each hard-time controlled component shall have not less than 3000
(Three Thousand) Flight Hours or 3000 (Three Thousand) Cycles or 12
(twelve) months whatever is applicable, remaining to the next
scheduled overhaul/inspection, in accordance with the Approved
Maintenance Program;
(c) "On-condition" and "Condition Monitored" components shall be
serviceable;
(d) The A.P.U. shall be serviceable.
4. Fuselage, Windows and Doors
(a) Fuselage shall be free of major dents and abrasions, scab patches
and loose or pulled or missing rivets;
(b) Windows shall be free of delamination, blemishes, crazing and shall
be properly sealed;
(c) Doors shall be free moving, correctly rigged and be fitted with
serviceable seals.
5. Wings and Empennage
(a) All leading edges shall be free from damage;
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(b) All unpainted cowlings, fairings and other surfaces shall be
polished;
(c) Wings shall be free of fuel leaks.
6. Interior
(a) Ceilings, sidewalls and bulkhead panels shall be clean and free of
cracks and stains;
(b) All carpets and seat covers shall be in good condition, clean and
stain free and meet Air Authority fire resistance regulations;
(c) All seats shall be serviceable, in good condition and repainted as
necessary;
(d) All signs and decals shall be clean and legible;
(e) All emergency equipment having a calendar life shall have a minimum
of one year or one hundred per cent of its total approved life,
whichever is less, remaining.
7. Cockpit
(a) All decals shall be clean, secure and legible;
(b) All fairing panels shall be free of stains and cracks, shall be
clean, secure and repainted as necessary;
(c) Floor coverings shall be clean and effectively sealed;
(d) Seat covers shall be in good condition, clean and shall conform to
Air Authority fire resistance regulations;
(e) Seats shall be fully serviceable and shall be repainted as
necessary.
8. Cargo Compartments
(a) All panels shall be in good condition;
(b) All nets shall be in good condition.
9. Landing Gear and Wheel Wells
(a) Shall be clean, free of leaks and repaired as necessary;
(b) All decals shall be clean, secure and legible.
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10. Corrosion
(a) Entire fuselage shall be substantially free from corrosion and shall
be adequately treated and an approved corrosion prevention program
shall be in operation;
(b) Fuel tanks shall be free from contamination and corrosion and a tank
treatment program shall be in operation.
11. Specification
The Aircraft shall conform to its specification at the Delivery Date,
including the following:
1. The Aircraft Configuration as defined in Appendix A of the Transwede
Lease attached as Annex 1 to this Appendix E.
2. Specification changes performed by or on behalf of Transwede in
accordance with the provisions of the Tripartite Agreement as
follows:
a. Modification to install Flight Management System Airline
Option No. 5; Ref. Fokker SCN 34-62.S008.
b. Modification to change from CAA certification to FAA
Certification; Ref. Fokker SCN 02-20.C004.
C. Modification to change indicators from Kilograms to Pounds;
Ref. Fokker SCN 28-40.C003.
d. Modification to install TCAS; Ref. Fokker SCN 34-46.C004.
e. Modification of Pitot Heat System in accordance with Service
Bulletin F100-30-017.
f. Installation of Galley Door Viewer in accordance with Service
Bulletin F100-52-053.
g. Any and all modifications necessary to obtain a Swedish Export
Certificate of Airworthiness and the issuance of a Certificate
of Airworthiness by the FAA including completion of all
Airworthiness Directives required by the FAA, the BLA or other
relevant authority.
3. The Loose Equipment Checklist attached as Annex 2 to this Appendix
E.
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ANNEX 1 TO APPENDIX E
FOKKER 100
AIRCRAFT CONFIGURATION
BETWEEN
STOCKHOLM AIRCRAFT FINANCE V B.V.
AND
TRANSWEDE AIRWAYS AB
<PAGE>
AIRCRAFT CONFIGURATION
relating to
Fokker 100 aircraft
PART Page
- ---- ----
PART A: Type Specification 64
Attachment A to Part A 65
PART B: Installed additional equipment 66
PART C: Lessee's additional requirements 86
Emergency Equipment Lay-out 90
PART D: List of Mandatory Modifications 91
<PAGE>
AIRCRAFT CONFIGURATION
relating to
Fokker 100 aircraft
PART A: TYPE SPECIFICATION
1) Type Specification as per printed copy supplied by Fokker Aircraft
B.V. to TRANSWEDE AIRWAYS A.B.
Document Reference: TD F.28:PL-004
Date of issue: February 01, 1983
Date of amendment: February 15, 1988
2) Engine Specification: Rolls Royce Tay Mk 650-15 as described in
the Rolls Royce Contract Specification 3004
issue 1, printed February 1986, including
the Design Change Orders as executed by
Rolls Royce.
<PAGE>
ATTACHMENT A TO PART A
NUMBER DESCRIPTION
FO 02-52.80 Fokker Company Logo.
FO 03-10.80 Incorrect flying hours for the economic repair life Fokker 100.
FO 03-65.80 Correction to maximum design towing load given in the Type
Specification.
FO 03-70.80 Floor panel loading - Correction to baseline Type Specification.
FO 12-13.80 Update the approved lubrication oils info given in the baseline
Type Spec.
FO 14-00.81 Amendment to Chapter l4 of the baseline Type Spec.
FO 14-l3.80 Interchangeability - add "cable wheels and removable pulley
brackets".
FO 21-22.80 Introd. of larger ventilation louvres and extra adjustable air
outlets.
FO 21-26.80 Equipment cooling - additional fan assembly.
FO 22-10.80 Profile mode - certification.
FO 22-10.81 Speed protection for FMS profile mode.
FO 23-40.80 Amend the Fokker 100 baseline Type Spec. to reflect ATA 100
breakdown.
FO 23-51.80 Jack panel location in the flight compartment.
FO 23-62.81 Electrostatic jack socket.
FO 25-50.80 Logitudinal track spacing incorrect in Type Spec.
FO 27-35.81 Stall protection - new PSRS control law.
FO 27-56.80 Flap indication availability.
FO 28-10.80 Fuel system - CWT usable capacity.
FO 28-10.81 Fuel system - main tank usable capacity.
FO 28-15.80 Fuel venting system water ingress.
FO 28-22.80 Engine fire shut-off valve - closed indication.
FO 29-12.80 Hydraulic fluid transfer.
FO 31-31.82 Relocation of Flight Data Recorder.
FO 31-41.80 Proximity switching system.
FO 32-10.80 Main Landing Gear - Torque link damper.
FO 32-10.81 Main Landing Gear - Water deflectors.
FO 33-41.80 Tires - Bias tires as standard.
FO 33-23.80 Toilet area lighting baseline Type Spec.
FO 34-43.80 GPWS - Glideslope warning inhibit annunciator.
FO 34-51.80 Type Spec. correction with respect to location of RDMI
desciption.
FO 38-10.80 Water tank installation.
FO 38-30.80 Electr. heated waste water drain masts and floor drain check
valves.
FO 49-00.80 APU "AVAIL" lamp function.
FO 49-50.80 APU - Fireproof inlet duct.
FO 49-60.80 APU automatic shutdown in flight.
FO 56-11.81 Windshield dry sealing.
FO 74-30.80 Ignition - Unit 1 deactivated, unit 2 activated.
FO 78-33.80 Thrust reverser - Electrical power supply.
FO 80-12.80 Engine starter circuit cutout.
<PAGE>
INSTALLED ADDITIONAL EQUIPMENT OVER AND ABOVE THE
TYPE SPECIFICATION DOC.: TD F28:PL-004
FIRST ISSUE: FEB.01/83 AND AMENDED UP TO FEBRUARY 1988
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ATA 100 DESCRIPTION
CHAPTER
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02 MISCELLANEOUS
02-21 CAA Certification
The aircraft shall include all hardware modifications resulting from
the Special Conditions as applicable to the UK CAA Type
Certification of the Fokker 100 aircraft. Operational requirements
are not included
02-70 Pin Programmable Options
Flight Management System (FMS)
1. Units
a. weight related items kg
b. length distance meters
c. baro correction mB
2. ATA/IATA departure profile ATA
3. Fuel option **) No. 1
4. Airline Type Option No. 2
Electronic Flight Instrument System (EFIS)
1. Bearing pointers on ND rose both ADF
2. ADF in ND MAP & ARC no ADF
3. Flap position on PFD disabled
4. Baro reference mB
5. FD presentation cross-bar
Multi Function Display System
1. Engine Oil Quantity liters
2. Temperature Reference (degrees) Celcius
3. Fuel Mass kg
4. Fuel Flow sec. page
5. WX Display on MFDS disabled
Automatic Flight Control & Augmentation
System (AFCAS)
1. C-chord disabled
Flight Warning Computer
1. C-chord disabled
<PAGE>
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ATA 100 DESCRIPTION
CHAPTER
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02-70 Pin Programmable Options (cont'd)
**) Buyer shall specify the following fuel options under option
No. 1 to its Navigation Base Vendor.
- Taxi fuel
- Route reserve
- Upper limit route reserve
- Lower limit route reserve
- Final/Time
03 STRUCTURAL DESIGN CRITERIA
03-20 Increase in MTOW
The aircraft shall be certified according to the following operating
weights:
Maximum Ramp Weight : 98.500 lbs
Maximum Take-Off Weight : 98.000 lbs
Maximum Zero Fuel Weight : 81.000 lbs
Maximum Landing Weight : 88.000 lbs
03-50 Design Speeds
Increase of Mmo to M077.
Introduction of this change is accomplished by software changes to
AFCAS, FMS and ADC.
The speed limitation placard on the main instrument panel shall be
changed to reflect the correct Vmo and Mmo. This change shall also
be reflected in all applicable manuals.
11 PLACARDS AND MARKINGS
11-10 Exterior Colour Schemes and Markings
Exterior placards and markings in English.
Placarding shall reflect the use of Mobil Jet Oil II for engine,
APU, IDG and cooling turbines.
<PAGE>
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ATA 100 DESCRIPTION
CHAPTER
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11-30 Interior Placards and Markings
Cabin placards and markings in English/Spanish.
Cockpit placards in English.
12 SERVICING
12-00 Servicing
Fuel contents table in kilograms (kg).
Oil : Mobil Jet Oil II
i.l.o. ESSO 2380
Fuel : JP1, JP4 and JP5
Hydr.Fluid : Skydrol 500 B4
22 AUTOFLIGHT
22-10 Extended Autoland (capability cat. 3B)
Installation of a fail-operational three channel Autoland, Automatic
Flight Control and Augmentation System suitable for automatic
landings down to 15 ft DH and 150 m RVR weather conditions.
During high speed roll-out after touch down the AFCAS provides
lateral control via the aircraft rudder.
Installation adds to the standard system: FCC 3, ILS 3 (ref. 34-32),
LRRA 3 (ref. 34-42) and static inverter (ref. 24.26).
- (01) FCC 1000 Collins
23 COMMUNICATIONS
23-11 Single HF Communication System
The aircraft shall be provided with full provisions for a single
Collins HFS-700 HF communication system.
<PAGE>
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ATA 100 DESCRIPTION
CHAPTER
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To arrive at an operational system the following equipment is to be
supplied by Buyer.
- (01) Tranceiver, Collins HFS-700
- (01) Antenna tuner, Collins 4905-1
- (01) HF Control panel, Gables
23-12 VHF Communication
Installation of a Bendix VHF Communication system i.l.o. the
standard Collins system.
The installation comprises the following Seller Furnished units,
- (02) Transceiver, Bendix RTA-44A
- (02) Antenna, Sensor
- (02) VHF Control panel, Gables
Third VHF Communications
Additionally the Aircraft shall be provided with full provisions for
a third VHF Communication system. This third VHF will be dedicated
to and fully interfaced with the provisions for the ACARS system.
To arrive at an operational system the following equipment is to be
supplied by Buyer.
- (01) Transceiver, Bendix RTA-44A
- (01) Antenna, Sensor
- (01) VHF Control panel, Gables
23-21 Selective Calling (Selcal) - ARINC 714
The Aircraft shall be provided with full provisions for a Selcal
system in acc. with ARINC 714.
The Selcal system shall be interfaced with VHF1, VHF2 and the
provisions for HF communication. The Selcal system shall be reset if
the approporiate VHF or HF system is keyed.
<PAGE>
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ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
To arrive at an operational system the following equipment is to be
supplied by Buyer.
- (01) Selcal unit, TEAM
23-22 ACARS
Installation of full provisions for ACARS in addition to the space
provisions provided in the baseline aircraft.
The ACARS shall provide OOOI information. The ACARS shall have a
dedicated VHF Comm system (ref. 23-12). The ACARS shall be hooked-up
to the DFDAU for report downlink purposes which are formed via the
standard parameter information connected to the DFDAU, when a second
CPU will be installed.
To arrive at an operational system the following equipment is to be
supplied by Buyer.
- (01) Management Unit (MU) with internal GMT clock, powered
from batteries, Teledyne
- (01) Interactive Display Unit (IDU) on the pedestal, Teledyne
Wiring provisions will be available for:
- (01) Cabin Management Terminal at Flight Attendant Panel,
Teledyne
- (01) Printer, to be installed in column of maintenance and
test panel, Datametric
- (01) Voice go-ahead to FWC from MU
- (01) Remote voice/data switch, on the pedestal
23-22 ACARS (cont'd)
The voice-mode shall be selectable via the IDU (pin programmable)
The OOOI information generated by the flight warning computer will
be transferred via a databus to ACARS Management Unit. In addition,
the OOOI and ground/flight info will be also hardwired.
<PAGE>
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ATA 100 DESCRIPTION
CHAPTER
- --------------------------------------------------------------------------------
The aircraft ident. information will be provided via the ACARS - MU
hardwired.
The ACARS - IDU and MU shall be hardwired connected to the DFDAU.
Installation of the standard Flight Data Acquisition Unit DFDAU with
a single CPU.
23-32 Passenger Entertainment
Installation of a pre-recorded announcement and boarding music
system. The system comprises a Matsushita RDAX 7351 recorder system.
The recorder with build-in control panel shall be installed in
Galley 3.
The installation comprises the following Seller Furnished unit:
- (01) Recorder, Matsushita RD-AX7351
23-51 Audio Management
Audio control panels in the pedestal shall be relocated to the LH
and RH flightdeck side panels, as a result the jack box panels will
be installed in the sidewalls. Audio control panels will be with
provisions for VHF Com-3 and single HF Com facilities.
Because of the full provisions for VHF3 and HF, switches for these
functions are installed on the Audio Control Panels. As these
switches are not functional they must be provided with an "INOP"
sticker in accordance with JAR 25.1523.
24 ELECTRICAL POWER
24-26 Static Inverter
Installation of a single-phase autoland static inverter to provide a
source of AC power to the essential autoland 3 bus (350 VA).
<PAGE>
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ATA 100 DESCRIPTION
CHAPTER
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24-33 Batteries
Batteries with an increased Amp. hr. rating will be installed
resulting from CAA special conditions applicable to Fokker 100
aircraft.
25 EQUIPMENT AND FURNISHINGS
25-12 Sunvisors
Installation of two sunvisors and rail system in the flight
compartment. The visors can be locked at various angles.
25-20 Passenger Compartment
Interior lay-out is for 109 passengers in accordance with drawing
F100-01-088 sheet 1, issue -.
Accomodation shall be provided for 109 seats at 31 inch (787 mm)
pitch. Triple seats RH and double seats LH.
25-21 Passenger and Attendant seats
Installation of 109 passenger seats including covers, seatbelts,
tables etc. The fully dressed passenger seats are supplied by
Seller.
Double Cabin Attendant Seat
Installation of a rear facing double cabin attendants seat in
entrance against forward wardrobe/stowage wall on floor hardpoints
and a third top-point.
- (01) Double cabin attendant seat, Socea
Installation of a double cabin attendants seats i.l.o. a single at
the aft pressure bulkhead.
- (01) Double cabin attendant seat, Socea
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25-23 Sidewall Panels and Window Shades
Installation of a rolling blind in each window of the passenger
compartment.
- (66) Window blind, Magee
25-25 Floor Covering
Carpet material or the passenger's compartment shall be supplied by
Seller. Installation of protection covers below the floor over the
avionics rack.
25-26 Movable Cabin Divider
The aircraft shall be provided with full provisions for a movable
class divider, from approx. Sta. 6200 to Sta. 22320, which is
throughout the cabin.
Cabin backwall LH/RH incl. lintel.
25-26 Passenger Compartment Curtains
The Aircraft's passenger compartment shall be provided with curtains
and curtain rails in the following locations:
- between Galley 1 and Galley 2
- between Galley 2 and Galley 3
The required curtain material of Buyers choice shall be supplied by
Seller
25-27 Rail on Overhead Luggage Bins
Installation of a seat-placard rail on the luggage bins. An extruded
metal rail is fitted to the RH and LH luggage bins throughout the
cabin. The rail incorporates the facility to easily fit and remove
seat row placards.
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25-29 Stowage unit/Wardrobe
Deletion of the standard RH forward stowage unit behind Galley 2.
Deletion of the standard LH forward stowage unit aft of the LH
passenger door.
25-29 Trolley Stowage rear cabin
The standard wardrobes in the rear of the Aircraft's cabin (forward
of the lavatories) shall be made suitable for stowage of one half
size trolley (one at each side) and a standard unit. The stowage
shall be closed by means of a door. A folding panel shall allow the
use of the compartment as wardrobe. Trolleys and standard units are
Buyer Furnished Equipment.
25-31 Galleys
All galleys and galley inserts are supplied by Seller as Seller
Furnished Equipment.
25-31 Galley 1
Installation of Galley 1 (22" deep) of the standard location forward
of the RH S/E door.
- (01) Galley, Rumbold
System provisions for galley inserts:
- (03) Coffee makers, Rumbold
- (03) Half size trolley, Driessen
- (01) Ice drawer, Rumbold
- (01) Standard unit, Rumbold
Ref. Fokker drawing F28-04-143 sheet 1, issue: A.1.
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25-32 Galley 2
Installation of a Galley 2 (35" deep) at the standard location aft
of the RH S/E door.
- (01) Galley, Rumbold
System provisions for galley inserts:
- (01) Large oven, Rumbold
- (04) Half size trolley, Driessen
- (02) Oven control panel, Rumbold
- (01) Waste bin, Rumbold
Ref. Fokker drawing F28-04-143 sheet 2, issue: A proposal 1.
25-33 Galley 3
Installation of a Galley 3 (29" deep) on structural provisions
(hardpoints) on the floor and top for a galley.
Location aft of the LH passenger door, between Sta. 4875 and 5611.
- (01) Galley, Rumbold
System provisions for galley inserts:
- (02) Standard units, Driessen
- (04) Half size trolley, Driessen
The front wall shall be equipped with the cabin attendant control
panel, passenger entertainment panel and shall have wiring
provisions for an ACARS cabin management terminal (Ref. 23-22).
25-60 Emergency Equipment
The BCF fire-extinguisher, the megaphone aid oxygen bottle will be
installed as described in the type specification.
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26 FIRE PROTECTION
26-12 APU Fire Detection and Warning
Installation of a warning horn in the nosewheel bay to provide an
audible APU fire warning during APU ground operation.
The function of the warning horn will be inhibited during an APU
fire warning test.
31 INDICATING/RECORDING SYSTEMS
31-21 Flight Deck Clocks
Installation of alternate p/n clocks
- (02) Clock, Smiths Industries p/n 2610-07-1
31-31 Flight Data Recorder Alternate Source - ARINC 573
Installation of an alternate source FDR (Sundstrand) i.l.o. standard
unit (Fairchild). The optional equipment shall be installed above
stowage unit section (in the position allocated to the standard
equipment).
- (01) FDR, Sundstrand
- (01) Accelerometer, Sundstrand
- (01) Mounting tray
32 LANDING GEAR
32-48 Autobrakes
Installation of an Automatic Braking System in addition of the
standard brake- and analog anti-skid system. The system provides
pilot selectable decelleration rates: low, med, max and RTO.
For take-off, use of the maximum setting shall result in maximum
braking if the take-off is required from a speed of 80 knots.
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33 LIGHTS
33-24 Illuminated Signs
Installation of a lintel in the forward passenger compartment with
legend EXIT in English/Spanish due to the installation of a curtain
between Galley 2 and Galley 3.
33-26 Entrance Lighting
Wiring provisions for a galley area light installed in Galley 3, to
be connected to the entrance light.
33-28 Galley Area Lighting
Installation of a galley area light in the ceiling between Galley l
and 2. Switch will be installed on Galley 1.
33-46 Logo Lights
Installation of lighting fixtures in the LH and RH flap track
fairings for illumination of both sides of the vertical stabilizer.
Installation of a ON/OFF switch for NAV/LOGO light switching on the
external-light switch panel in the overhead panel of the flight
compartment.
33-47 Strobe Lights
Installation of high intensity strobe lights in each wingtip and one
in the tailcone. Control of the system is via a rotary switch panel
in the overhead panel of the flight compartment. Switch
identification is by STROBE, printed below the switch. Switch
operation designation are as follows:
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- OFF = strobe lights are off
- ON = strobe lights will be switched on by this selection.
- AUTO = strobe lights are activated to come on via the landing gear
switch at take-off.
34 NAVIGATION
34-13 Air Data Instruments
A combined standby altimeter and airspeed indicator i.l.o. the
standard separate standby altimeter and standby airspeed indicator.
The following Seller Furnished equipment shall be deleted from the
baseline configuration:
- (01) Standby altimeter, Smiths Industries
- (01) Standby airspeed indicator, Smiths Industries
The following unit shall be supplied as Seller Furnished Equipment:
- (01) Combined standby altimeter and airspeed indicator, Smiths
Industries
34-16 Windshear
Installation of a windshear detection, alerting and recovery
guidance system.
During flight near the ground (below 1500 A.G.L.) the system will:
- detect the presence of potentially hazardous windshear conditions.
- alert the flight crew when the airmass motions reach potentially
hazardous levels.
- provide flight director guidance to the crew to maximize the
probability of ground avoidance.
- provide automatic recovery guidance through the AFCAS when
selected.
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o Detection: implementation in FMC via software changes. All Sensor
data are available via existing interfaces, as are the
discrete outputs to the AFCAS/EFIS, GPWS and other
subsystems
o Guidance: implemented in AFCAS (FCC's) via software changes using
all existing interfaces
o Alerts: Aural alerts will be produced within the GPWS. Primary
display of detection alerts and guidance is on the PFD
of EFIS.
Wiring changes for the following functions:
- To add discrete for the following functions:
o TOGA/SPE
o Max. TLA/SPE
o FCC/GPWS
- Changes of speedbrake auto retract logic
- Change pin option FCC and FWC windshear enable
34-28 Inertial Reference System
Installation of a triple inertial reference system (IRS) i.l.o. the
std triple attitude and heading reference system (AHRS).
The following Seller Furnished Equipment shall be deleted from the
baseline configuration:
- (03) AHRS unit, Litton
- (02) Magnetic sensor unit, Sperry
- (02) Magnetic compensator, Litton
Structural provisions for the magnetic sensor units remain in the
Aircraft.
The installation comprises the following Seller Furnished units:
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- (03) IRS unit, Honeywell HG
- (03) Mode selector panel, Honeywell
- (01) Inertial system display unit, Honeywell CG
34-32 Instrument Landing System
Installation of a triple Bendix system i.l.o. the standard dual
Collins system (ARINC 710) as part of the three channel Autoland
AFCAS (Ref. ATA 22-10).
The installation comprises the following Seller Furnished units:
- (03) Receiver, Bendix RIA-35A
- (03) G/S Antenna, Sensor
34-41 Weather Radar (WXR)
Installation of a Bendix weather radar system i.l.o. the std Collins
system.
The installation comprises the following Seller Furnished units:
- (01) Tranceiver, Bendix RTA-4A
- (01) Control panel, Bendix CON-4A
- (01) Antenna pedestal, Bendix DAA-4A
- (01) Antenna, Bendix REA-4A
34-42 Radio Altimeter
Installation of a triple TRT AHV 530 LRRA system i.l.o. the standard
dual system (ARINC 707) as a part of the three channel Autoland
AFCAS (ref. ATA 22-10).
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The following Seller Furnished units are deleted:
- (04) Antenna, TRT AHV 5
The installation comprises the following Seller Furnished units:
- (03) Transceiver, TRT AHV 530
- (06) Antenna, Sensor
34-43 Ground Proximity Warning
The installation of a GPWS/GS annunciator on the main instrument
panel LH and RH.
34-51 VHF Omni Range (VOR) - ARINC 711
Installation of two Bendix VOR/M receivers i.l.o. the two standard
Collins receivers. The equipment shall be installed in the aft rack
of the avionics bay.
The installation comprises the following Seller Furnished units:
- (02) Transceiver, Bendix RVA-36A
34-52 Distance Measuring Equipment
Installation of two Bendix DME interrogators i.l.o. the two std
Collins interrogators. The equipment shall be installed in the aft
rack of the avionics bay (in the positions allocated for the
standard equipment).
The installation comprises the following Seller Furnished units:
- (02) DME Interrogators, Bendix DMA-37A
34-53 Automatic Direction Finding (ADF)
Installation of two Bendix ADF receivers i.l.o. the two std Collins
receivers. The equipment shall be installed in the aft rack of the
avionics bay (in the positions allocated for the standard
equipment).
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The installation comprises the following Seller Furnished units:
- (02) Receiver, Bendix DFA-75A
34-54 Air Traffic Control
Installation of a dual Bendix ATC system with S-mode i.l.o. the
standard, single, Collins system with C-mode. The transponders shall
be installed in the aft rack of the avionics bay and the control
panel shall be installed in the center pedestal (replacing the
standard units).
Two mode S ATC antennae will be installed at bottom of fuselage and
2 antennae on top of the fuselage.
The following Seller Furnished Equipment shall be deleted from the
baseline configuration:
- (01) Control panel, Gables
The installation comprises the following Seller Furnished units:
- (02) ATC S-mode transponders, Bendix TRA-67A
- (01) Control panel, Bendix CNA-67A
- (04) ATC antenna, Sensor
34-61 Flight Management System
ATA departure profile i.l.o. IATA airline Type option no. 2 i.l.o.
European FMS.
35 OXYGEN
35-20 Passenger Oxygen System
The RH luggage bins shall be equipped with oxygen panels containing
four oxygen masks, the LH luggage bins shall be equipped with oxygen
panels containing three oxygen masks.
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The following units shall be deleted from the baseline aircraft:
- (43) 3 mask panels
The following units shall be installed:
- (22) 4 mask panels
- (22) 3 mask panels
38 WATER/WASTE
38-12 Water heater in aft toilet compartments
Installation of a water heater and a dual timed faucet in both aft
toilet compartments.
The installation comprises the following Seller Furnished units:
- (02) Heater, Inventum
- (02) Faucet, Adams Rite
38-30 Waste Disposal
To change the material of toilet waste ducts from titanium to
stainless steel to allow suction draining
52 DOORS
52-13 Forward Opening Passenger Door
Installation of a forward opening pax/crew door on the LH side of
the fuselage between Sta. 3845 and 4875. The door will allow
connecting the airplane to boarding bridges as presently in use and
will provide an available entry height of 1850 mm (73 inches).
Installation of the door will not comprise the installation of an
integral staircase.
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The door shall be outward and forward opening and shall be provided
with a locking mechanism comprising C-latches. An escape slide will
be mounted on the inboard side of the door.
(01) Escape slide, Air Cruisers Co
52-31 Enlarged Cargo Compartment Doors
Installation of upward opening, enlarged cargo doors, two in the
forward cargo compartment and one in the aft cargo compartment. The
door sills are flush mounted with the cargo compartment floor to
facilitate ease of loading.
52-70 Avionics Bay Access Hatch Warning
Installation of two micro switches on each of the two avionics
access doors to detect an unlocked condition. Separate warnings, on
each door, are fed to the Multifunction Display Units located on the
main instrument panel. The warnings is fed to the MFDS via the
flight warning computer.
The warning is a level 2 category warning which is also accompanied
by an aural single chime.
53 FUSELAGE
53-73 Door Protection Plates
Scuff plates made of corrosion resistant steel shall be provided on
the external fuselage at the sills of the passenger and
service/emergency doors.
56 WINDOWS
56-00 Windows
Due to Galley 3 installation the first cabin window on the LH side
will be blanked off.
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72 ENGINES
72-00 Tay Mk 650-15 i.l.o. Mk 620-15 engines
Changes to the airframe structure, airframe systems and system
software for the installation of Rolls-Royce Tay Mk 650-15 engines.
(Exclusive engines).
1. Structural Hardware
o New nacelle inlet (fan diameter increased by 0.8"
o Increased anti-icing valve access doors
- LH fixed cowl
- RH cowl door
o Reinforced thrust strut bracked back-up structure.
72-00 Tay Mk 650-15 i.l.o. Mk 620-15 engines (cont'd)
System Hardware
o Throttle controls and fuel shut-off
o Control: geometry change
o New igniter lead cables. Penetration point on engine on
bottom dead center
o Engine ident plug (delivered C.W. engine)
o Inlet anti-icing: Goemetry changed
o Standby engine indicator (new p/n)
o Electrical harness
o Fuel lines: geometry change
o Hydraulic lines: geometry change
3. Avionics Software
o AFCAS : Installation of a new FCC (the FCC is pin
programmable)
o MFDS : Installation of a new MFDS
o FMC : Installation of a new FMC (the FMC is pin
programmable)
o FWC Installation of a new FWC (the FWC is pin programmable)
4. Performance
o Noise
o Handbooks (o.a. AFM)
(Standard Option SO 72-00.01)
<PAGE>
LESSEE'S ADDITIONAL REQUIREMENTS
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ATA 100 DESCRIPTION
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02 MISCELLANEOUS
02-20 Certification
The aircraft shall be certified for operation on the Swedish
register.
11 PLACARDS AND MARKINGS
11-10 Exterior Colour Schemes
The outboard painting shall be as specified by customer.
11-20 Exterior Placards and Markings
Exterior placards and markings shall be in English, as specified by
customer.
11-30 Interior Placards and Markings
Interior placards and markings shall be in English/Swedish, as
specified by customer.
12 SERVICING
12-13 * Servicing
The oil for engine, IDG and APU shall be Mobil Jet Oil 254
25 EQUIPMENT AND FURNISHINGS
25-20 Passenger compartment.
Interior lay-out for 107 pax in accordance with drawing W98251.
Interior colors and materials as specified by customer.
25-31 Galleys
Galley parts that are now red shall be painted dark blue, as
specified by customer.
25-31 * Galley 1
Galley 1 shall be made suitable for KSSU trolleys, including
numbering
** Add:
(03) Trolley Halfsize Driessen DLH573-009
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LESSEE'S ADDITIONAL REQUIREMENTS
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25-31 * Galley 2
Galley 2 shall be made suitable for KSSU trolleys. Deletion of frame
in order to have additional stowage of 1 full size trolley,
including numbering.
Provisions for installation of 3 ATLAS type ovens, p/n 62755.
Provisions for the attachment of a baby cradle.
Add:
* (03) ATLAS type ovens, p/n 67255.
** (03) Trolley Fullsize Driessen DLH621-029
(01) Magazine holder C15018-001-001
25-31 * Galley 3
Galley 3 shall be made suitable for KSSU trolleys, including
numbering.
Provisions for the attachment of a baby cradle. Installation of
compartment doors at positions 303 and 305.
Add:
** (04) Trolley Halfsize Driessen DLH573-009
25-31 * Galley 4
Installation of a seat rail mounted stowage for 4 half size
trolleys, at RH aft of the cabin, in stead of a double seat, and
including numbering, p/n C10119-001-004 (Rumbold). Fokker will do
best effort to certify this at delivery date of first a/c.
Add:
** (04) Trolly Halfsize Driessen DLH573-009
25-31 ** Aft stowage
The aft stowages shall be modified to accept KSSU trolleys, the top
part of aft stowages shall be modified to accept a KSSU container.
** (02) Trolley Halfsize Driessen DLH573-009
25-61 * Emergency equipment
The following additional evacuation equipment shall be installed:
(02) Fire extinguishers, Walter Kidde 892480MODX
(04) Smoke hoods, Puritan Bennet, 119003
(07) Life vests, orange, Svitlik S21850-7300
A complete lay out of the emergency equipment is attached to this
Part C
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LESSEE'S ADDITIONAL REQUIREMENTS
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25-63 * Emergency Locator Transmitter
An emergency locator transmitter shall be installed, comprising the
following components:
(01) Transmitter, Dorne & Margolin DMELT8-1
located in the ceiling at the rear of the
passenger compartment
(02) Antenna, Sensor S65-8280-7
mounted on the upper fuselage
(03) Test switch panel, Fokker A42730-403
located on the overhead panel in the flight compartment
33-24 Illuminated Signs
All signs shall be in english, as specified by customer.
Installation of white covers on overwing escape hatches.
34-26 * EFIS
ADF pointers shall be available in ARC/MAP mode.
<PAGE>
(a) The price for the items marked with * totals an amount of $95,640;
(b) The price for the items marked with ** will be determined before delivery
of the Aircraft;
(c) The total of the prices mentioned in (a) and (b) above shall, at delivery
of the Aircraft, be deducted from the credit for start-up costs mentioned
in SL01 648.005 and SLO2 648.013 to the Aircraft Support Services
Agreement ASSA 648.004, concluded between Lessee and Fokker on even date
herewith.
<PAGE>
EMERGENCY EQUIPMENT LAY-OUT
[GRAPHIC DESCRIPTION]
Layout of emergency equipment and locations.
<PAGE>
LIST OF MANDATORY MODIFICATIONS TO BE
INSTALLED IN THE AIRCRAFT PRIOR TO DELIVERY
A (This list includes all mandatory service
bulletins issued at the time of delivery of the
Aircraft)
T
A SERV. PUBLIC. DESCRIPTION
22 SBF100-22-026 INTRODUCTION FAC V13R1
SBF100-22-029 INTRODUCTION FCC V13R1
SBF100-22-031 REPLACEMENT FLIGHT MODE PANEL
SBF100-22-032 INTRODUCTION FAC MOD 11
23 SBF100-23-017 THE MODIFICATION OF THE PASSENGER ADDRESS SYSTEM
24 SBf100-24-024 THE CHANGE OF THE LOCATION OF THE HP BLEED CIRCUIT
BREAKERS.
25 SBF100-25-064 MOD. OF THE COVER OF THE ESCAPE SLIDE ON THE PASS.
DOOR
26 SBF100-26-002 NEW SAFETY CATCH FOR HALON 1211 PORTABLE FIRE
EXTINGUISHERS
27 SBF100-27-032 MODIFICATION HORIZONTAL STABILIZER ACTUATOR
SBF100-27-041 INSPECTION RUDDER AUTOPILOT INPUT BRACKETS
SBF100-27-043 CONNECT OF A NUMB. OF SHIELDINGS WITHIN THE LIFTD.
SYS. TO GROUND
SBF100-27-047 ONE TIME INSPECTION OF THE RUDDER PEDAL ASSEMBLIES
SBF100-27-051 MOD. OF FLIGHT CONTROL LOCK HANDLE AND SWITCH.
SBF100-27-052 REPETITIVE CHECK ELEVATOR BOOSTER CONTROL UNIT
BACKLASH REMOVER
28 SBF100-28-022 ONE TIME INSP.: IF NECESSERY INSTAL. A NEW APU
FUEL SUP. TUBE ASSY
SBF100-28-026 ONE TIME INSP. LH AND RH ENGINE FUEL SUPPLY LINE
29 SBF100-29-021 REPL. OF SYSTEMS 1 & 2 RETURN FILTER BY-PASS
ASSY'S
SBF100-29-022 NEW HYDR. HOSE ASSEMBLIES IN SYS. 1 ENG. DRIVEN
PUMP
31 SBF100-31-020 INSTALLATION FWC V8
31 SBF100-31-036 A SOFTWARE MODIFICATION TO THE MFDU (DRAFT)
32 SBF100-32-044 INTRODUCTION OF IMPROVED MAIN WHEELS.
SBF100-32-058 INTRODUCTION OF AN IMPROVED MAIN LANDING GEAR DOOR
SEQUENCE VALVE
SBF100-32-061 INSPECT. OF THE BOLTS IN THE PRESSURE REDUCER
VALVE
SBF100-32-064 NLG RETRACTION TIME OUT OF TOLERANCE
SBF100-32-068 THE INTRODUCTION OF A LOWER AXLE NUT TORQUE
SBF100-32-070 INSPECTION AND SHOT PEENING OF THE MAIN WHEELS
SBF100-32-071 THE INSPECTION OF CORRECT GREASING OF THE TELEFLEX
SYSTEM (DRAFT)
SBF100-32-073 THE INSPECTION AND SHOT PEENING OF THE MAIN
WHEELS.
SBF100-32-074 THE REPLACEMENT OF THE MAIN LANDING GEAR DOWNLOCK
ACTUATOR.
35 SBF100-35-003 MODIF. OF THE OXYGEN DROP OUT PANELS
38 SBF100-38-024 MODIFICATION TO THE CHECK VALVE AND TUBE ASSEMBLY
49 SBF100-49-015 T2 BIAS SYSTEM IN THE ELECTRONIC CONTROL UNIT
SBF100-49-016 THE MODIFICATION OF THE WIRING OF THE T2 BIAS
SYSTEM
SBF100-49-022 ONE TIME INSPEC. FOR DRAIN HOLE IN APU MOUNT.
FRAME.
SBF100-49-023 INTRO. OF TWO ADD CLAMPS ON APU FUEL SUPPLY LINE
52 SBF100-52-039 REPL. OF NYLON BUSHES FOR THE C-LATCHES OF THE S/E
DOORS
SL123 THE REPLACEMENT OF GAS SPRINGS IN LARGE CARGO
DOORS
55 SBF100-55-018 MODIFACATION OF RIB 5.0
SBF100-55-019 INSPECTION OF RIB 5.0 FLANGES AND FINGER STRIPS.
SBF100-55-021REV1 STRUCTURAL MOD. HORIZONTAL STABILIZER. (INCL.
BRACKETS) (DRAFT)
57 SBF100-57-021REV1 REWORK OF THE SIDE STAY BRACKET AN THE UPLOCK
MECH. BRACKET (DRAFT)
SFB100-57-027 THE REPLACEMENT OF THE WING ACCESS PANELS (DRAFT)
71 SBF100-71-012 THE MODIF. OF THE ENGINEMOUNT SHEAR SHELF WEB
76 SFB100-76-011 ENG. CONTROL MOD. TO IMPLEMENT THE NEW 52 MAX.
SETTING (DRAFT)
78 SFB100-78-010 INTRODUCTION OF ENLARGED THRUST REVERSER DOOR
WEDGES (DRAFT)
The items marked with "Draft" will be installed by retrofit and free of charge
as soon as they will be available.
<PAGE>
DESPATCH RELATED SERVICE BULLETINS TO BE INSTALLED
IN THE AIRCRAFT PRIOR TO DELIVERY
A
T
A SEV. PUBLIC. DESCRIPTION
21 SBF100-21-032 INTRODUCTION NEW SEALS MFDU TRAYS EQUIPMENT
SBF100-21-035REV1 INSTALLATION NEW FLEX PIPE EQUIPMENT COOLING
SBF100-21-038REV1 INSTALLATION STOP PLUGS NEAR CABIN TEMP SENSOR
SFB100-21-041 AIR CONDITIONING, IF THIRD COOLING FAN IS
INSTALLED
SBF100-21-056 AUGMENTATION OF THE FLOW THROUGH THE TURB. BYPASS
VALVES (DRAFT)
22 SBF100-22-037 INTROD. OF SOFTWARE VERSION V13a To AUTOFLIGHT
COMPUTERS (DRAFT)
27 SBF100-27-034 INTROD. IMPROVED FLAP CONTROL DATA UNIT
SBF100-27-038 INTROD. NEW PROXIMITY SENSOR BELL-CRANCK 2
SBF100-27-039 INTROD. NEW RUDDER LIMIT MONITOR UNIT (-413)
(DRAFT)
SBF100-27-046 INTROD. OF ROT LIM RING ON NEW MFDU
SBF100-27-048 THE MOD. OF THE FLEX DRIVE SHAFT OF THE LEFT FLAP
ACT.
SL 073 IMPROVED ADJUSTMENT OF LIFTDUMPER MECH. CONTROL
SYSTEM
28 SBF100-28-019 INTROD. OF VENTILATION-DRAIN FLOAT-VALVE WITH AN
IMPROVED HEAD
SL 119 INTRODUCTION OF SOFTWARE CHANGE TO COMB. PROC.
TOTALIZER
SL 105 RELACEMENT OF SYS 1 AND 2 HYDRAULIC TUBES
30 SBF100-30-013 MODIF. WINDOW TEMP. CONTR. UNIT FROM -407 INTO
-409 (DRAFT)
31 SL 057 INTRO SEVERAL MODS FOR EFIS AND MFDU DISPLAY UNITS
32 SBF100-32-050 INTROD. NEW SPRING & WIRING ROUTE TO IMPROVE
RELIAB. OF ANTI RETR. SOL.
SBF100-32-059 ENLARGED TARGETS ON MLG UP SENSORS
SBF100-32-065 REPLACEMENT OF THE PARKING BRAKE MECHANISM
SBF100-32-069 INTRO OF NEW PROXIMITY SWITCHES FOR MLG DOOR
UPLOCK MECHANISMS
36 SBF100-36-012 INTRO OF NEW APU INLET DUCT OVERHEAT S/W
SBF100-36-015 REV 1 INSTALLATION OF IMPROVED HEAT INSULATION BLANKETS
SBF100-36-018 A CHANGE TO THE BLEED AIR CONTROL CIRCUIT OF THE
TAY 650-15
SBF100-36-022 INSP. THE CHECK-VALVE ON PRES. SWITCH/AFT BLEED
AIR SENSE LINE (DRAFT)
38 SBF100-38-026 INTRO OF AN EXTENDED DUMP OUTLET FOR THE PRESSURE
REGULATOR
49 SBF100-49-017 A NEW RELAY TO PREVENT ELECTRO MAGNETIC
INTERFERENCE
SBF100-49-020 MOD FOR WIRING TO THE APU CONTROL BUS RELAY
VENDOR SB MODIFICATION OF THE APU INLET PLENUM
VENDOR SB T2 BIAS MODIFICATION
VENDOR SB INTRODUCTION OF AN FCU -04
77 SL 137 INTRODUCTION OF NEW EMUX
The items marked with "Draft" will be installed by retrofit and free of charge
as soon as they will be available.
<PAGE>
ANNEX 2 TO APPENDIX E
[LOGO] FOKKER
AIRCRAFT Folio 3.5
SERVICES REPORT NR.
Woensdrecht-Holland FAS-Z067
<TABLE>
<CAPTION>
BASIC CHECKLIST
- -----------------------------------------------------------------------------------------------------------------------------------
Serialno.: 11330 NO TOTAL ARM INDEX RECORD OF CHECKING
REQ. WEIGHT CHANGE
Description kg mm dI 28-04
1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cockpit compartment
Escape rope (in ceiling) Fok.D86227-401 1 0.45 2750 -0.066 V
Life vest S21850-7300 1 0.62 2750 -0.090 V oper. item
Smoke goggle Eros MXP210-00 1 0.20 2743 -0.029 V
Fire extinguisher BCF FFE BA51015G3 1 2.07 2794 -0.301 V
Escape rope (in ceiling) Fok.D86227-401 1 0.45 2750 -0.066 V
Life vest S21850-7300 1 0.62 2750 -0.090 V oper. item
Life vest S21850-7300 1 0.62 2795 -0.090 V oper. item
Side panels (RH + LH)
Microphone handheld (RH+LH) Telex 63333-007 2 0.36 1762 -0.056 V
Smoke goggle (RH+LH) Eros MXP210-00 2 0.40 1762 -0.062 V
Oxygen mask (RH+LH) Eros MC10-04-109 2 0.23 1890 -0.036 V
Flashlight(c/w pwr.pack) DME EF-2C1 2 1.10 2285 -0.166 V
Boomtype headset(RH+LH) Telex 64300-005 2 0.23 2920 -0.033 V
Spare lamp box (LH) D48383-409 1 0.28 2850 -0.041 V
Sunvisor Magee 141-31020 2 0.91 2900 -0.131 V
Pair of gloves (RH) 817-168-13 1 0.22 2850 -0.032 -
LH aft-wall
Boomtype headset Telex 64300-005 1 0.12 2970 -0.017 V
Flash light DME EF-1 1 0.38 2970 -0.055 V
V = IN AIRPLANE WHEN WEIGHED
- = NOT IN AIRPLANE WHEN WEIGHED
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
[LOGO] FOKKER
AIRCRAFT Folio 3.5
SERVICES REPORT NR.
Woensdrecht-Holland FAS-Z067
<TABLE>
<CAPTION>
BASIC CHECKLIST
- -----------------------------------------------------------------------------------------------------------------------------------
Serialno.: 11330 NO TOTAL ARM INDEX RECORD OF CHECKING
REQ. WEIGHT CHANGE
Description kg mm dI 28-04
1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cockpit compartment (cont'd):
RH aft wall
- -Ogygen bottle(fixed) PUR 176225 1 5.23 2903 -0.755 V
- -Crash-axe Gemtor 42D8331 1 1.00 2952 -0.144 V
- -Oxygen bottle Scott 5600-1C1AE23A 1 4.07 2882 -0.588 V
- -Full face mask Scott 10100C1A 1 0.97 2882 -0.140 V
- -Pitot head covers FOK 28.0.2493 3 0.29 3000 -0.042 V
- -Locking thrust reverser FOK 28.0.4591 2 0.13 3000 -0.019 V
- -Groundlocks FOK 28.0.1233 3 0.76 3000 -0.109 -
- -Groundlocks (installed) FOK 28.0.1233 3 0.76 13022 -0.033 V
- -Folding observer seat FOK D86007 1 8.50 3180 -1.203 V
- -Safety belt + sh harness 502422-403 1 1.20 2985 -0.172 V
- -Oxygen mask(in gangway LH) Eros MC10-04-109 1 0.11 3050 -0.016 -
Entrance compartment
Microphone (pass.addr.) SENN MD 430-16TAK 1 0.17 3937 -0.023 V
Flashlight DME EF-1 2 0.76 3937 -0.102 V
Handset incl. cradle AH 2542D 1 1.36 3937 -0.182 V
Life vest S21850-7300 2 1.24 3937 -0.166 V oper. item
V = IN AIRPLANE WHEN WEIGHED
- = NOT IN AIRPLANE WHEN WEIGHED
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
[LOGO] FOKKER
AIRCRAFT Folio 3.5
SERVICES REPORT NR.
Woensdrecht-Holland FAS-Z067
<TABLE>
<CAPTION>
BASIC CHECKLIST
- -----------------------------------------------------------------------------------------------------------------------------------
Serialno.: 11330 NO TOTAL ARM INDEX RECORD OF CHECKING
REQ. WEIGHT CHANGE
Description kg mm dI 28-04
1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Entrance compartment continued
Curtain Galley 1 - 2 FOK D89285-403 1 4283 V
Escape slide (S/E door) FOK D31873-101 1 12.40 4240 -1.623 V
Escape slide cover FOK D15505-103 1 1.59 4240 -0.208 V
Lockpin S/E door FOK D87766-401 2 0.06 4240 -0.008 V
Escape slide (pax door) AC 60049-101 1 12.90 4355 -1.674 V
Escape slide cover AC 60750-101 1 1.1 4355 -0.008 V
In stowage of galley 3 at entrance side:
Fire extinguisher 892480 MODX 1 2.90 5125 -0.354 V
Pass. entert. recorder RDAX 7351 1 2.28 4925 -0.283 V
Curtain Galley 2 - 3 FOK D89285-429 1 5611 V
V = IN AIRPLANE WHEN WEIGHED
- = NOT IN AIRPLANE WHEN WEIGHED
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
[LOGO] FOKKER
AIRCRAFT Folio 3.5
SERVICES REPORT NR.
Woensdrecht-Holland FAS-Z067
<TABLE>
<CAPTION>
BASIC CHECKLIST
- -----------------------------------------------------------------------------------------------------------------------------------
Serialno.: 11330 NO TOTAL ARM INDEX RECORD OF CHECKING
REQ. WEIGHT CHANGE
Description kg mm dI 28-04
1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cabin compartment (cont'd)
In second LH luggage bin
Megaphone ACR EMIA2204 1 6531 V
Smoke hood PUR 119003 1 1.98 6711 +0.120 V
Fire extinguisher (BCF) FFE BA51015G3 1 2.07 6071 -0.233 V
Pair of gloves 817-168-13 1 0.22 6491 -0.024 V
Life vest enfant MK22 5 2.35 6661 -0.251 V oper. item
In second RH luggage bin
First aid kit MISC25-001 1 1.73 6481 -0.188 -
Oxygen bottle c/w mask SCOTT 5500BF1UBF23A 1 3.73 6361 -0.409 V
Aft LH luggage bin:
Fire extinguisher (BCF) FFE BA51015G3 1 2.07 22796 +0.113 V
Pair of gloves 817-168-13 1 0.22 22936 +0.012 V
Megaphone ACR-EMIA2204 1 23076 -
Infant life vest MK22 5 2.35 22486 +0.121 V oper. item
Smoke hood 119003 1 1.98 22676 +0.106 V
Infant seat belt 502755-101-2258 2 0.22 23246 +0.013 V oper. item
Aft RH luggage bin:
First aid kit MISC25-001 1 1.73 23400 +0.105 -
Oxygen bottle c/w mask 5500BIUBF23A 2 6.74 23400 +0.409 V
V = IN AIRPLANE WHEN WEIGHED
- = NOT IN AIRPLANE WHEN WEIGHED
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
[LOGO] FOKKER
AIRCRAFT Folio 3.5
SERVICES REPORT NR.
Woensdrecht-Holland FAS-Z067
<TABLE>
<CAPTION>
BASIC CHECKLIST
- -----------------------------------------------------------------------------------------------------------------------------------
Serialno.: 11330 NO TOTAL ARM INDEX RECORD OF CHECKING
REQ. WEIGHT CHANGE
Description kg mm dI 28-04
1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Rear cabin compartment
Handset incl. cradle AH2542D/B 1 1.36 24880 +0.103 V
Microphone (pass. addr.) SENN MD430-16TAK 1 0.17 24880 +0.013 V
Flashlight DME EF-1 2 0.76 24880 +0.057 V
Life vest S21580-7300 2 1.24 24880 +0.094 V oper. item
[ILLEGIBLE] RH trolley stowage:
Flight data recorder SDC 980-4100-DXUS 1 12.70 23828 +0.825 V
Toilet compartments:
Toilet bucket 12201-404 (405) 2 25.60 24305 +1.785 V
Mirror FOK 2 2.98 25000 +0.229 V
Automatic toilet waste 30100022-20 2 0.72 24990 +0.057 V
[ILLEGIBLE] trolley stowage(RH+LH)
[ILLEGIBLE] trolley Driessen DLH573-009 2 23828 - oper. item
V = IN AIRPLANE WHEN WEIGHED
- = NOT IN AIRPLANE WHEN WEIGHED
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
APPENDIX F
AIRCRAFT DOCUMENTS
FOKKER 100 AIRCRAFT 11329
Aircraft Documents shall include the following documents:
Type Quantity/
---- ---------
Number
------
1. Airplane Flight Manual book
(volumes 1 & 2) 1
2. Aircraft Operating Manual book 1
3. Quick Reference Handbook book 2
4. Weight and Balance Manual book 1
5. Master Minimum Equipment List book 1
6. Aircraft Maintenance Manual film 1
7. Illustrated Parts Catalogue film 1
8. Wiring Diagram Manual film 1
(parts 1, 2 & 3)
9. Trouble Shooting Systems film 1
Manual
10. Aircraft Logbook book 1
11. Engine Logbooks book 2
12. APU logbook book 1
13. Delivery Document book 1
(at delivery to Transwede)
14. Certificate of Airworthiness 1
15. Certificate of Registration 1
16. Radio Station License 1
88
<PAGE>
Aircraft Documents shall also include all logs, certificates and data, and
inspection, modification and overhaul records, relating to the Aircraft and
required to be maintained by the Air Authority and/or by the Approved
Maintenance Program.
Upon Expiry Date or upon earlier termination of the Agreement all Aircraft
Documents shall be redelivered by Lessee to Lessor complete and fully updated
simultaneously with the redelivery of the Aircraft.
89
<PAGE>
APPENDIX G
FAA POWER OF ATTORNEY
Form used for Midway Closings to be Substituted
This POWER OF ATTORNEY in favor of LESSOR [HEAD LESSOR] ("Lessor")
dated _____________, 199__ from MIDWAY AIRLINES CORPORATION ("Lessee") [is
consented to by BANK ("Bank")].
RECITALS:
A. Lessor and Lessee have entered into an Aircraft Operating Lease
Agreement 135 dated as of ________, 1995 (the "Lease Agreement")
with respect to the Fokker 100 aircraft, serial no. ______, U.S.
registration no. ________ (the "Aircraft").
B. Capitalized terms used herein and not otherwise defined shall have
the respective meanings ascribed to such terms in the Lease
Agreement.
NOW, THEREFORE, for good and valuable consideration, the adequacy of
which is hereby acknowledged, it is hereby agreed as follows:
Lessee hereby irrevocably constitutes and appoints Lessor, with full
power of substitution, for and in the name and on behalf of Lessee, as the act
and deed or otherwise of Lessee:
to direct, authorize and instruct the insurer or insurance broker
with respect to the Aircraft, as if Lessor were policy holder,
pursuant to Article 11.6 of the Lease Agreement, in order to
initiate, process and settle any insurance claim with respect to the
Aircraft, Engines or Parts;
to execute, sign, deliver, authorize and file such instruments
legally necessary for any and all actions necessary to take
possession and effect redelivery of the Aircraft, Engines or Parts
upon termination of the Lease Agreement due to an Event of Default;
90
<PAGE>
to execute, sign, deliver and file all such instruments requested by
Lessor [Head Lessor] that may be required to deregister the Aircraft
from the FAA, or to terminate the Lease for the Aircraft that is
recorded at the FAA, or that may be deemed proper in or in
connection with all or any of the purposes aforesaid, and to appoint
substitutes or agents to take any such action on its behalf;
provided, however, that such power shall not be exercisable by or on
behalf of the Lessor until an Event of Default shall have occurred
and is continuing.
Lessee hereby ratifies and confirms and agrees to ratify and confirm
any direction, authorization and instruction of Lessor [Head Lessor] taken
pursuant to this Power of Attorney.
This Power of Attorney shall expire the date one year following the
Expiry Date or earlier termination of the Lease.
IN WITNESS WHEREOF, Lessee has duly caused this Power of Attorney to
be executed on the date first set forth above.
MIDWAY AIRLINES CORPORATION
By: __________________________
Name:
Title:
Consented and Agreed:
[BANK]
By: __________________________
Name:
Title:
[CERTIFIED RESOLUTIONS OF LESSEE AUTHORIZING THIS
POWER OF ATTORNEY TO BE ATTACHED]
91
<PAGE>
AMENDMENT NO. 1
dated as of April 15, 1996
to
AIRCRAFT OPERATING LEASE AGREEMENT
NO. 136
dated as of December 15, 1995
between
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee, as
Lessor
and
MIDWAY AIRLINES CORPORATION
as
Lessee
Aircraft: Fokker 100
Serial No./RN: 11330/N133ML
<PAGE>
THIS AMENDMENT No. 1 dated as of April 15, 1996 (this Amendment"), is
between FIRST SECURITY BANK OF UTAH, N.A., a national banking association
existing pursuant to the laws of the United States, having its principal place
of business at 79 South Main Street, Salt Lake City, Utah 84130-0007, not in its
individual capacity (except as expressly set forth in the Agreement) but solely
as Owner Trustee under the Trust Agreement ("Lessor"), and MIDWAY AIRLINES
CORPORATION, a company incorporated under the laws of the State of Delaware,
having its principal place of business at 300 West Morgan Street, Durham, North
Carolina 27702 ("Lessee").
WHEREAS, Lessor and Lessee are parties to that certain Aircraft Operating
Agreement No. 136, dated as of December 15, 1995, and recorded by the Federal
Aviation Administration on December 20, 1995, under conveyance number BB22901
(as amended hereby, the "Agreement"; capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to them in the
Agreement);
WHEREAS, Stockholm Aircraft Finance V, B.V. ("SAF") is the beneficial
owner of the Aircraft;
WHEREAS, Lessee is in default under the Agreement by reason of its failure
to make certain Rent and Deposit payments due thereunder in January 1996; and
WHEREAS, Lessor and Lessee desire to amend the Agreement as hereinafter
set forth.
NOW THEREFORE, for valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as follows:
1
<PAGE>
1. Amendment.
1.1 Article 7 of the Agreement is hereby amended by adding a new Article
7.6 thereto as follows:
"7.6 "Without in any way limiting the rights contained elsewhere in
the Agreement, Lessor shall have the right to have observers
(who may or may not be employees of Lessor) on site at
Lessee's premises (provided such observers do not unreasonably
interfere with Lessee's business or operations) and, provided
the recipients of any financial and operational information of
Lessee (which recipients may include employees or other
representatives of Beneficiary or any of its affiliates, or
agents, attorneys or accountants of Beneficiary or any of its
affiliates) agree to keep strictly confidential any such
information, Lessor shall have the right to inspect and review
any internal financial and operational information of Lessee
as Lessor may reasonably request (provided such request is
made to Lessee's controller or to a vice president, senior
vice president or the president of Lessee), including, without
limitation, cash flow statements, financial books and records,
and any other records relating to the operation of Lessee's
fleet. Lessee covenants that it will fully cooperate with
Lessor regarding any inspection of Lessee's fleet and records
pursuant to this Agreement."
1.2. Article 15.1(n) of the Agreement is hereby amended by deleting it in its
entirety and replacing it with the following:
"(n) if any event of default (however defined) occurs under (i) any
of the Other Aircraft Agreements, (ii) any other lease
agreements between Lessee and a lessor for the benefit,
directly or indirectly, of debis AirFinance B.V. or
Daimler-Benz Aerospace, A.G., relating to other aircraft
("DASA Aircraft Agreements"), or (iii) any Aircraft
Maintenance Agreement entered into by Lessee in lieu of
Reserve Rate payments relating to Engine Maintenance Accruals
or Landing Gear Maintenance Accruals, which event permits
acceleration or termination; or"
1.3 Article 15.1 of the Agreement is hereby amended by adding the following as
Article 15.1(o):
"(o) if Lessee's financial performance deviates in any material
adverse way (as determined by Lessor in its sole, but
reasonable, discretion) from the projections set forth on
Lessee's Business Plan for calendar year 1996 (attached hereto
as Exhibit A), taken as a
2
<PAGE>
whole, and such deviation is not the result of a natural
disaster which effectively makes it impossible for Lessee to
meet such projections; or"
1.4 Article 15.1 of the Agreement is hereby amended by adding the following as
Article 15.1(p):
"(p) if, prior to satisfaction of Lessee's obligations to pay
Deferred Rent and Deferred Deposit (as defined in Section 2 of
this Amendment) Lessee shall make (i) any payment of principal
or interest on any amounts owed by Lessee to Zell/Chilmark
Fund, L.P. ("Zell") or any affiliate of Zell, (ii) any
redemption of, or any dividend or distribution with respect
to, any shares of Lessee owned by Zell or any affiliate of
Zell, (iii) any prepayment of principal or interest with
respect to any other subordinated debt owed by Lessee or (iv)
any redemption of, or any dividend or other distribution with
respect to, any other shares of Lessee; or"
1.5 Article 15.1 of the Agreement is hereby amended by adding the following as
Article 15.1(q):
"(q) if Lessee shall fail to fulfill any of the obligations set
forth in paragraphs (c) or (d) of Section 2 of this
Amendment."
1.6 Article 15.2 of the Agreement is hereby amended by adding "(a), (n), (q)" to
clause (i) of paragraph (b) thereof following the word "paragraphs" and by
adding to such Article the following additional clause;
"provided, however, that such automatic termination shall not apply
with respect to defaults of the type referred to in Articles 15.1(a)
or (n) of the Agreement prior to the date hereof or for payment
defaults for Rent Dates occurring in February, March or April 1996,
for so long as Lessee makes the payments specified in paragraphs (c)
and (d) of Section 2 of this Amendment."
1.7 Article 16 of the Agreement is hereby amended by adding a new Article 16.9
thereto as follows:
"16.9 Notwithstanding anything to the contrary contained in this
Agreement, Lessee covenants that upon earlier termination of this
Agreement pursuant to Article 15, Lessee will not interpose any
defense to, or otherwise oppose, any action commenced by Lessor to
regain possession of the Aircraft and Lessee shall join in any
application by Lessor to regain possession of the Aircraft if so
requested by Lessor. This covenant shall apply whether or not
3
<PAGE>
Lessee is or shall subsequently become a debtor in a case under
Title 11 of the United States Code."
2. Forbearance
Execution of this Amendment shall serve as Lessor's agreement to
forebear from exercising its rights (including, without limitation, its rights
under Article 15 of the Agreement) with respect to:
(a) Lessee's failure to make payments of Rent or Deposits due under the
Agreement in January 1996 and for Rent Dates occurring in February, March and,
with the exception of the initial payment specified in clause (c)(v) of this
Section 2, April 1996; and
(b) Lessee's failure to make payment of Reserve Rate constituting Engine
Maintenance Accruals due under the Agreement for the period prior to January 1,
1996;
provided, however, that Lessor's agreement to forbear shall be effective,
for so long, and only so long, as Lessee otherwise complies with all the terms
of the Agreement, as amended, and fulfills the obligations set forth in
paragraphs (c) and (d) of this Section 2, as follows:
(c) Lessee shall pay to Lessor the following amounts:
(i) [***] on the Rent Date occurring in February 1996;
(ii) [***] on the Rent Date occurring in March 1996;
(iii) [***] on the Rent Date occurring in April 1996;
(iv) [***] ("Deferred Rent") on May 20,1996 and on each Rent Date
thereafter throughout the Term (as specified on pages 1 and 2 of Exhibit B
hereto -- "Restructuring Rental Amortization Schedule") and shall pay the
balance of any amount outstanding on the Expiry Date with interest to such
Expiry Date,
(v) [***] ("Deferred Deposit") on April 19, 1996 and for the next
succeeding three (3) Rent Dates thereafter (as specified on page 3 of
Exhibit B hereto -- "Restructuring Deposit Amortization Schedule").
Each such Deferred Rent payment and Deferred Deposit payment on and after
the dates set forth in clauses (iv) and (v) above, as the case may be, (i)
shall constitute a portion of Rent and Deposit, as the case may be, (ii)
shall be made
4
<PAGE>
together with such installment of Rent or Deposit or other amount as shall
be otherwise due on each such Rent Date as provided in Exhibit D of the
Agreement and (iii) shall be made in accordance with the terms and
conditions of the Agreement. Lessee may satisfy its obligations to pay the
Deferred Rent and Deferred Deposit at any time by paying the portion of
such Deferred Rent and Deferred Deposit which constitutes principal,
together with the portion of such Deferred Rent and Deferred Deposit which
constitutes interest accrued and unpaid as of the date of payment, all as
reflected on Exhibit B to this Amendment.
(d) Lessor hereby consents to the terms and conditions and Lessee's
execution of the Fleet Hour Agreement between Lessee and Rolls-Royce Aero
Engine Services, Ltd (Rolls-Royce Ref. G2273/13.03.96) ("Fleet Hour
Agreement") in respect of the engines originally installed on the Airframe
(MSN 17667 and 17668) and acknowledges that the Fleet Hour Agreement
constitutes an Aircraft Maintenance Agreement as defined in the Agreement;
provided, however, that if the amounts required to be paid under the Fleet
Hour Agreement are less than the Engine Maintenance Accrual required under
the Agreement, Lessee shall pay the difference to Lessor as Reserve Rate
under the Agreement in accordance therewith.
Execution of this Amendment shall not constitute a waiver of any
Rent payment defaults or of any other defaults which may have occurred and be
continuing or which may occur in the future. Lessor's agreement to forbear shall
terminate automatically if Lessee fails to fulfill any of the obligations set
forth in paragraph (c) or (d) of this Section 2 or if any Event of Default
occurs under the Agreement (other than an Event of Default to which this
forbearance agreement applies). For so long, and only so long as Lessor's
agreement to forbear has not terminated, and provided that the obligation set
forth in paragraph (d) of this Section 2 has been fulfilled, (I) Lessee shall be
entitled to exercise its rights and privileges under Articles 5.1.2(b), 5.1.3,
7.4.1 and 13.3 of the Agreement and (ii) Lessor shall be deemed to have elected
not the apply the Deposit in accordance with Section 1 of Appendix D of the
Agreement to payments of Rent and Deposit that are subject to amortization
pursuant to Section 2(c) of this Amendment.
3. Governing Law
This Amendment shall be governed by and construed in accordance with
the internal laws of the State of New York and without regard to any conflict of
law rules. This Amendment is being delivered in the State of New York. The terms
and conditions of Article 18 of the Agreement are incorporated herein by
reference as applicable to this Amendment.
5
<PAGE>
4. Miscellaneous
Except as specifically amended or supplemented by this Amendment,
the Agreement is hereby ratified, approved, confirmed and continued in all
respects and all provisions of the Agreement as heretofore amended shall remain
in full force and effect. This Amendment may be executed in any number of
counterparts, and all of such counterparts taken together shall be deemed and
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity but solely
as owner trustee
By:
-----------------------------------
Title:
SIGNED on behalf of
MIDWAY AIRLINES CORPORATION
By: /s/ J.S Waller
-----------------------------------
Title: JONATHAN S. WALLER
SENIOR VICE PRESIDENT
GENERAL COUNSEL
6
<PAGE>
4. Miscellaneous
Except as specifically amended or supplemented by this Amendment,
the Agreement is hereby ratified, approved, confirmed and continued in all
respects and all provisions of the Agreement as heretofore amended shall remain
in full force and effect. This Amendment may be executed in any number of
counterparts, and all of such counterparts taken together shall be deemed and
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
SIGNED on behalf of
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity but solely
as owner trustee
By: /s/ [ILLEGIBLE]
-----------------------------------
Title: Vice President
SIGNED on behalf of
MIDWAY AIRLINES CORPORATION
By:
-----------------------------------
Title:
6
<PAGE>
EXHIBIT A
MIDWAY 1996 BUSINESS PLAN
[***] (6 pages omitted)
<PAGE>
[Letterhead of Fokker Aircraft U.S.A., Inc.]
May 31, 1996
Via Federal Express
Jonathan Waller, Esq.
Midway Airlines Corporation
300 W. Morgan Street
Durham, NC 27702
Greg Hawley, Esq.
First Security Bank of Utah N.A.
79 South Main Street
Salt Lake City, UT 84111
Jan Willem van Toulon van der Koog
Aircraft Financing & Trading B.V.
Hoogoorddreef 15
1101 BA Amsterdam-Zuidoost
The Netherlands
re: Amendment to Lease No. 136
Gentlemen:
I enclose the following counterparts of the above-referenced lease amendment:
- - to Jonathan Waller, one counterpart signed by FSBU;
- - to Greg Hawley, one counterpart signed by Jon Waller;
- - to Jan Willem, two signed counterparts, one for AFT and one (that I ask
Jan Willem to forward) for Nicole Meisner at DASA.
As always, best regards.
Very truly yours,
/s/ Janice
Janice E. Erich
<PAGE>
AMENDMENT NO. 2
dated as of January 31, 1997
to
AIRCRAFT OPERATING LEASE AGREEMENT
NO. 136
dated as of December 15, 1995
between
FIRST SECURITY BANK, N.A., formerly known as
FIRST SECURITY BANK OF UTAH, N.A.,
not in its individual capacity
but solely as owner trustee, as
Lessor
and
MIDWAY AIRLINES CORPORATION, as
Lessee
Aircraft: Fokker 100
Serial No./RN: 11330/N133ML
<PAGE>
THIS AMENDMENT NO.2 dated as of January 31, 1997 (this "Amendment"),
is between FIRST SECURITY BANK, N.A., formerly known as First Security Bank of
Utah, N.A., a national banking association existing pursuant to the laws of the
United States, having its principal place of business at 79 South Main Street,
Salt Lake City, Utah 84130-0007, not in its individual capacity (except as
expressly set forth in the Lease) but solely as Owner Trustee under the Trust
Agreement ("Lessor"), and MIDWAY AIRLINES CORPORATION, a company incorporated
under the laws of the State of Delaware, having its principal place of business
at 300 West Morgan Street, Durham, North Carolina 27701 ("Lessee").
WHEREAS, Lessor and Lessee are parties to that certain Aircraft
Operating Lease Agreement No. 136, dated as of December 15, 1995 (as amended
from time to time, the "Lease"; capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the Lease);
WHEREAS, Lessor and Lessee entered into Amendment No. 1 to the
Lease, dated as of April 15,1996 ("Amendment No.1");
WHEREAS, debis AirFinance B.V. ("debis AF") is the beneficial owner
of the Aircraft;
WHEREAS, debis AF, Lessee, and Lessor entered into a Deferral
Agreement dated as of October 25, 1996 ("Deferral Agreement"), which provided
for the deferral of certain payments due under the Lease, and amended the Lease
in certain other respects;
WHEREAS, debis AF and Lessee entered into an Amendment to Deferral
Agreements dated as of December 30, 1996, which modified the Deferral Agreement
in certain respects (the "Amendment to Deferral Agreements");
WHEREAS, Lessee has entered into an Agreement and Plan of Merger
dated as of January 17, 1997 (as amended, the "Merger Agreement") with GoodAero,
Inc., a Delaware corporation ("GoodAero") and Zell/Chilmark Fund, L.P., a
Delaware limited partnership, whereby it is proposed that GoodAero will be
merged into Lessee to effect a recapitalization of Lessee (the "Merger"),
subject to certain conditions precedent having been satisfied; and
WHEREAS, Lessor and Lessee desire to amend the Lease to become
effective upon the consummation of the Merger and to enter into further
agreements as hereinafter set forth.
NOW THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Amendment of Lease. The Lease is hereby amended as follows:
(a) Section 1 of the Lease is amended by eliminating the
period at the end of Subsection 1.25 thereof, and by inserting in lieu thereof
the following clause:
<PAGE>
"or such earlier date as may be specified by Lessor pursuant
to notice given in accordance with, and subject to the terms
of Section 16.10 hereof."
(b) Section 1.48 of the Lease is amended by deleting the
period at the end of the first sentence and by inserting the following in lieu
thereof: "or any successor or assign thereof."
(c) Section 6.4 of the Lease is amended as follows: (a) by
deleting subsection (i) thereof in its entirety and by inserting in lieu thereof
the following: "(i) any financial reports or projections supplied to the
majority shareholder of Lessee"; and (b) by deleting the words "upon Lessor
requesting the same" from subsection (ii) thereof.
(d) Section 11.1(a) of the Lease is amended by deleting the
period at the end thereof and by inserting the following clause:
provided, however, that the deductible may be $500,000 (Dollars Five
Hundred Thousand) for each accident, but only if Lessee procures and
maintains in favor of debis AirFinance B.V. for the benefit of the
Beneficiary and/or the Lessor under each of the Leases identified on
Schedule 16.10 hereof (as those terms are defined therein) an
irrevocable letter of credit (the "Letter of Credit") in the face
amount of $800,OOO (Dollars Eight Hundred Thousand) issued by
Wachovia Bank or another banking institution reasonably acceptable
to debis AirFinance B.V. and in a form reasonably acceptable to
debis AirFinance B.V. containing the terms set forth in Schedule
11.1(a).1 of this Lease; provided, however, that Lessee may reduce
the amount of the Letter of Credit to $400,000 in any year where
Lessee's audited financial statements for the prior year show that
Lessee had net income (as determined in accordance with generally
accepted accounting principles ("Net Income")) greater than the
amount for such prior year identified as "Net Income (1)" on
Schedule 11.1(a).2, but less than the amount for such prior year
identified as "Net Income (2)" on Schedule 11.1(a).2; and Lessee
shall not be required to maintain the Letter of Credit in any year
where Lessee's audited financial statements for the prior year show
that Lessee had Net Income for such prior year greater than the
amount for such prior year identified as "Net Income (2)" on
Schedule 11.1(a).2; and provided, further, that notwithstanding any
reduction or cancellation of the Letter of Credit in accordance with
the terms hereof, Lessee shall be required to restore the Letter of
Credit in any year where Lessee's audited financial statements for
the immediately preceding year show that Lessee's Net Income was
less than the threshold set by Schedule 11.1(a).2 for such prior
year for reduction of the Letter of Credit or in any year in which
audited financials for Lessee for the immediately preceding year
have not been certified on or before April 15 of that year. For
purposes of determining the amount required for the Letter of Credit
in any year, reductions, if any, shall not be permitted until 30
days after receipt by debis AirFinance B.V. of the audited financial
statements of Lessee for the
-2-
<PAGE>
prior year and, in the event that the Letter of Credit is to be
reinstated or increased in any year as aforedescribed, such Letter
of Credit shall be required on or before April 15 of such year. Any
failure by Lessee to comply with the provisions of this Section
11.1(a) shall be an Event of Default under Section 15.1(b) of the
Lease.
(e) Intentionally Omitted.
(f) Section 14.1(p) is amended by deleting the same in its
entirety and by inserting in lieu thereof the following:
"not become the surviving corporation of a merger with any
other entity, or itself consolidate with, or merge into, any
other corporation, or convey, transfer or lease substantially
all of its assets as entirety to any person, without the prior
written consent of Lessor (such consent not to be unreasonably
withheld) and the execution and delivery to Lessor of such
agreements, certificates and legal opinions as Lessor may
reasonably request with respect thereto.
(g) Intentionally Omitted.
(h) Intentionally Omitted.
(i) Section 15.1(e) of the Lease is deleted in its entirety
and the following is inserted in lieu thereof:
"if (i) if Lessee or any of its subsidiaries is in default
under any lease, hire-purchase, conditional sale or credit
sale agreement for equipment having a casualty value in excess
of [***] and such default is not cured or waived within
the applicable grace period or five (5) Business Days
(whichever is greater); (ii) (regardless of the amount of
money involved), any event occurs which with or without notice
or lapse of time or both would constitute a default under any
agreement between Lessee and, or promissory note executed by
Lessee in favor of, (a) [***]; (b) Zell/Chilmark Fund, L.P.;
[***]; (e) any affiliate of any of the foregoing; unless such
default or event of default is cured or waived within the
applicable grace period or five (5) Business Days (whichever
is greater); or (iii) any indebtedness owed by Lessee or any
of its subsidiaries in an amount in excess of [***] is not
paid when due or becomes due or capable of being declared
due prior to the date when it would otherwise become due
provided, however, the failure of Lessee to pay amounts
approximating [***]
-3-
<PAGE>
[***], shall not be deemed a Default or an Event of Default
hereunder."
(j) Section 15.1(n) is modified by inserting the following
clause after the words "Daimler-Benz Aerospace A.G.": "or any affiliate,
successor or assign of either of them"
(k) Sections 15.1(o), (p) and (q) are deleted in their
entirety and the following new Sections 15.1(o) and (p) are inserted in lieu
thereof:
"(o) if, an Event of Default shall occur under and as defined
in that certain Promissory Note dated as of January 31, 1997
from the Lessee to debis AirFinance B.V. or under, and as
defined in that certain Promissory Note dated as of January
31, 1997 from the Lessee to DASA Aircraft Finance XVI, B.V.
(each, a "Note" and collectively, the "Notes");
(p) if, prior to satisfaction of Lessee's obligations pursuant
to the Notes, Lessee shall make (i) any payment of principal
or interest on any debt owed by Lessee to Zell/Chilmark Fund,
L.P. or to any holder of equity in Lessee representing the
right to vote twenty percent (20%) or more of the stock in
Lessee on any matter presented for vote to the shareholders of
Lessee (an "Insider") or any affiliate of an Insider; or (ii)
any redemption of, or any dividend or distribution with
respect to, any shares of Lessee owned by an Insider or any
affiliate thereof."
(l) Section 15.2 is amended by deleting clause (i) of
paragraph (b) thereof in its entirety and inserting the following new clause (i)
in lieu thereof:
"(i) serving notice of such termination on Lessee specifying
the occurrence giving rise to such Event of Default or Events
of Default, provided that such notice shall be deemed to have
been served without the necessity of actual service and this
Lease shall terminate automatically without the necessity of
any service of notice thereof upon Lessee upon the occurrence
of any Event of Default described in paragraphs (a), (f), (g),
(h), (n) or (o) of Section 15.1 of this Lease; provided,
however, that actual service of notice of such termination on
Lessee shall be required where an Event of Default described
in paragraph (n) of Section 15.1 of the Lease has occurred
solely by reason of occurrence of an event of default under an
Other Aircraft Agreement or under a DASA Aircraft Agreement,
which event of default does not, under the terms of such Other
Aircraft Agreement or DASA Aircraft Agreement, result in
automatic termination of such Other Aircraft Agreement or such
DASA Aircraft Agreement."
-4-
<PAGE>
(m) Article 16 of the Lease is amended by adding a new Section
16.10 as follows:
"(a) Notwithstanding anything to the contrary contained in
this Lease, Lessor may terminate this Lease by giving not less
than six (6) months' prior written notice of the termination
date to Lessee provided that in no event may Lessor choose a
termination date earlier than September 15, 1998 ("Lessor's
Termination Option") and the termination date specified in
such notice shall become the Expiry Date; provided, however,
that (subject to the following sentence) Lessor shall not be
entitled to exercise Lessor's Termination Option with respect
to this Lease where the same would result in the termination
of four (4) or more of the aircraft operating lease agreements
identified in Schedule 16.10 to the Lease in any twelve (12)
month period, taking into account the scheduled or actual
Expiry Date of each such aircraft operating lease agreement.
Nothing herein shall be construed to limit the Lessor's rights
upon the occurrence of any Default or Event of Default or upon
the termination of this Lease as a result thereof or upon the
expiration of any Lease in the absence of the exercise of
Lessor's Termination Option.
(b) Lessee shall in no event be liable for any costs,
expenses, liabilities, losses, damages or amounts incurred by
Lessor which arise solely from the Lessor exercising Lessor's
Termination Option hereunder such as the loss of any tax
benefit, or fees or penalties arising from the breakage of any
contract or agreement. Except as expressly provided in
subsection (c) below, Lessor shall in no event be liable for
any costs, expenses, liabilities, losses, damages or amounts
incurred by Lessee as a result of Lessor exercising Lessor's
Termination Option in accordance with this Section 16.10.
(c) Notwithstanding the terms of clause (b) above, if Lessor
exercises Lessor's Termination Option hereunder in accordance
with this Section 16.10, then Lessee shall be responsible for
performing all of its obligations under and in accordance with
the terms of this Article 16, subject to the following:
(i) the Lessor shall pay or cause to be paid to Lessee
for Lessee's application against the "C Check" completed
pursuant to Appendix E, Item 1(e), an amount equal to
the lesser of (x) $100,000 or (y) an amount equal to the
product of the full cost of the "C Check" completed by
Lessee pursuant to Appendix E, Item 1(e) on the Aircraft
multiplied by a fraction, the numerator of which is the
number of hours (including fractions of an hour)
remaining on the Aircraft until Lessee's next scheduled
"C Check" for the Aircraft (assuming
-5-
<PAGE>
Lessor had not exercised Lessor's Termination Option
hereunder) and the denominator of which is 3000; and
(ii) for purposes of Section 7.4.1(b) and (c), any shop
visit required to meet the conditions of Appendix B
shall be deemed a "scheduled" shop visit."
(n) Section 18.6 of the Lease is amended by deleting the
firm of "Haight, Gardner, Poor & Havens, Attn: Bonny L.Y. Kwoh, 195 Broadway,
New York, NY 10007" as agent for Lessor and by inserting in lieu thereof the new
agent for Lessor as follows: "Hertzog, Calamari & Gleason, Attn: Carla Craig,
100 Park Avenue, New York, New York 10017".
(o) Appendix B to the Lease is hereby amended as
follows:
(i) The amount set forth as the "AGREED VALUE" is
deleted in its entirety and the amount of [***] is
substituted therefor.
(ii) The Amount set forth as "RENT" is deleted in its
entirety and the amount of [***] is substituted
therefor.
(p) Appendix D to the Lease is hereby amended by
deleting Sections 2.2 through 2.7 in their entirety and by deleting Section 1 in
its entirety and inserting the following in lieu thereof:
"1. Deposit. Lessee has paid to Lessor the amount set
forth on Schedule B.1 as a Deposit for the Aircraft prior to
January 31, 1997. Lessor has applied such Deposit (plus all
accrued interest thereon) to the Default Payments (as defined
in Section 6 of Amendment No. 1 to this Lease) and/or to
Default Payments (as defined in Section 6 of Amendment No. 1
to the Other Aircraft Agreements)."
(q) Schedule 16.10 attached to this Amendment is hereby
attached to the Lease as Schedule 16.10 thereto and is incorporated therein.
2. Waiver of Default. Lessor agrees that any Default or Event of
Default under Sections 15.1(a), 15.1(e), 15.1(g) or 15.1(o) of the Lease (prior
to the amendment of any such Sections hereunder) which occurred prior to the
date of this Amendment is hereby deemed to have been cured by Lessee and Lessor
waives any rights or remedies it may have had with respect to the occurrence of
any such Default or Event of Default.
-6-
<PAGE>
3. Representations, Warranties and Covenants
The following shall be, as applicable, representations, warranties
or covenants of Lessee pursuant to Articles 13 and 14 of the Lease:
(a) Representations
(i) This Amendment and the Notes have been duly entered into
and delivered by Lessee, and each constitutes a valid, legal and binding
obligation of Lessee enforceable against Lessee in accordance with its terms.
(ii) As of the date of this Amendment, Lessee has entered,
or will contemporaneously herewith enter, into an agreement with [***] having
terms which are substantially in accordance with the terms set forth under
the heading [***] in Exhibit 6.02(k) to the Agreement and Plan of Merger
dated as of January 17, 1997 by and among GoodAero, Inc., James H. Goodnight,
John P. Sall, Midway Airlines Corporation and Zell/Chilmark Fund, L.P., as
amended, except to the extent otherwise specifically set forth in the letter
dated as of February 10, 1997, from Lessee to Lessor.
(b) Covenants
Lessee covenants that it will not make any prepayment in
respect of the Promissory Note dated February 7, 1997 in the amount of [***],
or amend the [***] to provide for terms more favorable to the payee thereof
{including, without limitation, any increase in the interest rate or
acceleration of payment).
4. Deferral Agreement. Lessor and Lessee agree that the Deferral
Agreement and the Amendment to Deferral Agreements are hereby declared null and
void and shall have no further force or effect with respect to the Lease.
5. Merger. Lessor hereby consents to the Merger.
6. Governing Law. This Amendment shall be governed by and construed
in accordance with the internal laws of the State of New York and without regard
to any conflict of law rules. This Amendment is being delivered in the State of
New York.
7. Miscellaneous. Except as specifically amended or supplemented by
this Amendment, the Lease is hereby ratified, approved, confirmed and continued
in all respects and all provisions of the Lease as heretofore amended shall
remain in full force and effect. The parties hereto acknowledge and confirm that
the Lease is intended to he a true lease and not a financing arrangement. This
Amendment may be executed in any number of counterparts, and all of such
counterparts taken together shall be deemed and constitute one and the same
instrument.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
on the day and year first above written.
FIRST SECURITY BANK, N.A., formerly
known as First Security Bank of Utah, N.A.
not in its individual capacity but solely as
owner trustee
By: /s/ Greg A. Hawley
-----------------------------------------
Name: Greg A. Hawley
---------------------------------------
Title: Vice President
--------------------------------------
MIDWAY AIRLINES CORPORATION
By: /s/ J.S. Waller
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
<PAGE>
Schedule 11.1(a).1
The Letter of Credit shall contain the following terms:
debis AirFinance B.V. shall be entitled to draw amounts under the Letter of
Credit upon notice to the issuing bank signed by debis AirFinance B.V. stating
that amounts are due under one or more of the following, and that such amounts
remain unpaid:
Promissory Note dated as of January 31, 1997 executed by Midway
Airlines Corporation in favor of debis AirFinance B.V.
Promissory Note dated as of January 31, 1997 executed by Midway
Airlines Corporation in favor of Daimler-Benz Aerospace A.G.
Aircraft Operating Lease Agreement No. 111 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 112 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 113 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 114 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 135 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 136 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 524 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
Aircraft Operating Lease Agreement No. 525 between Midway Airlines
Corporation, as Lessee, and First Security Bank, N.A. (formerly
known as First Security Bank of Utah, N.A.), as Lessor
<PAGE>
Aircraft Operating Lease Agreement No. 115-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
Aircraft Operating Lease Agreement No. 116-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
Aircraft Operating Lease Agreement No. 117-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
Aircraft Operating Lease Agreement No. 118-A between Midway Airlines
Corporation, as Lessee, and Wings Aircraft Finance, Inc., as Lessor
<PAGE>
Schedule 11.1(a).2
Midway Airlines
Net Income Thresholds for Reduction in Amount of Letter of Credit Pursuant to
Section 11.1(a)
US$ millions
Year 1997 1998 1999 2000 2001
Net Income(2) 12.0 18.0 25.2 32.8 41.0
Net Income(1) 8.0 12.0 16.8 21.8 27.3
Year 2002 2003 2004 2005 2006
Net Income(2) 49.1 57.7 67.8 67.8 67.8
Net Income(1) 32.8 38.5 45.2 45.2 45.2
Year 2007 2008 2009 2010 2011
Net Income(2) 67.8 67.8 67.8 67.8 67.8
Net Income(1) 45.2 45.2 45.2 45.2 45.2
Year 2012 2013 2014
Net Income(2) 67.8 67.8 67.8
Net Income(1) 45.2 45.2 45.2
Amount of
Letter of Credit
$800,000 If actual Net Income is less than or equal to Net Income(1)
$400,000 If actual Net Income is greater than Net Income(1) but less
than or equal to Net Income(2)
0 If actual Net Income is greater than Net Income(2)
<PAGE>
Schedule 16.10
1. Aircraft Operating Lease Agreement No. 111, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
2. Aircraft Operating Lease Agreement No. 112, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
3. Aircraft Operating Lease Agreement No. 113, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
4. Aircraft Operating Lease Agreement No. 114, dated as of November 11, 1993,
between First Security Bank, N.A. and Midway Airlines Corporation.
5. Aircraft Operating Lease Agreement No. AOLAF-115-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
6. Aircraft Operating Lease Agreement No. AOLAF-116-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
7. Aircraft Operating Lease Agreement No. AOLAF-117-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
8. Aircraft Operating Lease Agreement No. AOLAF-118-A, dated as of July 10,
1995, between Wings Aircraft Finance, Inc. and Midway Airlines
Corporation.
9. Aircraft Operating Lease Agreement No. 135, dated as of July 20, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
10. Aircraft Operating Lease Agreement No. 136, dated as of December 15, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
11. Aircraft Operating Lease Agreement No. 524, dated as of August 1, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
12. Aircraft Operating Lease Agreement No. 525, dated as of October 15, 1995,
between First Security Bank, N.A. and Midway Airlines Corporation.
<PAGE>
Schedule B.1
Security Deposits Paid by Midway
Aircraft AOLAF Deposit
MSN No. Paid
- -------- ----- -------
11321 525 [***]
11323 524 [***]
11329 135 [***]
11330 136 [***]
11444 111 [***]
11445 112 [***]
11475 113 [***]
11477 114 [***]
11450 115 [***]
11484 116 [***]
11485 117 [***]
11486 118 [***]
<PAGE>
EXHIBIT 10.15
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY [***]. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
KAWASAKI AIRCRAFT LEASE AGREEMENT
(Airbus)
<PAGE>
AIRCRAFT LEASE AGREEMENT
Dated as of
May 24, 1995
between
WILMINGTON TRUST COMPANY
not in its individual capacity,
except as expressly provided herein,
but solely as Trustee
as
Lessor
and
MIDWAY AIRLINES CORPORATION
as
Lessee
in respect of
Aircraft: Airbus A320-231
Serial No: 373
FAA Reg. No.: N304ML
<PAGE>
INDEX
SECTION PAGE
- ------- ----
1. INTERPRETATION .................................................... 1
1.1 DEFINITIONS ................................................. 1
1.2 CONSTRUCTION ................................................ 9
2. REPRESENTATIONS AND WARRANTIES .................................... 10
2.1 Lessee's Representations and Warranties ..................... 10
2.2 Lessee's Further Representations and Warranties ............. 11
2.3 Repetition .................................................. 12
2.4 Trust Company's Representations and Warranties .............. 13
2.5 Lessor's Representations and Warranties ..................... 14
3. CONDITIONS PRECEDENT .............................................. 14
3.1 Conditions Precedent ........................................ 14
3.2 Further Conditions Precedent ................................ 16
3.3 Waiver ...................................................... 17
3.4 Lessee Conditions Precedent ................................. 17
4. COMMENCEMENT AND TERM ............................................. 18
4.1 Delivery .................................................... 18
4.2 Delivery Location ........................................... 18
4.3 Delayed Delivery ............................................ 19
4.4 Licenses .................................................... 19
4.5 Inspection .................................................. 19
4.6 Indemnity ................................................... 20
4.7 Term ........................................................ 20
4.8 Right of First Refusal ...................................... 20
5. PAYMENTS .......................................................... 21
5.1 Rental Periods .............................................. 21
5.2 Rent ........................................................ 21
5.3 Maintenance Reserves ........................................ 21
5.4 Payments .................................................... 22
5.5 Gross-up .................................................... 23
5.6 Taxation .................................................... 23
5.7 Value Added Tax ............................................. 24
5.8 Information ................................................. 24
5.9 Taxation of Indemnity Payments .............................. 25
5.10 Default Interest ............................................ 25
5.11 Contest ..................................................... 25
5.12 Security .................................................... 26
5.13 Absolute .................................................... 28
6. MANUFACTURER'S WARRANTIES ......................................... 29
6.1 Assignment .................................................. 29
6.2 Proceeds .................................................... 29
6.3 Parts ....................................................... 30
6.4 Agreement ................................................... 30
i
<PAGE>
SECTION PAGE
- ------- ----
7. LESSOR'S COVENANTS ................................................ 30
7.1 Quiet Enjoyment ............................................. 30
7.2 Reimbursement of Maintenance Costs .......................... 30
7.3 Certain Lessor Obligations .................................. 31
7.4 Indemnity: .................................................. 32
8. LESSEE'S COVENANTS ................................................ 32
8.1 Duration .................................................... 32
8.2 Information ................................................. 32
8.3 Lawful and Safe Operation ................................... 34
8.4 Taxes and Other Outgoings ................................... 36
8.5 Sub-Leasing ................................................. 36
8.6 Inspection .................................................. 37
8.7 Title ....................................................... 37
8.8 General ..................................................... 39
8.9 Records ..................................................... 39
8.10 Protection .................................................. 39
8.11 Maintenance and Repair ...................................... 40
8.12 Removal of Engines and Parts ................................ 41
8.13 Installation of Engines and Parts ........................... 42
8.14 Non-installed Engines and Parts ............................. 43
8.15 Pooling and Installation of Parts on Other
Aircraft .................................................... 43
8.16 Equipment Changes ........................................... 44
8.17 Title on an Equipment Change ................................ 45
8.18 Third Party ................................................. 45
8.19 Mandatory Modifications ..................................... 45
9. INSURANCE ......................................................... 48
9.1 Insurances .................................................. 48
9.2 Requirements ................................................ 48
9.3 Change ...................................................... 48
9.4 Insurance Covenants ......................................... 49
9.5 Failure to Insure ........................................... 50
9.6 Continuing Indemnity ........................................ 50
9.7 Application of Insurance Proceeds ........................... 51
10. INDEMNITY ......................................................... 51
10.1 General ..................................................... 51
10.2 Claim Procedure ............................................. 52
10.3 Mitigation and Settlement ................................... 53
10.4 Duration .................................................... 53
11. EVENTS OF LOSS .................................................... 53
11.1 (a) Pre-delivery ............................................ 53
(b) Post-delivery ........................................... 53
11.2 Requisition ................................................. 55
12. RETURN OF AIRCRAFT ................................................
12.1 Return ......................................................
12.2 Final Inspection ............................................
ii
<PAGE>
SECTION PAGE
- ------- ----
12.3 Non-compliance .............................................. 56
12.4 Redelivery .................................................. 56
12.5 Acknowledgement ............................................. 57
12.6 Maintenance Program ......................................... 57
12.7 Fuel and Oil ................................................ 57
12.8 Ferry Flight ................................................ 57
13. DEFAULT ........................................................... 57
13.1 Events ...................................................... 57
13.2 Rights ...................................................... 62
13.3 Deregistration .............................................. 62
13.4 Default Payments ............................................ 63
14. ASSIGNMENT ........................................................ 64
15. ILLEGALITY ........................................................ 66
16. MISCELLANEOUS ..................................................... 66
16.1 Waivers, Remedies Cumulative ................................ 66
16.2 Delegation .................................................. 66
16.3 Certificates ................................................ 66
16.4 Appropriation ............................................... 66
16.5 Set-off ..................................................... 66
16.6 Severability ................................................ 67
16.7 Remedy ...................................................... 67
16.8 Expenses .................................................... 67
16.9 Time of Essence ............................................. 68
16.10 Notices ..................................................... 68
16.11 Law and Jurisdiction ........................................ 69
16.12 Sole and Entire Agreement ................................... 70
16.13 Indemnities ................................................. 70
16.14 Counterparts ................................................ 70
16.15 Language .................................................... 70
16.16 No Brokers .................................................. 70
16.17 Training .................................................... 71
16.18 Confidentiality ............................................. 71
17. DISCLAIMERS AND WAIVERS ........................................... 72
17.1 Exclusion ................................................... 72
17.2 Waiver ...................................................... 72
17.3 Confirmation ................................................ 72
17.4 Concerning the Lessor ....................................... 72
iii
<PAGE>
AIRCRAFT LEASE AGREEMENT dated as of May 24, 1995 between WILMINGTON
TRUST COMPANY, a Delaware banking corporation, not in its individual capacity,
except as expressly provided herein, but solely as Trustee under the Trust
Agreement dated as of May 24, 1995 (the "Trust Agreement") between Wilmington
Trust Company and Kawasaki Leasing International Inc. and its successors and
assigns ("Lessor"); and MIDWAY AIRLINES CORPORATION, a corporation incorporated
under the laws of Delaware ("Lessee").
WHEREAS: Lessor wishes to lease to Lessee and Lessee is willing to
lease from Lessor the Aircraft on the terms of this Agreement.
NOW THEREFORE, it is hereby agreed as follows:
1. INTERPRETATION
1.1 DEFINITIONS
In this Agreement the following expressions have the respective
meanings set forth below:
Agreed Maintenance Performer shall mean Airbus (or any of its
Subsidiaries), Air Canada, America West Airlines, Inc., Canadian Airlines
International, Lockheed Aeromod Center, Inc., Marshall of Cambridge Aerospace
Ltd., Northwest Airlines Corporation, Triad International Maintenance Corp. or
any other person agreed to from time to time in writing by Lessor (which
agreement shall not be unreasonably withheld).
Agreed Maintenance Program shall mean the Maintenance Program from
time to time approved by the FAA.
Agreed Value shall mean [***] or such other value as may be
agreed between the parties.
Airbus shall mean Airbus Industrie, a groupement d'interet
economique organized under the laws of France having its principal office at
Toulouse, France.
Aircraft shall mean the aircraft described in Part 1 of Schedule 1
(which term includes where the context admits a separate reference to all
Engines, Parts and Aircraft Documents).
Aircraft Document. shall mean the documents, data and records
identified in Part 2 of Schedule 1 and all additions, renewals, revisions and
replacements from time to time made in accordance with this Agreement.
Airframe shall mean the Aircraft, excluding the Engines and Aircraft
Documents.
APU shall mean the auxiliary power unit installed on the Aircraft on
the Delivery Date and any replacement auxiliary power unit installed in
accordance with this Agreement.
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Bankruptcy Code shall mean the Federal Bankruptcy Code of 1978, as
amended from time to time.
Beneficiary shall mean Kawasaki Leasing International Inc., a
Delaware corporation, and its successors and permitted assigns.
Business Day shall mean a day of the year that is not a Saturday or
Sunday and on which banks are not required or authorized to be closed in
Wilmington, Delaware or New York, New York, U.S.A.
Certificate of Acceptance shall mean a Certificate of Acceptance in
the form of Schedule 2 hereto.
Certified Air Carrier shall mean any "air carrier" (as defined in
Section 40102 of Title 49 of the U.S. Code (Transportation)) that holds an "air
carrier operating certificate" issued by the DOT pursuant to Chapter 447 of such
Title and that is authorized by appropriate governmental authorities to engage
in the scheduled interstate domestic transportation of passengers or cargo.
Cycle shall mean one take-off and landing of the Aircraft.
Damage Notification Threshold shall mean (i) with respect to the
Airframe, $250,000 and (ii) with respect to any Engine, $100,000.
Default shall mean any Event of Default and any event which with the
giving of notice, lapse of time, determination of materiality or fulfillment of
other condition would constitute an Event of Default.
Delivery Date shall mean the date on which the Aircraft is tendered
for delivery by Lessor and accepted by Lessee. The Delivery Date shall be
confirmed in the Certificate of Acceptance.
Delivery Location shall mean Toulouse, France or such other location
selected by Lessee and approved by Lessor, provided that Lessee shall indemnify
Lessor and Beneficiary for any additional cost or expense incurred by Lessor and
Beneficiary attributable to such selected location.
DGAC shall mean Direction Generale de l'Aviation Civile and any
successor thereof.
Dollars and $ shall mean the lawful currency of. the United States
of America.
DOT shall mean the United States Department of Transportation, or
any person, governmental department, bureau, commission or agency succeeding to
the functions thereof.
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Engine shall mean whether or not installed on the Aircraft:
(a) each engine of the manufacture and model specified in Part 1 of
Schedule 1 which Lessor elects to tender to Lessee with the Aircraft on
the Delivery Date, such engines being described as to serial numbers on
the Certificate of Acceptance; or
(b) any engine which has replaced that engine, title to which has or
should have, passed to Lessor in accordance with this Agreement;
and in each case includes all modules and Parts from time to time belonging to
or installed in that engine but excludes any properly replaced engine or part
thereof title to which has, or should have, passed to Lessee pursuant to this
Agreement.
Event of Default shall mean an event specified in Section 13.1.
Event of Loss shall mean with respect to the Aircraft (including for
the purposes of this definition the Airframe) or any Engine:
(a) the actual or constructive total loss of the Aircraft or any
Engine (including any damage to the Aircraft or any Engine which results
in an insurance settlement on the basis of a total loss, or requisition
for use or hire which results in an insurance settlement on the basis of a
total loss); or
(b) its being destroyed, damaged beyond repair or permanently
rendered unfit for normal use for any reason whatsoever; or
(c) the requisition of title, or other compulsory acquisition,
capture, seizure, deprivation, confiscation or detention for any reason of
the Aircraft or any Engine by the United States of America or other
competent authority (whether de jure or de facto), but excluding
requisition for use or hire not involving requisition of title (unless
such requisition for use or hire extends beyond the end of the Term); or
(d) the hijacking, theft, condemnation, confiscation, seizure or
requisition for use or hire of the Aircraft or any Engine which deprives
any person permitted by this Agreement to have possession and/or use of
the Aircraft or such Engine, as the case may be, of its possession and/or
use for more than 30 days or which extends beyond the Term.
Excusable Delay shall mean with respect to delivery of the Aircraft,
delay or non-performance due to or arising out of
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acts of God or public enemy, civil war, insurrection or riot, fire, flood,
explosion, earthquake, accident, epidemic, quarantine restriction, any act of
government, governmental priority, allocation, regulation or order affecting
directly or indirectly, the Aircraft, any manufacturer, Lessor or any materials
or facilities, strike or labor dispute causing cessation, slowdown or
interruption of work, inability after due and timely diligence to procure
equipment, data or materials from manufacturers or suppliers in a timely manner,
damage, destruction or loss, or any other cause to the extent that such cause is
beyond the control of Lessor or Beneficiary whether above mentioned or not and
whether or not similar to the foregoing, except to the extent attributable to
the negligence or willful misconduct of Lessor.
FAA shall mean the Federal Aviation Administration of the United
States of America and any successor thereof.
Ferry Flight Location shall mean any airport in the United States of
America or the European Union selected by Lessor.
Financial Indebtedness shall mean any indebtedness in excess of
[***] in respect of.
(a) moneys borrowed or raised;
(b) any liability under any debenture, bond, note, loan stock,
acceptance, documentary credit or other security;
(c) the acquisition cost of any asset to the extent payable before
or after the time of acquisition or possession; or
(d) any guarantee, indemnity or similar assurance against financial
loss of any person in respect of the above.
Financing Parties shall mean such financial institution(s),
noteholders and/or other providers of finance or funds, or any indenture or
security trustee(s) acting on behalf of such persons, as identified by Lessor
from time to time in writing to Lessee from whom finance funds for the
acquisition or continued ownership of the Aircraft by Lessor is to be, or is for
the time being obtained and/or in whose favor or for whose benefit security
over, or rights relating to, the Aircraft and/or this Agreement is granted by
Lessor or at its request.
Flight Hour shall mean each hour or part thereof (rounded to two
decimal places) elapsing from the moment the wheels of the Aircraft leave the
ground on take off until the wheels of the Aircraft next touch the ground.
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GAAP shall mean generally accepted accounting principles applied on
a basis consistent with those which are to be used in making the calculations
for purposes of determining compliance with this Agreement.
Governing Law shall mean the law of the State of New York.
Government Entity shall mean (a) any national government, political
subdivision thereof, or state or local jurisdiction therein;
(b) any instrumentality, board, commission, court, or agency of any
thereof, however constituted; and
(c) any association, organization, or institution of which any of
the above is a member or to whose jurisdiction any thereof is subject or in
whose activities any of the above is a participant.
Habitual Base shall mean the United States of America.
Indemnitees shall mean each of Lessor, the Trust Company, the
Beneficiary, the Financing Parties and such person as is notified from time to
time to the Lessee by Lessor as being the "Servicer", any of their respective
successors and permitted assigns, shareholders, subsidiaries, affiliates,
partners, contractors, directors, officers, servants, agents and employees.
Landing Gear shall mean a landing gear assembly of the Aircraft
excluding any rotable components.
Lessee's Actual Cost shall mean Lessee's cost incurred in performing
an obligation under this Agreement determined as follows: (i) if such obligation
is performed by a third party, then Lessee's Actual Cost shall be the actual
charges of such third party paid by Lessee (without markups or overhead by
Lessee); and (ii) if Lessee elects that such obligation be performed by Lessee,
then Lessee's Actual Cost shall be Lessee's direct cost for labor and materials,
plus a percentage of such direct cost to cover overhead, which percentage shall
be determined by mutual agreement of Lessor and Lessee, prior to commencing
performance.
Lessor Lien shall mean
(a) any security interest in respect of the Aircraft which results
from acts of or claims against any Indemnitee not related to the
transactions contemplated by or permitted under this Agreement;
(b) any Security Assignment or any Security Interest whatsoever from
time to time created by or through any Indemnitee in connection with the
financing of the Aircraft; and
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(c) liens in respect of the Aircraft for Lessor Taxes.
Lessor Taxes shall mean Taxes (whether payable by way of
withholding or otherwise):
(a) imposed as a direct result of activities of any Indemnitee in
the jurisdiction imposing the liability unrelated to the transactions
contemplated by this Agreement or the operation of the Aircraft by Lessee;
or
(b) imposed on or measured by the gross or net income, profits,
gains, capital, net worth, franchise or conduct of business of any
Indemnitee by any authority having jurisdiction to tax if such Indemnitee
is subject to such tax other than by reason of its participation in the
transactions contemplated hereby; or
(c) imposed with respect to any period to the extent it commences or
event occurs prior to the date hereof (and, in the case of such period,
ending prior to the date hereof) or after the termination of this
Agreement and unrelated to the transactions contemplated by this
Agreement; or
(d) imposed in connection with a sale, assignment, transfer or other
disposition (i) by Beneficiary of all or any part of its interest in the
Trust Estate or (ii) by Lessor of all or any part of its interest in the
Aircraft (or any part thereof) or this Lease other than (A) if an Event of
Default shall have occurred and be continuing or (B) a sale, assignment,
transfer or other disposition to Lessee in accordance with Section 14.2
hereof; or
(e) which are in the nature of sales, use, rental, value-added,
goods and services, license or property taxes unless imposed solely as the
result of the use in whole or part of the Aircraft in the jurisdiction
imposing such Taxes.
Letter of Credit shall mean the irrevocable letter of credit issued
pursuant to Section 5.12(b) and any replacement or renewal of such letter of
credit.
Maintenance Program shall mean an FAA approved maintenance program
for the Aircraft encompassing scheduled maintenance (including block
maintenance), condition monitored maintenance, and/or on-condition maintenance
of Airframe, Engines and Parts, including but not limited to, servicing,
testing, preventive maintenance, repairs, structural inspections, system checks,
overhauls, approved modifications, service bulletins, engineering orders,
airworthiness directives, corrosion control, inspections and treatments.
Maintenance Reserves shall have the meaning given that term in
Section 5.3(e).
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Major Checks shall mean 4C and higher, Zonal Program, Structure
Program and Corrosion Program, in each case, as defined in the Airbus A320
Maintenance Planning Document [Ref ST4/993 441/88).
Manufacturer shall mean Airbus.
Minimum Liability Coverage shall mean $500,000,000 on each
occurrence.
Mortgage shall mean any mortgage over the Aircraft granted by Lessor
in favor of the Financing Parties.
Net Worth shall mean, as at any date for Lessee, the sum for Lessee
and its Subsidiaries (determined on a consolidated basis without duplication in
accordance with generally accepted accounting principles), of the following:
(a) the amount of capital stock, plus
(b) the amount of surplus and retained earnings (or, in the case of
a surplus or retained earnings deficit, minus the amount of such deficit).
Part shall mean whether or not installed on the Aircraft:
(a) any component, furnishing or equipment (other than a complete
Engine) furnished with the Aircraft on the Delivery Date; and
(b) any other component, furnishing or equipment (other than a
complete Engine) title to which has, or should have, passed to Lessor
pursuant to this Agreement; but excludes any such items title to which
has, or should have, passed to Lessee pursuant to this Agreement.
Payment Default shall mean Lessee fails to make any payment when due
under this Agreement.
Permitted Lien shall mean:
(a) any lien for Taxes not assessed or, if assessed, not yet due
and payable, or being contested in good faith by appropriate proceedings;
(b) any lien of a repairer, mechanic, carrier, hangar keeper or
other similar lien arising in the ordinary course of business or by
operation of law in respect of obligations which are not overdue or are
being contested in good faith by appropriate proceedings;
but only if (in the case of both (a) and (b)) (i) adequate resources have been
provided by Lessee for the payment of such Taxes or obligations; and (ii) such
proceedings, or the
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<PAGE>
continued existence of the lien, do not give rise to any likelihood of the
sale, forfeiture or other loss of the Aircraft or any interest therein or of
criminal liability on Lessor or any Financing Party;
(c) any Security Assignment or any Security Interest whatsoever from
time to time created by or through the Lessor in connection with the
financing of the Aircraft; and
(d) any Lessor Lien.
Person shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization or
government (or any agency, instrumentality or political subdivision thereof)
Power of Attorney shall mean the Power of Attorney. in the form of
Schedule 6 hereto.
Prime Rate shall mean the rate of interest from time to time
announced by The Chase Manhattan Bank (National Association) in New York as its
prime commercial lending rate.
Purchase Agreement shall mean Airbus A320 Purchase Agreement dated
as of September 28, 1990 between AVSA, S.A.R.L. and Kawasaki Leasing
International Inc., as amended.
Redelivery Location shall mean any airport in the United States of
America selected by Lessee and approved by Lessor (such approval not to be
unreasonably withheld).
Rent shall mean rent payable throughout the Term for the Aircraft
pursuant to Section 5.2 with respect to the Basic Term.
Rent Payment Date shall mean the first day of each Rental Period.
Rental Period shall mean each period ascertained in accordance with
Section 5.1.
Scheduled Delivery Date shall mean June 1, 1995.
Security Assignment shall mean an assignment in favor of a Financing
Party by Lessor whereby Lessor assigns to such Financing Party as security its
rights and benefits hereunder.
Security Interest shall mean any mortgage, charge, pledge, lien,
assignment, hypothecation, right of set-off or any agreement or arrangement
having the effect of creating a security interest other than a Permitted Lien.
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Subsidiary shall mean for any company, a corporation, partnership or
other entity of which at least a majority of the securities or other ownership
interests having by the terms thereof ordinary voting power to elect a majority
of the board of directors or other persons performing similar functions of such
corporation, partnership or other entity (irrespective of whether or not at the
time securities or other ownership interests of any other class or classes of
such corporation, partnership or other entity shall have or might have voting
power by reason of the happening or any contingency) is at the time directly or
indirectly owned or controlled by such company or one or more Subsidiaries of
such company or by such company and one or more Subsidiaries of such company.
Taxes shall mean taxes, duties and the like of all kinds and any
other amount corresponding to any taxation together with any penalties, fines,
surcharge or interest thereon.
Term shall have the meaning specified in Section 4.7.
Trust Company shall mean Wilmington Trust Company, a Delaware
banking corporation, and its successors and assigns.
Trustee shall mean Wilmington Trust Company in its capacity as owner
trustee under the Trust Agreement.
Trustee Estate Shall have the meaning attributed thereto in the
Trust Agreement.
Wet Lease means any arrangement whereby Lessee agrees to furnish the
Airframe and Engines or engines installed thereon to a third party pursuant to
which such Airframe and Engines or engines (i) shall be operated solely by
regular employees of Lessee possessing all current certificates and licenses
that would be required under Title 49 of the U.S. Code (Transportation) for the
performance by such employees of similar functions within the United States and
(ii) shall be maintained by Lessee in accordance with its normal maintenance
practices.
1.2 CONSTRUCTION
(a) In this Agreement, unless the contrary intention is stated, a
reference to:
(i) each of "Lessor" or "Lessee" or any other person includes
without prejudice to the provisions of this Agreement any successor in
title to it and any permitted assignee;
(ii) words importing the plural shall include the singular and vice
versa;
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(iii) any document shall include that document as amended, novated
or supplemented;
(iv) reference to a law or Law (1) includes any statute, decree,
constitution, regulation, order, judgment or directive of any Government
Entity; (2) includes any treaty, pact, compact or other agreement to which
any Government Entity is bound; (3) includes any judicial or
administrative application thereof; and (4) is a reference to that
provision as amended, substituted or re-enacted;
(v) a Section or a Schedule is a reference to a clause of or a
schedule to this Agreement; and
(b) the headings in this Agreement are to be ignored in construing
this Agreement.
2. REPRESENTATIONS AND WARRANTIES
2.1 Lessee's Representations and Warranties: Lessee represents and
warrants to Lessor that:
(a) Status: Lessee is a corporation duly incorporated and validly
existing under the laws of the State of Delaware and has the corporate
power to own its assets and carry on its business as it is being
conducted;
(b) Power and authority: Lessee has the corporate power to enter
into and perform, and has taken all necessary corporate action to
authorize the entry into, performance and delivery of, this Agreement and
the transactions contemplated by this Agreement;
(c) Legal validity: this Agreement constitutes Lessee's legal, valid
and binding obligation;
(d) Non-conflict: the entry into and performance by Lessee of, and
the transactions contemplated by, this Agreement do not and will not:
(i) conflict with any laws binding on Lessee; or
(ii) conflict with the constitutional documents of Lessee; or
(iii) conflict with or result in default under any document which is
binding upon Lessee or any of its assets nor result in the
creation of any Security Interest over any of its assets;
(e) Authorization: all authorizations, consents, registrations and
notifications required of or by the Lessee in connection with the Lessee's
entry into, performance, validity and enforceability of, this Agreement
and the
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transactions contemplated by this Agreement, have been (or will on or
before the Delivery Date have been) obtained or effected (as appropriate)
and are (or will on their being obtained or effected be) in full force and
effect;
(f) Financials: the consolidated financial statements of Lessee and
its Subsidiaries most recently delivered to Lessor:
(i) have been prepared in accordance with GAAP; and
(ii) fairly represent the consolidated financial condition of
Lessee and its Subsidiaries as at the date to which they
were drawn up; and
(g) Restricted Countries: Lessee does not hold a contract or other
obligation to operate the Aircraft to or from any of the countries
designated under U.S. Code of Federal Regulations 31 CFR Chapter V from
time to time (presently including, without limitation, Cuba, Haiti, Iraq,
Libya, North Korea, the Federal Republic of Yugoslavia (Serbia and
Montenegro) and the Unita Rebels of Angola).
2.2 Lessee's Further Representations and Warranties: Lessee further
represents and warrants to Lessor that:
(a) No Default: no Default has occurred and is continuing or would
result from the entry into or performance of this Agreement by Lessee;
(b) Registration:
(i) Upon recordation of this Lease and the Acceptance
Certificate pursuant to Title 49 of the U.S. Code
(Transportation) and upon filing of Uniform Commercial
Code Financing Statements in respect of the Aircraft and
the Engines leased hereunder in a form acceptable for
filing with the applicable Government Entity in the
State of Illinois, the State of North Carolina and the
State of Florida, it is not otherwise necessary or
advisable under the laws of the United States of America
or the laws of any state or commonwealth therein in
order to ensure the validity, effectiveness and
enforceability of this Agreement or to establish,
perfect or protect the property rights of Lessor in the
Aircraft or any Engine or Part that this Agreement or
any other instrument relating thereto be filed,
registered or recorded or that any other action be taken
or if any such filings, registrations, recordings or
other actions are necessary or advisable, the same have
been
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effected or will have been effected on or before the
Delivery Date; and
(ii) under the laws of the United States of America, the
property rights of Lessor in the Aircraft have been
fully established, perfected and protected and this
Agreement will have priority in all respects over the
claims of all creditors of Lessee (other than those
mandatorily preferred by law);
(c) Litigation: no litigation, arbitration or administrative
proceedings are pending or to its knowledge threatened against Lessee
which, if adversely determined, would have a material adverse effect upon
its financial condition or business or its ability to perform its
obligations under this Agreement;
(d) Pari Passu: the obligations of Lessee under this Agreement 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 virtue of any contract;
(e) Material Adverse Change: there has been no material adverse
change in the consolidated financial condition of Lessee and its
Subsidiaries or the condition of Lessee since the date hereof;
(f) Taxes: Lessee has delivered all necessary returns and payments
due to the tax authorities in the United States of America the failure of
which to deliver or pay would materially and adversely affect Lessee's
ability to perform its obligation under this Lease and is not required by
law to deduct any Taxes (excluding Lessor Taxes) from any payments under
this Agreement; and
(g) Information: the financial and other information furnished by
Lessee in connection with this Agreement does not contain any untrue
statement or omit to state any material fact, the omission of which makes
the statements therein, in the light of the circumstances under which they
were made, materially misleading, nor omits to disclose any material
matter to Lessor and all forecasts and opinions contained therein were
honestly made on reasonable grounds after due and careful enquiry by
Lessee (but the forecasted results are not guaranteed by Lessee).
2.3 Repetition: The representations and warranties in Section 2.1
and Section 2.2 will survive the execution of this Agreement. The
representations and warranties contained in Section 2.1 and Section 2.2 will be
deemed to be repeated by Lessee on the Delivery Date with reference to the facts
and circumstances then existing. The representations and warranties
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contained in Section 2.1 will be deemed to be repeated by Lessee on each Rent
Payment Date as if made with reference to the facts and circumstances then
existing.
2.4 Trust Company's Representation and Warranties: Trust Company
represents and warrants to Lessee that:
(a) Status: Trust Company is a Delaware banking corporation duly
incorporated and validly existing under the laws of the State of Delaware,
is a United States "Citizen" (as defined in Section 40102(a)15 of Title 49
of the U.S. Code) and has the corporate power to own its assets and carry
on its business as it is now being conducted;
(b) Power and Authority: Trust Company has the requisite power to
enter into and perform, and has taken all necessary corporate action to
authorize the entry into, performance and delivery of, this Agreement (to
the extent entered into by Trust Company in its individual capacity) and
the transactions contemplated by this Agreement (to the extent entered
into by Trust Company in its individual capacity) and (assuming due
authorization, execution and delivery of the Trust Agreement by
Beneficiary) has all requisite power as Trustee to execute, deliver and
perform this Agreement and the transactions contemplated by this
Agreement;
(c) Execution and Delivery: this Agreement has been duly executed
and delivered by Trust Company and Lessor;
(d) Non-conflict: the entry into and performance by the Trust
Company and the Lessor of, and the transactions contemplated by, this
Agreement do not and will not:
(i) conflict with any laws of the State of Delaware or the
Federal laws of the United States governing the banking
or trust powers of Trust Company or Lessor; or
(ii) conflict with the constitutional documents of Trust
Company; or
(iii) conflict with any document which is binding upon Trust
Company or any of its assets; and
(e) Authorization: So far as concerns the obligations of Trust
Company or Lessor, all authorizations, consents, registrations and
notifications required under the laws of the State of Delaware in
connection with the entry into, performance, validity and enforceability
of, and the transactions contemplated by, this Agreement by Trust Company
or Lessor have been (or will on or before the Delivery Date have been)
obtained or effected (as appropriate) and are or will on their being
obtained or effected be) in full force and effect;
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2.5 Lessor's Representations and Warranties: The Lessor represents
and warrants to Lessee that:
(a) Legal Validity: this Agreement constitutes Lessor's legal, valid
and binding obligation;
(b) No Immunity:
(i) Lessor is subject to civil commercial law with respect
to its obligations under this Agreement; and
(ii) neither Lessor nor any of its assets is entitled to any
right of immunity and the entry into and performance of
this Agreement by Lessor constitutes private and
commercial acts; and
(c) Title: On the Delivery Date full legal title to the Aircraft
will be vested in Lessor.
3. CONDITIONS PRECEDENT
3.1 Conditions Precedent: Lessor's obligation to deliver and lease
the Aircraft under this Agreement is subject to satisfaction of each of the
following conditions:
(a) receipt by Lessor from Lessee not later than 2 Business Days
prior to the Scheduled Delivery Date of the following satisfactory in form
and substance to Lessor:
(i) Constitutional Documents: a copy of Lessee's charter, as
amended and in effect, certified as of a recent date by
the Secretary of State of its jurisdiction of
incorporation, and a certificate from such Secretary of
State dated as of a recent date as to the good standing
of and charter documents filed by the Lessee;
(ii) Opinions: evidence that an opinion dated the Delivery
Date in the form of Schedule 5 hereto of legal counsel
acceptable to Lessor and that an opinion dated the
Delivery Date of Daugherty, Fowler & Peregrin, special
United States aviation counsel, in form and substance
reasonably satisfactory to Lessor, will be issued on the
Delivery Date;
(iii) Approvals: evidence of the issue of each approval,
license and consent which may be required in relation
to, or in connection with, the performance by Lessee of
any of its obligations hereunder;
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(iv) Licenses: copies of Lessee's air transport license, air
operator's certificates and all other licenses,
certificates and permits required by Lessee in relation
to, or in connection with, the operation of the
Aircraft;
(v) Certificate: a certificate of the Secretary or Assistant
Secretary of the Lessee, dated five days before the
Delivery Date certifying:
(a) that attached thereto is a true and complete copy
of the by-laws of the Lessee as amended and in
effect at all times from the date on which the
resolutions referred to in clause (b) were adopted
to and including the date of such certificate;
(b) that attached thereto is a true and complete copy
of resolutions duly adopted by the board of
directors of the Lessee authorizing the execution,
delivery and performance of this Agreement and the
power of attorney to be delivered pursuant to
clause (vi) hereof, and that such resolutions have
not been modified, rescinded or amended and are in
full force and effect;
(c) that the charter of the Lessee has not been
amended since the date of the certification
thereto furnished pursuant to clause (i) above;
and
(d) as to the incumbency and specimen signature of
each officer of the Lessee executing this
Agreement and any other agreement contemplated
hereby or to be delivered by the Lessee from time
to time in connection herewith;
(vi) Deregistration Power: the Power of Attorney, duly
executed;
(vii) General: such other documents as Lessor may reasonably
request;
(b) the receipt by Lessor on or before the Delivery Date of:
(i) Opinions: signed originals (or facsimiles thereof) of
each of the opinions referred to in Section 3.1(a)(ii);
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(ii) Payments: all sums due to Lessor under this Agreement on
or before the Delivery Date including, without
limitation, the first payment of Rent;
(iii) Insurances: certificates of insurance, an undertaking
from Lessee's insurance broker in the form of Schedule
4B hereto, and other evidence satisfactory to Lessor
that Lessor is sole loss payee with respect to the hull
insurance on Aircraft and that Lessee is otherwise
taking the required steps to ensure due compliance with
the provisions of this Agreement as to Insurances with
effect on and after the Delivery Date;
(iv) Financial Statements: the latest available financial
statements of Lessee as described in Section 8.2(b)(i)
and (ii);
(v) Documents: a confirmation of receipt of the Aircraft
Documents delivered with the Aircraft on the Delivery
Date;
(vi) Certificate of Acceptance: the Certificate of
Acceptance; and
(vii) General: such other documents as Lessor may reasonably
request;
(c) receipt by Lessor of such information and documents relating to
the proposed Maintenance Program based upon the Airbus Maintenance
Planning Document Ref [ST4/993 441.88] as Lessor may require and Lessor
having agreed to the proposed Maintenance Program on or prior to the
Delivery Date; and
(d) evidence that on the Delivery Date the Aircraft has been validly
registered under the laws of the United States and that all filings,
registrations, recordings and other actions have been or will be taken
which are necessary or advisable to ensure the validity, effectiveness and
enforceability of this Agreement and to protect the property rights of
Lessor in the Aircraft or any Part.
3.2 Further Conditions Precedent: The obligations of Lessor to
deliver and lease the Aircraft under this Agreement are subject to the further
conditions precedent that the Lessee deliver to the Lessor a certificate dated
the Delivery Date stating that:
(a) the representations and warranties of Lessee under Sections 2.1
and 2.2 are correct on and as of the Delivery Date; and
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(b) no Default has occurred and is continuing.
3.3 Waiver: The conditions specified in Sections 3.1 and 3.2 are for
the sole benefit of Lessor and may be waived or deferred in whole or in part and
with or without conditions by Lessor. If any of those conditions are not
satisfied on the Delivery Date and Lessor (in its absolute discretion)
nonetheless agrees to deliver the Aircraft to Lessee, Lessee will ensure that
those conditions are fulfilled within 15 days after the Delivery Date and Lessor
may treat as an Event of Default the failure of Lessee to do so.
3.4 Lessee Conditions Precedent: Lessee's obligation to take
delivery of the Aircraft under this Agreement is subject to the Aircraft being
in the condition and meeting or exceeding the requirements set forth in Schedule
9 hereto and receipt by Lessee from Lessor not later than 2 Business Days prior
to the Scheduled Delivery Date of a certificate of the Secretary or Assistant
Secretary of Trust Company, dated five days before the Delivery Date certifying:
(a) that attached thereto is a true and complete copy of the
by-laws of Trust Company as amended and in effect at all times
from the date on which the resolutions referred to in clause
(b) were adopted to and including the date of such
certificate;
(b) that attached thereto is a true and complete copy of
resolutions duly adopted by the board of directors of Trust
Company authorizing the execution, delivery and performance of
this Agreement, and that such resolutions have not been
modified, rescinded or amended and are in full force and
effect;
(c) that the charter of Trust Company has not been amended since
the date that they were last amended; and
(d) as to the incumbency and specimen signature of each officer of
Trust Company executing this Agreement and any other agreement
contemplated hereby or to be delivered by Trust Company from
time to time in connection herewith.
Lessee's obligation to take delivery of the Aircraft under this Agreement is
also subject to the receipt by Lessee on the Delivery Date of:
(i) evidence that the Aircraft has been validly registered under the
laws of the United States and that all filings, registrations, recordings
and other actions have been or will be taken which are necessary or
advisable to ensure the validity, effectiveness and enforceability of
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this Agreement and to protect the property rights of Lessee in the
Aircraft or any Part;
(ii) a letter from Beneficiary addressed to Lessee to the effect
that (A) so long as no Event of Default shall have occurred and be
continuing, Beneficiary will not interfere with the quiet use, possession
and enjoyment of the Aircraft by Lessee and agrees to discharge without
undue delay any Lessor Lien attributable to it which materially prejudices
the quiet use, possession and enjoyment of the Aircraft by Lessee, (B) the
Trust Agreement has been duly authorized, executed and delivered by
Beneficiary and (C) Beneficiary acknowledges receipt of the Deposit in the
amount of $272,500 due to Lessor under Section 5.12(a) of the Lease; and
(iii) evidence that the next scheduled C-Check is a lC.
4. COMMENCEMENT AND TERM
4.1 Delivery: Lessor will lease the Aircraft to Lessee and Lessee
will take the Aircraft on lease in accordance with the terms and conditions of
this Agreement. Lessor will deliver and Lessee will accept the Aircraft on the
Scheduled Delivery Date (if such Date is confirmed by Lessor to Lessee to be the
Delivery Date at least 5 Business Days in advance of such Date) or as may be
specified in writing by the Lessor to the Lessee at least 5 Business Days in
advance of such other date; provided that Lessee shall only be required to
accept the Aircraft if the Aircraft is tendered for delivery in the condition
required and meets or exceeds the specifications set forth in Schedule 9 hereto
on the Delivery Date. If the Aircraft does not meet or exceed the specifications
set forth in Schedule 9 hereto on the Scheduled Delivery Date and such failure
is not due to an Excusable Delay, the Lessee shall have the option to terminate
this Agreement and obtain a refund of any amounts or deposits paid by or on
behalf of Lessee hereunder (the "Refund") and, upon such termination and the
payment of the Refund to Lessee, neither Lessor nor Lessee will have any further
obligation to the other under this Agreement. After delivery the Aircraft and
every Part will be in every respect at the sole risk of Lessee, who will bear
all risk of loss, theft, damage or destruction to the Aircraft from any cause
whatsoever.
4.2 Delivery Location: The Aircraft will be delivered to and
accepted by Lessee at the Delivery Location or such other location as may be
agreed. Subject to the terms conditions hereof, Lessee will effect acceptance of
the Aircraft by execution and delivery to Lessor of the duly completed and
executed Certificate of Acceptance.
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4.3 Delayed Delivery: If owing to:
(a) any Excusable Delay; or
(b) notification of any defect or non-conformity pursuant to Section
4.5;
Lessor delays in the delivery of, or fails to deliver, the Aircraft under this
Agreement, then:
(i) Lessor will not be responsible for any losses, including loss of
profit, costs or expenses arising from or in connection with the delay or
failure suffered or incurred by Lessee;
(ii) Lessee will be entitled to terminate this Agreement on the
grounds of any such delay if Lessor fails to deliver the Aircraft in
accordance with this Agreement on or prior to June 30, 1995; and
(iii) upon any such termination or termination pursuant to Section
4.5 neither Lessor nor Lessee will have any further obligation to the
other under this Agreement other than Lessor's obligation to make the
Refund to Lessee or otherwise as expressly set out in this Agreement.
4.4 Licenses: Lessee will at its expense obtain all licenses,
permits and approvals which may be necessary to export the Aircraft from the
Delivery Location. Lessor will furnish such data and information as may be
reasonably requested by Lessee in connection with obtaining any such license,
permit or approval. Notwithstanding the foregoing, Lessor will endeavor to have
the Manufacturer as agent for Lessee, apply for such licenses, permits, and
approvals. Lessor will have no responsibility for Manufacturer's or Lessee's
failure to obtain or delay in obtaining such licenses, permits and approvals.
Lessee will have no responsibility for Manufacturer's failure to obtain or delay
in obtaining such licenses, permits and approvals.
4.5 Inspection: Not earlier than 10 days, and not later than 3 days,
prior to the Scheduled Delivery Date, Lessor will give Lessee an opportunity:
(a) to inspect the Aircraft at the Delivery Location; and
(b) to dispatch up to two representatives as observers in a 2 hour
Acceptance Flight (as described in the Airbus Customer Acceptance Manual)
to inspect the condition of the Aircraft.
If Lessee notifies Lessor promptly prior to or on the Scheduled Delivery Date of
any defect or nonconformity with Schedule 9 hereto observed during the
inspection or demonstration flight, Lessor shall correct such defect and/or
nonconformity as promptly
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as possible (except to the extent otherwise agreed or to the extent that, in the
reasonable opinion of Lessor, it is impracticable or prohibitively expensive to
do so). Lessor may, by written notice to Lessee, postpone the delivery of the
Aircraft in such a case to such date as the defect or nonconformity will have
been rectified (the "Extended Delivery Date"). The Extended Delivery Date shall
be set forth by Lessor in a written notice to Lessee as soon as possible
following notification by Lessee of the defect or nonconformity with Schedule 9
hereto and the Extended Delivery Date shall be a date not later than 30 days
following the Scheduled Delivery Date. Upon receipt of such notice by the Lessee
the Extended Delivery Date shall be the Scheduled Delivery Date for all purposes
hereunder.
4.6 Indemnity: Lessee will indemnify and hold harmless the
Indemnitees from and against all Claims (as defined in Section 10) arising from
death or injury to any observer or any employee of Lessee in connection with any
demonstration flight or inspection of the Aircraft by Lessee, except that Lessee
does not indemnity or hold harmless any Indemnitee pursuant to this Section 4.6
for any claims to the extent caused by the gross negligence or wilful misconduct
of such Indemnitee.
4.7 Term: The Aircraft shall be leased to Lessee hereunder for a
term (the "Term") of forty-eight (48) months, commencing on the Delivery Date
and ending at 11:59 p.m. New York, New York time on the date which is 4 years
after the Delivery Date, or such earlier date as this Agreement may be
terminated in accordance with the terms hereof.
4.8 Right of First Refusal: If, on the Rental Payment Date occurring
on or about three months prior to the end of the Term (the "Notice Date"), a
Firm Offer exists, Lessor shall provide Lessee with written notice (the "Sale or
Lease Notice") specifying the terms and conditions of such Firm Offer. Provided
no Default has occurred and is continuing, Lessee shall have the right to
purchase or lease the Aircraft on the exact terms of such Firm Offer. Such right
of Lessee shall be exercised by irrevocable written notice to Lessor, to be
received by Lessor not later than 7 days from the Notice Date. After receipt of
such irrevocable notice by Lessor, Lessor shall sell or lease, as the case may
be, and Lessee shall purchase or lease, as the case may be, from Lessor the
Aircraft in accordance with the terms of the Firm Offer. In the event that
Lessee shall exercise its right to purchase the Aircraft pursuant to this
Section 4.8 and the terms of the sale shall be other than for cash, Lessee shall
have (or provide) credit of equal quality to the third party purchaser
reasonably satisfactory to Lessor. For the purposes of this Section 4.8, "Firm
Offer" shall mean (i) a firm offer from a third party to sell or lease the
Aircraft to such third party which offer is acceptable to Lessor and (ii) an
offer made by Lessor to a third party (subject to the right of first refusal set
forth in this Section 4.8) to sell or lease the Aircraft to such third party
which offer is acceptable to such third party.
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5. PAYMENTS
5.1 Rental Periods: The first Rental Period will commence on the
Delivery Date and each subsequent Rental Period will commence on the date
succeeding the last day of the previous Rental Period. Each Rental Period will
end on the date immediately preceding the numerically corresponding day in the
next month except that:
(a) if there is no such numerically corresponding day in that month,
it will end on the last day of that month; and
(b) if a Rental Period would otherwise extend beyond the last day of
the Term, it will end on such day.
5.2 Rent: Lessee agrees to pay to Lessor or its order throughout the
Term on each Rent Payment Date Rent in advance in the amount of (a) with respect
to each of the first 12 Rent Payment Dates, [***] (b) with respect to each of
the 13th through 24th Rent Payment Dates, [***], (c) with respect to each of
the 25th through the 36th Rent Payment Dates, [***], and (d) with respect to
each of the 37th through the 48th Rent Payment Dates, [***]. Payment must be
initiated adequately in advance of each Rent Payment Date to ensure that Lessor
receives credit for the payment on each Rent Payment Date. If a Rental Period
begins on a non-Business Day, the Rent payable in respect of that Rental Period
shall be paid on the Business Day immediately preceding the date on which such
Rental Period commences.
5.3 Maintenance Reserves:
(a) Amount: Lessee will further pay to Lessor Maintenance Reserves
in relation to each calendar month (the "Reporting Period") (including
without limitation the last calendar month of the Term) on the 10th day
following the end of the Reporting Period (provided that if such 10th day
is not a Business Day then such payment shall be made on the Business Day
immediately following such 10th day) as follows:
(i) in respect of the Airframe, [***] for each Flight Hour
operated by the Aircraft during that Reporting Period ("Airframe
Maintenance Reserves"); and
(ii) in respect of each Engine, [***] for each Flight Hour
operated by that Engine during that Reporting Period ("Engine
Maintenance Reserves"); and
(iii) in respect of the APU, [***] for each Flight Hour
operated by the APU during that Reporting Period ("APU Maintenance
Reserves"); and
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(iv) in respect of each Landing Gear, [***] for each Flight
Hour operated by that Landing Gear during that Reporting Period
("Landing Gear Maintenance Reserves"); and
(b) Adjustment: Lessor may adjust the amount of Maintenance
Reserves after the Delivery Date by notice to Lessee if the Flight Hour to
Cycle ratio averages below 1.8:1 for any Reporting Period to an amount of
Maintenance Reserves for such Reporting Period equal to (F X $261) +
((C-(F/1.8)) x [***]), where C equals the number of cycles operated and F
equals the number of Flight Hours during the Reporting Period.
(c) Maintenance: Notwithstanding anything to the contrary contained
herein, any and all maintenance contemplated by this Section 5.3 shall be
conducted at a facility of an Agreed Maintenance Performer and Lessor
shall be entitled to have representatives present during the performance
of such maintenance to observe all aspects of such performance.
(d) Concerning Reserves: At the time Lessee pays amounts of
Maintenance Reserves pursuant to this Section 5.3, Lessee shall provide to
Lessor a certificate as to the computation of each such payment, duly
executed by the manager of maintenance planning of Lessee, or other
qualified officer, certifying the number of Flight Hours and Cycles. From
time to time, Lessor shall have the right, on reasonable prior notice to
Lessee, to cause its representatives or agents to review the appropriate
records of Lessee to determine the accuracy of such certificates. In the
event a discrepancy is determined as a result of such review, Lessor shall
notify Lessee in writing thereof and Lessee shall make up any deficiency
in its payments to Lessor within five (5) Business Days of such notice and
Lessee shall be given a credit for any excess.
(e) Property of Lessor: It is intended by Lessor and Lessee that the
Maintenance Reserves are payable to Lessor in consideration for the
continued use of the Aircraft by Lessee, and that such monies irrevocably
and unconditionally shall be the property of Lessor. Lessee accordingly
acknowledges that the Maintenance Reserves will be the sole property of
Lessor and that Lessee will have no interest therein or any right to
repayment thereof. Any reference in this Agreement, including Section 7.2
hereof, to Lessor paying amounts to Lessee by reference to the Maintenance
Reserves shall be construed as and take effect as an independent and
unsecured obligation of Lessor to pay such amount.
5.4 Payments: All payments by Lessee to Lessor under this Agreement
will be made for value on the due date in Dollars and in same day funds settled
through the New York Clearing House System or such other funds as may for the
time being be customary for the settlement in New York City of international
payments in
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Dollars by telegraphic transfer to The Dai-Ichi Kangyo Bank, Limited, New York
Branch, Account Name: Kawasaki Leasing International Inc., Account Number
10740004161 or to such other account as Lessor may advise Lessee in writing.
5.5 Gross-up:
(a) All payments by Lessee under or in connection with this
Agreement will be made without set-off or counterclaim, free and clear of
and without deduction for or on account of all Taxes (other than, subject
to Section 5.9 hereof, Lessor Taxes) (save as required by law);
(b) all Taxes (other than, subject to Section 5.9 hereof, Lessor
Taxes) in respect of payments under this Agreement shall be for the
account of and will be paid by Lessee for its own account prior to the
later of the date on which penalties apply and the date on which Lessee is
notified or has knowledge that such Taxes are payable; and
(c) if Lessee is compelled by law to make payment subject to any Tax
(other than, subject to Section 5.9 hereof, Lessor Taxes) and Lessor does
not actually receive for its own benefit on the due date a net amount
equal to the full amount provided for under this Agreement, Lessee will
pay all necessary additional amounts to ensure receipt by Lessor of the
full amount so provided for.
5.6 Taxation:
(a) Lessee will on demand indemnify Lessor and Beneficiary against
all Taxes (other than Lessor Taxes) levied or imposed against or upon
Lessor, Beneficiary or Lessee and relating to or attributable to the
operation, 4subleasing, possession, use, repair, maintenance, overhaul,
transportation, landing or storage of Aircraft by Lessee provided that
Lessee shall not be liable in respect of any stamp documentary or other
like duties and taxes relating to any assignment or transfer by Lessor of
any of its rights or obligations hereunder (other than a transfer to
Lessee in accordance with Section 14.2 hereof) or the creation of any
Security Interest by Lessor.
(b) Lessor will use reasonable endeavors and shall cooperate with
Lessee to avoid or mitigate any Taxes for which Lessee would otherwise be
liable under this Agreement, and in particular in making timely claims for
any relevant refund, declaration, credit, set-off or corresponding savings
against or in respect of Taxes.
(c) To the extent that Lessor or Beneficiary actually receives a tax
benefit or saving by reason of any deduction or withholding in respect of
which Lessee has made a payment or increased payment hereunder, or by
reason of any indemnity payment made by Lessee hereunder, Lessor shall
notify
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Lessee and shall pay to Lessee such amount as is equivalent to such
benefit or saving not exceeding the payment made by the Lessee.
(d) If the Lessee has made a payment in respect of Taxes and Lessor
or Beneficiary subsequently receives a refund in respect of such Taxes
from any taxation authority or other person, Lessor or Beneficiary shall
forthwith repay to Lessee an amount equal to the sum of (i) the amount
actually received less (ii) any Taxes imposed on the receipt or accrual
thereof plus (iii) any Taxes saved by reason of the deduction of such
payment.
(e) If Lessee has made a payment in respect of Taxes and Lessor or
Beneficiary becomes entitled to recover from any other person any sum in
respect of such Taxes, Lessor or Beneficiary shall if so required by
Lessee and at Lessee's expense take all reasonable steps to enforce such
recovery and shall account to Lessee for any amount recovered (including
any interest paid on or in respect thereof) net of any Taxes chargeable on
such amount not exceeding the amount of the payment made by Lessee.
5.7 Value Added Tax:
(a) For the purposes of this sub-clause:
(i) "VAT" means value added tax and any sales or turnover tax,
imposition or levy of a like nature (other than Lessor Taxes);
(ii) "supply" includes anything on which VAT is chargeable
with respect to this Agreement or the operation or use of the
Aircraft;
(b) Lessee will pay to Lessor or Beneficiary, upon receipt from
Lessor of an invoice or receipt in respect thereof, the amount of any VAT
chargeable in respect of any supply for VAT purposes under this Agreement;
and
(c) each amount stated as payable by Lessee under this Agreement is
exclusive of VAT (if any) and is accordingly to be construed as a
reference to that amount plus any VAT in respect of it.
5.8 Information: If Lessee is required by any applicable Law, or by
any third party, to deliver any report or return in connection with any Taxes,
Lessee will complete the same in a manner satisfactory to Lessor and in
particular will state therein that Lessee is exclusively responsible for the use
and operation of the Aircraft and for any Taxes other than Lessor Taxes arising
therefrom, and Lessee will, on request supply a copy of the report or return to
Lessor.
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5.9 Taxation of Indemnity Payments:
(a) If and to the extent that any sums payable to Lessor by Lessee
under this Agreement by way of indemnity are insufficient, by reason of
any Taxes payable in respect of those sums, for Lessor or Beneficiary to
discharge the corresponding liability to the relevant third party
(including any taxation authority), or to reimburse Lessor or Beneficiary
for the cost incurred by it to a third party (including any taxation
authority) Lessee will pay to Lessor or Beneficiary such sum as will after
the tax liability has been fully satisfied leave Lessor or Beneficiary
with the same amount as it would have been entitled to receive in the
absence of that liability together with interest on the amount of the
deficit at the rate of interest stated in Section 5.10 in respect of the
period commencing on the later of the date on which the payment of
taxation is finally due and the date on which Lessee is notified or has
knowledge of such tax liability until payment by Lessee (both before and
after judgment); and
(b) If and to the extent that any sums constituting (directly or
indirectly) an indemnity to Lessor but paid by Lessee to any person other
than Lessor or Beneficiary are treated as taxable in the hands of Lessor
or Beneficiary, Lessee will pay to Lessor or Beneficiary such sum as will
after the tax liability has been fully satisfied indemnify Lessor or
Beneficiary to the same extent as it would have been indemnified in the
absence of such liability together with interest on the amount payable by
Lessee under this sub-clause at the rate of interest stated in Section
5.10 in respect of the period commencing on the later of the date on which
the payment of taxation is finally due and the date on which Lessee is
notified or has knowledge of such tax liability until payment by Lessee
(both before and after judgment).
5.10 Default Interest: If Lessee fails to pay any amount payable
under this Agreement on the due date, Lessee will pay on demand from time to
time to Lessor interest (both before and after judgment) on that amount, from
the due date to the date of payment in full by Lessee to Lessor, at the rate
calculated by Lessor to be the Prime Rate plus 3% per annum. All such interest
will be compounded monthly and calculated on the basis of the actual number of
days elapsed and a 360 day year.
5.1l Contest: If Lessor or Beneficiary becomes aware of any claim or
matter which could give rise to a liability for Taxes for which Lessee might be
responsible under this Agreement, it shall promptly notify Lessee in writing
with full details thereof. If Lessee disputes the payment of any Taxes for which
Lessee is responsible under this Agreement, including a dispute as to the amount
thereof or due date for payment, Lessor shall take such action to avoid, resist,
appeal or compromise the claim for Taxes provided that Lessee has first
indemnified and secured
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Lessor to its reasonable satisfaction against all costs and expenses (including
Taxes) which may be incurred thereby. Lessor shall have sole control over the
conduct of the contest, including the method of contest and the choice of forum
and shall keep Lessee informed as to the progress of the contest. For the
avoidance of doubt Lessee shall be entitled to request Lessor apply for a
postponement of the payment of any Taxes or to take over (at its own expense)
the conduct of all proceedings relating to the Taxes in question, provided that
Lessee acknowledges in writing that it will indemnify Lessor and Beneficiary for
all Taxes that are the subject of the contest indemnifiable hereunder. Lessee
shall be kept fully informed of all matters pertaining to such Taxes and Lessor
shall make no settlement or compromise in relation to such Taxes or agree any
matter in relation thereto which will affect the future liability to Taxes of
Lessee without the prior approval of Lessee.
5.12 Security:
(a) The Lessee shall pay to Lessor a deposit in the total amount of
[***] (the "Deposit") as security for its obligations hereunder payable
as follows:
Upon signing the Letter
of Intent [***]
Upon signing this [***]
Agreement
(b) On the Delivery Date, Lessee will provide Lessor with an
irrevocable Letter of Credit in a face amount of [***] in accordance
with this Section 5.12(b). Upon receipt of such Letter of Credit, Lessor
shall reimburse to Lessee the [***] aggregate Deposit received by
Lessor from Lessee prior to the Delivery Date. The Letter of Credit shall
be held by Lessor until the termination of this Lease and thereafter until
Lessee has paid and performed all of its obligations under this Lease.
Lessee agrees (and will cause the issuers of the Letters of Credit to
agree) that the Letter of Credit may be assigned as security to, or
reissued in the name of, any Financing Party or transferred to, or
reissued in the name of, any other transferee of Lessor. Any Letter of
Credit provided to Lessor pursuant to this Section 5.12(b) shall (i) be
issued by a bank acceptable to Lessor and in form and substance acceptable
to Lessor, and if Lessor requests, confirmed by the New York branch of a
major international bank acceptable to Lessor and (ii) provide that such
Letter of Credit is drawable at any time or times until 60 days after the
termination of this Agreement, in whole or in part, upon certification by
Lessor that an amount equal to the amount of the drawing :s owed by Lessee
to Lessor under this Agreement (including damages). Any Letter of Credit
may have a validity period which is shorter than the period (the "Validity
Period" required by the preceding sentence provided that (a) such
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Letter of Credit shall have a Validity Period of at least one year, (b)
such Letter of Credit shall, in each case, be renewed not later than 30
days prior to its expiry, (c) a Letter of Credit shall remain in force at
all times during the Validity Period and (d) such Letter of Credit shall
also provide that the full face amount of such Letter of Credit may be
drawn down by Lessor upon certification by Lessor that Lessor has not
received satisfactory evidence of the renewal of such Letter of Credit
within 30 days prior to its expiry, in which case the proceeds of such
drawing shall constitute the Deposit for all purposes hereunder.
(c) To the fullest extent permitted by law and by way of continuing
security Lessee as sole beneficial owner assigns, transfers and pledges
for security purposes the Deposit and, to the extent the Lessee may have
any interest therein, the Maintenance Reserves and all rights of Lessee to
payment thereof and the debt represented thereby (the "Charged Monies") to
Lessor as security for Lessee's obligations and liabilities under this
Agreement (the "Secured Liabilities"). Except as expressly permitted under
this Agreement, Lessee shall not be entitled to payment of the Charged
Monies. Lessee will not assign, transfer or otherwise dispose of all or
part of its rights in the Charged Monies and it will enter into any
additional documents and instruments necessary or advisable (including any
financing statements) to evidence, create or perfect Lessor's rights to
the Charged Monies;
(d) if Lessee fails to make any payment under this Agreement within
three Business Days after the due date thereof or any Event of Default has
occurred and is continuing Lessor may immediately or at any time
thereafter that such failure or Event of Default is continuing, without
prior notice to Lessee:
(i) set-off all or any part of the Secured Liabilities against
the liabilities of Lessor in respect of the Charged Monies; or
(ii) apply or appropriate the Charged Monies in or towards the
payment or discharge of the Secured Liabilities in such order as
Lessor sees fit.
Lessor and the Lessee hereby agree that, if an Event of Default pursuant
to Section 13.1(p) hereof shall exist and be continuing, Lessor may apply
the Charged Monies in their entirety against Lessor's anticipated damages
resulting from such breach.
(e) if Lessor has exercised the set-off described in sub-clause (d)
above, Lessee shall, following a demand in writing from Lessor, restore
the Charged Monies to the level at which they stood immediately prior to
such set-off.
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(f) Provided that no Default shall have occurred and be continuing
and provided that Lessee has satisfied all of its obligations under this
Agreement (including without limitation its obligations under Section 12
hereof), the Lessor shall pay to Lessee an amount equal to the amount of
the Deposit, if any, and shall return the Letter of Credit to Lessee.
5.13 Absolute: Lessee's obligations under this Agreement are
absolute and unconditional irrespective of any contingency whatsoever including
(but not limited to):
(a) any right of set-off, counterclaim, recoupment, defence or other
right which either party to this Agreement may have against the other;
(b) any unavailability of the Aircraft for any reason, including,
but not limited to, a requisition of the Aircraft or any prohibition or
interruption of or interference with or other restriction against Lessee's
use, operation or possession of the Aircraft;
(c) any lack or invalidity of title or any other defect in title
(other than any such lack, invalidity or defect caused by Lessor or
Beneficiary), airworthiness, merchantability, fitness for any purpose,
condition, design, or operation of any kind or nature of the Aircraft for
any particular use or trade, or for registration or documentation under
the laws of any relevant jurisdiction, or any Event of Loss in respect of
or any damage to the Aircraft;
(d) any insolvency, bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution, liquidation or similar proceedings by
or against Lessor or Lessee;
(e) any invalidity or unenforceability or lack of due authorization
of, or other defect in, this Agreement; and
(f) any other cause which but for this provision would or might
otherwise have the effect of terminating or in any way affecting any
obligation of Lessee under this Agreement.
Notwithstanding any provision of this Section 5.13 to the contrary, in the event
that Lessor becomes subject to a bankruptcy proceeding and Lessor's trustee in
bankruptcy rejects this Agreement, Lessee shall return the Aircraft to Lessor in
compliance with all the terms and provisions of this Agreement which are
applicable to the return of the Aircraft upon termination of the leasing of the
Aircraft under this Agreement, and, upon such return and performance of such
terms and conditions and the payment by Lessee to Lessor of all amounts owing by
Lessee to Lessor under this Agreement, this Agreement and Lessee's obligations
under this Agreement (including Lessee's obligation to pay Rent hereunder with
respect to any Rental
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Period commencing after such return of the Aircraft) shall terminate and Lessor
shall, if Lessee has satisfied all of its obligations under this Agreement, pay
to Lessee an amount equal to the amount of the Deposit, if any, and shall return
the Letter of Credit to Lessee.
6. MANUFACTURER'S WARRANTIES
6.1 Assignment: For so long as no Event of Default has occurred and
is continuing, Lessor agrees to assign or otherwise make available to Lessee
such rights, if any, as Lessor may have under any warranty with respect to the
Aircraft made by Manufacturer of the Aircraft to the extent the same may be
assigned or otherwise made available to Lessee, and without warranty by Lessor
as to enforceability of any of the rights so assigned. Notwithstanding such
assignment, Lessor will remain entitled to the benefit of each warranty, express
or implied, not assigned in accordance with the proceeding sentence with respect
to the Aircraft, any Engine or Part so far as concerns any manufacturer, vendor,
subcontractor or supplier. Lessee will notify Lessor promptly upon becoming
aware of any claim under any warranty so assigned to it. Upon termination of
this Agreement, Lessee shall re-assign to Lessor (or such other party as Lessor
shall direct) the benefit of any warranty assigned by Lessor to Lessee pursuant
to this Section 6.1 (to the extent that the same are re-assignable and have not
expired) together with all assignable warranties relating to the Aircraft made
available to Lessee directly under any agreement between Lessee and any
manufacturer, vendor, subcontractor or supplier (other than a claim under any
such warranty relating to a matter arising during the Term and in respect of
which Lessee is seeking reimbursement for amounts already paid or incurred by
Lessee). Notwithstanding anything to the contrary in this Section 6.1, upon the
occurrence of an Event of Default all rights held by Lessee derived from any
warranties relating to the Aircraft shall immediately revert to Lessor,
including all claims thereunder and shall remain with Lessor so long as any
Event of Default is continuing (and if no Event of Default shall thereafter be
continuing, such rights shall revert to Lessee).
6.2 Proceeds: Except to the extent Lessor otherwise agrees in a
particular case, all proceeds of any such claim will be paid directly to Lessor
but if and to the extent that such claim relates:
(a) to defects affecting the Aircraft which Lessee has rectified; or
(b) to compensation for loss of use of the Aircraft, an Engine or
any Part during the Term; and
provided no Event of Default or Payment Default has occurred and is
continuing the proceeds will be paid to Lessee by Lessor but
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in the case of (a) only on receipt of evidence satisfactory to Lessor that
Lessee has rectified the relevant defect.
6.3 Parts: Except to the extent Lessor otherwise agrees in a
particular case, Lessee will procure that all engines, components, furnishings
or equipment provided by the manufacturer, vendor, subcontractor or supplier in
replacement of a defective Engine or Part pursuant to the terms of any warranty
will be installed promptly by Lessee and that title thereto free of Security
Interests vests in Lessor. On installation those items will be deemed to be an
Engine or Part as applicable.
6.4 Agreement: To the extent any warranties relating to the Aircraft
are made available under an agreement between any manufacturer, vendor,
subcontractor or supplier and Lessee, this Section 6 is subject to that
agreement. However, Lessee will:
(a) pay the proceeds of any claim thereunder to Lessor to be applied
pursuant to Section 6.2 and pending such payment will hold the claim and
the proceeds on trust for Lessor; and
(b) Lessee will take all such steps as are necessary at the end of
the Term to ensure the benefit of any of those warranties which have not
expired are vested in Lessor.
7. LESSOR'S COVENANTS
7.1 Quiet Enjoyment: So long as no Event of Default shall have
occurred and be continuing, Lessor will not interfere with the quiet use,
possession and enjoyment of the Aircraft by Lessee. Lessor shall procure the
issue to Lessee of a letter of quiet enjoyment in respect of the Aircraft from
any Financing Party and shall discharge without undue delay any Lessor Liens
attributable to it which materially prejudice the quiet use, possession and
enjoyment of the Aircraft by Lessee.
7.2 Reimbursement of Maintenance Costs: Subject to Sections 5.4(e)
and 16.5, so long as no Default has occurred and is continuing, Lessor will
promptly pay to Lessee (or promptly pay, upon the instructions of Lessee, to the
Agreed Maintenance Performer) from the Maintenance Reserves upon submission by
Lessee to Lessor (which submission shall be within 6 months of the commencement
of such maintenance) of an invoice and supporting documentation reasonably
satisfactory to Lessor evidencing:
(a) with respect to the Airframe, the completion, in accordance with
this Agreement, of those items of maintenance characterized by the
Manufacturer's maintenance planning document and best industry practice as
"4C" or "8C" Check and/or individual structural inspections of not less
than 15,000 Flight Hours or 5 years for the Aircraft (but not including
repairs arising as the result of operational
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or maintenance mishandling), a sum equal to the lesser of (i) the amount
of that invoice and (ii) the amount equal to the aggregate amount of
Airframe Maintenance Reserves paid under this Agreement at the time of
commencement of that maintenance less the aggregate amount previously paid
by Lessor under this sub-clause;
(b) with respect to any Engine (other than a temporary engine
installed on the Aircraft pursuant to Section 8.13(b) hereof), the
performance, in accordance with this Agreement, of all shop visits
requiring engine disassembly (other than (i) repairs arising as a result
of foreign object damage or operational or maintenance mishandling and/or
(ii) removal, installation, maintenance and repair of QEC (Quick Engine
Change) kits), a sum equal to the lesser of (i) the amount of that invoice
and (ii) the amount equal to the aggregate amount of Engine Maintenance
Reserves paid in respect of the Engines under this Agreement at the time
of commencement of that maintenance less the aggregate amount previously
paid in respect of the Engines by Lessor under this sub-clause;
(c) with respect to the APU, the performance, in accordance with
this Agreement, of all shop visits requiring APU removal and disassembly
(other than repairs arising as the result of foreign object damage,
operational or maintenance mishandling), a sum equal to the lesser of (i)
the amount of that invoice and (ii) the amount equal to the aggregate
amount of APU Maintenance Reserves paid under this Agreement at the time
of commencement of that maintenance less the aggregate amount previously
paid by Lessor under this sub-clause; and
(d) with respect to the Landing Gear, the performance in accordance
with this Agreement, of all work on the landing gear in the nature of
overhaul and requiring removal and disassembly (other than repairs arising
as the result of operational or maintenance mishandling), a sum equal to
the lesser of (i) the amount of that invoice and (ii) the amount equal to
the aggregate amount of Landing Gear Maintenance Reserves paid under this
Agreement at the time of commencement of that maintenance less the
aggregate amount previously paid by Lessor under this sub-clause.
7.3. Certain Lessor Obligations: Within 5 Business Days of:
(a) redelivery of the Aircraft to Lessor in accordance with and in
the condition required by this Agreement; or
(b) of payment to Lessor of the Agreed Value following an Event of
Loss with respect to the Aircraft after the Delivery Date;
or in each case such later time as Lessor is satisfied Lessee has irrevocably
paid to Lessor all amounts which may then be out
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standing or shall then be due and payable under this Agreement or under any
other agreement between Lessor or Beneficiary and Lessee, Lessor will pay to
Lessee:
(i) the amount of any Rent received in respect of any period falling
after the date of redelivery of the Aircraft or payment of the Agreed
Value, as the case may be; and
(ii) in the case of an Event of Loss with respect to the Aircraft,
the excess of the aggregate amount of Maintenance Reserves paid under
Section 5.3(a) over the aggregate amount of Maintenance Reserves paid
under Section 7.2.
7.4 Indemnity: Lessor will indemnify and hold harmless Lessee from
and against all Claims (as defined in Section 10) arising from death or injury
to any observer or employee of Lessor attributable to the gross negligence or
willful misconduct of a Lessor appointed representative operating the Aircraft
as pilot in accordance with Section 12.2(d) hereof.
8. LESSEE'S COVENANTS
8.1 Duration: The undertakings in this Section and in Section 12
will:
(a) except as otherwise stated, be performed at the expense of
Lessee; and
(b) remain in force until the termination of this Agreement in
accordance with the terms hereof and thereafter to the extent of any
accrued rights of Lessor in relation to those undertakings.
8.2 Information: Lessee will:
(a) notify Lessor forthwith of the occurrence of any Default or any
other event which would materially and adversely affect Lessee's ability
to perform any of its obligations under this Agreement;
(b) furnish to Lessor:
(i) as soon as available but not in any event later than 60
days after the end of each quarterly fiscal period of each fiscal
year of the Lessee, consolidated and consolidating statements of
income, retained earnings and cash flow of the Lessee for such
period and for the period from the beginning of the respective
fiscal year to the end of such period, and, if available, the
related consolidated and consolidating balance sheets of the Lessee
as at the end of such period, setting forth in each case in
comparative form the corresponding consolidated and consolidating
figures for the corresponding period in the preceding
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fiscal year, accompanied by a certificate of a senior financial
officer of the Lessee, which certificate shall state that said
financial statements fairly present the consolidated financial
condition and results of operations of the Lessee, in accordance
with GAAP (subject to normal year-end audit adjustments);
(ii) as soon as available but not in any event later than 90
days after the end of each annual fiscal period of each fiscal year
of the Lessee, consolidated and consolidating statements of income,
retained earnings and cash flow of the Lessee for such period and
for the period from the beginning of the respective fiscal year to
the end of such period, and, if available, the related consolidated
and consolidating balance sheets of the Lessee as at the end of such
period, setting forth in each case in comparative form the
corresponding consolidated and consolidating figures for the
preceding fiscal year, all of which shall be certified by an
independent certified public accounting firm of recognized national
standing selected by the Lessee, accompanied by a certificate of a
senior financial officer of the Lessee, which certificate shall
state that said financial statements fairly present the consolidated
financial condition and results of operations of the Lessee, in
accordance with GAAP;
(iii) at the same time as it is issued to the creditors (or,
if Lessee does a public offering of any of its shares of stock, the
shareholders) of Lessee, a copy of each notice or circular issued to
Lessee's creditors (or, if Lessee does a public offering of any of
its shares of stock, shareholders) as a group; and
(iv) on request from time to time such other information
regarding Lessee and its business and affairs as Lessor may
reasonably request;
(c) keep Lessor informed as to current serial numbers of the Engines
and any engine installed on the Aircraft;
(d) promptly furnish to Lessor all information Lessor from time to
time reasonably requests regarding the Air-craft; any Engine or any Part,
its use, location and condition including, without limitation, the hours
available on the Aircraft and any Engine until the next scheduled check,
inspection, overhaul or shop visit, as the case may be;
(e) on request, within 10 days after the end of any Rental Period,
furnish to Lessor evidence satisfactory to Lessor of payment of all
material Taxes (other than Lessor Taxes) due during that or any previous
Rental Period;
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(f) on request, furnish to Lessor evidence satisfactory to Lessor
that all Taxes (other than Lessor Taxes) and charges incurred by Lessee
with respect to the Aircraft, including without limitation all payments
due to the relevant air traffic control authorities, have been paid and
discharged in full;
(g) provide Lessor with a monthly report on the Aircraft and each
Engine in the form reasonably required from time to time by Lessor;
(h) give Lessor not less than 60 days prior to the start of any
Major Check, written notice as to the time and location of such Major
Check;
(i) promptly notify Lessor of:
(i) any loss, theft, damage or destruction to the Aircraft,
any Engine or any Part, or any modification to the Aircraft if the
potential cost may exceed the Damage Notification Threshold; and
(ii) any claim or other occurrence known to Lessee and likely
to give rise to a claim under the Insurances (but in the case of
hull claims only in excess of the Damage Notification Threshold) and
details of any negotiations with the insurance brokers over any such
claim; and
(j) within 10 days after the end of each calendar month, furnish to
Lessor (or any representative of Lessor designated by Lessor) copies of
all amendments, modifications, supplements; waivers and deferrals of, or
with respect to, the Agreed Maintenance Program or other maintenance
requirements of the FAA, entered into or issued during such calendar
month.
8.3. Lawful and Safe Operation: Lessee will:
(a) (i) comply with the Law for the time being in force in any
country or jurisdiction which may for the time being be applicable to the
Aircraft or, so far as concerns the use and operation of the Aircraft or
an owner or operator thereof and take all reasonable steps to ensure that
the Aircraft is not used for any illegal purpose;
(ii) no later than 7 calendar days after the Delivery Date
(and, in any event, prior to operating the Aircraft for public transport)
obtain all necessary air transportation licenses required in connection
with the use and operation of the Aircraft;
(b) not use the Aircraft in any manner contrary to any requirement
of the manufacturers of the Aircraft, any Engine or any Part or any
recommendation or regulation of the FAA
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or for any purpose for which the Aircraft is not designed or reasonably
suitable;
(c) ensure that the crew and engineers employed by it in connection
with the operation and maintenance of the Aircraft have the qualifications
and hold the licenses required by the FAA and applicable Law;
(d) use the Aircraft solely in commercial or other operations for
which Lessee is duly authorized by the FAA and applicable Law;
(e) not use the Aircraft for the carriage of:
(i) whole animals living or dead except in the cargo
compartments according to I.A.T.A. regulations, and except domestic
pet animals carried in a suitable container to prevent the escape of
any liquid and to ensure the welfare of the animal;
(ii) acids, toxic chemicals, other corrosive materials,
explosives, nuclear fuels, nuclear wastes, or any nuclear assemblies
or components, except as permitted for passenger aircraft under the
"Restriction of Goods" schedule issued by I.A.T.A. from time to time
and provided that all the requirements for packaging or otherwise
contained therein are fulfilled;
(iii) any other goods, materials or items of cargo which could
reasonably be expected to cause damage to the Aircraft and which
would not be adequately covered by the Insurances; or
(iv) any illegal item or substance;
(f) not utilize the Aircraft for purposes of training, qualifying or
re-confirming the status of cockpit personnel except for the benefit of
Lessee's cockpit or cabin personnel, and then only if the use of the
Aircraft for such purpose is not disproportionate to the use for such
purpose of other aircraft of the same type operated by Lessee;
(g) not cause or permit the Aircraft to proceed to, or remain at,
any location which is for the time being the subject of a prohibition
order (or any similar order or directive); by:
(i) any Government Entity of the United States of America; or
(ii) any Government Entity of the country in which such
location is situated; or
(iii) any Government Entity having jurisdiction over Lessor,
the Beneficiary or the Aircraft;
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(h) obtain and maintain in full force all certificates, licenses,
permits and authorizations required for the use and operation of the
Aircraft for the time being, and for the making of payments requited by,
and the compliance by Lessee with its other obligations under, this
Agreement; and
(i) not operate the Aircraft to or for any country or entity that is
the subject of sanctions under the U.S. International Economic Emergency
Powers Act or U.N. Security Council directives (presently Haiti, Iraq,
Libya, the Federal Republic of Yugoslavia (Serbia and Montenegro) and the
Unita Rebels of Angola). Lessee also covenants and agrees not to operate
or locate the Aircraft in any country restricted under the U.S. Trading
with the Enemy Act and the U.S. Export Administration Act except as may be
permitted by operating in accordance with the conditions specified by the
U.S. Export Administration Regulations, General License GATS (15 CFR Part
771.19) (presently Cuba, Iran, North Korea, Sudan, and Syria).
Lessee agrees that if (i) Lessee uses the Aircraft in any manner
contrary to any recommendation of the manufacturers of the Aircraft, any Engine
or any Part and (ii) the effect of such use materially and adversely affects
the Aircraft, then, upon the written request of Lessor, Lessee shall not use
the Aircraft in any manner contrary to such recommendation.
8.4 Taxes and Other Outgoings: Lessee will promptly pay:
(a) all license and registration fees, Taxes (other than Lessor
Taxes) and other amounts of any nature imposed by any Government Entity
with respect to the Aircraft, including without limitation the purchase or
re-leasing of the Aircraft by Lessee in accordance with Section 4.8 hereof
and the leasing, possession, use, operation or return, of the Aircraft;
and
(b) all rent, fees, charges, Taxes (other than Lessor Taxes) and
other amounts in respect of any premises where the Aircraft or any Part
thereof is located from time to time;
except to the extent that in the reasonable opinion of Lessor such payment is
being contested in good faith by appropriate proceedings, in respect of which
adequate resources have been provided by Lessee and non-payment of which does
not give rise to any material likelihood of the Aircraft or any interest therein
being sold, forfeited or otherwise lost or of criminal liability on the part of
Lessor, Beneficiary or any Financing Party.
8.5 Sub-Leasing: Lessee will not, without the prior written consent
of Lessor, sub-lease or part with possession of the Aircraft, the Engines or any
Part, such consent not to be
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unreasonably withheld provided that (i) all of the terms and provisions of this
Agreement shall continue to be binding upon the Lessee, (ii) any sublessee shall
agree in writing prior to the effectiveness of any sublessee that such sublease
shall be subject and subordinate to this Agreement and such sublessee shall
enjoy no right of quiet enjoyment with respect to the Lessor or the Financing
Parties (unless no Event of Default hereunder, or "event of default" under such
sublease, shall have occurred and be continuing), (iii) all of the terms and
conditions of the sublease shall be as strict or stricter than the terms and
condition hereof and Sections 8.1 to 8.3 and 8.5 to 8.19 hereof shall be
incorporated therein in their entirety, mutatis mutandis, provided that each
reference therein to Lessee shall refer to the sublessee and each such provision
shall be for the benefit of Lessor as well as Lessee, (iv) all insurances
required hereby shall continue to be in effect and (v) an opinion of legal
counsel, reasonably acceptable to Lessor, shall be provided such opinion to
include an opinion that each of the above conditions has been met and such other
opinions as Lessor may reasonably request.
Notwithstanding the foregoing, Lessee may enter into a Wet Lease,
provided that (i) Lessee agrees that the rights of any Person with whom a Wet
Lease is entered into shall be made expressly subject and subordinate to all the
terms of this Agreement, (ii) Lessee shall remain primarily liable hereunder for
the performance of all the terms of this Agreement to the same extent as if such
Wet Lease had not been entered into and (iii) Lessee shall not permit a Person
with whom a Wet Lease has been entered into to enter into a further Wet Lease
with another Person.
8.6 Inspection:
(a) Lessor and any person designated by Lessor or any Financing
Party may during normal business hours at any time visit, inspect and
survey the Aircraft, any Engine or any Part and for such purpose may,
subject to any applicable FAA regulation or requirements, travel on the
flight deck as observer; and
(b) Lessor will:
(i) have no duty or liability to make, or arising out of any
such visit, inspection or survey; and
(ii) so long as no Default has occurred and is continuing, not
exercise such right other than on reasonable notice and so as not to
disrupt unreasonably the commercial operations of Lessee.
8.7 Title: Lessee will:
(a) not do or knowingly permit to be done or omit or knowingly
permit to be omitted to be done any act or thing which might reasonably be
expected to jeopardize the rights
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of Lessor as owner and lessor of the Aircraft or the rights of any
Financing Party as mortgagee, assignee of this Agreement and as assignee
of the Insurances or the validity, enforceability or priority of a
Mortgage or any Security Assignment;
(b) on all occasions when the ownership of the Aircraft, any Engine
or any Part is relevant, make clear to third parties that title is held by
Lessor;
(c) not at any time (i) represent or hold out Lessor or any
Financing Party as carrying goods or passengers on the Aircraft or as
being in any way connected or associated with any operation or carriage
(whether for hire or reward or gratuitously) which may be undertaken by
Lessee or (ii) pledge the credit of Lessor or any Financing Party;
(d) ensure that there is always affixed, and not removed or in any
way obscured, a fireproof plate (having dimensions of not less than 10 cm.
x 7 cm.) in a reasonably prominent position on Aircraft and on each Engine
stating:
"This Aircraft/Engine is owned by Wilmington Trust Company, as Owner
and Lessor [, is subject to a first priority Mortgage in favor of
[Name of Financing Party),]* and is leased to Midway Airlines
Corporation and may not be operated by any other person without the
prior written consent of Lessor";
(e) not create or permit to exist any Security Interest upon the
Aircraft, any Engine or any Part or this Agreement, and promptly discharge
all obligations which may give rise to such a Security Interest;
(f) not do or permit to be done anything which may reasonably be
expected to expose the Aircraft, any Engine or any Part to penalty,
forfeiture, impounding, detention, appropriation, damage or destruction or
(insofar as the same relates to the operation or use of the Aircraft) the
Lessor to any criminal liability and without prejudice to the foregoing,
if any such penalty, forfeiture, impounding, detention or appropriation,
damage or destruction occurs, give Lessor notice and use best endeavors to
procure the immediate release of the Aircraft, any Engine or the Part, as
the case may be;
(g) not abandon the Aircraft, the Engine or any Part;
(h) pay and discharge or cause to be paid and discharged when due
and payable or make adequate provision by way of security or otherwise for
all debts, damages, claims and liabilities which have given or might give
rise
- ----------
* Add if applicable.
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to a Security Interest over or affecting the Aircraft, any Engine or any
Part; and
(i) not attempt, or hold itself out as having any power, to sell,
lease or otherwise dispose of the Aircraft, any Engine or any Part (except
as expressly permitted by Section 8.5).
8.8 General: Lessee will:
(a) not make any substantial change in the nature of the business in
which it is engaged, will preserve its corporate existence, and will
conduct its business in an orderly and efficient manner; and
(b) ensure that no change will occur in the Habitual Base of the
Aircraft without the prior written consent of Lessor.
8.9 Records: Lessee will:
(a) procure that accurate, complete and current records of all
flights made by, and all maintenance carried out on, the Aircraft
(including in relation to each Engine and Part subsequently installed,
before the installation) are kept; keep the records in such manner as the
FAA may from time to time require. The records will form part of the
Aircraft Documents; and
(b) procure access to a revision service in respect of, and will
maintain with appropriate revisions in English, all Aircraft Documents,
records, logs, and other materials required by applicable laws and best
practice of major international air transport operators in respect of the
Aircraft.
8.10 Protection: Lessee will:
(a) at its own cost and expense, shall cause the Aircraft at all
times to remain duly registered, at the FAA in the name of Lessor under
the laws of the United States. Lessee agrees that the Aircraft will not be
operated, serviced or repaired in violation of any Applicable Laws of any
government having jurisdiction with respect to the Aircraft; provided,
that Lessee shall not be in default under this sentence if it is not
possible for it to comply with the Laws of a jurisdiction other than the
United States because of a conflict with the Laws of the United States;
and
(b) do all acts and things (including, without limitation, making
any filing or registration with the FAA or any other Government Entity)
and executing and delivering all documents (including, without limitation,
any amendment of this Agreement) as may be reasonably required by Lessor.
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(i) at the expense of the Lessor, following any change or
proposed change in the ownership or financing of the Aircraft or in
the manner of securing the Lessor's obligations to the Financing
Parties; or
(ii) following any modification of the Aircraft, any Engine or
any Part or the permanent replacement of any Engine or Part in
accordance with this Agreement, so as to ensure that the rights of
Lessor as owner of the Aircraft and under this Agreement and the
rights of any Financing Party under any Mortgage or Security
Assignment in respect thereof apply with the same effect as before;
or
(iii) to establish, maintain, preserve, perfect and protect
the rights of Lessor under this Agreement or the interest of Lessor
as owner of the Aircraft and, at the expense of Lessor, of any
Financing Party under any Mortgage or Security Assignment.
8.11 Maintenance and Repair: Lessee will:
(a) keep the Aircraft airworthy in all respects and keep the
Aircraft, the Airframe, each Engine and each Part in good repair,
operating condition, physical condition and appearance;
(b) not change the Agreed Maintenance Program or the schedule of the
Agreed Maintenance Program without the approval of the FAA;
(c) maintain the Aircraft in accordance with the Agreed Maintenance
Program through (i) in the case of all C-Checks and Major Checks, the
Agreed Maintenance Performer and (ii) in the case of all other
maintenance, a maintenance performer approved by the FAA, and perform (at
the respective intervals provided in the Agreed Maintenance Program) all
Major Checks;
(d) maintain the Aircraft in accordance with applicable laws and any
rules and regulations of the FAA as may be applicable to passenger
category aircraft;
(e) subject to the terms of Section 8.19, comply with all mandatory
inspection and modification requirements, airworthiness directives and
similar requirements applicable to the Aircraft, any Engine or Part (i)
issued prior to the commencement of the Term and having a compliance date
no earlier than 91 days after the commencement of the Term and no later
than 90 days after the end of the Term or (ii) issued during the Term and
having a compliance date no later than 90 days after the end of the Term,
in accordance with the terms thereof and which are required by the FAA
and/or recommended by any manufacturer of the Aircraft, any Engine or
Part;
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(f) comply with all applicable laws and the regulations of the FAA
and other aviation authorities with jurisdiction over Lessee or the
Aircraft, any Engine or Part regardless of upon whom such requirements are
imposed and which relate to the maintenance, condition, use or operation
of the Aircraft, or which require any modification or alteration to the
Aircraft, any Engine or Part (i) if issued prior to the commencement of
the Term, having a compliance date no earlier than 91 days after the
commencement of the Term and no later than 90 days after the end of the
Term or (ii) if issued during the Term, having a compliance date no later
than 90 days after the end of the Term;
(g) maintain in good standing a current certificate of airworthiness
(in the appropriate category for the nature of the operations of the
Aircraft) for the Aircraft issued by the FAA except where the Aircraft is
undergoing maintenance, modification or repair required or permitted by
this Agreement and will from time to time provide to Lessor a copy on
request;
(h) if required by the FAA, maintain a current certification as to
maintenance issued by or on behalf of the FAA in respect of the Aircraft
and will from time to time provide to Lessor a copy on request;
(i) subject to the terms of Section 11 below, procure promptly the
replacement of any Part which has become time, cycle or calendar expired,
lost, stolen, seized, confiscated, destroyed, damaged beyond repair,
unserviceable or permanently rendered unfit for use, with an engine or
part complying with the conditions set out in Section 8.13(a); and
(j) keep the Aircraft maintained in the same manner and with the
same care and diligence and to the same standards as used by Lessee with
respect to other similar aircraft owned or operated by Lessee.
8.12 Removal of Engines and Parts: Lessee will ensure that no
Engine or Part installed on the Aircraft is at any time removed from the
Aircraft other than:
(a) if replaced as expressly permitted by this Agreement; or
(b) if the removal is of an obsolete item and is in accordance with
the Agreed Maintenance Program; or
(c) (i) during the course of maintaining, servicing, repairing,
overhauling or testing that Engine or the Aircraft, as the case may be; or
(ii) as part of a normal engine or part rotation program; or
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(iii) for the purpose of making such modifications to the
Engine or the Aircraft, as the case may be, as are permitted under
this Agreement;
and then in each case only if it is reinstalled or replaced by an engine
or part complying with Section 8.13(a) as soon as practicable and in any
event no later than the termination date of this Agreement pursuant to the
terms hereof.
8.13 Installation of Engines and Parts: Lessee will:
(a) ensure that, except as permitted by this Agreement, no engine or
part is installed on the Aircraft unless:
(i) in the case of an engine, it is an engine of the same
model as, or an improved or advanced version of the Engine it
replaces, which is in the same or better operating condition, has
substantially similar hours available until the next scheduled
checks, inspections, overhauls and shop visits and has the same or
greater value and utility as the replaced Engine and is capable of
operation on the Airframe and with the other Engines thereon;
(ii) in the case of a part, it is in as good operating
condition, has substantially similar hours available until the next
scheduled checks, inspections, overhauls and shop visits, is of the
same or a more advanced make and model and is of the same
interchangeable modification status as the replaced Part;
(iii) in each case, it has become and remains the property of
Lessor free from Security Interests and on installation on the
Aircraft will without further act be subject to this Agreement and
any Mortgage; and
(iv) in each case, Lessee has full details as to its source
and maintenance records;
(b) if no Event of Default has occurred which is continuing, be
entitled to install any engine or part on the Aircraft by way of temporary
replacement notwithstanding Section 8.13(a) if:
(i) there is not available to Lessee at the time and in the
place that 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 8.13(a);
(ii) it would result in an unreasonable disruption of the
operation of the Aircraft and/or the business of Lessee to ground
the Aircraft until an engine or part, as the case may be, complying
with Section 8.13 (a) becomes available for installation on the
Aircraft; and
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(iii) as soon as practicable after installation of the same on
the Aircraft but, in any event, no later than the termination of
this Agreement in accordance with the terms hereof, Lessee removes
any such engine or part and replaces it with the Engine or Part
replaced by it or by an engine or part, as the case may be,
complying with Section 8.13(a); provided that if (i) the Engine to
be replaced by such proposed temporary replacement engine has more
hours available to its next scheduled overhaul than such proposed
temporary replacement engine and (ii) the Engine to be replaced will
at any time not be located in United States (or any other country
approved by Lessor) during such temporary replacement period, Lessee
shall pay Lessor a special maintenance reserve (the "Special
Maintenance Reserve") equal to the product of (A) $85 and (B) the
number of such excess hours. Upon the replacement of such
replacement engine with the Engine replaced by it or by an engine
complying with Section 8.13(a), Lessor shall pay to Lessee the
Special Maintenance Reserve. The Special Maintenance Reserve shall
secure Lessee's obligations under this Section 8.13(b) as well as
its obligations to maintain the Engines in accordance with Section
8.11 hereof.
8.14 Non-installed Engines and Parts: Lessee will:
(a) ensure that any Engine or Part which is not installed on the
Aircraft (or any other aircraft as permitted by this Agreement) is, except
as expressly permitted by this Agreement, properly and safely stored, and
kept free from Security Interests and is not installed on any aircraft
other than the Aircraft; and
(b) notify Lessor whenever any Engine is removed from the Aircraft
and, from time to time, on request procure that any person to whom
possession of an Engine is given acknowledges in writing to Lessor, in
form and substance satisfactory to Lessor, that it will respect the
interests of any Financing Party as mortgagee and Lessor as owner and
lessor of the Engine and will not seek to exercise any rights whatsoever
in relation to it.
8.15 Pooling and Installation of Parts on Other Aircraft:
(a) Provided no Event of Default shall have occurred and be
continuing, Lessee may subject any Part (other than a complete or
substantially complete APU or Landing Gear) to normal interchange or
pooling agreements or similar arrangements in each case customary in the
airline industry with (i) Northwest Airlines; (ii) United Airlines; or
(iii) America West Airlines (or with any other Certificated Air Carrier
approved by Lessor, which approval shall not be unreasonably withheld)
provided that (x) no such agreement
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or arrangement results in or requires the transfer of title to such Part;
and (y) the other party to the agreement or arrangement shall have entered
into an agreement with Lessor and each Financing Party pursuant to which
such other party agrees to recognize and respect the rights and interests
of Lessor and the Financing Parties in such Part; and
(b) Lessee shall be permitted, provided no Event of Default shall
have occurred and be continuing, to install any Part (other than a
complete or substantially complete APU or Landing Gear) on an aircraft or
engine:
(i) owned and operated by Lessee free from Security Interests;
or
(ii) leased or hired to Lessee pursuant to a lease or
conditional sale agreement on a long-term basis and on terms whereby
Lessee has full operational control of that aircraft or engine;
provided that in the case of (ii):
(1) the terms of any such lease or conditional sale agreement will
not have the effect of prejudicing the interests of any
Financing Party or Lessor; and
(2) Lessor under such lease or the seller under such conditional
sale agreement, as the case may be, has confirmed and
acknowledged in such lease, conditional sale agreement or
other document that it will not acquire, as against any
Financing Party or Lessor, any right, title or interest in
such Part and the terms of such lease, conditional sale
agreement or other document shall not have the effect that
such Part will cease to be subject to the respective rights of
any Financing Party or Lessor.
8.16 Equipment Changes:
(a) Lessee will not make any modification or addition to the
Aircraft (each an "Equipment Change"), except for an Equipment Change
which:
(i) is expressly permitted by this Agreement, or
(ii) has the prior written approval of Lessor and which does
not diminish the value, utility, condition, or airworthiness of the
Aircraft; and
(b) Unless an Event of Default has occurred and is continuing,
Lessee may remove any Equipment Change if it can be removed from the
Aircraft without diminishing or im-
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pairing the value, utility, condition or airworthiness of the Aircraft.
8.17 Title on an Equipment Change:
(a) Title to all Engines and Parts installed on the Aircraft whether
by way of replacement, as the result of an Equipment Change or otherwise
will, on installation, without further act, vest in Lessor subject to this
Agreement and any Mortgage free and clear of all Security Interests.
Lessee will at its own expense take all such steps and execute, and
procure the execution of, all such instruments as Lessor may require and
which are necessary to ensure that title so passes to Lessor according to
all applicable laws. At any time when reasonably requested by Lessor,
Lessee will provide evidence to Lessor's satisfaction (including the
provision, if required, to Lessor of one or more legal opinions) that
title has so passed to Lessor; and
(b) Except as referred to in Section 8.16(b) any Engine or Part at
any time removed from the Aircraft will remain the property of Lessor
until a replacement has been made in accordance with this Agreement and
until title in that replacement has passed, according to applicable laws,
to Lessor subject to this Agreement and any Mortgage free of all Security
Interests whereupon title to the replaced Engine or Part, will, provided
no Event of Default has occurred and is continuing, pass to Lessee.
8.18 Third Party: Lessee will use its best efforts to procure that
no person (other than Lessor or any Financing Party) will act in any manner
inconsistent with its obligations under this Agreement and that all persons will
comply with those obligations as if references to "Lessee" included a separate
reference to those persons.
8.19 Mandatory Modifications: In the event the FAA, or other
governmental authority issues a mandatory airworthiness directive (i) prior to
the commencement of the Term, having a mandatory effective date no earlier than
91 days after the commencement of the Term and no later than 90 days after the
end of the Term or (ii) during the Term, having a mandatory effective date no
later than 90 days after the end of the Term, and which requires that Airbus
Model A320-231 Aircraft or IAE V2500-A1 engines or any Part be modified or
altered, or in the event the Manufacturer of such aircraft or the manufacturer
of engines or Parts issues a mandatory service bulletin (i) prior to the
commencement of the Term, having a mandatory effective date no earlier than 91
days after the commencement of the Term and no later than 90 days after the end
of the Term or (ii) during the Term, having a mandatory effective date no later
than 90 days after the end of the Term, and which requires such aircraft or
engines or Parts to be modified or altered, Lessee shall cause such modification
or alteration to be duly performed and, provided no Default or Event of Default
shall have occurred and
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be continuing, Lessor shall reimburse Lessee semi-annually within 10 days after
the end of each six month period following the Delivery Date, the end of the
Term and the date six months after the end of the Term, with respect to each
such modification or alteration performed by Lessee hereunder since the
immediately preceding anniversary of the Delivery Date (or since the Delivery
Date if there has been no such anniversary), such reimbursement to be in an
amount equal to the aggregate of "Lessor's Share" (as hereinafter defined) of
the portion of the kit cost and direct labor costs (such direct labor costs to
be determined by multiplying the number of man-hours of labor recommended in
such airworthiness directive or mandatory service bulletin, as the case may be,
for implementing or effecting such modification or alteration times Lessee's
actual per hour cost in the case of work performed by any third party
maintenance performer and Lessee's then current per-hour cost of labor, not to
exceed $50 per man-hour in the case of work performed by Lessee) associated with
each such modification or alteration in excess of $25,000 (hereinafter referred
to as the "Amortized Cost" of an item of Equipment), provided if the Term has
ended and the Lessor has physical possession of the Aircraft, Lessor may cause
such modification or alteration to be duly performed and Lessee shall reimburse
Lessor for the cost of such modification or alteration minus any amount of such
cost that Lessor would have been required to reimburse Lessee in accordance with
this provision had Lessee incurred such cost.
"Lessor's Share" for an item of Equipment shall be the sum remaining
after subtracting from the Amortized Cost of an item of Equipment the amount
determined by multiplying the Amortized Cost of an item of Equipment times a
fraction of which the numerator is the number of months from and including the
month in which the airworthiness directive or mandatory service bulletin is
issued for such item of Equipment to and including the month in which the fourth
anniversary of the Delivery Date occurs and the denominator is 216.
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Example
For an airworthiness directive with a combined kit cost and labor cost of
$250,000 issued during the 24th month of a 48 month lease:
Amortized Cost = (250,000 - 25,000) = $225,000
Lessor's Share = (Amortized Cost) minus
(Amortized Cost) x Remaining Lease Months
----------------------
216
= $225,000 - (225,000 x 25)
--
216
= $225,000 - $26,041.65
= $198,958.35
In the event that the Term hereof ends prior to the fourth anniversary of the
Delivery Date, the "Lessor's Share" shall be recalculated using the methodology
provided above but using the actual number of months between the month in which
the applicable airworthiness directive or mandatory service bulletin was issued
and the month in which the Term hereof actually ends, and Lessor shall pay to
Lessee on demand the amount by which the amount of the Lessor's Share as so
recalculated exceeds the amount of the Lessor's Share as originally calculated.
Example
If the Lease actually ended after 36 months, the adjustment for the
airworthiness directive described in the previous example would be calculated as
follows:
(Amortized Cost) x Remaining Lease Months
(using actual Lease Term)
-------------------------
216
= $225,000 - (225,000 x 13)
--
216
= $225,000 - $13,541.65
= $211,458.35 Recalculated Lessor's Share
Reimbursement Adjustment = Recalculated Lessor's Share -
originally calculated Lessor's Share
= $211,458.35 - $198,958.35
= $ 12,500 additional reimbursement due from Lessor
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Anything in the Agreement to the contrary notwithstanding, Lessee
shall not be required to perform any modification or alteration to the Aircraft
otherwise required to be performed pursuant to any rule, law, regulation, order,
certificate, license or registration issued by the FAA or any other governmental
authority, if and to the extent that the aggregate cost of all such
modifications and/or alterations to the Aircraft performed by Lessee exceeds or
would exceed $350,000.
9. INSURANCE
9.1 Insurances: Lessee will maintain in full force during the Term
insurances in respect of the Aircraft in form and substance satisfactory to
Lessor (the "Insurances" which expression includes, where the context so admits,
any relevant re-insurance(s)) through such brokers and with such insurers and
having such deductibles and being subject to such exclusions as may be approved
by Lessor. The Insurances will be effected either:
(a) on a direct basis with insurers of recognized standing who
normally participate in aviation insurances in the leading international
insurance markets and led by reputable underwriter(s) approved by Lessor;
or
(b) with a single insurer or group of insurers approved by Lessor
who does not retain the risk but effects substantial reinsurance with
reinsurers in the leading international insurance markets and through
brokers each of recognized standing and acceptable to Lessor for a
percentage acceptable to Lessor of all risks insured (the "Reinsurances").
9.2 Requirements: Lessor's current requirements as to required
Insurances are as specified in this Section and in Schedule 4. If at any time
Lessor wishes to stipulate other requirements for the Insurances so that the
scope and level of cover is maintained in line with industry practice for
comparable airlines in the United States and the interests of Lessor and the
Financing Parties protected, it and/or its brokers will consult with Lessee and
Lessee's brokers regarding whether such other requirements are in line with
industry practice for comparable airlines in the United States. If, following
the consultation, Lessor considers that such other requirement should be
satisfied by Lessee (and provides a reasonable written explanation to Lessee for
such other requirements), Lessee will then satisfy such other requirements.
9.3 Change: If at any time Lessor wishes to revoke its approval of
any insurer, reinsurer, insurance or reinsurance, Lessor and/or its brokers will
consult with Lessee and Lessee's brokers (as for the time being approved by
Lessor) regarding whether that approval should be revoked to protect the
interests of the parties insured. If, following the consultation, Lessor
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considers that any change should be made (and provides a reasonable written
explanation to Lessee for such change), Lessee will then arrange or procure the
arrangement of alternative cover satisfactory to Lessor.
9.4. Insurance Covenants: Lessee will:
(a) ensure that all legal requirements as to insurance of the
Aircraft, any Engine or any Part which may from time to time be imposed by
the laws of the United States of America or any state to, from or over
which the Aircraft may be flown, in so far as they affect or concern the
operation of the Aircraft, are complied with and in particular those
requirements compliance with which is necessary to ensure that (i) the
Aircraft is not in danger of detention or forfeiture, (ii) the Insurances
remain valid and in full force and effect, and (iii) the interests of the
Indemnitees in the Insurances and the Aircraft or any Part are not thereby
prejudiced;
(b) not use, cause or permit the Aircraft, any Engine or any Part to
be used for any purpose or in any manner not covered by the Insurances or
outside any geographical limit imposed by the Insurances;
(c) comply with the terms and conditions of each policy of the
Insurances and not do, consent or agree to any act or omission which:
(i) invalidates or may invalidate the Insurances; or
(ii) renders or may render void or voidable the whole or any
part of any of the Insurances; or
(iii) brings any particular liability within the scope of an
exclusion or exception to the Insurances;
(d) not take out any insurance or reinsurance in respect of the
Aircraft other than those required under this Agreement if such insurance
or reinsurance adversely affects the insurance or reinsurance required
under this Agreement;
(e) commence renewal procedures at least 30 days prior to expiry of
any of the Insurances and provide to Lessor:
(i) if requested by Lessor, a written status report of renewal
negotiation 14 days prior to each expiry date;
(ii) telexed confirmation of completion of renewal prior to
each expiry date;
(iii) certificates of insurance (and where appropriate
certificates of reinsurance), and broker's and
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any reinsurance brokers') letter of undertaking, detailing the
coverage and confirming the insurers' (and any reinsurer's)
agreement to the specified insurance requirements of this Agreement,
within 7 days after each renewal date;
(f) on request, provide to Lessor copies of documents evidencing the
Insurances;
(g) on request, provide to Lessor evidence that the Insurance
premiums have been paid;
(h) not make any modification or alteration to the Insurances
material and adverse to the interests of any of the Indemnitees;
(i) be responsible for any deductible under the Insurances; and
(j) provide any other insurance and reinsurance related information,
or assistance, in respect of the Insurances as Lessor may reasonably
require.
9.5 Failure to Insure: If Lessee fails to maintain the Insurances in
compliance with this Agreement, each of the Indemnitees will be entitled but not
bound (without prejudice to any other rights of Lessor under this Agreement):
(a) to pay the premiums due or to effect and maintain insurances
satisfactory to it or otherwise remedy Lessee's failure in such manner
(including, without limitation to effect and maintain an "owner's
interest" policy) as it considers appropriate. Any sums so expended by it
will become immediately due and payable by Lessee to Lessor together with
interest thereon at the rate specified in Section 5.10, from the date of
expenditure by it up to the date of reimbursement by Lessee; and
(b) at any time while such failure is continuing to require the
Aircraft to remain at any airport or to proceed to and remain at any
airport designated by it until the failure is remedied to its
satisfaction.
9.6 Continuing Indemnity: Lessor may require Lessee to effect and to
maintain insurance after the end of the Term with respect to its liability under
the indemnities in Section 10 for such period as Lessor may reasonably require
(but in any event not more than 3 years) which provides for each Indemnitee to
be named as additional insured. Lessee's obligation in this Section shall not be
affected by Lessee ceasing to be lessee of the Aircraft and/or any of the
Indemnitees ceasing to have any interest in respect of the Aircraft.
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9.7 Application of Insurance Proceeds:
As between Lessor and Lessee:
(a) all insurance payments received as the result of an Event of
Loss occurring during the Term will be paid to Lessor and Lessor will pay
the balance of those amounts to Lessee after deduction of all amounts
which may be or become payable by Lessee to Lessor under this Agreement
(including under Section 11.1(b));
(b) all insurance proceeds of any property, damage or loss to the
Aircraft, any Engine or any Part occurring during the Term not
constituting an Event of Loss and in excess of the Damage Notification
Threshold will be paid to Lessor and applied in payment (or to promptly
reimburse Lessee) for repairs or replacement property upon Lessor being
satisfied that the repairs or replacement have been effected in accordance
with this Agreement. Insurance proceeds in amounts below the Damage
Notification Threshold may be paid by the insurer directly to Lessee;
(c) all insurance proceeds in respect of third party liability will,
except to the extent paid by the insurers to the relevant third party, be
paid to Lessor to be paid directly in satisfaction of the relevant
liability or to Lessee in reimbursement of any payment so made;
(d) notwithstanding Section 9.7(a), (b) or (c), if at the time of
the payment of any such insurance proceeds a Default has occurred and is
continuing, all such proceeds will be paid to or retained by Lessor to be
applied toward payment of any amounts which may be or become payable by
Lessee in such order as Lessor sees fit or as Lessor may elect.
10. INDEMNITY
10.1 General: Lessee agrees to defend, indemnify and hold harmless
the Indemnitees from and against any and all claims, proceedings, losses,
liabilities, suits, judgments, costs, expenses, penalties or fines (each a
"Claim") (regardless of when the same is made or incurred, whether during or
after the Term (but not before)):
(a) which may at any time be suffered or incurred directly or
indirectly as a result of or connected with the possession, performance,
management, ownership, (to the extent attributable to acts of Lessee)
registration, control, maintenance, condition, service, repair, overhaul,
subleasing, use, operation or return of the Aircraft, any Engine or Part
(either in the air or on the ground) whether or not the Claim may be
attributable to any defect in the Aircraft, any Engine or any Part or to
its testing or use
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otherwise, and regardless of when the same arises or whether it arises out
of or is attributable to any act or omission or otherwise, of any
Indemnitee; and
(b) which arise out of any act or omission which invalidates or
which renders voidable any of the Insurances;
provided that the foregoing indemnity shall not apply to:
(i) any Claim in relation to a particular Indemnitee to the extent
that Claim is covered pursuant to another indemnity provision of this
Agreement;
(ii) any Claim in relation to a particular Indemnitee to the extent
it arises solely as a result of an act or omission which constitutes the
gross negligence or willful misconduct of such Indemnitee;
(iii) any Claim in relation to a particular Indemnitee to the
extent arising solely as a result of a breach by such Indemnitee of any of
its express obligations under the terms of this Agreement;
(iv) any Tax; or
(v) acts or events that occur prior to the date hereof or after the
return of physical possession of Aircraft to Lessor in accordance with the
terms of this Agreement (unless a Default shall have occurred and be
continuing)
10.2 Claim Procedure: If a claim is made against an Indemnitee
involving one or more Claims and such Indemnitee has notice thereof, such
Indemnitee shall promptly, upon receiving such notice, give notice of such claim
to Lessee; provided that the failure to provide such notice shall not release
Lessee from any of its obligations to indemnify hereunder (except to the extent
that Lessee is precluded from conducting a meritorious contest of such Claim as
a result of such failure). Lessee shall be entitled, at its sole cost and
expense, acting through counsel reasonably acceptable to the respective
Indemnitee (consent not to be unreasonably withheld or delayed):
(1) in any judicial or administrative proceeding that involves
only one Claim, to assume responsibility for and control thereof;
(2) in any judicial or administrative proceeding involving a
Claim and other claims related or unrelated to the transactions
contemplated by this Agreement, to assume responsibility for and
control of such Claim to the extent that the same be and is severed
from such other claims; and
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(3) in any other case, to be consulted by such Indemnitee with
respect to judicial proceedings subject to the control of such
Indemnitee and to be allowed, at the Lessee's sole expense, as the
case may be, to participate therein to the extent such participation
would not prejudice such Indemnitee's conduct of such proceedings,
as reasonably determined by such Indemnitee.
Notwithstanding the foregoing, Lessee shall not be entitled to assume
responsibility for or control of any such judicial or administrative proceedings
with respect to a Claim, (I) unless the Lessee has acknowledged responsibility
under this Section 11 for such Claim hereunder, (II) while an Event of Default
hereunder shall have occurred and be continuing, or (III) if such proceedings
will involve any material danger of the sale, forfeiture or loss of, or the
creation of any Lien (other than a Permitted Lien) on the Aircraft or this
Agreement or any part thereof or any material risk of civil liability to such
Indemnitee for which such Indemnitee is not indemnified hereunder, or any risk
of criminal liability. The Indemnitee may participate at its own expense and
with its own counsel in any judicial proceeding controlled by Lessee pursuant to
the preceding provisions to the extent such participation would not prejudice
Lessee's conduct of such proceedings.
10.3 Mitigation and Settlement: If Lessee has expressly acknowledged
responsibility under this Section 10 for the relevant Claim, Indemnitee shall
take such actions to mitigate such Claim as reasonably requested by Lessee
unless such mitigation would materially adversely effect such Indemnitee. Such
Indemnitee shall not enter into a settlement or other compromise with respect to
any Claim without the prior written consent of Lessee, which consent shall not
be unreasonably withheld or delayed, unless such Indemnitee waives its right to
be indemnified under this Section 11 with respect to such Claim.
10.4 Duration: The indemnities contained in this Agreement will
continue in full force after the termination of this Agreement.
11. EVENTS OF LOSS
11.1 (a) Pre-delivery: If an Event of Loss occurs with respect to
the Aircraft prior to delivery of the Aircraft to, and the acceptance of
the Aircraft by, Lessee on the Delivery Date, this Agreement will
terminate and except as expressly stated in this Agreement neither party
will have any further obligation or liability under this Agreement other
than pursuant to Section 16.8; and
(b) Post-delivery: (i) If an Event of Loss with respect to the
Aircraft occurs after delivery of the Aircraft to, and the acceptance of
the Aircraft by, Lessee
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on the Delivery Date, Lessee will pay the Agreed Value to Lessor on or
prior to the earlier of (1) 90 calendar days after the Event of Loss and
(2) the date of receipt of insurance proceeds in respect of that Event of
Loss. Subject to the rights of any insurers and reinsurers or other third
party, upon irrevocable payment in full to Lessor of that amount and all
other amounts which may be or become payable to Lessor under this
Agreement, Lessor will without recourse or warranty (except as to Lessor's
Liens) and without further act, be deemed to have transferred to Lessee
all of Lessor's rights to any Engines and Parts not installed when the
Event of Loss occurred, all on an as-is where-is basis, and will at
Lessee's expense, execute and deliver such bills of sale and other
documents and instruments as Lessee may reasonably request to evidence (on
the public record or otherwise) the transfer and the vesting of Lessor's
rights in such Engines and Parts in Lessee, free and clear of all rights
of Lessor and Lessor Liens.
(ii) If an Event of Loss with respect to an Engine occurs after
delivery of the Aircraft to, and acceptance of the Aircraft by, Lessee on
the Delivery Date, Lessee shall within 90 calendar days of such Event of
Loss (and provided that Lessor has made available to Lessee any insurance
proceeds received by Lessor in respect of such Engine which Lessor is then
required to pay to Lessee hereunder) (A) replace such Engine with an
engine of the same model as, or an improved or advanced version of the
Engine it replaces, which is in the same or better operating condition,
has substantially similar hours available until the next scheduled checks,
inspections, overhauls and shop visits and has the same or greater value
and utility as the replaced Engine (in each case, immediately prior to
such Event of Loss) and is capable of operation on the Airframe and with
the other Engines thereon, (B) convey or cause to be conveyed to Lessor
title to such engine free from Security Interests and on installation on
the Aircraft, such engine will without further act be subject to this
Agreement and any Mortgage, (C) furnish Lessor with evidence of Lessor's
title with respect of such replacement engine in form and substance
satisfactory to Lessor and (D) take such other actions and provide such
other documents as Lessor reasonably requests in order that title to such
replacement engine is duly and properly vested in Lessor, leased hereunder
and subject to any Mortgage. 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 to the same extent as was the Engine replaced thereby. If a
proposed replacement engine under this clause (ii) satisfies all the
requirements of the preceding sentence other that the requirement that the
replacement engine have substantially similar hours available until the
next scheduled overhaul, such proposed replacement engine will be deemed
to satisfy such requirement if Lessee pays to Lessor Maintenance Reserves
in an
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amount equal to the product of (i) $85, and (ii) the excess of such hours
available for the Engine subject to such Event of Loss (immediately prior
to such Event of Loss) over such hours available for the proposed
replacement engine. If a replacement engine under this clause (ii) shall
have more scheduled hours available until the next scheduled overhaul than
the Engine subject to the Event of Loss, Lessor shall pay to Lessee
Maintenance Reserves, to the extent available, in an amount equal to the
product of (i) $85 and (ii) the excess of such hours available for the
replacement engine over such hours available for the Engine subject to
such Event of Loss. If the Flight Hour to Cycle ratio for the proposed
replacement engine has averaged below 1.8:1 since the last scheduled check
the Maintenance Reserves shall be increased by an amount equal to the
product of (i) $55, and (ii) C-(F/1.8), where C equals the number of
cycles since the last scheduled check and F equals the number of Flight
Hours since the last scheduled check.
For the avoidance of doubt, the risk of loss of, or damage to, the
Aircraft shall be assumed by Lessee upon the delivery of the Aircraft to
Lessee on the Delivery Date.
11.2 Requisition: During any requisition for use or hire of the
Aircraft, any Engine or Part which does not constitute an Event of Loss:
(a) the Rent and other charges payable under this Agreement will not
be suspended or abated either in whole or in part, and Lessee will not be
released from any of its other obligations under the Agreement (other than
operational obligations with which Lessee is unable to comply solely by
virtue of the requisition);
(b) so long as no Default has occurred and is continuing, Lessee
will be entitled to any rent paid by the requisitioning authority in
respect of the Term. Lessee will, as soon as practicable after the end of
any such requisition, cause the Aircraft to be put into the condition
required by this Agreement. Lessor will be entitled to all compensation
payable by the requisitioning authority in respect of any change in the
structure, state or condition of the Aircraft arising during the period of
requisition, and Lessor will promptly apply such compensation in
reimbursing Lessee for the cost of complying with its obligations under
this Agreement in respect of any such change, but so that, if any Default
has occurred and is continuing, Lessor may apply the compensation or hire
in or towards settlement of any amounts owing by Lessee under this
Agreement.
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12. RETURN OF AIRCRAFT
12.1 Return: On the termination of the leasing of the Aircraft under
this Agreement Lessee will, unless an Event of Loss has occurred, at its
expense, redeliver the Aircraft and Aircraft Documents to Lessor at the
Redelivery Location, in a condition complying with Schedule 3 and no later than
5 days after the completion of a scheduled check (C-Check), free and clear of
all Security Interests and Permitted Liens (other than Lessor Liens) and
thereupon, upon request of Lessor, cause this Agreement to be terminated for FAA
purposes.
12.2 Final Inspection: Immediately prior to redelivery of the
Aircraft, Lessee will make the Aircraft available to Lessor for inspection
("Final Inspection") in order to verify that the condition of the Aircraft
complies with this Agreement. The Final Inspection will be long enough to permit
Lessor to:
(a) inspect the Aircraft Documents;
(b) inspect the Aircraft and uninstalled Parts;
(c) inspect the Engines, including without limitation (i) a
boroscope inspection of (A) the low pressure and high pressure compressors
and (B) turbine area and (ii) engine condition; and
(d) carry out a 2 hour Acceptance Flight (as described in the Airbus
Customer Acceptance Manual) with up to three Lessor appointed
representatives on board as observers.
12.3 Non-compliance: To the extent that, at the time of Final
Inspection, the condition of the Aircraft does not comply with this Agreement,
Lessee will at Lessor's Option:
(a) immediately rectify the non-compliance and to the extent the
non-compliance extends beyond the termination of this Agreement, the Term
will be automatically extended and this Agreement will remain in force
until the non-compliance has been rectified, provided that, so long as
Lessee is not flying the Aircraft (other than to rectify the noncompliance
or the ferry flight in accordance with Section 12.8 hereof), no additional
rent is payable; or
(b) redeliver the Aircraft to Lessor and indemnify Lessor, and
provide to Lessor's satisfaction cash as security for that indemnity,
against the cost of putting the Aircraft into the condition required by
this Agreement.
12.4 Redelivery: Upon redelivery Lessee will provide to Lessor all
documents necessary to export the Aircraft from the Habitual Base (including,
without limitation, a valid and subsisting export certificate of airworthiness
for the Aircraft and required to deregister the Aircraft from the FAA.
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12.5 Acknowledgement: Provided Lessee has complied with its
obligations under this Agreement, following redelivery of the Aircraft by Lessee
to Lessor at the Redelivery Location, Lessor will deliver to Lessee an
acknowledgment in the form of Schedule 7 hereto.
12.6 Maintenance Program:
(a) Prior to the termination of this Agreement and upon Lessor's
request, Lessee will provide Lessor or its agent reasonable access to the
Agreed Maintenance Program and the Aircraft Documents in order to
facilitate the Aircraft's integration into any subsequent operator's
fleet;
(b) Lessee will, if requested by Lessor to do so, upon return of the
Aircraft deliver to Lessor a certified true current and complete copy of
the Airbus Maintenance Planning Document and all Engineering Orders in
connection therewith.
12.7 Fuel and Oil: The Aircraft shall be delivered to Lessee and
redelivered to Lessor with a full tank of fuel and oil.
12.8 Ferry Flight: In connection with any return of the Aircraft
pursuant to this Section 12, Lessee will comply with any request made by Lessor
to the effect that Lessee shall cause the Aircraft to be ferried to the Ferry
Flight Location. All costs and expenses incurred in connection with such ferry
flight (including, without limitation, fuel, oil, airport and landing fees,
navigation fees, insurance and crew costs) shall be for the account of Lessee,
provided that if Lessor selects a Ferry Flight Location outside of the
continental United States of America, Lessor shall reimburse Lessee in an amount
equal to the excess, if any, of the cost incurred ferrying the Aircraft to such
Ferry Flight Location over $20,000. During the ferry flight and ending on
delivery of the Aircraft to Lessor at the Ferry Flight Location, this Lease
shall remain in full force and effect, except that (A) all return conditions
shall be required to be complied with only on the date of return of the Aircraft
at the Redelivery Location and (B) Lessee shall not be required to pay any
additional rent in respect of such ferry flight.
13. DEFAULT
13.l Event.: Each of the following events will constitute an Event
of Default and a repudiation of this Agreement by Lessee and each such event
shall continue to be an Event of Default so long as it shall not have been
remedied:
(a) Non-payment: Lessee fails to make any payment under this
Agreement within 5 days after the due date thereof; or
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(b) Insurance: Lessee fails to comply with any provision of Section
9 or any insurance required to be maintained under this Agreement is
canceled or terminated or notice of cancellation is given in respect of
any such insurance and, in the case of notice of cancellation, the same is
not replaced or renewed prior to such cancellation; or
(c) Breach: Lessee fails to comply with any other provision of this
Agreement in any material respect and, if such failure is in the
reasonable opinion of Lessor capable of remedy, the failure continues for
is days after notice from Lessor to Lessee; or
(d) Representation: any representation or warranty made (or deemed
to be repeated) by Lessee in or pursuant to this Agreement or in any
document or certificate or statement is or proves to have been incorrect
in any material respect when made or deemed to be repeated, and in the
case of any representation or warranty in any such document or certificate
or statement, such incorrectness has a material adverse effect on Lessee's
ability to satisfy any of its obligations under this Agreement; or
(e) Cross Default:
(i) If:
(A) any Financial Indebtedness of Lessee or any of its
Subsidiaries is not paid when due;
(B) any such Financial Indebtedness becomes due or
capable of being declared due prior to the date when it would
otherwise have become due;
(C) the security for any such Financial Indebtedness
becomes enforceable; or
(D) any event of default or termination event, howsoever
described, occurs under any lease, hire purchase, conditional
sale or credit sale agreement of Lessee or any of its
Subsidiaries that contemplates a lease, hire or sale or
property having a fair market value in excess of [***]; and
(ii) in addition to the occurrence and continuance of any
event described in clause (A), (B), (C) or (D) of Section 13.1(e)
(i) above, a Payment Default or a Default under Section 13.1(c)
(without giving effect to the grace period therein) in respect of
any covenant or agreement set forth in any of Sections 8.3 through
8.19, hereof shall have occurred and be continuing.
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(f) Approvals: any consent, authorization, license, certificate or
approval of or registration with or declaration to any Government Entity
in connection with this Agreement (including, without limitation):
(i) any authorization required by Lessee to obtain and
transfer freely Dollars (or any other relevant currency) out of any
relevant country; or
(ii) required by Lessee to authorize, or in connection with,
the execution, delivery, validity, enforceability or admissibility
in evidence of this Agreement or the performance by Lessee of its
obligations under this Agreement; or
(iii) the registration of the Aircraft;
(iv) the AOC or operating license of Lessee; and
(v) any other airline license or air transport license;
is modified or is withheld, or is revoked, suspended, canceled, withdrawn,
terminated or not renewed, or otherwise ceases to be in full force and,
except in the case of clause (iii) or (iv), such modification,
withholding, revocation, suspension, cancellation, withdrawal, termination
or non-renewal has a material adverse effect on Lessee's ability to
satisfy any of its obligations under this Agreement; provided that the
above provisions of this paragraph (f) shall not apply where the
certificate of airworthiness for all Airbus A320 aircraft is suspended or
revoked by the FAA; or
(g) Insolvent:
(i) Lessee or any of its Subsidiaries is, or is deemed for the
purposes of any Law to be, unable to pay its debts as they fall due
or to be insolvent, or admits its inability to pay its debts as they
fall due; or
(ii) Lessee or any of its Subsidiaries suspends making
payments on all of its debts or announces an intention to do so, or
a moratorium is declared in respect of any of its indebtedness; or
(h) Liquidation and Similar Proceedings: Lessee or any of its
Subsidiaries shall (i) apply for or consent to the appointment of, or the
taking of possession by, a receiver, custodian, trustee, examiner or
liquidator of itself or of all or a substantial part of its property, (ii)
make a general assignment for the benefit of its creditors, (iii) commence
a voluntary case under the Bankruptcy Code, (iv) file a petition seeking
to take advantage of any other law relating to bankruptcy, insolvency,
reorganization,
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liquidation, dissolution, arrangement or winding-up, or composition or
readjustment of debts, (v) fail to controvert in a timely and appropriate
manner, or acquiesce in writing to, any petition filed against it in an
involuntary case under the Bankruptcy Code or (vi) take any corporate
action for the purpose of effecting any of the foregoing; or
(i) Receiver: A proceeding or case shall be commenced, without the
application or consent of the Lessee or any of its Subsidiaries, in any
court of competent jurisdiction, seeking (i} its reorganization,
liquidation, dissolution, arrangement or winding-up, or the composition or
readjustment of its debts, (ii) the appointment of a receiver, custodian,
trustee, examiner, liquidator or the like of Lessee or such Subsidiary, as
the case may be, or of all or any substantial part of its property, or
(iii) similar relief in respect of Lessee or such Subsidiary, as the case
may be, under any law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or adjustment of debts and such proceeding or
case shall continue undismissed, or an order, judgment or decree approving
or ordering any of the foregoing shall be entered and continue unstayed
and in effect, for a period of 60 or more days; or an order for relief
against Lessee or any of its Subsidiaries shall be entered in an
involuntary case under the Bankruptcy Code; or
(j) Other Jurisdiction: there occurs in relation to Lessee or any of
its Subsidiaries any event anywhere (other than the United States) which,
in the reasonable opinion of Lessor, corresponds with any of those
mentioned in Section 13.1(g), (h) or (i); or
(k) Unlawful: it becomes unlawful for Lessee to perform any of its
obligations under this Agreement or this Agreement becomes wholly or
partly invalid or unenforceable; or
(1) Suspension of Business: Lessee or any of its Subsidiaries
suspends or ceases or threatens to suspend or cease to carry on all or a
substantial part of its business; or
(m) Disposal: Lessee or any of its Subsidiaries disposes or
threatens to dispose of all or a material part of its assets, whether by
one or a series of transactions, related or not, other than for the
purpose of a reconstruction or amalgamation the terms of which have
received the previous consent in writing of Lessor; or
(n) Rights: the existence, validity, enforceability or priority of
the rights of Lessor as owner and as lessor in respect of the Aircraft or
the rights of a Financing Party as mortgagee, assignee of this Agreement
under the
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Security Assignment are challenged by Lessee or any other person lawfully
claiming by or through Lessee; or
(o) Change of Ownership: any single person, or group of persons
acquire control of Lessee without the previous consent in writing of
Lessor (which consent shall not be unreasonably withheld; it being agreed
that any failure of Lessor to so consent due to Lessor's reasonable belief
that such acquisition will have an adverse effect on the credit quality of
Lessee shall be deemed reasonable); provided that the "public offering" of
any securities of Lessee shall not constitute an Event of Default if,
after giving effect to such "public offering", the ratio of the aggregate
Financial Indebtedness of Lessee and its Subsidiaries to the Net Worth of
the Lessee shall exceed 3:1; or
(p) Delivery: Lessee fails to accept delivery of the Aircraft when
validly tendered pursuant to this Agreement by Lessor; or
(q) Letter of Credit:
(i) the issuer of any Letter of Credit fails to make any
payment under such Letter of Credit when due; or
(ii) any Letter of Credit is not in full force or, for any
reason ceases to constitute the legal, valid and binding obligation
of the issuer; or
(iii) any of the events listed in sub-clauses 13.1(g), (h),
(i) or (j) apply to any issuer of a Letter of Credit (references in
those sub-clauses to Lessee being deemed to be to such issuer); or
(iv) where applicable, any Letter of Credit is not renewed
within the time required by Section 5.12(b);
provided that, in the case of any event described in clauses (i), (ii) or
(iii) above, such event shall not constitute an Event of Default until the
next Business Day after the occurrence of such event (and only if such
event has not been remedied by such next Business Day).
Notwithstanding the foregoing, Lessor agrees that any event
described in any of clauses (g), (h), (i), (j) or (1) of this Section 13.1 above
with respect to a Subsidiary of the Lessee only shall be deemed not to
constitute an Event of Default hereunder unless such event (i) has a material
adverse effect on Lessee's ability to satisfy any of its obligations under this
Agreement or (ii) has a material adverse effect on the financial condition of
Lessee.
Following the occurrence of a Default described in Section 13.1(k)
hereof, Lessor shall consult in good faith with
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Lessee as to any steps which may be taken to restructure the transaction to
avoid such unlawfulness. If Lessor or Lessee have not reached an agreement to
restructure the transaction within 30 days of the occurrence of such Default,
such Default shall mature into an Event of Default and Lessor then shall be
entitled to exercise remedies pursuant to this Section 13.
13.2 Rights: Upon the occurrence of an Event of Default under the
provisions of Section 13.1(g), (h) or (i) with respect to Lessee, this Agreement
and all Lessee's rights hereunder and in and to the Aircraft shall automatically
terminate, whereupon Lessee's right to possess and use the Aircraft shall
immediately cease. Upon the occurrence of any other Event of Default, and at any
time thereafter so long as the same shall be continuing, Lessor, may, at its
option, declare this Lease to be in default. At any time after automatic
termination of this Lease or after declaration by Lessor that this Lease is in
default, Lessor may, in addition to any other remedies provided by applicable
law (and without prejudice to any of its other rights under this Agreement),
exercise one or more of the following remedies as Lessor in its sole discretion
shall elect:
(a) accept such repudiation and by notice to Lessee and with
immediate effect terminate the letting of the Aircraft (but without
prejudice to the continuing obligations of Lessee under this Agreement)
whereupon all rights of Lessee under this Agreement shall cease; and/or
(b) proceed by appropriate court action or actions to enforce
performance of this Agreement or to recover damages for the breach of this
Agreement; and/or
(c) either:
(i) take possession of the Aircraft, for which purpose Lessor
may enter any premises belonging to or in the occupation of or under
the control of Lessee where the Aircraft may be located, or cause
the Aircraft to be redelivered to Lessor at such location as Lessor
may require, and Lessor is hereby irrevocably by way of security for
Lessee's obligations under this Agreement appointed attorney for
Lessee in causing the redelivery or in directing the pilots of
Lessee or other pilots to fly the Aircraft to that airport and will
have all the powers and authorizations necessary for taking that
action; or
(ii) by serving notice require Lessee to redeliver the
Aircraft to Lessor at the airport designated by Lessor..
13.3 Deregistration: If an Event of Default occurs, Lessor may sell
or otherwise deal with the Aircraft as if. this Agreement had never been made
and Lessee will at the request of Lessor take all steps necessary to effect (if
applicable) dereg-
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istration of the Aircraft and its export from the country where the Aircraft is
for the time being situated and any other steps necessary to enable the Aircraft
to be redelivered to Lessor in accordance with this Agreement; Lessee hereby
irrevocably and by way of security for its obligations under this Agreement
appoints Lessor as its attorney to execute and deliver any documentation and to
do any act or thing required in connection with the foregoing. Lessor agrees not
to use the Power of Attorney for any purpose unless an Event of Default shall
have occurred and be continuing.
13.4 Default Payments: If:
(a) an Event of Default occurs or a Default is continuing beyond the
end of Term; or
(b) the Aircraft is not delivered on the proposed Delivery Date by
reason of failure of Lessee to satisfy any conditions to that delivery
(unless such failure is due to the willful misconduct or negligence of
Lessor);
Lessee will indemnify Lessor on demand against any loss (including loss of
profit), damage, expense, cost or liability which Lessor may sustain or incur
directly or indirectly as a result including but not limited to:
(a) any loss of profit suffered by Lessor because of Lessor's
inability to place the Aircraft on lease with another lessee on terms as
favorable to Lessor as this Agreement or because whatever use, if any, to
which Lessor is able to put the Aircraft upon its return to Lessor, or the
funds arising upon a sale or other disposal of the Aircraft, is not as
profitable to Lessor as this Agreement; and
(b) any loss, cost, expense or liability sustained or incurred by
Lessor owing to Lessee's failure to redeliver the Aircraft on the date, at
the place and in the condition required by this Agreement, including
without limitation, if Lessor or Beneficiary had made, prior to the
scheduled redelivery of the Aircraft, binding arrangements for the release
or sale of the Aircraft upon or after the scheduled redelivery of the
Aircraft, any loss (including loss of profit), damage, expense, cost or
liability (a "Subsequent Arrangement Loss") which Lessor or Beneficiary
may sustain or incur directly arising out of any delay or termination of,
or any default under, such arrangements directly or indirectly as a result
of any such failure of Lessee to redeliver the Aircraft on the date, at
the place or in the condition required by this Agreement; provided that
Lessee will not be required to indemnify Lessor for any Subsequent
Arrangement Loss resulting from the failure of Lessee to redeliver the
Aircraft in the condition required by this Agreement if the Aircraft is in
the condition required by
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this Agreement no later than seven days after the end of the Term.
14. ASSIGNMENT
14.1 Lessee will not assign, or create or permit to exist any
Security Interest over, any of its rights under this Agreement.
(b) Lessee shall not consolidate with or merge into any other
corporation or other Person, and the Lessee shall not convey, transfer,
lease or otherwise dispose of all or substantially all of its property and
other assets, whether in one or a series of related transactions, unless,
(i) no Default shall have occurred and be continuing, and (ii) the Lessor
shall have provided its prior written consent to such merger, conveyance,
transfer, lease or other disposition and the Person formed by or surviving
such consolidation or merger or the Person which acquires by conveyance,
transfer, lease or other disposition all or a material portion of such
property and other assets or stock (the "Successor Entity")
(i) shall be a corporation organized and existing under the
laws of the United States or any state thereof or the District of
Columbia;
(ii) immediately after giving effect to such transaction,
shall succeed as Lessee hereunder and shall have acquired or
succeeded to all or substantially all of the property and other
assets (including, without limitation, all or substantially all of
the Lessee's property and other assets) as an entirety;
(iii) shall deliver to the Lessor, the Beneficiary and the
Financing Parties (A) an assignment agreement duly authorized and
executed by Lessee and the Successor Entity in form and substance
satisfactory to the Lessor, such agreement being the legal, valid,
binding and enforceable obligation of Successor Entity pursuant to
which the Successor Entity agrees to perform each covenant,
obligation, duty and condition of the Lessee under this Agreement,
and (B) such other agreements or certificates as the Lessor may deem
to be necessary or desirable, and (C) one or more legal opinions
addressed to the Lessor, the Beneficiary and the Financing Parties
of legal counsel or counsel(s) reasonably acceptable to each of the
Lessor, the. Beneficiary and the Financing Parties, opining to such
matters as the Lessor, the Beneficiary and the Financing Parties may
require in their absolute discretion; and
(iv) shall make any and all recordations and filings with any
Government Entity as the Lessor, the
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Beneficiary or the Financing Parties may deem to be necessary or
advisable;
; provided nothing in this Section 14.1 shall be construed to prohibit the
"initial public offering" of securities of Lessee.
14.2 (a) At any time during the Term, Lessor may sell, assign or
transfer all or any of its rights under this Agreement and in the
Aircraft; provided, however, that, the Lessor shall provide notice to
Lessee of such proposed sale, assignment or transfer no later than 7
calendar days prior to the proposed date of such sale, transfer or
assignment.
(b) Notwithstanding any sale, assignment or transfer by Lessor, the
original Lessor (the "Original Lessor") together with its successors and
assigns will remain entitled to the benefit of each indemnity under this
Agreement to the extent relating to events prior to such transfer. At
Lessor's cost, Lessee will comply with all reasonable requests of Lessor,
its successors and assigns in respect of any such sale, assignment or
transfer.
(c) If the Original Lessor sells, assigns or transfers its interest
in the Aircraft or this Lease to a person (together with any "Lessor"
hereunder from time to time other than the Original Lessor, the "New
Lessor"), during the period from the Delivery Date through the forth
anniversary of the Delivery Date, the New Lessor shall be entitled to no
greater indemnification for any loss, cost, expense and Tax incurred
during such period only under Sections 5.5, 5.6 or 10 hereof than Original
Lessor would have been entitled had such sale, assignment or transfer not
occurred. For the avoidance of doubt, the limitation on indemnity set
forth in the preceding sentence shall not be applicable after the fourth
anniversary of the Delivery Date.
(d) Lessor shall pay all costs and expenses of Lessee (including
reasonable legal fees and expenses) in connection with any sale,
assignment or transfer by Lessor under this Section 14.2 other than a
sale, assignment or transfer to Lessee.
14.3 If Lessor desires to effect a sale, assignment or transfer of
its rights and obligations under this Agreement, (i) Lessee agrees to cooperate
and take all such steps, at the expense of Lessor, as Lessor may reasonably
request to give the transferee the benefit of this Agreement, (ii) Lessor will
procure from the transferee and provide to Lessee a quiet enjoyment letter in
the form of Schedule B hereto and (iii) Lessor will transfer the Deposit, if
any, the Letter of Credit and all Maintenance Reserves to the transferee.
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15. ILLEGALITY
15.1 If it is or becomes unlawful (other than as an immediate
consequence of a sale, assignment or transfer by Lessor pursuant to Section 14.2
hereof) in any jurisdiction for Lessor to give effect to any of its obligations
as contemplated by this Agreement or to continue this Agreement Lessor may by
notice in writing to Lessee terminate the leasing of the Aircraft under this
Agreement and Lessee will forthwith redeliver the Aircraft to Lessor in
accordance with Section 12. Without prejudice to the foregoing Lessor will
consult in good faith with Lessee as to any steps which may be taken to
restructure the transaction to avoid that unlawfulness but will be under no
obligation to take any such steps.
16. MISCELLANEOUS
16.1 Waivers, Remedies Cumulative: The rights of Lessor under this
Agreement:
(i) may be exercised as often as necessary;
(ii) are cumulative and not exclusive of its rights under any
law; and
(iii) may be waived only in writing and specifically.
Delay in exercising or non-exercise of any such right will not constitute a
waiver of that right.
16.2 Delegation: Lessor may delegate to any person or persons all or
any of the trusts, powers or discretions vested in it by these presents and any
such delegation may be made upon such terms and conditions and subject to such
regulations (including power to sub-delegate) as Lessor in its absolute
discretion thinks fit.
16.3 Certificates: Save where expressly provided in this Agreement,
any certificate or determination by Lessor as to any rate of interest or as to
any other amount payable under this Agreement will, in the absence of manifest
error, be conclusive and binding on Lessee.
16.4 Appropriation: If any sum paid or recovered in respect of the
liabilities of Lessee under this Agreement is less than the amount then due,
Lessor may apply that sum to amounts due under this Agreement in such
proportions and order and generally in such manner as Lessor may determine.
16.5 Set-off: Lessor may set off any matured obligation owed by
Lessee under this Agreement or under any other agreement between Lessor or
Beneficiary and Lessee against any obligation (whether or not matured) owed by
Lessor to Lessee.
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regardless of the place of payment or currency. If the obligations are in
different currencies, Lessor may convert either obligation at the market rate of
exchange available at its option in London New York for the purpose of the
set-off. If an obligation is unascertained or unliquidated, Lessor may in good
faith estimate that obligation and set off in respect of the estimate, subject
to the relevant party accounting to the other when the obligation is ascertained
or liquidated. Lessor will not be obliged to pay any amounts to Lessee under
this Agreement so long as any sums which are then due from Lessee under this
Agreement or under any other agreement between Lessor or Beneficiary and Lessee
remain unpaid and any such amounts which would otherwise be due will fall due
only if and when Lessee has paid all such sums except to the extent Lessor
otherwise agrees or sets off such amounts against such payment pursuant to the
foregoing. At any time a Payment Default or Event of Default shall have occurred
and be continuing, Lessor may set off any obligation of Lessor to make any
payment in respect of Maintenance Reserves pursuant to Section 7.2 to any
obligation of the Lessee hereunder as the Lessor may determine. To the extent
that, in accordance with the preceding sentence, any obligation in respect of
Maintenance Reserves is set off against any obligation of the Lessee owing to
Lessor, Lessee shall, following a demand in writing from Lessor, pay such
additional amount. to Lessor so as to restore the relevant Maintenance Reserve
to the level at which it stood immediately prior to such set-off.
16.6 Severability: If a provision of this Agreement is or becomes
illegal, invalid or unenforceable in any jurisdiction, that will not affect:
(a) the legality, validity or enforceability in that jurisdiction of
any other provision of this Agreement; or
(b) the legality, validity or enforceability in any other
jurisdiction of that or any other provision of this Agreement.
16.7 Remedy: If Lessee fails to comply with any provision of this
Agreement, Lessor may, without being in any way obliged to do so or responsible
for so doing and without prejudice to the ability of Lessor to treat the
non-compliance as a Default or an Event of Default, effect compliance on behalf
of Lessee, whereupon Lessee shall become liable to pay immediately any sums
expended by Lessor together with all costs and expenses (including legal costs)
in connection therewith.
16.8 Expenses: Whether or not the Aircraft is delivered to Lessee
pursuant to this Agreement, each party hereto agrees to pay its own costs and
expenses (including legal, professional, and out-of-pocket expenses) incurred or
payable by such party in connection with the negotiation, preparation, and
execution of this Agreement and all such expenses related to any amendment to or
extension of or other documentation in connection with, or the granting of any
waiver or consent under this
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Agreement; provided that (i) if the Aircraft is not delivered pursuant to this
Agreement because of a Default or Event of Default by the Lessee or the failure
of the Lessee to satisfy any condition precedent set forth in Section 3 hereof
(other than the valid registration of the Aircraft under the laws of the United
States), then Lessee shall pay all such costs and expenses of itself, the Lessor
and the Beneficiary and (ii) if the Aircraft is not delivered pursuant to this
Agreement because of a default of the Lessor or the failure of the Lessor to
deliver and lease the Aircraft to Lessee after satisfaction of all of the
conditions precedent set forth in Section 3 hereof, then Lessor shall pay all
such costs and expenses of itself, the Lessee and the Beneficiary. The
prevailing party in any action or proceeding between Lessor and Lessee to
enforce the terms of this Lease shall be entitled to recover from the other
party all its costs and expenses, including reasonable attorneys' fees incurred
by such prevailing party in such action or proceeding.
All expenses payable pursuant to this Section 16.8 will be paid in the currency
in which they are incurred by Lessor or, if applicable, by Lessee or
Beneficiary.
16.9 Time of Essence: The time stipulated in this Agreement for all
payments payable by Lessee to Lessor and for the performance of Lessee's and
Lessor's other obligations under this Agreement will be of the essence of this
Agreement.
16.10 Notices: All notices under, or in connection with, this
Agreement will, unless otherwise stated, be given in writing by letter, telex,
facsimile or SITA. Any such notice is deemed effectively to be given as follows:
(i) if by letter, when delivered;
(ii) if by telex, when despatched, but only if, at the time of
transmission, the correct answerback appears at the start and at the
end of the sender's copy of the notice; and
(iii) if by facsimile or SITA, when transmitted and full
transmission has been separately notified by telephone by the
transmitting party.
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The address, facsimile and telephone number's of Lessee, Lessee's counsel,
Lessor and the Beneficiary are as follows (or as any such Person may otherwise
notify each other such Persons)
Lessee: Address: Midway Airlines Corporation
5713 South Central Avenue
Chicago, IL 60638
Attn: President
Facsimile: (312) 838-2069
Telephone: (312) 838-8100
(with a copy to Lessee's counsel)
Lessee's
counsel: Address: Jonathan Waller
Rosenberg & Liebentritt, PoC.
Two North Riverside Plaza
Chicago, Illinois 60606
Facsimile: (312) 454-0335
Telephone: (312) 466-3456
Lessor: Address: c/o Wilmington Trust Company
Rodney Square North,
1100 N. Market Street,
Wilmington,
DE 19890
Attn: Corporate Trust Department
Facsimile: (302) 651 8882
Telephone: (302) 651 1000
(with a copy to Beneficiary)
Beneficiary: Address: c/o Kawasaki Enterprises Inc.
Shuwa Shiba Park Building
2-4-1, Shibakoen, Minato-Ku
Tokyo 105
Japan
Attn: Mr. Tadao Tsukiyama
Facsimile: (81) (3) 3578 6089
Telephone: (81) (3) 3578 6015
16.11 Law and Jurisdiction:
(a) This Agreement is governed by the Governing Law;
(b) Each of Lessee and Lessor hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District
of New York and of any New York state court sitting in New York City for
the purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby;
(c) Each of Lessee and Lessor hereby irrevocably waives, to the
fullest extent permitted by applicable law, any objection which it may now
or hereafter have to the laying of the venue of any such proceeding
brought consis-
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tent with clause (b) above, and. any claim that any such proceeding has
been brought in an inconvenient forum;
(d) Nothing in this Section limits the right of Lessor to bring
proceedings against Lessee in connection with this Agreement:
(i) in any other court of competent jurisdiction; or
(ii) concurrently in more than one jurisdiction;
(e) Each of Lessee and Lessor irrevocably and unconditionally:
(i) agrees that if Lessee or Lessor, as the case may be,
brings legal proceedings against it or its assets in relation to
this Agreement no immunity from such legal proceedings (which will
be deemed to include without limitation, suit, attachment prior to
judgment, other attachment, the obtaining of judgment, execution or
other enforcement) will be claimed by or on behalf of itself or with
respect to its assets; and
(ii) waives any such right of immunity which it or its assets
now has or may in the future acquire;
16.l2 Sole and Entire Agreement: This Agreement and any related
side-letters are the sole and entire agreement between Lessor and Lessee in
relation to the leasing of the Aircraft, and supersede all previous agreements
in relation to that leasing.
16.13 Indemnities: All rights expressed to be granted to each
Indemnitee under this Agreement are given to Lessor on behalf of that
Indemnitee.
16.14 Counterparts: This Agreement may be executed in counterparts
each of which will constitute one and the same document.
16.15 Language: All notices to be given under this Agreement will be
in English. All documents delivered to Lessor pursuant to this Agreement will be
in English.
16.16 No Brokers: Each party agrees to indemnify and hold the other
harmless from and against any and all claims, suits, damages, costs and expenses
(including, but not limited to, reasonable attorneys' fees) asserted by any
agent, broker or other third party for any commission or compensation of any
nature whatsoever based upon the lease of the Aircraft, if such claim, suit,
damage, cost or expense arises out of any action or alleged action by the
indemnifying party, its employees or agents Each of Lessee and Lessor hereby
represents and warranties to the other that it has not paid, agreed to pay or
caused to be
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paid directly or indirectly in any form, any commission, percentage, contingent
fee, brokerage or other similar payments of any kind, in connection with the
establishment or operation of this Agreement, to any employee of Lessor or
Lessee or to any person or entity in the United States of America or elsewhere,
except to Excluded Persons, as defined below. For the purposes hereof, the term
"Excluded Persons" shall mean (x) in the case of Lessor, any of its officers,
directors, employees, attorneys or other professional advisors, wherever
located; and (y) in the case of Lessee, any of its officers, directors,
employees, attorneys or other professional advisors, wherever located.
16.17 Training: On and after the date hereof Lessor shall cause AVSA
S.A.R.L. to provide Lessee with certain training, support services and field
assistance. The value of training services is equivalent to approximately
[***] and the value of the field assistance is equivalent to approximately
[***]. Lessor hereby assigns to Lessee, such assignment to be effective
as of the date hereof unless Lessee notifies Lessor prior to such date that it
will not be taking delivery of the Aircraft in accordance with this Agreement,
the training, support services and field assistance available under Sections 15
and 16 of the Purchase Agreement between the Beneficiary and AVSA S.A.R.L. dated
September 28, 1990 (as amended from time to time) pursuant to which the
Beneficiary purchased the Aircraft. Provided that Lessor has fully complied with
its obligations under the Purchase Agreement, Lessor shall not have any
liability or responsibility for the adequacy of such training, support services
or technical data and documents or for Manufacturer's performance or
nonperformance in respect thereof, all of which is, as to Lessor, without
recourse, representation or warranty, express or implied. Lessee hereby agrees
to be bound by all the provisions of such Sections of the Purchase Agreement
applicable to the operator of the Aircraft.
16.18 Confidentiality: Except to the extent necessary for the
exercise of its rights and remedies and the performance of its obligations under
this Agreement, no party hereto will itself use or intentionally disclose,
directly or indirectly, this Agreement or any information herein, and will use
all reasonable efforts to have all such information kept confidential; provided
that (a) any such party may use, retain and disclose any such information to its
special counsel, professional advisors and public accountants and any
governmental agency or instrumentality or other supervisory or regulatory body
requesting or requiring such disclosure, (b) any such party may use, retain and
disclose any such information that has been publicly disclosed (other than by
such party in breach of this Section 16.18), (c) to the extent that any party
may have received a subpoena or other written demand under color of legal right
for such information or otherwise is required to do so under any applicable law,
such party may disclose such information, (d) any party may disclose any such
information to any transferee or prospective transferee of shares of or
interests in such party or an affiliate thereof or the Aircraft, (e) the Lessor
may disclose
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<PAGE>
any such information to any Financing Party and (f) either party may disclose
the existence of this Agreement and the names of the parties hereto.
17. DISCLAIMERS AND WAIVERS
17.1 Exclusion: THE AIRCRAFT IS DELIVERED "AS IS, WHERE IS" AND
LESSEE AGREES AND ACKNOWLEDGES THAT, SAVE AS EXPRESSLY STATED IN THIS AGREEMENT,
LESSOR WILL HAVE NO LIABILITY IN RELATION TO, AND LESSOR HAS NOT AND WILL NOT BE
DEEMED TO HAVE MADE OR GIVEN, ANY WARRANTIES OR REPRESENTATIONS, EXPRESS OR
IMPLIED, WITH RESPECT TO, THE AIRCRAFT, INCLUDING BUT NOT LIMITED TO:
(a) THE AIRWORTHINESS, MERCHANTABILITY, FITNESS FOR ANY USE OR
PURPOSE, VALUE, CONDITION, OR DESIGN, OF THE AIRCRAFT OR ANY PART; OR
(b) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN TORT,
WHETHER OR NOT ARISING FROM LESSOR'S NEGLIGENCE, ACTUAL OR IMPUTED; OR
(c) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS OF OR
DAMAGE TO THE AIRCRAFT, FOR ANY LIABILITY OF LESSEE TO ANY THIRD PARTY, OR
FOR ANY OTHER DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES.
17.2 Waiver: LESSEE HEREBY WAIVES, AS BETWEEN ITSELF AND THE LESSOR,
ALL ITS RIGHTS IN RESPECT OF ANY WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED,
ON THE PART OF LESSOR AND ALL CLAIMS AGAINST LESSOR HOWSOEVER AND WHENEVER
ARISING AT ANY TIME IN RESPECT OF OR OUT OF THE OPERATION OR PERFORMANCE OF THE
AIRCRAFT OR THIS AGREEMENT EXCEPT TO THE EXTENT ARISING UNDER SECTION 2.4.
17.3 Confirmation: LESSEE CONFIRMS THAT IT IS FULLY AWARE OF THE
PROVISIONS OF THIS SECTION AND ACKNOWLEDGES THAT RENT AND OTHER AMOUNTS HAVE
BEEN CALCULATED NOTWITHSTANDING ITS PROVISIONS.
17.4 Concerning the Lessor: The parties hereto agree that all of the
statements, representations, covenants and agreements made by the Lessor
contained in this Agreement, unless expressly otherwise stated, are made and
intended only for the purpose of binding the Trust Estate (as defined in the
Trust Agreement) and establishing the existence of rights and remedies which can
be exercised and enforced against the Trustee Estate. Therefore, anything
contained in this Agreement to the contrary notwithstanding (except for any
express provisions that the Trust Company is responsible for or is acting in or
making representations or agreements in its individual capacity) no recourse
shall be had with respect to this Agreement against the Trust Company in its
individual capacity or against any institution or person which becomes a
successor trustee or co-trustee or any officer,
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director, trustee, servant or direct or indirect parent or con-trolling person
or persons of any of them; provided, however, that this Section 17.4 shall not
be construed to prohibit any action or proceeding against any party hereto for
its own willful misconduct or grossly negligent conduct; and provided, further,
that nothing contained in this Section 17.4 shall be construed to limit the
exercise and enforcement in accordance with the terms of this Agreement of
rights and remedies against the Trustee Estate. The foregoing provisions of this
Section 17.4 shall survive the termination of this Agreement.
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<PAGE>
IN WITNESS WHEREOF this Agreement has been duly executed the day and
year first above written.
MIDWAY AIRLINES CORPORATION
By /s/ Brian Olds
--------------------------------------
Name: Brian Olds
Title: Executive Vice President
WILMINGTON TRUST COMPANY, not
in its individual capacity,
but solely as Trustee
By
--------------------------------------
Name:
Title:
<PAGE>
IN WITNESS WHEREOF this Agreement has been duly executed the day and
year first above written.
MIDWAY AIRLINES CORPORATION
By
--------------------------------------
Name:
Title:
WILMINGTON TRUST COMPANY, not
in its individual capacity,
but solely as Trustee
By /s/ Emmett R. Harmon
--------------------------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE>
SCHEDULE 1
PART 1
DESCRIPTION OF AIRCRAFT
AIRCRAFT
MANUFACTURER: AIRBUS
MODEL: A320-231
SERIAL NUMBER: 373
ENGINES
ENGINE TYPE: IAE V2500-A1
SERIAL NOS: V0266 and V0267
PART 2
Description Medium Quantity
AMM F 3
ASM F 3
AWM F 3
AWL F 3
IPC F 3
MPD P2 1
TSM P2 3
NTM P2 1
SRM F 2
P2 1
F=16mm Cartridge
P2=Printed Both Sides
Any modifications made to Aircraft prior to the Delivery Date shall
be incorporated into the technical manuals at no cost to Lessee.
<PAGE>
SCHEDULE 2
CERTIFICATE OF ACCEPTANCE
This Certificate of Acceptance is delivered, on the date set out below by Midway
Airways Corporation ("Lessee"), to Wilmington Trust Company, as Trustee
("Lessor"), pursuant to the Aircraft Lease Agreement dated as of May 24, 1994
between Lessor and Lessee (as so amended and restated, the "Agreement"). The
capitalized terms used in this Certificate shall have the meaning given to such
terms in the Agreement.
1. DETAILS OF ACCEPTANCE
Lessee hereby confirms to Lessor that Lessee has at o'clock on this [ ]
day of [ ], 1995, at [ ), accepted the following, in accordance with the
provisions of the Agreement:
(a) Airbus Model A320-231 airframe, Manufacturer's Serial No. [Serial No.];
(b) IAE V2500-Al Engines:
Engine Number Manufacturer's Serial No.
1 ; and
2 ;
(c) Fuel Status: Kilos [ ]; and
(d) Loose Equipment Check List: as per list signed by Lessor and Lessee and
attached hereto.
2. CONFIRMATION
Lessee confirms to Lessor that as at the time indicated above, being the
Delivery Date:
(a) the representations and warranties contained in Section 2 are hereby
repeated;
(b) the Aircraft is insured as required by the Agreement;
(c) Lessee Confirms that there have been affixed to the Aircraft and the
Engines the fireproof notices required by the Agreement; and
(d) Lessee's authorized technical experts have inspected the Aircraft to
ensure the Aircraft conforms to Lessee's requirements. The Aircraft is in
accordance with the specifications of the Agreement and satisfactory in
all respects. Lessee confirmed that there is no defect in the
Aircraft and the Aircraft is operational and serviceable
<PAGE>
3. IN WITNESS WHEREOF, Lessee has, by its duly authorized representative,
executed this Certificate on the date in paragraph 1 above.
MIDWAY AIRLINES CORPORATION
By
-----------------------------------
Name:
Title:
2
<PAGE>
SCHEDULE 3
OPERATING CONDITION AT REDELIVERY
Upon the termination of the Lease in accordance with the terms thereof 1 the
Aircraft, subject to fair wear and tear generally, will be in the condition set
out below:
1. GENERAL CONDITION
The Aircraft will:
(a) be clean by airline standards;
(b) have installed the full complement of engines and other equipment, parts
and accessories and loose equipment as is normally installed in the
Aircraft, and be in a condition suitable for immediate operation in
commercial service;
(c) have in existence a valid certificate of airworthiness (or if required by
Lessor, a valid export certificate of airworthiness) with respect to the
Aircraft issued by the FAA;
(d) comply with the original specifications at delivery as specified in
Schedules 1 and 9 save as otherwise expressly provided in this Agreement;
(e) have undergone, no more than 5 days prior to redelivery, a C-Check as
defined in the aircraft manufacturer's Maintenance Planning Document and
the currently approved Lessee's Maintenance Schedule so that all airframe
inspections falling due within the period to the next C-Check cycle
according to the current maintenance policy have been accomplished;
(f) have had accomplished all outstanding airworthiness directives and similar
requirements affecting that model of Aircraft issued by the FAA (i) prior
to the commencement of the Term and having a compliance date no earlier
than 91 days after the commencement of the Term and no later than 90 days
after the end of the Term or (ii) during the Term and having a compliance
date no later than 90 days after the end of the Term, in accordance with
the terms hereof;
(g) have installed all applicable vendor's and manufacturer's service bulletin
kits received free of charge by Lessee that are appropriate for the
Aircraft and to the extent not installed, those kits will be furnished
free of charge to Lessor;
(h) the Aircraft shall be painted white;
(i) have all signs and decals clean, secure and legible; and
<PAGE>
(j) at the request of Lessor, remove any Equipment Change and restore the
Aircraft to its condition prior to such Equipment Change.
2. COMPONENTS
(a) Each life limited component (other than the APU) shall have not less than
33.3% of the currently approved life remaining to the next scheduled
removal, in accordance with the Agreed Maintenance Program;
(b) Each calendar-limited component will have not less than 12 months life
remaining to the next scheduled removal in accordance with the Agreed
Maintenance Program;
(c) Each "on-condition" and "condition monitored" component will be
serviceable; and
(d) The installed components as a group will have an average of total flight
time since new of not more than that of the Airframe.
3. ENGINES
Each Engine will be installed on the Aircraft and if not the engines
installed on the Delivery Date will be accompanied by all documentation
Lessor may require to evidence that title thereto is properly vested in
Lessor and will:
(a) have not less than 25% of the currently approved life remaining on any
life limited part or one year remaining before any time controlled
maintenance event is due that will require engine removal or not more than
3000 Flight Hours since last hot section inspection. The expected life
remaining will be determined by the inspection and checks accomplished in
accordance with this Agreement;
(b) have no defect which places less than 3,000 Flight Hours of remaining life
pursuant to Manufacturer's or airworthiness requirements until overhaul;
(c) have demonstrated maximum thrust within specified limits for all
parameters as per the Airbus A320 Aircraft Maintenance Manual Chapter
71-00-00 Test 14 current revision at the time of delivery;
(d) the internal condition of each engine shall be verified immediately prior
to redelivery by carrying out a full borescope inspection with video
record in accordance with the engine manufacturers recommendations and
acceptance standards to the satisfaction of the Lessor's appointed
technical representative; and
(e) be returned with a full set of certified (by Lessee or its agents) records
covering every shop visit of the engines and
2
<PAGE>
APU during the term of the Lease or Where a replacement engine is
installed, a full set of certified (by Lessee or its agents) records for
every shop visit since new or last major overhaul of each module.
4. FUSELAGE, WINDOWS AND DOORS
(a) The fuselage will be free of damage that exceeds the Airbus A320
Structural Repair Manual definition as "Negligible", all repairs will be
designated by the manufacturer as permanent and all loose, pulled or
missing fasteners shall be replaced in accordance with accepted
procedures;
(b) Windows will be free of delamination, blemishes, crazing and will be
properly sealed; and
(c) Doors will be free moving, correctly rigged and be fitted with serviceable
seals.
5. WINGS AND EMPENNAGE
(a) The wings and empennage will be free of damage that exceeds the Airbus
A320 Structural Repair Manual definition as "Negligible", all repairs will
be designated by the manufacturer as permanent and all loose, pulled or
missing fasteners shall be replaced in accordance with accepted
procedures;
(b) Control surfaces will be waxed and polished;
(c) Unpainted cowlings and fairings will be polished; and
(d) Wings will be free of fuel leaks.
6. INTERIOR
(a) Ceilings, sidewalls and bulkhead panels will be clean and free of cracks
and stains.
(b) Carpets and seat covers will be in good condition, clean and free of
stains and meet FAR fire resistance regulations;
(c) Seats will be serviceable, in good condition and repainted as necessary;
and
(d) Emergency equipment having a calendar life will have a minimum of 1 year
or 100% of its total approved life, whichever is less, remaining.
7. COCKPIT
(a) Fairing panels shall be free 6f stains and cracks, will be clean secure
and repainted as necessary;
(b) Floor coverings will be clean and effectively sealed;
3
<PAGE>
(c) Seatcovers will be in good condition, clean and free of stains and will
conform to FAR fire resistance regulation;
(d) Seats will be serviceable, in good condition and will be repainted as
necessary; and
(e) A copy of the A320 Aircraft Flight Manual, Weight & Balance Document,
Flight Crew Operating Manuals Vols. 1 to 4 and Quick Reference Handbook to
the current revision shall be on board.
8. CARGO COMPARTMENTS
(a) Panels will be in good condition;
(b) Nets will be in good condition; and
(c) All spillage residue to be cleaned and the bilge areas free of
contamination.
9. LANDING GEAR
(a) The landing gear and wheel wells will be clean, free of leaks and repaired
as necessary; and
(b) All brakes to have a minimum of 50% life remaining.
10. CORROSION
(a) The Aircraft will have been inspected and treated with respect to
corrosion as defined in the Agreed Maintenance Program;
(b) The entire fuselage will be substantially free from corrosion and will be
adequately treated and an approved corrosion prevention program will be in
operation; and
(c) Fuel tanks will be free from contamination and corrosion.
4
<PAGE>
SCHEDULE 4
INSURANCE REQUIREMENTS
The Insurances required to be maintained are as follows:
(a) HULL ALL RISKS of Loss or Damage while flying and on the ground
with respect to the Aircraft on an "agreed value basis" for the Agreed
Value and with a deductible not exceeding $100,000, or such other amount
agreed by Lessor from time to time;
(b) HULL WAR AND ALLIED PERILS, being such risks excluded from the
Hull All Risks Policy to the fullest extent available from the leading
international insurance markets including confiscation and requisition by
any Government other than the United States of America for the Agreed
Value;
(c) ALL RISKS (INCLUDING WAR AND ALLIED RISK except when on the
ground or in transit other than by air) property insurance on all Engines
and Parts when not installed on the Aircraft on an "agreed value" basis
for their full replacement value minus a deductible not exceeding $10,000
or, in the case of engine test and running risks, not exceeding $200,000;
(d) AIRCRAFT THIRD PARTY, PROPERTY DAMAGE, PASSENGER, BAGGAGE, CARGO
AND MAIL AND AIRLINE GENERAL THIRD PARTY (INCLUDING PRODUCTS) LEGAL
LIABILITY for a Combined Single Limit (Bodily Injury/Property Damage) of
an amount not less than the Minimum Liability Coverage (or, in the case of
personal injury, $25,000,000) for the time being any one occurrence (but
in respect of products and personal injury liability this limit may be an
aggregate limit for any and all losses occurring during the currency of
the policy). War and Allied Risks are also to be covered under the Policy
to the fullest extent available from the leading international insurance
markets;
(e) All required hull and spares insurance (as specified above), so
far as it relates to the Aircraft will:
(i) name Lessor, Beneficiary, Trust Company, the Financing
Parties, their respective successors and assigns as additional
assureds for their respective rights and interests, warranted, each
as to itself only, no operational interest;
(ii) provide that Lessor (or, if Lessor shall have assigned to
the Financing Parties all of its interests in and to the Insurances
pursuant to any security agreement (for purposes of this Schedule 4
only "a Security Agreement") entered into between Lessor and the
Financing Parties with respect to
<PAGE>
finance funds provided by the Financing Parties, the Financing
Parties) shall be named as the sole loss payee;
(iii) include a notice and/or acknowledgement of assignment
relating to any assignment of Lessor's interest in the Insurances to
any Financing Party (in a form acceptable to Lessor);
(iv) if separate Hull "all risks" and "war risks" insurances
are arranged, include a 50/50 provision in accordance with market
practice (AVS. 103 is the current market language); and
(v) provide that the insurers are not entitled to replace the
Aircraft in the event of an insured Event of Loss.
(f) All required liability insurances (specified above) will:
(i) include Lessor (in its individual capacity and as
Trustee), Beneficiary, Trust Company and any Financing Party and
their respective successors and assigns and their respective
shareholders, subsidiaries, directors, officers, agents, employees
and indemnitees as additional insureds for their respective rights
and interests, warranted, each as to itself only, no operational
interest;
(ii) include a "Severability of Interest" clause which
provides that the insurance, except for the limit of liability, will
operate to give each assured the same protection as if there was a
separate policy issued to each assured;
(iii) contain a provision confirming that the policy is
primary without right of contribution and the liability of the
insurers will not be affected by any other insurance of which
Lessor, any Financing Party or Lessee have the benefit so as to
reduce the amount payable to the additional insureds under such
policies;
(g) All Insurances will:
(i) be in accordance with normal industry practice of persons
operating similar aircraft in similar circumstances;
(ii) provide cover denominated in Dollars and any other
currencies which Lessor may reasonably require in relation to
liability insurance;
(iii) operate on a worldwide basis subject to such limitations
and exclusions as Lessor may agree;
2
<PAGE>
(iv) acknowledge the insurer is aware (and has seen a copy) of
this Agreement and that the Aircraft is owned by Lessor for the
benefit of the Beneficiary and, if a Security Agreement has been
entered into between Lessor and any Financing Party, that the
Insurances are subject to such security assignment in favor of such
Financing Party;
(v) provide that, in relation to the interests of each of the
additional assureds the Insurances will not be invalidated by any
act or omission (including misrepresentation and non-disclosure) by
Lessee, or any other person or party which results in a breach of
any term, condition or warranty of the Insurances, provided that the
respective additional assured so protected has not caused,
contributed to or knowingly condoned said act or omission;
(vi) provide that the insurers will not exercise any right of
subrogation against additional assured without the consent of such
the respective additional assured (such consent not to be
unreasonably withheld);
(vii) provide that the additional assureds will have no
obligation or responsibility for the payment of any premiums due
(but reserve the right to pay the same should any of them elect so
to do) and that the insurers will not exercise any right of set-off
or counter-claim in respect of any premium due against the
respective interests of the additional assureds other than
outstanding premiums relating to the Aircraft, any Engine or Part
the subject of the relevant claim;
(viii) provide that the Insurances will continue unaltered for
the benefit of the additional assureds for at least 30 days after
written notice of any cancellation, change, event of non-payment of
premium. or installment thereof has been sent to Lessor, Beneficiary
and any Financing Party, except in the case of war risks for which 7
days (or such lesser period as is or may be customarily available in
respect of war risks or allied perils) will be given, or in the case
of war between the 5 great powers or nuclear peril for which
termination is automatic;
(ix) if reinsurance is a requirement of this Agreement such
reinsurance will (i) be on the same terms as the original insurances
and will include the provisions of this Schedule, (ii) provide that
notwithstanding any bankruptcy, insolvency, liquidation, dissolution
or similar proceedings of or affecting the reinsured that the
reinsurers' liability will be to make such payments as would have
fallen due under the relevant policy of reinsurance if the
3
<PAGE>
reinsured had (immediately before such bankruptcy, insolvency,
liquidation, dissolution or similar proceedings) discharged its
obligations in full under the original insurance policies in respect
of which the then relevant policy of reinsurance has been effected;
and (iii) contain a "cut-through" clause in the following form (or
otherwise, satisfactory to Lessor): "The Reinsurers and the
Reinsured hereby mutually agree that in the event of any claim
arising under the reinsurances in respect of a total loss or other
claim where as provided by the Aircraft Lease Agreement dated as of
May 24, 1995 and made between Wilmington Trust Company as Trustee
and Midway Airlines Corporation such claim is to be paid to the
person named as sole loss payee under the primary insurances, the
Reinsurers will in lieu of payment to the Reinsured, its successors
in interest and assigns pay to the person named as sole loss payee
under the primary insurances effected by the Reinsured that portion
of any loss due for which the Reinsurers would otherwise be liable
to pay the Reinsured (subject to proof of loss), it being understood
and agreed that any such payment by the Reinsurers will (to the
extent of such payment) fully discharge and release the Reinsurers
from any and all further liability in connection therewith"; subject
to such provisions not contravening any law of the United States of
America; and
(x) provide that Lessor, Beneficiary, the Financing Parties or
any insured party may initiate a claim under any policy in the event
of the refusal or failure of Lessee to do so.
4
<PAGE>
SCHEDULE 4B
Broker's Letter of undertaking
To: Wilmington Trust Company
Kawasaki Leasing International Inc.
______________, 1995
Dear Sirs:
We confirm that insurance is in effect on and in respect of the Airbus A320-231
aircraft bearing Serial Number 373 and Registration Number N373KA for the period
and the risks as set out in our Certificate of Insurance numbered ___________
and dated _________.
In connection with the insurance covered by this letter we hereby undertake to
hold the benefit of the insurance thereunder to the extent available, to your
order.
We further undertake:
1. To pass on to you any notice of cancellation (including for non-payment of
premium) or material change in coverage or any notice of any act or
omission of which insurers are aware that might void the policy or make
the policy invalid or unenforceable in whole or in part as soon as
practicable after receipt of the same from insurers in accordance with
their agreement as evidenced in our certificate.
2. To advise you as soon as practicable if we cease to be insurance brokers
or if we have not received renewal instructions 15 days prior to renewal
date of the insurances, and in the event of our receiving instructions to
renew to advise you promptly of the relevant retails thereof.
3. To pay the Loss Payee without any set-off or deduction of any kind for any
reason any and all proceeds from the Hull, Hull War or Spares Insurance.
The above undertakings are given:
(a) subject to our lien, if any, on the policies referred to in our
certificate for premiums due under such policies.
(b) subject to our continuing appointment for the time being as insurance
brokers to Midway Airlines Corporation.
Yours faithfully,
- ------------------------
[Insurance Broker]
<PAGE>
SCHEDULE 5
[Letterhead of Rosenberg & Liebentritt, P.C.]
May 19, 1995
Wilmington Trust Company,
as Owner Trustee
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Re: Aircraft Lease Agreement dated as of __________________ (the
"Lease") between Wilmington Trust Company, as Owner Trustee
("Lessor") and Midway Airlines Corporation ("Lessee") for One Airbus
Industrie A320-231 Aircraft Manufacturer's Serial Number ___ (the
"Aircraft")
We have acted as counsel to Midway-Airlines Corporation, a Delaware
corporation, in connection with the Lease.
In arriving at the opinions expressed below,
(a) we have examined and relied on originals or copies certified or
otherwise identified to our satisfaction, of the Lease;
(b) we have examined such corporate documents and records of the Lessee
and such other instruments and certificates of public officials, officers and
representatives of the Lessee and other Persons as we have deemed necessary or
appropriate for the purposes of this opinion.
(c) terms which are capitalized. but not defined herein, shall have the
meaning given such terms in the Lease.
The opinions hereinafter expressed are also subject to the following
qualifications:
A. We have assumed, without investigation, that the parties (other than
the Lessee) to the Lease, or any document or oral agreement relating thereto
are not subject to any statute, rule, or regulations, or to any impediment to
which contracting parties
<PAGE>
May 19, 1995
Page 2
are generally not subject, which requires the Lessee to obtain the consent of or
to make a declaration or filing with any Government Entity.
B. The validity, binding effect and enforceability of the Lease (or any
portion of such documents) and the rights and remedies of the parties thereunder
are subject to, and limited by, the following: (a) the effect of the federal and
state bankruptcy laws, (the "Bankruptcy Code"), insolvency, reorganization,
receivership, moratorium, and other similar laws; (b) principles of equity and
the doctrine of commercial reasonableness (and we express no opinion as to the
availability of any equitable remedies); (c) the power of federal and state
courts to refuse to enforce (or to stay enforcement of) any provision of the
Lease which purports to: (i) establish evidentiary standards, (ii) waive the
right of the Lessee to due notice and hearing, (iii) waive the right of the
Lessee to assert defenses available to the Lessee by statute, common law or in
equity, (iv) declare the Lessee to be in default in the event of the institution
of any proceeding in bankruptcy (whether voluntary or involuntary) pursuant to
the Bankruptcy Code, (v) waive the right of personal service of process, or (vi)
provide for self-help remedies.
C. Whenever a statement herein with respect to the existence or absence of
facts is qualified by the phrases "known to us" or "we are not aware" or "to our
knowledge" or words of similar input, it is intended to indicate that during the
course of our representation of the Lessee, no information that would give us
actual knowledge of the existence or absence of such facts has come to the
attention of those persons in this firm who have rendered legal services in
connection with the representation described above. Without limiting the
generality of the foregoing, it is expressly understood that no opinion is
expressed with regard to: (a) the financial ability of the Lessee to meet its
obligations under the Lease; (b) although we are not aware of any untruthfulness
or inaccuracy, the truthfulness or accuracy of any applications, reports, plans,
documents, financial statements or other matters furnished to any addressee of
this letter by (or on behalf of) the Lessee in connection with the transactions
evidenced by the Lease; or (c) although we are not aware of any untruthfulness
or inaccuracy, the truthfulness or accuracy of any representations or warranties
made by the Lessee in the Lease, which are not the subject of any of the
opinions stated herein. We have also assumed, without investigation for the
purpose of the opinions expressed herein, that no fraud exists with respect to
any matters relevant to such opinions, but we have no reason to believe that any
fraud exists.
D. We understand that, with respect to matters relating to the
registration of the Aircraft with the FAA, the filing and recordation of the
Lease with the FAA, and other matters relating to filings or recordation of
documents with the FAA in order to establish or perfect
<PAGE>
May 19,1995
Page 3
Beneficiary's or Lessor's right, title and interest under the Lease or in any
Aircraft, as against Lessee or any third party (including but not limited to
trustees, custodians and other representatives or similar officials), you will
be receiving and relying upon the opinion of Daugherty, Fowler & Peregrin,
federal aviation counsel to Lessor. We render no opinion with respect to any
such matters.
E. The opinions set forth above are based upon and limited to the laws of
the State of Illinois, and the Federal laws of the United States applicable
therein, the Bankruptcy Code of 1978, as amended (11 U.S.C. ss.101 et seq.) and
the general corporate law of the State of Delaware. We note that the Lease is
stated to be governed by the laws of the State of New York and we are not
familiar with those laws and render no opinion about them.
F. This letter is limited to the matters expressly set forth herein; no
statements or opinions may be inferred beyond such matters.
G. The opinions set forth herein are based upon and limited to the law as
is in effect on the date of this letter and our knowledge of the facts relevant
to such opinions on the date of this letter. We assume no obligation to update
the opinions set forth in this letter.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Lessee (a) is duly organized, validly existing and in good standing
under the laws of the State of Delaware (b) has the corporate power and
authority and the legal right to own and operate its property, to lease the
property it operates as lessee (c) is duly qualified as a foreign corporation
and in good standing under the laws of each jurisdiction where its ownership,
lease or operation of property or the conduct of its business requires such
qualification and (d) is incorporated for perpetual existence.
2. The Lessee has the corporate power and authority, and the legal
right, to make, deliver and perform its obligations under the Lease. No
consent or authorization of, approval by, notice to, filing with or other act
by or in respect of, any United States Government Entity in the State of
Illinois or any other Person is required or reasonably desirable in
connection with the Lessee's execution, delivery or performance, of or the
validity or enforceability of the Lease as against the Lessee; or to protect
the rights of Lessor in the Aircraft or the Lease other than the filing of
UCC-1 Financing Statements with applicable Governmental Entities in the State
of Illinois, the State of North Carolina or the State [ILLEGIBLE].
3. The Lease has been duly executed and delivered on behalf of the Lessee
and constitutes the legal, valid and binding obligation of The Lessee,
enforceable against the Lessee in accordance with its terms.
<PAGE>
May 19, 1995
Page 4
4. The execution and delivery of the Lease, the performance by the Lessee
of its obligations thereunder, the consummation of the transactions contemplated
thereby by Lessee, the compliance by the Lessee with any of the provisions
thereof, all as provided therein, (a) will not violate, or constitute a default
under, any applicable law or, to the best of our knowledge, any contractual
obligations of the Lessee and (b) will not result in, or require, the creation
or imposition of any lien on any of its respective properties or revenues,
except the security interests created pursuant to the Lease, if any.
5. To our knowledge, no steps have been, or are being, taken to appoint a
receiver, liquidator, trustee or similar officer over, or to wind up, Lessee,
and to our knowledge there is no litigation or proceeding pending against Lessee
which if adversely determined would have a material adverse effect on Lessee's
ability to perform its obligations under the Lease.
6. No consents, licenses, approvals and registrations (other than those
which have been obtained, copies of which have been delivered to Lessor's
counsel) are necessary desirable to be obtained from any United States
Government Entity to enable Lessee to operate the Aircraft in the United States
of America for the transport of farepaying passengers.
7. Based solely on the undersigned's receipt of a certificate issued by
the Department of Transportation under Section 401 of the Federal Aviation Act
of the United States of America (the "Act"), which receipt is hereby
acknowledged, the Lessee is an "air carrier" within the meaning of Section
101(3) of the Act and, to our knowledge, the Lessee is a "citizen of the United
States" within the meaning of Section 101(16) of the Act.
8. Lessor is entitled to the benefits of 11 U.S.C. ss.1110 with respect to
the Aircraft subject to the Lease to the extent such Aircraft constitutes
aircraft, aircraft engines, appliances or spare parts as defined in Section 101
of the Act.
9. To our knowledge, the obligations of the Lessee rank at least equally
and rateably (pari passu) in point of priority and security with all other
unsecured obligations of Lessee.
10. There is no applicable usury or similar law concerning the maximum
amount of interest which may be charged under Illinois law which may restrict
the recovery of payments made or to be made by Lessee under the Lease.
11. This opinion has been rendered solely for your benefit in connection
with the Lease, and the transactions contemplated thereby and may not be used
circulated, quoted, relied upon or otherwise referred to for any other purpose
without our prior written consent; provided, however, that this opinion may be
delivered to your accountants
<PAGE>
May 19, 1995
Page 5
attorneys and other professional advisors and may be used in connection with any
legal or regulatory proceeding relating to the subject matter of this opinion.
This letter is for the benefit of the addressees and their counsel only,
and is not to be reproduced or disclosed for the benefit of any other person or
entity, except as required by law.
Very truly yours,
ROSENBERG & LIEBENTRITT, P.C.
By:
--------------------------------------
Jonathan S. Waller, Vice President
<PAGE>
SCHEDULE 6
FORM OF IRREVOCABLE POWER OF ATTORNEY
This Power of Attorney is made on ___________ __, 1995 by [ ].
The undersigned, MIDWAY AIRLINES CORPORATION (the "Company") refers to the
Aircraft Lease Agreement dated as of May 24, 1995 (the "Lease") between
Wilmington Trust Company, as Trustee (the "Lessor") and the Company with respect
to one Airbus A320-231 aircraft with manufacturer's serial number 373 (the
"Aircraft")
In consideration of the sum of US$1 paid by the Lessor to the Company (the
receipt and sufficiency of which is hereby acknowledged) and as security for the
performance of the Company's obligations under the Lease, the Company hereby
IRREVOCABLY AND UNCONDITIONALLY APPOINTS WILMINGTON TRUST COMPANY, AS TRUSTEE
(the "Attorney"), its true and lawful attorney to execute and deliver any
documents, instruments or certificates with such amendments thereto (if any) and
to do and perform any acts or things (in each case, upon its behalf and in its
name) which are required (i) to terminate the Lease, (ii) to deregister the
Aircraft from the aircraft registry maintained by the Federal Aviation Authority
and (iii) to export the aircraft from the United States of America upon the
lawful termination of the Lease of the Aircraft.
AND generally to do any and all such acts and things and to execute under seal
or hand (as appropriate) and deliver any and all documents under seal or under
hand (as appropriate) as may be requested or required in connection with the
matters referred to in the above paragraph.
AND the Company hereby undertakes from time to time and at all times to
indemnify the Attorney against all costs, claims, expenses and liabilities
howsoever incurred by the Attorney in connection herewith and further undertakes
to ratify and confirm whatsoever the Attorney shall lawfully do or cause to be
done in or by virtue of this Power of Attorney.
AND for the better doing performing and executing of the matters and things
aforesaid the Company hereby further grants unto the Attorney full power and
authority to substitute and appoint in its place one or more attorney or
attorneys to exercise for it as attorney or attorneys of the Company any or all
the powers and authorities hereby conferred and to revoke any such appointment
from time to time as the Attorney shall from time to time think fit.
This Power of Attorney shall not expire until May 24, 2001.
This Power of Attorney shall be governed by and construed in accordance with the
laws of New York.
<PAGE>
IN WITNESS WHEREOF this Power of Attorney has been duly executed the
day and year first above written.
MIDWAY AIRLINES CORPORATION
By
---------------------------------------
Name:
Title:
2
<PAGE>
SCHEDULE 7
FORM OF CERTIFICATE OF REDELIVERY ACKNOWLEDGEMENT
This Certificate of Redelivery Acknowledgement is delivered, on the date set out
below by Wilmington Trust Company, as Trustee ("Lessor"), to Midway Airlines
Corporation ("Lessee"), pursuant to the Aircraft Lease Agreement dated as of May
24, 1995 between Lessor and Lessee (the "Agreement"). The capitalized terms used
in this Certificate shall have the meaning given to such terms in the Agreement.
DETAILS OF ACKNOWLEDGEMENT
Lessor hereby confirms to Lessee that, on this [ ] day of [ ] 199[ ], Lessee
has redelivered the Aircraft to Lessor in accordance with the provisions of the
Agreement and is satisfactory in all respects:
(a) Airbus Model A320-230 1 airframe, Manufacturer's Serial No. (Serial No.);
(b) IAE V2500-A1 Engines:-
Engine Number Manufacturer's Serial No.
1 ; and
2 ;
(c) Fuel Status: Kilos [ ].
IN WITNESS WHEREOF, Lessor has, by its duly authorized representative, executed
this Certificate on ____________ __, ________.
WILMINGTON TRUST COMPANY, not
in its individual capacity
but solely as Trustee
By
---------------------------------------
Name:
Title:
<PAGE>
SCHEDULE 8
FORM OF QUIET ENJOYMENT LETTER
Midway Airlines Corporation
5713 S. Central Avenue
Chicago, IL 60638
Dear Sirs,
Reference is made to the Aircraft Lease Agreement dated as of May 24, 1995
("Lease") between Wilmington Trust Company, as Trustee ("Lessor") and Midway
Airlines Corporation ("Lessee"). Capitalized terms herein not defined herein
shall have the meanings attributed thereto in the Lease.
So long as no Event of Default shall have occurred and be continuing, we hereby
agree not to interfere with the quite use, possession and enjoyment of the
Aircraft by Lessee and agree to discharge without undue delay any Lessor Liens
attributable to us which materially prejudices the quiet use, possession and
enjoyment of the Aircraft by Lessee.
Very truly yours,
[LESSOR/FINANCING PARTY]
By
---------------------------------------
Name:
Title:
2
<PAGE>
SCHEDULE 9
SPECIFICATIONS
On the Delivery Date:
(a) the Aircraft shall be "as is" and shall have installed its full complement
of engines and other equipment, parts and accessories;
(b) the Airframe shall have completed a Pre-service Maintenance Package that
includes all flight time, cyclic and calendar time items from the current
Airbus Maintenance Planning Document (MPD) and be approved by Airbus
Industrie to be acceptable for 15 months or 6000 hours remaining to the
next C Check;
(c) each engine will have demonstrated maximum thrust within specified limits
for all parameters as per the Airbus A320 Aircraft Maintenance Manual
Chapter 71-00-00 Test 14 current revision at the time of delivery.
(d) the components of the Aircraft shall have not less than twelve (12)
calendar months or four thousand (4,000) hours/two thousand (2,000) cycles
(as applicable) of time remaining to the next scheduled removal;
(e) the APU and Landing Gear shall have not less than fifty per cent (50%)
life remaining to the next scheduled overhaul/removal;
(f) the aircraft shall be painted in the Lessee's external livery to drawings
and written instructions provided by the Lessee at the Lessor's expense;
(g) the Aircraft shall be in a 10F/l38Y seating configuration;
(h) the Aircraft shall have installed galleys Gl and G5;
(i) the Aircraft shall have installed toilets LA, LE and LD;
(j) the Aircraft shall have an MTOW of 75.5 M.T. subject to the availability
of the Airbus Industrie Service Bulletin and the corresponding revision to
the Aircraft Flight Manual, provided that Lessor shall be responsible for
the cost of the upgrade to 75.5 M.T., but in no event shall Lessor's
portion of the cost of such upgrade exceed $145,000;
(k) the Aircraft shall have in existence a valid and existing Standard
Airworthiness Certificate with respect to the aircraft issued by the FAA;
(1) the Aircraft shall be clean by airline standards;
3
<PAGE>
(m) the Aircraft shall have no deferred items outstanding except as may be
noted and agreed to by Lessee on the Acceptance Certificate;
(n) all Aircraft repairs shall be permanent and where possible flush type
repairs and in any event be in accordance with the manufacturer's
structural repair manual or as otherwise approved by the FAA;
(o) the Aircraft shall be airworthy and ready for flight and shall be eligible
in all respects for operations by the Lessee pursuant to its operation
specifications approved under Part 121 of the Federal Aviation
Regulations; and
(p) all airworthiness directives, and all mandatory inspection and
modification requirements, including without limitation, alert service
bulletins and inspection service bulletins, or similar requirements
applicable to the Aircraft or any Part having a compliance date during the
first three (3) months of the Lease Term and which are required by the
FAA and/or by any manufacturer of the Aircraft or any Engine or Part shall
have been completed at Lessor's cost, subject however to Lessee's rights
under this Agreement.
4
<PAGE>
[Letterhead of Midway Airlines]
February 3, 1997
VIA TELECOPY AND REGULAR MAIL
KE Aircraft Leasing, Inc. KE Aircraft Leasing, Inc.
65 East 55th Street Shuwa Shiba Park Building
New York, New York 10022 2-4-1 Shibakoen, Minato - KU
ATTN: Shoji Mizuta Tokyo 105, Japan
ATTN: Shoji Mizuta
Re: Aircraft Lease Agreement dated as of May 24, 1995 (the "Lease")
between Wilmington Trust Company ("Lessor") and Midway Airlines
Corporation ("Lessee") with KE Aircraft Leasing (as "Beneficiary")
Dear Mr. Mizuta:
Thank you for your prompt assistance in obtaining the consent recently
requested. I have attached a signed copy of the November 27, 1996 letter
regarding Engine Maintenance Reserves. I have forwarded one original to you and
one original to Wilmington Trust Company for its records.
Very truly yours,
MIDWAY AIRLINES CORPORATION
Jonathan S. Waller
Senior Vice President and
General Counsel
JSW/tmg
Attachment
cc: Wilmington Trust Company
<PAGE>
[Letterhead of KE Aircraft Leasing Inc.]
November 27, 1996
Midway Airlines Corporation
300 West Morgan Street, 12th Floor
Durham, NC 27701
Attn: Mr. Jonathan S. Waller
Senior Vice President and General Counsel
Re: Amendment of the Lease Agreement in respect of Airbus A320-231
Aircraft bearing manufacturer's serial number 373, registration number
N3O4ML.
Dear Sir:
Reference is made to the Aircraft Lease Agreement dated as of May 24,
1995, between Wilmington Trust Company, not in its individual capacity, but
solely as Trustee ("Lessor") and Midway Airlines Corporation ("Lessee") in
respect of Airbus A320-231 MSN 373 bearing registration number N304ML (the
"Agreement"). Lessee, Lessor and KE Aircraft Leasing Inc., as Beneficiary,
hereby mutually agree that Section 7.2(b) of the Agreement is amended to read in
its entirety as follows (the capitalized terms used herein shall have the
respective meanings in the Agreement):
(b) with respect to any Engine (other than a temporary engine installed on
the Aircraft pursuant to Section 8.13(b) hereof), the performance, in
accordance with this Agreement, of all shop visits requiring engine
disassembly (other than (i) repairs arising as a result of foreign object
damage or operational or maintenance mishandling and/or (ii) removal,
installation, maintenance and repair of QEC (Quick Engine Change) kits), a
sum equal to the lesser of (i) the amount of that invoice and (ii) the
amount equal to the aggregate amount of Engine Maintenance Reserves paid
in respect of that Engine under this Agreement at the time of commencement
of that maintenance less the aggregate amount previously paid in respect
of that Engine by Lessor under this sub-clause;
<PAGE>
Except as otherwise specified in this letter, the Agreement shall remain in all
respects unchanged and in full force and effect. This letter shall be governed
by and construed in accordance with the law of the State of New York.
Sincerely, AGREED AND CONFIRMED:
MIDWAY AIRLINES CORPORATION
/s/ Tadao Tsukiyama
- -----------------------------
Tadao Tsukiyama /s/ Jonathan S. Waller
President -----------------------------------------
KB AIRCRAFT LEASING INC. By: JONATHAN S. WALLER
Title: SENIOR VICE PRESIDENT
GENERAL COUNSEL
WILMINGTON TRUST COMPANY,
not in its individual capacity, but
solely as Trustee
/s/ Emmett R. Harmon
-----------------------------------------
By: Emmett R. Harmon
Title: Vice President
<PAGE>
EXHIBIT 10.16
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF
THIS EXHIBIT. THE CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND
ARE DENOTED BY [***]. THE CONFIDENTIAL PORTIONS HAVE BEEN
SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
AIRBUS A320-200 PURCHASE AGREEMENT
Dated as of March 17, 1995
between
AVSA, S.A.R.L.,
Seller
and
MIDWAY AIRLINES CORPORATION,
Buyer
March 17, 1995
<PAGE>
CONTENTS
CLAUSES TITLE
0 PURCHASE AGREEMENT
1 DEFINITIONS
2 SALE AND PURCHASE
3 CHANGES
4 PRICE
5 PRICE REVISION
6 PAYMENT TERMS
7 PLANT REPRESENTATIVES - INSPECTION
8 BUYER'S ACCEPTANCE
9 DELIVERY
10 EXCUSABLE DELAY
11 INEXCUSABLE DELAY
12 WARRANTIES AND SERVICE LIFE POLICY
13 PATENT INDEMNITY
14 TECHNICAL PUBLICATIONS
15 FIELD ASSISTANCE
16 TRAINING AND TRAINING AIDS
17 VENDORS' PRODUCT SUPPORT
18 BUYER FURNISHED EQUIPMENT AND DATA
19 ASSIGNMENT
20 DATA RETRIEVAL
21 TERMINATION FOR CERTAIN EVENTS; INSECURITY EVENTS;
FURTHER ASSURANCES
22 MISCELLANEOUS PROVISIONS
0-1
<PAGE>
CONTENTS
EXHIBITS
EXHIBIT "A-1" A320 STANDARD SPECIFICATION
EXHIBIT "A-2" A319 STANDARD SPECIFICATION
EXHIBIT "B" CHANGE ORDERS TO STANDARD SPECIFICATION (SCNs)
EXHIBIT "C" SCN FORM
EXHIBIT "D" SELLER SERVICE LIFE POLICY AND VENDOR SERVICE LIFE
POLICY
EXHIBIT "E" CERTIFICATE OF ACCEPTANCE
EXHIBIT "F" TECHNICAL PUBLICATIONS
EXHIBIT "G" AIRFRAME REVISION FORMULA
EXHIBIT "H-1" CFM PROPULSION SYSTEM REVISION FORMULA (A320
AIRCRAFT)
EXHIBIT "H-2" CFM PROPULSION SYSTEM REVISION FORMULA (A319
AIRCRAFT)
EXHIBIT "I-1" IAE PROPULSION SYSTEM REVISION FORMULA (A320
AIRCRAFT)
EXHIBIT "1-2" IAE PROPULSION SYSTEM REVISION FORMULA (A319
AIRCRAFT)
0-2
<PAGE>
CONTENTS
LETTER AGREEMENTS
LETTER AGREEMENT NO. 1 SPARE PARTS PROCUREMENT
LETTER AGREEMENT NO. 2 PURCHASE INCENTIVES AND
MISCELLANEOUS MATTERS
LETTER AGREEMENT NO. 3 OPTION AIRCRAFT
LETTER AGREEMENT NO. 4 PREDELIVERY PAYMENT FLEXIBILITY
0-3
<PAGE>
PURCHASE AGREEMENT
This Agreement is made this 17th day of March, 1995,
between
AVSA, a societe a responsibilite limitee organized and existing
under the laws of the Republic of France, having its registered
office located at
2, rond-point Maurice Bellonte
31700 BLAGNAC
FRANCE
(hereinafter referred to as the "Seller")
and
Midway Airlines Corporation, a corporation organized and existing
under the laws of the State of Delaware, United States of America,
having its principal corporate offices located at
5713 South Central Avenue
Chicago, IL 60638
(hereinafter referred to as the "Buyer")
WHEREAS,
a) the Buyer wishes to purchase and the Seller is willing to sell four (4)
new firm Airbus Industrie A320-200 model aircraft and the Buyer wishes to
obtain and the Seller is willing to grant the Buyer an option to purchase
up to four (4) new option Airbus Industrie A320-200 model aircraft, upon
the terms and conditions herein provided; and
b) the Seller is a sales subsidiary of Airbus Industrie and will purchase
the Aircraft from Airbus Industrie for resale to the Buyer.
NOW THEREFORE IT IS AGREED AS FOLLOWS:
0-4
<PAGE>
1 - DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, the following
terms shall have the following meanings:
Affiliate - with respect to any person or entity, any other person
or entity directly or indirectly controlling, controlled by or
under common control with such person or entity, not including any
of the Associated Contractors.
Agreement - this Airbus A320-200 Purchase Agreement, including all
Exhibits, Appendixes and numbered Letter Agreements attached
hereto, as the same may be amended or modified and in effect from
time to time.
Aircraft - any or all of the Firm Aircraft or Option Aircraft that
have been converted to a firm order to be purchased by the Seller
and sold to the Buyer pursuant to this Agreement, together with all
components, equipment, parts and accessories installed in or on
such aircraft and the Propulsion Systems installed thereon upon
delivery.
Airframe - any Aircraft, excluding the Propulsion Systems therefor.
Alternate Closing Site - as defined in Paragraph 3 of Letter
Agreement No. 2 to the Agreement.
ASC - Airbus Service Company, Inc., a corporation organized and
existing under the laws of Delaware, having its registered office
located at 593 Herndon Parkway, Suite 300, Herndon, VA 22070, or
any successor thereto.
Associated Contractors - collectively, the members and, for certain
purposes, subcontractors of the Manufacturer from time to time,
which members presently are:
(1) AEROSPATIALE, SOCIETE NATIONALE INDUSTRIELLE ("Aerospatiale"),
whose principal office is at
37, Boulevard de Montmorency
75016 Paris
France
1-1
<PAGE>
(2) BRITISH AEROSPACE (OPERATIONS) LTD, whose principal office is
at
Warwick House
P0 Box 87
Farnborough Aerospace Centre
Farnborough
Hants GU14 6YU
England
(3) CONSTRUCCIONES AERONAUTICAS, S.A., whose principal office is
at
404 Avenida de Aragon
28022 Madrid
Spain
(4) DAIMLER-BENZ AEROSPACE AIRBUS, GmbH ("Daimler-Benz"), whose
principal office is at
Kreetslag 10
Postfach 95 0l 09
21111 Hamburg
Germany
ATA Specification 100 - the specification issued by the Air
Transport Association of America relating to manufacturers'
technical data.
ATA Specification 101 - the specification issued by the Air
Transport Association of America relating to ground equipment
technical data.
ATA Specification 102 - the specification issued by the Air
Transport Association of America relating to software programs.
ATA Specification 200 - the specification issued by the Air
Transport Association of America relating to integrated data
processing.
ATA Specification 300 - the specification issued by the Air
Transport Association of America relating to the packaging of spare
parts shipments.
ATA Specification 2000 - the specification issued by the Air
Transport Association of America relating to an industry-wide
communication system linking suppliers and users for the purposes
of spares provisioning, purchasing, order administration, invoicing
and information or data exchange.
Base Price - for any Aircraft, Airframe or Propulsion Systems, as
defined in Subclause 4.1 of this Agreement.
1-2
<PAGE>
Buyer Furnished Equipment - for any Aircraft, all the items of
equipment that shall be furnished by the Buyer and installed in the
Aircraft by the Seller, as defined in the Specification.
Collateral - as referred to in Subclause 21.3(c) of this Agreement.
Comfort - as defined in Subclause 21.2(k) of this Agreement.
Customer Originated Changes - as defined in Subclause 14.4.3 of
this Agreement.
DGAC - the Direction Generale de l'Aviation Civile of France, or
any successor agency thereto.
FAA - the U.S. Federal Aviation Administration, or any successor
agency thereto.
Failure - as defined in Subclause 12.2 of this Agreement.
Final Contract Price - as defined in Subclause 4.2 of this
Agreement.
Firm Aircraft - any or all of the four (4) firm originally ordered
Airbus Industrie A320-200 model aircraft to be purchased by the
Seller and sold to the Buyer pursuant to this Agreement, together
with all components, equipment, parts and accessories installed in
or on such aircraft and the Propulsion Systems installed thereon
upon delivery, for which the delivery schedule is set forth in
Subclause 9.1 of this Agreement.
Inhouse Warranty - as referred to in Subclause 12.1.7 of this
Agreement.
Inhouse Warranty Labor Rate - as defined in Subclause 12.1.7(v) of
this Agreement.
Insecurity Event - as defined in Clause 21 of this Agreement.
Interface Problem - as defined in Subclause 12.4.1 of this
Agreement.
Item - as defined in Subclause 12.2 of this Agreement.
1-3
<PAGE>
Letter of Agreement No. 1 - the letter agreement regarding
"Spare Parts Procurement," dated the date hereof between the
Buyer and the Seller, and incorporated by reference in this
Agreement.
Letter of Agreement No. 2 - the letter agreement regarding
"Purchase Incentives and Miscellaneous Matters," dated the date
hereof between the Buyer and the Seller, and incorporated by
reference in this Agreement.
Letter of Agreement No. 3 - the letter agreement regarding
"Option Aircraft," dated the date hereof between the Buyer and
the Seller, and incorporated by reference in this Agreement.
Letter of Agreement No. 4 - the letter agreement regarding
"Predelivery Payment Flexibility," dated the date hereof between
the Buyer and the Seller, and incorporated by reference in this
Agreement.
Letter of Intent (LOI) - the Letter of Intent dated February 17,
1995, reference number 5128.9/95, executed by the Buyer and the
Seller regarding matters addressed in this Agreement.
LIBOR - for each stated interest period, the rate determined on the
basis of the offered rates for deposits in US dollars, which appear
on the Reuters Screen LIBO Page as of 11:00 a.m., London time, on
the day that is two (2) days (other than a Saturday, Sunday or a
day that is a legal holiday or a day on which banking institutions
are authorized to close in the City of New York, New York, London,
England, or Paris, France) before the first day of an interest
period. If at least two (2) such offered rates appear on the
Reuters Screen LIBO Page, the rate for that interest period will be
the arithmetic mean of such offered rates rounded to the nearest
basis point (0.5 rounds to 1). If only one (1) offered rate
appears, the rate for that interest period will be "LIBOR" as
quoted by National Westminster Bank, plc. "Reuters Screen LIBO
Page" means the display designated as page "LIBO" on the Reuters
Monitor Money Rates Service (or any successor to such page or
service).
Manufacturer - Airbus Industrie, a "Groupement
d'Interet Economique" established under "Ordonnance"
No. 67-821 dated September 23, 1967, of the Republic of
France.
1-4
<PAGE>
Material - as defined in Subclause 1.1 of Letter Agreement No. 1
to the Agreement.
Option Aircraft - any or all of the Airbus Industrie A320-200 or
A319-l00 (when applicable) model aircraft on option order by the
Buyer pursuant to the terms and conditions contained in Letter
Agreement No. 3 hereto, together with all components, equipment,
parts and accessories installed in or on such aircraft and the
Propulsion Systems installed thereon upon delivery.
ORIX - ORIX Aviation Systems Limited, whose address is Block 3
Harcourt Center, Harcourt Road, Dublin 2, Ireland.
Predelivery Payment - any payment made against the Final Contract
Price of an Aircraft according to the schedule set forth in
Subclause 6.2 of this Agreement.
Predelivery Payment Reference Price - as defined in Subclause 6.2.4
of this Agreement.
Product Support Agreements - as referred to in Subclause 17.1.1 of
this Agreement.
Propulsion Systems - a set of either (1) CFM 56-5A-3 engines, (2)
IAE V2527-A5 engines, (3) CFM 56-5A-5 engines or (4) IAE V2524-A5
engines, to be installed on an Aircraft or installed on an Aircraft
at delivery, each composed of the powerplant (as such term is
defined in Chapters 70-80 of ATA Specification 100 (Revision 21),
but limited to the equipment, components, parts and accessories
included in the powerplant, as so defined), that have been sold to
the Manufacturer by International Aero Engines or CFM International
(as applicable), and a nacelle and thrust reverser for each such
powerplant, as applicable.
Replacement BFE - as defined in Subclause 18.3.3 of this Agreement.
SCN - as defined in Subclause 3.1 of this Agreement.
Service Life Policy - as referred to in Subclause 12.2 of this
Agreement.
Specification - as defined in Subclause 2.2 of this Agreement.
Supplemental Credit - as defined in Subparagraph 7.7.2 of
Letter Agreement No. 2 to the Agreement.
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Technical Publications - as defined in Subclause 14.1 of this
Agreement.
Termination Event - as defined in Clause 21 of this Agreement.
Third Party - as defined in Paragraph 10 of Letter Agreement No.
3 to this Agreement.
Tooling Credit - as defined in Subparagraph 7.7.1 of Letter
Agreement No. 2 to the Agreement.
Tooling Equipment - as defined in Subparagraph 7.7.1 of Letter
Agreement No. 2 to the Agreement.
Transaction Security Agreements - as defined in Clause 21.3(b) of
this Agreement.
Upfront Support Package - as defined in Subparagraph 7.2.1 of
Letter Agreement No. 2 to the Agreement.
Upfront Technical Publications - as defined in Subparagraph 7.3 of
Letter Agreement No. 2 to the Agreement.
Upfront Training - as defined in Subparagraph 7.5 of Letter
Agreement No. 2 to the Agreement.
Vendor - each manufacturer (other than the manufacturer of the
Propulsion Systems) of a component, equipment, accessory or part
installed in an Aircraft at its delivery to the Buyer under this
Agreement, or any replacement therefor, other than a Warranted
Part, and listed in the Vendor Product Support Agreements manual
referred to in Subclause 12.3.1 of this Agreement.
Vendor Component - as defined in Subclause 12.4.3 of this
Agreement.
Vendor Parts - as defined in Subclause 12.3.1 of this Agreement.
Warranted Part - as defined in Subclause 12.1.1 of this Agreement.
Warranty Claim - as defined in Subclause 12.1.6(v) of this
Agreement.
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<PAGE>
Working Day - with respect to any action to be taken hereunder, a
day other than a Saturday, Sunday or other day designated as a
holiday in the jurisdiction in which such action is required to be
taken.
The terms "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement, and not a particular Clause
thereof.
Technical and trade items not otherwise defined herein will have
the meanings assigned to them as generally accepted in the aircraft
manufacturing industry.
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2 - SALE AND PURCHASE
2.1 General
The Seller shall cause to be manufactured and shall sell and
deliver, and the Buyer shall buy and take delivery of, the Aircraft
subject to the terms and conditions contained in this Agreement.
2.2 Specification
The Aircraft shall be manufactured in accordance with the A320-200
Standard Specification, Document No. D.000.02000, Issue 3, dated
May 4, 1992, including Revision No. 1 dated January 27, 1994, with
the maximum take-off weight increased to 75.5 metric tons (the
"Standard Specification"). Such Standard Specification, a copy of
which is annexed hereto as Exhibit "A-l" to this Agreement, as
amended by the estimated change orders set forth in Exhibit "B"
hereto is hereinafter referred to as the "Specification." The
Specification may be further modified from time to time pursuant to
the provisions of Clause 3 below.
2.3 Certification
Prior to the delivery of the first Aircraft, the Seller shall
obtain or cause to be obtained a US FAA Type Certificate (transport
category) for the Aircraft pursuant to Part 21 and in compliance
with the applicable provisions of Part 25 of the US Federal
Aviation Regulations.
Each Aircraft shall be delivered to the Buyer with the Certificate
of Airworthiness for Export issued by the DGAC and in a condition
enabling the Buyer (or a person eligible to obtain such certificate
under then applicable law) to obtain at the time of delivery a
Standard Airworthiness Certificate issued pursuant to Part 21 of
the US Federal Aviation Regulations. Subject to the other terms of
this Agreement, the Seller shall have no obligation, whether
before, at or after delivery of any Aircraft, to make any
alterations to such Aircraft to enable such Aircraft to meet FAA
requirements for specific operation on routes unique to the Buyer,
except to the extent the specific operational requirements were
mutually agreed as part of the Specification.
Except as set forth in this Subclause 2.3, the Seller shall not be
required to obtain any other certificate or approval with respect
to the Aircraft.
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3 - CHANGES
3.1 Specification Change Notices
The Specification may be amended from time to time by a
Specification Change Notice, a written agreement between the
parties (each such Specification Change Notice being herein called
an "SCN" and being in the form of Exhibit "C" hereto). Each SCN
shall set forth in detail the particular changes to be made in the
Specification, and the effect, if any, of such changes on design,
performance, weight, balance, time of delivery, Buyer Furnished
Equipment and price of each Aircraft affected thereby and
interchangeability or replaceability of parts. SCN's shall not be
binding on either party until signed by persons duly authorized in
writing by the Buyer and the Seller, but upon being so signed shall
constitute amendments to this Agreement.
3.2 Development Changes
The Specification shall also be revised by the Seller without an
SCN or the Buyer's consent to incorporate Manufacturer-decided
changes that are deemed necessary or useful to correct defects,
improve the Aircraft or its process of manufacture, prevent delay,
to ensure compliance with this Agreement, or to comply with any
applicable statutory or regulatory requirement and that do not
either increase the price, adversely affect the delivery, overall
dimensions, guaranteed weight, maintenance requirements or
performance of the Aircraft or adversely change the
interchangeability or replaceability requirements of the
Specification with respect to parts (hereinafter called
"Development Changes").
3.3 Requests and Approvals
In the event that the Buyer files a Request for Change ("RFC") with
the Seller and the RFC does not subsequently become an SCN for any
reason, such RFC will be cancelled without charge to the Buyer. In
the event that the Buyer requests the Seller in writing to
incorporate a proposed change (excluding Development Changes) in an
Aircraft and the Seller agrees to such request and properly
initiates or performs work related to such change, but the change
is not subsequently made the subject of an SCN for any reason
(other than (i) the Seller's unreasonable refusal to sign the SCN
or otherwise acting in bad faith or (ii) the Buyer's good faith
refusal to sign the SCN due to the cost or lead time thereof,
provided such refusal is due to the
3-1
<PAGE>
actual or estimated cost or lead time not having been provided to
the Buyer at an earlier date and not having been accepted in
writing by the Buyer), the Buyer will pay to the Seller the full
cost of design and other work resulting from such request and
incurred by the Seller, at the Seller's then existing labor and
materials cost. In the event that the Buyer requests the Seller in
writing to proceed with a proposed change and such change has been
initiated before any requisite approval of such change of the DGAC
and FAA has been obtained and subsequently such DGAC or FAA
approval is not obtained, any SCN which will have been executed in
connection with such proposed change will be deemed cancelled at
the Buyer's cost.
3.4 Specification Changes Before Delivery
If, pursuant to the promulgation of any applicable law or
regulation, any change in the Specification has to be made before
delivery of any Aircraft to enable the Buyer to obtain a Standard
Airworthiness Certificate for such Aircraft referred to in
Subclause 2.3, the Seller shall make the required change or
modification to the Aircraft. For each such change, the parties
shall sign an SCN specifying the effect, if any, of such change on
design, performance, weight, balance, time of delivery, Buyer
Furnished Equipment and price of each Aircraft affected thereby and
interchangeability or replaceability of parts. If the Seller
anticipates that the scheduled delivery of any Aircraft will be
postponed by reason of such change, the delivery date of such
Aircraft as provided in Subclause 9.1 shall be extended to the
extent of such postponement, as set forth in the SCN covering such
change.
The effect on price of such a change shall be borne by the Seller,
when such law or regulation is to be complied with before delivery
of each relevant Aircraft; except for changes applicable to
Propulsion Systems, which will be borne by the party responsible
therefor (excluding in all events the Seller) in accordance with
such arrangements as may be made separately between the Buyer and
the manufacturer of the Propulsion Systems.
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<PAGE>
3.5 Specification Changes After Delivery
Subclause 3.4 shall not require the Seller to make any changes or
modifications to or to make any payments or take any other action
with respect to any Aircraft delivered to the Buyer before any law
or regulation referred to in Subclause 3.4 is to be complied with.
Any such changes or modifications made to an Aircraft after its
delivery to the Buyer shall be at the Buyer's expense.
3-3
<PAGE>
4 - PRICE
4.1 Base Price of the Aircraft
The "Base Price" of each Aircraft is the sum of:
(i) the Base Price of the Airframe, and
(ii) the Base Price of the Propulsion Systems.
4.1.1 Base Price of the Airframe
4.1.1.1 The Base Price of the Airframe shall be the sum of the Base Prices
set forth below in (i) and (ii):
(i) The Base Price of the Standard Airframe, as defined in the
Standard Specification set forth in Exhibit "A-l" hereto
(excluding Buyer Furnished Equipment, Propulsion Systems and
SCNs), at delivery conditions prevailing in January 1995,
which is:
[***]
(ii) The Base Price of the estimated change orders to the Standard
Specification (SCN estimate) referred to in Exhibit "B"
hereto, at delivery conditions prevailing in January 1995,
which is estimated at:
[***]
4.1.1.2 The Base Price of the Airframe of each Aircraft shall be revised to
the actual delivery date of such Aircraft in accordance with
Subclause 5.1 hereto.
4.1.2 Base Price of the Propulsion Systems
4.1.2.1 The Base Price of the CFM 56-5A-3 Propulsion Systems is the sum of
(i), (ii) and (iii) below:
(i) Base Price of the CFM 56-5A-3 Engines
The Base Price of a set of two (2) CFM International CFM
56-5A-3 engines and additional standard equipment at delivery
conditions prevailing in January 1995, which is:
4-1
<PAGE>
[***]
Said Base Price has been calculated with reference to the
Reference Price indicated by CFM International of [***]
in accordance with economic conditions prevailing in
October 1985.
Said Reference Price is subject to adjustment to the date of
delivery of the Aircraft in accordance with the CFM
International Price Revision Formula set forth in Exhibit
"H-1" of this Agreement.
(ii) Base Price of Nacelles and Thrust Reversers
The Base Price of a set of two (2) nacelles and two (2) thrust
reversers for the CFM 56-5A-3 Propulsion Systems at delivery
conditions prevailing in January 1995, which is:
[***]
Said Base Price is subject to adjustment to the date of
delivery of the Aircraft in accordance with the Airframe Price
Revision Formula set forth in Exhibit "G" of this Agreement.
(iii) Base Price of the Engine Configuration Option
The Base Price of the configuration option for the CFM 56-5A-3
Propulsion Systems at delivery conditions prevailing in
January 1995, which is:
[***]
4-2
<PAGE>
Said Base Price is subject to adjustment to the date of
delivery of the Aircraft in accordance with the Airframe Price
Revision Formula set forth in Exhibit "G" of this Agreement.
4.1.2.2 The Base Price of the IAE V2527-A5 Propulsion Systems is the sum of
(i) and (ii) below:
(i) Base Price of the IAE Propulsion Systems
The Base Price of a set of two (2) IAE V2527-A5 Propulsion
Systems, including related equipment, nacelles and thrust
reversers, at delivery conditions prevailing in January 1995
is:
[***]
Said Base Price has been calculated with reference to the
Reference Price indicated by International Aero Engines of
[***] in accordance with theoretical economic conditions
prevailing in March 1988.
Said Reference Price is subject to adjustment to the date of
delivery of the Aircraft in accordance with the IAE Price
Revision Formula set forth in Exhibit "I-1" of this Agreement.
(ii) Base Price of the Engine Configuration Option
The Base Price of the configuration option for the IAE
V2527-A5 Propulsion Systems at delivery conditions prevailing
in January 1995 is:
[***]
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<PAGE>
Said Base Price is subject to adjustment to the date of
delivery of the Aircraft in accordance with the Airframe Price
Revision Formula set forth in Exhibit "G" of this Agreement.
4.2 Final Contract Price
The Final Contract Price of an Aircraft shall be the sum of:
(i) the Base Price of the Airframe constituting a part of such
Aircraft, together with the Base Price of the engine
configuration option and the Base Price of nacelles and thrust
reversers (when applicable), as adjusted to the date of
delivery of such Aircraft in accordance with Subclause 5.1 of
this Agreement;
(ii) the price (as of delivery conditions prevailing in January
1995) of any SCNs constituting a part of such Aircraft that
are entered into pursuant to Clause 3 after the date of
execution of this Agreement, as adjusted to the date of
delivery of such Aircraft in accordance with Subclause 5.1 of
this Agreement;
(iii) the Reference Price of the installed Propulsion Systems
(excluding the engine configuration option and the nacelles
and thrust reversers, when applicable), constituting a part of
such Aircraft, as adjusted to the date of delivery of such
Aircraft in accordance with Subclause 5.2 of this Agreement;
and
(iv) any other amount resulting from any other provisions of this
Agreement and/or any other written agreement between the Buyer
and the Seller relating to the Aircraft and specifically
making reference to the Final Contract Price of an Aircraft.
4.3 Validity of Propulsion Systems Prices
It is understood that the prices cited above and the price revision
formulas referred to in Clause 5 concerning the Propulsion Systems
and related equipment are based on information received from the
Propulsion Systems manufacturers and remain subject to any
modifications that might be communicated by said Propulsion Systems
manufacturers to the Seller, the Manufacturer and the Buyer.
4-4
<PAGE>
4.4 Taxes, Duties and Imposts
4.4.1 The Seller shall bear and pay the amount of any and all taxes,
duties, imposts or similar charges of any nature whatsoever that are
(i) imposed upon the Buyer, (ii) imposed upon the Seller with an
obligation on the Buyer to withhold or collect the amount thereof
from the Seller or (iii) imposed upon the Buyer with an obligation
on the Seller to withhold or collect such amount from the Buyer, and
that are levied, assessed, charged or collected for or in connection
with the fabrication, manufacture, modification, assembly, sale,
delivery, use of or payment under this Agreement for any Aircraft,
component, accessory, equipment or part delivered or furnished
hereunder, provided such taxes, duties, imposts or similar charges
have been levied, assessed, charged or collected by the Republic of
France under laws promulgated and enforceable in the Republic of
France.
4.4.2 The Buyer shall bear and pay the amount of any and all taxes,
duties, imposts or similar charges of any nature whatsoever that are
(i) imposed upon the Seller, (ii) imposed upon the Buyer with an
obligation on the Seller to collect the amount thereof for the Buyer
or (iii) imposed upon the Seller with an obligation for the Buyer to
withhold such amount from the Seller, and that are levied, assessed,
charged or collected for or in connection with the fabrication,
manufacture, modification, assembly, sale, delivery or use of or
payment under this Agreement for any Aircraft, component, accessory,
equipment or part delivered or furnished hereunder, provided such
taxes, duties, imposts or similar charges have been levied,
assessed, charged or collected under laws promulgated and
enforceable in countries other than the Republic of France under
laws promulgated and enforceable in the Republic of France.
4.4.3 The Seller shall in its own name do all things necessary with
respect to the exportation of the Aircraft from France and shall pay
any customs duties, taxes and fees required to be paid with respect
to such exportation of the Aircraft.
4.4.4 The Buyer shall in its own name do all things necessary with respect
to the importation of the Aircraft into any country or jurisdiction
and shall pay any customs duties, taxes and fees required to be paid
with respect to such importation of the Aircraft.
4-5
<PAGE>
5 - PRICE REVISION
5.1 Airframe Price Revision Formula
The Base Price of the Airframe of each Aircraft, together with the
Base Price of the engine configuration option and the Base Price of
nacelles and thrust reversers (when applicable), shall be revised in
accordance with the revision formula set forth in Exhibit "G" hereto
to the month of delivery of such Aircraft.
5.2 Propulsion Systems Price Revision Formula
The Base Price of the Propulsion Systems (excluding the engine
configuration option and the nacelles and thrust reversers, when
applicable) shall be revised to the month of delivery of the
Aircraft on which the Propulsion Systems are installed in accordance
with the revision formula set forth in Exhibit "H" or Exhibit "I"
(as applicable) hereto.
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<PAGE>
6 - PAYMENT TERMS
6.1 Unless set forth to the contrary in Letter Agreement No. 4 to the
Agreement, the Buyer shall pay all sums due hereunder in immediately
available funds in United States dollars by credit to Credit
Lyonnais, New York Branch, for transfer by the Seller to Credit
Lyonnais to the Seller's account with Credit Lyonnais at 1,
Esplanade Compans Caffarelli, 31000 Toulouse, France, or to such
other account as the Seller shall designate by notice to the Buyer.
6.2 Predelivery Payments
6.2.1 Predelivery Payments shall be paid by the Buyer to the Seller for
each Aircraft and will, in the aggregate, amount to (i) [***] of the
Predelivery Payment Reference Price defined in Subclause 6.2.4 below
for each of the Firm Aircraft and (ii) [***] of the Predelivery
Payment Reference Price defined in Subclause 6.2.4 below for each of
the Option Aircraft.
6.2.2 Predelivery Payments for each of the Firm Aircraft shall be paid
according to the following schedule:
Percentage of
Predelivery
Payment
Reference Price
---------------
- first payment, received
on signature of the LOI [***]
- second payment, no later than
[***] [***]
- third payment, no later than
[***] [***]
- fourth payment, no later than
[***] [***]
- fifth payment, 18 months
prior to delivery [***]
- sixth payment, 15 months
prior to delivery [***]
- seventh payment, 12 months
prior to delivery [***]
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<PAGE>
- eighth payment, 6 months
prior to delivery [***]
- ninth payment, 3 months
prior to delivery [***]
TOTAL PAYMENT PRIOR TO DELIVERY [***]
The balance of the Final Contract Price shall be paid to the Seller
at delivery of each of the Firm Aircraft.
6.2.3 Predelivery Payments for each of the Option Aircraft shall be paid
according to the following schedule:
Percentage of
Predelivery Payment
Reference Price (or
USD)
- first payment, received
on signature of the LOI [***]
- second payment, no later than
[***] [***]
- third payment, no later than
[***] [***]
- fourth payment, upon Option
Aircraft exercise but not later
than 24 months prior to delivery [***]
- fifth payment, 18 months prior
to delivery [***]
- sixth payment, 15 months prior
to delivery [***]
- seventh payment, 12 months prior
to delivery [***]
- eighth payment, 6 months prior
to delivery [***]
- ninth payment, 3 months prior
to delivery [***]
TOTAL PAYMENT PRIOR TO DELIVERY [***]
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<PAGE>
The balance of the Final Contract Price shall be paid to the Seller
at delivery of each of the Option Aircraft.
6.2.4 The Predelivery Payment Reference Price is defined as:
A = Pb (1 + 0.05 N)
where
A = the Predelivery Payment Reference Price for Aircraft
scheduled to be delivered in calendar year T pursuant to
this Agreement.
Pb = the Base Price of the Aircraft as defined in Clause 4
above.
N = (T - 1995).
T = the scheduled year of delivery of the relevant Aircraft
pursuant to this Agreement.
6.3 Payment of Final Contract Price
Concurrently with the delivery of each Aircraft, the Buyer shall pay
to the Seller the Final Contract Price thereof, less the total
amount of the Predelivery Payments theretofore received by the
Seller in cash for such Aircraft under Subclause 6.2 above. The
Seller's receipt of the full amount of all Predelivery Payments and
of the Final Contract Price, less all applicable credits, shall be a
condition precedent to the Seller's obligation to deliver such
Aircraft.
6.4 Payment of Other Amounts
6.4.1 Unless otherwise expressly provided for herein, any payments due
hereunder or in respect of an Aircraft in addition to those referred
to in Subclauses 6.2 and 6.3 above shall be paid by the Buyer
concurrently with the delivery of the corresponding Aircraft or, if
invoiced after delivery of such Aircraft, within one (1) month after
the invoice date.
6.4.2 Notwithstanding any other rights the Seller may have at contract or
at law, the Buyer and the Seller hereby agree that should any amount
(whether under the Agreement or under any other agreement and
whether at the stated maturity of such amount, by acceleration or
otherwise) become due and payable by the Buyer or its Affiliates,
and not be paid in full in immediately
6-3
<PAGE>
available funds on the date due, then the Seller shall have the
right to debit and apply, in whole or in part, the unused amount of
any credit made available by the Seller to the Buyer against such
unpaid amount. The Seller shall promptly notify the Buyer in writing
before such debiting and application.
6.5 Overdue Payments
If any payment due the Seller is not received by the Seller on the
date or dates as agreed upon between the Buyer and the Seller, the
Seller shall have the right to claim from the Buyer and the Buyer
shall promptly pay to the Seller upon receipt of such claim interest
at the rate of LIBOR for six-month deposits of US dollars plus three
hundred (300) basis points on the amount of such overdue payment, to
be calculated from and including the due date of such payment to
(but excluding) the date such payment is received by the Seller. The
Seller's right to receive such interest shall be in addition to any
other rights of the Seller hereunder or at law.
6.6 Refund of Predelivery Payments
The Buyer shall have no right to any refund of any deposit or
Predelivery Payment received by the Seller, except as provided under
Clauses 10 and 11 of this Agreement.
6.7 Proprietary Interest
The Buyer shall not, by virtue of anything contained in this
Agreement (including, without limitation, any Predelivery Payments
hereunder, or any designation or identification by the Seller of a
particular Aircraft as an Aircraft to which any of the provisions of
this Agreement refers), and notwithstanding any provision of law to
the contrary, acquire any proprietary, insurable or other interest
whatsoever in any Aircraft prior to delivery of and payment for such
Aircraft as provided in this Agreement.
6.8 Tender of Delivery
In addition to any other rights and remedies available to the
Seller, the Seller shall not be obligated to tender delivery of any
Aircraft for which the Buyer has not paid all Predelivery Payments
to the Buyer and shall have no further liability to the Buyer with
respect thereto, if the Buyer fails to make any Predelivery Payment
due pursuant to or generally is in default under this Agreement.
6-4
<PAGE>
6.9 Payment in Full
The Buyer's obligation to make payments to the Seller hereunder
shall not be affected by and shall be determined without regard to
any setoff, counterclaim, recoupment, defense or other right that
the Buyer may have against the Seller or any other person and all
such payments shall be made without deduction of any kind. The Buyer
shall ensure that the sums received by the Seller under this
Agreement shall be equal to the full amounts expressed to be due the
Seller hereunder, without deduction on account of and free from any
and all taxes, levies, imposts, duties or charges of whatever nature
imposed on the Buyer, except that if the Buyer is compelled by law
to make any such deduction the Buyer shall pay such additional
amounts as may be necessary so that the net amount received by the
Seller after such deduction shall equal the amounts that would have
been received in the absence of such deduction.
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<PAGE>
7 - PLANT REPRESENTATIVES - INSPECTION
7.1 Inspection Procedures
7.1.1 All work to be carried out on the Aircraft and all materials and
parts thereof shall at all reasonable times during business hours be
open to inspection by duly authorized representatives of the Buyer
or its designee at the respective works of the Associated
Contractors and, if possible, at the works of their respective
subcontractors, and such representatives shall, to carry out the
aforesaid inspection, have access to such relevant technical data as
is reasonably necessary for this purpose (except that, if access to
any part of the respective works where construction is in progress
or materials or parts are stored is restricted for security reasons,
the Associated Contractors shall be allowed a reasonable time to
make the items available for inspection elsewhere). The actual
detailed inspection of the Aircraft, materials and parts thereof
shall take place only in the presence of the respective inspection
department personnel of the Associated Contractors or their
subcontractors. The procedures for such inspections shall be agreed
upon with the Buyer prior to any inspection.
7.1.2 For the purposes of Subclause 7.1.1 above and commencing with the
date of this Agreement until the delivery of the last Aircraft, the
Seller shall furnish free-of-charge adequate secretarial assistance
and suitable space, office equipment and facilities in or
conveniently located with respect to Aerospatiale's works in
Toulouse, France, for the use of not more than four (4)
representatives of the Buyer during the aforementioned period. The
Seller shall provide telecommunications facilities at the Buyer's
cost to be invoiced on a monthly basis.
7.1.3 All inspections, examinations and discussions with the Seller's, the
Associated Contractors' or their respective subcontractors'
engineering or other personnel by the Buyer and its said
representatives shall be performed in such manner as not to delay or
hinder the work to be carried out on the Aircraft or the proper
performance of this Agreement. In no event shall the Buyer or its
representatives be permitted to inspect any aircraft other than the
Aircraft.
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<PAGE>
7.2 INDEMNITY
THE SELLER SHALL INDEMNIFY AND HOLD HARMLESS THE BUYER, ITS
DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES FROM AND AGAINST ALL
LIABILITIES, DAMAGES, LOSSES, COSTS AND EXPENSES (I) FOR ALL
INJURIES TO AND DEATHS OF PERSONS (EXCEPTING INJURIES TO OR DEATH OF
THE BUYER'S REPRESENTATIVES PARTICIPATING IN ANY TESTS, CHECKOUTS OR
INSPECTIONS OR CONTROLS UNDER THIS CLAUSE 7) CAUSED BY THE BUYER OR
ITS REPRESENTATIVES AND (II) FOR ANY LOSS OF OR DAMAGE TO PROPERTY
(EXCEPTING LOSS OF OR DAMAGE TO PROPERTY OF THE BUYER'S SAID
REPRESENTATIVES) CAUSED BY THE BUYER OR ITS REPRESENTATIVES, IN
EITHER CASE WHEN ARISING OUT OF OR IN CONNECTION WITH ANY SUCH
TESTS, CHECKOUTS, INSPECTIONS OR CONTROLS UNDER THIS CLAUSE 7. THIS
INDEMNITY OF THE SELLER SHALL NOT APPLY FOR ANY SUCH LIABILITIES,
DAMAGES, LOSSES, COSTS OR EXPENSES ARISING OUT OF OR CAUSED BY THE
NEGLIGENCE OR WILLFUL MISCONDUCT OF THE BUYER'S SAID
REPRESENTATIVES.
THE BUYER SHALL INDEMNIFY AND HOLD HARMLESS THE SELLER, THE
MANUFACTURER, EACH OF THE ASSOCIATED CONTRACTORS AND THEIR
RESPECTIVE SUBCONTRACTORS AND THEIR RESPECTIVE OFFICERS, AGENTS AND
EMPLOYEES FROM AND AGAINST ALL LIABILITIES, DAMAGES, LOSSES, COSTS
AND EXPENSES (I) FOR INJURIES TO OR DEATHS OF THE BUYER'S SAID
REPRESENTATIVES PARTICIPATING IN ANY TESTS, CHECKOUTS, INSPECTIONS
OR CONTROLS UNDER THIS CLAUSE 7, (II) FOR LOSS OF OR DAMAGE TO
PROPERTY OF THE BUYER'S SAID REPRESENTATIVES OR (III) ARISING OUT OF
OR CAUSED BY THE WILLFUL MISCONDUCT OR NEGLIGENCE OF THE BUYER'S
SAID REPRESENTATIVES. WITH RESPECT TO SUBCLAUSES (I) AND (II) OF THE
PRECEDING SENTENCE, THE BUYER SHALL NOT BE OBLIGATED TO INDEMNIFY OR
HOLD HARMLESS THE SELLER WHERE THE LIABILITIES, DAMAGES, LOSSES,
COSTS OR EXPENSES ARISE FROM THE SELLER'S NEGLIGENCE OR WILLFUL
MISCONDUCT.
IN THE EVENT ANY CLAIM IS MADE OR LAWSUIT IS BROUGHT AGAINST EITHER
PARTY (OR ITS RESPECTIVE INDEMNITEES) FOR DAMAGES FOR DEATH OR
INJURY, OR FOR PROPERTY DAMAGE, THE LIABILITY FOR WHICH HAS BEEN
ASSUMED BY THE OTHER PARTY PURSUANT TO THIS SUBCLAUSE 7.2, THE
FORMER (INDEMNITEE) SHALL PROMPTLY GIVE NOTICE TO THE OTHER PARTY
(INDEMNITOR), AND THE INDEMNITOR SHALL ASSUME AND CONDUCT THE
DEFENSE THEREOF, AND SHALL HAVE THE RIGHT TO EFFECT ANY SETTLEMENT
WHICH FINALLY EXTINGUISHES SUCH CLAIM AS AGAINST THE INDEMNITEE, AND
THE INDEMNITOR AGREES TO INDEMNIFY AND HOLD THE INDEMNITEE HARMLESS
FROM ANY LOSSES, LIABILITIES, OR EXPENSES BY REASON OF SUCH
SETTLEMENT. IN THE EVENT THAT THE INDEMNITOR FAILS TO ASSUME AND
CONDUCT THE DEFENSE OF
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THE CLAIM OR LAWSUIT WHEN IT WAS OBLIGATED TO DO SO, THEN THE
INDEMNITEE SHALL HAVE THE RIGHT TO PROCEED WITH DEFENSE OF THE CLAIM
OR LAWSUIT AS IT DEEMS APPROPRIATE AND SHALL HAVE AN ACTION AGAINST
THE INDEMNITOR FOR ANY JUDGMENTS, SETTLEMENTS, COSTS OR EXPENSES
INCURRED IN CONDUCTING SAID DEFENSE. IF THE INDEMNITEE BELIEVES IT
HAS A DEFENSE TO THE CLAIM OR LAWSUIT AND THE INDEMNITOR HAS NOT
RAISED SUCH DEFENSE, THE INDEMNITEE MAY SUGGEST SUCH DEFENSE TO THE
INDEMNITOR AND THE INDEMNITOR SHALL THEN CONSIDER SUCH DEFENSE IN
GOOD FAITH. FOR THE PURPOSE OF THIS SUBCLAUSE 7.2, A CLAIM OR
LAWSUIT AGAINST THE MANUFACTURER OR ANY OF THE ASSOCIATED
CONTRACTORS OR ANY OF THEIR RESPECTIVE SUBCONTRACTORS OR ANY OF
THEIR RESPECTIVE DIRECTORS, OFFICERS, AGENTS OR EMPLOYEES SHALL BE
DEEMED TO BE A LAWSUIT AGAINST THE SELLER.
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8 - BUYER'S ACCEPTANCE
8.1 Acceptance Procedures
8.1.1 The Seller or any Affiliate thereof acting as the Seller's designee
shall give to the Buyer not less than thirty (30) days' notice of
the proposed time when the Buyer's acceptance tests will be
conducted, and, in the event that the Buyer elects to attend the
said tests, the Buyer will cooperate in complying with the
reasonable requirements of the Seller with the intention of
completing all tests within five (5) Working Days after
commencement. The tests shall take place at Aerospatiale's works
near Toulouse, France (or at such other facilities of the Associated
Contractors or any affiliates thereof as the Seller may specify) and
shall be carried out by the personnel of the Manufacturer
(accompanied, if the Buyer so wishes, by representatives of the
Buyer up to a total of four (4) acting as observers, of whom not
more than two (2) shall have access to the cockpit at any one time).
During flight tests, these representatives shall comply with the
instructions of the Manufacturer's representatives. The Manufacturer
will not normally be required in the course of such acceptance tests
to fly any of the Aircraft for more than an aggregate of three (3)
hours.
8.1.2 The Seller will cause ASC, at no cost to the Buyer, to brief two (2)
pilots and provide one (1) free-of-charge four-hour (4-hour)
simulator session for each such two (2) pilots prior to acceptance
of the first Aircraft. This briefing shall provide specific
information related to acceptance flights.
8.1.3 The acceptance tests shall demonstrate the satisfactory functioning
of the Aircraft. The successful completion of such acceptance tests
in accordance with the Manufacturer's aircraft acceptance procedure
shall also be deemed to demonstrate compliance with the
Specification. In the event that the Buyer does not attend the tests
or fails to so cooperate, the Seller may complete them in the
absence of the Buyer, whereupon the Buyer shall be deemed to have
accepted the tests, if such tests are reasonably deemed satisfactory
by the Seller, and the Seller shall furnish such data with respect
to such tests as the Buyer may reasonably request.
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8.1.4 If the acceptance tests for an Aircraft are not successfully
completed or there is a defect, the Buyer, within three (3) days
after such tests, shall give notice to the Seller specifying such
unsuccessful completion or defect. Thereafter the Seller shall, at
its cost, without hindrance from the Buyer, carry out any necessary
changes and, as soon as practicable thereafter, to resubmit the
Aircraft for new acceptance tests to demonstrate the elimination of
the defect, such tests to be held and carried out in accordance with
this Subclause 8.1.
8.2 Seller's Use of Aircraft
The Seller shall be entitled to use, without compensation to the
Buyer or other liability, each Aircraft prior to its delivery as may
be necessary to obtain the certificates required under Clause 2
hereof, and such use shall not affect the Buyer's obligation to
accept delivery of any Aircraft hereunder.
8.3 Certificate of Acceptance
When the Aircraft is "ready for delivery" as defined below in
Subclause 9.2, the Buyer will forthwith give to the Seller a signed
Certificate of Acceptance in the form attached as Exhibit "E" in
respect of the relevant Aircraft. Should the Buyer fail to so
deliver the said Certificate when conditions relating thereto have
been satisfied, then the Buyer shall be deemed to be in default as
though it had without warrant rejected delivery of such Aircraft
when duly tendered to it hereunder and shall thereafter bear all
costs and expenses resulting from such delay in delivery.
8.4 Finality of Acceptance
The Buyer's acceptance of delivery of each Aircraft shall be
evidenced by the Buyer's execution and delivery to the Seller of the
Certificate of Acceptance in the form attached to this Agreement as
Exhibit "E" and shall occur when the Aircraft is "ready for
delivery" as required by Subclauses 8.3 and 9.2 hereof. The Buyer's
execution of the Certificate of Acceptance and the Buyer's
acceptance of the Aircraft shall constitute a waiver of the Buyer's
right to revoke such acceptance of the Aircraft for any reason,
whether known or unknown at the time of acceptance, provided,
however, that the Buyer's execution of the Certificate of Acceptance
shall not constitute a waiver of any of the Buyer's rights or
remedies in the enforcement of any and all of the Seller's
obligations under this Agreement.
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8.5 INDEMNITY
THE SELLER SHALL INDEMNIFY AND HOLD HARMLESS THE BUYER, ITS
DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES FROM AND AGAINST ALL
LIABILITIES, DAMAGES, LOSSES, COSTS AND EXPENSES (I) FOR ALL
INJURIES TO AND DEATHS OF PERSONS (EXCEPTING INJURIES TO AND DEATHS
OF THE BUYER'S REPRESENTATIVES PARTICIPATING IN ANY GROUND OR FLIGHT
TESTS UNDER THIS CLAUSE 8) CAUSED BY THE BUYER OR ITS
REPRESENTATIVES AND (II) FOR ANY LOSS OF OR DAMAGE TO PROPERTY
(EXCEPTING LOSS OF OR DAMAGE TO PROPERTY OF THE BUYER'S SAID
REPRESENTATIVES) CAUSED BY THE BUYER OR ITS REPRESENTATIVES, IN
EITHER CASE WHEN ARISING OUT OF OR IN CONNECTION WITH THE OPERATION
OF THE AIRCRAFT DURING ANY GROUND OR FLIGHT TESTS UNDER THIS CLAUSE
8. THIS INDEMNITY OF THE SELLER SHALL NOT APPLY FOR ANY SUCH
LIABILITIES, DAMAGES, LOSSES, COSTS OR EXPENSES ARISING OUT OF OR
CAUSED BY THE NEGLIGENCE OR WILLFUL MISCONDUCT OF THE BUYER'S SAID
REPRESENTATIVES.
THE BUYER SHALL INDEMNIFY AND HOLD HARMLESS THE SELLER, THE
MANUFACTURER, EACH OF THE ASSOCIATED CONTRACTORS AND THEIR
RESPECTIVE SUBCONTRACTORS AND EACH OF THEIR RESPECTIVE DIRECTORS,
OFFICERS, AGENTS AND EMPLOYEES FROM AND AGAINST ALL LIABILITIES,
DAMAGES, LOSSES, COSTS AND EXPENSES (I) FOR INJURIES TO OR DEATHS OF
THE BUYER'S SAID REPRESENTATIVES PARTICIPATING IN ANY GROUND OR
FLIGHT TESTS UNDER THIS CLAUSE 8, (II) FOR LOSS OF OR DAMAGE TO
PROPERTY OF THE BUYER'S SAID REPRESENTATIVES OR (III) ARISING OUT OF
OR CAUSED BY THE WILLFUL MISCONDUCT OR NEGLIGENCE OF THE BUYER'S
SAID REPRESENTATIVES. WITH RESPECT TO SUBCLAUSES (I) AND (II) OF THE
PRECEDING SENTENCE, THE BUYER SHALL NOT BE OBLIGATED TO INDEMNIFY OR
HOLD HARMLESS THE SELLER WHERE THE LIABILITIES, DAMAGES, LOSSES,
COSTS OR EXPENSES ARISE FROM THE SELLER'S NEGLIGENCE OR WILLFUL
MISCONDUCT.
IN THE EVENT ANY CLAIM IS MADE OR LAWSUIT IS BROUGHT AGAINST EITHER
PARTY (OR ITS RESPECTIVE INDEMNITEES) FOR DAMAGES FOR DEATH OR
INJURY OR FOR PROPERTY DAMAGE, THE LIABILITY FOR WHICH HAS BEEN
ASSUMED BY THE OTHER PARTY PURSUANT TO THIS SUBCLAUSE 8.5, THE
FORMER (INDEMNITEE) SHALL PROMPTLY GIVE NOTICE TO THE OTHER PARTY
(INDEMNITOR), AND THE INDEMNITOR SHALL ASSUME AND CONDUCT THE
DEFENSE THEREOF, AND SHALL EFFECT ANY SETTLEMENT WHICH FINALLY
EXTINGUISHES SUCH CLAIM AS AGAINST THE INDEMNITEE, AND THE
INDEMNITOR AGREES TO INDEMNIFY AND HOLD THE INDEMNITEE HARMLESS FROM
ANY LOSSES, LIABILITIES, OR EXPENSES BY REASON OF SUCH SETTLEMENT.
IN THE EVENT THAT THE INDEMNITOR FAILS TO ASSUME AND CONDUCT THE
DEFENSE OF THE CLAIM OR LAWSUIT
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WHEN IT WAS OBLIGATED TO DO SO, THEN THE INDEMNITEE SHALL HAVE THE
RIGHT TO PROCEED WITH DEFENSE OF THE CLAIM OR LAWSUIT AS IT DEEMS
APPROPRIATE AND SHALL HAVE AN ACTION AGAINST THE INDEMNITOR FOR ANY
JUDGMENTS, SETTLEMENTS, COSTS OR EXPENSES INCURRED IN CONDUCTING
SAID DEFENSE. IF THE INDEMNITEE BELIEVES IT HAS A DEFENSE TO THE
CLAIM OR LAWSUIT AND THE INDEMNITOR HAS NOT RAISED SUCH DEFENSE, THE
INDEMNITEE MAY SUGGEST SUCH DEFENSE TO THE INDEMNITOR AND THE
INDEMNITOR SHALL THEN CONSIDER SUCH DEFENSE IN GOOD FAITH. FOR THE
PURPOSE OF THIS SUBCLAUSE 8.5, A CLAIM OR LAWSUIT AGAINST THE
MANUFACTURER OR ANY OF THE ASSOCIATED CONTRACTORS OR ANY OF THEIR
RESPECTIVE SUBCONTRACTORS OR ANY OF THEIR RESPECTIVE DIRECTORS,
OFFICERS, AGENTS OR EMPLOYEES SHALL BE DEEMED TO BE A LAWSUIT
AGAINST THE SELLER.
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9 - DELIVERY
9.1 Delivery Schedule
Subject to the provisions of this Agreement, the Seller shall have
the Aircraft ready for delivery at Aerospatiale's works near
Toulouse, France, and the Buyer shall accept the same, during the
months set forth below:
Firm Aircraft Delivery Date
No. 1: December 1998
No. 2: January 1999
No. 3: February 1999
No. 4: December 1999
Not later than thirty (30) days prior to the date scheduled for
acceptance tests for a particular Aircraft, the Seller shall give
the Buyer notice of the anticipated date on which such Aircraft will
be ready for delivery. Not later than fifteen (15) days prior to
such date notified to the Buyer, the Seller shall (i) confirm to the
Buyer that such anticipated delivery date is firm or (ii) in the
event the Seller cannot confirm such date as being firm, confirm a
new date, which shall be no more than two (2) Working Days in France
before or after the originally scheduled date.
9.2 Certificate of Airworthiness
Each Aircraft shall for the purpose of this Agreement be deemed to
be "ready for delivery" upon the satisfactory completion of its
acceptance tests and the issuance of a DGAC Certificate of
Airworthiness for Export in the "Transport Category" with respect
thereto and the compliance by the Seller with the other obligations
to be performed by it under Subclause 2.3 hereof.
9.3 Title
Title to and risk of loss of and damage to the Aircraft shall pass
to the Buyer upon delivery following execution of the Certificate of
Acceptance and upon payment of the Final Contract Price for such
Aircraft. The Seller will provide the Buyer with such appropriate
documents of title or other documents as the Buyer may reasonably
request.
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9.4 Overdue Payment or Flyaway
In the event that:
(i) the delivery of the Aircraft and payment of the Final Contract
Price for the Aircraft is delayed more than five (5) days
after the firm delivery date established pursuant to Subclause
9.1 due to any act or omission by the Buyer, or
(ii) within two (2) days after delivery of the Aircraft, in
accordance with this Agreement, the Buyer has failed to remove
such Aircraft for whatever reason (except for reasons directly
attributable to the Seller),
then the Buyer shall on demand reimburse the Seller for all
reasonable costs and expenses (including, without limitation, costs
and expenses attributable to storage, preservation and protection,
insurance and taxes) sustained by the Seller and resulting from any
such delay or failure. Such reimbursement will be in addition to any
other rights that the Seller may have under this Agreement as a
result of any such delay or failure.
9.5 Flyaway Expenses
Except for expenses to be borne by the Seller as provided in
Subclause 4.4 of or elsewhere in this Agreement, all expenses of and
in connection with flyaway from Aerospatiale's works shall be borne
by the Buyer.
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10 - EXCUSABLE DELAY
10.1 Scope
Neither the Seller nor the Manufacturer shall be responsible for or
be deemed to be in default on account of delays in delivery or
failure to deliver the Aircraft or otherwise in the performance of
this Agreement or any part hereof due to causes reasonably beyond
the Seller's, the Manufacturer's or any Associated Contractor's
control or not occasioned primarily by the Seller's, the
Manufacturer's or any Associated Contractor's fault or negligence
("Excusable Delay"), including, but not limited to: acts of God or
the public enemy, natural disasters, fires, floods, storms beyond
ordinary strength, explosions or earthquakes; epidemics or
quarantine restrictions; serious accidents; total or constructive
total loss; any law, decision, regulation, directive or other act
impacting directly or indirectly the performance of the Seller's
obligations under this Agreement (whether or not having the force of
law) of any government or of the Council of the European Community
or the Commission of the European Community or of any national,
Federal, State, municipal or other governmental department,
commission, board, bureau, agency, court or instrumentality,
domestic or foreign; governmental priorities, regulations or orders
affecting allocation of materials, facilities or a completed
Aircraft; war, civil war or warlike operations, terrorism,
insurrection or riots; failure of transportation; strikes or labor
troubles causing cessation, slow down or interruption of work,
provided such strikes or labor troubles are beyond the Seller's and
the Manufacturer's reasonable control or not occasioned by the
Seller's or the Manufacturer's fault or negligence; delay in
obtaining any airworthiness or type certification; inability after
due and timely diligence to procure materials, accessories,
equipment or parts; general hindrance in transportation; or failure
of a subcontractor or Vendor (except where such a failure is caused
by the fault or negligence of the Seller or the Manufacturer) to
furnish materials, components, accessories, equipment or parts.
It is expressly understood and agreed that each of (i) any delay
caused directly or indirectly by the action or inaction of the
Buyer, and (ii) delay in delivery or otherwise in the performance of
this Agreement by the Seller due in whole or in part to any delay in
or failure of the delivery of, or any other event or circumstance
relating to, the Propulsion Systems or Buyer Furnished Equipment,
shall constitute Excusable Delay for the Seller. The Seller shall as
soon as practicable after becoming aware of any delay falling
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within the provisions of this Subclause 10.1 (i) notify the Buyer of
such delay, of the probable extent thereof, and that such delay is
an anticipated delay such notification by the Seller to be a
condition precedent to the applicability of the provisions of this
Clause 10 and (ii) subject to the following provisions, as soon as
practicable after the removal of the cause or causes for delay,
resume the performance of those obligations affected under this
Agreement.
10.2 Unanticipated Delay
In the event that the delivery of any Aircraft shall be delayed by
reason of an Excusable Delay for a period of more than six (6)
months after the end of the calendar month in which delivery is
otherwise required hereunder, the Buyer shall be entitled to
terminate this Agreement with respect only to the Aircraft so
affected upon notice given to the Seller within thirty (30) days
after the expiration of such six (6) month period. In the event such
delay shall continue for an additional six (6) month period after
the expiration of such six (6) month period, either party shall have
the option to terminate this Agreement with respect to the Aircraft
so affected upon notice given to the other within thirty (30) days
after the end of such additional six (6) month period. Such
termination shall discharge all obligations and liabilities of the
parties hereunder with respect to such affected Aircraft, except
that the Seller shall repay to the Buyer an amount equal to the
entire amount of any Predelivery Payments received from the Buyer in
cash hereunder with respect to such affected Aircraft, with interest
at LIBOR for six-month deposits of US dollars plus fifty (50) basis
points to be calculated from (and including) the due date of such
Predelivery Payment to (but excluding) the date payment is received
by the Buyer.
10.3 Anticipated Delay
In respect of any Aircraft, the Seller may conclude that Excusable
Delays will (i) cause delay in delivery of such Aircraft for a
period of more than six (6) months after the end of the calendar
month in which delivery is otherwise required or (ii) prevent
delivery of such Aircraft. In such event, in good faith and in
accordance with its normal scheduling procedures, the Seller will
give notice to the Buyer of either (i) such delay and its related
rescheduling reflecting such delay(s) or (ii) such nondelivery.
Within thirty (30) days after the Buyer's receipt of such notice,
either party may terminate this Agreement as to such rescheduled or
nondeliverable Aircraft by giving notice to the other party. Such
termination shall discharge
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all obligations and liabilities of the parties hereunder with
respect to such affected Aircraft, except that the Seller shall
repay to the Buyer an amount equal to the entire amount of any
Predelivery Payment received from the Buyer in cash hereunder with
respect to such affected Aircraft, with interest at LIBOR for
six-month deposits of US dollars plus fifty (50) basis points to be
calculated from (and including) the due date of such Predelivery
Payment to (but excluding) the date payment is received by the
Buyer.
10.4 Delivery Date
If, following notice of an anticipated delay under Subclause 10.3,
this Agreement is not terminated in accordance with the provisions
of such Subclause (with respect to the affected Aircraft), then the
date of delivery otherwise required hereunder shall be extended by a
period equal to the delay specified in such notice.
10.5 Lost Destroyed or Damaged Aircraft
If, any Aircraft is lost, destroyed or damaged beyond economic
repair prior to delivery thereof, then this Agreement shall be
terminated with respect to such Aircraft and the obligations and
liabilities of the parties hereunder with respect to such Aircraft
shall be discharged. The Seller shall repay to the Buyer an amount
equal to the entire amount of any Predelivery Payments (without
interest) received from the Buyer in cash hereunder with respect to
any such Aircraft that is lost, destroyed or damaged beyond economic
repair.
10.6 REMEDIES
OTHER THAN AS EXPRESSLY PROVIDED FOR ELSEWHERE IN THIS AGREEMENT,
THIS CLAUSE 10 SETS FORTH THE SOLE AND EXCLUSIVE REMEDY OF THE BUYER
FOR EXCUSABLE DELAYS, AND THE BUYER HEREBY WAIVES ALL RIGHTS,
INCLUDING WITHOUT LIMITATION ANY RIGHTS TO INCIDENTAL AND
CONSEQUENTIAL DAMAGES OR SPECIFIC PERFORMANCE, TO WHICH IT WOULD
OTHERWISE BE ENTITLED IN RESPECT OF SUCH EXCUSABLE DELAY. THE BUYER
SHALL NOT BE ENTITLED TO CLAIM THE REMEDIES AND RECEIVE THE BENEFITS
PROVIDED IN THIS CLAUSE 10 TO THE EXTENT THE EXCUSABLE DELAY
REFERRED TO IN THIS CLAUSE 10 IS CAUSED BY THE NEGLIGENCE OR WILLFUL
MISCONDUCT OF THE BUYER OR ITS REPRESENTATIVES.
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11 - INEXCUSABLE DELAY
11.1 Liquidated Damages
Should an Aircraft not be ready for delivery to the Buyer within
thirty (30) days after the month of delivery specified in this
Agreement (as such month may otherwise be changed pursuant to this
Agreement) for reasons other than an Excusable Delay, the Buyer
shall, in respect of any subsequent delay in delivery of such
Aircraft, have the right to claim and the Seller shall in respect of
any subsequent delay, pay or credit to the Buyer, at the Buyer's
option, as liquidated damages for the delay in delivery of such
Aircraft [***] for each day of subsequent delay in the delivery
until the effective date of the written notice of termination
referred to in Subclause 11.4 or 11.5 plus any amount referred to
in Subclause 11.4 or 11.5.
11.2 Total Liability
Notwithstanding Subclause 11.1, the total liability of the Seller
under this Clause 11 and this Agreement with respect to each
Aircraft shall in no event exceed the total sum of US $1,350,000 (US
dollars--one million three hundred fifty thousand) plus any amount
referred to in Subclause 11.4 or 11.5.
11.3 Written Claim
The Buyer's right to recover such damages in respect of an Aircraft
is conditional upon the Buyer's written notice to the Seller that it
intends to enforce the terms of this Clause 11. Such notice shall be
due no later than sixty (60) days after the date when such Aircraft
was scheduled to have been ready for delivery.
11.4 Six-Month Delay
In the event that such subsequent delay in delivery exceeds six (6)
months, the Buyer shall have the further right (in addition to the
damages and rights set forth above in Subclause 11.1 of this
Agreement), exercisable by written notice to the Seller given no
less than one (1) month and no more than two (2) months after such
six (6) month period, to terminate this Agreement in respect only of
the Aircraft that is the subject of such delay, whereupon the Seller
shall pay the Buyer, within one (1) month after receipt of such
notice, an amount equal to all Predelivery Payments made by the
Buyer to the Seller in cash in relation to
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such Aircraft, with interest at LIBOR for six-month deposits of US
dollars plus three hundred (300) basis points to be calculated from
(and including) the due date of such Predelivery Payment to (but
excluding) the date payment is received by the Buyer. Such payment
shall be in addition to any amount due pursuant to Subclause 11.1
above.
11.5 Twelve-Month Delay
In the event that such subsequent delay in delivery exceeds twelve
(12) months, the Seller shall have the right, exercisable by written
notice to the Buyer given no less than one (1) month and no more
than two (2) months after such twelve (12) month period, to
terminate this Agreement in respect only of the Aircraft that is
subject to such delay, whereupon the Seller shall pay the Buyer,
within one (1) month after such notice, an amount equal to all
Predelivery Payments made by the Buyer to the Seller in cash in
relation to such Aircraft, with interest at LIBOR for six-month
deposits of US dollars plus three hundred (300) basis points to be
calculated from (and including) the due date of such Predelivery
Payment to (but excluding) the date payment is received by the
Buyer. Such payment shall be in addition to any amount due pursuant
to Subclause 11.1 above.
11.6 Setoff Payments
If the Buyer terminates the Agreement pursuant to this Clause 11,
and is entitled to the return of Predelivery Payments as set forth
in Subclause 11.4 or 11.5, and notwithstanding anything to the
contrary contained herein, the Seller shall have the right to apply
any and all Predelivery Payments previously paid by the Buyer to the
Seller with respect to an Aircraft first to the payment of any other
amounts owing from the Buyer to the Seller or any affiliate thereof
under any agreement between them, including any amount the Buyer
owes the Seller under the Financial Matters Agreement dated the date
hereof between the Buyer and the Seller.
11.7 REMEDIES
OTHER THAN AS EXPRESSLY PROVIDED FOR ELSEWHERE IN THIS AGREEMENT,
THIS CLAUSE 11 SETS FORTH THE SOLE AND EXCLUSIVE REMEDY OF THE BUYER
FOR INEXCUSABLE DELAYS, AND THE BUYER HEREBY WAIVES ALL RIGHTS,
INCLUDING WITHOUT LIMITATION ANY RIGHTS TO INCIDENTAL AND
CONSEQUENTIAL DAMAGES OR SPECIFIC PERFORMANCE, TO WHICH IT WOULD
OTHERWISE BE ENTITLED IN RESPECT OF SUCH
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INEXCUSABLE DELAY. THE BUYER SHALL NOT BE ENTITLED TO CLAIM THE
REMEDIES AND RECEIVE THE BENEFITS PROVIDED IN THIS CLAUSE 11 WHERE
THE INEXCUSABLE DELAY REFERRED TO IN THIS CLAUSE 11 IS CAUSED BY THE
NEGLIGENCE OR WILLFUL MISCONDUCT OF THE BUYER OR ITS
REPRESENTATIVES.
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12 - WARRANTIES AND SERVICE LIFE POLICY
12.1 STANDARD WARRANTY
12.1.1 Nature of warranty
12.1.2 Exceptions
12.1.3 Warranty Periods
12.1.4 Buyer's Remedy and Seller's Obligation
12.1.5 Warranty Claim Requirements
12.1.6 Warranty Administration
12.1.7 Inhouse Warranty
12.1.8 Standard Warranty Transferability
12.1.9 Warranty for Corrected, Replacement or Repaired Warranted Parts
12.1.10 Good Airline Operation - Normal Wear and Tear
12.2 SELLER SERVICE LIFE POLICY
12.2.1 Definitions
12.2.2 Periods and Seller's Undertakings
12.2.3 Seller's Participation in the Cost
12.2.4 General Conditions and Limitations
12.2.5 Transferability
12.3 VENDOR WARRANTIES
12.3.1 Seller's Support
12.3.2 Vendor's Default
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12.4 INTERFACE COMMITMENT
12.4.1 Interface Problem
12.4.2 Seller's Responsibility
12.4.3 Vendor's Responsibility
12.4.4 Joint Responsibility
12.4.5 General
12.5 EXCLUSIVITY OF WARRANTIES AND GENERAL LIMITATIONS OF LIABILITY
12.6 DUPLICATE REMEDIES
12.7 NEGOTIATED AGREEMENT
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12 - WARRANTIES AND SERVICE LIFE POLICY
The Seller, in its capacity as "Buyer" under its arrangements with
the Manufacturer, has negotiated and obtained the following Standard
Warranty, Service Life Policy, Vendor Warranties and Interface
Commitment from the Manufacturer with respect to the Aircraft,
subject to the terms, conditions, limitations and restrictions
(including, but not limited to, the Exclusivity of Warranties and
General Limitations of Liability and Duplicate Remedies provisions)
all as hereinafter set out. The Seller hereby assigns to the Buyer,
and the Buyer hereby accepts, all of the rights and obligations of
the Seller in its capacity as "Buyer" as aforesaid under the said
Standard Warranty, Service Life Policy, Vendor Warranties and
Interface Commitment and the Seller subrogates the Buyer into all
such rights and obligations in respect of the Aircraft. The Seller
hereby warrants to the Buyer that it has all requisite authority to
make the foregoing assignment and effect the foregoing subrogation
to and in favor of the Buyer and that it will not enter into any
amendment of the provisions so assigned without the prior written
consent of the Buyer. Capitalized terms utilized in the following
provisions have the meanings assigned thereto in this Agreement,
except that the term "Seller" refers to the Manufacturer and the
term "Buyer" refers to the Seller.
QUOTE
12.1 STANDARD WARRANTY
12.1.1 Nature of Warranty
Subject to the limitations and conditions as hereinafter provided,
and except as provided in Subclause 12.1.2, the Seller warrants to
the Buyer that each Aircraft and each Warranted Part (as defined
hereinafter) shall at the time of delivery to the Buyer:
(i) be free from defects in material,
(ii) be free from defects in workmanship, including, without
limitation, processes of manufacture,
(iii) be free from defects in design (including, without limitation,
selection of materials) having regard to the state of the art
at the date of such design, and
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(iv) be free from defects arising from failure to conform to the
Specification, except as to those portions of the
Specification that are expressly stated in the Specification
to be estimates or approximations or design aims (unless there
is material failure to conform to such estimates or
approximations or design aims).
For the purposes of this Agreement, the term "Warranted Part" shall
mean any Seller proprietary component, equipment, accessory or part
that is part of an Aircraft at the time of delivery of such Aircraft
and that (a) is manufactured to the detail design of the Seller or a
subcontractor of it and (b) bears a part number of the Seller at the
time of such delivery.
12.1.2 Exceptions
The warranties set forth in Subclause 12.1.1 shall not apply to
Buyer Furnished Equipment, nor to the engine and its associated
parts, nor to any component, accessory, equipment or part purchased
by the Buyer that is not a Warranted Part, provided, however, that:
(i) any defect in the Seller's workmanship in respect of the
installation of such items in the Aircraft, including any
failure by the Seller to conform to the installation
instructions of the manufacturers of such items that
invalidates any applicable warranty from such manufacturers,
shall constitute a defect in workmanship for the purpose of
this Subclause 12.1 and be covered by the warranty set forth
in Subclause 12.1.1(ii)
(ii) any defect inherent in the Seller's design of the
installation, in view of the state of the art at the date of
such design, that impairs the use of such items shall
constitute a defect in design for the purposes of this
Subclause 12.1 and be covered by the warranty set forth in
Subclause 12.1.1(iii).
For the purposes of Subclauses 12.1.2(i) and (ii) only, a Buyer
Furnished Equipment item that is the subject of a defect, as
described in such Subclauses, shall be deemed a Warranted Part and
be covered by the warranty set forth in either Subclause 12.1.1(ii)
or 12.1.1(iii), as applicable.
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12.1.3 Warranty Periods
The warranties contained in Subclauses 12.1.1 and 12.1.2 hereinabove
shall be limited as follows:
(i) with respect to defects covered by Subclauses 12.1.1(i) and
(ii) and 12.1.2(i), to those defects that become apparent
within [***] (whichever shall first occur) after delivery of
the affected Aircraft, provided, however, that for any
Warranted Part that has not been scheduled for inspection by
the Buyer under its maintenance program approved by its
airworthiness authority prior to the expiration of such
[***], such warranties shall be extended to cover those
defects that become apparent before completion of the first
applicable inspection thereafter or within [***] after
delivery of the affected Aircraft (whichever shall first
occur); and
(ii) with respect to defects covered by Subclauses 12.1(iii) and
(iv) and 12.1.2(ii), to those defects that become apparent
within eighteen (18) months after delivery of the affected
Aircraft or, in the case of a Warranted Part, the Aircraft in
which the defective item was initially installed.
12.1.4 Buyer's Remedy and Seller's Obligation
12.1.4.1 The Buyer's remedy and the Seller's obligation and liability under
Subclauses 12.1.1 and 12.1.2 hereinabove are limited to the repair,
replacement or correction, at the Seller's sole expense and option,
of any defective Warranted Part, and, if necessary, to bear the cost
of any temporary replacement while any such Warranted Part is not
useable by the Buyer. Alternatively, the Seller may at its option
furnish a credit to the Buyer for the future purchase of Material
equal to the price at which the Buyer is then entitled to acquire a
replacement for the defective Warranted Part. Should the Buyer have
an outstanding credit in its favor at such time as the Buyer no
longer needs to purchase goods and services from the Seller or its
Affiliates, then, upon the Buyer's written request, the Seller will
pay the Buyer in cash an amount equal to
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the amount of the then outstanding credit. Nothing herein contained
shall obligate the Seller to correct any failure to conform to the
Specification with respect to components, equipment, accessories or
parts that the parties agree in writing at the time of delivery of
the affected Aircraft are acceptable deviations or have no adverse
effect on the use, operation or performance of an Aircraft.
12.1.4.2 In the event a defect covered by Subclause 12.1.1(iii) becomes
apparent within the applicable period set forth in Subclause
12.1.3(ii) and the Seller is obligated to correct such defect, the
Seller shall also, if so requested by the Buyer in writing, make
such correction in any Aircraft that has not already been delivered
to the Buyer; provided, however, that the Seller shall not be
responsible nor deemed to be in default on account of any delay in
delivery of any Aircraft or otherwise, in respect of performance of
this Agreement, due to the Seller's undertaking to make such
correction where the Seller has given the Buyer notice of the
anticipated delay. Further, rather than accept a delay in delivery
of any such Aircraft, the Buyer may elect to accept delivery of such
Aircraft with subsequent correction of the defect by the Buyer at
the Seller's expense, or the Buyer may elect to accept delivery and
thereafter file a Warranty Claim as though the defect had become
apparent immediately after delivery of such Aircraft. It is
understood that nothing in this Subclause 12.1.4.2 will be deemed to
contravene the obligations of the Seller under the provisions of
Subclause 2.3 of this Agreement.
12.1.5 Warranty Claim Requirements
The Buyer's remedy and the Seller's obligation and liability under
this Subclause 12.1, with respect to each claimed defect, are
subject to the following conditions precedent:
(i) the existence of a defect covered by the provisions of this
Subclause 12.1,
(ii) the defect's having become apparent within the applicable
warranty period, as set forth in Subclause 12.1.3,
(iii) the Buyer's having submitted to the Seller proof reasonably
satisfactory to the Seller that the claimed defect is due to a
matter embraced within this Subclause 12.1, and that such
defect did not result from any
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failure of the Buyer to operate the Aircraft in accordance
with the applicable approved data, including, but not limited
to, any failure to operate and maintain the affected Aircraft
or part thereof in accordance with the standards or any matter
set forth or covered in Subclause 12.1.10,
(iv) the Buyer's having returned as soon as reasonably practicable
the Warranted Part claimed to be defective to such repair
facilities in the United States as may be designated by the
Seller, except where the Buyer elects to repair a defective
Warranted Part in accordance with the provisions of Subclause
12.1.7, and
(v) the Seller's having received a Warranty Claim fulfilling the
conditions of and in accordance with the provisions of
Subclause 12.1.6 below.
12.1.6 Warranty Administration
The warranties set forth in Subclause 12.1 shall be administered as
hereinafter provided:
(i) Claim Determination
Warranty Claim determination by the Seller will be reasonably
based upon the claim details, reports from the Seller's
regional representative, historical data logs, inspections,
tests, findings during repair, defect analysis and other
suitable documents and information.
(ii) Transportation Costs
Transportation costs associated with the sending of a
defective Warranted Part to the facilities designated by the
Seller shall be borne by the Buyer and for the return
therefrom of a repaired or replacement Warranted Part shall be
borne by the Seller.
(iii) Return of an Aircraft
In the event that the Buyer desires to return an Aircraft to
the Seller for consideration of a Warranty Claim, the Buyer
shall notify the Seller of its intention to do so and the
Seller shall, prior to such return, have the
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right to inspect such Aircraft and thereafter, without
prejudice to its rights hereunder, to repair such Aircraft, at
its sole option, either at the Buyer's facilities or at
another place acceptable to the Seller. Return of any Aircraft
by the Buyer to the Seller and return of such Aircraft to the
Buyer's facilities shall be at the Seller's expense.
(iv) On-Aircraft Work by the Seller
In the event that a defect necessitates the dispatch by the
Seller of a working team to repair or correct such defect at
the Buyer's facilities, or in the event that the Seller
accepts the return of an Aircraft to perform or have performed
such repair or correction, then all related expenses other
than direct costs incurred in performing such repair or
correction shall be borne by the Seller.
Any work performed by the Seller to rectify defects, which if
performed by the Buyer would not be eligible for a warranty
credit under the terms of Subclause 12.1.7(v), shall be at the
Buyer's expense. The rate charged by the Seller for any such
services shall not exceed the rate charged by the Seller to
other commercial airline customers of the Seller during
substantially the same time period.
(v) Warranty Claim Substantiation
For each claim under this Subclause 12.1, within ninety (90)
days after a defect becomes apparent, the Buyer will give
written notice to the Seller that contains at least the
following data with respect to a part or Aircraft, as
applicable ("Warranty Claim"):
(a) description of defect and action taken, if any,
(b) date of incident and/or of removal,
(c) description of the defective part,
(d) part number,
(e) serial number (if applicable),
(f) position on Aircraft, according to Catalog Sequence
Number (CSN) of the
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Illustrated Parts Catalog, Component Maintenance Manual
or Structural Repair Manual (as such documents are
defined in Clause 14 and Exhibit "F" thereto) as
applicable,
(g) total flying hours or calendar times, as applicable, at
the date of appearance of a defect,
(h) time since last shop visit at the date of defect
appearance,
(i) Manufacturer's serial number of the Aircraft and/or its
registration number,
(j) Aircraft total flying hours and/or number of landings at
the date of defect appearance,
(k) claim number,
(l) date of claim, and
(m) date of delivery of an Aircraft or part to the Buyer.
Claims are to be addressed as follows:
Airbus Industrie
Support Division
Warranty Administration
Rond-Point Maurice Bellonte
F-31707 Blagnac
FRANCE
(vi) Replacements
Replacements made pursuant to this Subclause 12.1 will be made
within the lead time defined in the Seller's Spare Parts Price
List. Replaced components, equipment, accessories or parts
shall become the Seller's property.
Title to and risk of loss of any Aircraft, component,
accessory, equipment or part returned by the Buyer to the
Seller shall at all times remain with the Buyer, except that
(i) when the Seller has possession of a returned Aircraft,
component, accessory, equipment or part to which the Buyer has
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title, the Seller shall have such responsibility therefor as
is chargeable by law to a bailee for hire, and, in addition,
the responsibility to insure the Buyer against direct damages
for loss of such returned Aircraft, component, accessory,
equipment or part to which the Buyer has title, but the Seller
shall not be liable for loss of use, and (ii) title to and
risk of loss of a returned component, accessory, equipment or
part shall pass to the Seller upon shipment by the Seller to
the Buyer of any item furnished by the Seller to the Buyer as
a replacement therefor. Upon the Seller's shipment to the
Buyer of any replacement component, accessory, equipment or
part provided by the Seller pursuant to this Subclause 12.1,
title to and risk of loss of such component, accessory,
equipment or part shall pass to the Buyer.
(vii) Rejection
The Seller shall provide reasonable written substantiation in
case of rejection of a claim. In such event the Buyer shall
pay to the Seller reasonable inspection and test charges
incurred by the Seller in connection with the investigation
and processing of such claim, provided, however, that the
Seller shall not invoice the Buyer for such charges for
amounts less than $500 (US dollars--five hundred) per Warranty
Claim. Such charges will be based on the Seller's then current
labor and materials cost. Transportation, insurance, and any
other costs associated with the sending of any Warranted Part
or any other item, equipment, component or part for which the
Buyer's warranty claim is properly rejected by the Seller
shall be borne by the Buyer.
(viii) Inspection
The Seller shall have the right to inspect the affected
Aircraft and documents and other records relating thereto in
the event of any claim under this Subclause 12.1.
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12.1.7 Inhouse Warranty
(i) Authorization
The Buyer is hereby authorized to perform the repair of
Warranted Parts, subject to the terms of this Subclause 12.1.7
("Inhouse Warranty"). The Buyer shall notify the Seller's
representative of its decision to perform any inhouse repairs
before such repairs are commenced, unless it is not practical
to do so, in which case the Buyer shall notify the Seller of
the inhouse repair as soon as reasonably practicable.
(ii) Conditions of Authorization
The Buyer shall be entitled to repair such Warranted Parts:
(a) only if adequate facilities and qualified personnel, as
approved by the FAA, are available to the Buyer,
(b) in accordance with the Seller's written instructions set
forth in documents such as the Aircraft Maintenance
Manual, Component Maintenance Manual (Manufacturer),
Component Maintenance Manual (Vendor) and Structural
Repair Manual, and
(c) only to the extent specified by the Seller, or, in the
absence of such specification, to the extent reasonably
necessary to correct the defect, in accordance with the
standards set forth in Subclause 12.1.10.
(iii) Seller's Rights
The Seller shall have the right to have any Warranted Part, or
any part removed therefrom, which is claimed to be defective,
returned to the Seller, as set forth in Subclause 12.1.6(ii),
if, in the judgment of the Seller, the nature of the defect
requires technical investigation.
The Seller shall further have the right to have a
representative present during the disassembly, inspection and
testing of any Warranted Part claimed to be defective, at the
Seller's cost.
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(iv) Inhouse Warranty Claim Substantiation
Claims for Inhouse Warranty credit shall be filed within the
time period set forth in and shall contain the same
information required in Warranty Claims under Subclause
12.1.6(v) and in addition shall include:
(a) a report of technical findings with respect to the
defect,
(b) for parts required to remedy the defect:
- part numbers,
- serial numbers (if applicable),
- description of the parts,
- quantity of parts,
- unit price of parts,
- total price of parts,
- related Seller's or third party's invoices (if
applicable),
(c) detailed number of labor hours,
(d) agreed Inhouse Warranty Labor Rate (defined below in
Subclause 12.1.7(v)(a)), and
(e) total claim value.
(v) Credit
The Buyer's sole remedy, and the Seller's sole obligation and
liability, in respect of Inhouse Warranty claims, shall be a
credit to the Buyer's account. Should the Buyer have an
outstanding credit in its favor at such time as the Buyer no
longer needs to purchase goods and services from the Seller or
its Affiliates, then, upon the Buyer's written request, the
Seller will pay the Buyer in cash an amount equal to the
amount of the then outstanding credit. The credit to the
Buyer's account shall be equal to the direct labor cost
expended in performing a repair and to the direct cost of
materials incorporated in the repair. Such costs shall be
determined as set forth below.
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(a) To determine direct labor costs, only man-hours spent on
disassembly, inspection, repair, reassembly, and final
inspection and test (including flight tests if flight
tests prove necessary to complete a repair under the
Inhouse Warranty) of the Warranted Part alone will be
counted. Man-hours required for maintenance work
concurrently being carried out on the Aircraft or
Warranted Part will not be included.
The man-hours counted as set forth above shall be
multiplied by an agreed labor rate representing the
Buyer's composite average hourly labor rate (excluding
all fringe benefits, premium time allowances, social
security charges, business taxes and similar items) paid
to the Buyer's employees whose jobs are directly related
to the performance of the repair (the "Inhouse Warranty
Labor Rate").
(b) Direct material costs are determined by the prices at
which the Buyer acquired such material, excluding any
parts and materials used for overhaul furnished free of
charge by the Seller.
(vi) Limitation on Credit
The Buyer will in no event be credited for repair costs
(including labor and material) for any Warranted Part
exceeding sixty-five percent (65%) of the Seller's current
catalog price for a replacement of such defective Warranted
Part or exceeding those costs which would have resulted if
repairs had been carried out at the Seller's facilities.
Such cost shall be substantiated in writing by the Seller upon
reasonable request by the Buyer.
(vii) Scrapped Material
The Buyer shall retain any Warranted Part defective beyond
economic repair and any defective part removed from a
Warranted Part during repair for a period of either one
hundred and twenty (120) days after the date of completion of
repair or ninety (90) days after submission of a claim for
Inhouse
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Warranty credit relating thereto, whichever is longer. Such
parts shall be returned to the Seller at the Seller's cost
within thirty (30) days of receipt of the Seller's request to
that effect.
Notwithstanding the foregoing, the Buyer may, with the
agreement of the Seller's Field Representative, scrap any such
defective parts that are beyond economic repair and not
required for technical evaluation.
Scrapped Warranted Parts shall be evidenced by a record of
scrapped material certified by an authorized representative of
the Buyer, which shall be kept in the Buyer's file for at
least the duration of the warranty periods set forth in this
Subclause 12.1.
(viii) LIMITATIONS ON LIABILITY OF SELLER
THE SELLER SHALL NOT BE LIABLE FOR ANY RIGHT, CLAIM OR REMEDY,
AND THE BUYER SHALL INDEMNIFY THE SELLER AGAINST THE CLAIMS OF
ANY THIRD PARTIES FOR ANY DEFECT, NONCONFORMANCE OR PROBLEM OF
ANY KIND, ARISING OUT OF OR IN CONNECTION WITH ANY REPAIR OF
WARRANTED PARTS OR ANY OTHER ACTIONS UNDERTAKEN BY THE BUYER
UNDER THIS SUBCLAUSE 12.1.7, INCLUDING BUT NOT LIMITED TO: (I)
LIABILITY IN CONTRACT OR TORT, (II) LIABILITY ARISING FROM THE
BUYER'S ACTUAL OR IMPUTED NEGLIGENCE, INTENTIONAL TORTS AND/OR
STRICT LIABILITY, AND/OR (III) LIABILITY TO ANY THIRD PARTIES.
THIS LIMITATION OF LIABILITY SHALL NOT APPLY IN THOSE
CIRCUMSTANCES WHERE THE BUYER FOLLOWED, WITHOUT ANY DEVIATION
WHATSOEVER, INSTRUCTIONS ISSUED BY THE SELLER WITH RESPECT TO
THOSE ACTIONS UNDERTAKEN BY THE BUYER UNDER THIS SUBCLAUSE
12.1.7.
12.1.8 Standard Warranty Transferability
The warranties provided for in this Subclause 12.1 for any Warranted
Part shall accrue to the benefit of any airline in revenue service
other than the Buyer, if the Warranted Part enters into the
possession of any such airline as a result of a pooling, sale or
leasing agreement between such airline and the Buyer, in accordance
with the terms and subject to the limitations and exclusions of the
foregoing warranties.
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12.1.9 Warranty for Corrected, Replacement or Repaired Warranted Parts
Whenever any Warranted Part that contains a defect for which the
Seller is liable under Subclause 12.1 has been corrected, repaired
or replaced pursuant to the terms of this Clause 12, the period of
the Seller's warranty with respect to such corrected, repaired or
replacement Warranted Part, whichever may be the case, shall be the
longer of six (6) months and the remaining portion of the original
warranty in respect of such corrected, repaired or replacement
Warranted Part. In the event that a defect is attributable to a
repair or replacement by the Buyer that was not completed in
accordance with this Agreement, a Warranty Claim with respect to
such defect shall not be allowable, notwithstanding any subsequent
correction or repairs, and shall immediately terminate the remaining
warranties under this Subclause 12.1 in respect of the affected
Warranted Part.
12.1.10 Good Airline Operation - Normal Wear and Tear
The Buyer's rights under this Subclause 12.1 are subject to the
Aircraft and each component, equipment, accessory and part thereof
being maintained, overhauled, repaired and operated in accordance
with good commercial airline practice, all technical documentation
and any other instructions issued by the Seller to the Buyer, the
Vendors or the manufacturer of the Propulsion Systems and all
applicable rules, regulations and directives of the FAA.
The Seller's liability under this Subclause 12.1 shall not extend to
normal wear and tear nor to:
(i) any Aircraft or component, equipment, accessory or part
thereof that has been repaired, altered or modified after
delivery by a party other than the Seller or in a manner other
than that allowed pursuant to this Agreement or otherwise
approved by the Seller;
(ii) any Aircraft or component, equipment, accessory or part
thereof that has been knowingly operated in a damaged state,
but only to the extent of any extra damage caused by such
operation; or
(iii) any component, equipment, accessory or part from which the
trademark, trade name,
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part or serial number or other identification marks have been
knowingly removed by the Buyer.
This waiver of the Seller's liability by the Buyer will not apply in
the cases of Subclause 12.1.10(i) and Subclause 12.1.10(ii) above if
the Buyer submits evidence satisfactory to the Seller that the
defect did not arise from nor was contributed to by either of said
cases.
12.2 SELLER SERVICE LIFE POLICY
In addition to the warranties set forth in Subclause 12.1 above, the
Seller further agrees that should a Failure (as defined in Subclause
12.2.1.2) occur in any Item (as defined in Subclause 12.2.1.1),
then, subject to the general conditions and limitations set forth in
Subclause 12.2.4 below, the provisions of this Subclause 12.2 shall
apply. The following provisions shall constitute the full extent of
coverage of the Service Life Policy.
12.2.1 Definitions
For the purposes of this Subclause 12.2, the following definitions
shall apply:
12.2.1.1 "Item" means any of the Seller components, equipment, accessories or
parts listed in Exhibit "D" hereto which are installed on an
Aircraft at any time during the period of effectiveness of the
Service Life Policy as defined below in Subclause 12.2.
12.2.1.2 "Failure" means any breakage of, or defect in, an Item that has
occurred, that can reasonably be expected to occur on a repetitive
or fleetwide basis, and that materially impairs the utility or
safety of the Item, provided that any such breakage of, or defect
in, any Item did not result from any breakage or defect in any other
Aircraft part or component or from any other extrinsic force.
12.2.2 Periods and Seller's Undertaking
Subject to the general conditions and limitations set forth in
Subclause 12.2.4 below, the Seller agrees that if a Failure occurs
in an Item before the Aircraft in which such Item is installed has
completed forty-three thousand two hundred (43,200) flying hours or
twentyeight thousand eight hundred (28,800) landings or within
twelve (12) years after the delivery of said Aircraft to the Buyer,
whichever shall first occur, the Seller shall, at its own
discretion, as promptly as practicable and for a price that reflects
the Seller's
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financial participation as hereinafter provided, either:
12.2.2.1 design and furnish to the Buyer a correction for such Item subject
to a Failure and provide any parts required for such correction
(including Seller designed standard parts but excluding industry
standard parts), or,
12.2.2.2 replace such Item.
12.2.3 Seller's Participation in the Cost
Any part or Item that the Seller is required to furnish to the Buyer
under this Service Life Policy in connection with the correction or
replacement of an Item shall be furnished to the Buyer at the
Seller's current sales price therefor, less the Seller's financial
participation, which will be determined in accordance with the
following formula:
P = C (N - T)/N
where
P: financial participation of the Seller,
C: the Seller's then current sales price for the required
Item or required Seller designed parts,
and,
(i) T: total flying time in hours since
delivery of the particular Aircraft in
which the Item subject to a Failure was
originally installed,
and,
N: forty-three thousand two hundred (43,200)
hours,
or,
(ii) T: total number of landings since delivery
that have been accumulated by the
particular Aircraft in which the Item
subject to a Failure was originally
installed,
and,
N: twenty-eight thousand eight hundred
(28,800) landings,
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or,
(iii) T: total time in months since delivery of
the particular Aircraft in which the
Item subject to a Failure was originally
installed,
and,
N: one hundred and forty-four (144) months,
whichever of the foregoing clauses (i), (ii) and (iii) yields
the lowest ratio of:
N-T/N
12.2.4 General Conditions and Limitations
12.2.4.1 Notwithstanding Subclause 12.2.3, the undertakings given in this
Subclause 12.2 shall not be valid during the period applicable to an
Item under Subclause 12.1.
12.2.4.2 The Buyer's remedy and the Seller's obligation and liability under
this Service Life Policy are subject to compliance by the Buyer with
the following conditions precedent:
(i) The Buyer shall maintain log books and other historical
records with respect to each Item adequate to enable
determination as to whether the alleged Failure is covered by
this Service Life Policy and, if so, to define the portion of
the cost to be borne by the Seller in accordance with
Subclause 12.2.3 above.
(ii) The Buyer shall keep the Seller informed of any significant
incidents relating to an Aircraft, howsoever occurring or
recorded.
(iii) The conditions of Subclause 12.1.10 shall have been complied
with.
(iv) The Buyer shall carry out specific structural inspection
programs for monitoring purposes as may be reasonably
established from time to time by the Seller. Such programs
shall be, to the extent possible, compatible with the Buyer's
operational requirements and shall be carried out at the
Buyer's expense. Reports relating thereto shall be regularly
furnished to the Seller.
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(v) In the case of any breakage or defect, the Buyer will report
the same in writing to the Seller within ninety (90) days
after any breakage or defect in an Item becomes apparent,
whether or not said breakage or defect can reasonably be
expected to occur in any other Aircraft, and the Buyer shall
inform the Seller in sufficient detail about the breakage or
defect to enable the Seller to determine whether said breakage
or defect is subject to this Service Life Policy.
In addition, in the event of a material change in the operational
parameters on which the figures set forth in Subclauses 12.2.3(i)
and 12.2.3(ii) are based, then the Buyer and the Seller will adjust
such figures.
12.2.4.3 Except as otherwise provided in this Subclause 12.2, any claim under
this Service Life Policy shall be administered as provided in, and
shall be subject to the terms and conditions of, Subclause 12.1.6.
12.2.4.4 In the event that the Seller shall have issued a modification
applicable to an Aircraft, the purpose of which is to avoid a
Failure, the Seller may elect to supply the necessary modification
kit free of charge or under a pro rata formula established by the
Seller. If such a kit is so offered to the Buyer, then, in respect
of such Failure and any Failures that could ensue therefrom, the
validity of the Seller's commitment under this Subclause 12.2 shall
be subject to the Buyer's incorporating such modification in the
relevant Aircraft, within a reasonable time, as promulgated by the
Seller and in accordance with the Seller's instructions.
12.2.4.5 THIS SERVICE LIFE POLICY IS NEITHER A WARRANTY, PERFORMANCE
GUARANTEE, NOR AN AGREEMENT TO MODIFY ANY AIRCRAFT OR AIRFRAME
COMPONENTS TO CONFORM TO NEW DEVELOPMENTS OCCURRING IN THE STATE OF
AIRFRAME DESIGN AND MANUFACTURING ART. THE SELLER'S OBLIGATION UNDER
THIS SUBCLAUSE 12.2 IS TO MAKE ONLY THOSE CORRECTIONS TO THE ITEMS
OR FURNISH REPLACEMENTS THEREFOR AS PROVIDED IN THIS SUBCLAUSE 12.2.
THE BUYER'S SOLE REMEDY AND RELIEF FOR THE NONPERFORMANCE OF ANY
OBLIGATION OR LIABILITY OF THE SELLER ARISING UNDER OR BY VIRTUE OF
THIS SERVICE LIFE POLICY SHALL BE IN MONETARY DAMAGES, LIMITED TO
THE AMOUNT THE BUYER REASONABLY EXPENDS IN PROCURING A CORRECTION OR
REPLACEMENT FOR ANY ITEM THAT IS THE SUBJECT OF A FAILURE COVERED BY
THIS SERVICE LIFE POLICY AND TO WHICH SUCH NONPERFORMANCE IS
RELATED, LESS THE AMOUNT THAT THE BUYER OTHERWISE WOULD HAVE BEEN
REQUIRED TO PAY UNDER THIS SUBCLAUSE 12.2 IN RESPECT OF SUCH
CORRECTED OR REPLACEMENT ITEM. WITHOUT LIMITING THE
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EXCLUSIVITY OF WARRANTIES AND GENERAL LIMITATIONS OF LIABILITY
PROVISIONS SET FORTH IN SUBCLAUSE 12.5, THE BUYER HEREBY WAIVES,
RELEASES AND RENOUNCES ALL CLAIMS TO ANY FURTHER DIRECT, INCIDENTAL
OR CONSEQUENTIAL DAMAGES, INCLUDING LOSS OF PROFITS AND ALL OTHER
RIGHTS, CLAIMS AND REMEDIES, ARISING UNDER OR BY VIRTUE OF THIS
SERVICE LIFE POLICY, EXCEPT AS PROVIDED FOR ELSEWHERE IN THIS
AGREEMENT.
12.2.5 Transferability
The Buyer's rights under this Subclause 12.2 shall not be assigned,
sold, leased, transferred or otherwise alienated by operation of law
or otherwise, without the Seller's prior written consent.
Any unauthorized assignment, sale, lease, transfer or other
alienation of the Buyer's rights under this Service Life Policy
shall, as to the particular Aircraft involved, immediately void this
Service Life Policy in its entirety.
12.3 VENDOR WARRANTIES
12.3.1 Seller's Support
Prior to delivery of the first Aircraft, the Seller shall obtain
from all Vendors listed in the Supplier Product Support Agreements
manual enforceable and transferable warranties and indemnities
against patent infringements for components, equipment, accessories
and parts of the Vendors that are installed in an Aircraft at the
time of delivery thereof ("Vendor Parts," it being understood that
such term shall not include the Propulsion Systems, Buyer Furnished
Equipment or other equipment selected by the Buyer to be supplied by
Vendors with whom the Seller has no existing enforceable warranty
agreements). The Seller shall also obtain enforceable and
transferable Vendor service life policies from landing gear Vendors
for selected structural landing gear elements. The Seller undertakes
to supply to the Buyer such Vendor warranties, Vendor service life
policies and indemnities against patent infringements substantially
in the form summarized in the Supplier Product Support Agreements
manual.
12.3.2 Vendor's Default
12.3.2.1 In the event that any Vendor under any standard warranty or
indemnity against patent infringements obtained by the Seller
pursuant to Subclause 12.3.1 or
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Clause 13 hereof defaults in the performance of any material
obligation under such warranty or indemnity against patent
infringements with respect to a Vendor Part, and the Buyer submits
within a reasonable time to the Seller reasonable proof that such
default has occurred, then Subclause 12.1 or Clause 13 of this
Agreement shall apply to the extent the same would have been
applicable had such Vendor Part been a Warranted Part except that,
for obligations covered under Subclause 12.1, the longer of (i) the
Vendor's warranty period as indicated in the Supplier Product
Support Agreements manual and (ii) the Seller's warranty period as
indicated in Subclause 12.1.3 of this Agreement shall apply.
12.3.2.2 In the event that any Vendor under any Vendor service life policy
obtained by the Seller pursuant to Subclause 12.3.1 hereof defaults
in the performance of any material obligation with respect thereto,
and the Buyer submits within reasonable time to the Seller
reasonable proof that such default has occurred, then Subclause 12.2
of this Agreement shall apply to the extent the same would have been
applicable had such component, equipment, accessory or part been
listed in Exhibit "D" hereto.
12.3.2.3 At the Seller's request, the Buyer shall assign to the Seller, and
the Seller shall be subrogated to, all of the Buyer's rights against
the relevant Vendor, with respect to and arising by reason of such
default and the Buyer shall provide reasonable assistance to enable
the Seller to enforce the rights so assigned.
12.4 INTERFACE COMMITMENT
12.4.1 Interface Problem
If the Buyer experiences any technical problem in the operation of
an Aircraft or its systems due to a malfunction, the cause of which,
after due and reasonable investigation, is not readily identifiable
by the Buyer, but which the Buyer reasonably believes to be
attributable to the design characteristics of one or more components
of the Aircraft (an "Interface Problem"), the Seller shall, if
requested by the Buyer, and without additional charge to the Buyer,
promptly conduct or have conducted an investigation and analysis of
such problem to determine, if possible, the cause or causes of the
problem and to recommend such corrective action as may be feasible,
provided, however, that if the Seller determines, after such due and
reasonable investigation, that the Interface Problem was due to or
caused by any failure of the Buyer to operate the Aircraft in
accordance with the applicable approved data, the Buyer shall pay to
the Seller all reasonable
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costs and expenses incurred by the Seller during such investigation.
The Buyer shall furnish to the Seller all data and information in
the Buyer's possession relevant to the Interface Problem and shall
cooperate with the Seller in the conduct of the Seller's
investigations and such tests as may be required.
At the conclusion of such investigation the Seller shall promptly
advise the Buyer in writing of the Seller's opinion as to the cause
or causes of the Interface Problem and the Seller's recommendations
as to corrective action.
12.4.2 Seller's Responsibility
If the Seller reasonably determines that the Interface Problem is
primarily attributable to the design of a Warranted Part, the Seller
shall, if requested by the Buyer, correct the design of such
Warranted Part, pursuant to the terms and conditions of Subclause
12.1.
12.4.3 Vendor's Responsibility
If the Seller reasonably determines that the Interface Problem is
primarily attributable to the design of a component, equipment,
accessory or part other than a Warranted Part ("Vendor Component"),
the Seller shall, if requested by the Buyer, reasonably assist the
Buyer in processing any warranty claim the Buyer may have against
the manufacturer of such Vendor Component.
12.4.4 Joint Responsibility
If the Seller reasonably determines that the Interface Problem is
attributable partially to the design of a Warranted Part and
partially to the design of any Vendor Component, the Seller shall,
if requested by the Buyer, seek a solution to the Interface Problem
through cooperative efforts of the Seller and any Vendor involved.
The Seller shall promptly advise the Buyer of such corrective action
as may be proposed by the Seller and any such Vendor. Such proposal
will be consistent with any then existing obligations of the Seller
hereunder and of any such Vendor to the Buyer. Such corrective
action, unless reasonably rejected by the Buyer, shall constitute
full satisfaction of any claim the Buyer may have against either the
Seller or any such Vendor with respect to such Interface Problem.
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12.4.5 General
12.4.5.1 All requests under this Subclause 12.4 shall be directed both to the
Seller and the affected Vendors.
12.4.5.2 Except as specifically set forth in this Subclause 12.4, this
Subclause 12.4 shall not be deemed to impose on the Seller any
obligations not expressly set forth elsewhere in this Agreement.
12.4.5.3 All reports, recommendations, data and other documents furnished by
the Seller to the Buyer pursuant to this Subclause 12.4 shall be
deemed to be delivered under this Agreement and shall be subject to
the terms, covenants and conditions set forth in this Clause 12 and
in Subclause 22.4.
12.5 EXCLUSIVITY OF WARRANTIES AND GENERAL LIMITATIONS OF LIABILITY
THIS CLAUSE 12 (INCLUDING ITS SUBPROVISIONS) SETS FORTH THE
EXCLUSIVE WARRANTIES, EXCLUSIVE LIABILITIES AND EXCLUSIVE
OBLIGATIONS OF THE SELLER, AND THE EXCLUSIVE REMEDIES AVAILABLE TO
THE BUYER, WHETHER UNDER THIS AGREEMENT OR OTHERWISE, ARISING FROM
ANY DEFECT OR NONCONFORMITY OR PROBLEM OF ANY KIND IN ANY AIRCRAFT,
COMPONENT, EQUIPMENT, ACCESSORY, PART OR SERVICE DELIVERED UNDER
THIS AGREEMENT.
THE BUYER RECOGNIZES THAT THE RIGHTS, WARRANTIES AND REMEDIES IN
THIS CLAUSE 12 ARE ADEQUATE AND SUFFICIENT TO PROTECT THE BUYER FROM
ANY DEFECT OR NONCONFORMITY OR PROBLEM OF ANY KIND IN THE GOODS AND
SERVICES SUPPLIED UNDER THIS AGREEMENT. THE BUYER HEREBY WAIVES,
RELEASES AND RENOUNCES ALL OTHER WARRANTIES, OBLIGATIONS, GUARANTEES
AND LIABILITIES OF THE SELLER AND ALL OTHER RIGHTS, CLAIMS AND
REMEDIES OF THE BUYER AGAINST THE SELLER, WHETHER EXPRESS OR IMPLIED
BY CONTRACT, TORT, OR STATUTORY LAW OR OTHERWISE, WITH RESPECT TO
ANY NONCONFORMITY OR DEFECT OR PROBLEM OF ANY KIND IN ANY AIRCRAFT,
COMPONENT, EQUIPMENT, ACCESSORY, PART OR SERVICE DELIVERED UNDER
THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO:
(1) ANY IMPLIED WARRANTY OF MERCHANTABILITY AND/OR FITNESS FOR ANY
GENERAL OR PARTICULAR PURPOSE;
(2) ANY IMPLIED OR EXPRESS WARRANTY ARISING FROM COURSE OF
PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE;
(3) ANY RIGHT, CLAIM OR REMEDY FOR BREACH OF CONTRACT;
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(4) ANY RIGHT, CLAIM OR REMEDY FOR TORT, UNDER ANY THEORY OF
LIABILITY, HOWEVER ALLEGED, INCLUDING, BUT NOT LIMITED TO,
ACTIONS AND/OR CLAIMS FOR NEGLIGENCE, GROSS NEGLIGENCE,
INTENTIONAL ACTS, WILLFUL DISREGARD, IMPLIED WARRANTY, PRODUCT
LIABILITY, STRICT LIABILITY OR FAILURE TO WARN;
(5) ANY RIGHT, CLAIM OR REMEDY ARISING UNDER THE UNIFORM
COMMERCIAL CODE OR ANY OTHER STATE OR FEDERAL STATUTE;
(6) ANY RIGHT, CLAIM OR REMEDY ARISING UNDER ANY REGULATIONS OR
STANDARDS IMPOSED BY ANY INTERNATIONAL, NATIONAL, STATE OR
LOCAL STATUTE OR AGENCY;
(7) ANY RIGHT, CLAIM OR REMEDY TO RECOVER OR BE COMPENSATED FOR:
(a) LOSS OF USE OR REPLACEMENT OF ANY AIRCRAFT, COMPONENT,
EQUIPMENT, ACCESSORY OR PART PROVIDED UNDER THIS
AGREEMENT;
(b) LOSS OF, OR DAMAGE OF ANY KIND TO, ANY AIRCRAFT,
COMPONENT, EQUIPMENT, ACCESSORY OR PART PROVIDED UNDER
THIS AGREEMENT;
(c) LOSS OF PROFITS AND/OR REVENUES;
(d) ANY OTHER INCIDENTAL OR CONSEQUENTIAL DAMAGE.
THE WARRANTIES AND SERVICE LIFE POLICY PROVIDED BY THIS AGREEMENT
SHALL NOT BE EXTENDED, ALTERED OR VARIED EXCEPT BY A WRITTEN
INSTRUMENT SIGNED BY THE SELLER AND THE BUYER. IN THE EVENT THAT ANY
PROVISION OF THIS CLAUSE 12 SHOULD FOR ANY REASON BE HELD UNLAWFUL,
OR OTHERWISE UNENFORCEABLE, THE REMAINDER OF THIS CLAUSE 12 SHALL
REMAIN IN FULL FORCE AND EFFECT.
12.6 DUPLICATE REMEDIES
The remedies provided to the Buyer under this Clause 12 as to any
defect in respect of the Aircraft or any part thereof are mutually
exclusive and not cumulative. The Buyer shall be entitled to the
remedy that provides the maximum benefit to it, as the Buyer may
elect, pursuant to the terms and conditions of this Clause 12 for
any such particular defect for which remedies are provided
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under this Clause 12; provided, however, that the Buyer shall not be
entitled to elect a remedy under one part of this Clause 12 that
constitutes a duplication of any remedy elected by it under any
other part hereof for the same defect. The Buyer's rights and
remedies herein for the nonperformance of any obligations or
liabilities of the Seller arising under these warranties shall be in
monetary damages limited to the amount the Buyer expends in
procuring a correction or replacement for any covered part subject
to a defect or nonperformance covered by this Clause 12, and the
Buyer shall not have any right to require specific performance by
the Seller.
UNQUOTE
In consideration of the assignment and subrogation by the Seller
under this Clause 12 in favor of the Buyer in respect of the
Seller's rights against and obligations to the Manufacturer under
the provisions quoted above, the Buyer hereby accepts such
assignment and subrogation and agrees to be bound by all of the
terms, conditions and limitations therein contained, specifically
including, without limitation, the Exclusivity of Warranties and
General Limitations of Liability provisions and Duplicate Remedies
provisions.
THIS CLAUSE 12 (INCLUDING ITS SUBPROVISIONS) SETS FORTH THE
EXCLUSIVE WARRANTIES, EXCLUSIVE LIABILITIES AND EXCLUSIVE
OBLIGATIONS OF THE SELLER, AND THE EXCLUSIVE REMEDIES AVAILABLE TO
THE BUYER, WHETHER UNDER THIS AGREEMENT OR OTHERWISE, ARISING FROM
ANY DEFECT OR NONCONFORMITY OR PROBLEM OF ANY KIND IN ANY AIRCRAFT,
COMPONENT, EQUIPMENT, ACCESSORY, PART OR SERVICE DELIVERED UNDER
THIS AGREEMENT.
THE BUYER RECOGNIZES THAT THE RIGHTS, WARRANTIES AND REMEDIES IN
THIS CLAUSE 12 ARE ADEQUATE AND SUFFICIENT TO PROTECT THE BUYER FROM
ANY DEFECT OR NONCONFORMITY OR PROBLEM OF ANY KIND IN THE GOODS AND
SERVICES SUPPLIED UNDER THIS AGREEMENT. THE BUYER HEREBY WAIVES,
RELEASES AND RENOUNCES ALL OTHER WARRANTIES, OBLIGATIONS, GUARANTEES
AND LIABILITIES OF THE SELLER AND ALL OTHER RIGHTS, CLAIMS AND
REMEDIES OF THE BUYER AGAINST THE SELLER, WHETHER EXPRESS OR IMPLIED
BY CONTRACT, TORT, OR STATUTORY LAW OR OTHERWISE, WITH RESPECT TO
ANY NONCONFORMITY OR DEFECT OR PROBLEM OF ANY KIND IN ANY AIRCRAFT,
COMPONENT, EQUIPMENT, ACCESSORY, PART OR SERVICE DELIVERED UNDER
THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO:
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(1) ANY IMPLIED WARRANTY OF MERCHANTABILITY AND/OR FITNESS FOR ANY
GENERAL OR PARTICULAR PURPOSE;
(2) ANY IMPLIED OR EXPRESS WARRANTY ARISING FROM COURSE OF
PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE;
(3) ANY RIGHT, CLAIM OR REMEDY FOR BREACH OF CONTRACT;
(4) ANY RIGHT, CLAIM OR REMEDY FOR TORT, UNDER ANY THEORY OF
LIABILITY, HOWEVER ALLEGED, INCLUDING, BUT NOT LIMITED TO,
ACTIONS AND/OR CLAIMS FOR NEGLIGENCE, GROSS NEGLIGENCE,
INTENTIONAL ACTS, WILLFUL DISREGARD, IMPLIED WARRANTY, PRODUCT
LIABILITY, STRICT LIABILITY OR FAILURE TO WARN;
(5) ANY RIGHT, CLAIM OR REMEDY ARISING UNDER THE UNIFORM
COMMERCIAL CODE OR ANY OTHER STATE OR FEDERAL STATUTE;
(6) ANY RIGHT, CLAIM OR REMEDY ARISING UNDER ANY REGULATIONS OR
STANDARDS IMPOSED BY ANY INTERNATIONAL, NATIONAL, STATE OR
LOCAL STATUTE OR AGENCY;
(7) ANY RIGHT, CLAIM OR REMEDY TO RECOVER OR BE COMPENSATED FOR:
(a) LOSS OF USE OR REPLACEMENT OF ANY AIRCRAFT, COMPONENT,
EQUIPMENT, ACCESSORY OR PART PROVIDED UNDER THIS
AGREEMENT;
(b) LOSS OF, OR DAMAGE OF ANY KIND TO, ANY AIRCRAFT,
COMPONENT, EQUIPMENT, ACCESSORY OR PART PROVIDED UNDER
THIS AGREEMENT;
(c) LOSS OF PROFITS AND/OR REVENUES;
(d) ANY OTHER INCIDENTAL OR CONSEQUENTIAL DAMAGE.
THE WARRANTIES AND SERVICE LIFE POLICY PROVIDED BY THIS AGREEMENT
SHALL NOT BE EXTENDED, ALTERED OR VARIED EXCEPT BY A WRITTEN
INSTRUMENT SIGNED BY THE SELLER AND THE BUYER. IN THE EVENT THAT ANY
PROVISION OF THIS CLAUSE 12 SHOULD FOR ANY REASON BE HELD UNLAWFUL,
OR OTHERWISE UNENFORCEABLE, THE REMAINDER OF THIS CLAUSE 12 SHALL
REMAIN IN FULL FORCE AND EFFECT.
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The remedies provided to the Buyer under this Clause 12 as to any
defect in respect of the Aircraft or any part thereof are mutually
exclusive and not cumulative. The Buyer shall be entitled to the
remedy that provides the maximum benefit to it, as the Buyer may
elect, pursuant to the terms and conditions of this Clause 12 for
any such particular defect for which remedies are provided under
this Clause 12; provided, however, that the Buyer shall not be
entitled to elect a remedy under one part of this Clause 12 that
constitutes a duplication of any remedy elected by it under any
other part hereof for the same defect. The Buyer's rights and
remedies herein for the nonperformance of any obligations or
liabilities of the Seller arising under these warranties shall be in
monetary damages limited to the amount the Buyer expends in
procuring a correction or replacement for any covered part subject
to a defect or nonperformance covered by this Clause 12, and the
Buyer shall not have any right to require specific performance by
the Seller.
12.7 NEGOTIATED AGREEMENT
The Buyer and the Seller agree that this Clause 12 has been the
subject of discussion and negotiation and is fully understood by the
parties and that the price of the Aircraft and the other mutual
agreements of the parties set forth in this Agreement were arrived
at in consideration of, inter alia, the provisions of this Clause
12, specifically including the Exclusivity of Warranties and General
Limitations of Liability provisions and the Duplicate Remedies
provisions set forth following Subclause 12.6.
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3 - PATENT INDEMNITY
The Seller, in its capacity as "Buyer" under its arrangements with
the Manufacturer, has negotiated and obtained the following Patent
Indemnity from the Manufacturer with respect to the Aircraft,
subject to the terms, conditions, limitations and restrictions
(including, but not limited to, the waiver, release and renunciation
provision) all as hereinafter set out. The Seller hereby assigns to
the Buyer, and the Buyer hereby accepts, all of the rights and
obligations of the Seller in its capacity as "Buyer" as aforesaid
under the said Patent Indemnity and the Seller subrogates the Buyer
into all such rights and obligations in respect of the Aircraft. The
Seller hereby warrants to the Buyer that it has all requisite
authority to make the foregoing assignment and effect the foregoing
subrogation to and in favor of the Buyer and that it will not enter
into any amendment of the provisions so assigned without the prior
written consent of the Buyer. Capitalized terms utilized in the
following provisions have the meanings assigned thereto in this
Agreement, except that the term "Seller" refers to the Manufacturer
and the term "Buyer" refers to the Seller.
QUOTE
13.1 Scope
The Seller shall indemnify the Buyer from and against any damages,
costs and expenses including reasonable legal costs (excluding
damages, costs, expenses, loss of profits and other liabilities in
respect of or resulting from loss of use of any Aircraft):
(1) to the extent of one hundred percent (100%) thereof in case of
any actual or alleged infringement by any Aircraft or any
Warranted Part or the use thereof of (a) any British, French,
German, Spanish or US patent, or (b) any patent issued under
the laws of any other country that (i) is bound by and
entitled to all benefits of Article 27 of the Chicago
Convention on International Civil Aviation of December 7,
1944, or (ii) is a party to the International Convention for
the Protection of Industrial Property or (iii) has in full
force and effect patent laws that recognize and give adequate
protection to patents issued under the laws of other
countries, and
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(2) to the extent of fifty percent (50%) thereof in case of any
actual or alleged infringement by any Aircraft or any
Warranted Part or the use thereof of any patent issued under
the laws of any country not covered by (1) above in which the
Buyer is from time to time lawfully operating the Aircraft.
The Seller's undertaking under this Clause 13 shall not apply to
components, accessories, equipment or parts which are not Warranted
Parts.
13.2 Seller's Action
Should the Buyer be enjoined from using any part of an Aircraft by
reason of infringement of a patent covered by Subclause 13.1, the
Seller will, at its option and expense, either (i) procure for the
Buyer the right to use such part free of any liability for patent
infringement or (ii) as soon as possible replace such part with a
noninfringing substitute otherwise complying with the requirements
of this Agreement.
13.3 Seller's Obligation
The Seller's obligation hereunder with respect to any actual or
alleged infringement is conditioned upon commencement of suit
against the Buyer for infringement or the Buyer's receipt of a
written claim alleging infringement, and upon written notice by the
Buyer to the Seller within ten (10) days after receipt by the Buyer
of notice of the institution of such suit or claim, giving
particulars thereof. The Seller shall have the option but not the
obligation at any time to conduct negotiations with the party or
parties charging infringement and may intervene in any suit
commenced. Whether or not the Seller intervenes in any such suit, it
shall be entitled at any stage of the proceedings to assume, conduct
or control the defense thereof, if it assumes the costs associated
therewith.
The Seller's obligation hereunder with respect to any actual or
alleged infringement is also conditioned upon (i) the Buyer's
promptly furnishing to the Seller all the data, papers, records and
other assistance within the control of the Buyer material to the
resistance of or defense against any such charge or suits for
infringement, (ii) the Buyer's use of reasonable efforts to
cooperate with the Seller to reduce royalties, damages, costs and
expenses involved, (iii) the Seller's prior approval of the Buyer's
payment, assumption or admission of any liabilities, expenses,
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costs or royalties for which the Seller is asked to respond and (iv)
the Buyer's not otherwise reasonably acting in a manner prejudicial
to its or the Seller's defense of the action.
13.4 WAIVER
THE INDEMNITY PROVIDED IN THIS CLAUSE 13 AND THE OBLIGATIONS AND
LIABILITIES OF THE SELLER UNDER THIS CLAUSE 13 ARE EXCLUSIVE AND IN
SUBSTITUTION FOR, AND SOLELY IN CONNECTION WITH ITS RIGHTS UNDER
THIS CLAUSE 13, THE BUYER HEREBY WAIVES, RELEASES AND RENOUNCES ALL
OTHER INDEMNITIES, WARRANTIES, OBLIGATIONS, GUARANTEES AND
LIABILITIES ON THE PART OF THE SELLER AND RIGHTS, CLAIMS AND
REMEDIES OF THE BUYER AGAINST THE SELLER, EXPRESS OR IMPLIED,
ARISING BY LAW OR OTHERWISE (INCLUDING WITHOUT LIMITATION ANY
OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY ARISING FROM OR WITH
RESPECT TO LOSS OF USE OR REVENUE OR CONSEQUENTIAL DAMAGES), WITH
RESPECT TO ANY ACTUAL OR ALLEGED PATENT INFRINGEMENT OR THE LIKE BY
ANY AIRCRAFT, ACCESSORY, EQUIPMENT OR PART, OR THE USE OR SALE
THEREOF, PROVIDED THAT, IN THE EVENT THAT ANY OF THE AFORESAID
PROVISIONS SHOULD FOR ANY REASON BE HELD UNLAWFUL OR OTHERWISE
INEFFECTIVE, THE REMAINDER OF THIS SUBCLAUSE 13.4 SHALL REMAIN IN
FULL FORCE AND EFFECT. THIS PATENT INDEMNITY SHALL NOT BE EXTENDED,
ALTERED OR VARIED EXCEPT BY A WRITTEN INSTRUMENT SIGNED BY THE
SELLER AND THE BUYER.
UNQUOTE
In consideration of the assignment and subrogation by the Seller
under this Clause 13 in favor of the Buyer in respect of the
Seller's rights against and obligations to the Manufacturer under
the provisions quoted above, the Buyer hereby accepts such
assignment and subrogation and agrees to be bound by all of the
terms, conditions and limitations therein contained (specifically
including, without limitation, the waiver, release and renunciation
provision).
THE INDEMNITY PROVIDED IN THIS CLAUSE 13 AND THE OBLIGATIONS AND
LIABILITIES OF THE SELLER UNDER THIS CLAUSE 13 ARE EXCLUSIVE AND IN
SUBSTITUTION FOR, AND THE BUYER HEREBY WAIVES, RELEASES AND
RENOUNCES ALL OTHER INDEMNITIES, WARRANTIES, OBLIGATIONS, GUARANTEES
AND LIABILITIES ON THE PART OF THE SELLER AND RIGHTS, CLAIMS AND
REMEDIES OF THE BUYER AGAINST THE SELLER, EXPRESS OR IMPLIED,
ARISING BY LAW OR OTHERWISE (INCLUDING WITHOUT LIMITATION ANY
OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY ARISING FROM OR WITH
RESPECT TO LOSS OF USE OR REVENUE OR CONSEQUENTIAL
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DAMAGES), WITH RESPECT TO ANY ACTUAL OR ALLEGED PATENT INFRINGEMENT
OR THE LIKE BY ANY AIRCRAFT, ACCESSORY, EQUIPMENT OR PART, OR THE
USE OR SALE THEREOF, PROVIDED THAT, IN THE EVENT THAT ANY OF THE
AFORESAID PROVISIONS SHOULD FOR ANY REASON BE HELD UNLAWFUL OR
OTHERWISE INEFFECTIVE, THE REMAINDER OF THIS CLAUSE SHALL REMAIN IN
FULL FORCE AND EFFECT. THIS PATENT INDEMNITY SHALL NOT BE EXTENDED,
ALTERED OR VARIED EXCEPT BY A WRITTEN INSTRUMENT SIGNED BY THE
SELLER AND THE BUYER.
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14 - TECHNICAL PUBLICATIONS
14.1 Scope
Unless set forth to the contrary in Letter Agreement No. 2 to the
Agreement or in any other agreement between the Buyer and the Seller
dated the date hereof, the Seller will provide the Buyer or cause
the Buyer to be provided with a set of technical publications to
support the operation of each of the Aircraft in accordance with the
terms set forth in this Clause 14 (the "Technical Publications").
Such Technical Publications are listed in Exhibit "F" of this
Agreement together with the form, type, format and quantity of each
such Technical Publication.
14.2 Specification
14.2.1 The Technical Publications are prepared according to applicable ATA
specifications. Exhibit "F" references the relevant ATA
specification for each affected Technical Publication.
14.2.2 Technical Publications will be customized as indicated in Exhibit
"F."
14.2.3 Technical Publications at delivery of the Aircraft shall correspond
to the Specification of the Aircraft as defined at least six (6)
months before such delivery.
14.3 Delivery
The Technical Publications and corresponding revisions that the
Seller will supply or cause to be supplied in accordance with the
terms of this Clause 14 will be sent to one address only, as defined
by the Buyer.
The quantities of the Technical Publications to be delivered on or
before the delivery of the Buyer's first Aircraft shall be mutually
agreed. The Seller shall send or cause to be sent additional
quantities of Technical Publications as required by the Buyer upon
thirty (30) days' prior notice. If the Buyer elects to cancel the
order for or return a certain number of Technical Publications in
hard copy that are already in production and scheduled for delivery
or have already been supplied, then the next quantity of
free-of-charge Technical Publications to be delivered by the Seller
shall not be due until one year after such cancellation or return of
Technical Publications.
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Technical Publications and their revisions will be shipped by the
quickest transportation methods. The shipments will be Free Carrier
(FCA) Toulouse, France, and/or Hamburg, Germany.
14.4 Language
The Technical Publications will be supplied in the English language
using aeronautical terminology in common use.
14.4 Revision Service
14.4.1 General
Unless otherwise specifically stated, revision service shall be
offered free of charge for [***] years after delivery of the last
Aircraft. Mandatory changes shall be incorporated into the Technical
Publications at no charge for as long as one (1) Aircraf is in
service with the Buyer.
14.4.2 Service Bulletins
Service Bulletin (SB) information will be incorporated into the
Technical Publications after notice from the Buyer of embodiment of
a Service Bulletin, provided that such notice is given to the Seller
within three (3) years after issue of such Service Bulletin. The
split effectivity for the corresponding Service Bulletin will remain
in the Technical Publications until notification from the Buyer that
embodiment of such Service Bulletin has been completed for all the
Aircraft.
14.4.3 Customer Originated Changes
14.4.3.1 Buyer-originated data documented in the Buyer's own Airline
Engineering Bulletin (AEB) ("Customer Originated Changes" or "COC")
may be introduced into the following customized Technical
Publications:
(i) Aircraft Maintenance Manual
(ii) Illustrated Parts Catalog
(iii) Trouble Shooting Manual
(iv) Wiring Manual (Schematics, Wirings, Lists)
14.4.3.2 The Buyer shall issue COC in accordance with the provisions of the
"Guidelines for Customer Originated Changes" issued by the Seller
and shall label such data "COC."
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<PAGE>
14.4.3.3 The Seller shall use all reasonable efforts to introduce the COC
into the relevant Technical Publications within two (2) revisions
following the receipt of complete and accurate data for processing.
14.4.3.4 COC data will be incorporated by the Seller in all affected
customized Technical Publications, unless the Buyer specifies in
writing to the Seller into which Technical Publications the COC data
will be incorporated. The customized Technical Publications into
which the COC data are incorporated will only show the Aircraft
configuration that reflects the COC data and not the configuration
before incorporation of such COC data.
14.4.3.5 The Buyer hereby acknowledges and accepts that the incorporation of
any COC into the Technical Publication issued by or caused to be
issued by the Seller shall be entirely at the Buyer's risk.
Accordingly, the Seller shall be under no liability whatsoever in
respect of either the engineering contents of any COC, including any
omissions or inaccuracies therein, or the effect that incorporation
of such COC may have on the Technical Publications.
14.4.3.6 The Seller shall not be required to check any COC data submitted for
incorporation as aforementioned, and the Buyer shall ensure that all
COC data submitted for incorporation into a Technical Publication
have received prior agreement from its local airworthiness
authority.
14.4.3.7 IN THE EVENT THAT THE SELLER AND/OR THE MANUFACTURER IS REQUIRED
UNDER ANY COURT ORDER OR SETTLEMENT TO INDEMNIFY IN WHOLE OR IN PART
ANY THIRD PARTY FOR INJURY, LOSS OR DAMAGE INCURRED DIRECTLY OR
INDIRECTLY AS A RESULT OF INCORPORATION OF ANY COC INTO THE
TECHNICAL PUBLICATIONS ISSUED OR CAUSED TO BE ISSUED BY THE SELLER,
THE BUYER AGREES TO DEFEND, INDEMNIFY OR HOLD HARMLESS THE SELLER
AND/OR THE MANUFACTURER FOR ALL PAYMENTS OR SETTLEMENTS MADE IN
RESPECT OF SUCH INJURY, LOSS OR DAMAGE INCLUDING ANY EXPENSES
INCURRED BY THE SELLER AND/OR THE MANUFACTURER IN DEFENDING SUCH
CLAIMS. THIS INDEMNIFICATION BY THE BUYER SHALL IN NO EVENT BE
AFFECTED BY ANY WRITTEN OR ORAL COMMUNICATION THAT THE SELLER OR THE
MANUFACTURER MAY MAKE TO THE BUYER IN RESPECT OF SUCH DOCUMENTATION.
14.4.3.8 The price for the incorporation of any COC as aforesaid shall be
invoiced to the Buyer under conditions specified in the Seller's
then current Support Services Price Catalog.
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14.5 Vendor Equipment
14.5.1 Information relating to Vendor equipment that is installed on the
Aircraft by the Seller will be included free of charge in the basic
issue of the Technical Publications, to the extent necessary for the
understanding of the systems concerned.
14.5.2 The Buyer shall supply or cause to be supplied to the Seller the
data related to Buyer Furnished Equipment and Seller Furnished
Equipment not covered in the Seller's standard Seller Furnished
Equipment definition at least six (6) months before the scheduled
delivery of the customized Technical Publications.
14.5.3 The Seller shall introduce into the basic issue of the Technical
Publications the data related to Buyer Furnished Equipment and
Seller Furnished Equipment, at no charge.
14.6 Aircraft Identification for Technical Publications
For the customized Technical Publications the Buyer agrees to the
allocation of Fleet Serial Numbers (FSNS) from 001 up to 999. The
sequence shall be interrupted only if two (2) different Propulsion
Systems manufacturers are selected and/or different aircraft models
are chosen.
The Buyer will indicate to the Seller the Fleet Serial Number
allocated to the Aircraft Manufacturer's Serial Number (MSN) two (2)
years prior to delivery of the first Aircraft. The allocation of
Fleet Serial Numbers to Manufacturer's Serial Numbers shall not
constitute any proprietary, insurable or other interest whatsoever
of the Buyer in any Aircraft prior to delivery of and payment for
such Aircraft as provided in this Agreement.
The relevant customized Technical Publications are:
(i) Aircraft Maintenance Manual
(ii) Illustrated Parts Catalog
(iii) Trouble Shooting Manual
(iv) Wiring Manuals (Schematics, Wirings, Lists)
14.7 Airworthiness Authority
It will be the responsibility of the Buyer to provide its local
airworthiness authority with such Technical Publications as it may
require, using the Technical Publications delivered by the Seller to
the Buyer in accordance with the terms hereof.
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14.8 Additional Requirements
If feasible the Seller will comply with the Buyer's request to
change the form, quantity, type and/or revisions of any of the data
specified in Exhibit "F, upon receipt of the Buyer's purchase order.
The charges for such changes shall be invoiced to the Buyer under
conditions specified in the Seller's then current Support Services
Price Catalog.
14.9 Future Developments
The Seller shall continuously monitor technological developments and
apply them to document production and method of transmission where
beneficial and economical.
14.10 Proprietary Rights
14.10.1 All proprietary rights, including but not limited to patent, design
and copyrights, relating to Technical Publications and data supplied
under this Agreement, shall remain with the Seller. All such
Technical Publications and data are supplied to the Buyer for the
sole use of the Buyer, who undertakes not to divulge the contents
thereof to any third party save as permitted therein or otherwise
pursuant to any governmental or legal requirement imposed upon the
Buyer. These proprietary rights shall also apply to any translation
into a language or languages or media that may have been performed
or caused to be performed by the Buyer.
14.10.2 The supply of Technical Publications and data by the Seller shall
not give the Buyer any right to design or manufacture any Aircraft
or spare parts except as expressly provided in this Agreement.
Further, any right of manufacture granted to the Buyer by the Seller
under this Agreement shall in no way be construed as, express or
implied approval of any such manufactured products.
14.10.3 Drawings of the Manufacturer are provided to the Buyer under the
express condition that the Manufacturer shall have no liability,
whether in contract or tort, arising from or in connection with the
use of a drawing of the Manufacturer by the Buyer.
14.10.4 In the event that the Seller has authorized the disclosure to third
parties, either under this Agreement or by express written
authorization, the Buyer will undertake to bind such third party to
the same conditions and restrictions as the Buyer with respect to
such disclosure, as set forth in this Subclause 14.10.
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15 - FIELD ASSISTANCE
15.1 Seller's Service
Unless set forth to the contrary in Letter Agreement No. 2 to the
Agreement or in any other agreement between the Buyer and the Seller
dated the date hereof, the Seller shall provide or cause to be
provided at no charge to the Buyer the following services at the
Buyer's main base or at other locations to be mutually agreed.
15.1.1 The Seller shall provide Customer Support Representatives acting in
an advisory capacity at the Buyer's main base for the period to be
agreed commencing at or about delivery of the first Aircraft up to a
total of [***]. The actual number of Customer Support
Representatives allocated to the Buyer shall be mutually agreed. At
no time, however, will that number exceed three (3) persons.
15.1.2 If requested by the Buyer, the Seller shall use reasonable efforts
to arrange for similar services to be procured by competent
representatives of the Propulsion Systems manufacturer(s) and, when
necessary and applicable, by representatives of Vendors (other than
Vendors of Buyer Furnished Equipment).
15.1.3 The Seller shall provide one (1) Customer Support Director based in
Herndon, VA, to liaise between the Manufacturer and the Buyer on
product support matters after execution of this Agreement for as
long as any of the Aircraft is operated by the Buyer.
15.2 Buyer's Service
15.2.1 For as long as the Customer Support Representative(s), specified in
Subclause 15.1.1 above remain(s) with the Buyer, the Buyer shall
furnish without charge secretarial assistance, suitable space,
office equipment and facilities in or conveniently near the Buyer's
maintenance facilities. The Buyer shall provide telecommunications
facilities at the Seller's cost to be invoiced on a monthly basis.
15.2.2 In accordance with the Buyer's regulations, the Buyer shall provide
at no charge to the Seller:
(i) for the Customer Support Representatives mentioned in
Subclause 15.1.1, confirmed and guaranteed airline tickets
between the locations
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mentioned above in Subclause 15.1 and the international
airport nearest Toulouse, France, in business class on
international routes and in coach class on domestic routes;
and
(ii) when said Customer Support Representatives are assigned away
from the locations mentioned above in Subclause 15.1 at the
Buyer's request, transportation between the said locations and
the place of assignment.
15.2.3 The Buyer shall give the Seller all necessary reasonable assistance
with general administrative functions specific to the Buyer's
country and procurement of the documents necessary to live and work
there. Failure of the Seller to obtain the necessary documents,
after using its best efforts to do so, will relieve the Seller of
any obligation to the Buyer under this Clause 15.
15.3 Representatives' Status
In providing the above technical service, the Seller's employees,
including Customer Support Representatives and the Customer Support
Director, are deemed to be acting in an advisory capacity only and
at no time shall they be deemed to be acting, either directly or
indirectly, as the Buyer's employees or agents.
15.4 Temporary Assignment of Customer Support Representative
The Buyer agrees that the Seller shall have the right to transfer or
recall any Customer Support Representative on a temporary or
permanent basis. The Buyer shall receive credit for the man-days
during which any Customer Support Representative is absent from the
Buyer's facility pursuant to this Subclause 15.4.
15.5 INDEMNITY AND INSURANCE
THE BUYER WILL INDEMNIFY AND HOLD HARMLESS THE SELLER, THE
MANUFACTURER, ASC AND EACH OF THE ASSOCIATED CONTRACTORS AND THEIR
RESPECTIVE SUBCONTRACTORS AND THEIR RESPECTIVE AFFILIATES,
DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES FROM AND AGAINST ALL
LIABILITIES, DAMAGES, LOSSES, LOSS OF USE, COSTS AND EXPENSES (I)
FOR ALL INJURIES TO AND DEATHS OF PERSONS (EXCEPTING INJURIES TO AND
DEATHS OF THE SELLER'S REPRESENTATIVES PROVIDING THE SERVICES UNDER
THIS CLAUSE) CAUSED BY THE SELLER OR ITS REPRESENTATIVES AND (II)
FOR LOSS OF OR DAMAGE TO PROPERTY (EXCEPTING LOSS OF OR DAMAGE TO
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PROPERTY OF THE SELLER'S SAID REPRESENTATIVES) CAUSED BY THE SELLER
OR ITS REPRESENTATIVES, IN EITHER CASE WHEN ARISING OUT OF OR IN
CONNECTION WITH THE PROVISION OF SERVICES UNDER THIS CLAUSE 15. THIS
INDEMNITY OF THE BUYER WILL NOT APPLY FOR ANY SUCH LIABILITIES,
DAMAGES, LOSSES, COSTS OR EXPENSES ARISING OUT OF OR CAUSED BY THE
NEGLIGENCE OR WILLFUL MISCONDUCT OF THE SELLER'S SAID
REPRESENTATIVES.
THE SELLER WILL INDEMNIFY AND HOLD HARMLESS THE BUYER, ITS
DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES FROM AND AGAINST ALL
LIABILITIES, DAMAGES, LOSSES, COSTS AND EXPENSES (I) FOR INJURIES TO
OR DEATHS OF THE SELLER'S SAID REPRESENTATIVES PROVIDING THE
SERVICES UNDER THIS CLAUSE, (II) FOR LOSS OF OR DAMAGE TO PROPERTY
OF THE SELLER'S SAID REPRESENTATIVES OR (III) ARISING OUT OF OR
CAUSED BY THE WILLFUL MISCONDUCT OR NEGLIGENCE OF THE SELLER'S SAID
REPRESENTATIVES. WITH RESPECT TO SUBCLAUSES (I) AND (II) OF THE
PRECEDING SENTENCE, THE SELLER SHALL NOT BE OBLIGATED TO INDEMNIFY
OR HOLD HARMLESS THE BUYER WHERE THE SELLER'S LIABILITIES, DAMAGES,
LOSSES, COSTS OR EXPENSES ARISE FROM THE BUYER'S NEGLIGENCE OR
WILLFUL MISCONDUCT.
IN THE EVENT ANY CLAIM IS MADE OR LAWSUIT IS BROUGHT AGAINST EITHER
PARTY (OR ITS RESPECTIVE INDEMNITEES) FOR DAMAGES FOR DEATH OR
INJURY OR FOR PROPERTY DAMAGE, THE LIABILITY FOR WHICH HAS BEEN
ASSUMED BY THE OTHER PARTY PURSUANT TO THIS SUBCLAUSE 15.5, THE
FORMER (INDEMNITEE) WILL PROMPTLY GIVE NOTICE TO THE OTHER PARTY
(INDEMNITOR), AND THE INDEMNITOR WILL ASSUME AND CONDUCT THE DEFENSE
THEREOF, AND WILL HAVE THE RIGHT TO EFFECT ANY SETTLEMENT THAT
FINALLY EXTINGUISHES SUCH CLAIM AS AGAINST THE INDEMNITEE, AND THE
INDEMNITOR AGREES TO INDEMNIFY AND HOLD THE INDEMNITEE HARMLESS FROM
ANY LOSSES, LIABILITIES, OR EXPENSES BY REASON OF SUCH SETTLEMENT.
IN THE EVENT THAT THE INDEMNITOR FAILS TO ASSUME AND CONDUCT THE
DEFENSE OF THE CLAIM OR LAWSUIT WHEN IT WAS OBLIGATED TO DO SO, THEN
THE INDEMNITEE WILL HAVE THE RIGHT TO PROCEED WITH THE DEFENSE OF
THE CLAIM OR LAWSUIT AS IT DEEMS APPROPRIATE AND WILL HAVE AN ACTION
AGAINST THE INDEMNITOR FOR ANY JUDGMENTS, SETTLEMENTS, COSTS OR
EXPENSES INCURRED IN CONDUCTING SAID DEFENSE. IF THE INDEMNITEE
BELIEVES IT HAS A DEFENSE TO THE CLAIM OR LAWSUIT AND THE INDEMNITOR
HAS NOT RAISED SUCH DEFENSE, THE INDEMNITEE MAY SUGGEST SUCH DEFENSE
TO THE INDEMNITOR AND THE INDEMNITOR SHALL THEN CONSIDER SUCH
DEFENSE IN GOOD FAITH. FOR THE PURPOSE OF THIS SUBCLAUSE 15.5, A
CLAIM OR LAWSUIT AGAINST THE MANUFACTURER OR ANY OF THE ASSOCIATED
CONTRACTORS OR ANY OF THEIR RESPECTIVE SUBCONTRACTORS OR ANY OF
THEIR RESPECTIVE DIRECTORS, OFFICERS, AGENTS OR EMPLOYEES WILL BE
DEEMED TO BE A CLAIM OR LAWSUIT AGAINST THE SELLER.
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FOR THE PERIOD OF PERFORMANCE DESCRIBED IN THIS CLAUSE, THE BUYER
WILL (I) INDEMNIFY AND WAIVE ANY RIGHTS OF RECOURSE OR SUBROGATION
AGAINST THE SELLER, THE MANUFACTURER AND ASC, AND EACH OF THE
ASSOCIATED CONTRACTORS AND THEIR RESPECTIVE SUBCONTRACTORS AND THEIR
RESPECTIVE DIRECTORS, OFFICERS, AGENTS, EMPLOYEES AND SUBCONTRACTORS
IN RESPECT OF ALL RISKS HULL INSURANCE POLICY; AND (II) EFFECT
INSURANCE TO COVER THIRD-PARTY LIABILITY RISKS ARISING DURING SAID
PERFORMANCE IN AN AMOUNT REASONABLY SATISFACTORY TO THE SELLER,
NAMING THE SELLER AND ITS DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES
AS ADDITIONAL INSUREDS. SUCH INSURANCE WILL CONTAIN A
CROSS-LIABILITY CLAUSE AND WILL ALSO CONTAIN A THIRTY (30)-DAY
NOTICE-OF-CANCELLATION PROVISION. UPON REQUEST, THE BUYER WILL
DELIVER TO THE SELLER A CERTIFICATE OF INSURANCE EVIDENCING THE
COVERAGE REQUIRED BY THIS CLAUSE.
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16 - TRAINING AND TRAINING AIDS
16.1 General
Unless set forth to the contrary in Letter Agreement No. 2 to the
Agreement or in any other agreement between the Buyer and the Seller
dated the date hereof, training services will be provided as follows
in this Clause 16.
16.1.1 Training Sites
The Seller shall provide training services, or cause training
services to be provided, for the Buyer's personnel. Such training
services shall be provided at the Seller's training center in
Toulouse, France, or Miami, Florida, as more fully described in this
Clause 16.
Certain training may also be provided by the Seller at the Buyer's
base or other location, if and when practicable for the Seller,
under terms and conditions to be mutually agreed.
The location at which training services shall be provided will be
mutually agreed at the Training Conference referenced below in
Subclause 16.1.3.
16.1.2 Training Conference
Subject to the terms of Letter Agreement No. 2 to the Agreement or
to any other agreement dated the date hereof between the Buyer and
the Seller, training courses provided for the Buyer's personnel
shall be scheduled at dates mutually agreed during a training
conference to be held about twelve (12) months before delivery of
the first Aircraft (the "Training Conference") or at an earlier
date, if mutually desirable. The courses shall be scheduled for a
minimum number of participants, to be agreed upon at the Training
Conference.
16.1.3 Course Level
Training courses provided for the Buyer's personnel shall be the
Seller's standard courses.
The training equipment used for flight and maintenance crew training
shall reflect the Specification as closely as possible but will not
necessarily be fully customized.
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The Seller will be responsible for all training course syllabi,
training aids, and training equipment necessary for the organization
of the training courses.
16.1.4 Course Prerequisites
The Buyer warrants that trainees are able to fully understand, write
and speak English.
They shall have the prerequisite jet transport category experience,
as defined in Appendix "A" to this Clause 16, in order to attend the
Seller's courses, and the Seller reserves the right to check the
trainees' previous professional experience in accordance with
applicable law. The Seller reserves the right to check the trainees'
previous professional experience. Avionics specialists must have
knowledge of digital techniques including ARINC 429 liaisons.
It is clearly understood that said training courses will be FAA
approved transition courses.
The Buyer shall be responsible for the selection of training and for
any liability with respect to entry knowledge level of the trainees.
In the event the Seller should determine that a trainee lacks such
entry-level preparation, the trainee shall, after consultation with
the Buyer, either be cycled through an entry-level training program
or be withdrawn from the program. All costs associated with such
entry-level program and with the cancellation of the scheduled
transition training shall be charged to the Buyer's account.
16.1.5 Attendance and Performance
In fulfillment of its obligation to provide training courses, the
Seller shall deliver to the trainees a certificate of completion at
the end of such training courses. This certificate does not
represent authority or qualification by any official civil aviation
authority, but may be presented to such authority as an attestation
of completion of the Seller's training courses.
The Buyer shall provide the Seller with an attendance list of the
trainees for each course and with the validated performance of each
trainee.
The Seller warrants to the Buyer that the Seller's standard courses
are designed to and have been approved
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by all applicable authorities to bring jet transport specialists to
a professional knowledge of the Aircraft. However, the Seller shall
not be held liable for the unsatisfactory performance of any
individual trainee for whatever reason originating from the Buyer,
including, but not limited to, entry level or learning capacity.
16.1.6 Additional Training
Performance of an additional number of courses for the Buyer's
personnel, over and above those provided free of charge pursuant to
this Clause 16, and the supply of other additional training services
can be provided at the Buyer's expense, subject to availability.
On the Buyer's request and/or on the Seller's advice and subject to
mutual agreement, an extension in duration, a repetition or a
deviation from the standard of any course to be given or in progress
(for reasons due to the Buyer, including, but not limited to
unsatisfactory performance of the trainees) may be provided.
Extensions exceeding the Buyer's trainee-day allowance or any
extension in the duration of the Seller's flight crew training
course set forth hereunder shall be at the Buyer's expense.
16.1.7 Training at the Buyer's Base
In the event that, at the Buyer's request, training is provided by
the Seller's instructors at any location other than the Seller's
training center in Toulouse, France, or Miami, Florida, the Buyer
shall provide lodging and local transportation and shall reimburse
the Seller for other expenses on the basis of a per diem rate of $75
(US dollars--seventy-five) (subject to escalation from January 1995
economic conditions) per Seller's instructor.
In addition, the Buyer shall ensure that airline reservations shall
be confirmed and guaranteed in business class on the Buyer's route
network. When the use of the Buyer's route network is not feasible
or practical, the Buyer shall reimburse the Seller for business
class accommodations on international routes and coach class on
domestic routes.
It is understood that transportation of the Seller's instructors
includes travel to and from the Seller's training center and the
place of assignment.
The training equipment necessary for course performance on the
Buyer's request at any base other than the Seller's shall be
provided by the Buyer in accordance with the Seller's
specifications.
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In the event the relevant equipment cannot be made available by the
Buyer, when performance is made at a base other than the Seller's
base pursuant to the Buyer's request, this equipment shall, when
practicable, be provided by the Seller and sent by air from
Toulouse, France, or Miami to the course location and back to
Toulouse, France, or Miami at the Buyer's expense.
The Buyer shall be solely liable for and hereby indemnifies and
holds harmless the Seller, for any and all delay in the performance
of training outside the Seller's training centers associated with
transportation services described above and/or consequences of such
delays.
16.1.8 Practical Flight Crew Training on Aircraft
(i) Any training involving the use of an aircraft shall be
performed on the Buyer's delivered Aircraft or on the Buyer's
leased A320 aircraft. Should no delivered Aircraft or leased
A320 aircraft be available for whatever reason, the Seller
will assist the Buyer in finding a substitute aircraft.
Related costs and expenses shall be charged to the Buyer's
account.
(ii) When such training on Aircraft is performed in Toulouse,
France, the Seller shall provide free-of-charge line
maintenance, including servicing, preflight checks and
changing of minor components for the contractual training
sessions. The Buyer shall provide, in whatever training
location, a mutually agreed batch of spare parts as required
to support said training and shall bear all other expenses
such as fuel, oil and landing fees.
(iii) The Buyer shall provide the Seller with a certificate of
insurance evidencing coverage required under the provisions of
Subclause 16.5 hereunder.
16.1.9 Buyer's Personnel Transportation
(i) When training is performed in Toulouse, France, the Seller
shall provide free of charge local transportation by bus for
the Buyer's trainees to and from designated pick up points and
the training center. The Seller shall also provide each flight
crew with a rented car or taxi transportation as from the
beginning of the
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Fixed Base Simulator (FBS) phase of the course to enable the
crew to attend either simulator or flight sessions at any
time.
(ii) When training is performed in Miami, Florida, the Seller shall
provide free-of-charge for the Buyer's trainees one rented car
per group of four (4) trainees or per flight crew as from the
beginning of the course.
(iii) For each rented car, twenty (20) miles per working day shall
be free of charge. Any additional mileage shall be charged to
the crew at the end of the training period. The Buyer's
trainees will be responsible for fuel charges and fines, if
any. The Seller reserves the right to ask the Buyer to pay for
car damages that are not declared in due time by the
responsible trainee.
16.1.10 Duration
The training provided herein can be taken until one (1) year after
delivery of the last Firm Aircraft scheduled to be delivered under
this Agreement.
16.1.11 Unused Training
In the event that all or part of the training or training aids as
defined in this Clause 16 is not used by the Buyer, then, upon
delivery of the first Aircraft, the Seller will make available to
the Buyer a credit memorandum for the purchase of goods and services
from the Seller or any of its Affiliates for such unused portion.
16.2 Training Courses
16.2.1 Flight Courses
16.2.1.1 Flight Crew Transition Course
The Seller shall provide transition training free of charge for up
to forty-four (44) flight crews (each of which consists of a captain
and a first officer). Among these forty-four (44) flight crews,
eight (8) captains shall also receive flight-crew instructor
familiarization training. The training manual shall be the AIRBUS
INDUSTRIE FLIGHT CREW OPERATING MANUAL (FCOM).
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16.2.1.2 Flight Crew Initial Operating Experience
As part of the flight crew transition course allowance set forth in
Subclause 16.2.1.1 above, and in order to assist the Buyer with
initial operating experience, after the delivery of the first
Aircraft, the Seller shall provide free of charge to the Buyer one
(1) instructor pilot for an aggregate period of up to two (2) months
after delivery of the first Aircraft.
The Buyer shall reimburse the expenses for said instructors as set
forth above in Subclause 16.1.7. Additional pilot instructors can be
provided at the Buyer's expense upon conditions to be mutually
agreed.
16.2.1.3 Cabin Attendants' Familiarization Course
The Seller shall offer the cabin attendants course to up to fifteen
(15) cabin attendants.
16.2.2 Maintenance Courses
The maintenance courses are listed in Appendix "B" to this Clause
16.
16.2.2.1 Trainee Days
The Seller shall train ground personnel free of charge for a
training period equivalent to one thousand nine hundred thirty-five
(1,935) trainee days of instruction for the whole range of courses
listed in Appendix "B" to this Clause 16. The number of EM-07
(Engine Run-up) courses shall be limited to six (6) courses with
three (3) trainees each.
The trainee days will be debited as follows:
(i) For instruction at the Seller's training centers, one (1) day
of instruction for one (1) trainee equals one (1) trainee day.
The number of trainees at the beginning of the course shall be
counted as the number of trainees considered to have taken the
entire course.
(ii) For instruction at locations other than the Seller's Training
Centers, the total number of trainee days shall be the number
of trainees at the beginning of the course, with a minimum of
twelve (12), multiplied by the number of days of detachment of
the Seller's instructor(s).
16.2.2.2 Maintenance Line Training
As part of the maintenance trainee-day allowance set forth in
Subclause 16.2.2.1 above, and in order to
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assist the Buyer with practical line training, such as Aircraft
handling and servicing, flight crew/maintenance coordination, use of
manuals and any other activities that the instructor might deem
necessary after delivery of the first Aircraft, the Seller shall
provide the Buyer one (1) free-of-charge maintenance instructor at
the Buyer's base for a period of four (4) weeks.
The Buyer shall reimburse the expenses for said instructor as set
forth above in Subclause 16.1.7. Additional maintenance instructors
can be provided at the Buyer's expense.
16.2.3 Operations/Performance Courses
The Seller shall provide free of charge sixty-five (65) trainee days
to be used for the training courses listed in Appendix "C" to this
Clause 16.
16.2.4 Vendors and Engine Manufacturer Training
The Seller shall ensure that the major Vendors and the Propulsion
Systems manufacturer shall provide maintenance and overhaul training
on their products at appropriate times.
A list of the Vendors concerned will be supplied to the Buyer upon
request.
16.3 Training Aids and Materials
16.3.1 Training Aids for Trainees at the Seller's Training Centers
For the purposes of this Subclause 16.3.1, training aids shall be
understood to include (a) all printed course materials, including
manuals and supporting documents, such materials to be for trainees
receiving the training referred to in Subclause 16.2 and to be free
of charge, and (b) all computer hardware, software and courseware
(including simulators and simulator data packages) and all other
equipment, such material in (b) to remain the property of the Seller
or to be sold to the Buyer pursuant to the Seller's price catalog.
Training aids shall be "FOR TRAINING ONLY," and as such are supplied
for the sole and express purpose of training.
All training aids and materials supplied to the Buyer are for the
training of the Buyer's personnel only. The Buyer undertakes not to
divulge the contents thereof to any third party without the prior
agreement of the Seller, save as required pursuant to any
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governmental, contractual or legal requirement imposed upon the
Buyer.
16.3.2 Training Aids for the Buyer's Training Organization
The Seller will provide Video and Computer Based Instruction (VACBI)
courseware related to the Aircraft and similar to that used by the
Seller for the Buyer's training organization, upon commercial
conditions to be mutually agreed.
Such courseware will be for the training of the Buyer's personnel
only and can include a revision service upon terms and conditions to
be agreed.
16.4 Seller's Support
If requested by the Buyer and on terms to be agreed upon, the Seller
may assist the Buyer with the development and introduction of
Aircraft training programs at the Buyer's training center.
16.5 INDEMNITY AND INSURANCE
THE BUYER WILL INDEMNIFY AND HOLD HARMLESS THE SELLER, THE
MANUFACTURER, AND EACH OF THE ASSOCIATED CONTRACTORS AND THEIR
RESPECTIVE SUBCONTRACTORS AND THEIR RESPECTIVE AFFILIATES,
DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES FROM AND AGAINST ALL
LIABILITIES, DAMAGES, LOSSES, LOSS OF USE, COSTS AND EXPENSES (I)
FOR ALL INJURIES TO AND DEATHS OF PERSONS (EXCEPTING INJURIES TO AND
DEATHS OF THE SELLER'S REPRESENTATIVES PROVIDING THE SERVICES UNDER
THIS CLAUSE) CAUSED BY THE SELLER OR ITS REPRESENTATIVES AND (II)
FOR LOSS OF OR DAMAGE TO PROPERTY (EXCEPTING LOSS OF OR DAMAGE TO
PROPERTY OF THE SELLER'S SAID REPRESENTATIVES) CAUSED BY THE SELLER
OR ITS REPRESENTATIVES, IN EITHER CASE WHEN ARISING OUT OF OR IN
CONNECTION WITH THE PROVISION OF SERVICES UNDER THIS CLAUSE 16. THIS
INDEMNITY OF THE BUYER SHALL NOT APPLY FOR ANY SUCH LIABILITIES,
DAMAGES, LOSSES, COSTS OR EXPENSES ARISING OUT OF OR CAUSED BY THE
WILLFUL MISCONDUCT OR NEGLIGENCE OF THE SELLER'S SAID
REPRESENTATIVES.
THE SELLER WILL INDEMNIFY AND HOLD HARMLESS THE BUYER, ITS
DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES FROM AND AGAINST ALL
LIABILITIES, DAMAGES, LOSSES, COSTS AND EXPENSES (I) FOR INJURIES TO
OR DEATHS OF THE SELLER'S SAID REPRESENTATIVES PROVIDING THE
SERVICES UNDER THIS CLAUSE, (II) FOR LOSS OF OR DAMAGE TO PROPERTY
OF THE SELLER'S SAID REPRESENTATIVES OR (III) ARISING OUT OF OR
CAUSED BY THE WILLFUL MISCONDUCT OR NEGLIGENCE OF THE SELLER'S SAID
REPRESENTATIVES. WITH RESPECT TO SUBCLAUSES (I) AND (II) OF THE
PRECEDING SENTENCE, THE SELLER SHALL NOT BE OBLIGATED TO INDEMNIFY
OR HOLD
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HARMLESS THE BUYER WHERE THE SELLER'S LIABILITIES, DAMAGES, LOSSES,
COSTS OR EXPENSES ARISE FROM THE BUYER'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.
IN THE EVENT ANY CLAIM IS MADE OR LAWSUIT IS BROUGHT AGAINST EITHER
PARTY (OR ITS RESPECTIVE INDEMNITEES) FOR DAMAGES FOR DEATH OR
INJURY OR FOR PROPERTY DAMAGE, THE LIABILITY FOR WHICH HAS BEEN
ASSUMED BY THE OTHER PARTY PURSUANT TO THIS SUBCLAUSE 16.5, THE
FORMER (INDEMNITEE) WILL PROMPTLY GIVE NOTICE TO THE OTHER PARTY
(INDEMNITOR), AND THE INDEMNITOR WILL ASSUME AND CONDUCT THE DEFENSE
THEREOF, AND WILL HAVE THE RIGHT TO EFFECT ANY SETTLEMENT THAT
FINALLY EXTINGUISHES SUCH CLAIM AS AGAINST THE INDEMNITEE, AND THE
INDEMNITOR AGREES TO INDEMNIFY AND HOLD THE INDEMNITEE HARMLESS FROM
ANY LOSSES, LIABILITIES, OR EXPENSES BY REASON OF SUCH SETTLEMENT.
IN THE EVENT THAT THE INDEMNITOR FAILS TO ASSUME AND CONDUCT THE
DEFENSE OF THE CLAIM OR LAWSUIT WHEN IT WAS OBLIGATED TO DO SO, THEN
THE INDEMNITEE WILL HAVE THE RIGHT TO PROCEED WITH THE DEFENSE OF
THE CLAIM OR LAWSUIT AS IT DEEMS APPROPRIATE AND WILL HAVE AN ACTION
AGAINST THE INDEMNITOR FOR ANY JUDGMENTS, SETTLEMENTS, COSTS OR
EXPENSES INCURRED IN CONDUCTING SAID DEFENSE. IF THE INDEMNITEE
BELIEVES IT HAS A DEFENSE TO THE CLAIM OR LAWSUIT AND THE INDEMNITOR
HAS NOT RAISED SUCH DEFENSE, THE INDEMNITEE MAY SUGGEST SUCH DEFENSE
TO THE INDEMNITOR AND THE INDEMNITOR SHALL THEN CONSIDER SUCH
DEFENSE IN GOOD FAITH. FOR THE PURPOSE OF THIS SUBCLAUSE 16.5, A
CLAIM OR LAWSUIT AGAINST THE MANUFACTURER OR ANY OF THE ASSOCIATED
CONTRACTORS OR ANY OF THEIR RESPECTIVE SUBCONTRACTORS OR ANY OF
THEIR RESPECTIVE DIRECTORS, OFFICERS, AGENTS OR EMPLOYEES WILL BE
DEEMED TO BE A CLAIM OR LAWSUIT AGAINST THE SELLER.
FOR THE PERIOD OF PERFORMANCE DESCRIBED IN THIS CLAUSE, THE BUYER
WILL (I) INDEMNIFY AND WAIVE ANY RIGHTS OF RECOURSE OR SUBROGATION
AGAINST THE SELLER, THE MANUFACTURER, AND EACH OF THE ASSOCIATED
CONTRACTORS AND THEIR RESPECTIVE SUBCONTRACTORS AND THEIR RESPECTIVE
DIRECTORS, OFFICERS, AGENTS, EMPLOYEES AND SUBCONTRACTORS IN RESPECT
OF ALL RISKS HULL INSURANCE POLICY; AND (II) EFFECT INSURANCE TO
COVER THIRD-PARTY LIABILITY RISKS ARISING DURING SAID PERFORMANCE IN
AN AMOUNT REASONABLY SATISFACTORY TO THE SELLER, NAMING THE SELLER
AND ITS DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES AS ADDITIONAL
INSUREDS. SUCH INSURANCE WILL CONTAIN A CROSS-LIABILITY CLAUSE AND
WILL ALSO CONTAIN A THIRTY (30)-DAY NOTICE-OF-CANCELLATION
PROVISION. UPON REQUEST, THE BUYER WILL DELIVER TO THE SELLER A
CERTIFICATE OF INSURANCE EVIDENCING THE COVERAGE REQUIRED BY THIS
CLAUSE.
16-9
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CLAUSE 16 - APPENDIX "A"
RECOMMENDED PILOT QUALIFICATION
IN RELATION TO TRAINING REQUIREMENTS
(transition courses)
1. Captains' minimum experience: 1,000 hours in command of jet transport
category aircraft.
- cases of senior co-pilots upgrading to captain position (therefore
not meeting this minimum requirement) may be considered on an ad-hoc
basis.
2. Copilots' minimum experience: 300 hours total experience operating jet
transport aircraft with a total experience of not less than 500 hours.
This assumes formal basic training.
NOTE:
1. For pilots not meeting these above requirements, a jet familiarization
course will be required.
2. For pilots who come from early generation jet transport aircraft, and, in
particular, with no previous experience of FMS, AFCS, glass cockpits or
two crew member operations, an introductory course would be highly
desirable in order to obtain full benefits from the transition course.
16-10
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CLAUSE 16 - APPENDIX "B"
LIST OF STANDARD A320-200 MAINTENANCE COURSES
EMOl GENERAL FAMILIARIZATION COURSE
EMO2 RAMP AND TRANSIT COURSE
EM3l LINE MECHANICS/AVIONICS COURSE, LEVEL II
EM4l BASE MECHANICS COURSE, LEVEL III
EM42 BASE MECHANICS, ELECTRICS AND AVIONICS LEVEL III COURSE
EM45 BASE MECHANICS AND ELECTRICS COURSE, LEVEL III
EM5l BASE ELECTRICS LEVEL III/AVIONICS LEVEL II COURSE
EM52 BASE ELECTRICS AND AVIONICS LEVEL III COURSE
EM62 BASE AVIONICS LEVEL III COURSE
EMO7 ENGINE RUN-UP COURSE
EMO9 MECHANIC CONTROL RIGGING COURSE
EMlO CABIN INTERIOR AND EMERGENCY EQUIPMENT COURSE
EMl1 STRUCTURE MAINTENANCE COURSE
EMl2 ON THE JOB PRACTICAL TRAINING
EMl6 STRUCTURE N.D.T. INSPECTION COURSE
EMl7 COMPOSITE STRUCTURE REPAIR COURSE
XM15 BASIC DIGITAL AND MICROPROCESSOR COURSE
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CLAUSE 16 - APPENDIX "C"
LIST OF A320 OPERATIONS/PERFORMANCE COURSES
EG0l MANAGEMENT SURVEY COURSE
EG02 PERFORMANCE ENGINEER'S COURSE
EG03 DISPATCHER'S COURSE
EFC5 FLIGHT CREW GROUND INSTRUCTOR'S COURSE
EG06 WEIGHT AND BALANCE COURSE
EG07 LOAD MASTER TRANSITION COURSE
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17 - VENDORS' PRODUCT SUPPORT
17.1 Vendor Product Support Agreements
17.1.1 The Seller has obtained product support agreements transferable to
the Buyer from Vendors of Seller Furnished Equipment listed in the
Specification ("Product Support Agreements").
17.1.2 These Product Support Agreements are based on the "World Airlines
and Suppliers Guide" and include Vendor commitments as contained in
the Supplier Product Support Agreements, which include the following
provisions:
17.1.2.1 Technical data and manuals required to operate, maintain, service
and overhaul the Vendor items. Such technical data and manuals shall
be prepared in accordance with the applicable provisions of ATA
Specification 100 and 101 in accordance with Clause 14 of this
Agreement, shall include revision service and shall be published in
the English language. The Seller recommends that software data,
supplied in the form of an appendix to the Component Maintenance
Manual, be provided in compliance with ATA Specification 102 up to
level 3 to protect Vendors' proprietary interests.
17.1.2.2 Warranties and guarantees including Vendors' standard warranties. In
addition, Vendors of landing gear will provide service life policies
for landing gear structures.
17.1.2.3 Training to ensure efficient operation, maintenance and overhaul of
the Vendors' items for the Buyer's instructors, shop and line
service personnel.
17.1.2.4 Spares data in compliance with ATA Specification 200 or 2000,
initial provisioning recommendations, spares and logistics service,
including routine and emergency deliveries.
17.1.2.5 Technical service to assist the Buyer with maintenance, overhaul,
repair, operation and inspection of Vendor items as well as required
tooling and spares provisioning.
17.2 Vendor Compliance
The Seller will monitor Vendor compliance with support commitments
defined in the Product Support Agreements and will take remedial
action together with the Buyer if requested by the Buyer.
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17.3 Vendor Part Repair Stations
17.3.1 The Manufacturer has developed with the Vendors a program aimed at
building a comprehensive network of repair stations in North America
for those Vendor Parts originating from outside this territory.
17.3.2 As a result of the above, most Vendor Parts are now repairable in
North America, and corresponding repair stations are listed in a
document, the AOG and Repair Guide, which is issued and regularly
updated by the Manufacturer.
The Seller undertakes that the Vendor Parts that have to be
forwarded for repair outside North America will be sent back to the
Buyer with proper tagging as required by the FAA.
17.3.3 The Seller will support the Buyer in cases where the agreed repair
turn time of an approved repair station is not met by causing
free-of-charge loans or exchanges (as specified in the relevant
Supplier Product Support Agreements manual) to be offered to the
Buyer.
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18 - BUYER FURNISHED EQUIPMENT AND DATA
18.1 Installation and Delivery
18.1.1 Without additional charge, and in accordance with the Specification,
the Seller shall cause the Manufacturer to provide for the
installation of the Buyer Furnished Equipment.
18.1.2 The Seller shall cause the Manufacturer to advise the Buyer of the
dates by which, in the planned release of engineering for an
Aircraft, the Manufacturer requires a written detailed description
of the dimensions and weight of Buyer Furnished Equipment for such
Aircraft and information necessary for the installation and
operation thereof, and the Buyer shall furnish such detailed
description and information by the dates so specified. Such
dimensions and weights shall not thereafter be revised unless
mutually agreed and set forth in an SCN.
18.1.3 The Seller shall also cause the Manufacturer to furnish in due time
to the Buyer a schedule of dates by and locations to which Buyer
Furnished Equipment for such Aircraft must be delivered to the
Manufacturer to permit installation in and delivery of such Aircraft
in accordance with the delivery schedule referred to in Clause 9.
The Buyer shall furnish such equipment to the Manufacturer at such
locations by such dates. The Buyer, at its own expense, shall also
furnish or cause to be present at the works where such Buyer
Furnished Equipment is to be installed, when requested by the
Manufacturer, field service representatives to provide the
Manufacturer technical advice regarding the installation and
calibration of Buyer Furnished Equipment.
18.2 Specification and Airworthiness Approvals
The Buyer warrants that all Buyer Furnished Equipment shall, to its
knowledge, meet the requirements of the Specification, shall comply
with applicable DGAC and FAA regulations and shall be approved by
the DGAC and the FAA for installation and use on an Aircraft at the
time of delivery of such Aircraft. The Seller shall bear no expense
in connection with adjusting and calibrating Buyer Furnished
Equipment to the extent necessary to obtain DGAC and FAA approval.
18-1
<PAGE>
18.3 Delay and Nonperformance
Any delay or failure in complying with the warranty in the foregoing
Subclause 18.2, in providing the descriptive information and
services mentioned in Subclause 18.1 hereof, in furnishing the Buyer
Furnished Equipment or in obtaining any required approval of such
equipment under the DGAC or FAA regulations shall be the
responsibility of the Buyer, to the extent that such delay or
failure shall in turn,
(i) delay the performance of any act to be performed by or on
behalf of the Seller or the Manufacturer, or
(ii) cause the Final Contract Price of the Aircraft to be increased
by the amount of the Seller's additional costs, if any,
attributable to such delay or failure by the Buyer, including,
without limitation, storage, taxes, insurance and costs of
out-of-sequence installation,
and any resulting cost shall be borne by the Buyer.
Further, in any such event, the Seller may elect to take any of the
actions set forth below in Subclauses 18.3.2, 18.3.3 or 18.3.4:
18.3.2 The Seller shall be entitled to cause the Manufacturer to select,
purchase and install the Buyer Furnished Equipment involved, in
which event the Final Contract Price of the affected Aircraft shall
be increased by the purchase price of such Buyer Furnished Equipment
plus reasonable costs and expenses incurred by the Manufacturer for
handling charges, transportation, insurance, packaging and, if so
required and not already provided for in the Final Contract Price of
such Aircraft, for adjustment and calibration.
18.3.3 If (i) delivery of the Buyer Furnished Equipment is delayed by more
than thirty (30) days after the date specified by the Manufacturer
for the delivery of such Buyer Furnished Equipment or (ii) the Buyer
Furnished Equipment required to obtain certification of the Aircraft
in accordance with Subclause 2.3 hereof is not approved by the DGAC
or the FAA within thirty (30) days after the date specified by the
Manufacturer for the delivery of such Buyer Furnished Equipment,
then, subject to reasonable industrial and commercial constraints,
the Seller shall use its reasonable efforts to identify a
replacement Buyer Furnished Equipment of its choice (the
"Replacement BFE") for the
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Aircraft, in which case the provisions of Subclause 18.3.2 above
applicable to the Replacement BFE shall apply. Should the Seller be
unable after diligent efforts to identify a Replacement BFE, then,
notwithstanding the terms of Subclause 2.3, the Seller shall be
entitled to deliver the affected Aircraft where it is then located
with no obligation to install such Buyer Furnished Equipment. Upon
such delivery the Seller shall be relieved of all obligations to
install such Buyer Furnished Equipment.
18.3.4 If (i) the Buyer Furnished Equipment is delayed by more than thirty
(30) days after the date specified by the Manufacturer for the
delivery of such Buyer Furnished Equipment or (ii) the Buyer
Furnished Equipment is not required for certification of the
Aircraft and is not approved by the DGAC or the FAA within thirty
(30) days after the date specified by the Manufacturer for the
delivery of such Buyer Furnished Equipment, then the Seller shall be
entitled to deliver the Aircraft with no obligation to install such
Buyer Furnished Equipment. The Buyer may also elect to have the
Aircraft so delivered, whereupon the Seller will be relieved of all
obligations to install such Buyer Furnished Equipment.
18.3.5 Any Buyer Furnished Equipment installed on an Aircraft and
subsequently removed, as a result of action or inaction by the
Buyer, shall be removed at the Buyer's expense.
18.4 Tax-Free Zones
The Buyer will cause all Buyer Furnished Equipment to be delivered
at its own expense to tax-free zones at the following addresses:
(i) For all Buyer Furnished Equipment other than cabin furnishing
equipment:
Aerospatiale, Societe Nationale Industrielle 316,
Route de Bayonne
31000 Toulouse
FRANCE
(ii) For cabin furnishing equipment:
Daimler-Benz Aerospace Airbus GmbH
Division Hamburger Flugzeugbau
Kreetslag 10
21129 Hamburg
GERMANY
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<PAGE>
or to such other addresses as the Seller may notify in writing to
the Buyer.
18.5 Risk of Loss
Title to and risk of loss of Buyer Furnished Equipment shall at all
times remain with the Buyer. When Buyer Furnished Equipment is in
the possession of the Seller, the Seller shall have only such
responsibility therefor as is chargeable by law to a bailee for
hire, but shall not be liable for loss of use. In addition, the
Seller shall insure the Buyer against direct damages for loss of
Buyer Furnished Equipment in the possession of the Seller.
18.6 Seller-Supplied Buyer Furnished Equipment
If the Buyer requests the Seller to cause the Manufacturer to supply
directly certain items that are Buyer Furnished Equipment pursuant
to the Specification, and if compliance with such request by the
Seller and the Manufacturer in their judgment shall not affect the
delivery date of an Aircraft referred to in Clause 9, then the
Seller shall order such items subject to the execution of an SCN
reflecting the effect on price and any other items and conditions of
this Agreement. In such a case, the Seller shall be entitled to the
payment of a reasonable handling charge and shall bear no liability
in respect of any delay caused and product support commitments
assumed by the Vendor of such Buyer Furnished Equipment. The
provisions of Subclauses 18.2 and 18.3 shall apply to Buyer
Furnished Equipment covered under this Subclause 18.6 in the event
of any delay in approval or delivery of such Buyer Furnished
Equipment.
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19 - ASSIGNMENT
19.1 Successors and Assigns
Subject to the provisions of this Subclause 19.1, this Agreement
shall inure to the benefit of and be binding upon the successors and
assigns of the parties hereto. This Agreement shall not be assigned
in whole or in part by either party without the prior written
consent of the other party. Notwithstanding anything herein to the
contrary, so long as the same does not affect any of the Seller's
obligations under Subclause 2.3 of the Agreement, the Seller may at
any time, without the Buyer's consent, assign any of its rights to
receive money, and any of its duties to effect sale and delivery of
any Aircraft, or any of its responsibilities, duties or obligations
to perform any other obligations hereunder to the Manufacturer, any
of the Associated Contractors, ASC or any affiliate of the Seller,
the Manufacturer or of any Associated Contractor.
19.2 Seller's Designations
The Seller may at any time by notice to the Buyer designate
particular facilities or particular personnel of the Manufacturer,
ASC, any of the Associated Contractors or any affiliate of the
Manufacturer or any Associated Contractor at which or by whom the
services to be performed under this Agreement shall be performed.
The Seller may also designate the Manufacturer, any Associated
Contractor or any affiliate of the Manufacturer or any Associated
Contractor as the party responsible on behalf of the Seller for
providing to the Buyer all or any of the services described in this
Agreement.
19.3 Assignment in Case of Resale or Lease
In the event of the resale or lease of any Aircraft, pursuant to a
financing arrangement, by the Buyer immediately before, upon, or
immediately after delivery thereof to the Buyer, the Buyer's rights
with respect to such Aircraft under this Agreement, other than the
Buyer's rights under Clauses 3, 14, 15, 16 and 17 hereof and the
Letter Agreements hereto, may be assigned to the extent necessary
with the Seller's prior written consent to the terms and conditions
of such assignment, such consent not to be unreasonably withheld.
The Buyer shall furnish to the Seller a true copy of such agreement
with such purchaser or lessor, clearly stating that such purchaser
or lessor acknowledges that it is bound by and will comply with all
applicable terms, conditions and limitations of this Agreement.
19-1
<PAGE>
20 - DATA RETRIEVAL
On the Seller's reasonable request, the Buyer shall provide the
Seller with all the necessary data, as customarily compiled by the
Buyer and pertaining to the operation of the Aircraft, to assist the
Seller in making an efficient and coordinated survey of all
reliability, maintenance, operational and cost data with a view to
improving the safety, availability and operational costs of the
Aircraft.
20-1
<PAGE>
21 - TERMINATION FOR CERTAIN EVENTS; INSECURITY EVENTS; FURTHER
ASSURANCES
21.1 Termination Events
21.1.1 Each of the following shall constitute a "Termination Event" under
this Agreement:
(1) The Buyer or any other party shall commence any case,
proceeding or other action with respect to the Buyer in any
jurisdiction relating to bankruptcy, insolvency,
reorganization, relief from debtors, an arrangement,
winding-up, liquidation, dissolution or other relief with
respect to its debts and such case, proceeding or other action
remains unstayed, undismissed or undischarged for sixty (60)
days.
(2) An action is commenced seeking the appointment of a receiver,
trustee, custodian or other similar official for the Buyer for
all or substantially all of its assets, and such action
remains unstayed, undismissed or undischarged for sixty (60)
days, or the Buyer makes a general assignment for the benefit
of its creditors.
(3) An action is commenced against the Buyer seeking issuance of a
warrant of attachment, execution, distraint or similar process
against all or any substantial part of its assets, and such
action remains unstayed, undismissed or undischarged for sixty
(60) days.
(4) The Buyer becomes insolvent or fails generally to pay its
debts as they become due.
(5) There is a liquidation, winding up or analogous event with
respect to the Buyer.
(6) The Buyer fails to make (i) any payment required to be made
pursuant to this Agreement or any other agreement between the
Buyer and the Seller dated the date hereof when such payment
comes due, (ii) any Predelivery Payment required to be made
pursuant to Subclause 6.2 of this Agreement, (iii) payment of
all or part of the Final Contract Price required to be made
pursuant to Subclause 6.3 of this Agreement, or (iv) any
payments as they become due the Propulsion Systems
manufacturer or an A320 operating lessor, under their
respective agreements with the Buyer.
21-1
<PAGE>
(7) The Buyer shall default on any payment of principal or
interest on any indebtedness or in the payment of any
guarantee obligation to the Seller or any of its Affiliates.
(8) The Buyer shall default on any payment of any lease obligation
relating to any Aircraft.
(9) The Buyer shall default in its obligation to take delivery of
an Aircraft as provided in Subclause 9.3 of this Agreement.
(10) The Buyer shall default in the observance or performance of
any other covenant or undertaking contained in this Agreement
or any other agreement between the Buyer and the Seller dated
as of the date hereof, beyond a five day cure period.
(11) The Buyer shall fail to provide Comfort (as defined in
Subclause 21.2 hereof) to the Seller within forty-five (45)
days of the occurrence of an Insecurity Event (as defined in
Subclause 21.2 hereof).
Immediately upon the occurrence of a Termination Event, the Buyer
shall notify the Seller of such occurrence in writing and by courier
or telecopier, provided, however, that any failure by the Buyer to
notify the Seller shall not prejudice the Seller's rights hereunder.
21.1.2 In the event of any Termination Event, the Seller shall at its
option have the right to resort to any remedy under applicable law
(provided that the Seller shall mitigate its damages), including,
without limitation, the right by written notice, effective
immediately, to (i) suspend its performance under the Agreement and
under the agreements between the Buyer and the Seller dated the date
hereof, (ii) terminate this Agreement or any agreement between the
Buyer and the Seller dated the date hereof with respect to any or
all Aircraft, services, data and other items undelivered or
unfurnished on the effective date of such termination and (iii)
retain, as part of the damages for breach and not as a penalty, an
amount equal to (a) all Predelivery Payments and (b) all other
payments to the Seller made theretofore under this Agreement and
(iv) receive payment for the Utilized Amount of the Upfront Support
Credit pursuant to the Financial Matters Agreement dated the date
hereof between the Buyer and the Seller.
21-2
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21.2 Insecurity Events
Any of the following shall constitute an "Insecurity Event" and any
remedies therefor provided in this Agreement shall be in addition to
and not in substitution for any rights the Seller may have at law to
terminate this Agreement as set forth in Subclause 21.1.2:
(a) At the end of each of the following months, the Buyer shall
fail to have unencumbered cash balances of not less than the
product of (i) $225,000 (US dollars--two hundred twenty-five
thousand) at the end of April 1995; $150,000 (US dollars--one
hundred fifty thousand) at the end of May 1995; $150,000 (US
dollars--one hundred fifty thousand) at the end of June 1995;
$250,000 (US dollars--two hundred fifty thousand) at the end
of July 1995; $300,000 (US dollars--three hundred thousand) at
the end of August 1995; $325,000 (US dollars--three hundred
twenty-five thousand) at the end of September 1995; and
$350,000 (US dollars--three hundred fifty thousand) at the end
of each month thereafter until the termination of this
Agreement; (in each case as adjusted to any month of
determination from March 1995 by multiplying the relevant
requisite unencumbered cash balance by the ratio of (A) to
(B), where (A) is equal to the Consumer Price Index ("CPI")
reported for the third month prior to such month of
determination and (B) is equal to the CPI reported for March
1995) (provided, however, that in no event shall the number
computed thereby be less than one (1)) multiplied by (ii) the
number of jet-powered aircraft then owned, acquired pursuant
to a conditional sale agreement or leased by the Buyer (in
each case whether or not then operated by the Buyer);
(b) The ratio of current assets to current liabilities, as those
amounts would be determined through the application of
Generally Accepted Accounting Principles, is 0.80 to 1 or
less; or
(c) If at any time the Buyer shall enter into a revolving credit
agreement, line of credit or similar extension of credit and
such agreement is terminated (other than by its own terms or
by the Buyer) or a covenant is breached and such breach is not
waived or ceases to exist within thirty (30) days after the
occurrence thereof; or
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(d) With respect to the Agreement of Sublease dated January 18,
1995, between the Buyer and American Airlines, Inc.
("American"), relating to property which American has leased
or will lease to the Buyer (as such agreement may be amended
from time to time); if such agreement is terminated prior to
March 31, 1997, and at any subsequent date if such termination
results in an unfavorable change in the Buyer's financial
condition or if such agreement becomes subject to revision in
a manner that is materially unfavorable to the Buyer; or
(e) With respect to the current holders of the Buyer's outstanding
shares, the current majority shareholder ceases to control
eighty percent (80%) of the outstanding voting shares of the
Buyer or its successor, provided that this shall not apply in
the event of a public offering of the Buyer, as long as such
public offering provides the Buyer (or its successor) with a
total debt-to-net worth ratio, as those amounts would be
determined through the application of Generally Accepted
Accounting Principles, of at least three to one; or
(f) With respect to any or all of the seven operating leases or
any other leases in replacement thereof for the Buyer's use of
the Fokker F-l00 aircraft ("Fokker F-l00 Aircraft Leases"),
the Buyer fails to make a payment when due or a financial
covenant thereunder is breached; provided, however, that such
provision shall not apply for as long as the earlier of the
following events has occurred and/or is continuing: (i) the
Buyer fails to make a payment under the Fokker F-l00 Aircraft
Leases and such nonpayment is not cured to the satisfaction of
the lessor under the Fokker F-l00 Aircraft Leases and the
Buyer within thirty (30), days and (ii) the Lessor under the
Fokker F-l00 Aircraft Leases delivers to the Buyer a notice of
termination or seeks to repossess the aircraft; or
(g) With respect to any or all of the four aircraft leases for the
Buyer's use of A320 aircraft, between the Buyer and ORIX, or
any of its Affiliates, or any successor or assignee, the Buyer
fails to make a payment when due or a financial covenant
thereunder is breached; or
(h) With respect to the Term Loan Agreement, dated as of April 14,
1994, between the Buyer and American National Bank and Trust
Company of Chicago or any successor thereto, the Buyer fails
to make a payment when due or a financial covenant thereunder
is breached; or
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<PAGE>
(i) With respect to any other significant credit or lease
financing facility or similar agreement, including but not
limited to any agreement signed subsequent to this date for
the lease of aircraft, either (i) the commitment to lend,
finance or lease, as the case may be, thereunder is terminated
(other than by the Buyer) or (ii) a financial covenant
thereunder is breached and such breach is not waived or ceases
to exist within forty-five (45) days after the occurrence
thereof; or
(j) The Buyer is involuntarily removed from active membership and
participation in the airline clearinghouse (or any substitute
or replacement arrangement) among domestic airlines or the
Buyer is placed on a cash basis by such clearinghouse (or any
such substitute or replacement arrangement).
Within five (5) days of the occurrence of an Insecurity Event, the
Buyer shall notify the Seller of such occurrence in writing and by
courier or telecopier, provided, however, that any failure by the
Buyer to notify the Seller shall not prejudice the Seller's rights
hereunder.
If Comfort is not received by the Seller within forty-five (45) days
after the date of the Insecurity Event, the Seller may treat this
Agreement as terminated by giving written notice of such termination
to the Buyer. Such termination shall constitute a Termination Event
and Subclause 21.1.2 above shall apply.
The term "Comfort," is defined as follows:
Comfort - at the time of determination, assurance from the Buyer to
the Seller of the Buyer's ability to duly perform each of the
Buyer's obligations under this Agreement and any agreement between
the Buyer and the Seller dated the date hereof (including with
respect to all Option Aircraft, assuming such options have been
exercised at the time) at the time and in the manner that each such
obligation is required to be performed, provided that such assurance
shall:
(a) consist of assurance substantially identical to that
constituting "adequate assurance of due performance" within
the meaning of Article 2-609 of the Uniform Commercial Code as
in effect on the date hereof in the State of New York, and
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(b) be in writing or evidenced by a writing.
In addition, Comfort shall be deemed to have been received hereunder
if the event or circumstance which caused the Insecurity Event to
occur hereunder has been cured satisfactorily as set forth above and
the same has been evidenced in writing to the Seller.
21.3 The Seller's obligations pursuant to this Agreement are subject to
the following conditions:
(a) No Termination Event shall have occurred and be continuing;
(b) The Buyer shall have entered into the Security Agreement,
dated the dated hereof and such supplemental security
agreements (if applicable) as are contemplated by such
Security Agreement;
(c) Uniform Commercial Code financing statements covering the
"Collateral," the subject of the defined Transaction Security
Agreements, duly completed and executed by the Buyer and the
Seller, and showing the Buyer as debtor and the Seller as
secured party. Each such financing statement shall have been
properly filed in each of the appropriate jurisdictions and
the Seller shall have received evidence satisfactory to it of
each such filing; and
(d) Such other filings, instruments and documents with respect to
the Buyer as the Seller may reasonably request in order to
establish the taking by the Buyer of all necessary corporate
action in connection herewith.
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22 - MISCELLANEOUS PROVISIONS
22.1 Notices
All notices and requests required or authorized hereunder shall be
given in writing either by personal delivery to a responsible
officer of the party to whom the same is given or by commercial
courier, certified air mail (return receipt requested), facsimile or
other electronic transmission at the addresses and numbers set forth
below. The date upon which any such notice or request is so
personally delivered, or if such notice or request is given by
commercial courier, certified air mail, facsimile or other
electronic transmission, the date upon which sent; shall be deemed
to be the effective date of such notice or request.
The Seller shall be addressed at:
2, rond-point Maurice Bellonte
31700 Blagnac
FRANCE
Attention: Director - Contracts
Telephone: 33 61 30 40 12
Telex: AVSA 521155F
The Buyer shall be addressed at:
5713 South Central Avenue
Chicago, IL 60638
Attention: President
Telephone: 312-838-8100
Telecopier: 312-838-2069
Copy: General Counsel
Telephone: 312-466-3456
Telecopier: 312-454-0335
From time to time, the party receiving the notice or request may
designate another address or another person.
22.2 Waiver
The failure of either party to enforce at any time any of the
provisions of this Agreement, to exercise any right herein provided
or to require at any time performance by the other party of any of
the provisions hereof shall in no way be construed to be a present
or future waiver of such provisions nor in any way to
22-1
<PAGE>
affect the validity of this Agreement or any part hereof or the
right of the other party thereafter to enforce each and every such
provision. The express waiver by either party of any provision,
condition or requirement of this Agreement shall not constitute a
waiver of any future obligation to comply with such provision,
condition or requirement.
22.3 INTERPRETATION AND LAW
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND THE
PERFORMANCE THEREOF SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK.
THE PARTIES HEREBY ALSO AGREE THAT THE UNITED NATIONS CONVENTION ON
THE INTERNATIONAL SALE OF GOODS SHALL NOT APPLY TO THIS TRANSACTION.
22.4 Confidentiality
Subject to any legal or governmental requirements of disclosure, the
parties (which for this purpose shall include their employees,
agents and advisors) shall maintain the terms and conditions of this
Agreement and any reports or other data furnished hereunder strictly
confidential. Without limiting the generality of the foregoing, the
Buyer shall use its best efforts to limit the disclosure of the
contents of this Agreement to the extent legally permissible in any
filing required to be made by the Buyer with any governmental agency
and shall make such applications as shall be necessary to implement
the foregoing. With respect to any public disclosure or filing, the
Buyer agrees to submit to the Seller a copy of the proposed document
to be filed or disclosed and will give the Seller a reasonable
period of time in which to review the said document. The Buyer and
Seller shall consult with each other prior to the making of any
public disclosure or filing, permitted hereunder, of this Agreement
or the terms and conditions thereof. The provisions of this
Subclause 22.4 shall survive any termination of this Agreement.
22.5 Severability
In the event that any provision of this Agreement should for any
reason be held to be without effect, the remainder of this Agreement
shall remain in full force and effect. To the extent permitted by
applicable law, each party hereto hereby waives any provision of law
which renders any provision of this Agreement prohibited or
unenforceable in any respect.
22-2
<PAGE>
22.6 Alterations to Contract
This Agreement, including its Exhibits, Appendixes and Letter
Agreements, contains the entire agreement between the parties with
respect to the subject matter hereof and thereof and supersedes any
previous understanding, commitments or representations whatsoever,
whether oral or written (including, without limitation, the Letter
of Intent). This Agreement shall not be varied except by an
instrument in writing of even date herewith or subsequent hereto
executed by both parties or by their fully authorized
representatives.
22.7 Inconsistencies
In the event of any inconsistency between the terms of this
Agreement and the terms contained in either (i) the Specification,
or (ii) any other Exhibit or Letter Agreement attached to this
Agreement, in each such case the terms of such Specification,
Exhibit or Letter Agreement shall prevail over the terms of this
Agreement. For the purpose of this Subclause 22.7, the term
Agreement shall not include the Specification or any other Exhibit
or Letter Agreement hereto.
22.8 Language
All correspondence, documents and any other written matters in
connection with this Agreement shall be in English.
22.9 Headings
All headings in this Agreement are for convenience of reference only
and do not constitute a part of this Agreement.
22.10 Counterparts
This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute but
one and the same instrument.
22.11 Opinion of Counsel
The Buyer shall, concurrently with the execution of this Agreement,
deliver to the Seller an opinion of counsel for the Buyer reasonably
satisfactory to the Seller and dated as of such date to the effect
that (i)
22-3
<PAGE>
the execution, delivery and performance of this Agreement are within
the corporate power of the Buyer, (ii) the execution, delivery and
performance of this Agreement, in accordance with the respective
terms by the Buyer, do not, to such counsel's knowledge, constitute
a breach of any agreement to which the Buyer is a party, and (iii)
this Agreement has been duly executed and delivered by and
constitutes legal, valid and binding obligations of the Buyer
enforceable in accordance with its terms, and such opinion shall
also address such other matters as the Seller may reasonably
request.
22.12 Conditions Precedent
This Agreement shall be subject to:
(a) the Propulsion System manufacturer's financial participation in
the transactions that are the subject matter of the Agreement as
outlined in Subparagraph (c) of the third paragraph of Paragraph 11
of the LOI, no later than March 31, 1995, (b) the execution by March
31, 1995, of an A320 operating lease agreement between the Buyer and
ORIX, and (c) any other condition precedent to be fulfilled by
either party before March 31, 1995, in any agreement between the
Buyer and the Seller dated the date hereof.
It is hereby agreed and understood that in the event that for any
reason any of the above listed conditions is not met, the Buyer and
the Seller may each unilaterally terminate this Agreement by written
notice to the other without any further obligations to each other,
provided, however, that the Seller shall refund to the Buyer (if
applicable) the portion of the first Predelivery Payment received
from the Buyer upon execution of the LOI and that has not been spent
by the Seller (if applicable) to support the introduction of the
A320 aircraft into the Buyer's fleet.
22-4
<PAGE>
IN WITNESS WHEREOF, these presents were entered into as of the day and year
first above written.
AVSA, S.A.R.L.
By: /s/ Christophe Mourey
-------------------------------
Title Christophe Mourey
AVSA Chief Executive Officer
Midway Airlines Corporation
By: /s/ Brian J. Olds
-------------------------------
Title
Brian J. Olds
Executive Vice president
Chief Operating Officer
<PAGE>
EXHIBIT "A-1"
The A320 Standard Specification is contained in a separate folder.
Exh. A-1 1
<PAGE>
EXHIBIT "A-2"
The A319 Standard Specification is contained in a separate folder.
Exh. A-2 1
<PAGE>
EXHIBIT "B"
Change orders will be mutually agreed between the Buyer and the Seller
after execution of the Agreement. For practical purposes, the dollar amount of
these change orders has been estimated (i) as set forth in Subclause 4.1.1.1
(ii) of the Agreement for the Aircraft and (ii) as set forth in Subparagraph
9.4.1.1.1 (ii) of Letter Agreement No. 3 to the Agreement for the Converted A319
Aircraft.
Exh. B-1
<PAGE>
EXHIBIT "C"
SCN FORM
Exh. C-1
<PAGE>
- --------------------------------------------------------------------------------
A V S A SCN No
[LOGO]
Issue
SPECIFICATION CHANGE NOTICE Dated
(SCN) Page No
- --------------------------------------------------------------------------------
TITLE
DESCRIPTION
EFFECT ON WEIGHT Manufacturer's Weight Empty Change:
Operational Weight Empty Change ..:
Allowable Payload Change .........:
REMARKS/REFERENCES
Responds to RFC
SPECIFICATION CHANGED BY THIS SCN
THIS SCN REQUIRES PRIOR OR CONCURRENT ACCEPTANCE OF THE FOLLOWING SCN(s):
- --------------------------------------------------------------------------------
PRICE PER AIRCRAFT
US DOLLARS:
AT DELIVERY CONDITIONS:
This change will be effective on Aircraft No and subsequent.
Provided approval is received by
BUYER APPROVAL SELLER APPROVAL
By ...: By ...:
Date .: Date .:
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
A V S A SCN No
[LOGO]
Issue
SPECIFICATION CHANGE NOTICE Dated
(SCN) Page No
- --------------------------------------------------------------------------------
After contractual agreement with respect to weight, performance, delivery,
etc., the indicated part of the specification wording will read as follows:
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
A V S A SCN No
[LOGO]
Issue
SPECIFICATION CHANGE NOTICE Dated
(SCN) Page No
- --------------------------------------------------------------------------------
SCOPE OF CHANGE (FOR INFORMATION ONLY)
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT "D"
SELLER SERVICE LIFE POLICY
1. The Items covered by the Service Life Policy pursuant to Subclause
12.2 are those Seller Items of primary and auxiliary structure
described hereunder.
2. WINGS - CENTER AND OUTER WING BOX
2.1 Spars
2.2 Ribs Inside the Wing Box
2.3 Upper and Lower Panels of the Wing Box
2.4 Fittings
2.4.1 Attachment fittings for the flap structure
2.4.2 Attachment fittings for the engine pylons
2.4.3 Attachment fittings for the main landing gear
2.4.4 Attachment fittings for the center wing box
2.5 Auxiliary Support Structure
2.5.1 For the slats:
2.5.1.1 Ribs supporting the track rollers on wing box structure
2.5.1.2 Ribs supporting the actuators on wing box structure
2.5.2 For the ailerons:
2.5.2.1 Hinge brackets and ribs on wing box rear spar or shroud box
2.5.2.2 Actuator fittings on wing box rear spar or shroud box
2.5.3 For airbrakes, spoilers, lift dumpers:
2.5.3.1 Hinge brackets and ribs on wing box rear spar or shroud box
2.5.3.2 Actuator fittings on wing box rear spar or shroud box
Exh. D-l
<PAGE>
EXHIBIT "D"
3. FUSELAGE
3.1 Fuselage Structure
3.1.1 Fore and aft bulkheads
3.1.2 Pressurized floors and bulkheads surrounding the main and nose gear
wheel well and centre wing box
3.1.3 Skins with doublers, stringers and frames from the forward pressure
bulkheads to the frame supporting the rear attachment of horizontal
stabilizer
3.1.4 Window and windscreen attachment structure but excluding
transparencies
3.1.5 Passenger and cargo doors internal structure
3.1.6 Sills excluding scuff plates and upper beams surrounding passenger
and cargo door apertures
3.1.7 Cockpit floor structure and passenger cabin floor beams excluding
floor panels and seat rails
3.1.8 Keel beam structure
3.2 Fittings
3.2.1 Landing gear attachment fittings
3.2.2 Support structure and attachment fittings for the vertical and
horizontal stabilizers
4. STABILIZERS
4.1 Horizontal Stabilizer Main Structural Box
4.1.1 Spars
4.1.2 Ribs
4.1.3 Upper and lower skins and stringers
4.1.4 Attachment fittings to fuselage and trim screw actuator
4.1.5 Elevator support structure
4.1.5.1 Hinge bracket
4.1.5.2 Servocontrol attachment brackets
Exh. D-2
<PAGE>
EXHIBIT "D"
4.2 Vertical Stabilizer Main Structural Box
4.2.1 Spars
4.2.2 Ribs
4.2.3 Skins and stringers
4.2.4 Attachment fittings to fuselage
4.2.5 Rudder support structure
4.2.5.1 Hinge brackets
4.2.5.2 Servocontrol attachment brackets
5. Bearing and roller assemblies, bearing surfaces, bushings, bolts,
rivets, access and inspection doors, including manhole doors,
latching mechanisms, all system components, commercial interior
parts, insulation and related installation and connecting devices
are excluded from this Seller Service Life Policy.
Exh. D-3
<PAGE>
EXHIBIT "E"
CERTIFICATE OF ACCEPTANCE
In accordance with the terms of that certain Airbus A320 Purchase Agreement (the
"Purchase Agreement") dated as of March ___ , 1995, between AVSA, S.A.R.L.
("AVSA") and Midway Airlines Corporation ("Midway"), the acceptance inspection
relating to the Airbus A320-200 aircraft (the "Aircraft"), manufacturer's serial
no. _____ FAA Registration No.: ___________, with two (2) series propulsion
systems installed thereon, serial nos. _________ (position #1) and ____________
(position #2), has taken place at Toulouse, France, on the ______ day of
____________ , 19__.
In view of said inspection having been carried out with satisfactory results,
Midway hereby accepts delivery of the Aircraft as being in conformity with the
provisions of the Agreement, provided, however, that Midway's execution of this
Certificate of Acceptance shall not constitute a waiver of Midway's rights or
remedies in the enforcement of any and all of the Seller's warranty obligations
under the Purchase Agreement.
Midway specifically recognizes that it has waived any right it may have at law
or otherwise to revoke this acceptance of the Aircraft.
RECEIPT AND ACCEPTANCE OF THE
ABOVE-DESCRIBED AIRCRAFT
ACKNOWLEDGED
MIDWAY AIRLINES CORPORATION
By: _______________________
Title: ____________________
Exh. E-l
<PAGE>
EXHIBIT "F"
TECHNICAL PUBLICATIONS
GENERAL
This Exhibit "F" lists the form, type, quantity and delivery dates for the
Technical Publications to be provided to the Buyer pursuant to Clause 14 of the
Agreement.
The Technical Publications are published in accordance with ATA Specification
100 revision 23, with the exception of certain Component Maintenance Manuals,
which may be written to an ATA Specification 100 revision other than revision
23.
The designation "C" after the title of a Technical Publication indicates that
such Technical Publication may be customized.
Exh. F-l
<PAGE>
EXHIBIT "F"
1 ENGINEERING DOCUMENTS
1.1 Installation and Assembly Drawings (IAD)--C
The IAD will be delivered according to the Buyer's standard for the
major Assembly and Installation drawings.
1.2 Drawing Number Index (DNI)--C
The DNI lists applicable drawings of the Aircraft delivered under
the Agreement.
1.3 Process and Material Specification (PMS)
The PMS contains data related to manufacturing processes, material
identification and treatments used in the construction and assembly
of the Aircraft.
1.4 Standards Manual (SM)
The SM contains data about Seller approved standards and includes
cross reference lists.
2 MAINTENANCE AND ASSOCIATED MANUALS
2.1 APU Build-up Manual (ABM)
The ABM follows the format adopted for the Power Plant Build-up
Manual.
2.2 Aircraft Maintenance Manual (AMM)--C
The component location section of the AMM will show those components
detailed in the AMM maintenance procedures. The trouble shooting
part is covered in Subparagraph 2.21 below.
*Aircraft Maintenance Manual Chapter O5 Time Limits (Service Life
Limits) and Maintenance Checks are only delivered in hard copies.
2.3 Aircraft Time Limits/Maintenance Checks (TLMC)
The TLMC document provides the Manufacturer's recommended scheduled
time limits for inspections and maintenance checks.
2.4 Aircraft Schematics Manual (ASM)--C
The ASM is part of the Wiring Manual. Supplied as a separate manual
for schematics.
Exh. F-2
<PAGE>
EXHIBIT "F"
2.5 Aircraft Wiring Manual (AWM)--C
The AWM is part of the Wiring Manual. Supplied as a separate manual
for wirings.
2.6 Aircraft Wiring Lists (AWL)--C
The AWL is part of the Wiring Manual. Supplied as a separate
document for lists.
2.7 Consumable Material List (CML)
The CML details the characteristics and gives procurement sources of
consumable materials such as grease, oil, etc.
2.8 Duct Repair Manual (DRM)
The DRM contains all the data necessary to locate, identify, repair
and/or replace sub-assemblies of metallic ducts. It also includes
details of tests necessary after repair.
2.9 ECAM System Logic Book (ESLB)
The ESLB contains the data that is used to generate the output
messages and/or the graphics that are shown on the ECAM display
units.
2.10 Fuel Pipe Repair Manual (FPRM)
The FPRM provides workshop repair procedures and data for specific
fuel pipes, after removal from any aircraft of the Manufacturer of
the type of the Aircraft.
2.11 Illustrated Parts Catalog (IPC)--C The IPC for the power plant is
provided separately.
2.12 Illustrated Parts Catalog (power plant) (PPIPC)--C
The PPIPC covers line replaceable parts and units of the power
plant, provided by the Propulsion Systems manufacturer.
2.13 Illustrated Tool and Equipment Manual (TEM)
The TEM provides information on Ground Equipment and Tools listed in
the Seller's Aircraft Maintenance Manual.
Exh. F-3
<PAGE>
EXHIBIT "F"
2.14 Maintenance Facility Planning (MFP)
The MFP provides information that will assist airline personnel
concerned with long term planning of ramp or terminal operations,
Aircraft maintenance on the ramp and in the hangar, overhaul and
testing of structure and system components.
2.15 Maintenance Planning Document (MPD)
The MPD provides maintenance data necessary to plan and conduct
Aircraft maintenance checks and inspections.
2.16 Power Plant Build-up Manual (PPBM)
The PPBM provides instructions for the installation of a quick
engine change kit on a bare engine.
2.17 Support Equipment Summary (SES)
The SES lists support equipment recommended by the Seller, the
Propulsion Systems manufacturer and Vendors.
2.18 Tool Drawings (TD)
TD's will be supplied in the form of aperture cards for the Seller
and, when available, Vendor maintenance tools. A Tool Drawing Index
(TDI) will be supplied.
2.19 Tool Drawing Index (TDI)
The TDI is an alpha-numeric listing of the TD's.
2.20 Tool and Equipment Bulletin (TEB)
The TEB provides advance information related to tools and test
equipment development.
2.21 Trouble Shooting Manual (TSM)
The TSM complements the CFDS and provides troubleshooting data in
the following three levels:
Level 1 - Aimed at line use. Fault isolation guidance for
systems or parts of systems monitored mainly by CFDS.
Also guidance for systems not monitored by CFDS.
Level 2 - Aimed at hangar use. Fault isolation guidance for
non-CFDS monitored systems in the form of
functional block diagrams, charts and tables.
Exh. F-4
<PAGE>
EXHIBIT "F"
Level 3 - Aimed at engineering use. List of CFDS messages
and decoding of trouble shooting data (decoding of
coded messages provided by the CFDS). Level 3 is
supplied on floppy disk.
3. MISCELLANEOUS DOCUMENTATION
3.1 Airplane Characteristics for Airport Planning (AC)
The AC will be in general accordance with Specification NAS 3601.
3.2 Aircraft Recovery Manual (ARM)
The ARM provides the following planning information: preparing and
moving a disabled aircraft that may be obstructing airport traffic.
3.3 Cargo Loading System Manual (CLS)
The CLS details handling procedures for the Cargo Loading System.
3.4 Crash Crew Chart (CCC)
The CCC provides information concerning access to the Aircraft
interior, location of safety equipment, hazardous liquids, etc.
3.5 Guidelines for Customer Originated Changes (COC)
The COC provides production and presentation rules for the data
covering Buyer originated changes on the Aircraft to be incorporated
by the Seller in the Technical Publications as per Subclause 14.11
of the Agreement.
3.6 List of Radioactive and Hazardous Elements (LRE)
The LRE provides information on components and materials for which
specific precautions have to be taken.
3.7 List of Applicable Publications (LAP)--C
The LAP will record the Seller's various Airframe Technical
Publications indicating the last valid revision number and issue
date.
Exh. F-5
<PAGE>
EXHIBIT "F"
3.8 Livestock Transportation Manual (LTM)
The LTM details the facilities, equipment and procedures necessary
for live animal transportation in aircraft of the Manufacturer of
the type of the Aircraft.
3.9 Service Bulletins (SB)--C
The Buyer will receive all Service Bulletins applicable to the
Aircraft.
3.10 Service Bulletin Index (SBI)
The SBI is a listing of all Service Bulletins issued in ATA 100
chapter sequence.
The SBI provides details of SB number, SB title, associated
modification number, issue status, Vendor SB number (if applicable)
and affected fleet.
3.11 Service Information Letters (SIL)
SILs give information of a general nature and also about minor
changes or inspections the Buyer may wish to apply under the Buyer's
authority.
3.12 Transortability Manual (TM)
The TM gives cargo hold dimensions for currently available cargo
Aircraft, transportation information and requirements for large
Aircraft components. Component dimensions, weights and shelf life
limitations are also given.
3.13 Supplier Product Support Agreements (SPSA)
The SPSA is a collection of product support conditions negotiated by
the Manufacturer with the suppliers of Aircraft equipment.
3.14 Vendor Information Manual (VIM)
The VIM provides Vendor contact information.
3.15 Vendor Information Manual (GSE) (VIM/GSE)
The VIM/GSE gives contact names and addresses of Ground Support
Equipment (GSE) vendors and their product support organizations.
Exh. F-6
<PAGE>
EXHIBIT "F"
4 OPERATIONAL MANUALS
4.1 Cabin Attendant Operating Manual (CAOM)--C
The CAOM describes the Aircraft in its standard version and provides
operating instructions for the equipment controlled by cabin
attendants.
4.2 Abnormal/Emergency Check List (CL)--C
The CL is an extract from the FCOM presented as a booklet for quick
in-flight use.
4.3 Flight Crew Operating Manual (FCOM)--C
The FCOM provides Aircraft and systems descriptions, normal,
abnormal and emergency procedures as well as operational
performance.
4.4 FAA Approved Flight Manual (AFM)--C
The AFM provides Aircraft performance operating limitations and
other flight data required by the relevant airworthiness authorities
for certification. It includes the Configuration Deviation List
(CDL).
4.5 Master Minimum Equipment List (MMEL)
The MMEL defines the components and the related conditions under
which, when the components are defective, the Aircraft may be
cleared for flight. In addition, the MMEL provides the necessary
information to establish the Buyer's own Minimum Equipment List
(MEL).
4.6 Noise Definition Manual (NDM)
The NDM provides all the necessary curves to determine noise levels
for various phases of operations: on the ground, at take-off and
during approach.
4.7 Trim Sheet (TS)
The TS enables the ground crew to determine the center of gravity of
the Aircraft according to the actual load (cargo, fuel, passengers).
Exh. F-7
<PAGE>
EXHIBIT "F"
4.8 Performance Engineering Program (PEP)
The PEP consists of a Low Speed performance data base and a High
Speed Performance data base together with their respective programs.
The Performance Engineering Program may be used by the Buyer under
the license conditions set forth in Appendix A to this Exhibit "F."
The Low Speed Performance programs consist of the Takeoff and
Landing Chart computation program (TLC) which permits the
computation of:
- regulatory take-off and landing performance,
- noncertified take-off performance accounting for runway data and
weather, together with the Tabulation and Interpolation program
(TAB), issued with the AFM, which permits the reading, editing
and interpolation of the tables listed in the AFM.
The High Speed Performance programs are the In Flight Performance
computation program (IFP) which permits computation of Aircraft
performance for each flight phase and the Aircraft Performance
Monitoring program (APM) which permits analysis of Aircraft cruise
performance from data recorded during stabilized flight periods.
4.9 Performance Program Manual (PPM)
The PPM is the users' guide for the Performance Engineering Program
(PEP).
4.10 Weight and Balance Manual (WBM) and Weight and Balance Manual
Supplements--C
The corresponding supplements:
-Delivery Weighing Report,
-Equipment List,
will be delivered with each Aircraft.
5 OVERHAUL DATA
5.1 Component Documentation Status (CDS)--C
The CDS lists Component Maintenance Manuals in accordance with
Paragraphs 5.4 and 5.5 below.
Exh. F-8
<PAGE>
EXHIBIT "F"
5.2 Component Evolution List (CEL)
The CEL is a noncustomized document listing all components on the
Aircraft and also gives the evolution of each component.
The information is provided in order of:
- part number
- FSCM
- ATA reference.
5.3 Cable Fabrication Manual (CFM)
The CFM contains all the data necessary to locate, identify,
manufacture and test control cables used on the Aircraft. An
appendix contains cable end fitting specification sheets, and
detailed manufacturing instructions.
5.4 Component Maintenance Manual Manufacturer (CMMM)
The CMMM contains all the data necessary to locate, identify and
maintain Aircraft components manufactured by the Seller.
5.5 Component Maintenance Manual Vendor (CMMV)
The Seller shall endeavor to ensure that each Vendor of repairable
components shall deliver to the Buyer a Component Maintenance Manual
Vendor with revision service.
6 STRUCTURAL MANUALS
6.1 Nondestructive Testing Manual (NTM)
The NTM supplies Airframe data necessary to carry out nondestructive
testing.
6.2 Structural Repair Manual (SRM)
The SRM contains descriptive information for identification and
repair of the Airframe primary and secondary structure.
Exh. F-9
<PAGE>
EXHIBIT "F"
MANUAL FORMAT AND TYPE IDENTIFICATION
FORM AC APERTURE CARD. Refers to 35mm film contained on
punched aperture cards.
ADRES Aircraft Documentation Retrieval System on CD ROM.
D FLOPPY DISK
F MICROFILM. Refers to l6mm roll film in 3M type
cartridges.
MF MASTER FILM. Refers to thick diazo film suitable for
further reproduction.
MFC MICROFICHE.
MP Refers to paper printed one side, unpunched quality
shall be suitable for further reproduction or
microfilming.
MT MAGNETIC TAPE
P1 PRINTED ONE SIDE. Refers to manuals in paper with print
on one side of the sheets only.
P2 PRINTED BOTH SIDES. Refers to manuals with print on both
sides of the sheets.
TYPE C CUSTOMIZED. Refers to manuals which are customized to
specific MSNs.
E ENVELOPE. Refers to manuals which are not customized.
P PRELIMINARY. Refers to preliminary data or manuals which
may consist of:
-either one time issue not maintained by revision
service, or
-preliminary issues maintained by revision service until
final manual or data delivery, or
-supply of best available data under final format with
progressive completion through revision service.
DELIVERY Manual delivery is expressed either as the number of days prior to
delivery of the first Aircraft or as nil (0), which designates the
date of delivery of the first Aircraft.
It is agreed that the number of days indicated will be rounded up to
the next regular revision release date.
Exh. F-10
<PAGE>
EXHIBIT "F"
MANUALS AVAILABLE (headlines)
1 - ENGINEERING DOCUMENTS
2 - MAINTENANCE & ASSOCIATED MANUALS
3 - MISCELLANEOUS PUBLICATIONS
4 - OPERATIONAL MANUALS AND DATA
5 - OVERHAUL DATA
6 - STRUCTURAL MANUALS
MANUALS AVAILABLE (detailed) Abbr Form Type Qty ATA Deliv.
---- ---- ---- --- --- ------
1. ENGINEERING DOCUMENTS
Installation and Assembly IAD AC C 1 NO 0
Drawings
Parts Usage (Effectivity) PU F E 1 NO 0
Schedule (Drawing S F E 1 NO 0
Nomenclature)
Drawing Number Index DNI P1 C 1 NO 0
Process and Material PMS F E 1 NO 0
Specification
Standards Manual SM F E 1 NO 0
2. MAINTENANCE & ASSOCIATED MANUALS
APU Build-up Manual ABM P2 E 2 NO 90
Aircraft Maintenance Manual AMM P2 C 1 YES 90
F C 2 YES 90
MF C 1 YES 90
ADRES C 1 YES 90
MT* C 1 YES 90
Aircraft Time Limits/ TLMC P2 C 3 YES 90
Maintenance Checks
Aircraft Schematics Manual ASM P1 C 1 YES 90
F C 2 YES 90
MF C 1 YES 90
MT** C 1 YES 90
Aircraft Wiring Manual AWM P1 C 1 YES 90
F C 3 YES 90
MF C 1 YES 90
MT** C 1 YES 90
* Field trial of ADRES required to determine if MT needs to be shipped to
the Buyer. Seller to hold MT on stock until Buyer's notification to ship.
** If developed and available.
Exh. F-11
<PAGE>
EXHIBIT "F"
MANUALS AVAILABLE (detailed) Abbr Form Type Qty ATA Deliv.
---- ---- ---- --- --- ------
Aircraft Wiring Lists AWL F C 3 YES 90
P1 C 1 YES 90
Consumable Material List CML P2 E 1 YES 90
Duct Repair Manual DRM P2 E 1 NO 90
ECAM System Logic Book ESLB P2 E 1 NO 90
Fuel Pipe Repair Manual FPRM P2 E 1 NO 90
Illustrated Parts Catalog IPC F C 3 YES 90*
(Airframe) MF C 1 YES 90
ADRES C 1 YES 90
MT** C 1 YES 90
Illustrated Parts Catalog PIPC F C 3 NO 90+
(Power Plant)
Illustrated Tool and TEM P2 E 3 YES 360
Equipment Manual
Maintenance Facility Planning MFP P2 E 3 NO 90
Maintenance Planning Document MPD P2 E 3 NO 360
Power Plant Build-up Manual PPBM P2 E 3 YES 90+
Support Equipment Summary SES P1 E 3 NO 360
Tool and Equipment Drawings TED AC E 1 NO 360
Tool and Equipment Index TEI P2 E 2 NO 360
Tool and Equipment Bulletins TEB P1 E 3 NO 0
Trouble Shooting Manual TSM P2 C 3 NO 90
MF C 1 NO 90
* Issue date to be coordinated with Initial Provisioning Data delivery
provided for under the terms of Letter Agreement No. 1 to the Agreement.
** Field trial of ADRES required to determine if MT needs to be shipped to
the Buyer. Seller to hold MT on stock until Buyer's notification to ship.
+ Supplied by the Propulsion Systems manufacturer.
Exh. F-12
<PAGE>
EXHIBIT "F"
MANUALS AVAILABLE (detailed) Abbr Form Type Qty ATA Deliv.
---- ---- ---- --- --- ------
3 MISCELLANEOUS PUBLICATIONS
Airplane Characteristics for AC P2 E 2 NO 360
Airport Planning
Aircraft Recovery Manual ARM P2 E 2 YES 90
Cargo Loading System Manual CLS P2 E 3 NO 180
Crash Crew Chart CCC P1 E 5 NO 180
Guidelines for Customer GCOC P1 E 1 NO 0
Originated Changes
List of Radioactive and LRE P2 E 1 NO 90
Hazardous Elements
List of Applicable LAP P2 C 1 NO 90
Publications
Livestock Transportation LTM P2 E 1 NO 90*
Manual
Service Bulletin SB P2 C 2 YES 0
F E 1 YES 90
Service Bulletin Index SBI P2 E 1 YES 90
Service Information Letters SIL P1 E 2 YES 0
Transportability Manual TM P1 E 1 NO 90
Vendor Product Support VPSA P2 E 2 NO 360
Agreements
Vendor Information Manual VIM D E 2 NO 360
Vendor Information Manual VIM/ P2 E 2 NO 360
GSE GSE
* Available on specific request.
Exh. F-13
<PAGE>
EXHIBIT "F"
MANUALS AVAILABLE (detailed) Abbr Form Type Qty ATA Deliv.
---- ---- ---- --- --- ------
4 OPERATIONAL MANUALS AND DATA
Cabin Attendant Operating CAOM P2 C 5+ NO 90
Manual
Abnormal/Emergency CL P2 C 5+ NO 90
Check List
Flight Crew Operating Manual FCOM P2 C 5* NO 90
MT^ C 1 NO 90
Flight Manual FM P2 C 11 NO 0
Master Minimum Equipment MMEL P2 E 3 NO 90
List
Noise Definition Manual NDM P2 E 1 NO 90
Trim Sheet TS P2 E 1 NO 90
Performance Engineering PEP D C 1 NO 90
Program
Performance Program Manual PPM P2 C 1 NO 90
Weight and Balance Manual WBM P2 C 1^^ YES 0++
+ Provided as part of the Flight Crew Training in Clause 16.
* In addition, the Seller will provide one FCOM manual for each pilot
trained under Clause 16. As of issuance to the Buyer of the first general
revision of the FCOM after execution of this Agreement, the Buyer's FCOM
shall be subject to revision service, pursuant to Clause 14 of the
Agreement.
^ Includes manuals provided upon delivery of each Aircraft.
^^ Per aircraft.
++ Weighing Equipment List delivered two weeks after delivery of the
Aircraft.
Exh. F-14
<PAGE>
APPENDIX "A" to EXHIBIT "F"
MANUALS AVAILABLE (detailed) Abbr Form Type Qty ATA Deliv.
---- ---- ---- --- --- ------
5 OVERHAUL DATA
Component Documentation CDS P2 C 3 NO 180
Status D C NO 180
Component Evolution List CEL P2 E 3 NO *
Cable Fabrication Manual CFM P2 E 1 NO 90
Component Maintenance Manual CMMM P2 E 1 YES 180
Airframe Manufacturer F E 1 YES 180
MFC 1
Component Maintenance Manual CMMV P2 E 1 YES 180
Vendor (from the vendor) MFC 1
6 STRUCTURAL MANUALS
Nondestructive Testing NTM P2 E 2 YES 90
Manual
Structural Repair Manual SRM P2 E 1 YES 90
F E 2 YES 90
* Optional. Delivered as follow-on for CDS.
Exh. F-15
<PAGE>
APPENDIX "A" to EXHIBIT "F"
LICENSE FOR USE
OF THE PERFORMANCE ENGINEERING PROGRAMS (PEP)
1. GRANT
The Seller grants to the Buyer the right to use the Performance
Engineering Programs (PEP) in machine readable form on a single computer
during the term of this license agreement (the "License Agreement")
Use of the PEP in readable form shall be limited to one (1) copy. However,
the Seller may make duplicate copies, provided that they are either
contained in the same computer as the original copy, or produced for
checkpoint and restart purposes or made with the consent of the Seller for
a specific need.
2. MERGING
The PEP may be used and adapted in machine readable form for the purpose
of merging it into other program material of the Buyer, but, on
termination of this License Agreement, the Buyer shall remove the PEP from
the other program material with which it has been merged.
The Buyer agrees to reproduce the copyright and other notices as they
appear on or within the original media on any copies that the Buyer makes
of the PEP.
3. PERSONAL LICENSE
The above described license is personal to the Buyer, nontransferable and
nonexclusive.
4. INSTALLATION
It is the Buyer's responsibility to install the PEP and to perform any
mergings and checks. The Seller shall, however, assist the Buyer's
operations engineers in the initial phase following the delivery of the
PEP until such personnel reach the familiarization level required to make
inputs and correlate outputs.
Exh. F-16
<PAGE>
APPENDIX "A" to EXHIBIT "F"
5. PROPRIETARY RIGHTS AND NONDISCLOSURE
5.1 The PEP and the copyright and other proprietary rights of whatever nature
in the PEP are and shall remain with the Seller. The PEP and its contents
are designated as confidential.
5.2 The Buyer undertakes not to disclose the PEP, parts thereof or its
contents to any third party without the prior written consent of the
Seller. Insofar as it is necessary to disclose aspects of the PEP to
employees, such disclosure is permitted only for the purpose for which the
PEP is supplied and only to the employee who needs to know the same.
6. CONDITIONS OF USE
6.1 The Seller does not warrant that the PEP shall contain no errors. However,
should the PEP be found to contain any error at delivery, the Buyer shall
notify the Seller promptly thereof and the Seller shall take all proper
steps to correct the same at its own expense.
6.2 The Buyer shall ensure that the PEP is correctly used in appropriate
machines as indicated in the Performance Programs Manual (PPM) and that
staff are properly trained to use the same, to trace and correct running
faults, to restart and recover after fault and to operate suitable checks
for accuracy of input and output.
6.3 It is understood that the PPM is the user's guide of the PEP and that the
Buyer shall undertake to use the PEP in accordance with the PPM.
6.4 The PEP is supplied under the express condition that the Seller shall have
no liability in contract or in tort arising from or in connection with the
Buyer's use of or inability to use the PEP.
7. DURATION
Subject to the Buyer's compliance with the terms of this License
Agreement, the rights under this License Agreement shall be granted to the
Buyer for as long as the Buyer operates an Aircraft to which the PEP
refers.
Exh. F-17
<PAGE>
EXHIBIT "G"
AIRFRAME PRICE REVISION FORMULA
1. BASE PRICE
The Base Price of the Airframe is as quoted above in Subclause 4.1.1 of
this Agreement for Aircraft that are A320-200 model aircraft and in
Subparagraph 9.4.1.1 of Letter Agreement No. 3 to the Agreement for
Aircraft that are Converted A319 Aircraft.
The Base Price of a set of two (2) nacelles and two (2) thrust reversers
is as quoted in Subclause 4.1.2.1(ii) of the Agreement for Aircraft that
are A320-200 model aircraft and in Subparagraph 9.4.1.2.1(ii) of Letter
Agreement No. 3 to the Agreement for Aircraft that are Converted A319
Aircraft.
The Base Price of the engine configuration option is as quoted in
Subclause 4.1.2.l(iii) or Subclause 4.1.2.2(ii) (as applicable).
2 Base Period
The above Base Prices have been established in accordance with the
economic conditions prevailing in December 1993/January 1994/February 1994
and corresponding to theoretical delivery conditions prevailing in January
1995, as defined by HEb and ICb index values indicated in Paragraph 4 of
this Exhibit "G."
These Base Prices are subject to adjustment for changes in economic
conditions as measured by data obtained from the US Department of Labor,
Bureau of Labor Statistics, and in accordance with the provisions of
Paragraphs 4 and 5 of this Exhibit "G."
HEb and ICb values indicated below in Paragraph 4 of this Exhibit "G" will
not be subject to any revision of these indexes.
3. Reference Indexes
Labor Index: "Aircraft and Parts," Standard Industrial Classification
372--Average hourly earnings (hereinafter referred to as "HE SIC 372"),
published by the US Department of Labor, Bureau of Labor Statistics, in
"Employment and Earnings," Establishment Data: Hours and Earnings (Table
B-15: Average hours and earnings of production or nonsupervisory workers
on private nonfarm payrolls by detailed industry).
Exh. G-l
<PAGE>
EXHIBIT "G"
Material Index: "Industrial Commodities" (hereinafter referred to as
"IC-Index"), published by the US Department of Labor, Bureau of Labor
Statistics, in "Producer Prices and Price Indexes" (Table 6: Producer
price indexes for commodity groupings and individual items). (Base year
1982 = 100.)
4. Revision Formula
Pn = (Pb + F) (0.75 HEn/HEb + 0.25 ICn/ICb)
where
Pn = Revised Base Price of the Airframe, nacelles and thrust
reversers, or engine configuration option, as applicable, at
delivery of the Aircraft.
Pb = Base Price of the Airframe, nacelles and thrust reversers,
or engine configuration option, as applicable, at economic
conditions December 1993/January 1994/February 1994 averaged
(January 1995 delivery conditions).
F = (0.005 x N x Pb) where N = The calendar year of delivery of
the Aircraft minus 1995.
HEn = The arithmetic average of HE SIC 372 for the 11th, 12th and
13th months prior to the month of delivery of the Aircraft (2
decimals).
HEb = HE SIC 372 for December 1993/January 1994/February 1994
averaged (= 17.68).
ICn = The arithmetic average of the IC-Index for the 11th, 12th
and 13th months prior to the month of delivery of the Aircraft
(1 decimal).
ICb = IC-Index for December 1993/January 1994/February 1994
averaged (=118.5).
In determining the Revised Base Price at delivery of the Aircraft, each
quotient shall be calculated to the nearest ten thousandth (4 decimals).
If the next succeeding place is five (5) or more, the preceding decimal
place shall be raised to the next higher figure. The final factor shall be
rounded to the nearest ten thousandth (4 decimals).
After final computation, Pn shall be rounded to the next whole number (0.5
or more rounded to 1).
Exh. G-2
<PAGE>
EXHIBIT "G"
5. General Provisions
5.1 If the US Department of Labor substantially revises the methodology or
discontinues any of the indexes referred to in this Subclause 5.1, the
Seller and the Buyer shall select a substitute for the revised or
discontinued index, such substitute index to lead in application to the
same adjustment result, insofar as possible, as would have been achieved
by continuing the use of the original index as it may have fluctuated had
it not been revised or discontinued.
Appropriate revision of the formula shall be made to accomplish this
result.
5.2 The Revised Base Price at delivery of the Aircraft shall be the final
price and will not be subject to further adjustments in the indexes.
Exh. G-3
<PAGE>
EXHIBIT "H-1"
(For A320 Aircraft)
CFM ENGINES PRICE REVISION FORMULA
1. REFERENCE PRICE
The Reference Price of a set of two (2) CFM International CFM 56-5A-3
engines and additional equipment is as quoted in Subclause 4.1.2.1(i) of
the Agreement.
This Reference Price is valid for Aircraft delivered no later than
December 31, 1997, and is subject to adjustment for changes in economic
conditions as measured by data obtained from the US Department of Labor,
Bureau of Labor Statistics, and in accordance with the provisions of
Paragraphs 4 and 5 of this Exhibit "H-1."
2. REFERENCE PERIOD
The above Reference Price has been established in accordance with the
economic conditions prevailing in October 1985 (April 1986 theoretical
delivery conditions), as defined, according to CFM International, by the
Reference Composite Price Index of 108.66.
3. INDEXES
Labor Index: "Aircraft Engines and Engine Parts" Standard Industrial
Classification 3724--Average hourly earnings (hereinafter referred to as
"HE SIC 3724"), published by the US Department of Labor, Bureau of Labor
Statistics, in "Employment and Earnings," Establishment Data: Hours and
Earnings (Table B-15: Average hours and earnings of production or
nonsupervisory workers on private nonfarm payrolls by detailed industry).
Material Index (I): "Industrial Commodities" (hereinafter referred to as
"IC-Index"), published by the US Department of Labor, Bureau of Labor
Statistics, in "Producer Prices and Price Indexes" (Table 6: Producer
price indexes for commodity groupings and individual items). (Base year
1982 =100.)
Material Index (II): "Metals and Metal Products" Code 10 (hereinafter
referred to as "MMP-Index"), published by the US Department of Labor,
Bureau of Labor Statistics, in "Producer Prices and Price Indexes" (Table
6: Producer price indexes for commodity groupings and individual items).
(Base year 1982 = 100.)
Exh. H-1-1
<PAGE>
EXHIBIT "H-l"
(For A320 Aircraft)
Energy Index: "Fuels and Related Products and Power" Code 5 (hereinafter
referred to as "EP-Index"), published by the US Department of Labor,
Bureau of Labor Statistics, in "Producer Prices and Price Indexes" (Table
6: Producer price indexes for commodity groupings and individual items).
(Base year 1982 = 100.)
4. REVISION FORMULA
Pn = Pb x CPIn/108.66
Where
Pn = Revised Reference Price of a set of two (2) engines at
delivery of the Aircraft.
Pb = Reference Price as defined above.
CPIn = Composite Price Index for the sixth month prior to the month
of delivery of the Aircraft.
Said Composite Price Index is composed as follows:
CPIn = 0.55 [(HEn/11.16) x 100] + 0.10 ICn + 0.25 MMPn + 0.10 EPn
Where
HEn = HE SIC 3724 for the sixth month prior to the month of
delivery of the Aircraft; the quotient HEn/11.16 is rounded to
the nearest third decimal place. The product by 0.55 is
rounded to the nearest second decimal place.
ICn = IC-Index for the sixth month prior to the month of delivery
of the Aircraft.
MMPn = MMP-Index for the sixth month prior to the month of delivery
of the Aircraft. The product by 0.25 is rounded to the nearest
second decimal place.
EPn = EP-Index for the sixth month prior to the month of delivery
of the Aircraft.
Exh. H-1-2
<PAGE>
EXHIBIT "H-1"
(For A320 Aircraft)
The Composite Price Index shall be determined to the second decimal place.
If the next succeeding decimal place is five (5) or more, the preceding
decimal figure shall be raised to the next higher figure.
The final factor shall be rounded to the nearest thousandth (3 decimals).
5. GENERAL PROVISIONS
5.1 The Revised Reference Price at delivery of the Aircraft shall be the final
price and will not be subject to further adjustments in the indexes.
5.2 If no final index value is available for any of the applicable months, the
published preliminary figures will be the basis on which the Revised
Reference Price will be computed.
5.3 If the US Department of Labor substantially revises the methodology of
calculation of the indexes referred to in this Exhibit "H-1" or
discontinues any of these indexes, the Seller shall, in agreement with CFM
International, apply a substitute for the revised or discontinued index,
such substitute index to lead in application to the same adjustment
result, insofar as possible, as would have been achieved by continuing the
use of the original index as it may have fluctuated had it not been
revised or discontinued.
Appropriate revision of the formula shall be made to accomplish this
result.
5.4 Should the above escalation provisions become null and void by action of
the US Government, the Reference Price shall be adjusted to reflect
increases in the cost of labor, material and fuel which have occurred from
the period represented by the applicable Reference Price Indexes to the
sixth month prior to the scheduled delivery of the Aircraft.
5.5 The Revised Reference Price at delivery of the Aircraft in no event shall
be less than the Reference Price defined in Paragraph 1 of this Exhibit
"H-l."
Exh. H-l-3
<PAGE>
EXHIBIT "H-2"
(For A319 Aircraft)
CFM ENGINES PRICE REVISION FORMULA
1. REFERENCE PRICE
The Reference Price of a set of two (2) CFM International CFM 56-5A-5
engines and additional equipment is as quoted in Subparagraph 9.4.1.2.1(i)
of Letter Agreement No. 3 to the Agreement.
This Reference Price is valid for Aircraft delivered no later than
December 31, 2002, and is subject to adjustment for changes in economic
conditions as measured by data obtained from the US Department of Labor,
Bureau of Labor Statistics, and in accordance with the provisions of
Paragraphs 4 and 5 of this Exhibit "H-2."
2. REFERENCE PERIOD - REFERENCE COMPOSITE PRICE INDEX
The above Reference Price has been established in accordance with the
economic conditions prevailing in September 1990 (March 1991 theoretical
delivery conditions), as defined, according to CFM International, by the
Reference Composite Price Index of 126.54.
3. REFERENCE INDEXES
Labor Index: "Aircraft Engines and Engine Parts," Standard Industrial
Classification 3724--Average hourly earnings (hereinafter referred to as
"HE SIC 3724"), published by the US Department of Labor, Bureau of Labor
Statistics, in "Employment and Earnings," Establishment Data: Hours and
Earnings (Table B-15: Average hours and earnings of production or
nonsupervisory workers on private nonfarm payrolls by detailed industry).
Material Index (I): "Industrial Commodities" (hereinafter referred to as
"IC-Index"), published by the US Department of Labor, Bureau of Labor
Statistics, in "Producer Prices and Price Indexes" (Table 6: Producer
price indexes for commodity groupings and individual items). (Base year
1982 = 100.)
Material Index (II): "Metals and Metal Products" Code 10 (hereinafter
referred to as "MMP-Index"), published by the US Department of Labor,
Bureau of Labor Statistics, in "Producer Prices and Price Indexes" (Table
6: Producer price indexes for commodity groupings and individual items).
(Base year 1982 = 100.)
Exh. H-2-l
<PAGE>
EXHIBIT "H-2"
(For A319 Aircraft)
Energy Index: "Fuels and Related Products and Power" Code 5 (hereinafter
referred to as "EP-Index"), published by the US Department of Labor,
Bureau of Labor Statistics, in "Producer Prices and Price Indexes" (Table
6: Producer price indexes for commodity groupings and individual items).
(Base year 1982 = 100.)
4. REVISION FORMULA
Pn = Pb x CPIn/126.54
Where
Pn = Revised Reference Price of a set of two (2) engines at
delivery of the Aircraft.
Pb = Reference Price as defined above.
CPIn = Composite Price Index for the sixth month prior to the month
of delivery of the Aircraft.
Said Composite Price Index is composed as follows:
CPIn = 0.55 [(HEn/11.16) x 100] + 0.10 ICn + 0.25 MMPn + 0.10 EPn
Where
HEn = HE SIC 3724 for the sixth month prior to the month of
delivery of the Aircraft; the quotient HEn/11.16 is
rounded to the nearest third decimal place. The product
by 0.55 is rounded to the nearest second decimal place.
ICn = IC-Index for the sixth month prior to the month of
delivery of the Aircraft.
MMPn = MMP-Index for the sixth month prior to the month of
delivery of the Aircraft. The product by 0.25 is rounded
to the nearest second decimal place.
EPn = EP-Index for the sixth month prior to the month of
delivery of the Aircraft.
Exh. H-2-2
<PAGE>
EXHIBIT "H-2"
(For A319 Aircraft)
The Composite Price Index shall be determined to the second decimal place.
If the next succeeding decimal place is five (5) or more, the preceding
decimal figure shall be raised to the next higher figure.
The final factor shall be rounded to the nearest thousandth (3 decimals).
5. GENERAL PROVISIONS
5.1 The Revised Reference Price at delivery of the Aircraft shall be the final
price and will not be subject to further adjustments in the indexes.
5.2 If no final index value is available for any of the applicable months, the
published preliminary figures will be the basis on which the Revised
Reference Price will be computed.
5.3 If the US Department of Labor substantially revises the methodology of
calculation of the indexes referred to in this Exhibit "H-2" or
discontinues any of these indexes, the Seller shall, in agreement with CFM
International, apply a substitute for the revised or discontinued index,
such substitute index to lead in application to the same adjustment
result, insofar as possible, as would have been achieved by continuing the
use of the original index as it may have fluctuated had it not been
revised or discontinued.
Appropriate revision of the formula shall be made to accomplish this
result.
5.4 Should the above escalation provisions become null and void by action of
the US Government, the Reference Price shall be adjusted to reflect
increases in the cost of labor, material and fuel which have occurred from
the period represented by the applicable Reference Price Indexes to the
sixth month prior to the scheduled delivery of the Aircraft.
5.5 The Revised Reference Price at delivery of the Aircraft in no event shall
be less than the Reference Price defined in Paragraph 1 of this Exhibit
"H-2."
Exh. H-2-3
<PAGE>
EXHIBIT "I-1"
(For A320 Aircraft)
INTERNATIONAL AERO ENGINES PRICE REVISION FORMULA
1. REFERENCE PRICE
The Reference Price of a set of two (2) International Aero Engines
V2527-A5 engines is as quoted in Subclause 4.1.2.2(i) of the Agreement.
This Reference Price is valid for Aircraft delivered no later than
December 31, 1997, and is subject to adjustment for changes in economic
conditions as measured by data obtained from the US Department of Labor,
Bureau of Labor Statistics, and in accordance with the provisions of
Paragraphs 4 and 5 of this Exhibit "I-1."
2. REFERENCE PERIOD
The above Reference Price has been established in accordance with the
economic conditions prevailing in March 1988 (or July 1988 theoretical
delivery conditions) as defined, according to International Aero Engines,
by the HEb, MMPb and EPb index values indicated in Paragraph 4 of this
Exhibit "I-1."
3. INDEXES
Labor Index: "Aircraft Engines and Engine Parts" Standard Industrial
Classification 3724--Average hourly earnings (hereinafter referred to as
"HE SIC 3724"), published by the US Department of Labor, Bureau of Labor
Statistics, in "Employment and Earnings," Establishment Data: Hours and
Earnings (Table B-15: Average hours and earnings of production or
nonsupervisory workers on private nonfarm payrolls by detailed industry).
Material Index: "Metals and Metal Products" Code 10 (hereinafter referred
to as "MMP-Index"), published by the US Department of Labor, Bureau of
Labor Statistics, in "Producer Prices and Price Indexes" (Table 6:
Producer price indexes for commodity groupings and individual items).
(Base year 1982 = 100.)
Energy Index: "Fuels and Related Products and Power" Code 5 (hereinafter
referred to as "EP-Index"), published by the US Department of Labor,
Bureau of Labor Statistics, in Producer Prices and Price Indexes" (Table
6: Producer price indexes for commodity groupings and individual items).
(Base year 1982 = 100.)
Exh. I-1-1
<PAGE>
EXHIBIT "I-1"
(For A320 Aircraft)
4. REVISION FORMULA
Pn = Pb [(0.60 HEn)/HEb + (0.30 MMPn)/MMPb + (0.10 EPn)/EPb)]
Where
Pn = Revised Reference Price of a set of two (2) engines at
delivery of the Aircraft.
Pb = Reference Price at March 1988 economic conditions.
HEn = HE SIC 3724 for the fourth month prior to the month of
delivery of the Aircraft.
HEb = HE SIC 3724 for March 1988 (= 13.58)
MMPn = MMP-Index for the fourth month prior to the month of
delivery of the Aircraft.
MMPb = MMP-Index for March 1988 (= 115.4)
EPn = EP-Index for the fourth month prior to the month of
delivery of the Aircraft.
EPb = EP-Index for March 1988 (=65.9)
In determining the Revised Reference Price each quotient ((0.60 HEn)/HEb,
(0.30 MMPn)/MMPb, (0.10 EPn)/EPb) shall be calculated to the nearest ten
thousandth (4 decimals). If the next succeeding place is five (5) or more
the preceding decimal place shall be raised to the next higher figure.
After final computation, Pn shall be rounded to the next whole number (0.5
or more rounded to 1).
5. GENERAL PROVISIONS
5.1 The Revised Reference Price at delivery of the Aircraft shall be the final
price and will not be subject to further adjustments in the indexes.
5.2 If no final index value is available for any of the applicable months, the
published preliminary figures will be the basis on which the Revised
Reference Price will be computed.
5.3 If the US Department of Labor substantially revises the methodology of
calculation of the indexes referred to in this Exhibit "I-1" or
discontinues any of these indexes, the Seller shall, in agreement with
International Aero Engines, apply a
Exh. I-1-2
<PAGE>
EXHIBIT "I-1" (For
A320 Aircraft)
substitute for the revised or discontinued index, such substitute index to
lead in application to the same adjustment result, insofar as possible, as
would have been achieved by continuing the use of the original index as it
may have fluctuated had it not been revised or discontinued. Appropriate
revision of the formula shall be made to accomplish this result.
5.4 Should the above escalation provisions become null and void by action of
the US Government, the Reference Price shall be adjusted to reflect
increases in the cost of labor, material and fuel which have occurred from
the period represented by the applicable Reference Price Indexes to the
fourth month prior to the scheduled delivery of the Aircraft.
5.5 The Revised Reference Price at delivery of the Aircraft in no event shall
be less than the Reference Price defined in Paragraph 1 of this Exhibit
"I-1."
Exh. I-1-3
<PAGE>
EXHIBIT "I-2"
(For A319 Aircraft)
INTERNATIONAL AERO ENGINES PRICE REVISION FORMULA
1. REFERENCE PRICE
The Reference Price of a set of two (2) International Aero Engines
V2524-A5 engines is as quoted in Subparagraph 9.4.1.2.2 of Letter
Agreement No. 3 to the Agreement.
This Reference Price is valid for Aircraft delivered no later than
December 31, 2000, and is subject to adjustment for changes in economic
conditions as measured by data obtained from the US Department of Labor,
Bureau of Labor Statistics, and in accordance with the provisions of
Paragraphs 4 and 5 of this Exhibit "I-2."
2. REFERENCE PERIOD
The above Reference Price has been established in accordance with the
economic conditions prevailing in November 1990 (or March 1991 theoretical
delivery conditions) as defined, according to International Aero Engines,
by the HEb, MMPb and EPb index values indicated in Paragraph 4 of this
Exhibit "I-2."
3. INDEXES
Labor Index: "Aircraft Engines and Engine Parts" Standard Industrial
Classification 3724--Average hourly earnings (hereinafter referred to as
"HE SIC 3724"), published by the US Department of Labor, Bureau of Labor
Statistics, in "Employment and Earnings," Establishment Data: Hours and
Earnings (Table B-15: Average hours and earnings of production or
nonsupervisory workers on private nonfarm payrolls by detailed industry).
Material Index: "Metals and Metal Products" Code 10 (hereinafter referred
to as "MMP-Index"), published by the US Department of Labor, Bureau of
Labor Statistics, in "Producer Prices and Price Indexes" (Table 6:
Producer price indexes for commodity groupings and individual items).
(Base year 1982 = 100.)
Energy Index: "Fuels and Related Products and Power" Code 5 (hereinafter
referred to as "EP-Index"), published by the US Department of Labor,
Bureau of Labor Statistics, in "Producer Prices and Price Indexes" (Table
6: Producer price indexes for commodity groupings and individual items).
(Base year 1982 = 100.)
Exh. I-2-1
<PAGE>
EXHIBIT "I-2"
(For A319 Aircraft)
4. REVISION FORMULA
Pn = Pb [(0.60 HEn)/HEb + (0.30 MMPn)/MMPb + (0.10 EPn)/EPb]
Where
Pn = Revised Reference Price of a set of two (2) engines at
delivery of the Aircraft.
Pb = Reference Price at economic conditions November 1990.
HEn = HE SIC 3724 for the fourth month prior to the month of
delivery of the Aircraft.
HEb = HE SIC 3724 for November 1990 (= 15.20)
MMPn = MMP-Index for the fourth month prior to the month of
delivery of the Aircraft.
MMPb = MMP-Index for November 1990 (=123.3)
EPn = EP-Index for the fourth month prior to the month of delivery
of the Aircraft.
EPb = EP-Index for November 1990 (=97.4)
In determining the Revised Reference Price each quotient ((0.60 HEn)/HEb,
(0.30 MMPn)/MMPb, (0.10 EPn)/EPb) shall be calculated to the nearest ten
thousandth (4 decimals). If the next succeeding place is five (5) or more
the preceding decimal place shall be raised to the next higher figure.
After final computation, Pn shall be rounded to the next whole number (0.5
or more rounded to 1).
5. GENERAL PROVISIONS
5.1 The Revised Reference Price at delivery of the Aircraft shall be the final
price and will not be subject to further adjustments in the indexes.
5.2 If no final index value is available for any of the applicable months, the
published preliminary figures will be the basis on which the Revised
Reference Price will be computed.
Exh. I-2-2
<PAGE>
EXHIBIT "I-2"
(For A319 Aircraft)
5.3 If the US Department of Labor substantially revises the methodology of
calculation of the indexes referred to in this Exhibit "I-2" or
discontinues any of these indexes, the Seller shall, in agreement with
International Aero Engines, apply a substitute for the revised or
discontinued index, such substitute index to lead in application to the
same adjustment result, insofar as possible, as would have been achieved
by continuing the use of the original index as it may have fluctuated had
it not been revised or discontinued. Appropriate revision of the formula
shall be made to accomplish this result.
5.4 Should the above escalation provisions become null and void by action of
the US Government, the Reference Price shall be adjusted to reflect
increases in the cost of labor, material and fuel which have occurred from
the period represented by the applicable Reference Price Indexes to the
fourth month prior to the scheduled delivery of the Aircraft.
5.5 The Revised Reference Price at delivery of the Aircraft in no event shall
be less than the Reference Price defined in Paragraph 1 of this Exhibit
"I-2."
Exh. I-2-3
<PAGE>
[Letterhead of AIRBUS INDUSTRIE OF NORTH AMERICA, INC.]
December 21, 1995
Mr. Steven Westberg
Chief Financial Officer
Midway Airlines Corporation
300 W. Morgan Street, Suite 1200
Durham, NC 27701
Dear Mr. Westberg:
You will find enclosed signature copies of Amendment No. 1 to the A320
Purchase Agreement (including Appendix A) and Amendment No. 1 to the Financial
Matters Letter Agreement between Midway Airlines and AVSA, S.A.R.L. These
documents are being sent to you so that you will have a complete set of
documents that are not faxed copies. The enclosed documents are identical to the
documents executed by Midway today.
In addition, original AVSA signature pages are being sent to you under
separate cover for the above-referenced amendments and the Promissory Note
Security Agreement.
If you have any questions regarding the finalization of these documents,
do not hesitate to call me. Please note that as our offices will be closed next
week I will not be in after tomorrow.
Very truly yours,
/s/ Elise Yousoufian
Elise Yousoufian
Contracts Manager
cc: Christian Sabardine, Airbus Industrie of North America, Inc.
Tom Weir, Airbus Industrie of North America, Inc.
Sylvain Lebeuf, AVSA, S.A.R.L.
Attachments
<PAGE>
[Letterhead of AIRBUS INDUSTRIE OF NORTH AMERICA, INC.]
December 22, 1995
Mr. Steven Westberg
Chief Financial Officer
Midway Airlines Corporation
300 W. Morgan Street, Suite 1200
Durham, NC 27701
Dear Mr. Westberg:
As I indicated in my voice message to you today, it would appear that there was
a little mixup in the documents exchanged yesterday. Therefore, enclosed with
this letter is Midway Airlines' copy of Amendment No. 1 to the A320 Purchase
Agreement, as executed yesterday, December 21, 1995. In turn, please return to
my attention one executed copy of Amendment No. 1 to the Financial Matters
Letter Agreement.
In the first week of January, we will send you copies of both documents with
original AVSA signatures, for Midway records, and we will coordinate with Tom
Weir the handling of the Promissory Note Security Agreement.
I trust you will pardon us for any confusion this mixup may have caused
Midway. Very truly yours,
/s/ Elise Yousoufian
Elise Yousoufian
Contracts Manager
cc: Christian Sabardine, Airbus Industrie of North America, Inc.
Tom Weir, Airbus Industrie of North America, Inc.
Sylvain Lebeuf, AVSA, S.A.R.L.
Attachments
<PAGE>
Amendment No. 1
TO THE A320 PURCHASE AGREEMENT
dated as of March 17, 1995
between
AVSA, S.A.R.L.
and
MIDWAY AIRLINES CORPORATION
This Amendment No. 1 (hereinafter referred to as the "Amendment") entered into
as of December 21,1995, by and between AVSA, S.A.R.L., a societe a
responsabilite limitee organized and existing under the laws of the Republic of
France, having its registered office located at 2, Rond Point Maurice Bellonte,
31700 Blagnac FRANCE, (hereinafter referred to as the "Seller"), and MIDWAY
AIRLINES CORPORATION, a body corporate, organized and existing under the laws of
the State of Delaware, United States of America, having its principal corporate
offices located at 300 West Morgan Street, Suite 1200, Durham, NC 27701
(hereinafter referred to as the "Buyer").
WITNESSETH:
WHEREAS, the Buyer and the Seller entered into a Purchase Agreement, dated
as of March 17,1995, relating to the sale by the Seller and the purchase by the
Buyer of certain Airbus Industrie A320-200 model aircraft (the "Aircraft"),
which, as previously amended by and supplemented with all Exhibits, Appendixes
and Letter Agreements attached thereto, is hereinafter called the "Agreement"
and a related letter agreement regarding "Financial Matters" which, as
previously amended, is hereinafter called the "Financial Matters Agreement";
WHEREAS, the Buyer has requested to make a certain Predelivery Payment
under the Agreement by way of a promissory note, and the Seller agrees to such
method of payment under the conditions set forth in this Amendment; and
WHEREAS, capitalized term's used herein and not otherwise defined in this
Amendment will have the meanings assigned to them in the Agreement, and the
terms "herein," "hereof," and hereunder and words of similar import refer to
this Amendment.
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS, HEREINAFTER SET
FORTH, IT IS AS FOLLOWS.
<PAGE>
1. PREDELIVERY PAYMENT PROMISSORY NOTE
1.1 As set forth in Subparagraph 6.2.2 of the Agreement, the third Predelivery
Payment is due no later than December 30, 1995, in respect of each of the
Firm Aircraft, and, as act forth in Subparagraph 6.2.3 of the Agreement,
the second Predelivery Payment is due no later than December 30, 1995, in
respect of each of the Option Aircraft (the "December 1995 Payments") The
total amount of the December 1995 Payments is [***] In answer to the
Buyer's prior request, the Seller hereby agrees to the Buyer' making the
December 1995 Payments by way of a promissory note made and dated
December 30, 1995, and maturing on April 30, 1996.
1.2 In consideration of the Seller's undertaking, as set forth above in
Subparagraph 1.1, the Buyer will do the following
(a) The Buyer will issue the Seller a secured negotiable note for the
total amount of the December 1995 Payments, which is [***] (the
"December 1995 Note"). The December 1995 Note will be dated as of
December 30, 1995, will mature and be payable in cash on April 30,
1996, and will be made in the form attached hereto as Appendix A.
All other terms and conditions applicable to "Notes" under Letter
Agreement No. 4 to the Agreement will also apply to the December
1995 Note except that the December 1995 Note will be noninterest
bearing. The December 1995 Note will be collateralized in the manner
set forth in the Promissory Note Security Agreement dated as of the
date hereof between the Buyer and the Seller (the "Promissory Note
Security Agreement").
(b) The Buyer will provide the Seller with satisfactory written
substantiation by January 31, 1996, of its having requested and
obtained from its other principal creditors (including, but not
limited to, American Airlines, Inc., and Fokker Aircraft U.S.A,
Inc.) payment deferrals generally similar in scope as the deferral
described in this Amendment.
(c) The December 1995 Note will become immediately due and payable on
February 1, 1996, in the event that any of the following conditions
have not been met by January 3l, 1996:
(x) The Seller or its designee has completed a satisfactory
physical inspection of the collateral delivered under the
Promissory Note Security Agreement.
(y) The Seller has obtained a perfected first priority security
interest in all the collateral described in the Promissory
Note Security Agreement.
<PAGE>
(z) The Buyer has provided the Seller the written substantiation
described above in Subparagraph 1.2(b).
2. CONFIDENTIALITY
Subject to any legal or governmental requirements of disclosure, the
parties (which for this purpose shall include their employees, agents and
advisors) shall maintain the terms and conditions of this Amendment and
any reports or other data furnished hereunder strictly confidential.
Without limiting the generality of the foregoing, the Buyer and the Seller
shall use their best efforts to limit the disclosure of the contents of
this Agreement to the extent legally permissible in any filing required to
be made by the Buyer or the Seller, as the case may be, with any
governmental agency and shall make such applications as shall be necessary
to implement the foregoing. With respect to any public disclosure or
filing, each party agrees to submit to the other party a copy of the
proposed document to be filed or disclosed and will give the other party a
reasonable period of time in which to review the said document. The Buyer
and Seller shall consult with each other prior to the making of any public
disclosure or filing permitted hereunder, of this Amendment or the terms
and conditions thereof. The provisions of this Paragraph 2 shall survive
any termination of this Agreement.
3. EFFECT OF AMENDMENT
The Agreement will be deemed amended to the extent herein provided, and,
except as specifically amended hereby, will continue in full force and
effect in accordance with its original terms, except that if the Agreement
and this Agreement have specific provisions that are inconsistent, the
specific provisions contained in this Amendment will govern. It is
understood that this Amendment does not in any way constitute a waiver by
the Seller of any rights it has under the Agreement or under the Financial
Matters Agreement, provided, however, that the Seller agrees to waive
until April 30, 1996, its rights with respect to Insecurity Events
described in Subparagraph 21.2(a) and 21.2(b) of the Agreement.
Further, It is agreed that this Amendment is subject to the parties
executing as of the date hereof an amendment to the Financial Matters
Agreement and the Promissory Note Security Agreement.
4. INTERPRETATION AND LAW
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND THE PERFORMANCE
THEREOF SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.
THE PARTIES HEREBY ALSO AGREE THAT THE UNITED NATIONS CONVENTION ON THE
INTERNATIONAL SALE OF GOODS SHALL NOT APPLY TO THIS TRANSACTION.
3
<PAGE>
If the foregoing correctly sets forth our understanding. please execute
this Amendment in the space provided below, whereupon. as of the date first
above written, this Amendment will constitute part of the Agreement.
Agreed and accepted Yours sincerely,
MIDWAY AIRLINES AVSA, S.A.R.L.
CORPORATION
By: [Illegible] By: /s/ Christophe Mourey
-------------------------- ----------------------------
Its: President Its:____________________________
Christophe MOUREY
AVSA Chief Executive Officer
By: _____________________
Its: ____________________
4
<PAGE>
If the foregoing correctly sets forth our understandihg,
please execute this Amendment in the space provided helow, whereupon, as of
the date firstahove written, this Amendment will constitute part of the
Agreement.
Agreed and accepted Yours sincerely,
MIDWAY AIRLINES AVSA, S.A.R.L.
CORPORATION
/s/ Christophe Mourey
By: ________________________ By: Christophe Mourey
Its: _______________________ Its: Chief Executive Officer
By: ________________________
Its: _______________________
December 21,1995 4
<PAGE>
Appendix A
MIDWAY AIRLINES CORPORATION
Secured Registered Promissory Note
R. New York, New York
$______________________ ____________ - 19__
MIDWAY AIRLINES CORPORATION, a corporation duly organized and existing
under the laws of the State of Delaware, USA (the "Company"), for value
received, hereby promises to pay to the order of AVSA, S.A.R.L. ("AVSA") or
registered assigns on April 1996, (the "Payment Date"), the principal amount of
[***] in such coin or currency of the United States of America as at the time of
payment shall be legal tender for public and private debts, at the office of
AVSA at 2, rond-point Maurice Bellonte, 31700 Blagnac, France (or at such other
office as the holder hereof shall designate to the Company in writing).
1. PAYMENT DATE; EXCHANGES; PREPAYMENTS
1.1 Transfer or Exchange
This Note is transferable by the holder hereof as herein provided. The
Company shall keep at its office or agency, maintained as provided in
Subparagraph 2.2, a register in which the Company shall provide for the
registration of this Note and for the registration of transfer of this
Note. The holder of this Note may, at its option and either in person or
by duly authorized attorney, surrender the same for registration of
transfer and receive in exchange herefor a Note, dated as of the transfer
of this Note, for the same aggregate unpaid principal amount as this Note
and registered in such name or names as may be designated by the holder
hereof. This Note, when presented or surrendered for registration of
transfer, shall be duly endorsed or shall be accompanied by a written
instrument of transfer duly executed by the holder of this Note or his
attorney duly authorized in writing. The Note so made and delivered in
exchange for this Note shall in all other respects be in the same form and
have the same terms as this Note and each such exchange or transfer shall
be made in such a manner that no gain or loss of principal shall result
therefrom. No transfer or exchange of this Note shall be valid unless made
in such manner at such office. The Company agrees that it will pay
shipping and insurance charges from and to the principal office of the
holder of this Note involved in any exchange by the holder of this Note.
<PAGE>
Appendix A
1.2 Registered Holders; Payments
Prior to due presentment for registration of transfer of this Note, the
Company may deem and treat the registered holder hereof as the absolute
owner hereof for the purpose of receiving payment of or on account of the
principal of this Note and for the purposes of any notices, waivers or
consents thereunder, and payments of any Note shall be made only to or
upon the order in writing of the registered holder hereof. All payments
made hereunder shall be made in immediately available funds in United
States Dollars prior to 1:00 P.M., New York City time, by credit to Credit
Lyonnais, New York Branch, or to such other account as the holder hereof
shall advise the Company in writing. All payments due under this Note
shall be made in full without set-off, counterclaim, recoupment, or
defense and without deduction or withholding of any kind, provided,
however, the same shall not be deemed a waiver of any rights or remedies
of the Company against the Seller or any of its Affiliates. Consequently,
the Company shall assure that the sums received by the holder of this Note
hereunder shall be equal to the full amounts expressed to be due to the
holder hereunder, without deduction or withholding on account of and free
from any and all taxes, levies, imposts, dues or charges of whatever
nature imposed on the Company, except that if the Company is compelled by
law to make any such deduction or withholding the Company shall pay such
additional amounts as may be necessary in order that the net amount
received by the holder after such deduction or withholding shall equal the
amounts which would have been received in the absence of such deduction or
withholding.
1.3 Optional Prepayments
Upon notice given as provided in Subparagraph 1.5, the Company, at its
option, may prepay this Note, in whole and not in part, at anytime, at one
hundred percent (100%) of the outstanding principal amount thereof,
without premium. This Note shall be paid in whole, at one hundred percent
(100%) of the outstanding principal amount hereof, on the Payment Date.
1.4 Notice of Prepayment and Other Notices
The Company shall give written notice of optional prepayment of this Note
pursuant to Subparagraph 1.3 one (1) Business Day prior to the Payment
Date. Any notice of prepayment and all other notices to be given to any
holder of this Note shall be given by registered or certified mail to the
registered holder hereof at its address designated on the register
maintained by the Company on the date fixed for such notice of prepayment
or other notice. Upon notice of any optional prepayment pursuant to
Subparagraph 1.3, the Company covenants and agrees that it will prepay on
the date therein fixed for prepayment the entire outstanding principal
amount of this Note. The principal amount of this Note shall be due and
payable on the date specified in such notice.
2
<PAGE>
Appendix A
2. COVENANTS
The Company covenants and agrees that so long as this Note shall be
outstanding:
2.1 To Pay Principal
The Company will punctually pay or cause to be paid the principal of this
Note according to the terms hereof at the place of payment hereinabove
specified.
2.2 Maintenance of Company Office
The Company will maintain an office or agency at 300 West Morgan Street,
Suite 1200, Durham, North Carolina 27701, USA or such other place in the
United States of America as the Company may designate in writing to the
holder hereof where notices, presentations and demands to or upon the
Company in respect of the Notes may be given or made.
2.3 To Keep Books
The Company will, and will cause each of its Material Subsidiaries to keep
proper books of record and account in which proper entries will be made of
its transactions in accordance with generally accepted accounting
principles.
2.4 Payment of Taxes; Corporate Existence; Maintenance of Properties
The Company will, and will cause each of its Material Subsidiaries to,
(a) pay and discharge promptly or cause to be paid and discharged
promptly (i) all taxes, assessments and governmental charges or
levies imposed upon it or upon its income or profits or upon any of
its property, real, personal or mixed, or upon any part thereof,
before the same shall become in default, unless the same is being
contested in good faith, (ii) all lawful claims for labor, materials
and supplies which if unpaid, might by law become a lien or charge
upon its property, unless the same is being contested in good faith,
and (iii) all obligations to the Pension Benefit Guaranty
Corporation (or any successor thereto under the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) ("PBGC").
(b do or cause to be done all things necessary to preserve and keep in
full force and effect its existence, materially advantageous
rights, licenses, privileges, permits and
3
<PAGE>
Appendix A
franchises and comply in all material respects with all laws and
regulations applicable to it and its business; and
(c) maintain and keep, or cause to be maintained and kept, its
properties, including the Collateral as defined in the Promissory
Note Security Agreement, in good repair, working order and condition
and from time to time make or cause to be made all needful and
proper repairs, renewals, replacements and improvements so that the
business carried on in connection therewith may be properly
conducted at all times.
2.5 To Insure
The Company will, and will cause each of its Material Subsidiaries to,
(a) keep adequately insured, by financially sound and reputable
insurers, all property of a character usually insured by similar
corporations engaged in the same or a similar business similarly
situated against loss or damage of the kinds customarily insured
against by such corporations;
(b) carry, with financially sound and reputable insurers, such other
insurance (including, without limitation, liability insurance) and
in such amounts as is usually carried by corporations engaged in the
same or a similar business similarly situated; and
(c) maintain all such worker's compensation or similar insurance as may
be required under the laws of any state or jurisdiction in
which it may be engaged in business.
All insurance herein provided for shall be effected under a valid
and enforceable policy or policies.
2.6 Sale of Assets
The Company will not, and will not permit any unconsolidated subsidiary
to, sell, lease, transfer or otherwise dispose of all or substantially all
of its assets to any Person other than the Company or any Material
Subsidiary.
2.7 Merger or Consolidation
The Company will not, and will not permit any Material Subsidiary to,
consolidate with or merge into any Person or permit any Person to merge
into it except that
(a) a Material Subsidiary may merge into the Company if the Company is
the surviving corporation or may merge or consolidate with any other
Material Subsidiary or any other corporation if a Material
Subsidiary is the surviving corporation; and
4
<PAGE>
Appendix A
(b) the Company may merge or consolidate with any other Person if (i)
the surviving or successor corporation is a corporation incorporated
or organized under the laws of the United States of America, one of
the states thereof or the District of Columbia, (ii) the surviving
or successor corporation (if not the Company) shall expressly assume
in writing (by an instrument a copy of which shall be mailed by
registered mail to the holder of this Note) the due and punctual
payment of the principal of this Note, according to its tenor, and
the due and punctual performance and observance of all of the terms,
covenants, agreements and conditions of this Note to be performed or
observed by the Company to the same extent as if such surviving or
successor corporation had originally executed this Note in the place
of the Company, and had been the original maker of this Note, (iii)
such Person is legally able to perform the Company's obligations
hereunder and has a Consolidated net worth, as determined in
accordance with generally accepted accounting principles
consistently applied, not less than the Consolidated net worth of
the Company (similarly determined) at the time of such merger or
consolidation, and (iv) immediately after such consolidation or
merger, no Event of Default or Insecurity Event or event which, with
notice or lapse of time or both, would become an Event of Default or
Insecurity Event, shall have occurred and be continuing under this
Note.
2.8 Information and Reports to be furnished by the Company
The Company will furnish to the holder of this Note:
(a) Reports
(i) Quarterly Reports. Within forty-five (45) days after the end
of each of the first three quarterly fiscal periods in each
fiscal year of the Buyer, a Consolidated balance sheet of the
Buyer and its Consolidated subsidiaries prepared as of the
close of such period, together with the related statements of
income and surplus; and
(ii) Annual Statements. Within ninety (90) days after the end of
each fiscal year of the Buyer, an audited Consolidated balance
sheet of the Buyer and its Consolidated subsidiaries as at the
end of such year (when they become available), and the related
statement of income and surplus.
(iii) Monthly Reports Within twenty (20) days after the end of each
month in each fiscal year of the Buyer, a Consolidated balance
sheet of the Buyer and its Consolidated subsidiaries prepared
as of the close of such month, together with the related
statements of income and surplus, statement of sources and
uses of cash, as well as such other historical information
5
<PAGE>
Appendix A
relating to such period that the Buyer maintains. Such
information will include, but not be limited to, revenue per
available seat mile, cost per available seat mile, segment
profitability information, the number of total passengers, and
load factor and average fare information.
"Consolidated" means, as applied to any financial or accounting term
or amount, such term or amount determined on a consolidated basis in
accordance with generally accepted accounting principles.
(b) Publicly Filed Reports to Stockholders and the SEC
The Company will furnish the Seller with all publicly filed reports
to stockholders or the United States Securities and Exchange
Commission, if any.
(c) Notice of Default
Immediately upon the Company's becoming aware of the existence of
any default in its performance or observance of any covenant,
agreement or condition contained in this Note or in the Promissory
Note Security Agreement, a written notice specifying the nature and
status thereof and what action the Company is taking with respect
thereto.
(d) Notice of Acceleration
Immediately upon the Company's becoming aware that the holder of any
bond, debenture, promissory note (including any note other than this
Note issued by the Company in favor of Payee or issued pursuant to
Amendment No. 1 to the Agreement ("Other Notes")) or any similar
evidence of indebtedness of the Company or any Material Subsidiary
has demanded payment, given notice or taken any other action with
respect to a claimed Event of Default under any Other Note or
claimed default in respect of or under such bond, debenture or
promissory note, a written notice specifying the demand made, notice
given or action taken by such holder and the nature and status of
the claimed Event of Default or default and what action the Company
is taking with respect thereto.
(e) ERISA
As promptly as practicable (but in any event not later than fifteen
(1) days) after the Company or Related Person (i) engages in any
"prohibited transaction" (as defined in Section 406 of ERISA or
section 497 of the Internal Revenue Code of 1986, as amended (the
"Code")) with any "employee benefit plan" (as defined in
6
<PAGE>
Appendix A
Section 3 (3) of ERISA ("Plan")), (ii) files a notice of intent
under Section 4041 of ERISA with the PBGC to terminate any such
Plan, (iii) receives a notice from the PBGC to appoint a trustee to
administer any such Plan, (iv) knows or has reason to know that
termination proceedings with respect to any such Plan have
commenced, (v) knows or has reason to know that any "reportable
event" (within the meaning of Section 4043(b) of ERISA) or other
condition with respect to any such Plan has occurred which will
result in a liability to the PBGC, (vi) fails to make a quarterly
installment contribution to any such Plan with respect to which a
lien may be imposed under section 412(n) of the Code, (vii) knows or
has reason to know that any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, shall exist
with respect to any such Plan, (viii) withdraws in a "complete
withdrawal" or a "partial withdrawal" from a "multiemployer plan"
pursuant to subtitle E of Title IV of ERISA or knows or has reason
to know that it will or is likely to incur a material liability in
connection with any reorganization or insolvency of such a Plan, or
(ix) is involved in a situation referred to in Section 4204 of
ERISA, a statement of an officer of the Company setting forth the
details with respect to the events resulting in such notice of
intent to terminate or to appoint a trustee, or with respect to such
termination proceedings, reportable event, other condition,
withdrawal, or other situation, as the case may be, and the action
which the Company or Related Person proposes to take with respect
thereto, together with a copy of any such notice of intent to
terminate or to appoint a trustee, a copy of any notice or other
papers received by the Company or Related Person with respect to
such termination proceedings, a copy of any notice of any such
reportable event or other condition filed by the Company or a
Related Person with PBGC, a copy of any notice received by the
Company or a Related Person pursuant to Section 4219 of ERISA, or a
copy of the papers pertaining to the situation described in Section
4204 of ERISA, as the case may be.
(f) Miscellaneous Information
From time to time upon request, when the Payee is not the holder of
the Note, such nonproprietary or nonconfidential information
regarding the business, affairs and condition of the Company and of
any Material Subsidiary and its properties in such detail as may
reasonably be requested. The Company covenants and agrees that any
authorized officer or representative of the holder of this Note
shall have the right, at such holder's expense and subject to
applicable governmental
7
<PAGE>
Appendix A
regulations, to visit and inspect any of the properties of the
Company and of any Material Subsidiary, to examine its books of
account and to discuss its affairs, finances and accounts with, and
be advised as to the same by, its officers or its independent
certified public accountants all at such reasonable times and
intervals as may be reasonably requested upon not less that five (5)
days' notice.
(g) The Note holder agrees to keep strictly confidential the information
described above in Subparagraph 2.8(f) and to not disclose the same
to any other Person or entity.
2.9 Taxes, etc.
The Company will pay or cause to be paid all United States stamp taxes
(including interest and penalties), if any, solely attributable to the
execution and delivery of this Note, or of any amendment of, or waiver or
consent under or with respect to, this Note, and will indemnify and save
the holder hereof harmless from any loss or damage of any kind whatsoever
resulting from or arising out of the non-payment or delay in the payment
of such taxes.
2.10 Transactions with Affiliates
The Company will not permit any of its Material Subsidiaries to, sell or
transfer any assets (including capital stock of any Subsidiary) to, or
purchase or acquire any assets of, or otherwise engage in any material
transaction (including any merger) with, or permit any Affiliate to sell
or transfer assets (including capital stock of any Subsidiary) to, or
purchase or acquire any assets of, or otherwise engage in any other
material transaction (including any merger) with, any other Affiliate
except for (i) transactions expressly permitted by the Agreement, (ii)
transactions (a) between the Company and one or more Wholly-Owned
Subsidiaries of the Company, provided that in the case of any
consolidation or merger in which the Company is not the surviving
corporation, such transaction shall be permitted pursuant to Subparagraph
2.7 hereof or (b) between Wholly-Owned Subsidiaries of the Company, (iii)
transactions in the ordinary course of business and upon fair and
reasonable terms no less favorable than the Company or any of its
Subsidiaries could obtain or could become entitled to in an arm's-length
transaction with a Person which was not an Affiliate and then, in any
case, only if no default or Event of Default shall have occurred and be
continuing, or (iv) transactions pursuant to a capital investment by an
Affiliate into the Company on fair and reasonable terms. None of the
Company and its Subsidiaries shall be permitted to amend any material
agreement with an Affiliate if a default or Event of Default has occurred
and is continuing.
8
<PAGE>
Appendix A
2.11 Certain Definitions
For purposes of this Note,
(a) "Affiliate" means with respect to any person or entity, any other
person or entity directly or indirectly controlling, controlled by
or under common control with such person or entity.
(b) "Agreement" means the Airbus A320 Purchase Agreement, dated as of
March 17, 1995, between AVSA, S.A.R.L. and the Company.
(c) "Business Day" means any day which is not a Saturday or a Sunday and
which is neither a legal holiday nor a day on which banking
institutions are authorized or required by law or regulation to
close in The City of New York, London, England or Toulouse, France.
(d) "Consolidated" means, as applied to any financial or accounting term
or amount, such term or amount determined on a consolidated basis in
accordance with generally accepted accounting principles;
(e) "Governmental Authority" means any nation or government, any state
or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government;
(f) "Letter Agreement" means the Financial Matters Letter Agreement,
dated March 17, 1995.
(g) "Material Subsidiary" of any Person means, at any time of
determination, each Subsidiary (or a group of Subsidiaries that
would constitute a Material Subsidiary if consolidated and which are
engaged in the same or related lines of business) of such Person now
existing or hereafter acquired or formed by such Person which (x)
accounted for more than 10% of the Consolidated revenues of such
Person and its Subsidiaries during the twelve-month period ending on
the date of the most recent Consolidated balance sheet of such
Person delivered to the holder of this Note pursuant to Subparagraph
2.8, or (y) was the owner of more than 10% of the Consolidated
assets of such Person and its Subsidiaries at the date of the most
recent Consolidated balance sheet of such Person delivered to the
holders of this Note pursuant to Subparagraph 2.8;
(h) "Person" means any natural person, corporation, partnership, joint
venture, joint-stock company, trust, unincorporated organization,
firm, association, government
9
<PAGE>
Appendix A
(or political subdivision thereof), governmental agency, authority
or instrumentality, or any other entity, whether acting in an
individual, fiduciary or other capacity;
(i) "Promissory Note Security Agreement" means the Promissory Note
Security Agreement, dated as of December 21, 1995.
(j) "Related Person" means any corporation or any trade or business
(whether or not incorporated) which, together with the Company, is a
member of a controlled group of corporations within the meaning of
Section 163 (a) of the Code, determined without regard to Section
163(a)(4) and (e)(3)(C) of the Code, or is under common control
with the Company as described in Section 414(c) of the Code;
(k) "Requirement of Law" means as to any Person, the certificate of
incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
any of its property or to which such Person or any of its property
is subject;
(l) "Subsidiary" of any Person means any corporation or other entity of
which such Person, directly or indirectly, shall at the time (a) own
shares of any class or classes with power for the election of at
least a majority of the members of the board of directors (or the
governing body) of such corporation or other entity other than
shares or other interest having such power only by reason of the
happening of a contingency or (b) otherwise have the legal right to
elect such a majority; and
(m) "Wholly-Owned Subsidiary" means, with respect to any Person, any
Subsidiary of such Person all of the outstanding shares of capital
stock of which (other than directors' qualifying shares) are owned
directly by such Person or a Wholly-Owned Subsidiary of such Person.
3. AMENDMENT AND WAIVER
Any term, covenant, agreement or condition of this Note may, with the
consent of the Company, be amended or compliance therewith may be waived
(either generally or in a particular instance and either retroactively or
prospectively), by one or more written instrument(s) signed by the holder
of this Note.
10
<PAGE>
Appendix A
4. YIELD PROTECTION AND ILLEGALITY
4.1 Illegality
In the event that it becomes unlawful for the holder of this Note to
maintain the loan evidenced hereby on a LIBOR basis, then the holder shall
promptly notify the Company thereof.
4.2 Compensation
The Company shall pay to the holder of this Note, upon the request of the
holder, such amount or amounts as shall be sufficient (in the opinion of
the holder) to compensate it for any actual out-of-pocket loss, cost or
expense incurred by it as a result of any payment or prepayment of this
Note on a date other than the Payment Date, or any failure by the Company
to prepay this Note on the date for such prepayment specified herein.
5. DEFAULTS AND REMEDIES
5.1 Events of Default
This Note shall become and be due and payable upon demand of the holder
hereof, without presentation, protest, or further demand or notice of any
kind (all of which are hereby expressly waived by the Company), if any one
or more of the following events (herein called "Events of Default") shall
occur for any reason whatsoever (and whether such occurrence 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 be continuing at the time of such demand:
(a) if default shall be made in the due and punctual payment of the
principal of this Note or of any Other Note when and as the same
shall become due and payable, whether at maturity or at a date fixed
for prepayment or by acceleration or otherwise;
(b) if default shall be made in the due and punctual payment of any
installment of interest on any Other Note, when and as such interest
installment shall become due and payable, and such default shall
have continued for a period of five (5) days;
(c) if default shall be made in the performance or observance of any
other of the covenants, agreements or conditions contained in this
Note, the Promissory Note Security Agreement or the Letter
Agreement, and such default shall have
11
<PAGE>
Appendix A
continued for a period of thirty (30) days after written notice
thereof to the Company by the holder of this Note;
(d) if an event or condition occurs or exists, with respect to any Plan
or otherwise, concerning which the Company is under an obligation to
furnish a report to the holder hereof in accordance with
Subparagraph 2.8(e) hereof and as a result of such event or
condition, together with all other such events or conditions, the
Company or any Related Person has incurred or in the reasonable
opinion of the holder hereof is likely to incur a liability to a
Plan or the PBGC (or any combination of the foregoing) which is
material in relation to the financial position of the Company;
(e) if:
(1) the Company or any other party shall commence any case,
proceeding or other action with respect to the Company in any
jurisdiction relating to bankruptcy, insolvency,
reorganization, relief from debtors, an arrangement,
winding-up, liquidation, dissolution or other relief with
respect to its debts and such case, proceeding or other action
remains unstayed, undismissed or undischarged for sixty (60)
days;
(2) an action is commenced seeking the appointment of a receiver,
trustee, custodian or other similar official for the Company
for all or substantially all of its assets, or the Company
makes a general assignment for the benefit of its creditors;
(3) an action is commenced against the Company seeking issuance of
a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets;
(4) the Company becomes insolvent or fails generally to pay its
debts as they become due; or
(5) there is a liquidation, winding up or analogous event with
respect to the Company.
5.2 In addition to the provisions of Subparagraph 5.1(a) through (d), only if
AVSA or an Affiliate of AVSA is the holder of this Note, the occurrence of
any Insecurity Event or Termination Event under Clause 21 of the Agreement
shall also constitute Events of Default for the purpose of this Amendment
to the Agreement.
12
<PAGE>
Appendix A
5.3 Costs and Expenses
The Company covenants that if default be made in any payment of principal
on this Note, it will pay to the holder hereof, to the extent permitted
under applicable law, such further amount (in addition to any amounts due
under the Notes) as shall be sufficient to cover the cost and expense of
collection, including reasonable compensation to the attorneys and counsel
of the holder hereof for all services rendered in that connection.
6. COVENANTS BIND SUCCESSORS AND ASSIGNS
All the covenants, stipulations, promises and agreements in this Note
contained by or on behalf of the Company shall bind its successors and
assigns, whether so expressed or not.
7. GOVERNING LAW
THIS NOTE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS WHICH ARE EXECUTED AND FULLY TO BE PERFORMED IN
THAT STATE. The Company hereby irrevocably and unconditionally submits to
the jurisdiction of the federal and state courts in New York, New York in
respect of any action or proceeding arising out of or in connection with
this Note. Final judgement against the Company in any such action or
proceeding shall be conclusive, and may be enforced in other jurisdictions
by suit on the judgment, a certified or true copy of which shall be
conclusive evidence of the fact and of the amount of indebtedness or
liability of the Company therein described; provided, however, that at all
times the holder of this Note may at its option bring suit, or institute
other judicial proceedings against the Company, in any court in any place
where the Company or any of its assets may be found.
8. HEADINGS
The headings of the Paragraphs and Subparagraphs of this Note are inserted
for convenience only and do not constitute a part of this Note.
9. LOST, ETC. NOTES
Upon receipt by the Company of evidence satisfactory to it of the loss,
theft, destruction or mutilation of this Note, and (in case of loss, theft
or destruction) or indemnity satisfactory to it, and upon surrender and
cancellation of this Note, if mutilated, the Company, at its expense, will
make and deliver a new Note of like tenor in lieu of this Note. Any Note
made and delivered in accordance with the provisions of this Subparagraph
9 shall be dated as of the date which such new Note is made and delivered.
13
<PAGE>
Appendix A
The unsecured indemnity agreement of the holder of this Note shall
constitute indemnity satisfactory to the Company for the purposes of this
Subparagraph 9.
10. MISCELLANEOUS
(a) In the event any day for payment of an amount hereunder is not a
Business Day, such payment shall be due and payable on the
immediately preceding Business Day.
(b) All amounts payable under this Note shall be payable without
presentment or demand for payment, protest or further notice or
demand of any kind, all of which are expressly waived by the
Company, except to the extent expressly provided in this Note.
IN WITNESS WHEREOF, MIDWAY AIRLINES CORPORATION has caused this Note to be
signed in its corporate name by its officer thereunto duly authorized, and to be
dated as of the day and year first above written.
MIDWAY AIRLINES CORPORATION
By: ____________________________
Its: President
14
<PAGE>
Amendment No. 2
TO THE A320 PURCHASE AGREEMENT
dated as of March 17, 1995
between
AVSA, S.A.R.L.,
and
MIDWAY AIRLINES CORPORATION
This Amendment No. 2 (hereinafter referred to as the "Amendment") entered into
as of January 31, 1996, by and between AVSA, S.A.R.L., a societe a
responsabilite limitee organized and existing under the laws of the Republic of
France, having its registered office located at 2, Rond Point Maurice Bellonte,
31700 Blagnac, FRANCE (hereinafter referred to as the "Seller"), and MIDWAY
AIRLINES CORPORATION, a body corporate, organized and existing under the laws of
the State of Delaware, United States of America, having its principal corporate
offices located at 300 West Morgan Street, Suite 1200, Durham, NC 27701
(hereinafter referred to as the "Buyer").
WITNESSETH:
WHEREAS, the Buyer and the Seller entered into a Purchase Agreement, dated
as of March 17, 1995, relating to the sale by the Seller and the purchase by the
Buyer of certain Airbus Industrie A320-200 model aircraft (the "Aircraft"),
which, as previously amended by Amendment No. 1 dated as of December 21, 1995,
and supplemented with all Exhibits, Appendixes and Letter Agreements attached
thereto, is hereinafter called the "Agreement";
WHEREAS, the Seller and the Buyer agree to amend the Agreement,
specifically Amendment No. 1 thereto, as set out below in this Amendment; and
WHEREAS, capitalized terms used herein and not otherwise defined in this
Amendment will have the meanings assigned to them in the Agreement, and the
terms "herein," "hereof," and hereunder and words of similar import refer to
this Amendment.
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS HEREINAFTER SET
FORTH, IT IS AGREED AS FOLLOWS:
1. Subparagraph I.2(b) of Amendment No. 1 is deleted in its entirety and
replaced as follows:
<PAGE>
QUOTE (b) The Buyer will provide the Seller with satisfactory written
substantiation by February 15, 1996, of its having requested
and obtained from its other principal creditors (including,
but not limited to, American Airlines, Inc., and Fokker
Aircraft U.S.A., Inc.) payment deferrals generally similar in
scope as the deferral described in this Amendment.
UNQUOTE
2. The first three lines of Subparagraph 1.2(c) of Amendment No. 1 are
deleted in their entirety and replaced as follows:
QUOTE (c) The December 1995 Note will become immediately due and
payable on February 16, 1996, in the event that any of the
following conditions have not been met by February 15, 1996:
UNQUOTE
3. CONFIDENTIALITY
Subject to any legal or governmental requirements of disclosure, the
parties (which for this purpose shall include their employees, agents and
advisors) shall maintain the terms and conditions of this Amendment and
any reports or other data furnished hereunder strictly confidential.
Without limiting the generality of the foregoing, the Buyer and the Seller
shall use their best efforts to limit the disclosure of the contents of
this Amendment to the extent legally permissible in any filing required to
be made by the Buyer or the Seller, as the case may be, with any
governmental agency and shall make such applications as shall be necessary
to implement the foregoing. With respect to any public disclosure or
filing, each party agrees to submit to the other party a copy of the
proposed document to be filed or disclosed and will give the other party a
reasonable period of time in which to review the said document. The Buyer
and Seller shall consult with each other prior to the making of any public
disclosure or filing, permitted hereunder, of this Amendment or the terms
and conditions thereof. The provisions of this Paragraph 3 shall survive
any termination of this Amendment.
4. EFFECT OF AMENDMENT
The Agreement will be deemed amended to the extent herein provided, and,
except as specifically amended hereby, will continue in full force and
effect in accordance with its original terms, except that if the Agreement
and this Amendment have specific provisions that are inconsistent, the
specific provisions contained in this Amendment will govern.
5. INTERPRETATION AND LAW
THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND THE PERFORMANCE
THEREOF SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.
THE PARTIES HEREBY ALSO AGREE THAT THE UNITED NATIONS CONVENTION ON THE
INTERNATIONAL SALE OF GOODS SHALL NOT APPLY TO THIS TRANSACTION.
2
<PAGE>
If the foregoing correctly sets forth our understanding, please execute
this Amendment in the space provided below, whereupon, as of the date first
above written, this Amendment will Constitute part of the Agreement.
Agreed and accepted Yours sincerely,
MIDWAY AIRLINES AVSA, S.A.R.L.
CORPORATION
/s/ Christophe Mourey
By: J S Waller By: Christophe Mourey
Its: __________________________ Its: Chief Executive Officer
JONATHAN S. WALLER
SENIOR VICE PRESIDENT
GENERAL COUNSEL
By: _________________
Its: ________________
3
<PAGE>
Amendment No. 3
TO THE A320 PURCHASE AGREEMENT
dated as of March 17, 1995
between
AVSA, S.A.R.L.,
and
MIDWAY AIRLINES CORPORATION
This Amendment No. 3 (hereinafter referred to as the "Amendment") entered into
as of February 28, 1996, by and between AVSA, S.A.R.L., a societe a
responsabilite limitee organized and existing under the laws of the Republic of
France, having its registered office located at 2, Rond Point Maurice Bellonte,
31700 Blagnac, FRANCE (hereinafter referred to as the "Seller"), and MIDWAY
AIRLINES CORPORATION, a body corporate, organized and existing under the laws of
the State of Delaware, United States of America, having its principal corporate
offices located at 300 West Morgan Street, Suite 1200, Durham, NC 27701
(hereinafter referred to as the "Buyer").
WITNESSETH:
WHEREAS, the Buyer and the Seller entered into a Purchase Agreement, dated
as of March 17, 1995, relating to the sale by the Seller and the purchase by the
Buyer of certain Airbus Industrie A320-200 model aircraft (the "Aircraft"),
which, as previously amended by Amendment No. 1 dated as of December 21, 1995,
and Amendment No. 2 dated as of January 31, 1996, and supplemented with all
Exhibits, Appendixes and Letter Agreements attached thereto, is hereinafter
called the "Agreement";
WHEREAS, the Seller and the Buyer agree to amend the Agreement,
specifically Amendment No. 1 and Amendment No. 2 thereto, as set out below in
this Amendment; and
WHEREAS, capitalized terms used herein and not otherwise defined in this
Amendment will have the meanings assigned to them in the Agreement, and the
terms "herein," "hereof," and hereunder and words of similar import refer to
this Amendment.
<PAGE>
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS HEREINAFTER SET
FORTH, IT IS AGREED AS FOLLOWS:
1. Subparagraph I.2(b) of Amendment No. 1, as amended by Amendment No. 2, is
deleted in its entirety and replaced as follows:
QUOTE (b) The Buyer will provide the Seller with satisfactory
written substantiation by February 29, 1996, of its
having requested and obtained from its other principal
creditors (including, but not limited to, American
Airlines, Inc., and Fokker Aircraft U.S.A., Inc.)
payment deferrals generally similar in scope as the
deferral described in this Amendment. UNQUOTE
2. The first three lines of Subparagraph 1.2(c) of Amendment No. 1, as
amended by Amendment No. 2, are deleted in their entirety and replaced as
follows:
QUOTE (c) The December 1995 Note will become immediately due and
payable on March 1, 1996, in the event that any of the
following conditions have not been met by
February 29, 1996: UNQUOTE
3. CONFIDENTIALITY
Subject to any legal or governmental requirements of disclosure, the
parties (which for this purpose shall include their employees, agents and
advisors) shall maintain the terms and conditions of this Amendment and
any reports or other data furnished hereunder strictly confidential.
Without limiting the generality of the foregoing, the Buyer and the Seller
shall use their best efforts to limit the disclosure of the contents of
this Amendment to the extent legally permissible in any filing required to
be made by the Buyer or the Seller, as the case may be, with any
governmental agency and shall make such applications as shall be necessary
to implement the foregoing. With respect to any public disclosure or
filing, each party agrees to submit to the other party a copy of the
proposed document to be filed or disclosed and will give the other party a
reasonable period of time in which to review the said document. The Buyer
and Seller shall consult with each other prior to the making of any public
disclosure or filing, permitted hereunder, of this Amendment or the terms
and conditions thereof. The provisions of this Paragraph 3 shall survive
any termination of this Amendment.
2
<PAGE>
4. EFFECT OF AMENDMENT
The Agreement will be deemed amended to the extent herein provided, and,
except as specifically amended hereby, will continue in full force and
effect in accordance with its original terms, except that if the Agreement
and this Amendment have specific provisions that are inconsistent, the
specific provisions contained in this Amendment will govern.
5. INTERPRETATION AND LAW
THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND THE PERFORMANCE
THEREOF SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.
THE PARTIES HEREBY ALSO AGREE THAT THE UNITED NATIONS CONVENTION ON THE
INTERNATIONAL SALE OF GOODS SHALL NOT APPLY TO THIS TRANSACTION.
If the foregoing correctly sets forth our understanding, please execute
this Amendment in the space provided below, whereupon, as of the date first
above written, this Amendment will constitute part of the Agreement.
Agreed and accepted Yours sincerely,
MIDWAY AIRLINES AVSA, S.A.R.L.
CORPORATION
By: /s/ J S Waller By: [Illegible]
Its: JONATHAN S. WALLER Its: ______________
SENIOR VICE PRESIDENT
GENERAL COUNSEL
3
<PAGE>
[Letterhead of AIRBUS INDUSTRIE OF NORTH AMERICA, INC.]
February 27, 1996
VIA FEDERAL EXPRESS
Mr. Jonathan S. Waller
Senior Vice President and
General Counsel
Midway Airlines Corporation
300 W. Morgan Street
Suite 1200
Durham, NC 27701
Dear Jon,
Please find enclosed herewith two (2) originals of Amendment No.3 to the
A320 Purchase Agreement dated as of March 17, 1995, between AVSA, S.A.R.L. and
Midway Airlines Corporation. This Amendment extends the due date for completion
of payment deferral programs until February 29, 1996. I would be grateful if you
could arrange for both originals to be signed on behalf of Midway and return one
original to my attention.
Thank you for your cooperation in this matter.
Yours sincerely,
/s/ Shelli L. Grayson
Shelli L. Grayson
Enclosures
cc: C. Sabardine, AINA/C
E. S. Yousoufian, AINA/C
S. Lebeuf, AVSA
<PAGE>
Amendment No. 4
TO THE A320 PURCHASE AGREEMENT
dated as of March 17, 1995
between
AVSA, S.A.R.L.,
and
MIDWAY AIRLINES CORPORATION
This Amendment No. 4 (hereinafter referred to as the "Amendment") entered into
as of March 27, 1996, by and between AVSA, S.A.R.L., a societe a responsabilite
limitee organized and existing under the laws of the Republic of France, having
its registered office located at 2, rond-point Maurice Bellonte, 31700 Blagnac,
FRANCE (hereinafter referred to as the "Seller"), and MIDWAY AIRLINES
CORPORATION, a body corporate, organized and existing under the laws of the
State of Delaware, United States of America, having its principal corporate
offices located at 300 West Morgan Street, Suite 1200, Durham, NC 27701
(hereinafter referred to as the "Buyer").
WITNESSETH:
WHEREAS, the Buyer and the Seller entered into (i) a Purchase Agreement,
dated as of March 17, 1995, relating to the sale by the Seller and the purchase
by the Buyer of certain Airbus Industrie A320-200 model aircraft (the
"Aircraft"), which, as previously amended by Amendment No. 1 dated as of
December 21, 1995, Amendment No. 2 dated as of January 31, 1996, and Amendment
No. 3 dated as of February 28, 1996, and supplemented with all Exhibits,
Appendixes and Letter Agreements attached thereto, is hereinafter called the
"Agreement," (ii) a related letter agreement regarding "Financial Matters,"
which, as previously amended by Amendment No. 1 dated as of December 21, 1995,
is hereinafter called the "Financial Matters Agreement," (iii) a related
Security Agreement, dated as of March 17,1995, hereinafter referred to as the
"Security Agreement," and (iv) a Promissory Note Security Agreement, dated as of
December 21,1995; and
WHEREAS, the Buyer has asked the Seller and the Seller agrees to
reschedule the maturity date of the December 1995 Note (made pursuant to
Amendment No. 1 of the Agreement), under the conditions set forth in this
Amendment;
<PAGE>
WHEREAS, the Buyer has asked the Seller and the Seller agrees to
reschedule additional Predelivery Payments due under the Agreement on June 30,
1996, under the conditions set forth in this Amendment; and
WHEREAS, capitalized terms used herein and not otherwise defined in this
Amendment will have the meanings assigned to them in the Agreement, and the
terms "herein," "hereof," and hereunder and words of similar import refer to
this Amendment.
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS HEREINAFTER SET
FORTH, IT IS AGREED AS FOLLOWS:
1. DECEMBER 1995 PREDELIVERY PAYMENTS
1.1 Pursuant to Paragraph 1 of Amendment No. 1 of the Agreement, the Buyer
issued to the Seller the December 1995 Note, which matures on April 30,
1996. The Seller hereby agrees, at the Buyer's request, to extend such
maturity date to October 1, 1996.
1.2 In consideration of the agreement above in Subparagraph 1.1, on execution
of this Amendment, the Seller will cancel and return the December 1995
Note to the Buyer, and the Buyer will issue to the Seller a new promissory
note (the "Replacement December 1995 Note"). The Replacement December 1995
Note will (i) be a secured, negotiable note for the same principal amount
as the December 1995 Note [***], (ii) be dated as of December 21, 1995,
(iii) mature and be payable to the Seller in cash on October 1, 1996, and
(iv) be made in the form attached hereto as Appendix A.
1.3 All other terms and conditions applicable to "Notes" under Letter
Agreement No. 4 of the Agreement will also apply to the Replacement
December 1995 Note, except that the Replacement December 1995 Note will
not bear interest. The Replacement December 1995 Note will be
collateralized in the manner set forth in an amendment to the Promissory
Note Security Agreement dated as of the date hereof.
2. JUNE 1996 PREDELIVERY PAYMENTS
2.1 As set forth in Subclause 6.2.2 of the Agreement, the fourth Predelivery
Payment is due no later than June 30, 1996, in respect of each of the Firm
Aircraft, and, as set forth in Subclause 6.2.3 of the Agreement, the third
Predelivery Payment is due no later than June 30, 1996, in respect of each
of the Option Aircraft (the "June 1996 Payments"). The total amount of
the June 1996 Payments is [***]. In answer to the Buyer's request, the
Seller hereby agrees to the Buyer's making the June 1996 Payment by way of
a promissory note made and dated as of the date hereof, and maturing on
October 1, 1996.
2.2 In consideration of the Seller's agreement set forth above in this
Subparagraph 2.1, the Buyer will issue the Seller a note for the total
amount of the June 1996 Payments (the
2
<PAGE>
"Rescheduled Payments Note"). The Rescheduled Payments Note will (i) be
secured and negotiable, (ii) be dated as of the date hereof, (iii) mature
and be payable in cash on October 1, 1996, and (iv) be made in the form
attached hereto as Appendix B.
2.3 All other terms and conditions applicable to "Notes" under Letter
Agreement No. 4 to the Agreement will also apply to the Rescheduled
Payments Note, except that the Rescheduled Payments Note will not bear
interest. The Rescheduled Payments Note will be collateralized in the
manner set forth in an amendment to the Promissory Note Security Agreement
dated as of the date hereof.
3. FURTHER AGREEMENT
3.1 Subparagraph 1.2(b) of Amendment No. 1, as amended by Amendment No. 2
and as further amended by Amendment No. 3 of the Agreement, is deleted
in its entirety and replaced as follows:
QUOTE
(b) The Buyer will provide the Seller with satisfactory written
substantiation by April 15, 1996, of its having requested and
obtained from its other principal creditors (including, but not
limited to, American Airlines, Inc., and Fokker Aircraft U.S.A.,
Inc.) payment deferrals generally similar in scope as the deferral
described in this Amendment.
UNQUOTE
3.2 The first three lines of Subparagraph 1.2(c) of Amendment No. 1, as
amended by Amendment No. 2 and as further amended by Amendment No. 3 of
the Agreement, and Subparagraphs 1.2(c)(x) and 1.2(c)(y) of Amendment No.
1 of the Agreement are deleted in their entirety and replaced as follows:
QUOTE
(c) The Replacement December 1995 Note will become immediately due and
payable on April 16,1996, in the event that any of the following
conditions have not been met by April 15, 1996:
(x) The Seller or its designee has completed a satisfactory
physical inspection of the collateral delivered under an
amendment to each of the Promissory Note Security Agreement
and the Security Agreement dated as of the date of Amendment
No. 4 to the Agreement.
3
<PAGE>
(y) The Seller has obtained a perfected first priority security
interest in all the collateral described in an amendment to
each of the Promissory Note Security Agreement and the
Security Agreement dated as of the date of Amendment No. 4 to
the Agreement.
UNQUOTE
3.3 In the event that the conditions of Subparagraphs 1.2(c)(x) through
1.2(c)(z) of Amendment No. 1 of the Agreement, as amended by this
Amendment, are not met by April 15, 1996, then the Seller will immediately
cancel and return to the Buyer the Rescheduled Payments Note, and the June
1996 Payments will become due and payable as originally scheduled under
Subclause 6.2.2 of the Agreement.
4. CONFIDENTIALITY
Subject to any legal or governmental requirements of disclosure, the
parties (which for this purpose shall include their employees, agents and
advisors) shall maintain the terms and conditions of this Amendment and
any reports or other data furnished hereunder strictly confidential
Without limiting the generality of the foregoing, the Buyer and the Seller
shall use their best efforts to limit the disclosure of the contents of
this Agreement to the extent legally permissible in any filing required to
be made by the Buyer or the Seller, as the case may be, with any
governmental agency and shall make such applications as shall be necessary
to implement the foregoing. With respect to any public disclosure or
filing, each party agrees to submit to the other party a copy of the
proposed document to be filed or disclosed and will give the other party a
reasonable period of time in which to review the said document. The Buyer
and Seller shall consult with each other prior to the making of any public
disclosure or filing, permitted hereunder, of this Amendment or the terms
and conditions thereof The provisions of this Paragraph 4 shall survive
any termination of this Agreement.
5. EFFECT OF AMENDMENT
The Agreement will be deemed amended to the extent herein provided, and,
except as specifically amended hereby, will continue in full force and
effect in accordance with its original terms, except that if the Agreement
and this Amendment have specific provisions that are inconsistent, the
specific provisions contained in this Amendment will govern. It is
understood that this Amendment does not in any way constitute a waiver by
the Seller of any rights it has under the Agreement or under the Financial
Matters Agreement, provided, however, that the Seller agrees to waive
until October 1, 1996, its rights with respect to Insecurity Events
described in Subparagraph 21.2(a) and 21.2(b) of the Agreement.
4
<PAGE>
Further, it is agreed that this Amendment is subject to the parties'
executing as of the date hereof an amendment to each of the Financial
Matters Agreement, the Security Agreement and the Promissory Note
Security Agreement.
6. INTERPRETATION AND LAW
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND THE PERFORMANCE
THEREOF SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.
THE PARTIES HEREBY ALSO AGREE THAT THE UNITED NATIONS CONVENTION ON THE
INTERNATIONAL SALE OF GOODS SHALL NOT APPLY TO THIS TRANSACTION.
If the foregoing correctly sets forth our understanding, please execute
this Amendment in the space provided below, whereupon, as of the date first
above written, this Amendment will constitute part of the Agreement.
Agreed and accepted Yours sincerely,
MIDWAY AIRLINES AVSA, S.A.R.L.
CORPORATION
By: /s/ Jonathan S. Waller By: /s/ Christophe Mourey
- -------------------------------- ------------------------------------
Its: Senior Vice President Its: AVSA Chief Executive Officer
General Counsel
By: /s/ [ILLEGIBLE]
- --------------------------------
Its: President
5
<PAGE>
Appendix A
MIDWAY AIRLINES CORPORATION
Secured Registered Promissory Note
R. New York, New York
[***] December 21, 1995
MIDWAY AIRLINES CORPORATION, a corporation duly organized and existing
under the laws of the State of Delaware, USA (the "Company"), for value
received, hereby promises to pay to the order of AVSA, S.A.R.L. ("AVSA") or
registered assigns on October 1, 1996, (the "Payment Date"), the principal
amount of [***] in such coin or currency of the United States of America as at
the time of payment shall be legal tender for public and private debts, at the
office of AVSA at 2, rond-point Maurice Bellonte, 31700 Blagnac, France (or at
such other office as the holder hereof shall designate to the Company in
writing).
1. PAYMENT DATE; EXCHANGES; PREPAYMENTS
1.1 Transfer or Exchange
This Note is transferable by the holder hereof as herein provided. The
Company shall keep at its office or agency, maintained as provided in
Subparagraph 2.2, a register in which the Company shall provide for the
registration of this Note and for the registration of transfer of this
Note. The holder of this Note may, at its option and either in person or
by duly authorized attorney, surrender the same for registration of
transfer and receive in exchange herefor a Note, dated as of the transfer
of this Note, for the same aggregate unpaid principal amount as this Note
and registered in such name or names as may be designated by the holder
hereof. This Note, when presented or surrendered for registration of
transfer, shall be duly endorsed or shall be accompanied by a written
instrument of transfer duly executed by the holder of this Note or his
attorney duly authorized in writing. The Note so made and delivered in
exchange for this Note shall in all other respects be in the same form and
have the same terms as this Note and each such exchange or transfer shall
be made in such a manner that no gain or loss of principal shall result
therefrom. No transfer or exchange of this Note shall be valid unless made
in such manner at such office. The Company agrees that it will pay
shipping and insurance charges from and to the principal office of the
holder of this Note involved in any exchange by the holder of this Note.
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Appendix A
1.2 Registered Holders; Payments
Prior to due presentment for registration of transfer of this Note, the
Company may deem and treat the registered holder hereof as the absolute
owner hereof for the purpose of receiving payment of or on account of the
principal of this Note and for the purposes of any notices, waivers or
consents thereunder, and payments of any Note shall be made only to or
upon the order in writing of the registered holder hereof. All payments
made hereunder shall be made in immediately available funds in United
States Dollars prior to 1:00 P.M., New York City time, by credit to Credit
Lyonnais, New York Branch, or to such other account as the holder hereof
shall advise the Company in writing. All payments due under this Note
shall be made in full without set-off, counterclaim, recoupment, or
defense and without deduction or withholding of any kind, provided,
however, the same shall not be deemed a waiver of any rights or remedies
of the Company against the Seller or any of its Affiliates. Consequently,
the Company shall assure that the sums received by the holder of this Note
hereunder shall be equal to the full amounts expressed to be due to the
holder hereunder, without deduction or withholding on account of and free
from any and all taxes, levies, imposts, dues or charges of whatever
nature imposed on the Company, except that if the Company is compelled by
law to make any such deduction or withholding the Company shall pay such
additional amounts as may be necessary in order that the net amount
received by the holder after such deduction or withholding shall equal the
amounts which would have been received in the absence of such deduction or
withholding.
1.3 Optional Prepayments
Upon notice given as provided in Subparagraph 1.5, the Company, at its
option, may prepay this Note, in whole and not in part, at anytime, at one
hundred percent (100%) of the outstanding principal amount thereof,
without premium. This Note shall be paid in whole, at one hundred percent
(100%) of the outstanding principal amount hereof, on the Payment Date.
1.4 Notice of Prepayment and Other Notices
The Company shall give written notice of optional prepayment of this Note
pursuant to Subparagraph 1.3 one (1) Business Day prior to the Payment
Date. Any notice of prepayment and all other notices to be given to any
holder of this Note shall be given by registered or certified mail to the
registered holder hereof at its address designated on the register
maintained by the Company on the date fixed for such notice of prepayment
or other notice. Upon notice of any optional prepayment pursuant to
Subparagraph 1.3, the Company covenants and agrees that it will prepay on
the date therein fixed for prepayment the entire outstanding principal
amount of this Note. The principal amount of this Note shall be due and
payable on the date specified in such notice.
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2. COVENANTS
The Company covenants and agrees that so long as this Note shall be
outstanding:
2.1 To Pay Principal
The Company will punctually pay or cause to be paid the principal of this
Note according to the terms hereof at the place of payment hereinabove
specified.
2.2 Maintenance of Company Office
The Company will maintain an office or agency at 300 West Morgan Street,
Suite 1200, Durham, North Carolina 27701, USA or such other place in the
United States of America as the Company may designate in writing to the
holder hereof where notices, presentations and demands to or upon the
Company in respect of the Notes may be given or made.
2.3 To Keep Books
The Company will, and will cause each of its Material Subsidiaries to keep
proper books of record and account in which proper entries will be made of
its transactions in accordance with generally accepted accounting
principles.
2.4 Payment of Taxes; Corporate Existence; Maintenance of Properties
The Company will, and will cause each of its Material Subsidiaries to,
(a) pay and discharge promptly or cause to be paid and discharged
promptly (i) all taxes, assessments and governmental charges or
levies imposed upon it or upon its income or profits or upon any
of its property, real, personal or mixed, or upon any part
thereof, before the same shall become in default, unless the same
is being contested in good faith, (ii) all lawful claims for
labor, materials and supplies which if unpaid, might by law
become a lien or charge upon its property, unless the same is
being contested in good faith, and (iii) all obligations to the
Pension Benefit Guaranty Corporation (or any successor thereto
under the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) ("PBGC").
(b) do or cause to be done all things necessary to preserve and keep in
full force and effect its existence, materially advantageous rights,
licenses, privileges, permits and franchises and comply in all
material respects with all laws and regulations applicable to it and
its business; and
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Appendix A
(c) maintain and keep, or cause to be maintained and kept, its
properties, including the Collateral as defined in the Promissory
Note Security Agreement, in good repair, working order and condition
and from time to time make or cause to be made all needful and
proper repairs, renewals, replacements and improvements so that the
business carried on in connection therewith may be properly
conducted at all times.
2.5 To Insure
The Company will, and will cause each of its Material Subsidiaries to,
(a) keep adequately insured, by financially sound and reputable
insurers, all property of a character usually insured by similar
corporations engaged in the same or a similar business similarly
situated against loss or damage of the kinds customarily insured
against by such corporations;
(b) carry, with financially sound and reputable insurers, such other
insurance (including, without limitation, liability insurance) and
in such amounts as is usually carried by corporations engaged in the
same or a similar business similarly situated; and
(c) maintain all such worker's compensation or similar insurance as may
be required under the laws of any state or jurisdiction in which it
may be engaged in business.
All insurance herein provided for shall be effected under a valid and
enforceable policy or policies.
2.6 Sale of Assets
The Company will not, and will not permit any unconsolidated subsidiary
to, sell, lease, transfer or otherwise dispose of all or substantially all
of its assets to any Person other than the Company or any Material
Subsidiary.
2.7 Merger or Consolidation
The Company will not, and will not permit any Material Subsidiary to,
consolidate with or merge into any Person or permit any Person to merge
into it except that
(a) a Material Subsidiary may merge into the Company if the Company is
the surviving corporation or may merge or consolidate with any other
Material Subsidiary or any other corporation if a Material
Subsidiary is the surviving corporation; and
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Appendix A
(b) the Company may merge or consolidate with any other Person if (i)
the surviving or successor corporation is a corporation
incorporated or organized under the laws of the United States of
America, one of the states thereof or the District of Columbia,
(ii) the surviving or successor corporation (if not the Company)
shall expressly assume in writing (by an instrument a copy of
which shall be mailed by registered mail to the holder of this
Note) the due and punctual payment of the principal of this Note,
according to its tenor, and the due and punctual performance and
observance of all of the terms, covenants, agreements and
conditions of this Note to be performed or observed by the
Company to the same extent as if such surviving or successor
corporation had originally executed this Note in the place of the
Company, and had been the original maker of this Note, (iii) such
Person is legally able to perform the Company's obligations
hereunder and has a Consolidated net worth, as determined in
accordance with generally accepted accounting principles
consistently applied, not less than the Consolidated net worth of
the Company (similarly determined) at the time of such merger or
consolidation, and (iv) immediately after such consolidation or
merger, no Event of Default or Insecurity Event or event which,
with notice or lapse of time or both, would become an Event of
Default or Insecurity Event, shall have occurred and be
continuing under this Note.
2.8 Information and Reports to be furnished by the Company
The Company will furnish to the holder of this Note:
(a) Reports
(i) Quarterly Reports. Within forty-five (45) days after the end
of each of the first three quarterly fiscal periods in each
fiscal year of the Buyer, a Consolidated balance sheet of the
Buyer and its Consolidated subsidiaries prepared as of the
close of such period, together with the related statements of
income and surplus; and
(ii) Annual Statements. Within ninety (90) days after the end of
each fiscal year of the Buyer, an audited Consolidated balance
sheet of the Buyer and its Consolidated subsidiaries as at the
end of such year (when they become available), and the related
statement of income and surplus.
(iii) Monthly Reports Within twenty (20) days after the end of each
month in each fiscal year of the Buyer, a Consolidated balance
sheet of the Buyer and its Consolidated subsidiaries prepared
as of the close of such month, together with the related
statements of income and surplus, statement of
5
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Appendix A
sources and uses of cash, as well as such other historical
information relating to such period that the Buyer maintains.
Such information will include, but not be limited to, revenue
per available seat mile, cost per available seat mile, segment
profitability information, the number of total passengers, and
load factor and average fare information.
"Consolidated" means, as applied to any financial or accounting term
or amount, such term or amount determined on a consolidated basis in
accordance with generally accepted accounting principles.
(b) Publicly Filed Reports to Stockholders and the SEC
The Company will furnish the Seller with all publicly filed reports
to stockholders or the United States Securities and Exchange
Commission, if any.
(c) Notice of Default
Immediately upon the Company's becoming aware of the existence of
any default in its performance or observance of any covenant,
agreement or condition contained in this Note or in the Promissory
Note Security Agreement, a written notice specifying the nature and
status thereof and what action the Company is taking with respect
thereto.
(d) Notice of Acceleration
Immediately upon the Company's becoming aware that the holder of any
bond, debenture, promissory note (including any note other than this
Note issued by the Company in favor of Payee or issued pursuant to
Amendment No. 1 to the Agreement ("Other Notes")) or any similar
evidence of indebtedness of the Company or any Material Subsidiary
has demanded payment, given notice or taken any other action with
respect to a claimed Event of Default under any Other Note or
claimed default in respect of or under such bond, debenture or
promissory note, a written notice specifying the demand made, notice
given or action taken by such holder and the nature and status of
the claimed Event of Default or default and what action the Company
is taking with respect thereto.
(e) ERISA
As promptly as practicable (but in any event not later than fifteen
(1) days) after the Company or Related Person (i) engages in any
"prohibited transaction" (as defined in Section 406 of ERISA or
section 497 of the Internal Revenue Code of
6
<PAGE>
Appendix A
1986, as amended (the "Code")) with any "employee benefit plan" (as
defined in Section 3 (3) of ERISA ("Plan"))) (ii) files a notice of
intent under Section 4041 of ERISA with the PBGC to terminate any
such Plan, (iii) receives a notice from the PBGC to appoint a
trustee to administer any such Plan, (iv) knows or has reason to
know that termination proceedings with respect to any such Plan have
commenced, (v) knows or has reason to know that any "reportable
event" (within the meaning of Section 4043(b) of ERISA) or other
condition with respect to any such Plan has occurred which will
result in a liability to the PBGC, (vi) fails to make a quarterly
installment contribution to any such Plan with respect to which a
lien may be imposed under section 412(n) of the Code, (vii) knows or
has reason to know that any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, shall exist
with respect to any such Plan, (viii) withdraws in a "complete
withdrawal" or a "partial withdrawal" from a "multiemployer plan"
pursuant to subtitle E of Title IV of ERISA or knows or has reason
to know that it will or is likely to incur a material liability in
connection with any reorganization or insolvency of such a Plan, or
(ix) is involved in a situation referred to in Section 4204 of
ERISA, a statement of an officer of the Company setting forth the
details with respect to the events resulting in such notice of
intent to terminate or to appoint a trustee, or with respect to such
termination proceedings, reportable event, other condition,
withdrawal, or other situation, as the case may be, and the action
which the Company or Related Person proposes to take with respect
thereto, together with a copy of any such notice of intent to
terminate or to appoint a trustee, a copy of any notice or other
papers received by the Company or Related Person with respect to
such termination proceedings, a copy of any notice of any such
reportable event or other condition filed by the Company or a
Related Person with PBGC, a copy of any notice received by the
Company or a Related Person pursuant to Section 4219 of ERISA, or a
copy of the papers pertaining to the situation described in Section
4204 of ERISA, as the case may be.
(f) Miscellaneous Information
From time to time upon request, when the Payee is not the holder of
the Note, such nonproprietary or nonconfidential information
regarding the business, affairs and condition of the Company and of
any Material Subsidiary and its properties in such detail as may
reasonably be requested. The Company covenants and agrees that any
authorized officer or representative of the holder of this Note
shall have the right, at such holder's expense and subject to
applicable governmental regulations, to visit and inspect any of the
properties of the Company and of any Material Subsidiary, to examine
its books of account and to discuss its affairs, finances and
accounts with, and be advised as to the same by, its officers or its
7
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Appendix A
independent certified public accountants all at such reasonable
times and intervals as may be reasonably requested upon not less
that five (5) days' notice.
(g) The Note holder agrees to keep strictly confidential the information
described above in Subparagraph 2.8(f) and to not disclose the same
to any other Person or entity.
2.9 Taxes, etc.
The Company will pay or cause to be paid all United States stamp taxes
(including interest and penalties), if any, solely attributable to the
execution and delivery of this Note, or of any amendment of, or waiver or
consent under or with respect to, this Note, and will indemnify and save
the holder hereof harmless from any loss or damage of any kind whatsoever
resulting from or arising out of the non-payment or delay in the payment
of such taxes.
2.10 Transactions with Affiliates
The Company will not permit any of its Material Subsidiaries to, sell or
transfer any assets (including capital stock of any Subsidiary) to, or
purchase or acquire any assets of; or otherwise engage in any material
transaction (including any merger) with, or permit any Affiliate to sell
or transfer assets (including capital stock of any Subsidiary) to, or
purchase or acquire any assets of, or otherwise engage in any other
material transaction (including any merger) with, any other Affiliate
except for (i) transactions expressly permitted by the Agreement, (ii)
transactions (a) between the Company and one or more Wholly-Owned
Subsidiaries of the Company, provided that in the case of any
consolidation or merger in which the Company is not the surviving
corporation, such transaction shall be permitted pursuant to Subparagraph
2.7 hereof or (b) between Wholly-Owned Subsidiaries of the Company, (iii)
transactions in the ordinary course of business and upon fair and
reasonable terms no less favorable than the Company or any of its
Subsidiaries could obtain or could become entitled to in an arm's-length
transaction with a Person which was not an Affiliate and then, in any
case, only if no default or Event of Default shall have occurred and be
continuing, or (iv) transactions pursuant to a capital investment by an
Affiliate into the Company on fair and reasonable terms. None of the
Company and its Subsidiaries shall be permitted to amend any material
agreement with an Affiliate if a default or Event of Default has occurred
and is continuing.
8
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Appendix A
2.11 Certain Definitions
For purposes of this Note,
(a) "Affiliate" means with respect to any person or entity, any other
person or entity directly or indirectly controlling, controlled by
or under common control with such person or entity.
(b) "Agreement" means the Airbus A320 Purchase Agreement, dated as of
March 17, 1995, between AVSA, S.A.R.L. and the Company.
(c) "Business Day" means any day which is not a Saturday or a Sunday and
which is neither a legal holiday nor a day on which banking
institutions are authorized or required by law or regulation to
close in The City of New York, London, England or Toulouse, France.
(d) "Consolidated" means, as applied to any financial or accounting term
or amount, such term or amount determined on a consolidated basis in
accordance with generally accepted accounting principles;
(e) "Governmental Authority" means any nation or government, any state
or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government;
(f) "Letter Agreement" means the Financial Matters Letter Agreement,
dated March 17, 1995.
(g) "Material Subsidiary" of any Person means, at any time of
determination, each Subsidiary (or a group of Subsidiaries that
would constitute a Material Subsidiary if consolidated and which
are engaged in the same or related lines of business) of such
Person now existing or hereafter acquired or formed by such
Person which (x) accounted for more than l0% of the Consolidated
revenues of such Person and its Subsidiaries during the
twelve-month period ending on the date of the most recent
Consolidated balance sheet of such Person delivered to the holder
of this Note pursuant to Subparagraph 2.8, or (y) was the owner
of more than 10% of the Consolidated assets of such Person and
its Subsidiaries at the date of the most recent Consolidated
balance sheet of such Person delivered to the holders of this
Note pursuant to Subparagraph 2.8;
(h) "Person" means any natural person, corporation, partnership, joint
venture, joint-stock company, trust, unincorporated organization,
firm, association, government
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Appendix A
(or political subdivision thereof), governmental agency, authority
or instrumentality, or any other entity, whether acting in an
individual, fiduciary or other capacity;
(i) "Promissory Note Security Agreement" means the Promissory Note
Security Agreement, dated as of December 21, 1995.
(j) "Related Person" means any corporation or any trade or business
(whether or not incorporated) which, together with the Company, is a
member of a controlled group of corporations within the meaning of
Section 163(a) of the Code, determined without regard to Section
163(a) (4) and (e)(3)(C) of the Code, or is under common control
with the Company as described in Section 414(c) of the Code;
(k) "Requirement of Law" means as to any Person, the certificate of
incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
any of its property or to which such Person or any of its property
is subject;
(l) "Subsidiary" of any Person means any corporation or other entity
of which such Person, directly or indirectly, shall at the time
(a) own shares of any class or classes with power for the
election of at least a majority of the members of the board of
directors (or the governing body) of such corporation or other
entity other than shares or other interest having such power only
by reason of the happening of a contingency or (b) otherwise have
the legal right to elect such a majority; and
(m) "Wholly-Owned Subsidiary" means, with respect to any Person, any
Subsidiary of such Person all of the outstanding shares of capital
stock of which (other than directors' qualifying shares) are owned
directly by such Person or a Wholly-Owned Subsidiary of such Person.
3. AMENDMENT AND WAIVER
Any term, covenant, agreement or condition of this Note may, with the
consent of the Company, be amended or compliance therewith may be waived
(either generally or in a particular instance and either retroactively or
prospectively), by one or more written instrument(s) signed by the holder
of this Note.
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Appendix A
4. YIELD PROTECTION AND ILLEGALITY
4.1 Illegality
In the event that it becomes unlawful for the holder of this Note to
maintain the loan evidenced hereby on a LIBOR basis, then the holder shall
promptly notify the Company thereof.
4.2 Compensation
The Company shall pay to the holder of this Note, upon the request of the
holder, such amount or amounts as shall be sufficient (in the opinion of
the holder) to compensate it for any actual out-of-pocket loss, cost or
expense incurred by it as a result of any payment or prepayment of this
Note on a date other than the Payment Date, or any failure by the Company
to prepay this Note on the date for such prepayment specified herein.
5. DEFAULTS AND REMEDIES
5.1 Events of Default
This Note shall become and be due and payable upon demand of the holder
hereof, without presentation, protest, or further demand or notice of any
kind (all of which are hereby expressly waived by the Company), if any one
or more of the following events (herein called "Events of Default") shall
occur for any reason whatsoever (and whether such occurrence 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 be continuing at the time of such demand:
(a) if default shall be made in the due and punctual payment of the
principal of this Note or of any Other Note when and as the same
shall become due and payable, whether at maturity or at a date fixed
for prepayment or by acceleration or otherwise;
(b) if default shall be made in the due and punctual payment of any
installment of interest on any Other Note, when and as such interest
installment shall become due and payable, and such default shall
have continued for a period of five (5) days;
(c) if default shall be made in the performance or observance of any
other of the covenants, agreements or conditions contained in this
Note, the Promissory Note Security Agreement or the Letter
Agreement, and such default shall have
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Appendix A
continued for a period of thirty (30) days after written notice
thereof to the Company by the holder of this Note;
(d) if an event or condition occurs or exists, with respect to any
Plan or otherwise, concerning which the Company is under an
obligation to furnish a report to the holder hereof in accordance
with Subparagraph 2.8(e) hereof and as a result of such event or
condition, together with all other such events or conditions, the
Company or any Related Person has incurred or in the reasonable
opinion of the holder hereof is likely to incur a liability to a
Plan or the PBGC (or any combination of the foregoing) which is
material in relation to the financial position of the Company;
(e) if:
(1) the Company or any other party shall commence any case,
proceeding or other action with respect to the Company in any
jurisdiction relating to bankruptcy, insolvency,
reorganization, relief from debtors, an arrangement,
winding-up, liquidation, dissolution or other relief with
respect to its debts and such case, proceeding or other action
remains unstayed, undismissed or undischarged for sixty (60)
days;
(2) an action is commenced seeking the appointment of a receiver,
trustee, custodian or other similar official for the Company
for all or substantially all of its assets, or the Company
makes a general assignment for the benefit of its creditors;
(3) an action is commenced against the Company seeking issuance of
a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets;
(4) the Company becomes insolvent or fails generally to pay its
debts as they become due; or
(5) there is a liquidation, winding up or analogous event with
respect to the Company.
5.2 In addition to the provisions of Subparagraph 5.1(a) through (d), only if
AVSA or an Affiliate of AVSA is the holder of this Note, the occurrence of
any Insecurity Event or Termination Event under Clause 21 of the Agreement
shall also constitute Events of Default for the purpose of this Amendment
to the Agreement.
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Appendix A
5.3 Costs and Expenses
The Company covenants that if default be made in any payment of principal
on this Note, it will pay to the holder hereof, to the extent permitted
under applicable law, such further amount (in addition to any amounts due
under the Notes) as shall be sufficient to cover the cost and expense of
collection, including reasonable compensation to the attorneys and counsel
of the holder hereof for all services rendered in that connection.
6. COVENANTS BIND SUCCESSORS AND ASSIGNS
All the covenants, stipulations, promises and agreements in this Note
contained by or on behalf of the Company shall bind its successors and
assigns, whether so expressed or not.
7. GOVERNING LAW
THIS NOTE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS WHICH ARE EXECUTED AND FULLY TO BE PERFORMED IN
THAT STATE. The Company hereby irrevocably and unconditionally submits to
the jurisdiction of the federal and state courts in New York, New York in
respect of any action or proceeding arising out of or in connection with
this Note. Final judgement against the Company in any such action or
proceeding shall be conclusive, and may be enforced in other jurisdictions
by suit on the judgment, a certified or true copy of which shall be
conclusive evidence of the fact and of the amount of indebtedness or
liability of the Company therein described; provided, however, that at all
times the holder of this Note may at its option bring suit, or institute
other judicial proceedings against the Company, in any court in any place
where the Company or any of its assets may be found.
8. HEADINGS
The headings of the Paragraphs and Subparagraphs of this Note are inserted
for convenience only and do not constitute a part of this Note.
9. LOST, ETC. NOTES
Upon receipt by the Company of evidence satisfactory to it of the loss,
theft, destruction or mutilation of this Note, and (in case of loss, theft
or destruction) or indemnity satisfactory to it, and upon surrender and
cancellation of this Note, if mutilated, the Company, at its expense, will
make and deliver a new Note of like tenor in lieu of this Note. Any Note
made and delivered in accordance with the provisions of this Subparagraph
9 shall be dated as of the date which such new Note is made and delivered.
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Appendix A
The unsecured indemnity agreement of the holder of this Note shall
constitute indemnity satisfactory to the Company for the purposes of this
Subparagraph 9.
10. MISCELLANEOUS
(a) In the event any day for payment of an amount hereunder is not a
Business Day, such payment shall be due and payable on the
immediately preceding Business Day.
(b) All amounts payable under this Note shall be payable without
presentment or demand for payment, protest or further notice or
demand of any kind, all of which are expressly waived by the
Company, except to the extent expressly provided in this Note.
IN WITNESS WHEREOF, MIDWAY AIRLINES CORPORATION has caused this Note to be
signed in its corporate name by its officer thereunto duly authorized, and to be
dated as of the day and year first above written.
MIDWAY AIRLINES CORPORATION
By: /s/ [ILLEGIBLE]
-------------------------
Its: President
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Appendix B
MIDWAY AIRLINES CORPORATION
Secured Registered Promissory Note
R. New York, New York
[***] March 27, 1996
MIDWAY AIRLINES CORPORATION, a corporation duly organized and existing
under the laws of the State of Delaware, USA (the "Company"), for value
received, hereby promises to pay to the order of AVSA, S.A.R.L. ("AVSA") or
registered assigns on October 1, 1996; (the "Payment Date"), the principal
amount of [***] in such coin or currency of the United States of America as at
the time of payment shall be legal tender for public and private debts, at the
office of AVSA at 2, rond-point Maurice Bellonte, 31700 Blagnac, France (or at
such other office as the holder hereof shall designate to the Company in
writing).
1. PAYMENT DATE; EXCHANGES; PREPAYMENTS
1.1 Transfer or Exchange
This Note is transferable by the holder hereof as herein provided. The
Company shall keep at its office or agency, maintained as provided in
Subparagraph 2.2, a register in which the Company shall provide for the
registration of this Note and for the registration of transfer of this
Note. The holder of this Note may, at its option and either in person or
by duly authorized attorney, surrender the same for registration of
transfer and receive in exchange herefor a Note, dated as of the transfer
of this Note, for the same aggregate unpaid principal amount as this Note
and registered in such name or names as may be designated by the holder
hereof. This Note, when presented or surrendered for registration of
transfer, shall be duly endorsed or shall be accompanied by a written
instrument of transfer duly executed by the holder of this Note or his
attorney duly authorized in writing. The Note so made and delivered in
exchange for this Note shall in all other respects be in the same form and
have the same terms as this Note and each such exchange or transfer shall
be made in such a manner that no gain or loss of principal shall result
therefrom. No transfer or exchange of this Note shall be valid unless made
in such manner at such office. The Company agrees that it will pay
shipping and insurance charges from and to the principal office of the
holder of this Note involved in any exchange by the holder of this Note.
<PAGE>
Appendix B
1.2 Registered Holders; Payments
Prior to due presentment for registration of transfer of this Note, the
Company may deem and treat the registered holder hereof as the absolute
owner hereof for the purpose of receiving payment of or on account of the
principal of this Note and for the purposes of any notices, waivers or
consents thereunder, and payments of any Note shall be made only to or
upon the order in writing of the registered holder hereof. All payments
made hereunder shall be made in immediately available funds in United
States Dollars prior to 1:00 P.M., New York City time, by credit to Credit
Lyonnais, New York Branch, or to such other account as the holder hereof
shall advise the Company in writing. All payments due under this Note
shall be made in full without set-off, counterclaim, recoupment, or
defense and without deduction or withholding of any kind, provided,
however, the same shall not be deemed a waiver of any rights or remedies
of the Company against the Seller or any of its Affiliates. Consequently,
the Company shall assure that the sums received by the holder of this Note
hereunder shall be equal to the full amounts expressed to be due to the
holder hereunder, without deduction or withholding on account of and free
from any and all taxes, levies, imposts, dues or charges of whatever
nature imposed on the Company, except that if the Company is compelled by
law to make any such deduction or withholding the Company shall pay such
additional amounts as may be necessary in order that the net amount
received by the holder after such deduction or withholding shall equal the
amounts which would have been received in the absence of such deduction or
withholding.
1.3 Optional Prepayments
Upon notice given as provided in Subparagraph 1.5, the Company, at its
option, may prepay this Note, in whole and not in part, at anytime, at one
hundred percent (100%) of the outstanding principal amount thereof,
without premium. This Note shall be paid in whole, at one hundred percent
(100%) of the outstanding principal amount hereof, on the Payment Date.
1.4 Notice of Prepayment and Other Notices
The Company shall give written notice of optional prepayment of this Note
pursuant to Subparagraph 1.3 one (1) Business Day prior to the Payment
Date. Any notice of prepayment and all other notices to be given to any
holder of this Note shall be given by registered or certified mail to the
registered holder hereof at its address designated on the register
maintained by the Company on the date fixed for such notice of prepayment
or other notice. Upon notice of any optional prepayment pursuant to
Subparagraph 1.3, the Company covenants and agrees that it will prepay on
the date therein fixed for prepayment the entire outstanding principal
amount of this Note. The principal amount of this Note shall be due and
payable on the date specified in such notice.
2
<PAGE>
Appendix B
2. COVENANTS
The Company covenants and agrees that so long as this Note shall be
outstanding:
2.1 To Pay Principal
The Company will punctually pay or cause to be paid the principal of this
Note according to the terms hereof at the place of payment hereinabove
specified.
2.2 Maintenance of Company Office
The Company will maintain an office or agency at 300 West Morgan Street,
Suite 1200, Durham, North Carolina 27701, USA or such other place in the
United States of America as the Company may designate in writing to the
holder hereof where notices, presentations and demands to or upon the
Company in respect of the Notes may be given or made.
2.3 To Keep Books
The Company will, and will cause each of its Material Subsidiaries to keep
proper books of record and account in which proper entries will be made of
its transactions in accordance with generally accepted accounting
principles.
2.4 Payment of Taxes: Corporate Existence; Maintenance of Properties
The Company will, and will cause each of its Material Subsidiaries to,
(a) pay and discharge promptly or cause to be paid and discharged
promptly (i) all taxes, assessments and governmental charges or
levies imposed upon it or upon its income or profits or upon any
of its property, real, personal or mixed, or upon any part
thereof, before the same shall become in default, unless the same
is being contested in good faith, (ii) all lawful claims for
labor, materials and supplies which if unpaid, might by law
become a lien or charge upon its property, unless the same is
being contested in good faith, and (iii) all obligations to the
Pension Benefit Guaranty Corporation (or any successor thereto
under the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) ("PBGC").
(b) do or cause to be done all things necessary to preserve and keep in
full force and effect its existence, materially advantageous rights,
licenses, privileges, permits and franchises and comply in all
material respects with all laws and regulations applicable to it and
its business; and
3
<PAGE>
Appendix B
(c) maintain and keep, or cause to be maintained and kept, its
properties, including the Collateral as defined in the Promissory
Note Security Agreement, in good repair, working order and condition
and from time to time make or cause to be made all needful and
proper repairs, renewals, replacements and improvements so that the
business carried on in connection therewith may be properly
conducted at all times.
2.5 To Insure
The Company will, and will cause each of its Material Subsidiaries to,
(a) keep adequately insured, by financially sound and reputable
insurers, all property of a character usually insured by similar
corporations engaged in the same or a similar business similarly
situated against loss or damage of the kinds customarily insured
against by such corporations;
(b) carry, with financially sound and reputable insurers, such other
insurance (including, without limitation, liability insurance) and
in such amounts as is usually carried by corporations engaged in the
same or a similar business similarly situated; and
(c) maintain all such worker's compensation or similar insurance as may
be required under the laws of any state or jurisdiction in which it
may be engaged in business.
All insurance herein provided for shall be effected under a valid and
enforceable policy or policies.
2.6 Sale of Assets
The Company will not, and will not permit any unconsolidated subsidiary
to, sell, lease, transfer or otherwise dispose of all or substantially all
of its assets to any Person other than the Company or any Material
Subsidiary.
2.7 Merger or Consolidation
The Company will not, and will not permit any Material Subsidiary to,
consolidate with or merge into any Person or permit any Person to merge
into it except that
(a) a Material Subsidiary may merge into the Company if the Company is
the surviving corporation or may merge or consolidate with any other
Material Subsidiary or any other corporation if a Material
Subsidiary is the surviving corporation; and
4
<PAGE>
Appendix B
(b) the Company may merge or consolidate with any other Person if (i)
the surviving or successor corporation is a corporation
incorporated or organized under the laws of the United States of
America, one of the states thereof or the District of Columbia,
(ii) the surviving or successor corporation (if not the Company)
shall expressly assume in writing (by an instrument a copy of
which shall be mailed by registered mail to the holder of this
Note) the due and punctual payment of the principal of this Note,
according to its tenor, and the due and punctual performance and
observance of all of the terms, covenants, agreements and
conditions of this Note to be performed or observed by the
Company to the same extent as if such surviving or successor
corporation had originally executed this Note in the place of the
Company, and had been the original maker of this Note, (iii) such
Person is legally able to perform the Company's obligations
hereunder and has a Consolidated net worth, as determined in
accordance with generally accepted accounting principles
consistently applied, not less than the Consolidated net worth of
the Company (similarly determined) at the time of such merger or
consolidation, and (iv) immediately after such consolidation or
merger, no Event of Default or Insecurity Event or event which,
with notice or lapse of time or both, would become an Event of
Default or Insecurity Event, shall have occurred and be
continuing under this Note.
2.8 Information and Reports to be furnished by the Company
The Company will furnish to the holder of this Note:
(a) Reports
(i) Quarterly Reports. Within forty-five (45) days after the end
of each of the first three quarterly fiscal periods in each
fiscal year of the Buyer, a Consolidated balance sheet of the
Buyer and its Consolidated subsidiaries prepared as of the
close of such period, together with the related statements of
income and surplus; and
(ii) Annual Statements. Within ninety (90) days after the end of
each fiscal year of the Buyer, an audited Consolidated balance
sheet of the Buyer and its Consolidated subsidiaries as at the
end of such year (when they become available), and the related
statement of income and surplus.
(iii) Monthly Reports Within twenty (20) days after the end of each
month in each fiscal year of the Buyer, a Consolidated balance
sheet of the Buyer and its Consolidated subsidiaries prepared
as of the close of such month, together with the related
statements of income and surplus,
5
<PAGE>
Appendix B
statement of sources and uses of cash, as well as such other
historical information relating to such period that the Buyer
maintains. Such information will include, but not be limited
to, revenue per available seat mile, cost per available seat
mile, segment profitability information, the number of total
passengers, and load factor and average fare information.
"Consolidated" means, as applied to any financial or accounting term
or amount, such term or amount determined on a consolidated basis in
accordance with generally accepted accounting principles.
(b) Publicly Filed Reports to Stockholders and the SEC
The Company will furnish the Seller with all publicly filed reports
to stockholders or the United States Securities and Exchange
Commission, if any.
(c) Notice of Default
Immediately upon the Company's becoming aware of the existence of
any default in its performance or observance of any covenant,
agreement or condition contained in this Note or in the Promissory
Note Security Agreement, a written notice specifying the nature and
status thereof and what action the Company is taking with respect
thereto.
(d) Notice of Acceleration
Immediately upon the Company's becoming aware that the holder of any
bond, debenture, promissory note (including any note other than this
Note issued by the Company in favor of Payee or issued pursuant to
Amendment No. 1 to the Agreement ("Other Notes")) or any similar
evidence of indebtedness of the Company or any Material Subsidiary
has demanded payment, given notice or taken any other action with
respect to a claimed Event of Default under any Other Note or
claimed default in respect of or under such bond, debenture or
promissory note, a written notice specifying the demand made, notice
given or action taken by such holder and the nature and status of
the claimed Event of Default or default and what action the Company
is taking with respect thereto.
(e) ERISA
As promptly as practicable (but in any event not later than fifteen
(1) days) after the Company or Related Person (i) engages in any
"prohibited transaction" (as
6
<PAGE>
Appendix B
defined in Section 406 of ERISA or section 497 of the Internal
Revenue Code of 1986, as amended (the "Code")) with any "employee
benefit plan" (as defined in Section 3 (3) of ERISA ("Plan")), (ii)
files a notice of intent under Section 4041 of ERISA with the PBGC
to terminate any such Plan, (iii) receives a notice from the PBGC to
appoint a trustee to administer any such Plan, (iv) knows or has
reason to know that termination proceedings with respect to any such
Plan have commenced, (v) knows or has reason to know that any
"reportable event" (within the meaning of Section 4043(b) of ERISA)
or other condition with respect to any such Plan has occurred which
will result in a liability to the PBGC, (vi) fails to make a
quarterly installment contribution to any such Plan with respect to
which a lien may be imposed under section 412(n) of the Code, (vii)
knows or has reason to know that any "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not
waived, shall exist with respect to any such Plan, (viii) withdraws
in a complete withdrawal" or a "partial withdrawal" from a
"multiemployer plan" pursuant to subtitle E of Title IV of ERISA or
knows or has reason to know that it will or is likely to incur a
material liability in connection with any reorganization or
insolvency of such a Plan, or (ix) is involved in a situation
referred to in Section 4204 of ERISA, a statement of an officer of
the Company setting forth the details with respect to the events
resulting in such notice of intent to terminate or to appoint a
trustee, or with respect to such termination proceedings, reportable
event, other condition, withdrawal, or other situation, as the case
may be, and the action which the Company or Related Person proposes
to take with respect thereto, together with a copy of any such
notice of intent to terminate or to appoint a trustee, a copy of any
notice or other papers received by the Company or Related Person
with respect to such termination proceedings, a copy of any notice
of any such reportable event or other condition filed by the Company
or a Related Person with PBGC, a copy of any notice received by the
Company or a Related Person pursuant to Section 4219 of ERISA, or a
copy of the papers pertaining to the situation described in Section
4204 of ERISA, as the case may be.
(f) Miscellaneous Information
From time to time upon request, when the Payee is not the holder of
the Note, such nonproprietary or nonconfidential information
regarding the business, affairs and condition of the Company and of
any Material Subsidiary and its properties in such detail as may
reasonably be requested. The Company covenants and agrees that any
authorized officer or representative of the holder of this Note
shall have the right, at such holder's expense and subject to
applicable governmental regulations, to visit and inspect any of the
properties of the Company and of any Material Subsidiary, to examine
its books of account and to discuss its affairs,
7
<PAGE>
Appendix B
finances and accounts with, and be advised as to the same by, its
officers or its independent certified public accountants all at such
reasonable times and intervals as may be reasonably requested upon
not less that five (5) days' notice.
(g) The Note holder agrees to keep strictly confidential the information
described above in Subparagraph 2.8(f) and to not disclose the same
to any other Person or entity.
2.9 Taxes, etc.
The Company will pay or cause to be paid all United States stamp taxes
(including interest and penalties), if any, solely attributable to the
execution and delivery of this Note, or of any amendment of, or waiver or
consent under or with respect to, this Note, and will indemnify and save
the holder hereof harmless from any loss or damage of any kind whatsoever
resulting from or arising out of the non-payment or delay in the payment
of such taxes.
2.10 Transactions with Affiliates
The Company will not permit any of its Material Subsidiaries to, sell or
transfer any assets (including capital stock of any Subsidiary) to, or
purchase or acquire any assets of, or otherwise engage in any material
transaction (including any merger) with, or permit any Affiliate to sell
or transfer assets (including capital stock of any Subsidiary) to, or
purchase or acquire any assets of, or otherwise engage in any other
material transaction (including any merger) with, any other Affiliate
except for (i) transactions expressly permitted by the Agreement, (ii)
transactions (a) between the Company and one or more Wholly-Owned
Subsidiaries of the Company, provided that in the case of any
consolidation or merger in which the Company is not the surviving
corporation, such transaction shall be permitted pursuant to Subparagraph
2.7 hereof or (b) between Wholly-Owned Subsidiaries of the Company, (iii)
transactions in the ordinary course of business and upon fair and
reasonable terms no less favorable than the Company or any of its
Subsidiaries could obtain or could become entitled to in an arm's-length
transaction with a Person which was not an Affiliate and then, in any
case, only if no default or Event of Default shall have occurred and be
continuing, or (iv) transactions pursuant to a capital investment by an
Affiliate into the Company on fair and reasonable terms. None of the
Company and its Subsidiaries shall be permitted to amend any material
agreement with an Affiliate if a default or Event of Default has occurred
and is continuing.
8
<PAGE>
Appendix B
2.11 Certain Definitions
For purposes of this Note,
(a) "Affiliate" means with respect to any person or entity, any other
person or entity directly or indirectly controlling, controlled by
or under common control with such person or entity.
(b) "Agreement" means the Airbus A320 Purchase Agreement, dated as of
March 17, 1995, between AVSA, S.A.R.L. and the Company.
(c) "Business Day" means any day which is not a Saturday or a Sunday and
which is neither a legal holiday nor a day on which banking
institutions are authorized or required by law or regulation to
close in The City of New York, London, England or Toulouse, France.
(d) "Consolidated" means, as applied to any financial or accounting term
or amount, such term or amount determined on a consolidated basis in
accordance with generally accepted accounting principles;
(e) "Governmental Authority" means any nation or government, any state
or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government;
(f) "Letter Agreement" means the Financial Matters Letter Agreement,
dated March 17, 1995.
(g) "Material Subsidiary" of any Person means, at any time of
determination, each Subsidiary (or a group of Subsidiaries that
would constitute a Material Subsidiary if consolidated and which
are engaged in the same or related lines of business) of such
Person now existing or hereafter acquired or formed by such
Person which (x) accounted for more than l0% of the Consolidated
revenues of such Person and its Subsidiaries during the
twelve-month period ending on the date of the most recent
Consolidated balance sheet of such Person delivered to the holder
of this Note pursuant to Subparagraph 2.8, or (y) was the owner
of more than 10% of the Consolidated assets of such Person and
its Subsidiaries at the date of the most recent Consolidated
balance sheet of such Person delivered to the holders of this
Note pursuant to Subparagraph 2.8;
(h) "Person" means any natural person, corporation, partnership, joint
venture, joint-stock company, trust, unincorporated organization,
firm, association, government
9
<PAGE>
Appendix B
(or political subdivision thereof), governmental agency, authority
or instrumentality, or any other entity, whether acting in an
individual, fiduciary or other capacity;
(i) "Promissory Note Security Agreement" means the Promissory Note
Security Agreement, dated as of December 21, 1995.
(j) "Related Person" means any corporation or any trade or business
(whether or not incorporated) which, together with the Company, is a
member of a controlled group of corporations within the meaning of
Section 163(a) of the Code, determined without regard to Section
163(a) (4) and (e)(3)(C) of the Code, or is under common control
with the Company as described in Section 414(c) of the Code;
(k) "Requirement of Law" means as to any Person, the certificate of
incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
any of its property or to which such Person or any of its property
is subject;
(l) "Subsidiary" of any Person means any corporation or other entity
of which such Person, directly or indirectly, shall at the time
(a) own shares of any class or classes with power for the
election of at least a majority of the members of the board of
directors (or the governing body) of such corporation or other
entity other than shares or other interest having such power only
by reason of the happening of a contingency or (b) otherwise have
the legal right to elect such a majority; and
(m) "Wholly-Owned Subsidiary" means, with respect to any Person, any
Subsidiary of such Person all of the outstanding shares of capital
stock of which (other than directors' qualifying shares) are owned
directly by such Person or a Wholly-Owned Subsidiary of such Person.
3. AMENDMENT AND WAIVER
Any term, covenant, agreement or condition of this Note may, with the
consent of the Company, be amended or compliance therewith may be waived
(either generally or in a particular instance and either retroactively or
prospectively), by one or more written instrument(s) signed by the holder
of this Note.
10
<PAGE>
Appendix B
4. YIELD PROTECTION AND ILLEGALITY
4.1 Illegality
In the event that it becomes unlawful for the holder of this Note to
maintain the loan evidenced hereby on a LIBOR basis, then the holder shall
promptly notify the Company thereof.
4.2 Compensation
The Company shall pay to the holder of this Note, upon the request of the
holder, such amount or amounts as shall be sufficient (in the opinion of
the holder) to compensate it for any actual out-of-pocket loss, cost or
expense incurred by it as a result of any payment or prepayment of this
Note on a date other than the Payment Date, or any failure by the Company
to prepay this Note on the date for such prepayment specified herein.
5. DEFAULTS AND REMEDIES
5.1 Events of Default
This Note shall become and be due and payable upon demand of the holder
hereof, without presentation, protest, or further demand or notice of any
kind (all of which are hereby expressly waived by the Company), if any one
or more of the following events (herein called "Events of Default") shall
occur for any reason whatsoever (and whether such occurrence 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 be continuing at the time of such demand:
(a) if default shall be made in the due and punctual payment of the
principal of this Note or of any Other Note when and as the same
shall become due and payable, whether at maturity or at a date fixed
for prepayment or by acceleration or otherwise;
(b) if default shall be made in the due and punctual payment of any
installment of interest on any Other Note, when and as such interest
installment shall become due and payable, and such default shall
have continued for a period of five (5) days;
(c) if default shall be made in the performance or observance of any
other of the covenants, agreements or conditions contained in this
Note, the Promissory Note Security Agreement or the Letter
Agreement, and such default shall have
11
<PAGE>
Appendix B
continued for a period of thirty (30) days after written notice
thereof to the Company by the holder of this Note;
(d) if an event or condition occurs or exists, with respect to any
Plan or otherwise, concerning which the Company is under an
obligation to furnish a report to the holder hereof in accordance
with Subparagraph 2.8(e) hereof and as a result of such event or
condition, together with all other such events or conditions, the
Company or any Related Person has incurred or in the reasonable
opinion of the holder hereof is likely to incur a liability to a
Plan or the PBGC (or any combination of the foregoing) which is
material in relation to the financial position of the Company;
(e) if:
(1) the Company or any other party shall commence any case,
proceeding or other action with respect to the Company in any
jurisdiction relating to bankruptcy, insolvency,
reorganization, relief from debtors, an arrangement,
winding-up, liquidation, dissolution or other relief with
respect to its debts and such case, proceeding or other action
remains unstayed, undismissed or undischarged for sixty (60)
days;
(2) an action is commenced seeking the appointment of a receiver,
trustee, custodian or other similar official for the Company
for all or substantially all of its assets, or the Company
makes a general assignment for the benefit of its creditors;
(3) an action is commenced against the Company seeking issuance of
a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets;
(4) the Company becomes insolvent or fails generally to pay its
debts as they become due; or
(5) there is a liquidation, winding up or analogous event with
respect to the Company.
5.2 In addition to the provisions of Subparagraph 5.1(a) through (d), only if
AVSA or an Affiliate of AVSA is the holder of this Note, the occurrence of
any Insecurity Event or Termination Event under Clause 21 of the Agreement
shall also constitute Events of Default for the purpose of this Amendment
to the Agreement.
12
<PAGE>
Appendix B
5.3 Costs and Expenses
The Company covenants that if default be made in any payment of principal
on this Note, it will pay to the holder hereof to the extent permitted
under applicable law, such further amount (in addition to any amounts due
under the Notes) as shall be sufficient to cover the cost and expense of
collection, including reasonable compensation to the attorneys and counsel
of the holder hereof for all services rendered in that connection.
6. COVENANTS BIND SUCCESSORS AND ASSIGNS
All the covenants, stipulations, promises and agreements in this Note
contained by or on behalf of the Company shall bind its successors and
assigns, whether so expressed or not.
7. GOVERNING LAW
THIS NOTE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS WHICH ARE EXECUTED AND FULLY TO BE PERFORMED IN
THAT STATE. The Company hereby irrevocably and unconditionally submits to
the jurisdiction of the federal and state courts in New York, New York in
respect of any action or proceeding arising out of or in connection with
this Note. Final judgement against the Company in any such action or
proceeding shall be conclusive, and may be enforced in other jurisdictions
by suit on the judgment, a certified or true copy of which shall be
conclusive evidence of the fact and of the amount of indebtedness or
liability of the Company therein described; provided, however, that at all
times the holder of this Note may at its option bring suit, or institute
other judicial proceedings against the Company, in any court in any place
where the Company or any of its assets may be found.
8. HEADINGS
The headings of the Paragraphs and Subparagraphs of this Note are inserted
for convenience only and do not constitute a part of this Note.
9. LOST, ETC. NOTES
Upon receipt by the Company of evidence satisfactory to it of the loss,
theft, destruction or mutilation of this Note, and (in case of loss, theft
or destruction) or indemnity satisfactory to it, and upon surrender and
cancellation of this Note, if mutilated, the Company, at its expense, will
make and deliver a new Note of like tenor in lieu of this Note. Any Note
made and delivered in accordance with the provisions of this Subparagraph
9 shall be dated as of the date which such new Note is made and delivered.
13
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Appendix B
The unsecured indemnity agreement of the holder of this Note shall
constitute indemnity satisfactory to the Company for the purposes of this
Subparagraph 9.
10. MISCELLANEOUS
(a) In the event any day for payment of an amount hereunder is not a
Business Day, such payment shall be due and payable on the
immediately preceding Business Day.
(b) All amounts payable under this Note shall be payable without
presentment or demand for payment, protest or further notice or
demand of any kind, all of which are expressly waived by the
Company, except to the extent expressly provided in this Note.
IN WITNESS WHEREOF, MIDWAY AIRLINES CORPORATION has caused this Note to be
signed in its corporate name by its officer thereunto duly authorized, and to be
dated as of the day and year first above written.
MIDWAY AIRLINES CORPORATION
By: /s/ [ILLEGIBLE]
-------------------------
Its: President
14
<PAGE>
Amendment No. 5
TO THE A320 PURCHASE AGREEMENT
dated as of March 17, 1995
between
AVSA, S.A.R.L.,
and
MIDWAY AIRLINES CORPORATION
This Amendment No. 5 (hereinafter referred to as the "Amendment") entered into
as of October 29, 1996, by and between AVSA, S.A.R.L., a societe a
responsabilite limitee organized and existing under the laws of the Republic of
France, having its registered office located at 2, rond-point Maurice Bellonte,
31700 Blagnac, FRANCE (hereinafter referred to as the "Seller"), and MIDWAY
AIRLINES CORPORATION, a body corporate, organized and existing under the laws of
the State of Delaware, United States of America, having its principal corporate
offices located at 300 West Morgan Street, Suite 1200, Durham, NC 27701
(hereinafter referred to as the "Buyer").
WITNESSETH:
WHEREAS, the Buyer and the Seller entered into (i) a Purchase Agreement,
dated as of March 17, 1995, relating to the sale by the Seller and the purchase
by the Buyer of certain Airbus Industrie A320-200 model aircraft (the
"Aircraft"), which, as previously amended by Amendment No. 1 dated as of
December 21, 1995, Amendment No. 2 dated as of January 31, 1996, Amendment No. 3
dated as of February 28, 1996, and Amendment No. 4 dated as of March 27, 1996,
and supplemented with all Exhibits, Appendixes and Letter Agreements attached
thereto, is hereinafter called the "Agreement," (ii) a related letter agreement
regarding "Financial Matters," which, as previously amended by Amendment No. 1
dated as of December 21, 1995, Amendment No. 2 dated as of March 27, 1996 and
Amendment No. 3 dated the date hereof, is hereinafter called the "Financial
Matters Agreement," (iii) a related Security Agreement, dated as of March 17,
1995, hereinafter referred to as the "Security Agreement," and (iv) a Promissory
Note Security Agreement, dated as of December 21, 1995; and
<PAGE>
WHEREAS, the Buyer has asked the Seller and the Seller agrees to
reschedule the maturity date of the Replacement December 1995 Note and the
Rescheduled Payments Note, (made pursuant to Amendment No. 4 of the Agreement),
under the conditions set forth in this Amendment;
WHEREAS, the Buyer and the Seller agree to reschedule the delivery
positions for the Aircraft; and
WHEREAS, capitalized terms used herein and not otherwise defined in this
Amendment will have the meanings assigned to them in the Agreement, and the
terms "herein," "hereof," and hereunder and words of similar import refer to
this Amendment.
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS HEREINAFTER SET
FORTH, IT IS AGREED AS FOLLOWS:
1. DELIVERY POSITIONS
1.1 The Buyer and the Seller agree that the delivery schedule for Firm
Aircraft set forth in Subclause 9.1 of the Agreement is superseded and
replaced by the following schedule:
QUOTE
Firm Aircraft Month of Delivery
------------- -----------------
No. 1 December 2000
No. 2 January 2001
No. 3 February 2001
No. 4 December 2001
UNQUOTE
1.2 The Buyer and the Seller agree that the delivery schedule for Option
Aircraft set forth in Paragraph 3 of Letter Agreement No. 3 to the
Agreement is superseded and replaced by the following schedule:
QUOTE
Option Aircraft No. Month of Delivery
------------------- -----------------
No. 1 January 2002
No. 2 February 2002
No. 3 November 2002
<PAGE>
No. 4 December 2002
UNQUOTE
2. DECEMBER 1995 PREDELIVERY PAYMENTS
2.1 Pursuant to Paragraph 1 of Amendment No. 1 of the Agreement, the Buyer
issued to the Seller the December 1995 Note, which was to mature on April
30, 1996. Pursuant to Paragraph 1 of Amendment No. 4 of the Agreement, in
substitution of the December 1995 Note, the Buyer issued to the Seller the
Replacement December 1995 Note, which was to mature on October 1, 1996.
The Seller hereby agrees, at the Buyer's request, to extend the maturity
date of the Replacement December 1995 Note to October 1, 1998.
2.2 In consideration of the agreement above in Subparagraph 2.1, on execution
of this Amendment, the Seller will cancel and return the Replacement
December 1995 Note to the Buyer, and the Buyer will issue to the Seller a
new promissory note (the "New Replacement December 1995 Note"). The New
Replacement December 1995 Note will (i) be a secured, negotiable note for
the same principal amount as the December 1995 Note and the Replacement
December 1995 Note, which is [***], (ii) be dated as of December 21,
1995, (iii) mature and be payable to the Seller in cash on October 1,
1998, and (iv) be made in the form attached hereto as Appendix A.
2.3 All other terms and conditions applicable to "Notes" under Letter
Agreement No. 4 of the Agreement will also apply to the New Replacement
December 1995 Note, except that the New Replacement December 1995 Note
will not bear interest. The New Replacement December 1995 Note will be
collateralized in the manner set forth in an amendment to the Promissory
Note Security Agreement dated as of the date hereof.
3. JUNE 1996 PREDELIVERY PAYMENTS
3.1 Pursuant to Paragraph 2 of Amendment No. 4 of the Agreement, the Buyer
issued to the Seller the Rescheduled Payments Note, which was to mature on
October 1, 1996. The Seller hereby agrees, at the Buyer's request, to
extend the maturity date of the Rescheduled Payments Note to October 1,
1998.
3.2 In consideration of the Seller's agreement set forth above in Subparagraph
3.1, on execution of this Amendment, the Seller will cancel and return the
Rescheduled Payments Note to the Buyer, and the Buyer will issue to the
Seller a new promissory note (the "New Rescheduled Payments Note"). The
New Rescheduled Payments Note will (i) be secured and negotiable, (ii) be
dated as of March 27, 1996, (iii) mature and be payable in cash on October
1, 1998, and (iv) be made in the form attached hereto as Appendix B.
3
<PAGE>
3.3 All other terms and conditions applicable to "Notes" under Letter
Agreement No. 4 to the Agreement will also apply to the New Rescheduled
Payments Note, except that the New Rescheduled Payments Note will not bear
interest. The New Rescheduled Payments Note will be collateralized in the
manner set forth in an amendment to the Promissory Note Security Agreement
dated as of the date hereof.
4. FURTHER AGREEMENT
4.1 Subparagraph 1.2(b) of Amendment No. 1, as amended by Amendment No. 2,
Amendment No. 3 and Amendment No. 4 of the Agreement, is deleted in its
entirety and replaced as follows:
QUOTE
(b) The Buyer will provide the Seller with satisfactory written
substantiation by November 28, 1996, of its having requested and
obtained from its other principal creditors (including, but not
limited to, American Airlines, Inc., and Fokker Aircraft U.S.A.,
Inc.) payment deferrals generally similar in scope as the deferral
described in this Amendment.
UNQUOTE
4.2 The first three lines of Subparagraph 1.2(c) of Amendment No. 1, as
amended by Amendment No. 2, Amendment No. 3 and Amendment No. 4 of the
Agreement, and Subparagraphs 1.2(c)(x) through 1.2(c)(z) of Amendment No.
1, as partially amended by Amendment No. 4 of the Agreement are deleted in
their entirety and replaced as follows:
QUOTE
(c) The New Replacement December 1995 Note and the New Rescheduled
Payments Note will become immediately due and payable on November
29, 1996, in the event that any of the following conditions have not
been met by November 28, 1996:
(x) The Seller or its designee has completed a satisfactory
physical inspection of the collateral delivered under an
amendment to each of the Promissory Note Security Agreement
and the Security Agreement dated as of the date of the
Amendment.
(y) The Seller has obtained a perfected first priority security
interest in all the collateral described in an amendment to
each of the Promissory Note
4
<PAGE>
Security Agreement and the Security Agreement dated as of the
date of Amendment No. 4 to the Agreement.
(z) The Buyer has provided the Seller the written substantiation
described above in Subparagraph 1.2(b).
UNQUOTE
4.3 The Seller agrees to review after the date hereof the availability to the
Buyer of earlier delivery positions for the Aircraft than those set forth
in Paragraph 1 above after completion of its production planning review
and subject to its commercial and industrial constraints.
5. CONFIDENTIALITY
Subject to any legal or governmental requirements of disclosure, the
parties (which for this purpose shall include their employees, agents and
advisors) shall maintain the terms and conditions of this Amendment and
any reports or other data furnished hereunder strictly confidential.
Without limiting the generality of the foregoing, the Buyer and the Seller
shall use their best efforts to limit the disclosure of the contents of
this Agreement to the extent legally permissible in any filing required to
be made by the Buyer or the Seller, as the case may be, with any
governmental agency and shall make such applications as shall be necessary
to implement the foregoing. With respect to any public disclosure or
filing, each party agrees to submit to the other party a copy of the
proposed document to be filed or disclosed and will give the other party a
reasonable period of time in which to review the said document. The Buyer
and Seller shall consult with each other prior to the making of any public
disclosure or filing, permitted hereunder, of this Amendment or the terms
and conditions thereof. The provisions of this Paragraph 5 shall survive
any termination of this Agreement.
6. EFFECT OF AMENDMENT
The Agreement will be deemed amended to the extent herein provided, and,
except as specifically amended hereby, will continue in full force and
effect in accordance with its original terms, except that if the Agreement
and this Amendment have specific provisions that are inconsistent, the
specific provisions contained in this Amendment will govern. It is
understood that this Amendment does not in any way constitute a waiver by
the Seller of any rights it has under the Agreement or under the Financial
Matters Agreement.
Further, it is agreed that this Amendment is subject to the parties'
executing as of the date hereof an amendment to each of the Financial
Matters Agreement, the Security Agreement and the Promissory Note
Security Agreement, if applicable.
5
<PAGE>
7. INTERPRETATION AND LAW
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND THE
PERFORMANCE THEREOF SHALL BE DETERMINED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
THE PARTIES HEREBY ALSO AGREE THAT THE UNITED NATIONS
CONVENTION ON THE INTERNATIONAL SALE OF GOODS SHALL NOT APPLY
TO THIS TRANSACTION.
If the foregoing correctly sets forth our understanding, please execute
this Amendment in the space provided below, whereupon, as of the date first
above written, this Amendment will constitute part of the Agreement.
Agreed and accepted Yours sincerely,
MIDWAY AIRLINES AVSA, S.A.R.L.
CORPORATION
By: /s/ Jonathan S. Waller By: /s/ [ILLEGIBLE]
- -------------------------------- ------------------------------------
Its: Senior Vice President Its:
General Counsel ------------------------------------
By:
--------------------------------
Its:
--------------------------------
6
<PAGE>
Appendix A
MIDWAY AIRLINES CORPORATION
Secured Registered Promissory Note
R. New York, New York
[***] December 21, 1995
MIDWAY AIRLINES CORPORATION, a corporation duly organized and existing
under the laws of the State of Delaware, USA (the "Company"), for value
received, hereby promises to pay to the order of AVSA, S.A.R.L. ("AVSA") or
registered assigns on October 1, 1998, (the "Payment Date"), the principal
amount of [***] in such coin or currency of the United States of America as
at the time of payment shall be legal tender for public and private debts, at
the office of AVSA at 2, rond-point Maurice Bellonte, 31700 Blagnac, France (or
at such other office as the holder hereof shall designate to the Company in
writing).
l. PAYMENT DATE; EXCHANGES; PREPAYMENTS
1.1 Transfer or Exchange
This Note is transferable by the holder hereof as herein provided. The
Company shall keep at its office or agency, maintained as provided in
Subparagraph 2.2, a register in which the Company shall provide for the
registration of this Note and for the registration of transfer of this
Note. The holder of this Note may, at its option and either in person or
by duly authorized attorney, surrender the same for registration of
transfer and receive in exchange herefor a Note, dated as of the transfer
of this Note, for the same aggregate unpaid principal amount as this Note
and registered in such name or names as may be designated by the holder
hereof. This Note, when presented or surrendered for registration of
transfer, shall be duly endorsed or shall be accompanied by a written
instrument of transfer duly executed by the holder of this Note or his
attorney duly authorized in writing. The Note so made and delivered in
exchange for this Note shall in all other respects be in the same form and
have the same terms as this Note and each such exchange or transfer shall
be made in such a manner that no gain or loss of principal shall result
therefrom. No transfer or exchange of this Note shall be valid unless made
in such manner at such office. The Company agrees that it will pay
shipping and insurance charges from and to the principal office of the
holder of this Note involved in any exchange by the holder of this Note.
<PAGE>
Appendix A
1.2 Registered Holders; Payments
Prior to due presentment for registration of transfer of this Note, the
Company may deem and treat the registered holder hereof as the absolute
owner hereof for the purpose of receiving payment of or on account of the
principal of this Note and for the purposes of any notices, waivers or
consents thereunder, and payments of any Note shall be made only to or
upon the order in writing of the registered holder hereof. All payments
made hereunder shall be made in immediately available funds in United
States Dollars prior to 1:00 P.M., New York City time, by credit to Credit
Lyonnais, New York Branch, or to such other account as the holder hereof
shall advise the Company in writing. All payments due under this Note
shall be made in full without set-off, counterclaim, recoupment, or
defense and without deduction or withholding of any kind, provided,
however, the same shall not be deemed a waiver of any rights or remedies
of the Company against the Seller or any of its Affiliates. Consequently,
the Company shall assure that the sums received by the holder of this Note
hereunder shall be equal to the full amounts expressed to be due to the
holder hereunder, without deduction or withholding on account of and free
from any and all taxes, levies, imposts, dues or charges of whatever
nature imposed on the Company, except that if the Company is compelled by
law to make any such deduction or withholding the Company shall pay such
additional amounts as may be necessary in order that the net amount
received by the holder after such deduction or withholding shall equal the
amounts which would have been received in the absence of such deduction or
withholding.
1.3 Optional Prepayments
Upon notice given as provided in Subparagraph 1.5, the Company, at its
option, may prepay this Note, in whole and not in part, at anytime, at one
hundred percent (100%) of the outstanding principal amount thereof,
without premium. This Note shall be paid in whole, at one hundred percent
(100%) of the outstanding principal amount hereof, on the Payment Date.
1.4 Notice of Prepayment and Other Notices
The Company shall give written notice of optional prepayment of this Note
pursuant to Subparagraph 1.3 one (1) Business Day prior to the Payment
Date. Any notice of prepayment and all other notices to be given to any
holder of this Note shall be given by registered or certified mail to the
registered holder hereof at its address designated on the register
maintained by the Company on the date fixed for such notice of prepayment
or other notice. Upon notice of any optional prepayment pursuant to
Subparagraph 1.3, the Company covenants and agrees that it will prepay on
the date therein fixed for prepayment the entire outstanding principal
amount of this Note. The principal amount of this Note shall be due and
payable on the date specified in such notice.
2
<PAGE>
Appendix A
2. COVENANTS
The Company covenants and agrees that so long as this Note shall be
outstanding:
2.1 To Pay Principal
The Company will punctually pay or cause to be paid the principal of this
Note according to the terms hereof at the place of payment hereinabove
specified.
2.2 Maintenance of Company Office
The Company will maintain an office or agency at 300 West Morgan Street,
Suite 1200, Durham, North Carolina 27701, USA or such other place in the
United States of America as the Company may designate in writing to the
holder hereof where notices, presentations and demands to or upon the
Company in respect of the Notes may be given or made.
2.3 To Keep Books
The Company will, and will cause each of its Material Subsidiaries to keep
proper books of record and account in which proper entries will be made of
its transactions in accordance with generally accepted accounting
principles.
2.4 Payment of Taxes; Corporate Existence; Maintenance of Properties
The Company will, and will cause each of its Material Subsidiaries to,
(a) pay and discharge promptly or cause to be paid and discharged
promptly (i) all taxes, assessments and governmental charges or
levies imposed upon it or upon its income or profits or upon any
of its property, real, personal or mixed, or upon any part
thereof, before the same shall become in default, unless the same
is being contested in good faith, (ii) all lawful claims for
labor, materials and supplies which if unpaid, might by law
become a lien or charge upon its property, unless the same is
being contested in good faith, and (iii) all obligations to the
Pension Benefit Guaranty Corporation (or any successor thereto
under the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) ("PBGC").
(b) do or cause to be done all things necessary to preserve and keep in
full force and effect its existence, materially advantageous rights,
licenses, privileges, permits
3
<PAGE>
Appendix A
and franchises and comply in all material respects with all laws and
regulations applicable to it and its business; and
(c) maintain and keep, or cause to be maintained and kept, its
properties, including the Collateral as defined in the Promissory
Note Security Agreement, in good repair, working order and condition
and from time to time make or cause to be made all needful and
proper repairs, renewals, replacements and improvements so that the
business carried on in connection therewith may be properly
conducted at all times.
2.5 To Insure
The Company will, and will cause each of its Material Subsidiaries to,
(a) keep adequately insured, by financially sound and reputable
insurers, all property of a character usually insured by similar
corporations engaged in the same or a similar business similarly
situated against loss or damage of the kinds customarily insured
against by such corporations;
(b) carry, with financially sound and reputable insurers, such other
insurance (including, without limitation, liability insurance) and
in such amounts as is usually carried by corporations engaged in the
same or a similar business similarly situated; and
(c) maintain all such worker's compensation or similar insurance as may
be required under the laws of any state or jurisdiction in which it
may be engaged in business.
All insurance herein provided for shall be effected under a valid and
enforceable policy or policies.
2.6 Sale of Assets
The Company will not, and will not permit any unconsolidated subsidiary
to, sell, lease, transfer or otherwise dispose of all or substantially all
of its assets to any Person other than the Company or any Material
Subsidiary.
2.7 Merger or Consolidation
The Company will not, and will not permit any Material Subsidiary to,
consolidate with or merge into any Person or permit any Person to merge
into it except that
4
<PAGE>
Appendix A
(a) a Material Subsidiary may merge into the Company if the Company is
the surviving corporation or may merge or consolidate with any other
Material Subsidiary or any other corporation if a Material
Subsidiary is the surviving corporation; and
(b) the Company may merge or consolidate with any other Person if (i)
the surviving or successor corporation is a corporation
incorporated or organized under the laws of the United States of
America, one of the states thereof or the District of Columbia,
(ii) the surviving or successor corporation (if not the Company)
shall expressly assume in writing (by an instrument a copy of
which shall be mailed by registered mail to the holder of this
Note) the due and punctual payment of the principal of this Note,
according to its tenor, and the due and punctual performance and
observance of all of the terms, covenants, agreements and
conditions of this Note to be performed or observed by the
Company to the same extent as if such surviving or successor
corporation had originally executed this Note in the place of the
Company, and had been the original maker of this Note, (iii) such
Person is legally able to perform the Company's obligations
hereunder and has a Consolidated net worth, as determined in
accordance with generally accepted accounting principles
consistently applied, not less than the Consolidated net worth of
the Company (similarly determined) at the time of such merger or
consolidation, and (iv) immediately after such consolidation or
merger, no Event of Default or Insecurity Event or event which,
with notice or lapse of time or both, would become an Event of
Default or Insecurity Event, shall have occurred and be
continuing under this Note.
2.8 Information and Reports to be furnished by the Company
The Company will furnish to the holder of this Note:
(a) Reports
(i) Quarterly Reports. Within forty-five (45) days after the end
of each of the first three quarterly fiscal periods in each
fiscal year of the Buyer, a Consolidated balance sheet of the
Buyer and its Consolidated subsidiaries prepared as of the
close of such period, together with the related statements of
income and surplus; and
(ii) Annual Statements. Within ninety (90) days after the end of
each fiscal year of the Buyer, an audited Consolidated balance
sheet of the Buyer and its Consolidated subsidiaries as at the
end of such year (when they become
5
<PAGE>
Appendix A
available), and the related statement of income and surplus.
(iii) Monthly Reports Within twenty (20) days after the end of each
month in each fiscal year of the Buyer, a Consolidated balance
sheet of the Buyer and its Consolidated subsidiaries prepared
as of the close of such month, together with the related
statements of income and surplus, statement of sources and
uses of cash, as well as such other historical information
relating to such period that the Buyer maintains. Such
information will include, but not be limited to, revenue per
available seat mile, cost per available seat mile, segment
profitability information, the number of total passengers, and
load factor and average fare information.
"Consolidated" means, as applied to any financial or accounting term
or amount, such term or amount determined on a consolidated basis in
accordance with generally accepted accounting principles.
(b) Publicly Filed reports to Stockholders and the SEC
The Company will furnish the Seller with all publicly filed reports
to stockholders or the United States Securities and Exchange
Commission, if any.
(c) Notice of Default
Immediately upon the Company's becoming aware of the existence of
any default in its performance or observance of any covenant,
agreement or condition contained in this Note or in the Promissory
Note Security Agreement, a written notice specifying the nature and
status thereof and what action the Company is taking with respect
thereto.
(d) Notice of Acceleration
Immediately upon the Company's becoming aware that the holder of any
bond, debenture, promissory note (including any note other than this
Note issued by the Company in favor of Payee or issued pursuant to
Amendment No. 1 to the Agreement ("Other Notes")) or any similar
evidence of indebtedness of the Company or any Material Subsidiary
has demanded payment, given notice or taken any other action with
respect to a claimed Event of Default under any Other Note or
claimed default in respect of or under such bond, debenture or
promissory note, a written notice specifying the demand made, notice
given or action taken by such holder and the nature and status of
the claimed Event of Default or default
6
<PAGE>
Appendix A
and what action the Company is taking with respect thereto.
(e) ERISA
As promptly as practicable (but in any event not later than fifteen
(1) days) after the Company or Related Person (i) engages in any
"prohibited transaction" (as defined in Section 406 of ERISA or
section 497 of the Internal Revenue Code of 1986, as amended (the
"Code")) with any "employee benefit plan" (as defined in Section 3
(3) of ERISA ("Plan")), (ii) files a notice of intent under Section
4041 of ERISA with the PBGC to terminate any such Plan, (iii)
receives a notice from the PBGC to appoint a trustee to administer
any such Plan, (iv) knows or has reason to know that termination
proceedings with respect to any such Plan have commenced, (v) knows
or has reason to know that any "reportable event" (within the
meaning of Section 4043(b) of ERISA) or other condition with respect
to any such Plan has occurred which will result in a liability to
the PBGC, (vi) fails to make a quarterly installment contribution to
any such Plan with respect to which a lien may be imposed under
section 412(n) of the Code, (vii) knows or has reason to know that
any "accumulated funding deficiency" (as defined in Section 302 of
ERISA), whether or not waived, shall exist with respect to any such
Plan, (viii) withdraws in a "complete withdrawal" or a "partial
withdrawal" from a "multiemployer plan" pursuant to subtitle E of
Title IV of ERISA or knows or has reason to know that it will or is
likely to incur a material liability in connection with any
reorganization or insolvency of such a Plan, or (ix) is involved in
a situation referred to in Section 4204 of ERISA, a statement of an
officer of the Company setting forth the details with respect to the
events resulting in such notice of intent to terminate or to appoint
a trustee, or with respect to such termination proceedings,
reportable event, other condition, withdrawal, or other situation,
as the case may be, and the action which the Company or Related
Person proposes to take with respect thereto, together with a copy
of any such notice of intent to terminate or to appoint a trustee, a
copy of any notice or other papers received by the Company or
Related Person with respect to such termination proceedings, a copy
of any notice of any such reportable event or other condition filed
by the Company or a Related Person with PBGC, a copy of any notice
received by the Company or a Related Person pursuant to Section 4219
of ERISA, or a copy of the papers pertaining to the situation
described in Section 4204 of ERISA, as the case may be.
(f) Miscellaneous Information
From time to time upon request, when the Payee is not the holder of
the Note,
7
<PAGE>
Appendix A
such nonproprietary or nonconfidential information regarding the
business, affairs and condition of the Company and of any Material
Subsidiary and its properties in such detail as may reasonably be
requested. The Company covenants and agrees that any authorized
officer or representative of the holder of this Note shall have the
right, at such holder's expense and subject to applicable
governmental regulations, to visit and inspect any of the properties
of the Company and of any Material Subsidiary, to examine its books
of account and to discuss its affairs, finances and accounts with,
and be advised as to the same by, its officers or its independent
certified public accountants all at such reasonable times and
intervals as may be reasonably requested upon not less that five (5)
days' notice.
(g) The Note holder agrees to keep strictly confidential the information
described above in Subparagraph 2.8(f) and to not disclose the same
to any other Person or entity.
2.9 Taxes, etc.
The Company will pay or cause to be paid all United States stamp taxes
(including interest and penalties), if any, solely attributable to the
execution and delivery of this Note, or of any amendment of, or waiver or
consent under or with respect to, this Note, and will indemnify and save
the holder hereof harmless from any loss or damage of any kind whatsoever
resulting from or arising out of the non-payment or delay in the payment
of such taxes.
2.10 Transactions with Affiliates
The Company will not permit any of its Material Subsidiaries to, sell or
transfer any assets (including capital stock of any Subsidiary) to, or
purchase or acquire any assets of; or otherwise engage in any material
transaction (including any merger) with, or permit any Affiliate to sell
or transfer assets (including capital stock of any Subsidiary) to, or
purchase or acquire any assets of, or otherwise engage in any other
material transaction (including any merger) with, any other Affiliate
except for (i) transactions expressly permitted by the Agreement, (ii)
transactions (a) between the Company and one or more Wholly-Owned
Subsidiaries of the Company, provided that in the case of any
consolidation or merger in which the Company is not the surviving
corporation, such transaction shall be permitted pursuant to Subparagraph
2.7 hereof or (b) between Wholly-Owned Subsidiaries of the Company, (iii)
transactions in the ordinary course of business and upon fair and
reasonable terms no less favorable than the Company or any of its
Subsidiaries could obtain or could become entitled to in an arm's-length
transaction with a Person which was not an Affiliate and then, in any
case, only if no default or Event
8
<PAGE>
Appendix A
of Default shall have occurred and be continuing, or (iv) transactions
pursuant to a capital investment by an Affiliate into the Company on fair
and reasonable terms. None of the Company and its Subsidiaries shall be
permitted to amend any material agreement with an Affiliate if a default
or Event of Default has occurred and is continuing.
2.11 Certain Definitions
For purposes of this Note,
(a) "Affiliate" means with respect to any person or entity, any other
person or entity directly or indirectly controlling, controlled by
or under common control with such person or entity.
(b) "Agreement" means the Airbus A320 Purchase Agreement, dated as of
March 17, 1995, between AVSA, S.A.R.L. and the Company.
(c) "Business Day" means any day which is not a Saturday or a Sunday and
which is neither a legal holiday nor a day on which banking
institutions are authorized or required by law or regulation to
close in The City of New York, London, England or Toulouse, France.
(d) "Consolidated" means, as applied to any financial or accounting term
or amount, such term or amount determined on a consolidated basis in
accordance with generally accepted accounting principles;
(e) "Governmental Authority" means any nation or government, any state
or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government;
(f) "Letter Agreement" means the Financial Matters Letter Agreement,
dated March 17, 1995.
(g) "Material Subsidiary" of any Person means, at any time of
determination, each Subsidiary (or a group of Subsidiaries that
would constitute a Material Subsidiary if consolidated and which
are engaged in the same or related lines of business) of such
Person now existing or hereafter acquired or formed by such
Person which
9
<PAGE>
Appendix A
(x) accounted for more than l0% of the Consolidated revenues of such
Person and its Subsidiaries during the twelve-month period ending on
the date of the most recent Consolidated balance sheet of such
Person delivered to the holder of this Note pursuant to Subparagraph
2.8, or (y) was the owner of more than 10% of the Consolidated
assets of such Person and its Subsidiaries at the date of the most
recent Consolidated balance sheet of such Person delivered to the
holders of this Note pursuant to Subparagraph 2.8;
(h) "Person" means any natural person, corporation, partnership, joint
venture, joint-stock company, trust, unincorporated organization,
firm, association, government (or political subdivision thereof),
governmental agency, authority or instrumentality, or any other
entity, whether acting in an individual, fiduciary or other
capacity;
(i) "Promissory Note Security Agreement" means the Promissory Note
Security Agreement, dated as of December 21, 1995.
(j) "Related Person" means any corporation or any trade or business
(whether or not incorporated) which, together with the Company, is a
member of a controlled group of corporations within the meaning of
Section 163(a) of the Code, determined without regard to Section
163(a) (4) and (e)(3)(C) of the Code, or is under common control
with the Company as described in Section 414(c) of the Code;
(k) "Requirement of Law" means as to any Person, the certificate of
incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
any of its property or to which such Person or any of its property
is subject;
(l) "Subsidiary" of any Person means any corporation or other entity
of which such Person, directly or indirectly, shall at the time
(a) own shares of any class or classes with power for the
election of at least a majority of the members of the board of
directors (or the governing body) of such corporation or other
entity other than shares or other interest having such power only
by reason of the happening of a contingency or (b) otherwise have
the legal right to elect such a majority; and
(m) "Wholly-Owned Subsidiary" means, with respect to any Person, any
Subsidiary of such Person all of the outstanding shares of capital
stock of which (other than
10
<PAGE>
Appendix A
directors' qualifying shares) are owned directly by such Person or a
Wholly-Owned Subsidiary of such Person.
3. AMENDMENT AND WAIVER
Any term, covenant, agreement or condition of this Note may, with the
consent of the Company, be amended or compliance therewith may be waived
(either generally or in a particular instance and either retroactively or
prospectively), by one or more written instrument(s) signed by the holder
of this Note.
4. YIELD PROTECTION AND ILLEGALITY
4.1 Illegality
In the event that it becomes unlawful for the holder of this Note to
maintain the loan evidenced hereby on a LIBOR basis, then the holder shall
promptly notify the Company thereof.
4.2 Compensation
The Company shall pay to the holder of this Note, upon the request of the
holder, such amount or amounts as shall be sufficient (in the opinion of
the holder) to compensate it for any actual out-of-pocket loss, cost or
expense incurred by it as a result of any payment or prepayment of this
Note on a date other than the Payment Date, or any failure by the Company
to prepay this Note on the date for such prepayment specified herein.
5. DEFAULTS AND REMEDIES
5.1 Events of Default
This Note shall become and be due and payable upon demand of the holder
hereof, without presentation, protest, or further demand or notice of any
kind (all of which are hereby expressly waived by the Company), if any one
or more of the following events (herein called "Events of Default") shall
occur for any reason whatsoever (and whether such occurrence 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 be continuing at the time of such demand:
(a) if default shall be made in the due and punctual payment of the
principal of this
11
<PAGE>
Appendix A
Note or of any Other Note when and as the same shall become due and
payable, whether at maturity or at a date fixed for prepayment or by
acceleration or otherwise;
(b) if default shall be made in the due and punctual payment of any
installment of interest on any Other Note, when and as such interest
installment shall become due and payable, and such default shall
have continued for a period of five (5) days;
(c) if default shall be made in the performance or observance of any
other of the covenants, agreements or conditions contained in this
Note, the Promissory Note Security Agreement or the Letter
Agreement, and such default shall have continued for a period of
thirty (30) days after written notice thereof to the Company by the
holder of this Note;
(d) if an event or condition occurs or exists, with respect to any
Plan or otherwise, concerning which the Company is under an
obligation to furnish a report to the holder hereof in accordance
with Subparagraph 2.8(e) hereof and as a result of such event or
condition, together with all other such events or conditions, the
Company or any Related Person has incurred or in the reasonable
opinion of the holder hereof is likely to incur a liability to a
Plan or the PBGC (or any combination of the foregoing) which is
material in relation to the financial position of the Company;
(e) if:
(1) the Company or any other party shall commence any case,
proceeding or other action with respect to the Company in any
jurisdiction relating to bankruptcy, insolvency,
reorganization, relief from debtors, an arrangement,
winding-up, liquidation, dissolution or other relief with
respect to its debts and such case, proceeding or other action
remains unstayed, undismissed or undischarged for sixty (60)
days;
(2) an action is commenced seeking the appointment of a receiver,
trustee, custodian or other similar official for the Company
for all or substantially all of its assets, or the Company
makes a general assignment for the benefit of its creditors;
(3) an action is commenced against the Company seeking issuance of
a warrant of attachment, execution, distraint or similar
process against all
12
<PAGE>
Appendix A
or any substantial part of its assets;
(4) the Company becomes insolvent or fails generally to pay its
debts as they become due; or
(5) there is a liquidation, winding up or analogous event with
respect to the Company.
5.2 In addition to the provisions of Subparagraph 5.1(a) through (d), only if
AVSA or an Affiliate of AVSA is the holder of this Note, the occurrence of
any Insecurity Event or Termination Event under Clause 21 of the Agreement
shall also constitute Events of Default for the purpose of this Amendment
to the Agreement.
5.3 Costs and Expenses
The Company covenants that if default be made in any payment of principal
on this Note, it will pay to the holder hereof to the extent permitted
under applicable law, such further amount (in addition to any amounts due
under the Notes) as shall be sufficient to cover the cost and expense of
collection, including reasonable compensation to the attorneys and counsel
of the holder hereof for all services rendered in that connection.
6. COVENANTS BIND SUCCESSORS AND ASSIGNS
All the covenants, stipulations, promises and agreements in this Note
contained by or on behalf of the Company shall bind its successors and
assigns, whether so expressed or not.
7. GOVERNING LAW
THIS NOTE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS WHICH ARE EXECUTED AND FULLY TO BE PERFORMED IN
THAT STATE. The Company hereby irrevocably and unconditionally submits to
the jurisdiction of the federal and state courts in New York, New York in
respect of any action or proceeding arising out of or in connection with
this Note. Final judgement against the Company in any such action or
proceeding shall be conclusive, and may be enforced in other jurisdictions
by suit on the judgment, a certified or true copy of which shall be
conclusive evidence of the fact and of the amount of indebtedness or
liability of the Company therein described; provided, however, that at all
times the holder of this Note may at its option bring suit, or institute
other judicial proceedings against the Company, in any court in any place
where the Company or any of its assets may be found.
13
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Appendix A
8. HEADINGS
The headings of the Paragraphs and Subparagraphs of this Note are inserted
for convenience only and do not constitute a part of this Note.
9. LOST, ETC. NOTES
Upon receipt by the Company of evidence satisfactory to it of the loss,
theft, destruction or mutilation of this Note, and (in case of loss, theft
or destruction) or indemnity satisfactory to it, and upon surrender and
cancellation of this Note, if mutilated, the Company, at its expense, will
make and deliver a new Note of like tenor in lieu of this Note. Any Note
made and delivered in accordance with the provisions of this Subparagraph
9 shall be dated as of the date which such new Note is made and delivered.
The unsecured indemnity agreement of the holder of this Note shall
constitute indemnity satisfactory to the Company for the purposes of this
Subparagraph 9.
10. MISCELLANEOUS
(a) In the event any day for payment of an amount hereunder is not a
Business Day, such payment shall be due and payable on the
immediately preceding Business Day.
(b) All amounts payable under this Note shall be payable without
presentment or demand for payment, protest or further notice or
demand of any kind, all of which are expressly waived by the
Company, except to the extent expressly provided in this Note.
IN WITNESS WHEREOF, MIDWAY AIRLINES CORPORATION has caused this Note to be
signed in its corporate name by its officer thereunto duly authorized, and to be
dated as of the day and year first above written.
MIDWAY AIRLINES CORPORATION
By: /s/ Jonathan S. Waller
--------------------------------
Its: Senior Vice President
General Counsel
14
<PAGE>
Appendix B
MIDWAY AIRLINES CORPORATION
Secured Registered Promissory Note
R. New York, New York
[***] March 27, 1996
MIDWAY AIRLINES CORPORATION, a corporation duly organized and existing
under the laws of the State of Delaware, USA (the "Company"), for value
received, hereby promises to pay to the order of AVSA, S.A.R.L. ("AVSA") or
registered assigns on October 1, 1998, (the "Payment Date"), the principal
amount of [***] in such coin or currency of the United States of America as at
the time of payment shall be legal tender for public and private debts, at the
office of AVSA at 2, rond-point Maurice Bellonte, 31700 Blagnac, France (or at
such other office as the holder hereof shall designate to the Company in
writing).
1. PAYMENT DATE; EXCHANGES; PREPAYMENTS
1.1 Transfer or Exchange
This Note is transferable by the holder hereof as herein provided. The
Company shall keep at its office or agency, maintained as provided in
Subparagraph 2.2, a register in which the Company shall provide for the
registration of this Note and for the registration of transfer of this
Note. The holder of this Note may, at its option and either in person or
by duly authorized attorney, surrender the same for registration of
transfer and receive in exchange herefor a Note, dated as of the transfer
of this Note, for the same aggregate unpaid principal amount as this Note
and registered in such name or names as may be designated by the holder
hereof. This Note, when presented or surrendered for registration of
transfer, shall be duly endorsed or shall be accompanied by a written
instrument of transfer duly executed by the holder of this Note or his
attorney duly authorized in writing. The Note so made and delivered in
exchange for this Note shall in all other respects be in the same form and
have the same terms as this Note and each such exchange or transfer shall
be made in such a manner that no gain or loss of principal shall result
therefrom. No transfer or exchange of this Note shall be valid unless made
in such manner at such office. The Company agrees that it will pay
shipping and insurance charges from and to the principal office of the
holder of this Note involved in any exchange by the holder of this Note.
<PAGE>
Appendix B
1.2 Registered Holders; Payments
Prior to due presentment for registration of transfer of this Note, the
Company may deem and treat the registered holder hereof as the absolute
owner hereof for the purpose of receiving payment of or on account of the
principal of this Note and for the purposes of any notices, waivers or
consents thereunder, and payments of any Note shall be made only to or
upon the order in writing of the registered holder hereof. All payments
made hereunder shall be made in immediately available funds in United
States Dollars prior to 1:00 P.M., New York City time, by credit to Credit
Lyonnais, New York Branch, or to such other account as the holder hereof
shall advise the Company in writing. All payments due under this Note
shall be made in full without set-off, counterclaim, recoupment, or
defense and without deduction or withholding of any kind, provided,
however, the same shall not be deemed a waiver of any rights or remedies
of the Company against the Seller or any of its Affiliates. Consequently,
the Company shall assure that the sums received by the holder of this Note
hereunder shall be equal to the full amounts expressed to be due to the
holder hereunder, without deduction or withholding on account of and free
from any and all taxes, levies, imposts, dues or charges of whatever
nature imposed on the Company, except that if the Company is compelled by
law to make any such deduction or withholding the Company shall pay such
additional amounts as may be necessary in order that the net amount
received by the holder after such deduction or withholding shall equal the
amounts which would have been received in the absence of such deduction or
withholding.
1.3 Optional Prepayments
Upon notice given as provided in Subparagraph 1.5, the Company, at its
option, may prepay this Note, in whole and not in part, at anytime, at one
hundred percent (100%) of the outstanding principal amount thereof,
without premium. This Note shall be paid in whole, at one hundred percent
(100%) of the outstanding principal amount hereof, on the Payment Date.
1.4 Notice of Prepayment and Other Notices
The Company shall give written notice of optional prepayment of this Note
pursuant to Subparagraph 1.3 one (1) Business Day prior to the Payment
Date. Any notice of prepayment and all other notices to be given to any
holder of this Note shall be given by registered or certified mail to the
registered holder hereof at its address designated on the register
maintained by the Company on the date fixed for such notice of prepayment
or other notice. Upon notice of any optional prepayment pursuant to
Subparagraph 1.3, the Company covenants and agrees that it will prepay on
the date therein fixed for prepayment the entire outstanding principal
amount of this Note. The principal amount of this Note shall be due and
payable on the date specified in such notice.
2
<PAGE>
Appendix B
2. COVENANTS
The Company covenants and agrees that so long as this Note shall be
outstanding:
2.1 To Pay Principal
The Company will punctually pay or cause to be paid the principal of this
Note according to the terms hereof at the place of payment hereinabove
specified.
2.2 Maintenance of Company Office
The Company will maintain an office or agency at 300 West Morgan Street,
Suite 1200, Durham, North Carolina 27701, USA or such other place in the
United States of America as the Company may designate in writing to the
holder hereof where notices, presentations and demands to or upon the
Company in respect of the Notes may be given or made.
2.3 To Keep Books
The Company will, and will cause each of its Material Subsidiaries to keep
proper books of record and account in which proper entries will be made of
its transactions in accordance with generally accepted accounting
principles.
2.4 Payment of Taxes; Corporate Existence; Maintenance of Properties
The Company will, and will cause each of its Material Subsidiaries to,
(a) pay and discharge promptly or cause to be paid and discharged
promptly (i) all taxes, assessments and governmental charges or
levies imposed upon it or upon its income or profits or upon any
of its property, real, personal or mixed, or upon any part
thereof, before the same shall become in default, unless the same
is being contested in good faith, (ii) all lawful claims for
labor, materials and supplies which if unpaid, might by law
become a lien or charge upon its property, unless the same is
being contested in good faith, and (iii) all obligations to the
Pension Benefit Guaranty Corporation (or any successor thereto
under the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) ("PBGC").
(b) do or cause to be done all things necessary to preserve and keep in
full force and effect its existence, materially advantageous rights,
licenses, privileges, permits
3
<PAGE>
Appendix B
and franchises and comply in all material respects with all laws and
regulations applicable to it and its business; and
(c) maintain and keep, or cause to be maintained and kept, its
properties, including the Collateral as defined in the Promissory
Note Security Agreement, in good repair, working order and condition
and from time to time make or cause to be made all needful and
proper repairs, renewals, replacements and improvements so that the
business carried on in connection therewith may be properly
conducted at all times.
2.5 To Insure
The Company will, and will cause each of its Material Subsidiaries to,
(a) keep adequately insured, by financially sound and reputable
insurers, all property of a character usually insured by similar
corporations engaged in the same or a similar business similarly
situated against loss or damage of the kinds customarily insured
against by such corporations;
(b) carry, with financially sound and reputable insurers, such other
insurance (including, without limitation, liability insurance) and
in such amounts as is usually carried by corporations engaged in the
same or a similar business similarly situated; and
(c) maintain all such worker's compensation or similar insurance as may
be required under the laws of any state or jurisdiction in which it
may be engaged in business.
All insurance herein provided for shall be effected under a valid and
enforceable policy or policies.
2.6 Sale of Assets
The Company will not, and will not permit any unconsolidated subsidiary
to, sell, lease, transfer or otherwise dispose of all or substantially all
of its assets to any Person other than the Company or any Material
Subsidiary.
2.7 Merger or Consolidation
The Company will not, and will not permit any Material Subsidiary to,
consolidate with or merge into any Person or permit any Person to merge
into it except that
4
<PAGE>
Appendix B
(a) a Material Subsidiary may merge into the Company if the Company is
the surviving corporation or may merge or consolidate with any other
Material Subsidiary or any other corporation if a Material
Subsidiary is the surviving corporation; and
(b) the Company may merge or consolidate with any other Person if (i)
the surviving or successor corporation is a corporation
incorporated or organized under the laws of the United States of
America, one of the states thereof or the District of Columbia,
(ii) the surviving or successor corporation (if not the Company)
shall expressly assume in writing (by an instrument a copy of
which shall be mailed by registered mail to the holder of this
Note) the due and punctual payment of the principal of this Note,
according to its tenor, and the due and punctual performance and
observance of all of the terms, covenants, agreements and
conditions of this Note to be performed or observed by the
Company to the same extent as if such surviving or successor
corporation had originally executed this Note in the place of the
Company, and had been the original maker of this Note, (iii) such
Person is legally able to perform the Company's obligations
hereunder and has a Consolidated net worth, as determined in
accordance with generally accepted accounting principles
consistently applied, not less than the Consolidated net worth of
the Company (similarly determined) at the time of such merger or
consolidation, and (iv) immediately after such consolidation or
merger, no Event of Default or Insecurity Event or event which,
with notice or lapse of time or both, would become an Event of
Default or Insecurity Event, shall have occurred and be
continuing under this Note.
2.8 Information and Reports to be furnished by the Company
The Company will furnish to the holder of this Note:
(a) Reports
(i) Quarterly Reports. Within forty-five (45) days after the end
of each of the first three quarterly fiscal periods in each
fiscal year of the Buyer, a Consolidated balance sheet of the
Buyer and its Consolidated subsidiaries prepared as of the
close of such period, together with the related statements of
income and surplus; and
(ii) Annual Statements. Within ninety (90) days after the end of
each fiscal year of the Buyer, an audited Consolidated balance
sheet of the Buyer and its Consolidated subsidiaries as at the
end of such year (when they
5
<PAGE>
Appendix B
become available), and the related statement of income and
surplus.
(iii) Monthly Reports Within twenty (20) days after the end of each
month in each fiscal year of the Buyer, a Consolidated balance
sheet of the Buyer and its Consolidated subsidiaries prepared
as of the close of such month, together with the related
statements of income and surplus, statement of sources and
uses of cash, as well as such other historical information
relating to such period that the Buyer maintains. Such
information will include, but not be limited to, revenue per
available seat mile, cost per available seat mile, segment
profitability information, the number of total passengers, and
load factor and average fare information.
"Consolidated" means, as applied to any financial or accounting term
or amount, such term or amount determined on a consolidated basis in
accordance with generally accepted accounting principles.
(b) Publicly Filed Reports to Stockholders and the SEC
The Company will furnish the Seller with all publicly filed reports
to stockholders or the United States Securities and Exchange
Commission, if any.
(c) Notice of Default
Immediately upon the Company's becoming aware of the existence of
any default in its performance or observance of any covenant,
agreement or condition contained in this Note or in the Promissory
Note Security Agreement, a written notice specifying the nature and
status thereof and what action the Company is taking with respect
thereto.
(d) Notice of Acceleration
Immediately upon the Company's becoming aware that the holder of any
bond, debenture, promissory note (including any note other than this
Note issued by the Company in favor of Payee or issued pursuant to
Amendment No. 1 to the Agreement ("Other Notes")) or any similar
evidence of indebtedness of the Company or any Material Subsidiary
has demanded payment, given notice or taken any other action with
respect to a claimed Event of Default under any Other Note or
claimed default in respect of or under such bond, debenture or
promissory note, a written notice specifying the demand made, notice
given or action taken by
6
<PAGE>
Appendix B
such holder and the nature and status of the claimed Event of
Default or default and what action the Company is taking with
respect thereto.
(e) ERISA
As promptly as practicable (but in any event not later than fifteen
(1) days) after the Company or Related Person (i) engages in any
"prohibited transaction" (as defined in Section 406 of ERISA or
section 497 of the Internal Revenue Code of 1986, as amended (the
"Code")) with any "employee benefit plan" (as defined in Section 3
(3) of ERISA ("Plan")), (ii) files a notice of intent under Section
4041 of ERISA with the PBGC to terminate any such Plan, (iii)
receives a notice from the PBGC to appoint a trustee to administer
any such Plan, (iv) knows or has reason to know that termination
proceedings with respect to any such Plan have commenced, (v) knows
or has reason to know that any "reportable event" (within the
meaning of Section 4043(b) of ERISA) or other condition with respect
to any such Plan has occurred which will result in a liability to
the PBGC, (vi) fails to make a quarterly installment contribution to
any such Plan with respect to which a lien may be imposed under
section 412(n) of the Code, (vii) knows or has reason to know that
any "accumulated funding deficiency" (as defined in Section 302 of
ERISA), whether or not waived, shall exist with respect to any such
Plan, (viii) withdraws in a "complete withdrawal" or a "partial
withdrawal" from a "multiemployer plan" pursuant to subtitle E of
Title IV of ERISA or knows or has reason to know that it will or is
likely to incur a material liability in connection with any
reorganization or insolvency of such a Plan, or (ix) is involved in
a situation referred to in Section 4204 of ERISA, a statement of an
officer of the Company setting forth the details with respect to the
events resulting in such notice of intent to terminate or to appoint
a trustee, or with respect to such termination proceedings,
reportable event, other condition, withdrawal, or other situation,
as the case may be, and the action which the Company or Related
Person proposes to take with respect thereto, together with a copy
of any such notice of intent to terminate or to appoint a trustee, a
copy of any notice or other papers received by the Company or
Related Person with respect to such termination proceedings, a copy
of any notice of any such reportable event or other condition filed
by the Company or a Related Person with PBGC, a copy of any notice
received by the Company or a Related Person pursuant to Section 4219
of ERISA, or a copy of the papers pertaining to the situation
described in Section 4204 of ERISA, as the case may be.
(f) Miscellaneous Information
7
<PAGE>
Appendix B
From time to time upon request, when the Payee is not the holder of
the Note, such nonproprietary or nonconfidential information
regarding the business, affairs and condition of the Company and of
any Material Subsidiary and its properties in such detail as may
reasonably be requested. The Company covenants and agrees that any
authorized officer or representative of the holder of this Note
shall have the right, at such holder's expense and subject to
applicable governmental regulations, to visit and inspect any of the
properties of the Company and of any Material Subsidiary, to examine
its books of account and to discuss its affairs, finances and
accounts with, and be advised as to the same by, its officers or its
independent certified public accountants all at such reasonable
times and intervals as may be reasonably requested upon not less
that five (5) days' notice.
(g) The Note holder agrees to keep strictly confidential the information
described above in Subparagraph 2.8(f) and to not disclose the same
to any other Person or entity.
2.9 Taxes, etc.
The Company will pay or cause to be paid all United States stamp taxes
(including interest and penalties), if any, solely attributable to the
execution and delivery of this Note, or of any amendment of, or waiver or
consent under or with respect to, this Note, and will indemnify and save
the holder hereof harmless from any loss or damage of any kind whatsoever
resulting from or arising out of the non-payment or delay in the payment
of such taxes.
2.10 Transactions with Affiliates
The Company will not permit any of its Material Subsidiaries to, sell or
transfer any assets (including capital stock of any Subsidiary) to, or
purchase or acquire any assets of, or otherwise engage in any material
transaction (including any merger) with, or permit any Affiliate to sell
or transfer assets (including capital stock of any Subsidiary) to, or
purchase or acquire any assets of, or otherwise engage in any other
material transaction (including any merger) with, any other Affiliate
except for (i) transactions expressly permitted by the Agreement, (ii)
transactions (a) between the Company and one or more Wholly-Owned
Subsidiaries of the Company, provided that in the case of any
consolidation or merger in which the Company is not the surviving
corporation, such transaction shall be permitted pursuant to Subparagraph
2.7 hereof or (b) between Wholly-Owned Subsidiaries of the Company, (iii)
transactions in the ordinary course of business and upon fair and
reasonable terms no less favorable than the Company or any of its
Subsidiaries could obtain or could become entitled to in an arm's-length
transaction
8
<PAGE>
Appendix B
with a Person which was not an Affiliate and then, in any case, only if no
default or Event of Default shall have occurred and be continuing, or (iv)
transactions pursuant to a capital investment by an Affiliate into the
Company on fair and reasonable terms. None of the Company and its
Subsidiaries shall be permitted to amend any material agreement with an
Affiliate if a default or Event of Default has occurred and is continuing.
2.11 Certain Definitions
For purposes of this Note,
(a) "Affiliate" means with respect to any person or entity, any other
person or entity directly or indirectly controlling, controlled by
or under common control with such person or entity.
(b) "Agreement" means the Airbus A320 Purchase Agreement, dated as of
March 17, 1995, between AVSA, S.A.R.L. and the Company.
(c) "Business Day" means any day which is not a Saturday or a Sunday and
which is neither a legal holiday nor a day on which banking
institutions are authorized or required by law or regulation to
close in The City of New York, London, England or Toulouse, France.
(d) "Consolidated" means, as applied to any financial or accounting term
or amount, such term or amount determined on a consolidated basis in
accordance with generally accepted accounting principles;
(e) "Governmental Authority" means any nation or government, any state
or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government;
(f) "Letter Agreement" means the Financial Matters Letter Agreement,
dated March 17, 1995.
(g) "Material Subsidiary" of any Person means, at any time of
determination, each Subsidiary (or a group of Subsidiaries that
would constitute a Material Subsidiary if consolidated and which
are engaged in the same or related lines of business) of such
Person now existing or hereafter acquired or formed by such
Person which
9
<PAGE>
Appendix B
(x) accounted for more than l0% of the Consolidated revenues of such
Person and its Subsidiaries during the twelve-month period ending on
the date of the most recent Consolidated balance sheet of such
Person delivered to the holder of this Note pursuant to Subparagraph
2.8, or (y) was the owner of more than 10% of the Consolidated
assets of such Person and its Subsidiaries at the date of the most
recent Consolidated balance sheet of such Person delivered to the
holders of this Note pursuant to Subparagraph 2.8;
(h) "Person" means any natural person, corporation, partnership, joint
venture, joint-stock company, trust, unincorporated organization,
firm, association, government (or political subdivision thereof),
governmental agency, authority or instrumentality, or any other
entity, whether acting in an individual, fiduciary or other
capacity;
(i) "Promissory Note Security Agreement" means the Promissory Note
Security Agreement, dated as of December 21, 1995.
(j) "Related Person" means any corporation or any trade or business
(whether or not incorporated) which, together with the Company, is a
member of a controlled group of corporations within the meaning of
Section 163(a) of the Code, determined without regard to Section
163(a) (4) and (e)(3)(C) of the Code, or is under common control
with the Company as described in Section 414(c) of the Code;
(k) "Requirement of Law" means as to any Person, the certificate of
incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
any of its property or to which such Person or any of its property
is subject;
(l) "Subsidiary" of any Person means any corporation or other entity
of which such Person, directly or indirectly, shall at the time
(a) own shares of any class or classes with power for the
election of at least a majority of the members of the board of
directors (or the governing body) of such corporation or other
entity other than shares or other interest having such power only
by reason of the happening of a contingency or (b) otherwise have
the legal right to elect such a majority; and
(m) "Wholly-Owned Subsidiary" means, with respect to any Person, any
Subsidiary of such Person all of the outstanding shares of capital
stock of which (other than
10
<PAGE>
Appendix B
directors' qualifying shares) are owned directly by such Person or a
Wholly-Owned Subsidiary of such Person.
3. AMENDMENT AND WAIVER
Any term, covenant, agreement or condition of this Note may, with the
consent of the Company, be amended or compliance therewith may be waived
(either generally or in a particular instance and either retroactively or
prospectively), by one or more written instrument(s) signed by the holder
of this Note.
4. YIELD PROTECTION AND ILLEGALITY
4.1 Illegality
In the event that it becomes unlawful for the holder of this Note to
maintain the loan evidenced hereby on a LIBOR basis, then the holder shall
promptly notify the Company thereof.
4.2 Compensation
The Company shall pay to the holder of this Note, upon the request of the
holder, such amount or amounts as shall be sufficient (in the opinion of
the holder) to compensate it for any actual out-of-pocket loss, cost or
expense incurred by it as a result of any payment or prepayment of this
Note on a date other than the Payment Date, or any failure by the Company
to prepay this Note on the date for such prepayment specified herein.
5. DEFAULTS AND REMEDIES
5.1 Events of Default
This Note shall become and be due and payable upon demand of the holder
hereof, without presentation, protest, or further demand or notice of any
kind (all of which are hereby expressly waived by the Company), if any one
or more of the following events (herein called "Events of Default") shall
occur for any reason whatsoever (and whether such occurrence 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 be continuing at the time of such demand:
(a) if default shall be made in the due and punctual payment of the
principal of this
11
<PAGE>
Appendix B
Note or of any Other Note when and as the same shall become due and
payable, whether at maturity or at a date fixed for prepayment or by
acceleration or otherwise;
(b) if default shall be made in the due and punctual payment of any
installment of interest on any Other Note, when and as such interest
installment shall become due and payable, and such default shall
have continued for a period of five (5) days;
(c) if default shall be made in the performance or observance of any
other of the covenants, agreements or conditions contained in this
Note, the Promissory Note Security Agreement or the Letter
Agreement, and such default shall have continued for a period of
thirty (30) days after written notice thereof to the Company by the
holder of this Note;
(d) if an event or condition occurs or exists, with respect to any
Plan or otherwise, concerning which the Company is under an
obligation to furnish a report to the holder hereof in accordance
with Subparagraph 2.8(e) hereof and as a result of such event or
condition, together with all other such events or conditions, the
Company or any Related Person has incurred or in the reasonable
opinion of the holder hereof is likely to incur a liability to a
Plan or the PBGC (or any combination of the foregoing) which is
material in relation to the financial position of the Company;
(e) if:
(1) the Company or any other party shall commence any case,
proceeding or other action with respect to the Company in any
jurisdiction relating to bankruptcy, insolvency,
reorganization, relief from debtors, an arrangement,
winding-up, liquidation, dissolution or other relief with
respect to its debts and such case, proceeding or other action
remains unstayed, undismissed or undischarged for sixty (60)
days;
(2) an action is commenced seeking the appointment of a receiver,
trustee, custodian or other similar official for the Company
for all or substantially all of its assets, or the Company
makes a general assignment for the benefit of its creditors;
(3) an action is commenced against the Company seeking issuance of
a warrant of attachment, execution, distraint or similar
process against all
12
<PAGE>
Appendix B
or any substantial part of its assets;
(4) the Company becomes insolvent or fails generally to pay its
debts as they become due; or
(5) there is a liquidation, winding up or analogous event with
respect to the Company.
5.2 In addition to the provisions of Subparagraph 5.1(a) through (d), only if
AVSA or an Affiliate of AVSA is the holder of this Note, the occurrence of
any Insecurity Event or Termination Event under Clause 21 of the Agreement
shall also constitute Events of Default for the purpose of this Amendment
to the Agreement.
5.3 Costs and Expenses
The Company covenants that if default be made in any payment of principal
on this Note, it will pay to the holder hereof to the extent permitted
under applicable law, such further amount (in addition to any amounts due
under the Notes) as shall be sufficient to cover the cost and expense of
collection, including reasonable compensation to the attorneys and counsel
of the holder hereof for all services rendered in that connection.
6. COVENANTS BIND SUCCESSORS AND ASSIGNS
All the covenants, stipulations, promises and agreements in this Note
contained by or on behalf of the Company shall bind its successors and
assigns, whether so expressed or not.
7. GOVERNING LAW
THIS NOTE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS WHICH ARE EXECUTED AND FULLY TO BE PERFORMED IN
THAT STATE. The Company hereby irrevocably and unconditionally submits to
the jurisdiction of the federal and state courts in New York, New York in
respect of any action or proceeding arising out of or in connection with
this Note. Final judgement against the Company in any such action or
proceeding shall be conclusive, and may be enforced in other jurisdictions
by suit on the judgment, a certified or true copy of which shall be
conclusive evidence of the fact and of the amount of indebtedness or
liability of the Company therein described; provided, however, that at all
times the holder of this Note may at its option bring suit, or institute
other judicial proceedings against the Company, in any court in any place
where the Company or any of its assets may be found.
13
<PAGE>
Appendix B
8. HEADINGS
The headings of the Paragraphs and Subparagraphs of this Note are inserted
for convenience only and do not constitute a part of this Note.
9. LOST, ETC. NOTES
Upon receipt by the Company of evidence satisfactory to it of the loss,
theft, destruction or mutilation of this Note, and (in case of loss, theft
or destruction) or indemnity satisfactory to it, and upon surrender and
cancellation of this Note, if mutilated, the Company, at its expense, will
make and deliver a new Note of like tenor in lieu of this Note. Any Note
made and delivered in accordance with the provisions of this Subparagraph
9 shall be dated as of the date which such new Note is made and delivered.
The unsecured indemnity agreement of the holder of this Note shall
constitute indemnity satisfactory to the Company for the purposes of this
Subparagraph 9.
10. MISCELLANEOUS
(a) In the event any day for payment of an amount hereunder is not a
Business Day, such payment shall be due and payable on the
immediately preceding Business Day.
(b) All amounts payable under this Note shall be payable without
presentment or demand for payment, protest or further notice or
demand of any kind, all of which are expressly waived by the
Company, except to the extent expressly provided in this Note.
IN WITNESS WHEREOF, MIDWAY AIRLINES CORPORATION has caused this Note to be
signed in its corporate name by its officer thereunto duly authorized, and to be
dated as of the day and year first above written.
MIDWAY AIRLINES CORPORATION
By: /s/ Jonathan S. Waller
--------------------------------
Its: Senior Vice President
General Counsel
14
<PAGE>
Amendment No. 6
TO THE A320 PURCHASE AGREEMENT
dated as of March 17, 1995
between
AVSA, S.A.R.L.,
and
MIDWAY AIRLINES CORPORATION
This Amendment No. 5 (hereinafter referred to as the "Amendment") entered into
as of February __, 1997, by and between AVSA, S.A.R.L., societe a responsabilite
limitee organized and existing under the laws of the Republic of France, having
its registered office located at 2, rond-point Maurice Bellonte, 31700 Blagnac,
FRANCE (hereinafter referred to as the "Seller"), and MIDWAY AIRLINES
CORPORATION, a body corporate, organized and existing under the laws of the
State of Delaware, United States of America, having its principal corporate
offices located at 300 West Morgan Street, Suite 1200, Durham, NC 27701
(hereinafter referred to as the "Buyer").
WITNESSETH:
WHEREAS, the Buyer and the Seller entered into (i) a Purchase Agreement,
dated as of March 17, 1995, relating to the sale by the Seller and the purchase
by the Buyer of certain Airbus Industrie A320-200 model aircraft (the
"Aircraft"), which, as previously amended by Amendment No. 1 dated as of
December 21, 1995, Amendment No. 2 dated as of January 31, 1996, Amendment No. 3
dated as of February 28, 1996, Amendment No. 4 dated as of March 27, 1996, and
Amendment No. 5 dated as of October 29, 1996, and supplemented with all
Exhibits, Appendixes and Letter Agreements attached thereto, is hereinafter
called the "Agreement," (ii) a related letter agreement regarding "Financial
Matters," which, as previously amended by Amendment No. 1 dated as of December
21, 1995, Amendment No. 2 dated as of March 27, 1996, Amendment No. 3 dated as
of October 29, 1996, and Amendment No. 4 dated the date hereof, is hereinafter
called the "Financial Matters Agreement," (iii) a related Security Agreement,
dated as of March 17, 1995, and (iv) a Promissory Note Security Agreement, dated
as of December 21, 1995, hereinafter referred to as the "Promissory Note
Security Agreement" and
<PAGE>
WHEREAS, in connection with the Buyer's reorganization, the Buyer has
asked the Seller and the Seller agrees to reschedule the delivery dates of the
Aircraft and make other changes to the Agreement, under the conditions set forth
in this Amendment; and
WHEREAS, capitalized terms used herein and not otherwise defined in this
Amendment will have the meanings assigned to them in the Agreement, and the
terms "herein," "hereof," and hereunder and words of similar import refer to
this Amendment.
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS HEREINAFTER SET
FORTH, IT IS AGREED AS FOLLOWS:
1. FIRM AIRCRAFT DELIVERY POSITIONS
The Buyer and the Seller agree that the delivery schedule for Firm
Aircraft set forth in Subclause 9.1 of the Agreement is superseded and
replaced by the following schedule:
QUOTE
Firm Aircraft Month of Delivery
------------- -----------------
No. 1 December 2005
No. 2 January 2006
No. 3 February 2006
No. 4 December 2006
UNQUOTE
2. OPTION AIRCRAFT DELIVERY POSITIONS
The Buyer and the Seller agree that the delivery schedule for Option
Aircraft set forth in Paragraph 3 of Letter Agreement No. 3 to the
Agreement is superseded and replaced by the following schedule:
QUOTE
Option Aircraft No. Month of Delivery
------------------- -----------------
No. 1 January 2007
No. 2 February 2007
No. 3 November 2007
No. 4 December 2007
UNQUOTE
2
<PAGE>
3. PROMISSORY NOTES
The Seller will cancel and return to the Buyer the two (2) promissory
notes (referred to as the "New Replacement December 1995 Note" and the
"New Rescheduled Payments Note" under Amendment No. 5 to the Agreement)
and will take all steps necessary to terminate and release all of its
security interest under the Promissory Note Security Agreement, made by
the Buyer and the Seller to secure the Buyer's obligations under the New
Replacement December 1995 Note and under the New Rescheduled Payments
Note.
4. FIRM AIRCRAFT PREDELIVERY PAYMENTS
The Buyer and the Seller agree that the schedule for Predelivery Payments
for each of the Firm Aircraft set forth in Subclause 6.2.3 of the
Agreement is amended by deleting the requirement that the Buyer make the
third payment no later than December 30, 1995, and the fourth payment no
later than June 30, 1996, and by instead requiring the Buyer to make the
third and fourth payments together (representing a total of two-thirds of
one percent of the Predelivery Payment Reference Price) twenty-four (24)
months prior to delivery.
5. OPTION AIRCRAFT PREDELIVERY PAYMENTS
The Buyer and the Seller agree that the schedule for Predelivery Payments
for each of the Option Aircraft set forth in Subclause 6.2.3 of the
Agreement is amended by deleting the requirement that the Buyer make the
second payment no later than December 30, 1995, and the third payment no
later than June 30, 1996, and by instead requiring the Buyer to make the
second and third payments together ([***] for each of the
Option Aircraft) at the same time the fourth payment is due, upon Option
Aircraft exercise but not later than twenty-four (24) months prior to
delivery.
6. INSECURITY EVENTS
The Buyer and the Seller agree that the Agreement is amended by deleting
Subclauses 21.2(a), 21.2(b), 21.2(g) and 21.2(h) thereof in their
entirety.
7. MERGER
The Buyer intends to become the surviving corporation of the merger of
GoodAero, Inc., a Delaware corporation, into the Buyer (the "Merger"),
pursuant to which Merger the Buyer's current majority shareholder will
cease to control eighty percent (80%) of the outstanding voting shares of
the Buyer. Following the consummation of the Merger, the shareholders of
GoodAero, Inc., will have the right to vote that number of votes that will
3
<PAGE>
equal to seventy percent (70%) of all votes in the aggregate on each
matter submitted to a vote of the holders of the Buyer's common stock. The
Seller agrees that the consummation of the Merger will not constitute an
Insecurity Event under Subclause 21.2(e) of the Agreement.
8. ADVANCEMENT OF DELIVERIES
Upon twenty-four (24) months' advance written notice to the Seller by the
Buyer, the Seller agrees to review the availability of delivery dates for
the Aircraft earlier than those set forth in Subclause 9.1 of the
Agreement (as amended hereby) and in Paragraph 3 of Letter Agreement No. 3
(as amended hereby), subject to the Seller's commercial and industrial
constraints.
9. CONFIDENTIALITY
Subject to any legal or governmental requirements of disclosure, the
parties (which for this purpose shall include their employees, agents and
advisors) shall maintain the terms and conditions of this Amendment and
any reports or other data furnished hereunder strictly confidential.
Without limiting the generality of the foregoing, the Buyer and the Seller
shall use their best efforts to limit the disclosure of the contents of
this Amendment to the extent legally permissible in any filing required to
he made by the Buyer or the Seller, as the case may be, with any
governmental agency and shall make such applications as shall he necessary
to implement the foregoing. With respect to any public disclosure or
filing, each party agrees to submit to the other party a copy of the
proposed document to be filed or disclosed and will give the other party a
reasonable period of time in which to review the said document. The Buyer
and Seller shall consult with each other prior to the making of any public
disclosure or filing, permitted hereunder, of this Amendment or the terms
and conditions thereof. The provisions of this Paragraph 9 shall survive
any termination of this Amendment.
10. EFFECT OF AMENDMENT
The Agreement will be deemed amended to the extent herein provided, and,
except as specifically amended hereby, will continue in full force and
effect in accordance with its original terms, except that if the Agreement
and this Amendment have specific provisions that are inconsistent, the
specific provisions contained in this Amendment will govern. It is
understood that this Amendment does not in any way constitute a waiver by
the Seller of any rights it has under the Agreement or under the Financial
Matters Agreement.
Further, it is agreed that this Amendment is subject to the parties'
executing as of the date hereof an amendment to the Financial Matters
Agreement and the Promissory Note Security Agreement, if applicable.
4
<PAGE>
11. INTERPRETATION AND LAW
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND THE PERFORMANCE
THEREOF SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.
THE PARTIES HEREBY ALSO AGREE THAT THE UNITED NATIONS CONVENTION ON THE
INTERNATIONAL SALE OF GOODS SHALL NOT APPLY TO THIS TRANSACTION.
5
<PAGE>
If the foregoing correctly sets forth our understanding, please execute
this Amendment in the space provided below, whereupon, as of the date first
above written, this Amendment will constitute part of the Agreement.
Agreed and accepted Yours sincerely,
MIDWAY AIRLINES AVSA, S.A.R.L.
CORPORATION
By: /s/ Jonathan S. Waller By: /s/ Christophe Mourey
----------------------------- ----------------------------------
Its: Senior Vice President Its: AVSA Chief Executive Officer
By:
--------------------------------
Its:
--------------------------------
6
<PAGE>
LETTER AGREEMENT NO. 2
As of March 17, 1995
Midway Airlines Corporation
5713 S. Central Avenue
Chicago, IL 60638
Re: PURCHASE INCENTIVES AND MISCELLANEOUS MATTERS
Dear Sir or Madam:
Midway Airlines Corporation (the "Buyer"), and AVSA, S.A.R.L. (the
"Seller"), have entered into an Airbus A320-200 Purchase Agreement dated as of
even date herewith (the "Agreement"), which covers, among other things, the sale
by the Seller and the purchase by the Buyer of certain Aircraft. The Buyer and
the Seller have agreed to set forth in this Letter Agreement No. 2 (the "Letter
Agreement") certain additional terms and conditions regarding the sale of the
Aircraft. The terms "herein," "hereof" and "hereunder" and words of similar
import refer to this Letter Agreement. Capitalized terms used herein and not
otherwise defined in this Letter Agreement shall have the meanings assigned
thereto in the Agreement.
Both parties agree that this Letter Agreement shall constitute an
integral, nonseverable part of said Agreement, that the provisions of said
Agreement are hereby incorporated herein by reference, and that this Letter
Agreement shall be governed by the provisions of said Agreement, except that if
the Agreement and this Letter Agreement have specific provisions that are
inconsistent, the specific provisions contained in this Letter Agreement shall
govern.
1. AIRFRAME CREDIT
The Seller will provide the Buyer a credit memorandum of [***] at January
1995 delivery conditions, subject to escalation as per the Airframe
escalation formula set forth in Exhibit "G" to the Agreement, on delivery
of each Aircraft. This credit memorandum may either be applied against the
Final Contract Price of the Aircraft or may be used for the purchase of
goods and services from Seller or any of its affiliates.
2. SCN CREDIT
The Seller will provide the Buyer an SCN credit memorandum of [***]
<PAGE>
[***] per Aircraft at January 1995 delivery conditions, subject to
escalation as per the Airframe escalation formula set forth in Exhibit "G"
to the Agreement, on delivery of each Aircraft. This credit will be
applied against the price of SCNs for the Aircraft.
3. AIRCRAFT DELIVERY RELATED MATTERS
3.1 Notwithstanding the provisions of Clause 9 of the Agreement, the Buyer may
request in writing to the Seller not later than thirty (30) days prior to
delivery of an Aircraft, to have an Aircraft closing procedure take place
in a location other than Toulouse, France, and other than the United
States of America or Canada (the "Alternate Closing Site"), provided,
however, that:
(i) the Buyer's request is solely to facilitate the Buyer's financing of
the Aircraft; and
(ii) such Alternate Closing Site is acceptable to the Seller and the
Seller agrees in writing to such Alternate Closing Site; and
(iii) the Buyer agrees to pay the Seller all direct incremental costs
arising from the relocation to the Alternate Closing Site, if any;
and
(iv) the acceptance of the Aircraft shall have taken place in Toulouse,
France, and all documentation required by the Seller to effect the
delivery shall have been signed.
3.2 The Buyer may request the Seller (not fewer than sixty (60) days prior to
the first day of the month of delivery of an Aircraft, pursuant to Clause
9 of the Agreement) to reschedule the delivery of an Aircraft by no more
than two (2) weeks, provided, however, that such request shall be
evidenced in writing and state that such request is based exclusively on
operational constraints of the Buyer. The Seller shall then, subject to
its reasonable commercial and industrial constraints, notify the Buyer of
a rescheduled (if applicable) delivery date for the Aircraft within the
timeframe set forth in the immediately preceding sentence. The Buyer's
obligation to take delivery of the Aircraft under this Agreement shall not
be altered in any manner by the provisions of this Subparagraph 3.2.
LA No. 2-2
<PAGE>
4. DELIVERY DELAY RELATED MATTERS
4.1 Notwithstanding the provisions of Clauses 10 and 11 of the Agreement, if
the Agreement is terminated with respect to any Aircraft under Clause 10
or Clause 11 of the Agreement, then, in respect of Buyer Furnished
Equipment in the possession of the Seller at the time of such termination,
the Seller, at its option, will take one of the following actions:
(i) install such Buyer Furnished Equipment on another Aircraft; or
(ii) install such Buyer Furnished Equipment on another aircraft in
production (subject to reasonable industrial and commercial
constraints), and provided the Seller has been able to so install
such Buyer Furnished Equipment, refund to the Buyer an amount equal
to the price it paid for such Buyer Furnished Equipment; or
(iii) obtain the Buyer's consent, such consent not to be unreasonably
withheld, to sell the Buyer Furnished Equipment as "used," and,
after such sale, pay an amount equal to the proceeds of such sale to
the Buyer; or
(iv) in the event of an Aircraft that is lost, destroyed or damaged
beyond economic repair, if the Seller is insured for loss of such
Buyer Furnished Equipment, obtain compensation therefor from the
Seller's insurance company and pay the Buyer an amount equal to the
lower of (a) the amount the Buyer paid for such Buyer Furnished
Equipment and (b) the amount the Seller received from its insurance
company for, such Buyer Furnished Equipment.
The Seller shall have no other obligation to the Buyer with respect to
such Buyer Furnished Equipment.
4.2 The provisions of Clause 5 of the Agreement notwithstanding, for each
A320-200 model Aircraft delivered that is the subject of an inexcusable
delay under Clause 11 of the Agreement, the Final Contract Price (set
forth in Subclause 4.2 of the Agreement), the airframe credit memorandum
and SCN credit memorandum (set forth in, respectively, Paragraphs 1 and 2
of this Letter Agreement), shall be revised in accordance with Exhibit
"G", "H" or "I" (as
LA No. 2-3
<PAGE>
applicable) to, at the Buyer's option, either (i) the month of delivery
originally scheduled and set forth in Subclause 9.1 of the Agreement or in
Paragraph 3 of Letter Agreement No. 3 to the Agreement (as applicable) for
such Aircraft or (ii) the rescheduled delivery date.
4.3 The provisions of Clause 5 of the Agreement notwithstanding, for each
Converted A319 Aircraft delivered that is the subject of an inexcusable
delay under Clause 11 of the Agreement, the Final Contract Price (set
forth in Subparagraph 9.4.2.2 of Letter Agreement No. 3 to the Agreement),
and the airframe credit memorandum, SCN credit memorandum and CFM credit
memorandum (set forth in, respectively, Subparagraphs 9.5.1, 9.5.2 and
9.5.3 of Letter Agreement No. 3 to the Agreement), shall be revised in
accordance with Exhibit "G," "H" or "I" (as applicable) to, at the Buyer's
option, either (i) the month of delivery originally scheduled and set
forth in Subparagraph 9.3 of Letter Agreement No. 3 to the Agreement for
such Converted A319 Aircraft or (ii) the rescheduled delivery date.
4.4 Notwithstanding the provisions of Subclause 11.1 of the Agreement and
beginning only with the third Aircraft that is the subject of an
inexcusable delay under Clause 11 and for which delivery is delayed
thirty-one (31) or more days, the Seller will also pay or credit to the
Buyer, at the Buyer's option and subject to the provisions of Subclause
11.3 of the Agreement, liquidated damages for the first thirty (30) days
of the inexcusable delay period. Such liquidated damages will be in the
amount of [***] for each of the first thirty (30) days of delay in
delivery of the affected Aircraft.
No other provision of Clause 11 of the Agreement shall be amended by this
Subparagraph 4.4.
5. PROPULSION SYSTEMS SELECTION
The Buyer hereby irrevocably selects International Aero Engines as the
Propulsion Systems manufacturer to equip the Aircraft.
6. TAX RELATED MATTERS
6.1 Notwithstanding the provisions of Subclause 4.4 of the Agreement, in the
event a material tax, tariff or duty has been levied, assessed, charged or
collected by the
LA No. 2-4
<PAGE>
United States of America specifically and exclusively on goods imported
from the Republic of France (due to a situation of trade retaliation by
the United States government specifically and exclusively against the
Republic of France), the Buyer and the Seller shall cooperate to reduce
the amount of or obtain a waiver of the obligation to pay such tax, tariff
or duty.
6.2 Notwithstanding the provisions of Subclause 4.4 of the Agreement, in the
event a material tax, tariff or duty has been levied, assessed, charged or
collected by the Commonwealth of Virginia in connection with the
fabrication, manufacture, modification, assembly, sale, delivery, use of
or payment under this Agreement for any Aircraft, component, accessory,
equipment or part delivered or furnished hereunder, then the Buyer and the
Seller shall cooperate to reduce the amount of or obtain a waiver of the
obligations to pay such tax, tariff or duty.
7. [***]
7.1 In consideration of the following conditions, the terms of Subparagraph
7.2 will apply:
7.1.1 The Buyer's operation, over time starting in April 1995, of ten (10)
A320-200 aircraft leased medium to long term by the Buyer from operating
lessors (including not fewer than four (4) A320 aircraft from ORIX), such
leases to begin between on or about April 1995 and the end of 1996; and
7.1.2 The Buyer's execution of the Agreement with the Seller for the purchase by
the Buyer from the Seller of four (4) Firm Aircraft to be delivered by the
Seller to the Buyer starting in December 1998 with an option to purchase
four (4) additional Option Aircraft; and
7.1.3 The Buyer's request and the Seller's acceptance to advance certain product
support services prior to the time when they would otherwise have been
available under the Agreement (excluding for this purpose only the Letter
Agreements).
7.2 The Buyer and the Seller agree to the following terms with respect to the
provision by the Seller of the [***] (as defined in Paragraph 7.2.1
below):
7.2.1 [***]
LA No. 2-5
<PAGE>
January 1995 delivery conditions subject to escalation pursuant to the
Airframe Price Revision Formula set forth in Exhibit "G" of the Agreement)
[***] based on the support of ten (l0) A320 aircraft; and
7.2.2 The [***] shall include product support goods and services from the Seller
or its Affiliates as further described in Subparagraphs 7.3 through 7.7
hereafter; and
7.2.3 The Seller and the Buyer agree, from time to time (but not later than at
the end of 1996), to review the number of leased A320 aircraft in the
Buyer's fleet in order to monitor the [***], should the number of A320
aircraft leased medium to long term be fewer than ten (10). The Buyer will
use its commercially reasonable efforts, whenever practicable, to have
product support allowances assigned by operating lessors (other than by
ORIX for the first four (4) A320 aircraft leased by the Buyer) included as
part of its A320 aircraft lease transactions. Any such allowances received
by the Buyer may be used by it to purchase goods and services from the
Seller or its Affiliates without affecting the Upfront Support Package.
7.2.4 Except as may otherwise be mutually agreed from time to time by the Seller
and the Buyer, at no time prior to the delivery of the first Firm Aircraft
shall the Seller be required to provide support services [***]
7.2.5 [***]
7.3 [***]
As part of the contractual allowances set forth in Clause 14 and Exhibit
"F" of the Agreement, it is hereby agreed that the Seller shall provide
the Buyer with certain advanced Technical Publications (the "Upfront
Technical Publications).
It is agreed that the Seller shall not, by virtue of this Letter Agreement
or otherwise, be required to
LA No. 2-6
<PAGE>
deliver technical publications and revision services thereto at any time
in excess of the provisions for Technical Publications set forth in the
Agreement and the total requirements set forth in said Exhibit "F" to
the Agreement (including, but not limited to, the quantities, format,
total aggregate duration of the revision service and customization).
Notwithstanding the foregoing, the Seller hereby agrees to integrate and
customize the Upfront Technical Publications beginning with the first
revision cycle following December 1996, provided, however, that the Buyer
then operates at least ten (10) A320 aircraft.
7.4 UPFRONT SUPPORT WITH RESPECT TO FIELD ASSISTANCE
As part of the contractual allowance set forth in Clause 15 of the
Agreement, it is agreed that the Seller shall provide the Customer Support
Representatives referred to therein starting with the month of April 1995
with respect to one Customer Support Representative. The allocation of
further Customer Support Representatives will be further reviewed between
the Buyer and the Seller as operational requirements dictate.
In no event shall the total aggregate number of man-months of Customer
Support Representatives exceed a total of [***]
7.5 UPFRONT SUPPORT WITH RESPECT TO TRAINING
As part of the contractual allowance set forth in Clause 16 of the
Agreement, it is agreed that the Seller will provide the Buyer with
advanced training (the "Upfront Training"). The Upfront Training will
include the following goods and services:
(i) Flight crew instructor familiarization training for [***] (each of
which consists of a captain and a first officer). Among these [***]
shall also receive flight-crew instructor familiarization training.
Each such flight crew may be converted to (a) dry or wet lease full
flight or fixed base simulator hours or (b) computer based training
or (c) maintenance training or (d) maintenance line training or (e)
flight crew line training, at the conversion rates set forth in
Appendix 1 to this Letter Agreement.
LA No. 2-7
<PAGE>
At any point in time, in lieu of such flight crew training (or the
converted flight crew training as per above) then unused and
remaining, the Buyer may elect to receive a cash payment equal to
[***] per crew trained by a third party. Alternatively and in lieu
of such cash payment, the Buyer may elect to either (x) apply the
amount equal to the cash payment (to the extent available) against
the Final Contract Price of each Firm Aircraft at a rate in no
event to [***] per delivered Firm Aircraft or (y) use an amount
equal to the cash payment (to the extent available) to purchase
goods and services from the Seller or its Affiliates.
(ii) [***] including on-the-job training, at the Buyer's facilities, if
desired and when feasible.
At any point in time, in lieu of such maintenance training then
unused and remaining, the Buyer may elect to receive a cash payment
equal to [***] per maintenance trainee day of training performed by
a third party. Alternatively and in lieu of such cash payment, the
Buyer may elect to either (x) apply the amount equal to the cash
payment (to the extent available) against the Final Contract Price
of each Firm Aircraft at a rate in no event to [***] per delivered
Firm Aircraft or (y) use an amount equal to the cash payment (to
the extent available) to purchase goods and services (including but
not limited to VACBI) from the Seller or its Affiliates.
(iii) [***] of performance/ operations courses.
(iv) Cabin attendant training for up to [***] cabin attendants.
7.6 UPFRONT SUPPORT WITH RESPECT TO SPARE PARTS PROCUREMENT
The Buyer shall have the option to (i) purchase spare parts from the
Seller pursuant to Letter Agreement No. 1 to the Agreement and (ii) have
access to a pool of
LA No. 2-8
<PAGE>
spare parts under a standard exchange support program developed by the
Seller, under terms to be mutually agreed between the Buyer and the Seller
after execution of the Agreement.
7.7 TOOLING AND SUPPORT EQUIPMENT
As a portion of and included in the [***], upon
execution of the first operating lease agreement for A320 aircraft, the
Seller will provide the Buyer with a credit memorandum (not to be
escalated) in an amount of [***]
[***] may be used for the purchase of A320 tooling and support equipment
from the Seller (the "Tooling Equipment"). In the event no further A320
tooling and support equipment is required by the Buyer, then the Buyer may
use the remaining portion of the Tooling Credit (if applicable) for the
purchase of Material from the Seller.
The Buyer will ensure and hereby undertakes that the Tooling Equipment be
free of all lien charges or other encumbrances at all times.
The Buyer hereby grants and conveys to the Seller a first-priority lien on
and security interest in all right, title and interest, if any, of the
Buyer in the Tooling Equipment. The Buyer shall cooperate with the Seller
in the preparation and filing for recordation with the FAA under the
Federal Aviation Act of 1958, as amended, of the relevant documentation
relating to security on the Tooling Equipment.
Further requirements relating to the security and collateralization of the
Tooling Equipment are outlined in the Security Agreement between the Buyer
and the Seller dated the date hereof.
8. TRAINING SUPPORT
Upon execution of the Agreement, the Seller will provide the Buyer with a
credit memorandum in addition to the [***] in the amount of [***] for the
purchase of training goods and services from the Seller (the "Supplemental
Credit"). In the event the Supplemental Credit has not been utilized at
the time of delivery of the first Firm Aircraft, then, upon delivery of
such first Firm Aircraft and each further
LA No. 2-9
<PAGE>
three (3) Firm Aircraft thereafter, the Seller will provide the Buyer with
a credit memorandum in the amount of [***] to be applied against the Final
Contract Price of each of the four (4) Firm Aircraft.
9. OTHER MATTERS
In the event (i) the Buyer is entitled to use a credit memorandum from the
Seller (when available) to purchase Material from a Vendor, and (ii) the
Buyer has negotiated terms and conditions relating to the provision of
such Material directly with the Vendor of Material, then the Seller shall
agree to pay such Vendor directly for the price of such Material,
provided, however, that the Seller shall be entitled to charge a
reasonable administrative fee to the Buyer (if applicable).
10. ASSIGNMENT
Notwithstanding any other provision of this Letter Agreement or of the
Agreement, this Letter Agreement and the rights and obligations of the
Buyer hereunder shall not be assigned or transferred in any manner without
the prior written consent of the Seller, and any attempted assignment or
transfer in contravention of the provisions of this Paragraph 10 shall be
void and of no force or effect.
LA No. 2-10
<PAGE>
If the foregoing correctly sets forth our understanding, please execute
the original and one (1) copy hereof in the space provided below and return a
copy to the Seller.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ Christophe Mourey
------------------------------------
Its: AVSA Chief Executive Officer
Date: March 17, 1995
Accepted and Agreed
Midway Airlines Corporation
By: /s/ Brian J. Olds
---------------------------
Brian J. Olds
Its: Executive Vice President
Chief Operating Officer
<PAGE>
APPENDIX 1 TO LETTER AGREEMENT
In lieu of each flight crew trained pursuant to Paragraph 7.5 (i) of this Letter
Agreement, the Buyer shall have the flexibility to receive any one of the items
listed below:
(i) Simulator time:
================================================================================
Full-flight Simulator Fixed Based Simulator
- --------------------------------------------------------------------------------
Dry Lease [***] [***]
- --------------------------------------------------------------------------------
Wet Lease [***] [***]
(with Simulator
instructor
================================================================================
or
(ii) [***] trainee days of maintenance instruction
or
(iii) Computer-based training:
================================================================================
Company Licensing CBT Courseware
- --------------------------------------------------------------------------------
Flight Crew [***] [***]
- --------------------------------------------------------------------------------
Maintenance [***] [***]
================================================================================
or
(iv) [***] maintenance line instructor days.
or
(v) [***] flight crew line instructor days.
LA No. 2-12
<PAGE>
LETTER AGREEMENT NO. 3
As of March 17, 1995
Midway Airlines Corporation
5713 S. Central Avenue
Chicago, IL 60638
Re: OPTION AIRCRAFT
Dear Sir or Madam:
Midway Airlines Corporation (the "Buyer"), and AVSA, S.A.R.L. (the
"Seller"), have entered into an Airbus A320-200 Purchase Agreement dated as of
even date herewith (the "Agreement"), which covers, among other things, the sale
by the Seller and the purchase by the Buyer of certain Aircraft. The Buyer and
the Seller have agreed to set forth in this Letter Agreement No. 3 (the "Letter
Agreement") certain additional terms and conditions regarding the sale of the
Aircraft. The terms "herein," "hereof" and "hereunder" and words of similar
import refer to this Letter Agreement. Capitalized terms used herein and not
otherwise defined in this Letter Agreement shall have the meanings assigned
thereto in the Agreement.
Both parties agree that this Letter Agreement shall constitute an
integral, nonseverable part of said Agreement, that the provisions of said
Agreement are hereby incorporated herein by reference, and that this Letter
Agreement shall be governed by the provisions of said Agreement, except that if
the Agreement and this Letter Agreement have specific provisions that are
inconsistent, the specific provisions contained in this Letter Agreement shall
govern.
The Seller hereby grants the Buyer the right to convert its Option Aircraft into
Aircraft, as set forth in this Letter Agreement.
1. SCOPE
The Seller hereby grants the Buyer and the Buyer hereby takes
options on up to four (4) Option Aircraft under the terms and
conditions set forth in the Agreement except as set forth in this
Letter Agreement.
2. SPECIFICATION
The specification for the Option Aircraft will be as set forth in
Subclause 2.2 of the Agreement.
<PAGE>
3. DELIVERY
Subject to the provisions of the Agreement, the Seller shall have
the Option Aircraft ready for delivery at Aerospatiale's works near
Toulouse, France, and the Buyer shall accept the same, during the
months set forth below:
Option Aircraft No. Month of Delivery
------------------- -----------------
1 January 2000
2 February 2000
3 November 2000
4 December 2000
4. OPTION EXERCISE
The Buyer shall exercise its option to purchase an Option Aircraft
by written notification to the Seller and payment of the fourth
Predelivery Payment therefor as stipulated in Paragraph 7 hereof no
later than the first day of the twenty-fourth (24th) month prior to
the scheduled month of delivery of such Option Aircraft, according
to the schedule set forth in Paragraph 3 of this Letter Agreement.
Provided that the first three Predelivery Payments for the Option
Aircraft have been received pursuant to Subclause 6.2.3 of the
Agreement, an Option Aircraft for which written notification and the
fourth Predelivery Payment have been received as set forth in this
paragraph shall be deemed a "Converted Option Aircraft."
In the event that the Seller does not receive both written
notification and all of the first four Predelivery Payments due in
accordance with Subclause 6.2.3 of the Agreement with respect to an
Option Aircraft being converted into an Aircraft, then the Buyer's
right to exercise its rights with respect to such individual Option
Aircraft shall expire and the parties shall have no further
obligations to one another with respect thereto.
5. OPTION AIRCRAFT BASE PRICE
The Base Price of the Converted Option Aircraft shall be the same as
for the Aircraft, the terms and conditions of which are set forth in
Clause 4 of the Agreement. The Base Price of the Propulsion Systems
shall be as quoted by the Propulsion Systems manufacturer at the
time of Option Aircraft exercise.
6. CREDIT MEMORANDA
Subject to the provisions of Paragraph 5 above, the Seller will
provide the Buyer with an airframe credit memorandum, and SCN credit
memorandum for each Option Aircraft equal to (in January 1995
delivery conditions) and determined in the same
LA No. 3-2
<PAGE>
manner as for the Aircraft. The terms and conditions of such credit
memoranda are set forth in Paragraph 1 and Paragraph 2,
respectively, of Letter Agreement No. 2 to the Agreement.
7. PREDELIVERY PAYMENTS
Predelivery Payments for each Converted Option Aircraft shall be due
as set forth in Subclause 6.2.3 of the Agreement. The fourth
Predelivery Payment for each Converted Option Aircraft shall be paid
no later than upon the Buyer's written notification to the Seller of
its exercise of the option to purchase such Option Aircraft.
8. OTHER MATTERS
Each Converted Option Aircraft shall be an Aircraft for the
purposes of the provisions of Clauses 1 through 22 of the Agreement,
the Exhibits to the Agreement, Letter Agreement No. 1 to the
Agreement and Paragraphs 1, 2, 3, 4.1, 4.2, 4.4, 5 and 6 of Letter
Agreement No. 2 to the Agreement. No other provisions of the
Agreement shall apply to such Converted Option Aircraft.
9. A319 AIRCRAFT OPTION CONVERSION FLEXIBILITY
9.1 Scope
In lieu of the conversion of A320 Option Aircraft into firmly
ordered Aircraft as described in Paragraphs 1 through 8 above, the
Seller grants the Buyer the right to convert Option Aircraft into
firmly ordered A319 aircraft (the "Converted A319 Aircraft") upon
the commercial terms set forth in this Paragraph 9.
9.2 Specification
The Converted A319 Aircraft shall be manufactured in accordance with
the A319-100 Standard Specification, Document No. J.000.0l000, Issue
2, dated March 30, 1994, (the "A319 Standard Specification"). Such
Standard Specification, a copy of which is annexed hereto as Exhibit
"A-2" to the Agreement is hereinafter referred to as the "A319
Specification." The Specification may be further modified from time
to time pursuant to the provisions of Clause 3 of the Agreement.
LA No. 3-3
<PAGE>
9.3 Delivery
Paragraph 3 above will apply to the delivery of the Converted A319
Aircraft, except that the Seller shall have the Converted A319
Aircraft ready for delivery at Daimler-Benz's works in Hamburg,
Germany.
9.4 Converted A319 Aircraft Pricing
9.4.1 Base Price of the Converted A319 Aircraft
The "Base Price" of each Converted A319 Aircraft is the sum of:
(i) the Base Price of the Airframe, and
(ii) the Base Price of the Propulsion Systems.
9.4.1.1 Base Price of the Airframe
9.4.1.1.1 The Base Price of the Airframe shall be the sum of the Base Prices
set forth below in (i) and (ii):
(i) the Base Price of the Standard Airframe, as defined in the
Standard Specification set forth in Exhibit "A-2" to the
Agreement (excluding Buyer Furnished Equipment, Propulsion
Systems and SCNs), at delivery conditions prevailing in
January 1995, which is:
[***]
(ii) the Base Price of the estimated change orders to the A319
Standard Specification (SCN estimate) referred to in Exhibit
"B" to the Agreement, at delivery conditions prevailing in
January 1995, which is estimated at:
[***]
9.4.1.1.2 The Base Price of the Airframe of each Converted A319 Aircraft shall
be revised to the actual delivery date of such Converted A319
Aircraft in accordance with the Airframe Price Revision Formula set
forth in Exhibit "G" to the Agreement.
LA No. 3-4
<PAGE>
9.4.1.2 Base Price of the Propulsion Systems
9.4.1.2.1 The Base Price of the CFM 56-5A-5 Propulsion Systems is the sum of
(i) and (ii) below:
(i) Base Price of the CFM 56-5A-5 Engines
The Base Price of a set of two (2) CFM International CFM
56-5A-5 engines and additional standard equipment at delivery
conditions prevailing in January 1995 is:
[***]
Said Base Price has been calculated with reference to the
Reference Price indicated by CFM of [***] in accordance with
economic conditions prevailing in September 1990.
Said Reference Price is subject to adjustment to the date of
delivery of the Converted A319 Aircraft in accordance with the
CFM Price Revision Formula set forth in Exhibit "H-2" to the
Agreement.
(ii) Base Price of Nacelles and Thrust Reversers
The Base Price for a set of two (2) nacelles and two (2)
thrust reversers at delivery conditions prevailing in January
1995 is:
[***]
Said Base Price is subject to adjustment to the date of
delivery of the Converted A319 Aircraft in accordance with the
Airframe Price Revision Formula set forth in Exhibit "G" to
the Agreement.
9.4.1.2.2 Base Price of the IAE V2524-A5 Propulsion Systems
The Base Price of the IAE V2524-A5 Propulsion Systems is:
The Base Price of a set of two (2) IAE V2524-A5 Propulsion
Systems, including related equipment,
LA No. 3-5
<PAGE>
nacelles and thrust reversers, at delivery conditions
prevailing in January 1995 is:
[***]
Said Base Price has been calculated with reference to the
Reference Price indicated by International Aero Engines of
[***] in accordance with economic conditions prevailing in
November 1990.
Said Reference Price is subject to adjustment to the date of
delivery of the Converted A319 Aircraft in accordance with the
IAE Price Revision Formula set forth in Exhibit "1-2" to the
Agreement.
9.4.2.2 Final Contract Price
The Final Contract Price of a Converted A319 Aircraft shall be the
sum of:
(i) the Base Price of the Airframe constituting a part of such
Converted A319 Aircraft, together with the Base Price of
nacelles and thrust reversers (when applicable), as adjusted
to the date of delivery of such Converted A319 Aircraft in
accordance with Subclause 5.1 of this Agreement;
(ii) the price (as of delivery conditions prevailing in January
1995) of any other SCNs constituting a part of such Converted
A319 Aircraft that are entered into pursuant to Clause 3 of
the Agreement after the date of execution of the Agreement, as
adjusted to the date of delivery of such Converted A319
Aircraft in accordance with Subclause 5.1 of the Agreement;
(iii) the Reference Price of the installed Propulsion Systems
(excluding the nacelles and thrust reversers, when
applicable), constituting a part of such Converted A319
Aircraft, as adjusted to the date of delivery of such
Converted A319 Aircraft in accordance with Subclause 5.2 of
the Agreement; and
(iv) any other amount resulting from any other provisions of this
Agreement and/or any other
LA No. 3-6
<PAGE>
written agreement between the Buyer and the Seller relating to
the Converted A319 Aircraft and specifically making reference
to the Final Contract Price of an Aircraft.
9.4.3 Validity of Propulsion Systems Prices
It is understood that the prices cited above and the price revision
formulas referred to in Subparagraph 9.4.1.2 of this Letter
Agreement concerning the Propulsion Systems and related equipment
are based on information received from the Propulsion Systems
manufacturer and remain subject to any modifications that might be
communicated by said Propulsion Systems manufacturer to the Seller,
the Manufacturer and/or the Buyer.
9.5 Converted A319 Aircraft Purchase Incentives
9.5.1 Airframe Credit
The Seller will provide the Buyer a credit memorandum of [***] at
January 1995 delivery conditions, subject to escalation as per the
Airframe Price Revision Formula set forth in Exhibit "G" to the
Agreement, on delivery of each Converted A319 Aircraft. This credit
memorandum may be applied against the Final Contract Price of the
Converted A319 Aircraft or may be used for the purchase of goods and
services from the Seller or any of its affiliates.
9.5.2 SCN Credit
The Seller will provide the Buyer an SCN credit memorandum of
[***] per Converted A319 Aircraft at January 1995 delivery
conditions, subject to escalation as per the Airframe Price Revision
Formula set forth in Exhibit "G" to the Agreement, on delivery of
each Converted A319 Aircraft. This credit may be applied against
the price of SCNs for the Converted A319 Aircraft.
9.5.3 Special CFM Credit
In the event the Buyer converts an Option Aircraft to a Converted
A319 Aircraft, and selects CFM International as the Propulsion
Systems manufacturer for such Converted A319 Aircraft, then, on
behalf of CFM International, the Seller will provide the Buyer a
credit memorandum of [***]
LA No. 3-7
<PAGE>
[***] per Converted A319 Aircraft at delivery conditions prevailing
in January 1995.
Said Base Price has been calculated with reference to the Reference
Price indicated by CFM of [***] in accordance with economic
conditions prevailing in September 1990.
Said Reference Price is subject to adjustment to the date of
delivery of the Converted A319 Aircraft in accordance with the CFM
Price Revision Formula set forth in Exhibit "H-2" to the Agreement.
9.6 A319 Option Aircraft Exercise and Predelivery Payments
The Buyer shall exercise its option to convert an Option Aircraft
into a Converted A319 Aircraft by written notification to the Seller
and payment of the fourth Predelivery Payment therefor as stipulated
in Paragraph 7 hereof no later than the first day of the
twenty-fourth (24th) month prior to the scheduled month of delivery
of such Option Aircraft being converted, according to the schedule
set forth in Paragraph 3 of this Letter Agreement. Paragraphs 4 and
7 of this Letter Agreement will apply to the Converted A319 Aircraft
using the Converted A319 Aircraft pricing set forth in Subparagraph
9.4 above, for the purpose of computing the Converted A319 Aircraft
Predelivery Payment Reference Price.
9.7 OTHER MATTERS
Each Converted A319 Aircraft shall be an Aircraft for the purposes
of the provisions of Clauses 1 through 22 of the Agreement, the
Exhibits to the Agreement, Letter Agreement No. 1 to the Agreement,
Paragraph 3, 5 and 6 and Subparagraphs 4.1, 4.3 and 4.4 of Letter
Agreement No. 2 to the Agreement and Paragraph 9 of this Letter
Agreement. No other provisions of the Agreement shall apply to such
Converted Option Aircraft.
10. ASSIGNMENT
Notwithstanding any other provision of this Letter Agreement or of
the Agreement, this Letter Agreement and the rights and obligations
of the Buyer hereunder shall not be assigned or transferred in any
manner without the prior written consent of the Seller, such consent
not to be unreasonably withheld, and any attempted assignment or
transfer in contravention of the provisions of this Paragraph 10
shall be void and of no force or effect.
LA No. 3-8
<PAGE>
Notwithstanding Subclause 6.6 of the Agreement, in the event (i) the
Buyer requests the Seller, at a date prior to the Option Aircraft
exercise date, to assign this Letter Agreement and the rights and
obligations of the Buyer hereunder to a third party (the "Third
Party"), (ii) such Third Party clearly states in writing to the
Seller that it is bound by and will comply with all applicable
terms, conditions and limitations of this Letter Agreement, and
provides evidence satisfactory to the Seller of its ability to
undertake such obligations, (iii) the Seller does not grant its
written consent to the Buyer pursuant to the immediately preceding
sentence, and (iv) the Buyer therefore then elects not to exercise
the right to purchase the Option Aircraft, then (and only in this
instance) the Seller will reimburse the Buyer an amount equal to the
suin of the first three Predelivery Payments received by the Seller
from the Buyer pursuant to Subclause 6.2.3 of the Agreement. The
Buyer shall not be entitled to the refund of any other Predelivery
Payments under any other circumstances.
LA No. 3-9
<PAGE>
If the foregoing correctly sets forth our understanding, please execute
the original and one (1) copy hereof in the space provided below and return a
copy to the Seller.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ Christophe Mourey
------------------------------------
Its: AVSA Chief Executive Officer
Date: March 17, 1995
Accepted and Agreed
Midway Airlines Corporation
By: /s/ Brian J. Olds
---------------------------
Brian J. Olds
Its: Executive Vice President
Chief Operating Officer
<PAGE>
LETTER AGREEMENT
As of March 17, 1995
Midway Airlines Corporation
5713 S. Central Avenue
Chicago, IL 60638
Re: FINANCIAL MATTERS
Dear Sir or Madam:
Midway Airlines Corporation (the "Buyer"), and AVSA, S.A.R.L. (the
"Seller"), have entered into an Airbus A320-200 Purchase Agreement dated as of
even date herewith (the "Agreement"), which covers, among other things, the sale
by the Seller and the purchase by the Buyer of certain Aircraft. The Buyer and
the Seller have agreed to set forth in this Letter Agreement (the "Letter
Agreement") certain additional terms and conditions regarding the sale of the
Aircraft. The terms "herein," "hereof" and "hereunder" and words of similar
import refer to this Letter Agreement. References to Paragraphs, save where the
context otherwise requires, are to Paragraphs contained in this Letter
Agreement.
Both parties agree that this Letter Agreement shall not constitute
part of said Agreement, but shall be a separate and independent contract of
financial accommodation to assist the Buyer in operating certain A320 aircraft.
Capitalized terms used herein and not otherwise defined in this Letter Agreement
shall have the meanings assigned thereto in the Agreement.
1. UPFRONT SUPPORT CREDIT
1.1 In consideration of the following conditions set forth in
Subparagraphs 1.1.1 through 1.1.4, the terms of Subparagraph 1.2
will apply:
1.1.1 The Buyer's operation, over time starting in April 1995, of ten (10)
A320-200 aircraft leased medium to long term by the Buyer from
operating lessors (including not fewer than four (4) A320 aircraft
from ORIX Aviation Systems Limited), such leases to begin between
(i) on or about April 1995 and (ii)the end of 1996.
1.1.2 The Buyer's execution of the Agreement with the Seller for the
purchase by the Buyer from the Seller of four
<PAGE>
(4) Firm Aircraft to be delivered by the Seller to the Buyer
starting in December 1998 with an option to purchase up to four (4)
additional Option Aircraft.
1.1.3 The Seller's agreement pursuant to the terms of Letter Agreement No.
2 to the Agreement to provide to the Buyer certain product support
services in advance of the time when such services will have been
made available under the Agreement (excluding for this purpose the
Letter Agreements to the Agreement).
1.1.4 The provision by the Buyer of Collateral (as defined in the Security
Agreement) to the Seller to secure the advancement of product
support services, until delivery of the last Firm Aircraft, and
repayment of the Utilized Amount (as defined in Subparagraph 1.2.1
below) as further described in Paragraph 2 below.
1.2 The Buyer and the Seller agree to the following terms set forth in
Subparagraphs 1.2.1 through 1.2.8 with respect to the provision by
the Seller of the Upfront Support Credit (as defined in Subparagraph
1.2.1 below).
1.2.1 [***] (at January 1995 delivery conditions, subject to escalation
pursuant to the Airframe Price Revision Formula set forth in Exhibit
"G" of the Agreement (the "Formula")) (the [***]), based on the
support of ten (10) A320 aircraft, provided, however, that the
Buyer's right to draw under the line of credit shall be further
limited as described in Subparagraph 1.2.7 below. The term "Utilized
Amount" at any time shall mean all amounts of the Upfront Support
Credit (as escalated in accordance with the Formula) that have been
extended as of such time to the Buyer.
1.2.2 The Upfront Support Credit shall be used for the purchase by the
Buyer of product support goods and services from the Seller or its
Affiliates (as defined below) and include goods and services as
further described in Letter Agreement No. 2 to the Agreement.
The term "Affiliates" is defined as follows:
Affiliate - with respect to any person or entity, any other person
or entity directly or indirectly controlling, controlled by or under
common control with such person or entity.
2
<PAGE>
1.2.3 The Buyer's obligation to repay to the Seller the Utilized Amount
of the Upfront Support Credit shall be deemed satisfied only upon
actual delivery of each Firm Aircraft to the Buyer unless the
Agreement is terminated for reasons set forth in Clause 10 or 11
of the Agreement and shall be reduced at the rate of [***] (at
January 1995 delivery conditions, subject to escalation through
application of the Formula) per delivered Firm Aircraft.
1.2.4 In the event (i) a Termination Event (as defined below in
Subparagraph 3.1.1) has occurred and is continuing or (ii) any of
the Firm Aircraft are not delivered or will not be delivered to
the Buyer for any reason other than on account of a termination
of the Agreement under Clause 10 or 11 thereof (including, but
not limited to, failure to satisfy the conditions set forth in
the Agreement or this Letter Agreement), then, provided that the
Buyer has met all its payment obligations to the Seller prior to
July 1, 1995, pursuant to the terms of the Agreement, the
Utilized Amount less an amount equal to $858,000 (US
dollars--eight hundred fifty-eight thousand) (as the result of
such subtraction is escalated in accordance with the Formula),
shall become due and payable immediately together with interest
thereon calculated as LIBOR for six-month deposits of US dollars
plus two hundred (200) basis points (the "Applicable Rate") from
(and including) the date of the Termination Event to the date of
payment of all of the Utilized Amount.
"LIBOR" shall be defined as, for each stated interest period, the
rate determined on the basis of the offered rates for deposits in US
dollars, which appear on the Reuters Screen LIBO Page as of 11:00
a.m., London time, on the day that is two (2) days (other than a
Saturday, Sunday or a day that is a legal holiday or a day on which
banking institutions are authorized to close in the City of New
York, New York, London, England, or Paris, France) before the first
day of an interest period. If at least two (2) such offered rates
appear on the Reuters Screen LIBO Page, the rate for that interest
period will be the arithmetic mean of such offered rates rounded to
the nearest basis point (0.5 rounds to 1). If only one (1) offered
rate appears, the rate for that interest period will be "LIBOR" as
quoted by National Westminster Bank, plc. "Reuters Screen LIBO Page"
means the display designated as page "LIBO" on the Reuters Monitor
Money Rates Service (or any successor to such page or service).
3
<PAGE>
1.2.5 The Upfront Support Credit shall be deemed drawn or utilized by the
Buyer in amounts calculated based on the Seller's then current
labor, material and service rates. In order to evidence to the Buyer
and the Seller the Utilized Amount, the Seller will send to the
Buyer on a monthly basis (to be reduced to a quarterly basis after
June 1996) statements and/or invoices, which, in the absence of
manifest error shall be conclusive, outlining (i) the increase in
the Utilized Amount of the Upfront Support Credit occurring during
such month (or quarter, as applicable) (ii) the total amount of the
Utilized Amount outstanding under the Upfront Support Credit as of
the date thereof and (iii) the portion, as of the date of such
statement and/or invoice, of the Upfront Support Credit remaining
outstanding and available from the Seller subject to the terms of
this Letter Agreement. It is agreed and understood between the
parties that failure by the Seller to issue such statements and/or
invoices to the Buyer shall in no manner release the Buyer from its
obligations under this Letter Agreement and the parties may agree to
adjust the administrative procedure described above at any time.
1.2.6 The Seller and the Buyer agree, from time to time (but not later
than at the end of 1996), review the number of leased A320 aircraft
in the Buyer's fleet in order to monitor the unutilized Upfront
Support Credit, should the number of A320 aircraft leased medium to
long term be fewer than ten (10). The Buyer will use its
commercially reasonable efforts, whenever practicable, to have
product support allowances assigned by operating lessors (other than
by ORIX Aviation Systems Limited for the first four (4) A320
aircraft leased by the Buyer) as part of its A320 aircraft lease
transactions. The Buyer's operation of fewer than ten (10) leased
A320 aircraft in 1995 and 1996 shall in no event be understood as an
acceleration of the Buyer's obligation to repay the Utilized Amount,
unless an event described above in Subparagraph 1.2.4 has occurred.
Notwithstanding the foregoing, the leasing of four (4) or five (5)
A320 aircraft will allow the Buyer to draw from the [***].
1.2.7 Notwithstanding the provisions set forth in Subparagraphs 1.2.1
through 1.2.6 above, it is hereby agreed and understood between the
Buyer and the Seller that the [***] (at January 1995 delivery
conditions, subject to escalation through
4
<PAGE>
application of the Formula) unless and until the time the Buyer has
provided Additional Collateral to the Seller's satisfaction (as
further described in Paragraph 2 below). In lieu of providing the
Additional Collateral (as described in Paragraph 2 below), the Buyer
shall have the option to pay the Seller in cash for further product
support services.
1.2.8 Except as may otherwise be mutually agreed from time to time by the
Seller and the Buyer, at no time shall the Seller be required to
provide support services in excess of the Upfront Support Credit and
as described in Letter Agreement No. 2 to the Agreement.
1.2.9 The Upfront Support Credit shall represent a portion of, and be
included in, the product support allowances set forth in Clauses 14,
15, and 16 of the Agreement and Letter Agreement No. 1 to the
Agreement and shall not be a duplication of or additional to such
allowances.
1.2.10 Notwithstanding the provisions of Subparagraphs 1.2.1 through 1.2.9
above, in the event (i) an A320 operating lessor from which the
Buyer leases A320 aircraft assigns to the Buyer certain product
support allowances in addition to the Upfront Support Credit (the
"Allowances") and (ii) such Allowances are applied by the Buyer to
acquire from the Seller or its Affiliates A320 product support goods
and services to support the operation of the leased A320 aircraft
and (iii) the Upfront Support Credit is not fully utilized to its
authorized limit at the time of delivery of the first Aircraft,
then, the Seller agrees to credit to the Buyer upon delivery of each
Firm Aircraft an amount equal to one-fourth of the unused portion of
the then authorized Upfront Support Credit (as escalated from
January 1995, through application of the Formula) to be applied
against the Final Contract Price of the Firm Aircraft.
2. COLLATERAL
2.1 As security for its obligations under this Letter Agreement,
including the due and punctual repayment of the Upfront Support
Credit (as the same may be escalated in accordance with the Formula)
and any interest thereon payable under Subparagraph 1.2.4, upon the
occurrence, if any, of a Termination Event, the Buyer has agreed to
execute and deliver with this Letter Agreement the following
agreements (collectively, the "Transaction Security Agreements"): a
Security Agreement dated the date hereof, and such other additional,
replacement or supplemental security agreements that the Seller may
reasonably request from time to time.
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2.2 It is hereby agreed and understood that pursuant to Subparagraph
1.2.7 above and upon the Utilized Amount reaching [***] (at January
1995 delivery conditions, subject to escalation through application
of the Formula) (the "Capped Amount") the Buyer shall provide the
Seller with collateral beyond the Collateral currently contemplated
in the Security Agreement between the Buyer and the Seller dated the
date hereof (the "Additional Collateral"). The provision by the
Seller of Upfront Support Credit in excess of the Capped Amount
shall also be subject to the satisfaction of the conditions set
forth in further security agreements between the Buyer and the
Seller and to the conditions set forth in Subparagraph 3.4
hereafter. The provision by the Buyer to the Seller of the
Additional Collateral to the Seller's satisfaction shall be a
condition precedent to the Seller's obligation to provide a line of
credit with respect to the Upfront Support Credit in an amount
greater than the Capped Amount.
Upon the Utilized Amount becoming equal to the Capped Amount, the
Buyer and the Seller agree to conduct a collateral review in order
to provide the Seller with Additional Collateral (if applicable).
Further collateral meetings shall take place not less than quarterly
thereafter and will allow the Seller to receive further collateral,
if applicable.
3. TERMINATION FOR CERTAIN EVENTS; INSECURITY EVENTS; FURTHER
ASSURANCES
3.1 Termination Events
3.1.1 Each of the following shall constitute a "Termination Event" under
this Letter Agreement:
(1) The Buyer or any other party shall commence any case,
proceeding or other action with respect to the Buyer in any
jurisdiction relating to bankruptcy, insolvency,
reorganization, relief from debtors, an arrangement,
winding-up, liquidation, dissolution or other relief with
respect to its debts and such case, proceeding or other action
remains unstayed, undismissed or undischarged for sixty (60)
days.
(2) An action is commenced seeking the appointment of a receiver,
trustee, custodian or other similar official for the Buyer for
all or substantially all of its assets, and such action
remains unstayed, undismissed or undischarged for sixty
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(60) days, or the Buyer makes a general assignment for the
benefit of its creditors.
(3) An action is commenced against the Buyer seeking issuance of a
warrant of attachment, execution, distraint or similar process
against all or any substantial part of its assets, and such
action remains unstayed, undismissed or undischarged for sixty
(60) days.
(4) The Buyer becomes insolvent or fails generally to pay its
debts as they become due.
(5) There is a liquidation, winding up or analogous event with
respect to the Buyer.
(6) The Buyer fails to make (i) any payment required to be made
pursuant to this Letter Agreement, the Agreement, the
Transaction Security Agreements, or any other agreement
between the Buyer and the Seller dated as of the date hereof
when such payment comes due, (ii) any Predelivery Payment
required to be made pursuant to Subclause 6.2 of the
Agreement, (iii) payment of all or part of the Final Contract
Price required to be made pursuant to Subclause 6.3 of the
Agreement, or (iv) any payments as they become due the
Propulsion Systems manufacturer or an A320 operating lessor,
under their respective agreements with the Buyer.
(7) The Buyer shall default on any payment of principal or
interest on any indebtedness or in the payment of any
guarantee obligation to the Seller or any of its Affiliates.
(8) The Buyer shall default on any payment of any lease obligation
relating to any Aircraft.
(9) The Buyer shall default in its obligation to take delivery of
an Aircraft as provided in Subclause 9.3 of the Agreement.
(10) The Buyer shall default in the observance or performance of
any other covenant or undertaking contained in this Letter
Agreement or the Agreement or the Transaction Security
Agreements or any other agreement between the Buyer and the
Seller dated as of the date hereof, beyond the five (5) day
cure period.
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(11) The Buyer shall fail to provide Comfort (as defined in
Subparagraph 3.2 hereafter) to the Seller within forty-five
(45) days of the occurrence of an Insecurity Event (as defined
in Subparagraph 3.2 hereafter).
Immediately upon the occurrence of a Termination Event, the Buyer
shall notify the Seller of such occurrence in writing and by courier
or telecopier, provided, however, that any failure by the Buyer to
notify the Seller shall not prejudice the Seller's rights hereunder.
3.1.2 Upon the occurrence of a Termination Event, the Seller may (i) by
written notice to the Buyer terminate the unutilized Upfront
Support Credit and it shall thereupon terminate, (ii) by written
notice to the Buyer declare the Utilized Amount to be immediately
due and payable without presentment, demand, protest, or other
notice of any kind, all of which are hereby expressly waived by
the Buyer, (iii) proceed to enforce performance by the Buyer of
the applicable covenants contained in the Transaction Security
Agreements or to recover damages for breach thereof, and (iv)
exercise any other right, power, privilege or remedy provided by
law or in the Transaction Security Agreements; provided that in
the case of any of the Termination Events specified in Clauses
(1) through (6) of Subparagraph 3.1.1, without any notice to the
Buyer or any other act by the Seller, the unutilized Upfront
Support Credit shall thereupon terminate and the Utilized Amount
shall become immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are
hereby expressly waived by the Buyer. Nothing contained in this
Subparagraph 3.1.2 shall be construed to limit in any way any
rights, powers or privileges of the Seller under the Transaction
Security Agreements, or under any applicable law, upon the
occurrence of a Termination Event. Each and every right, power
and privilege hereby given to, or retained by the Seller shall be
in addition to and not in limitation of every other right, power
and privilege given under the Transaction Security Agreements, or
now or hereafter existing at law or in equity.
3.2 Insecurity Events
Any of the following shall constitute an "Insecurity Event" and any
remedies therefor provided in this Letter Agreement shall be in
addition to and not in substitution for any rights the Seller may
have at law to terminate this Letter Agreement as set forth in
Subparagraph 3.1.2:
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(a) At the end of each of the following months, the Buyer shall
fail to have unencumbered cash balances of not less than the
product of (i) $225,000 (US dollars--two hundred twenty-five
thousand) at the end of April 1995; $150,000 (US dollars--one
hundred fifty thousand) at the end of May 1995; $150,000 (US
dollars--one hundred fifty thousand) at the end of June 1995;
$250,000 (US dollars--two hundred fifty thousand) at the end
of July 1995; $300,000 (US dollars--three hundred thousand) at
the end of August 1995; $325,000 (US dollars--three hundred
twenty-five thousand) at the end of September 1995; and
$350,000 (US dollars--three hundred fifty thousand) at the end
of each month thereafter until the termination of this Letter
Agreement; (in each case as adjusted to any month of
determination from March 1995 by multiplying the relevant
requisite unencumbered cash balance by the ratio of (A) to
(B), where (A) is equal to the Consumer Price Index ("CPI")
reported for the third month prior to such month of
determination and (B) is equal to the CPI reported for March
1995) (provided, however, that in no event shall the number
computed thereby be less than one (1)) multiplied by (ii) the
number of jet-powered aircraft then owned, acquired pursuant
to a conditional sale agreement or leased by the Buyer (in
each case whether or not then operated by the Buyer);
(b) The ratio of current assets to current liabilities, as those
amounts would be determined through the application of
Generally Accepted Accounting Principles, is 0.80 to 1 or
less; or
(c) If at any time the Buyer shall enter into a revolving credit
agreement, line of credit or similar extension of credit and
such agreement is terminated (other than by its own terms or
by the Buyer) or a covenant is breached and such breach is not
waived or ceases to exist within thirty (30) days after the
occurrence thereof; or
(d) With respect to the Agreement of Sublease dated January 18,
1995, between the Buyer and American Airlines, Inc.
("American"), relating to property which American has leased
or will lease to the Buyer (as such agreement may be amended
from time to time); if such agreement is terminated prior to
March 31, 1997, and at any subsequent date if such termination
results in an unfavorable change
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in the Buyer's financial condition or if such agreement
becomes subject to revision in a manner that is materially
unfavorable to the Buyer; or
(e) With respect to the current holders of the Buyer's outstanding
shares, the current majority shareholder ceases to control
eighty percent (80%) of the outstanding voting shares of the
Buyer or its successor, provided that this shall not apply in
the event of a public offering of the Buyer, as long as such
public offering provides the Buyer (or its successor) with a
total debt-to-net worth ratio, as those amounts would be
determined through the application of Generally Accepted
Accounting Principles, of at least three to one; or
(f) With respect to any or all of the seven operating leases or
any other leases, in replacement thereof for the Buyer's use
of the Fokker F-l00 aircraft ("Fokker F-l00 Aircraft Leases"),
the Buyer fails to make a payment when due or a financial
covenant thereunder is breached; provided, however, that such
provision shall not apply for as long as the earlier of the
following events has occurred and/or is continuing: (i) the
Buyer fails to make a payment under the Fokker F-l00 Aircraft
Leases and such nonpayment is not cured to the satisfaction of
the lessor under the Fokker F-l00 Aircraft Leases and the
Buyer within thirty (30) days and (ii) the Lessor under the
Fokker F-l00 Aircraft Leases delivers to the Buyer a notice of
termination or seeks to repossess the aircraft; or
(g) With respect to any or all of the four aircraft leases for the
Buyer's use of A320 aircraft between the Buyer and ORIX
Aviation Systems Limited or any of its Affiliates, or any
successor or assignee, the Buyer fails to make a payment when
due or a financial covenant thereunder is breached; or
(h) With respect to the Term Loan Agreement, dated as of April 14,
1994, between the Buyer and American National Bank and Trust
Company of Chicago or any successor thereto, the Buyer fails
to make a payment when due or a financial covenant thereunder
is breached; or
(i) With respect to any other significant credit or lease
financing facility or similar agreement, including but not
limited to any agreement signed subsequent to this date for
the lease of aircraft, either (i) the commitment to lend,
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finance or lease, as the case may be, thereunder is terminated
(other than by the Buyer) or (ii) a financial covenant
thereunder is breached and such breach is not waived or ceases
to exist within forty-five (45) days after the occurrence
thereof; or
(j) The Buyer is involuntarily removed from active membership and
participation in the airline clearinghouse (or any substitute
or replacement arrangement) among domestic airlines or the
Buyer is placed on a cash basis by such clearinghouse (or any
such substitute or replacement arrangement).
Within five (5) days of the occurrence of an Insecurity Event, the
Buyer shall notify the Seller of such occurrence in writing and by
courier or telecopier, provided, however, that any failure by the
Buyer to notify the Seller shall not prejudice the Seller's rights
hereunder.
If Comfort is not received by the Seller within forty-five (45) days
after the date of the Insecurity Event, the Seller may treat this
Letter Agreement as terminated by giving written notice of such
termination to the Buyer. Such termination shall constitute a
Termination Event and Subparagraph 3.1.2 above shall apply.
The term "Comfort" is defined as follows:
Comfort - at the time of determination, assurance from the Buyer to
the Seller of the Buyer's ability to duly perform each of the
Buyer's obligations under this Agreement and any agreement between
the Buyer and the Seller dated the date hereof (including with
respect to all Option Aircraft, assuming such options have been
exercised at the time) at the time and in the manner that each such
obligation is required to be performed, provided that such assurance
shall:
(a) consist of assurance substantially identical to that
constituting "adequate assurance of due performance" within
the meaning of Article 2-609 of the Uniform Commercial Code as
in effect on the date hereof in the State of New York, as if
this was a contract for the sale of goods or the supply of
services, and
(b) be in writing or evidenced by a writing.
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In addition, Comfort shall be deemed to have been received hereunder
if the event or circumstance which caused the Insecurity Event to
occur hereunder has been cured satisfactorily as set forth above and
the same has been evidenced in writing to the Seller.
3.3 The Seller's obligations to make each extension of credit under the
Upfront Support Credit ("Credit Extension") pursuant to this Letter
Agreement are subject to the satisfaction of the conditions set
forth in the Transaction Security Agreements and each of the
following conditions:
(a) The representations and warranties of the Buyer contained
herein and in the Transaction Security Agreements shall be
true in all material respects on and as of the date of such
Credit Extension, except to the extent that such
representations and warranties relate solely to an earlier
date (in which case such representations and warranties shall
have been true as of such earlier date);
(b) No Insecurity Event (as defined hereafter) or Termination
Event shall have occurred and be continuing;
(c) The Buyer shall have furnished prior to March 31, 1995, the
Seller with an opinion of counsel to the Buyer, dated the
initial Credit Extension Date, in substantially the same form
as required by Clause 4.18 below;
(d) The Buyer shall have entered into the Transaction Security
Agreements;
(e) Uniform Commercial Code financing statements, covering the
"Collateral," the subject of the Transaction Security
Agreements, prior to March 31, 1995, duly completed and
executed by the Buyer as debtor and the Seller as secured
party. Each such financing statement shall have been properly
filed in each of the appropriate jurisdictions and the Seller
shall have received evidence satisfactory to it of each such
filing; and
(f) Such other filings, instruments and documents with respect to
the Buyer as the Seller may reasonably request in order to
establish the taking by the Buyer of all necessary corporate
action in connection herewith.
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(g) The Buyer shall have permitted prior to March 31, 1995,
representatives of the Seller or third party certified
inspectors to visit and inspect (and at the Buyer's expense)
any of the Buyer's properties where any of the collateral (as
defined in Paragraph 2) or any of the Assignor's books and
records relating to the Collateral are located and to inspect
the Collateral and to examine and make abstracts from any of
its books and records at any reasonable time and as often as
may reasonably be desired and to discuss the condition and
operation of the Collateral with officers and employees of the
Assignor and with its independent certified public accounts.
(h) The Buyer shall have obtained prior to March 31, 1995, to the
satisfaction of the Seller, all waivers, consents, or
agreements which are necessary, or which the Seller shall
reasonably request, in respect of any Contractual Obligation
of the Buyer. In this Letter Agreement, "Contractual
Obligation" shall mean any provision of any security issued by
the Buyer or of any agreement, instrument or undertaking to
which the Buyer is a party or by which it or any of its
property is bound.
(i) The Buyer shall have provided prior to March 31, 1995, the
detailed content and location of the Collateral together with
all appropriate insurance certificates covered under the
Security Agreement between the Buyer and the Seller dated the
day hereof.
3.4 In addition to the provisions of Subparagraph 3.3, the provision by
the Seller of Upfront Support Credit in excess of the Capped Amount
shall be subject to the satisfaction of the conditions set forth in
further security agreements between the Buyer and the Seller and to
the following conditions:
(a) Each of the representations and warranties made by the Buyer
in or pursuant to this Letter Agreement or any Transaction
Security Agreement (or in any amendment, modification or
supplement hereto or thereto), shall be true and correct in
all material respects on and as of the date of determination
by the Buyer.
(b) No Insecurity Event or Termination Event shall have occurred
and be continuing as of the date of determination by the
Seller.
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(c) The security interests granted to the Seller by the Buyer in
respect of the Collateral (as defined in the Transaction
Security Agreements) constitute legal, valid perfected and
binding obligations of the Buyer, enforceable in accordance
with their terms, and (a) are prior to all other Liens (other
than the Permitted Lien as defined in the Security Agreement)
on the Collateral in existence as of the date of determination
by the Seller and (b) are enforceable as such against (i) all
creditors of and purchasers from the Buyer (except purchasers
of Inventory (as defined in the Uniform Commercial Code in
effect in the State of New York (the "Code") in ordinary
course of business) and (ii) any Person having any interest in
the real property where any of the Equipment (as defined in
the Code) is located, except in each case as enforceability is
affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to
or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealing.
(d) The Buyer shall have granted to the Seller a valid, legally
binding, perfected, unavoidable first priority security
interest over the Additional Collateral.
(e) The Buyer shall have provided a legal opinion, in form and
substance satisfactory to the Seller confirming that the
requirements of Subparagraph 3.4(d) above have been satisfied
in respect of such Additional Collateral.
3.5 Further Assurances
The Buyer shall promptly and duly execute and deliver to the Seller,
and to such other persons as the Seller shall reasonably designate,
such further instruments and documents as the Seller may from time
to time reasonably request in order to establish and protect the
Seller's interests in the Collateral hereunder.
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4. Miscellaneous Provisions
4.1 Notices
All notices and requests required or authorized hereunder shall be
given in writing either by personal delivery to a responsible
officer of the party to whom the same is given or by certified air
mail (return receipt requested) or by telex or cable at the
addresses set forth below. The date upon which any such notice or
request is so personally delivered, or if such notice or request is
given by mail, the date upon which it is deposited in the mails or,
in the case of a telex or cable, the date upon which sent, shall be
deemed to be the effective date of such notice or request.
Notices and requests to the Seller shall be addressed to:
AVSA, S.A.R.L.
2, rond-point Maurice Bellonte
31700 BLAGNAC
FRANCE
Attention: Director - Contracts
Telephone: 33 61 30 40 12
Telex: AVSA 521155F
Telecopy: 33 61 30 40 11
Notices and requests to the Seller shall be addressed to:
Midway Airlines Corporation
5713 South Central Avenue
Chicago, Illinois 60638 USA
Attention: President
Telephone: (312) 838-8100
Telecopy: (312) 838-2069
or at such other address or to such other person as the party
receiving the notice or request may designate from time to time.
4.2 Interpretation and Law; Jurisdiction; Payment Currency
This Letter Agreement shall be governed by and construed and the
performance thereof shall be determined in accordance with the laws
of the State of New York.
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Each party (I) hereby irrevocably submits itself to the nonexclusive
jurisdiction of the courts of the State of New York in New York
County, and, to the extent permitted by applicable law, to the
nonexclusive jurisdiction of the United States District Court for
the Southern District of New York, for the purposes of any suit,
action or other proceeding arising out of this Letter Agreement or
any of the transactions contemplated hereby brought by any party or
parties hereto, or their successors or assigns, and (II) hereby
irrevocably waives, and agrees not to assert, by way of motion, as a
defense, counterclaim or otherwise, in any such action or proceeding
with respect to this Letter Agreement, the defense of sovereign
immunity, any claim that it is not personally subject to the
jurisdiction of the above-named courts by reason of sovereign
immunity or otherwise that it or its property is exempt or immune
from jurisdiction of any court or from any legal process (whether
through service of notice, attachment prior to judgment or
otherwise), and to the fullest extent permitted by applicable law,
that the suit, action or proceeding is brought in an inconvenient
forum, that the venue of the suit, action or proceeding is improper
or that this Letter Agreement, or the subject matter hereof or
thereof may not be enforced in or by such courts and further
irrevocably waives, to the fullest extent permitted by applicable
law, the benefit of any defense that would hinder, fetter or delay
the levy, execution or collection of any amount to which the parties
hereto or beneficiaries hereunder are entitled pursuant to a final
judgment of any court having jurisdiction; provided that this
sentence shall not be construed as a waiver of any requirement of
service of process. Each party hereby generally consents to service
of process by registered mail, return receipt requested, at its
address set forth in Paragraph 4, or such other office as from time
to time may be designated by the Buyer or the Seller in writing to
the other party.
It is of the essence of this Letter Agreement that the Buyer and the
Seller make the payments due hereunder in lawful currency of the
United States of America ("Dollars"). The obligation to make each
payment in Dollars shall not be discharged or satisfied by any
tender, or any recovery pursuant to any judgment, which is expressed
in or converted into any other currency until and except to the
extent such tender or recovery shall result in the actual receipt by
the receiving party in Dollars of the amount expressed to be payable
in Dollars. The obligation to make payments in Dollars shall be
enforceable as an alternative or additional
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cause of action for the purpose of recovery in Dollars of the amount
(if any) by which such actual receipt shall fall short of the full
amount of Dollars and shall not be affected by judgment being
obtained for any other sums due hereunder.
4.3 Provisions as to Payments
All payments and prepayments under this Letter Agreement shall be
made by the Buyer on the due date thereof in immediately available
funds to a bank account of the Seller at the New York Branch of
Credit Lyonnais, the account number of which will be provided by the
Seller to the Buyer. The Buyer agrees to initiate the wire transfer
of each such payment no later than noon, New York City time, on such
due date, provided that nothing in this sentence shall affect the
Buyer's obligation to make each such payment on the due date
thereof. In the event that any such payment to be made to the Seller
shall become due on a day that is not a Business Day, such payment
shall be made on the next succeeding Business Day.
"Business Day" shall be defined as a day that is not a Saturday or a
Sunday and that is neither a legal holiday nor a day on which
banking institutions are authorized to close in the City of New
York, New York, London, England, or Paris, France.
4.4 Prepayments
The Buyer may prepay, upon no less than seven Business Days'
irrevocable prior written notice to the Seller, in whole or in part
and without premium or penalty, the Utilized Amount, together with
interest, if any, accrued on such amount to the date of such
prepayment calculated at the Applicable Rate. Amounts prepaid
pursuant to this Subparagraph 4.4 cannot be the subject of a further
extension of Credit under this Letter Agreement.
4.5 Buyer's Representations and Warranties
The Buyer represents and warrants that:
(a) Organization and Qualification. The Buyer is a corporation,
was duly organized and is validly existing in good standing
under the laws of the state of Delaware and has the corporate
power and authority to own or lease its properties and to
enter into and perform its obligations hereunder and under the
Transaction Security Agreements; and is duly qualified to do
business
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as a foreign corporation in good standing in each state in
which the failure to be so qualified or licensed would have a
materially adverse effect on the ability of the Buyer to
perform its obligations hereunder or under the Transaction
Security Agreements.
(b) Corporate Authority, Etc. The execution, delivery and
performance of this Letter Agreement or the Transaction
Security Agreements have been duly authorized by all necessary
corporate action on the part of the Buyer, and do not and will
not contravene any Requirement of Law (as defined in the
Transaction Security Agreements) applicable to the Buyer.
(c) Government Approvals. Neither the execution and delivery by
the Buyer of this Letter Agreement or the Transaction Security
Agreements, nor the consummation by the Buyer of any of the
transactions contemplated thereby requires the consent or
approval of, the giving of notice to, the registration with,
or the taking of any other action in respect of the Federal
Aviation Administration, or any other Governmental Authority
(as defined in the Transaction Security Agreements) except as
expressly contemplated by the provisions thereof.
(d) Valid and Binding Agreements. This Letter Agreement and the
Transaction Security Agreements constitute legal, valid and
binding obligations of the Buyer enforceable against the Buyer
in accordance with the terms thereof and create the security
interest they purport to create, subject, as to
enforceability, to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally and to
general principles of equity.
(e) Compliance with Other Instruments. The execution, delivery and
performance by the Buyer of this Letter Agreement or the
Transaction Security Agreements do not and will not constitute
or result in a material default under, or a material violation
or contravention of, any term or provision of the charter or
bylaws of the Buyer or of any certificate, exemption or order
issued by the United States Department of Transportation or
the Federal Aviation Administration or of any indenture,
mortgage, lease, contract or agreement binding
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upon the Buyer or of any law, statute, ordinance, judgment,
decree, order or governmental rule, regulation or law binding
upon or applicable to the Buyer.
(f) Security Agreement. The Transaction Security Agreements, when
executed and delivered in accordance with this Letter
Agreement and upon the filing of Uniform Commercial Code
financing statements as provided herein and therein, will
(unless expressly excepted therein) create for the benefit of
the Seller a valid first and prior perfected security interest
in the Collateral (as defined in the Transaction Security
Agreements).
(g) No Insecurity Event or Termination. No Insecurity Event or
Termination has occurred and the Buyer has not admitted in
writing its inability generally to pay its debts as they
become due.
4.6 Method of Credit Extension
The Buyer hereby gives the Seller irrevocable notice in writing to
extend the line of credit contemplated under the Upfront Support
Credit, under the terms and conditions set forth in this Letter
Agreement ("Credit Extension Notice").
4.7 Taxes
All payments made by the Buyer under this Letter Agreement or under
the Transaction Security Documents shall be made free and clear of,
and without reduction or withholding for or on account of, any
present or future taxes or other charges now or hereafter imposed or
collected by any Governmental Authority and withheld from such
payments.
4.8 Waiver
The failure of any party to enforce at any time any of the
provisions of this Letter Agreement, or to exercise any right herein
provided, or to require at any time performance by any other party
of any of the provisions hereof, shall in no way be construed to be
a present or future waiver of such provisions nor in any way to
affect the validity of this Letter Agreement or any part thereof or
the right of any other party thereafter to enforce each and every
such provision. The express waiver by any party of any provision,
condition or requirement of this Letter Agreement shall not
constitute a waiver of any future obligation to comply with such
provision, condition or requirement.
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4.9 Confidentiality
Subject to any legal or governmental requirements of disclosure, the
parties (which for this purpose shall include their employees,
agents and advisors) shall maintain the terms and conditions of this
Letter Agreement strictly confidential. Without limiting the
generality of the foregoing, the Buyer shall use its best efforts to
limit the disclosure of the contents of this Letter Agreement to the
extent legally permissible in any filing required to be made by the
Buyer with any governmental agency and shall make such applications
as shall be necessary to implement the foregoing. With respect to
any public disclosure or filing, the Buyer agrees to submit to the
Seller a copy of the proposed document to be filed or disclosed and
will give the Seller a reasonable period of time in which to review
the said document. The Buyer and the Seller shall consult with each
other prior to the making of any public disclosure or filing,
otherwise permitted hereunder, of this Letter Agreement or the terms
and conditions thereof. The provisions of this Subparagraph 4.5
shall survive any termination of this Letter Agreement.
4.10 Severability
In the event that any provisions of this Letter Agreement should for
any reason be held ineffective, the remainder of this Letter
Agreement shall remain in full force and effect. To the extent
permitted by applicable law, each party hereto hereby waives any
provision of law which renders any provision of this Letter
Agreement prohibited or unenforceable in any respect.
4.11 Alterations to Contract
This Letter Agreement contains the entire agreement between the
parties with respect to the subject matter hereof and thereof and
supersedes any previous understanding, commitments or
representations whatsoever, oral or written. This Letter Agreement
shall not be varied except by an instrument in writing of even date
herewith or subsequent hereto executed by all parties or by their
duly authorized representatives.
4.12 Language
All correspondence, documents and any other written matter in
connection with this Letter Agreement shall be in English.
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4.13 Headings
All headings in this Letter Agreement are for convenience of
reference only and do not constitute a part of this Letter
Agreement.
4.14 Counterparts
This Letter Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
4.15 Assignment
Notwithstanding any other provision of this Letter Agreement, this
Letter Agreement and the rights and obligations of the Buyer
hereunder shall not be assigned or transferred in any manner without
the prior written consent of the Seller, and any attempted
assignment or transfer in contravention of the provisions of this
Paragraph shall be void and of no force and effect.
4.16 Reports
The Buyer will furnish to the Seller:
(i) Quarterly Reports. Within sixty (60) days after the end of
each of the first three quarterly fiscal periods in each
fiscal year of the Buyer, a Consolidated (as hereinafter
defined) balance sheet of the Buyer and its Consolidated
subsidiaries prepared as of the close of such period, together
with the related statements of income and surplus; and
(ii) Annual Statements. Within one hundred twenty (120) days after
the end of each fiscal year of the Buyer, an audited
Consolidated balance sheet of the Buyer and its Consolidated
subsidiaries as at the end of such year, and the related
statement of income and surplus.
"Consolidated" means, as applied to any financial or
accounting term or amount, such term or amount determined on a
consolidated basis in accordance with generally accepted
accounting principles.
21
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4.17 Fees and Disbursements
The Buyer will bear the reasonable fees and out-of-pocket expenses
(if any) incurred by the Seller after the date hereof pursuant to
Paragraph 2 of this Letter Agreement and in the enforcement of its
remedies under this Letter Agreement or any Transaction Security
Agreement.
4.18 Opinion of Counsel
The Buyer shall, concurrently with the execution of this Agreement,
deliver to the Seller an opinion of counsel for the Buyer reasonably
satisfactory to the Seller and dated as of such date to the effect
that the execution, delivery and performance of this Letter
Agreement are within the corporate power of the Buyer, that the
execution, delivery and performance of this Letter Agreement, in
accordance with the respective terms by the Buyer, do not, to such
counsel's knowledge, constitute a breach of any agreement to which
the Buyer is a party, and that this Letter Agreement has been duly
executed and delivered by, and constitutes legal, valid and binding
obligations of, the Buyer enforceable in accordance with their
respective terms.
22
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If the foregoing correctly sets forth our understanding, please
execute the original and one (1) copy hereof in the space provided below and
return a copy to the Seller.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ Christophe Mourey
------------------------------------
Its: AVSA Chief Executive Officer
Date: March 17, 1995
Accepted and Agreed
Midway Airlines Corporation
By: /s/ Brian J. Olds
---------------------------
Brian J. Olds
Its: Executive Vice President
Chief Operating Officer
<PAGE>
SECURITY AGREEMENT
SECURITY AGREEMENT, dated _________, 1995, made by MIDWAY AIRLINES
CORPORATION, a Delaware corporation (the "Assignor"), and AVSA, S.A.R.L., a
societe a responsibilite limitee organized and existing under the laws of the
Republic of France (the "Assignee");
The Assignee has agreed to extend an upfront support line of credit (the
"Line of Credit") to the Assignor pursuant to, and subject to the terms and
conditions set forth in the Letter Agreement relating to Financial Matters,
dated March 17, 1995 (the "Letter Agreement");
It is a condition precedent to the obligation of the Assignee to extend
the Line of Credit to the Assignor under the Letter Agreement that, among other
things, the Assignor shall have executed and delivered this Security Agreement,
described herein, to the Assignee; and
In consideration of the premises and to induce the Assignee to enter into
the Letter Agreement and to extend the Line of Credit to the Assignor, the
Assignor hereby agrees with the Assignee as follows:
Section 1. DEFINITIONS
(a) Each term which is defined in the Letter Agreement and not
otherwise defined herein shall have for purposes hereof the meaning set forth
therein.
(b) The following terms when used in this Agreement shall have the
following meanings:
"Airbus Spare Parts" shall mean the following items:
(a) all rotable, nonconsumable parts (including rotable line replaceable
parts) whether titled in the name of the Assignor, regardless from whom
acquired, or leased by the Assignee to the Assignor and which are usable
in connection with Airframes, but excluding parts which relate to the
propulsion systems installed on such Airframes; and
(b) industrial proprietary components, equipment, accessories or parts
manufactured by Airbus Industrie to the detailed design of Airbus
Industrie or a subcontractor of it and bearing official part numbers of
Airbus Industrie or material for which the Assignee has exclusive sales
rights in the United States;
(c) ground support equipment and special-to-type tools; and
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2
(d) all the spare parts identified on Schedule 1, Part A hereto and not
previously identified in clauses (a) through (c) of this definition.
"Airframe" shall mean, as appropriate, any and all Airbus Industrie
aircraft and Fokker Aircraft B.V. model F100 aircraft but excluding the
engines installed thereon whether now or hereafter owned or leased by the
Assignor.
"Agreement" shall mean this Security Agreement, as the same may be
amended, modified or otherwise supplemented from time to time.
"Approval Tag" shall mean the Authorized Release Certificate
Airworthiness Approval Tag on FAA Form 8130-3 (or successor form)
associated with any appropriate item of Collateral.
"Code" shall mean the Uniform Commercial Code as from time to time
in effect in the State of New York.
"Collateral" has the meaning set forth in Section 2.
"Contractual Obligation" shall mean as to any Person, any provision
of any security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Delisted Locations" shall mean any locations which have been the
subject of a Delisting and which have not currently been redesignated as a
Designated Location pursuant to subsection 4.9(b).
"Delisting" has the meaning set forth in subsection 4.9(a).
"Designated Location" shall mean, as appropriate, (i) each of the
locations where Collateral is kept for use by the Assignor or where
Collateral is repaired, maintained or overhauled by the Assignor and (ii)
each location where Collateral is kept for use by third parties on behalf
of the Assignor in the repair and maintenance of aircraft or where
Collateral is repaired, maintained or overhauled by third parties on
behalf of the Assignor including, without limitation, the locations listed
in Schedule 2 hereto, as the same may be amended from time to time by the
addition of locations pursuant to subsection 4.7 hereof, but excluding any
Delisted Locations.
"Event of Loss" shall mean any of the following events with respect
to any of the Collateral, as appropriate, (i) any
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3
loss or loss of use thereof due to destruction, damage beyond repair,
wearing out, obsolescence or rendition of such property permanently unfit
for normal use for any reason whatsoever; (ii) any damage to any of the
Collateral which results in an insurance settlement with respect to such
property on the basis of a total loss; (iii) the theft or disappearance of
any of the Collateral which shall have resulted in the loss of possession
of such Collateral by the Assignor for a period of sixty (60) consecutive
days or more; or (iv) the condemnation, confiscation, seizure or other
expropriation of, or requisition of title to or use of, or the assumption
of management of any of the Collateral by any government or any officer,
agency or instrumentality thereof.
"Federal Aviation Act" shall mean the Sections of Title 49 of the
United States Code relating to aviation, as amended from time to time, or
any similar legislation of the United States enacted in substitution or
replacement thereof.
"Fokker Spare Parts" shall mean all rotable, nonconsumable parts
(including rotable line replaceable parts), aircraft components, systems,
accessories, test equipment and tools used on or in connection with Fokker
100 aircraft, including but not limited to test boxes, towbars, covers,
emergency slides, de-icing equipment, galley equipment, spare aircraft
seats, jacks and rigging kits, in each case whether titled in the name of
the Assignor, regardless from whom acquired, or leased to the Assignor and
which are usable in connection with Airframes, but excluding parts which
relate to the propulsion systems installed on such Airframes and
identified on Schedule 1, Part B hereto, and all replacements or
substitutions thereof.
"Governmental Authority" shall mean any nation or government, any
state or any political subdivision of any thereof, and any entity of
competent authority exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
"Ground Equipment" shall mean all cars, trucks, trailers, ground
support vehicles, construction and earth moving equipment and other
vehicles covered by a certificate of title under the law of any state and
all tires and other appurtenances to any of the foregoing and identified
on Schedule 3 hereto.
"Hereof", "hereto", "hereunder", "herewith" and similar terms
refer to the document in which such term is used and not to any particular
section or provision of such document.
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4
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge or
other security interest or any preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title
retention agreement and any financing lease having substantially the same
economic effect as any of the foregoing).
"Miscellaneous Spare Parts" shall exclude the Fokker Spare Parts and
shall mean all rotable, nonconsumable parts (including rotable line
replaceable parts), aircraft components, systems, accessories, test
equipment and tools used on or in connection with Fokker aircraft, in each
case whether titled in the name of the Assignor, regardless from whom
acquired, or leased to the Assignor and which are usable in connection
with Airframes, but excluding parts subject to the Permitted Lien or which
relate to the propulsion systems installed on such Airframes and
identified on Schedule 1, Part C hereto, and all replacements or
substitutions thereof.
"Obligations" shall mean the collective reference to:
(a) the unpaid principal of, and interest accrued and unpaid on or with
respect to, the Line of Credit (as the same may be escalated in
accordance with the Formula referred to in the Letter Agreement) and all
other obligations and liabilities of the Assignor to the Assignee
(including, without limitation, interest accruing at the then applicable
rate provided in the Letter Agreement after the Line of Credit becomes
due and payable and interest accruing after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Assignor, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding),
whether direct or indirect, absolute or contingent, due or to become due,
or now existing or hereafter incurred, which may arise under, out of, or
as a result of the Letter Agreement, this Agreement, any Supplemental
Security Agreement or any other document made, delivered or given in
connection therewith but specifically excluding the Agreement (as defined
in the Letter Agreement); and
(b) all obligations and liabilities of the Assignor which may arise
under or in connection with the Letter Agreement or this Agreement or any
other document made, delivered or given in connection therewith but
specifically excluding the Agreement (as defined in the Letter Agreement);
<PAGE>
5
in each case whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise (including,
without limitation, all fees and disbursements of counsel to the Assignee
that are required to be paid by the Assignor or the Assignor pursuant to
the terms of the Letter Agreement or this Agreement).
"Permitted Lien" shall mean the first priority security interest
granted by the Assignor (under its then name of Jet Express, Inc.) in
favor of Fokker Aircraft U.S.A., Inc. under the Credit and Security
Agreement, dated as of October 1, 1993 (the "Permitted Lien"), in respect
of the Fokker Spare Parts.
"Person" shall mean an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other legal entity of whatever
nature.
"Proceeds" shall have the meaning assigned to it under the Code and,
in any event, shall include, but not be limited to, (a) any and all
proceeds of any insurance, indemnity, warranty or guaranty payable to the
Assignor from time to time with respect to any of the Collateral, (b) any
and all payments (in any form whatsoever) made or due and payable to the
Assignor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of
the Collateral by any governmental body, authority, bureau or agency (or
any person acting under color of Governmental Authority) and (c) any and
all other amounts from time to time paid or payable under or in connection
with any of the Collateral.
"Security Account" shall have the meaning set forth in subsection
5.1.
"Security Instrument" shall mean any security agreement, chattel
mortgage, assignment, financing or similar statement or notice,
continuation statement, other agreement or instrument, or amendment,
modification or supplement to any thereof, providing for, evidencing or
perfecting the security interest created by this Agreement.
"Spare Parts" shall collectively mean the Airbus Spare Parts and
the Fokker Spare Parts.
"Supplemental Security Agreements" shall mean the collective
reference to such other additional, replacement or supplemental security
agreements that the Assignor or any other assignor may execute, from time
to time, in favor of the Assignee as security for the Line of Credit or
any extension
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6
or increase thereof.
"Tooling Equipment" shall mean all tooling and support equipment and
tooling and support equipment for scheduled tasks and tooling and support
equipment acquired from Seller or its affiliates and as more particularly
described on Schedule 4 together with all replacements and substitutions
therefor.
2. GRANT OF SECURITY
As security for the due and punctual payment and performance in full
by the Assignor of all Obligations, the Assignor hereby grants, pledges,
transfers, bargains, assigns, hypothecates and sets over to the Assignee, and
hereby grants to, and creates in the Assignee, a continuing first (except in the
case of the Fokker Spare Parts subject to the Permitted Lien, a second) priority
security interest in, all of the Assignor's right, title and interest which it
now has or hereafter may acquire in the following property (the "Collateral"):
(a) All Airbus Spare Parts;
(b) All Fokker Spare Parts;
(c) All Miscellaneous Spare Parts;
(d) All Tooling Equipment;
(e) All Ground Equipment;
(f) All Approval Tags, records, logs, manuals and other documents at
any time maintained or used with respect to any item in clauses (a)
through (e) above;
(g) All warranties and indemnifications payable to the Assignor by
any manufacturer or vendor with respect to any of the foregoing;
(h) All insurance proceeds and other funds of the Assignor whether
or not paid or payable into the Security Account pursuant to the terms of
this Agreement including, without limitation, proceeds of condemnation or
requisition with respect to any of the foregoing; and
(i) All Proceeds, revenues and other income of any of the foregoing.
<PAGE>
7
3. Representations and Warranties. The Assignor hereby represents and
warrants that:
3.1 Power and Authority. The Assignor has the corporate power and
authority and the legal right to execute and deliver, to perform its obligations
under, and to grant the security interest in the Collateral pursuant to, this
Agreement and has taken all necessary corporate action to authorize its
execution, delivery and performance of, and grant of the security interest in
the Collateral pursuant to, this Agreement.
3.2 Enforceable Obligation; Perfected, First Priority Security
Interests. This Agreement constitutes a legal, valid and binding obligation of
the Assignor, enforceable in accordance with its terms, and the security
interests granted pursuant to this Agreement (a) upon completion of the Code
filings and other actions will constitute perfected security interests on the
Collateral in favor of the Assignee, (b) are prior to all other Liens (other
than the Permitted Lien) on the Collateral in existence on the date hereof and
(c) are enforceable as such against (i) all creditors of and purchasers from the
Assignor (except purchasers of Inventory in the ordinary course of business) and
(ii) any Person having any interest in the real property where any of the
Equipment is located, except in each case as enforceability is affected by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.
3.3 No Violation. The execution, delivery and performance of this
Agreement by the Assignor will not violate any provision of any Requirement of
Law binding upon the Assignor or Contractual Obligation (including, without
limitation, the Permitted Lien) of the Assignor and will not result in the
creation or imposition of any Lien on any of the properties or revenues of the
Assignor pursuant to any Requirement of Law binding upon the Assignor or
Contractual Obligation of the Assignor, except the security interests created
hereby.
3.4 No Consents Required. No consent or authorization of, filing
with, other than those consents, authorizations or filings which have been
obtained, or other act by or in respect of, any arbitrator or Governmental
Authority and no consent of any other Person (including, without limitation, any
stockholder or creditor of the Assignor), is required in connection with the
execution, delivery or performance of this Agreement by Assignor, or the
validity or enforceability of this Agreement.
3.5 No Litigation. No litigation, investigation or
<PAGE>
8
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of the Assignor, threatened by or against the Assignor or
against any of its properties or revenues with respect to this Agreement or any
of the transactions contemplated hereby.
3.6 Chief Executive Office. The Assignor's chief executive office
and chief place of business is located at 5713 South Central Avenue, Chicago, IL
60638.
4. COVENANTS OF ASSIGNOR
The Assignor covenants and agrees that, so long as any amount shall
remain outstanding under the Letter Agreement or unless the Assignee shall
otherwise consent in writing:
4.1 Designated Locations. The Assignor shall maintain the Collateral
at the Designated Locations listed in Schedule 2 hereto or (ii) as otherwise
expressly permitted under Section 6 hereof.
4.2 Performance of Obligations. The Assignor shall perform promptly
and faithfully all the Obligations.
4.3 Compliance With Laws. The Assignor shall comply in all material
respects with all laws, rules, regulations and orders applicable to the
Assignor, noncompliance with which would, in the Assignee's reasonable judgment,
have a material and adverse effect upon the Collateral or its security interest
therein.
4.4 Notice of Event of Loss. The Assignor shall give prompt written
or telephonic notice followed by written notice to the Assignee of the
occurrence of any Event of Loss affecting any of the Collateral having an
aggregate value more than $500,000, which notice shall set forth in reasonable
detail the circumstances of such Event of Loss, shall describe in reasonable
detail any action the Assignor is taking or proposes to take with respect
thereto and shall be furnished within five (5) days after knowledge of such
Event of Loss by an officer of Assignor.
4.5 Further Acts and Assurances. The Assignor shall at all times and
from time to time at the Assignor's own cost and expense:
(a) Cause this Agreement, and all Security Instruments executed in
connection herewith, and the security interests created thereby, so far as
permitted by applicable law or regulations, to be properly perfected and
to be maintained so perfected;
<PAGE>
9
(b) Make, execute, acknowledge and deliver, and file and record in
the proper filing and recording places, all such further and additional
Security Instruments, including appropriate financing statements with
respect to the security interest created by this Agreement and the
Supplemental Security Agreements, as may be required by the Code; in each
case as may be necessary or as the Assignee or its counsel may reasonably
request in order to perfect and preserve the security interest created by
this Agreement and the Supplemental Security Agreements. Except as
otherwise provided by Section 8 hereof, the Assignee shall have no duty as
to the collection or protection of the Collateral or any part thereof or
any income thereon, or as to the preservation of any rights pertaining
thereto, beyond the safe custody of any Collateral in the actual
possession of the Assignee;
(c) Not change its name or do business under any other name except
after giving prior written notice thereof to the Assignee on the same day
the Assignor announces such name change to the public but in no event
later than the effective date of such change and not change the location
of its principal office or place of business, except for a change to a
location within a jurisdiction in which the Code is in effect, and of
which the Assignor shall have been given the lesser of (i) sixty (60)
days' prior written notice or (ii) the amount of days' prior written
notice required by the appropriate Governmental Authority which must be
notified prior to a change of location of the Assignor's principal office
or place of business in order for the Assignee to maintain the security
interest created by this Agreement and the Supplemental Security
Agreements;
(d) Provide to the Assignee on the first day of each month after the
execution and delivery of this Agreement a complete listing by
manufacturer's serial number, as appropriate, of all Collateral and of its
physical location; and
(e) Upon a request by the Assignee to do so, provide evidence that
the Collateral is readily identifiable and separate from any other parts
or equipment located at any Designated Location that do not constitute
Collateral.
4.6 Limitation on Dispositions and Liens; Further Documentation;
After Acquired Property. (a) The Assignor will not sell, transfer, lease or
otherwise dispose of any of the Collateral, or attempt, offer or contract to do
so, except as permitted by this Agreement or the Supplemental Security
Agreements.
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10
(b) The Assignor will not create, incur or permit to exist any Lien
(except the Permitted Lien) or claim on or to the Collateral, other than the
security interests created hereby, will maintain the security interests created
by this Agreement as first (except with respect to the Permitted Lien, a
second), perfected security interests and will defend such security interests
against claims and demands of all Persons whomsoever.
(c) At any time and from time to time, upon the written request of the
Assignee, and at the sole expense of the Assignor, the Assignor will promptly
and duly execute and deliver the Supplemental Security Agreements and such
further security agreements, instruments and documents and take such further
action as the Assignee may reasonably request for the purpose of obtaining or
preserving the full benefits of the Letter Agreement or this Agreement and of
the rights and powers therein and herein granted, including, without limitation,
the filing of any financing or continuation statements under the Code in effect
in any jurisdiction with respect to the security interests created hereby.
4.7 Notice of Designated Locations Not Listed on Schedule 2. The
Assignor shall not (i) maintain, repair or overhaul Collateral at a Designated
Location which is not listed in Schedule 2 hereto or (ii) deliver Collateral to
a location described in clause (ii) of the definition of "Designated Location"
which is not listed in Schedule 2 hereto except, in each case, after giving 30
days prior notice thereof to the Assignee and furnishing to the Assignee a
corporate officer's certificate certifying that such actions as are necessary to
perfect the security interests created by this Agreement in such Collateral have
been taken by the Assignor and executing, delivering and/or filing any Security
Instruments the Assignee may reasonably request in connection therewith.
Schedule 2 shall automatically be amended without further act to reflect the
addition of any such Designated Location upon receipt by the Assignee of such
written notice and corporate officer's certificate.
4.8 Maintenance of Collateral. The Assignor shall maintain all
Collateral at the Designated Locations and such locations shall constitute the
primary maintenance facilities of the Assignor.
4.9 Delisting or Redesignating Designated Locations. (a) If, in
accordance with the other terms of this Agreement, a certain Designated Location
no longer contains or will contain Collateral, the Assignor may notify the
Assignee in writing of its desire that such location that is a Designated
Location no longer be considered or treated as a Designated Location (such
action hereinafter referred to as "Delisting"), and such Delisting shall occur
upon receipt of such notice by the Assignee.
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11
(b) The Assignor may from time to time notify the Assignee of its
desire to redesignate Delisted Locations as Designated Locations. In order for
such locations to be considered a Designated Location hereunder, the Assignor
shall furnish to the Assignee a corporate officer's certificate certifying that
such actions as are necessary to perfect the security interests intended to be
created by this Agreement in the Collateral located at such redesignated
location have been taken by the Assignor and shall execute any Security
Instruments the Assignee may reasonably request in connection therewith.
Schedule 2 shall automatically be amended without future act to reflect the
redesignation of such location as a Designated Location upon receipt by the
Assignee of such written notice and corporate officer's certificate.
5. COVENANTS OF THE ASSIGNEE
5.1 Security Account. At its option and subject to the provisions of
Sections 7 and 8 hereof, all insurance or other proceeds received by the
Assignee in connection with an Event of Loss, all surplus insurance or other
proceeds paid in connection with an Event of Loss, and all other amounts which
the Assignee may receive pursuant to this Agreement as a direct or indirect
result of the occurrence or continuance of a Termination Event shall be
deposited by the Assignee in a special deposit account in a United States
banking institution (herein called the "Security Account") maintained by the
Assignee in its name and titled in such manner as to identify appropriately the
nature of such account. As between the Assignor and the Assignee, the Assignee
shall have sole control over the Security Account and shall invest all amounts
deposited therein at the Assignee's direction and risk. The Assignor shall have
no right to withdraw any funds deposited in the Security Account except as
otherwise expressly provided herein. The Assignee shall have the right to apply
any funds deposited in the Security Account only as expressly provided herein.
Interest earned with respect to funds deposited in the Security Account shall be
credited to the Security Account and be available for application in any manner
in which such funds may be applied hereunder.
Upon the occurrence and during the continuance of a Termination
Event, all balances in the Security Account may be applied by the Assignee in
discharge of all the Obligations. In addition, the Assignee may, from time to
time, in its discretion, release all or any portion of the balance in the
Security Account to the Assignor, provided that, any such release shall not be
deemed to constitute a waiver by the Assignee of any rights, powers or
privileges. The Assignor shall remain liable for the Obligations after any
application or release of funds from the Security Account.
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12
5.2 Release of All Security. Upon the termination of the Assignor's
obligations under the Letter Agreement including the payment in full by the
Assignor of the Obligations, the Assignee shall, subject to the following
sentence, without recourse, representation or warranty whatsoever, release its
security interests in the Collateral. In effecting the release from such
security interests of any Collateral, the Assignee shall at the request (which
may be telephonic to be followed by writing) and expense of the Assignor,
execute and deliver such instruments and perform such acts as may, in the
Assignor's reasonable judgment, be necessary or appropriate for such purpose.
6. POSSESSION, USE, TRANSFER AND MAINTENANCE OF COLLATERAL
6.1 Possession and Use of Collateral. Unless a Termination Event
shall have occurred and be continuing, and subject to the other terms and
provisions of this Agreement and the Supplemental Security Agreements, the
Assignor shall be entitled to the possession and use of the Collateral in the
ordinary course of the Assignor's operations.
6.2 Installation of the Collateral on Aircraft Owned or Leased the
Assignor. The Assignor may, as appropriate, install the Collateral on aircraft
leased to, or owned by, the Assignor subject to a lease, conditional sale
agreement, trust indenture or other Lien, including first priority Liens.
Immediately upon any Replacement Collateral (as hereinafter defined) being
removed from such aircraft for replacement or substitution by any Collateral,
(i) title to such Collateral installed or placed on such aircraft shall be
released from the security interests created by this Agreement, and (ii) such
Replacement Collateral shall be stored, maintained, repaired and overhauled at a
Designated Location and shall be deemed Collateral for all purposes hereof to
the same extent as that which it replaced or substituted, provided that such
Replacement Collateral shall meet the requirements of subsection 6.5. For the
purposes of this Agreement, the term "Replacement Collateral" shall mean, as
appropriate, all Collateral, which may for all purposes act as a replacement or
substitute for any item of Collateral. In the event the security interests
created by this Agreement shall attach to Replacement Collateral, such
Replacement Collateral shall be deemed to be an item of Collateral for the
purposes of this Agreement.
6.3 Permitted Transfers. The Assignor shall not, without the prior
written consent of the Assignee, lease, sublease or otherwise in any manner
deliver, transfer or relinquish possession of any item of Collateral or install
any Collateral or permit any Collateral to be installed on any aircraft other
than
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13
pursuant to subsection 6.2; provided however, that, so long as no Termination
Event shall have occurred and be continuing, the Assignor may, without the prior
written consent of the Assignee:
(a) Subject any Collateral to normal interchange or pooling
agreements or arrangements, in each case customary in the commercial
airline industry and entered into by the Assignor in the ordinary course
of its business with other United States or Canadian certificated air
carriers, or with such non-United States or non-Canadian air carriers as
the Assignee may permit in writing from time to time; provided however,
that no transfer of any interest shall be effected in connection therewith
and that the terms of this Agreement shall be observed; and provided,
further, that (i) no such agreement or arrangement contemplates or
requires the transfer of title to any Collateral, and (ii) such Collateral
is required to be returned to the Assignor upon termination or cessation
of such pooling or interchange;
(b) Deliver possession of any Collateral to the manufacturer thereof
for testing, service, repair, maintenance, overhaul work or any other
similar purpose, or to any other organization for testing, service,
repair, maintenance, overhaul work or any other similar purpose or for
alterations or modifications in or additions to such Collateral to the
extent required or permitted by the terms of subsection 6.4 hereof;
(c) Transfer possession of any Collateral to the United States
Government or any instrumentality or agency thereof pursuant to the Civil
Reserve Air Fleet Program administered pursuant to Executive Order No.
10999, as amended, or any similar or substitute programs; the Assignor
shall provide written notice to the Assignee upon (i) installing any
component of Collateral on any aircraft subject to such programs and (ii)
such aircraft being transferred to the United States Government pursuant
to such programs;
(d) Sell any Collateral for fair market value; provided however,
that all proceeds of any such sale shall be immediately applied either to
make payments or prepayments of the Obligations; or
(e) Transfer Collateral from one Designated Location to another
Designated Location.
6.4 Maintenance of Collateral. The Assignor shall, at its own cost
and expense, at all times maintain the Collateral in as good condition as when
delivered to the Assignor (reasonable wear and tear excepted), and in accordance
with all applicable
<PAGE>
14
orders, directives and instructions issued by the United States Federal Aviation
Administration or other governmental authorities having jurisdiction over the
Assignor. The Assignor shall comply with all applicable maintenance, service,
repair and overhaul manuals issued by the respective manufacturers of the
Collateral.
6.5 Replacement of Collateral. The Assignor, at its own cost and
expense, shall promptly replace all Collateral as to which an Event of Loss has
occurred, provided Assignee makes insurance or other proceeds, if any, payable
on account of such Event of Loss available to Assignor to make such replacement.
All such replacements shall be free and clear of all Liens in favor of any
Person and shall be in as good operating condition as, and shall have
performance and durability characteristics and a value and utility at least
equal to, the Collateral replaced assuming such replaced Collateral were in the
condition and repair required to be maintained under subsection 6.4 hereof.
6.6 FAA Records. The Assignor shall maintain all Approval Tags,
records, logs and other materials required by the FAA to be maintained in
respect of the Collateral, and in the event that the Assignee, obtains
possession of any Collateral pursuant to Section 8 hereof, the Assignor will
promptly deliver to the Assignee all such Approval Tags, records, logs and other
materials relating to such Collateral.
6.7 Inspection by Representative of the Assignee. The Assignor shall
permit the Assignee or any Person designated by the Assignee to visit any
Designated Location and inspect the Collateral located thereon, and the Approval
Tags, records, logs and other materials referred to in subsection 6.6, all at
such reasonable times and places and as often as the Assignee may reasonably
request.
6.8 Release of a Portion of the Collateral. Any Collateral which is
(i) removed from any Designated Location and installed on an aircraft pursuant
to subsection 6.2 or (ii) sold, assigned or otherwise transferred in accordance
with subsection 6.3(d) or 6.5 of this Section 6, shall without further act be
released from the security interests created by this Agreement. In effecting the
release from such security interests of any Collateral, the Assignee shall at
the request (which may be telephonic to be followed by writing) and expense of
the Assignor, execute and deliver such instruments and perform such acts as may
be necessary or appropriate for such purpose.
7. INSURANCE
7.1 General Requirements. The Assignor shall procure
<PAGE>
15
and at all times maintain on all Collateral at its sole cost and expense,
policies of insurance with insurers which shall be insurance companies or
underwriters of recognized responsibility of standing in the aviation insurance
industry not materially lower taken as a whole than that of the insurance
companies or underwriters utilized by the Assignor as of the date hereof, in
form, amounts and limits complying with the requirements of this Section 7 and
which, in any event, shall include "All-Risk" property insurance in an agreed
amount of not less than the replacement value (in the case of casualty
insurance) of the Collateral with a deductible of not more than the industry
standard. The "All-Risk" Property Insurance Policy, which shall be against risks
customarily insured against by companies engaged in the same or similar business
as the Assignor and which shall not be in an amount less than customary in the
industry for similar Collateral, shall include the following endorsements or
extensions of coverage:
(a) Notwithstanding anything herein to the contrary, the use of the
Collateral in the service of the Government of the United States (other
than a use that constitutes a confiscation by the Government of the United
States) will not prejudice the cover provided under this policy.
(b) It is understood and agreed that this insurance, as to the
interest of the Assignee as secured party with respect to the Collateral,
shall not be invalidated or in any way prejudiced by any action or
inaction of the Assignor, and shall insure the Assignee and its respective
directors, officers and employees regardless of breach or violations of
any warranties, declarations, conditions or exclusions contained in
policies held by the Assignor.
(c) Losses shall be adjusted with the Assignor and payable directly
to the Assignee (except as otherwise provided in this Agreement and except
that the Assignor shall consult with the Assignee throughout the
adjustment process) for the account of all interests in United States
Dollars in the United States.
(d) Insurers shall provide thirty (30) days' written notice of
cancellation, or such lesser period as is customary with respect to war
risk perils or material alteration and ten (10) days' written notice of
intent not to renew to the Assignee prior to the effective date of
cancellation or termination and in each case whether or not such
cancellation or termination is instituted by insurers or the Assignor.
(e) Insurers agree that neither the Assignee, nor its respective
assigns, officers, directors, agents and employees
<PAGE>
16
shall be liable for insurance premiums of the Assignor arising out of or
resulting from this Agreement. Insurers further agree that there will be
no setoff against any claims that may be payable to the Assignee or the
Assignor or their respective assigns, officers, directors, agents and
employees.
7.2 The Assignee as Loss Payee. The Assignor shall cause all
insurance covering loss of or damage to the Collateral as required by subsection
7.1 hereof to name the Assignee as loss payee and to provide that all payments
in respect of any loss shall be payable to the Assignee, provided that, unless
the Assignee shall provide notice to such insurers that an Insecurity Event or a
Termination Event has occurred and is continuing, any payment not in excess of
$1,000,000 shall be paid directly to the Assignor. The Assignor shall cause all
policies in which the Assignee is included as loss payee or as an additional
named insured to include an agreement by the insurer that the Assignee shall not
be responsible for the representations and warranties of the Assignor nor for
any premiums due under any insurance coverage of the Collateral.
7.3 Application of Payments if Event of Loss. All amounts received
at any time by the Assignee or the Assignor from any insurer or other Person
with respect to an Event of Loss shall be paid over to the Assignee or the
Assignor, as the case may be, as provided in subsection 7.2 hereof in the case
of insurance proceeds, provided that, any payments in respect of a requisition
in excess of $500,000 in the aggregate in any calendar year shall be paid over
to the Assignee; provided however, that all such amounts paid over to the
Assignee shall be deposited in the Security Account and thereafter the
provisions of subsection 5.1 shall apply to such amounts.
7.4 Application of Payments if No Event of Loss. All amounts
received at any time by the Assignee or the Assignor from any insurer or other
Person with respect to damage or loss to the Collateral which does not
constitute an Event of Loss in excess of $500,000 shall be applied in payment
of, or to reimburse the Assignor for, repairs to or for replacement of
Collateral in accordance with the terms of subsections 6.4 and 6.5 hereof, and
any balance of such amounts remaining after compliance with subsections 6.4 and
6.5 with respect to such damage or loss (including any such amounts attributable
to Collateral which the Assignor is not required to replace or repair pursuant
to the proviso in the first sentence of subsection 6.5) shall be paid over to,
or retained by, the Assignor, provided that, all such amounts shall be paid over
to, or retained by, the Assignee for deposit in the Security Account if at the
time such payment or retention would be made there shall have occurred and be
continuing an Insecurity Event or a Termination Event. Payment to, or retention
by, the
<PAGE>
17
Assignee of any such amounts shall not relieve the Assignor of its obligations
to make promptly all repairs and replacements required by subsections 6.4 and
6.5 and to pay for the same at the Assignor's own cost and expense. The Assignee
shall have no obligation to release the proceeds of such insurance to the party
or parties who are to make such repairs or the vendors of such replacement
Collateral unless the Assignor shall have first provided the Assignee with a
corporate officer's certificate specifying the repair for which such proceeds
are to be applied and the party or parties (which may be the Assignor) who are
to make such repair and/or the vendor or vendors of such replacement Collateral.
On receipt of such corporate officer's certificate from the Assignor and
provided no Insecurity Event or Termination Event has occurred and is
continuing, the Assignee shall become obligated to release all, or such portion
as the Assignor shall specify, of such proceeds to such party or parties making
such repairs or to such vendor or vendors in accordance with the customary
payment requirements of each such party or vendor. On completion of such repair
or delivery of such replacement Collateral, the Assignor shall provide the
Assignee with an corporate officer's certificate as to such completion or
delivery. Notwithstanding the foregoing, upon repair, restoration or replacement
of all damaged property for which such insurance proceeds have been paid to the
Assignee, the Assignee shall, provided no Insecurity Event or Termination Event
shall have occurred and be continuing, upon receipt of an corporate officer's
certificate to the effect that all such damaged property has been restored,
repaired or replaced as provided by subsections 6.4 and 6.5, pay to the Assignor
the balance of such insurance proceeds.
7.5 Evidence of Insurance. The Assignor agrees to furnish the
Assignee as of the date of the first extension of credit under the Line of
Credit, and thereafter upon the renewal of the insurance policies referred to
below, but in no event less than once per calendar year, a certificate, as
hereinafter described, signed by an independent aviation insurance broker
recognized in the aviation insurance industry (who may be the broker regularly
retained by the Assignor). Such broker's certificate shall (i) certify that the
insurance required by this Section 7 is in full force and effect, specifically
referring to this Agreement and Section 7; (ii) describe the perils covered by
each policy of insurance then in force, identify the insurer with which such
policies of insurance are carried and maintained, specify the amounts of
insurance coverage provided against each such peril, and describe the date of
expiration and other provisions contained in such policies of insurance so as to
evidence compliance with the requirements of this Section 7; and (iii) state
that all such policies of insurance are carried and maintained with insurers of
recognized responsibility of standing in the aviation insurance industry not
materially lower taken as a whole than that of the
<PAGE>
18
insurers utilized by the Assignor as of the date hereof. Such broker shall
undertake to cause to be provided thirty (30) days' prior written notice to the
Assignee of any cancellation of such policies of insurance for failure to pay
insurance premiums on such policies.
7.6 Failure to Maintain Insurance. If the Assignor shall fail to
maintain insurance as herein provided (including, but not limited to, the
renewal thereof), the Assignee may, but shall not be obligated to, provide such
insurance (whether or not such insurance duplicates insurance maintained by the
Assignor) and, in such event, the Assignor shall, upon demand, reimburse the
Assignee for the expense thereof, together with interest thereon at the interest
rates from time to time in effect under the Letter Agreement with respect to
overdue payments, provided that, any such action by the Assignee shall not in
any way affect any of the rights, powers and privileges of the Assignee under
this Agreement, the Letter Agreement, or any Security Instrument executed in
connection herewith.
7.7 Distribution of Funds. Any amount referred to in this Section 7
which is being retained by the Assignee solely because of the occurrence and
continuation of an Insecurity Event or a Termination Event shall be paid over to
the Assignor at such time as there shall not be continuing any such Insecurity
Event or Termination Event unless such amount has theretofore been applied in
the exercise of remedies provided in Section 8 or as otherwise expressly
required or permitted pursuant to this Agreement.
8. REMEDIES
8.1 Obtaining Collateral Upon Default under the Letter Agreement. If
any Termination Event shall have occurred and be continuing and the Obligations
shall have been declared or shall otherwise have become due and payable as
provided in the Letter Agreement, the Assignee may, subject to any mandatory
requirements of applicable law then in effect and in addition to any and all
other rights it may have under applicable law:
(a) Personally, or by agents or attorneys, take possession of the
Collateral or any portion thereof from the Assignor or any other Person
who then has possession of same, with or without notice or process of law,
and for that purpose may enter upon the Designated Locations or other
premises of the Assignor or such Person, as the case may be, where any
such Collateral is located and may remove the same and use in connection
with such removal any and all services, supplies, aids and other
facilities of the Assignee; and
<PAGE>
19
(b) Take possession of the Collateral or any portion thereof by
directing the Assignor in writing to deliver any of the same to the
Assignee, at any place or places designated by the Assignee, in which
event the Assignor shall at its own cost and expense:
(i) Promptly cause the same to be moved to the place or places
so designated by the Assignee and there delivered to the Assignee;
and
(ii) If directed by the Assignee, store and keep the
Collateral so delivered to the Assignee at such place or places
pending further action by the Assignee as provided in subsection 8.2
hereof, and during such storage provide such guards and maintenance
services as shall be necessary to protect the same and to preserve
and maintain it in good condition;
it being understood that the Assignor's obligation so to deliver any such
Collateral is of the essence of this Agreement and the Letter Agreement and
that, accordingly, upon application to a court having jurisdiction, the Assignee
shall be entitled to a decree requiring specific performance by the Assignor of
said obligation.
8.2 Disposition of Collateral. Any Collateral repossessed by the
Assignee under or pursuant to subsection 8.1 may be sold, leased or otherwise
disposed of under one or more contracts, in parcels or as an entirety, and
without the necessity of gathering at the place of sale the Collateral to be
sold, and in general in such manner, at such time or times, at such place or
places and on such terms as the Assignee may determine to be commercially
reasonable. Any Collateral may be sold, leased or otherwise disposed of, in the
condition in which the same existed when taken by the Assignee or after any
overhaul or repair which the Assignee shall determine to be commercially
reasonable, and all costs incurred by the Assignee, directly or indirectly in
connection with any such overhaul or repair, shall be paid by the Assignor.
Any such disposition which shall be a private sale or other private
proceeding shall be made upon not less than ten (10) days' written notice to the
Assignor specifying the time after which such disposition may be made. Any such
disposition which shall be a public sale shall be made upon not less than ten
(10) days' written notice to the Assignor specifying the time and place of such
sale.
The Assignee may bid for and purchase any Collateral offered for
sale in accordance with this Section, without accountability to the Assignor
(except to the extent of surplus
<PAGE>
20
money received as provided in subsection 8.4). In the event that the Assignee
becomes the purchaser at any such sale, it shall be entitled to credit the
Obligations against the purchase price of all such Collateral purchased. Any
amounts not so credited against such purchase price shall remain as obligations
of the Assignor to the Assignee and the Assignee shall have all of its rights,
powers and privileges under this Agreement, and the Security Instruments
executed in connection herewith, with respect to such obligations.
The rights, powers and privileges of the Assignee under this Section
shall, in all respects, be subject to mandatory requirements of applicable law,
provided that if, and to the extent that, any such right, power or privilege
shall be available to the Assignee, under applicable law, only upon the
agreement of the Assignee and the Assignor or the waiver by the Assignor of any
right, power or privilege, such agreement or waiver shall be deemed to have been
made (to the extent permitted by applicable law) for all purposes of this
Agreement, and all Security Instruments executed in connection herewith.
8.3 Waiver of Claims. Except as otherwise provided in this Agreement
(and without limiting any other term or provision of this Agreement, or any
Security Instrument executed in connection herewith), THE ASSIGNOR HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO PRIOR NOTICE OR
JUDICIAL HEARING IN CONNECTION WITH THE ASSIGNEE'S TAKING POSSESSION OR THE
ASSIGNEE'S DISPOSITION OF ANY COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND
ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH
RIGHT WHICH THE ASSIGNOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OF OR ANY
STATUTE OF THE UNITED STATES OR OF ANY STATE, and the Assignor hereby further
waives:
(a) All damages occasioned by such taking of possession except
damages arising from willful misconduct or gross negligence by the
Assignee or any other Person taking possession on behalf of the Assignee;
(b) All other requirements as to the time, place and terms of sale
or other requirements with respect to the enforcement of the Assignee's
rights hereunder; and
(c) All rights of redemption, appraisement, valuation, stay,
extension or moratorium now or hereafter in force under any applicable law
in order to prevent or delay the enforcement of this Agreement, or any
Security Instrument executed in connection herewith, or the absolute sale
of any Collateral, and the Assignor, for itself and all who may claim
under it, insofar as it or they now or hereafter lawfully may, hereby
waives the benefit of all such laws.
<PAGE>
21
Any sale of, or the grant of options to purchase, or any other
realization upon, any Collateral shall operate to divest all right, title,
interest, claim and demand, either at law or in equity, of the Assignor therein
and thereto, and shall be a perpetual bar both at law and in equity against the
Assignor and against any and all Persons claiming or attempting to claim any
Collateral so sold, optioned or realized upon, or any part thereof, from,
through and under the Assignor.
8.4 Application of Proceeds. Subject to the mandatory requirements
of applicable law, the proceeds of any disposition of any Collateral pursuant to
subsection 8.2 and, except as otherwise expressly provided herein, the proceeds
of any insurance or other payments received by the Assignee including, without
limitation, with respect to an Event of Loss or other loss or damage to the
Collateral shall be applied as follows:
(a) To the reimbursement of all fees, costs and expenses incurred by
the Assignee, the Obligations and any amounts payable by the Assignor,
under the Letter Agreement, interest on each such amount at the Applicable
Rate (as defined in the Letter Agreement) from and after the date such
amount is due and owing until paid in full; and
(b) Any surplus then remaining shall be paid to the Assignor, its
successors or assigns, subject, however, to the rights of the holder of
any then existing Lien of which the Assignee has actual notice (without
investigation).
8.5 Fees and Expenses. The Assignor shall pay to the Assignee all
reasonable fees, costs and expenses (including reasonable legal fees and
disbursements) incurred by the Assignee in protecting all or any portion of the
security interests created by this Agreement or exercising or enforcing rights
or remedies under this Agreement. All fees, costs and disbursements payable by
the Assignor pursuant to this Section shall bear interest at the rate payable
from time to time under the Letter Agreement for overdue payments, payable on
demand.
8.6 Remedies Cumulative. Nothing contained in this Section shall be
construed to limit in any way any right, power or privilege of the Assignee
under this Agreement, any Supplemental Security Agreement or any other Security
Instrument executed in connection herewith, or under applicable law upon the
occurrence of a Termination Event under the Letter Agreement. Each and every
right, power and privilege hereby given to, or retained by, the Assignee in this
Section 8 shall be in addition to and not in limitation of every other right,
power and privilege given under this Agreement, the Letter Agreement or any
other instrument executed in connection herewith or therewith, or now or
hereafter
<PAGE>
22
existing at law or in equity. Each and every right, power and privilege of the
Assignee may be exercised from time to time or simultaneously and as often and
in such order as may be deemed expedient by the Assignee. All such rights,
powers and privileges shall be cumulative and not mutually exclusive and the
exercise of one shall not be deemed a waiver of the right to exercise any other.
The Assignor hereby waives, to the extent permitted by applicable law, any right
which it may have to require Assignee to choose or elect remedies. If and to the
extent that any such right, power or privilege or other right, power or
privilege shall be available to the Assignee under applicable law, only upon the
agreement of the Assignee and the Assignor, or the waiver by the Assignor of any
right, power or privilege, then (to the extent permitted by applicable law) such
agreement or waiver shall be deemed to have been validly and irrevocably made
for all purposes of this Agreement, and all Security Instruments executed in
connection herewith.
9. MISCELLANEOUS
9.1 Representation and Warranty of the Assignor. The Assignor hereby
represents and warrants that it is a "citizen of the United States" as defined
in Section 40102(a)(15) of the Federal Aviation Act and that it holds a carrier
operating certificate issued by the Secretary of Transportation pursuant to
Chapter 447 of Title 49, United States Code, for aircraft capable of carrying
ten or more individuals or 6,000 pounds or more of cargo.
9.2 Termination, Waivers, Amendments. This Agreement and the
security interests created by this Agreement shall terminate when the
Obligations have been discharged. The provisions of this Agreement and any other
Security Instrument executed in connection herewith may from time to time be
amended, modified, discharged, or waived, only if such amendment, modification,
discharge or waiver is in writing and signed by the party against which
enforcement of the amendment, modification, discharge or waiver is sought. No
failure or delay on the part of the Assignee in exercising any right, power or
privilege under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or privilege preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. Notice to or demand on the Assignor made by the Assignee in one case
or circumstance shall not entitle the Assignor to any notice or demand in any
similar or other case.
9.3 Notices, Communications and Information. All notices,
communications and other information under this Agreement, or any Security
Instrument executed in connection herewith, shall
<PAGE>
23
be in writing and shall be given by overnight delivery or by facsimile, or
similar writing, addressed as follows:
(a) If to the Assignor, to
Midway Airlines Corporation
5713 South Central Avenue
Chicago, Illinois 60638
Attention: President
Telephone: (312) 838 8100
Facsimile: (312) 838-2069
(b) If to the Assignee, to
AVSA, S.A.R.L.
2, rond-point Maurice Bellonte
31700 BLAGNAC
FRANCE
Attention: Director - Contracts
Telephone: 33 61 30 40 12
Facsimile: 33 61 30 40 11
or as to any party hereto, at such other address as shall be notified by such
party to the other party. Any notice shall be deemed received (i) if given by
facsimile, when confirmed by telephone by the sender or (ii) if given by other
means, when delivered at the address specified in this subsection 9.3.
9.4 Severability. Any provision of this Agreement, which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of any provision in any other jurisdiction. To the
extent permitted by applicable law, the Assignor hereby waives any provision of
law which renders any provision hereof prohibited or unenforceable in any
respect.
9.5 Headings. The various headings of this Agreement are inserted
for convenience only and shall not affect the meaning or interpretation of this
Agreement or any provision hereof.
9.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
shall constitute together but one and the same agreement.
9.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND BE
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW
<PAGE>
24
OF THE STATE OF NEW YORK.
9.8 Successors and Assigns. This Agreement shall remain in full
force and effect and be binding in accordance with and to the extent of its
terms upon the Assignor and the successors and assigns thereof, and shall inure
to the benefit of the Assignee, and its respective successors, indorsees,
transferees and assigns, until the Obligations shall have been satisfied by
payment in full.
9.9 JURISDICTION. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO THIS
AGREEMENT OR THE OTHER FINANCING DOCUMENTS MAY BE INSTITUTED IN THE COURTS OF
THE STATE OF NEW YORK, THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK, OR ELSEWHERE TO THE EXTENT THAT JURISDICTION SHALL EXIST
APART FROM THE PROVISIONS OF THIS SUBSECTION, AS THE ASSIGNEE MAY ELECT, AND BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, THE ASSIGNOR IRREVOCABLY AND
UNCONDITIONALLY SUBMITS TO THE JURISDICTION (BOTH SUBJECT MATTER AND PERSONAL)
OF EACH SUCH COURT, AND IRREVOCABLY AND UNCONDITIONALLY WAIVES (I) ANY OBJECTION
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY OF SUCH COURTS, AND
(II) ANY CLAIM THAT ANY ACTION OR PROCEEDING BROUGHT IN ANY OF SUCH COURTS HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.
9.10 WAIVER OF JURY TRIAL. THE ASSIGNOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
<PAGE>
If the foregoing correctly sets forth our understanding, please execute
the original and one (1) copy hereof in the space provided below and return a
copy to the Seller.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ Christophe Mourey
------------------------------------
Its: AVSA Chief Executive Officer
Date:
-----------------
Accepted and Agreed
Midway Airlines Corporation, as Assignor
By: /s/ Brian J. Olds
---------------------------
Brian J. Olds
Its: Executive Vice President
Chief Operating Officer
<PAGE>
SCHEDULE 1 to
Security Agreement
Part A
Airbus Spare Parts
<PAGE>
SCHEDULE 1 to
Security Agreement
Part B
Fokker Spare Parts
<PAGE>
SCHEDULE 1 to
Security Agreement
Part C
Miscellaneous Spare Parts
<PAGE>
SCHEDULE 2 to
Security Agreement
Designated Locations
<PAGE>
SCHEDULE 3 to
Security Agreement
Ground Equipment
<PAGE>
SCHEDULE 4 to
Security Agreement
Tooling Equipment
<PAGE>
Amendment No. 1
TO THE "FINANCIAL MATTERS" LETTER AGREEMENT
dated as of March 17, 1995
between
AVSA, S.A.R.L.,
and
MIDWAY AIRLINES CORPORATION
This Amendment No. 1 (hereinafter referred to as the "Amendment") entered into
as of December 21, 1995, by and between AVSA, S.A.R.L., a societe a
responsabilite limitee organized and existing under the laws of the Republic of
France, having its registered office located at 2, Rond Point Maurice Bellonte,
31700 Blagnac, FRANCE (hereinafter referred to as the "Seller"), and MIDWAY
AIRLINES CORPORATION, a body corporate, organized and existing under the laws of
the State of Delaware, United States of America, having its principal corporate
offices located at 300 West Morgan Street, Suite 1200, Durham, NC 27701
(hereinafter referred to as the "Buyer").
WITNESSETH:
WHEREAS, the Buyer and the Seller entered into a Purchase Agreement, dated
as of March 17, 1995, relating to the sale by the Seller and the purchase by the
Buyer of certain Airbus Industrie A320-200 model aircraft (the "Aircraft"),
which, as previously amended by and supplemented with all Exhibits, Appendixes
and Letter Agreements attached thereto, is hereinafter called the "Agreement"
and a related letter agreement regarding "Financial Matters" which, as
previously amended, is hereinafter called the "Financial Matters Agreement";
WHEREAS, the Buyer has requested to make a certain Predelivery Payment
under the Agreement by way of a promissory note, and the Seller agrees to such
method of payment under the conditions set forth in this Amendment; and
<PAGE>
WHEREAS, capitalized terms used herein and not otherwise defined in this
Amendment will have the meanings assigned to them in the Agreement, and the
terms "herein," "hereof," and hereunder and words of similar import refer to
this Amendment.
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS HEREINAFTER SET
FORTH, IT IS AGREED AS FOLLOWS:
1. REPORTS
In connection with and in consideration of the Seller's entering into an
amendment to the Agreement dated as of the date hereof, Subparagraph 4.16
of the Financial Matters Agreement will be amended to include the
following quoted provisions:
QUOTE
(iii) Monthly Reports Within twenty (20) days after the end of each month
in each fiscal year of the Buyer, a Consolidated balance sheet of
the Buyer and its Consolidated subsidiaries prepared as of the close
of such month, together with the related statements of income and
surplus, statement of sources and uses of cash, as well as such
other historical information relating to such period that the Buyer
maintains. Such information will include, but not be limited to,
revenue per available seat mile, cost per available seat mile,
segment profitability information, the number of total passengers,
and load factor and average fare information. The previous sentence
notwithstanding, the requirement for the Buyer to provide segment
profitability information will expire on the Seller's receipt of
such information for the entire month of April 1996, provided that
no Insecurity Event has occurred under the Agreement.
UNQUOTE
2. COLLATERAL
It is hereby agreed that, notwithstanding the provisions of Subparagraph
2.2 of the Financial Matters Agreement, the Seller will not provide
Upfront Support Credit in excess of the Capped Amount until April 30,
1996.
3. CONFIDENTIALITY
Subject to any legal or governmental requirements of disclosure, the
parties (which for this purpose shall include their employees, agents and
advisors) shall maintain the terms and conditions of this Amendment and
any reports or other data furnished hereunder strictly confidential.
Without limiting the generality of the foregoing, the Buyer and the Seller
shall use their best efforts to limit the disclosure of the contents of
this Agreement to the
2
<PAGE>
extent legally permissible in any filing required to be made by the Buyer
or the Seller, as the case may be, with any governmental agency and shall
make such applications as shall be necessary to implement the foregoing.
With respect to any public disclosure or filing, each party agrees to
submit to the other party a copy of the proposed document to be filed or
disclosed and will give the other party a reasonable period of time in
which to review the said document. The Buyer and Seller shall consult with
each other prior to the making of any public disclosure or filing,
permitted hereunder, of this Amendment or the terms and conditions
thereof. The provisions of this Paragraph 2 shall survive any termination
of this Agreement.
4. EFFECT OF AMENDMENT
The Agreement will be deemed amended to the extent herein provided, and,
except as specifically amended hereby, will continue in full force and
effect in accordance with its original terms, except that if the Agreement
and this Amendment have specific provisions that are inconsistent, the
specific provisions contained in this Amendment will govern. It is
understood that this Amendment does not in any way constitute the a waiver
by the Seller of any rights it has under the Financial Matters Agreement
or under the Agreement, provided, however, that the Seller agrees to waive
until April 30, 1996, its rights with respect to Insecurity Events
described in Subparagraph 21.2(a) and 21.2(b) of the Agreement.
Further, it is agreed that this Amendment is subject to the parties
executing as of the date hereof an amendment to the Agreement and a
promissory note security agreement.
5. INTERPRETATION AND LAW
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND THE PERFORMANCE
THEREOF SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.
THE PARTIES HEREBY ALSO AGREE THAT THE UNITED NATIONS CONVENTION ON THE
INTERNATIONAL SALE OF GOODS SHALL NOT APPLY TO THIS TRANSACTION.
3
<PAGE>
If the foregoing correctly sets forth our understanding, please execute
this Amendment in the space provided below, whereupon, as of the date first
above written, this Amendment will constitute part of the Agreement.
Agreed and accepted Yours sincerely,
MIDWAY AIRLINES AVSA, S.A.R.L.
CORPORATION
By: /s/ [ILLEGIBLE] By: /s/ Christophe Mourey
-------------------------------- -----------------------------------
Its: President Its: AVSA Chief Executive Officer
By:
--------------------------------
Its:
--------------------------------
4
<PAGE>
If the foregoing correctly sets forth our understanding, please execute
this Amendment in the space provided below, whereupon, as of the date first
above written, this Amendment will constitute part of the Agreement.
Agreed and accepted Yours sincerely,
MIDWAY AIRLINES AVSA, S.A.R.L.
CORPORATION
By: By: /s/ Christophe Mourey
-------------------------------- -----------------------------------
Its: Its: Chief Executive Officer
--------------------------------
By:
--------------------------------
Its:
--------------------------------
4
<PAGE>
Amendment No. 2
TO THE "FINANCIAL MATTERS" LETTER AGREEMENT
dated as of March 17, 1995
between
AVSA, S.A.R.L.,
and
MIDWAY AIRLINES CORPORATION
This Amendment No. 2 (hereinafter referred to as the "Amendment") entered into
as of March 27, 1996, by and between AVSA, S.A.R.L., a societe a responsabilite
limitee organized and existing under the laws of the Republic of France, having
its registered office located at 2, rond-point Maurice Bellonte, 31700 Blagnac,
FRANCE (hereinafter referred to as the "Seller"), and MIDWAY AIRLINES
CORPORATION, a body corporate, organized and existing under the laws of the
State of Delaware, United States of America, having its principal corporate
offices located at 300 West Morgan Street, Suite 1200, Durham, NC 27701
(hereinafter referred to as the "Buyer").
WITNESSETH:
WHEREAS, the Buyer and the Seller entered into (i) a Purchase Agreement,
dated as of March 17, 1995, relating to the sale by the Seller and the purchase
by the Buyer of certain Airbus Industrie A320-200 model aircraft (the
"Aircraft"), which, as previously amended by Amendment No. 1 dated as of
December 21, 1995, Amendment No. 2 dated as of January 31, 1996, and Amendment
No. 3 dated as of February 28,1996, and supplemented with all Exhibits,
Appendixes and Letter Agreements attached thereto, is hereinafter called the
"Agreement," (ii) a related letter agreement regarding "Financial Matters,"
which, as previously amended by Amendment No. 1 dated as of December 21, 1995,
is hereinafter called the "Financial Matters Agreement," (iii) a related
Security Agreement, dated as of March 17, 1995, hereinafter referred to as the
"Security Agreement," and(iv) a Promissory Note Security Agreement, dated as of
December 2l, 1995; and
<PAGE>
WHEREAS, capitalized terms used herein and not otherwise defined in this
Amendment will have the meanings assigned to them in the Agreement, and the
terms "herein," "hereof" and hereunder and words of similar import refer to this
Amendment.
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS HEREINAFTER SET
FORTH, IT IS AGREED AS FOLLOWS:
1. REPORTS
In connection with and in consideration of the Seller's entering into an
amendment to the Agreement dated as of the date hereof, Subparagraph 4.16
of the Financial Matters Agreement will be amended to include the
following quoted provisions:
QUOTE
(iii) Monthly Reports Within twenty (20) days after the end of each month
in each fiscal year of the Buyer, a Consolidated balance sheet of
the Buyer and its Consolidated subsidiaries prepared as of the close
of such month, together with the related statements of income and
surplus, statement of sources and uses of cash, as well as such
other historical information relating to such period that the Buyer
maintains. Such information will include, but not be limited to,
revenue per available seat mile, cost per available seat mile,
segment profitability information, the number of total passengers,
and load factor and average fare information. The previous sentence
notwithstanding, the requirement for the Buyer to provide segment
profitability information will expire on the Seller's receipt of
such information for the entire month of September 1996, provided
that no Insecurity Event has occurred under the Agreement.
UNQUOTE
2. COLLATERAL AND UPFRONT SUPPORT
It is hereby agreed that, notwithstanding the provisions of Subparagraph
2.2 of the Financial Matters Agreement, as amended by Amendment No. 1 of
the Financial Matters Agreement, the Seller will not provide Upfront
Support Credit in excess of the Capped Amount before October 1, 1996, and
as of such date only, on the earlier of (i) the Buyer's operation of at
least five (5) A320-200 aircraft leased by the Buyer from operating
lessors medium to long term and (ii) six (6) months or fewer before
delivery of the first Aircraft.
2
<PAGE>
3. CONFIDENTIALITY
Subject to any legal or governmental requirements of disclosure, the
parties (which for this purpose shall include their employees, agents and
advisors) shall maintain the terms and conditions of this Amendment and
any reports or other data furnished hereunder strictly confidential.
Without limiting the generality of the foregoing, the Buyer and the Seller
shall use their best efforts to limit the disclosure of the contents of
this Agreement to the extent legally permissible in any filing required to
be made by the Buyer or the Seller, as the case may be, with any
governmental agency and shall make such applications as shall be necessary
to implement the foregoing. With respect to any public disclosure or
filing, each party agrees to submit to the other party a copy of the
proposed document to be filed or disclosed and will give the other party a
reasonable period of time in which to review the said document. The Buyer
and Seller shall consult with each other prior to the making of any public
disclosure or filing, permitted hereunder, of this Amendment or the terms
and conditions thereof. The provisions of this Paragraph 3 shall survive
any termination of this Agreement.
4. EFFECT OF AMENDMENT
The Agreement will be deemed amended to the extent herein provided, and,
except as specifically amended hereby, will continue in full force and
effect in accordance with its original terms, except that if the Agreement
and this Amendment have specific provisions that are inconsistent, the
specific provisions contained in this Amendment will govern. It is
understood that this Amendment does not in any way constitute the a waiver
by the Seller of any rights it has under the Financial Matters Agreement
or under the Agreement, provided, however, that the Seller agrees to waive
until October 1, 1996, its rights with respect to insecurity Events
described in Subparagraph 21.2(a) and 21.2(b) of the Agreement.
Further, it is agreed that this Amendment is subject to the parties'
executing as of the date hereof an amendment to each of the Agreement, the
Security Agreement and the Promissory Note Security Agreement.
5. INTERPRETATION AND LAW
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND THE PERFORMANCE
THEREOF SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.
THE PARTIES HEREBY ALSO AGREE THAT THE UNITED NATIONS CONVENTION ON THE
INTERNATIONAL SALE OF GOODS SHALL NOT APPLY TO THIS TRANSACTION.
3
<PAGE>
If the foregoing correctly sets forth our understanding, please execute
this Amendment in the space provided below, whereupon, as of the date first
written above, this Amendment will constitute part of the Agreement.
Agreed and accepted Yours sincerely,
MIDWAY AIRLINES AVSA, S.A.R.L.
CORPORATION
By: /s/ Jonathan S. Waller By: /s/ Christophe Mourey
- -------------------------------- ------------------------------------
Its: Senior Vice President Its: AVSA Chief Executive Officer
General Counsel
By: /s/ [ILLEGIBLE]
- --------------------------------
Its: President
4
<PAGE>
Amendment No. 3
TO THE "FINANCIAL MATTERS" LETTER AGREEMENT
dated as of March 17, 1995
between
AVSA, S.A.R.L.,
and
MIDWAY AIRLINES CORPORATION
This Amendment No. 3 (hereinafter referred to as the "Amendment") entered into
as of October 29, 1996, by and between AVSA, S.A.R.L., a societe a
responsabilite limitee organized and existing under the laws of the Republic of
France, having its registered office located at 2, rond-point Maurice Bellonte,
31700 Blagnac, FRANCE (hereinafter referred to as the "Seller"), and MIDWAY
AIRLINES CORPORATION, a body corporate, organized and existing under the laws of
the State of Delaware, United States of America, having its principal corporate
offices located at 300 West Morgan Street, Suite 1200, Durham, NC 27701
hereinafter referred to as the "Buyer").
WITNESSETH:
WHEREAS, the Buyer and the Seller entered into (i) a Purchase Agreement,
dated as of March 17, 1995, relating to the sale by the Seller and the purchase
by the Buyer of certain Airbus Industrie A320-200 model aircraft (the
"Aircraft"), which, as previously amended by Amendment No. 1 dated as of
December 21, 1995, Amendment No. 2 dated as of January 31, 1996, Amendment No. 3
dated as of February 28, 1996, Amendment No. 4 dated as of March 27, 1996, and
Amendment No. 5 dated the date hereof and supplemented with all Exhibits,
Appendixes and Letter Agreements attached thereto, is hereinafter called the
"Agreement," (ii) a related letter agreement regarding "Financial Matters,"
which, as previously amended by Amendment No. 1 dated as of December 21, 1995,
and Amendment No. 2 dated as of March 27, 1996, is hereinafter called the
"Financial Matters Agreement," (iii) a related Security Agreement, dated as of
March 17, 1995, hereinafter referred to as the "Security Agreement," and (iv) a
<PAGE>
Promissory Note Security Agreement, dated as of December 21, 1995; and
WHEREAS, capitalized terms used herein and not otherwise defined in this
Amendment will have the meanings assigned to them in the Agreement, and the
terms "herein," "hereof," and hereunder and words of similar import refer to
this Amendment.
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS HEREINAFTER SET
FORTH, IT IS AGREED AS FOLLOWS:
1. REPORTS
In connection with and in consideration of the Seller's entering into an
amendment to the Agreement dated as of the date hereof, Subparagraph 4.16
of the Financial Matters Agreement will be amended to include the
following quoted provisions:
QUOTE
(iii) Monthly Reports Within twenty (20) days after the end of each month
in each fiscal year of the Buyer, a Consolidated balance sheet of
the Buyer and its Consolidated subsidiaries prepared as of the close
of such month, together with the related statements of income and
surplus, statement of sources and uses of cash, as well as such
other historical information relating to such period that the Buyer
maintains. Such information will include, but not be limited to,
revenue per available seat mile, cost per available seat mile,
segment profitability information, the number of total passengers,
and load factor and average fare information. The previous sentence
notwithstanding, the requirement for the Buyer to provide segment
profitability information will expire on the Seller's receipt of
such information for the entire month of September 1998, provided
that no Insecurity Event has occurred under the Agreement.
UNQUOTE
2. COLLATERAL AND UPFRONT SUPPORT
It is hereby agreed that, notwithstanding the provisions of Subparagraph
2.2 of the Financial Matters Agreement, as amended by Amendment No. 1 and
Amendment No. 2 of the Financial Matters Agreement, the Seller will not
provide Upfront Support Credit in excess of the Capped Amount before
October 1, 1998, and as of such date only, on the earlier of (i) the
Buyer's operation of at least five (5) A320-200 aircraft leased by the
Buyer from operating lessors medium to long term and (ii) six (6) months
or fewer before delivery of the first Aircraft.
2
<PAGE>
3. CONFIDENTIALITY
Subject to any legal or governmental requirements of disclosure, the
parties (which for this purpose shall include their employees, agents and
advisors) shall maintain the terms and conditions of this Amendment and
any reports or other data furnished hereunder strictly confidential.
Without limiting the generality of the foregoing, the Buyer and the Seller
shall use their best efforts to limit the disclosure of the contents of
this Agreement to the extent legally permissible in any filing required to
be made by the Buyer or the Seller, as the case may be, with any
governmental agency and shall make such applications as shall be necessary
to implement the foregoing. With respect to any public disclosure or
filing, each party agrees to submit to the other party a copy of the
proposed document to be filed or disclosed and will give the other party a
reasonable period of time in which to review the said document. The Buyer
and Seller shall consult with each other prior to the making of any public
disclosure or filing, permitted hereunder, of this Amendment or the terms
and conditions thereof. The provisions of this Paragraph 3 shall survive
any termination of this Agreement.
4. EFFECT OF AMENDMENT
The Agreement will be deemed amended to the extent herein provided, and,
except as specifically amended hereby, will continue in full force and
effect in accordance with its original terms, except that if the Agreement
and this Amendment have specific provisions that are inconsistent, the
specific provisions contained in this Amendment will govern. It is
understood that this Amendment does not in any way constitute a waiver by
the Seller of any rights it has under the Financial Matters Agreement or
under the Agreement.
Further, it is agreed that this Amendment is subject to the parties'
executing as of the date hereof an amendment to each of the Agreement, the
Security Agreement and the Promissory Note Security Agreement, if
applicable.
5. INTERPRETATION AND LAW
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND THE PERFORMANCE
THEREOF SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.
THE PARTIES HEREBY ALSO AGREE THAT THE UNITED NATIONS CONVENTION ON THE
INTERNATIONAL SALE OF GOODS SHALL NOT APPLY TO THIS TRANSACTION.
3
<PAGE>
If the foregoing correctly sets forth our understanding, please execute
this Amendment in the space provided below, whereupon, as of the date first
above written, this Amendment will constitute part of the Agreement.
Agreed and accepted Yours sincerely,
MIDWAY AIRLINES AVSA, S.A.R.L.
CORPORATION
By: /s/ Jonathan S. Waller By: /s/ Christophe Mourey
- -------------------------------- ------------------------------------
Its: Senior Vice President Its:
General Counsel
By:
--------------------------------
Its:
--------------------------------
4
<PAGE>
Amendment No. 4
TO THE "FINANCIAL MATTERS" LETTER AGREEMENT
dated as of March 17,1995
between
AVSA, S.A.R.L.,
and
MIDWAY AIRLINES CORPORATION
This Amendment No. 4 (Hereinafter referred to as the "Amendment") entered into
as of February __, 1997, by and between AVSA, S.A.R.L., a societe a
responsabilite limitee organized and existing under the laws of the Republic of
France, having its registered office located at 2, rond-point Maurice Bellonte,
31700 Blagnac, FRANCE (hereinafter referred to as the "Seller"), and MIDWAY
AIRLINES CORPORATION, a body corporate, organized and existing under the laws of
the State of Delaware, United States of America, having its principal corporate
offices located at 300 West Morgan Street, Suite 1200, Durham, NC 27701
(hereinafter referred to as the "Buyer").
WITNESSETH:
WHEREAS, the Buyer and the Seller entered into (i) a Purchase Agreement,
dated as of March 17, 1995, relating to the sale by the Seller and the purchase
by the Buyer of certain Airbus Industrie A320-200 model aircraft (the
"Aircraft"), which, as previously amended by Amendment No. 1 dated as of
December 21, 1995, Amendment No. 2 dated as of January 31, 1996, Amendment No. 3
dated as of February 28, 1996, Amendment No. 4 dated as of March 27, 1996,
Amendment No. 5 dated as of October 29, 1996, and Amendment No. 6 dated the date
hereof and supplemented with all Exhibits, Appendixes and Letter Agreements
attached thereto, is hereinafter called the "Agreement," (ii) a related letter
agreement regarding "Financial Matters," which, as previously amended by
Amendment No. 1 dated as of December 21, 1995, Amendment No. 2 dated as of March
27, 1996 and Amendment No. 3 dated as of October 29, 1996, is hereinafter called
the "Financial Matters Agreement," (iii) a related Security Agreement,
<PAGE>
dated as of March 17, 1995, and (iv) a Promissory Note Security Agreement, dated
as of December 21, 1995, hereinafter referred to as the "Promissory Note
Security Agreement"; and
WHEREAS, capitalized terms used herein and not otherwise defined in this
Amendment will have the meanings assigned to them in the Agreement, and the
terms "herein," "hereof," and hereunder and words of similar import refer to
this Amendment.
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS HEREINAFTER SET
FORTH, IT IS AGREED AS FOLLOWS:
1. INSECURITY EVENTS
The Buyer and the Seller agree that the Financial Matters Agreement is
amended by deleting Subparagraphs 3.2(a), 3.2(b), 3.2(g) and 3.2(h)
thereof in their entirety.
2. MERGER
The Buyer intends to become the surviving corporation of the merger of
GoodAero, Inc., a Delaware corporation, into the Buyer (the "Merger"),
pursuant to which Merger the Buyer's current majority shareholder will
cease to control eighty percent (80%) of the outstanding voting shares of
the Buyer. Following the consummation of the Merger, the shareholders of
GoodAero, Inc., will have the right to vote that number of votes that will
equal to seventy percent (70%) of all votes in the aggregate on each
matter submitted to a vote of the holders of the Buyers common stock. The
Seller agrees that the consummation of the Merger will not constitute an
Insecurity Event under Subparagraph 3.2(e) of the Financial Matters
Agreement.
3. UPFRONT SUPPORT
The Buyer and the Seller agree to negotiate in good faith the execution of
amendments to the Agreement, the Financial Matters Agreement and any other
necessary agreement or letter agreement between the Seller and the Buyer
with respect to the Utilized Amount and the Upfront Support Package (as
such terms are defined in the Financial Matters Agreement), based upon the
following:
The Buyer's obligation to the Seller with respect to the Utilized
Amount of the Upfront Support Package may be satisfied (i) fully, by
the Buyer's payment of such Utilized Amount to the Seller in cash or
(ii) partially, by the Buyers delivery and return to the Seller of
serviceable Airbus aircraft parts and/or tooling currently owned by
the Buyer to the extent of the mutually agreed value of such parts
and/or tooling (the "Agreed Amount"). Subclause (ii) in the
2
<PAGE>
immediately preceding sentence will be subject to such parts and/or
tooling being serviceable and in operating condition, tagged and
otherwise having the necessary documentation and, further, to
inspection by the Seller. The Agreed Amount will be (i) recredited
against the product support package available under the Agreement,
or (ii) in the event that the Buyer does not need such product
support (or a portion thereof), the Agreed Amount can be provided as
a price reduction at the time of Aircraft delivery (subject to
escalation as set forth in Subparagraph 1.2.1 of the Financial
Matters Agreement).
4. CONFIDENTIALITY
Subject to any legal or governmental requirements of disclosure, the
parties (which for this purpose shall include their employees, agents and
advisors) shall maintain the terms and conditions of this Amendment and
any reports or other data furnished hereunder strictly confidential.
Without limiting the generality of the foregoing, the Buyer and the Seller
shall use their best efforts to limit the disclosure of the contents of
this Amendment to the extent legally permissible in any filing required to
be made by the Buyer or the Seller, as the case may be, with any
governmental agency and shall make such applications as shall be necessary
to implement the foregoing. With respect to any public disclosure or
filing, each party agrees to submit to the other party a copy of the
proposed document to be filed or disclosed and will give the other party a
reasonable period of time in which to review the said document. The Buyer
and Seller shall consult with each other prior to the making of any public
disclosure or filing, permitted hereunder, of this Amendment or the terms
and conditions thereof. The provisions of this Paragraph 4 shall survive
any termination of this Amendment.
5. EFFECT OF AMENDMENT
The Agreement will be deemed amended to the extent herein provided, and,
except as specifically amended hereby, will continue in full force and
effect in accordance with its original terms, except that if the Agreement
and this Amendment have specific provisions that are inconsistent, the
specific provisions contained in this Amendment will govern. It is
understood that this Amendment does not in any way constitute a waiver by
the Seller of any rights it has under the Financial Matters Agreement or
under the Agreement.
Further, it is agreed that this Amendment is subject to the parties'
executing as of the date hereof an amendment to the Agreement and the
Promissory Note Security Agreement, if applicable.
3
<PAGE>
6. INTERPRETATION AND LAW
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND THE PERFORMANCE
THEREOF SHALL BE DETERMINED TN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.
THE PARTIES HEREBY ALSO AGREE THAT THE UNITED NATIONS CONVENTION ON THE
INTERNATIONAL SALE OF GOODS SHALL NOT APPLY TO THIS TRANSACTION.
4
<PAGE>
If the foregoing correctly sets forth our understanding, please execute
this Amendment in the space provided below, whereupon, as of the date first
above written, this Amendment will constitute part of the Agreement.
Agreed and accepted Yours sincerely,
MIDWAY AIRLINES AVSA, S.A.R.L.
CORPORATION
By: /s/ Jonathan S. Waller By: /s/ Christophe Mourey
- -------------------------------- ------------------------------------
Its: Senior Vice President Its: AVSA Chief Executive Officer
By:
--------------------------------
Its:
--------------------------------
5
<PAGE>
EXHIBIT 10.17
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY {***}. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
CONFIDENTIAL
AGREEMENT OF SUBLEASE
Between
AMERICAN AIRLINES, INC. And
MIDWAY AIRLINES CORPORATION
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
1. Premises ........................................................... 1
A. Initial Premises ............................................. 1
B. Phase 2 Premises ............................................. 1
C. Fixtures, Personal Property, Terminal C Systems and Services . 2
D. Additional Premises .......................................... 3
E. No Conflict .................................................. 4
2. Term ............................................................... 4
3. Base Lease Incorporated ........................................... 4
A. Sublease Subordinate ......................................... 4
B. Base Lease In Effect ......................................... 4
C. Base Lease Amendment ......................................... 5
4. Use ................................................................ 5
5. Rent and Related Matters ........................................... 5
A. Rent ......................................................... 5
B. Default Interest ............................................. 6
C. Late Payment ................................................. 6
D. Concessions .................................................. 7
E. Most Favored Nations Clause .................................. 7
F. Third Party Vendors .......................................... 7
6. Utilities and Services; Parking .................................... 7
7. Acceptance of Premises ............................................. 8
8. Repairs and Maintenance ............................................ 8
9. Taxes .............................................................. 9
10. Alterations ........................................................ 9
11. Right of Entry ..................................................... 9
12. Compliance with Law ................................................ 9
13. Casualty ........................................................... 9
14. Release and Indemnity .............................................. 10
B. Sublessee Indemnity .......................................... 10
C. American Indemnity ........................................... 11
i
<PAGE>
D. Excluded Damages ............................................. 11
15. Insurance .......................................................... 11
A. Coverage ..................................................... 11
B. Form and Certificates ........................................ 12
C. Waiver of Subrogation ........................................ 12
16. Liens .............................................................. 12
17. Condemnation ....................................................... 12
A. Total Taking ................................................. 12
B. Partial Taking ............................................... 12
C. Awards ....................................................... 13
18. Default and Remedies ............................................... 13
A. Event of Default by Sublessee ................................ 13
B. Remedies of American ......................................... 14
C. Acceptance of Surrender ...................................... 14
D. Accelerated Rent ............................................. 14
E. Other Costs .................................................. 15
F. Reletting Demised Premises ................................... 15
G. Remedial Costs ............................................... 15
H. Sublessee Unique ............................................. 15
19. American's Lien .................................................... 16
20. Cumulative Rights .................................................. 16
21. Surrender of Premises/Holding Over ................................. 16
22. Assignment and Sublease ............................................ 16
23. Accord and Satisfaction ............................................ 17
24. Force Majeure ...................................................... 17
25. Attorneys' Fees .................................................... 17
26. GOVERNING LAW ...................................................... 17
27. Entire Agreement/Amendment ......................................... 18
28. Waiver ............................................................. 18
29. Severability ....................................................... 18
30. Approval by Landlord ............................................... 18
ii
<PAGE>
31. Notices ............................................................ 18
32. Quiet Enjoyment .................................................... 19
33. Binding Effect ..................................................... 19
34. Other Space ........................................................ 19
35. Financial and Statistical Reports .................................. 20
36. Offset ............................................................. 20
37. Competition ........................................................ 20
38. American's Annual Report ........................................... 20
39. Construction ....................................................... 20
EXHIBIT A ................................................................. A-1
EXHIBIT B ................................................................. B-1
EXHIBIT C ................................................................. C-1
SCHEDULE I to EXHIBIT C ................................................... 1
EXHIBIT D ................................................................. D-1
EXHIBIT E ................................................................. E-1
iii
<PAGE>
This Agreement of Sublease (this "Sublease"), dated as of the 18th day of
January, 1995 ("Execution Date"), is entered into by and between American
Airlines, Inc., a Delaware corporation ("American"), and Midway Airlines
Corporation, a Delaware corporation (the "Sublessee");
WITNESSETH
WHEREAS, pursuant to that certain Raleigh-Durham Airport Facilities Lease
and Use Agreement dated as of November 1, 1985 between the Raleigh-Durham
Airport Authority, a municipal corporation of the State of North Carolina
("Landlord") and American (together with all amendments, the "Base Lease")
American leases from Landlord certain premises (the "Base Lease Premises") at
Raleigh-Durham Airport ("RDU"); and
WHEREAS, American also leases from Landlord the improvements located on
the real property described in the Base Lease, which improvements are commonly
referred to as Terminal C (the "Improvements"); and
WHEREAS, American desires to sublease to Sublessee, and Sublessee desires
to sublease from American, a portion of each of the Base Lease Premises and the
Improvements as more fully described herein, on the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the mutual promises, agreements,
covenants, conditions and provisions contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, American and Sublessee hereby agree as follows:
1. Premises.
A. Initial Premises. American hereby subleases to Sublessee, and
Sublessee hereby subleases and takes from American space in the Base Lease
Premises and the Improvements, such space and Improvements being
specifically described and generally depicted on Exhibit A attached hereto
(such space and Improvements being referred to collectively herein as the
"Initial Premises"). The square footage set forth on Exhibit A is
approximate. The actual amount of square footage in the Initial Premises
shall be as stated in a survey to be prepared by a qualified surveyor, at
American's sole cost and expense, within 60 days after the Execution Date.
The parties agree to sign a revised Exhibit A after delivery of the survey
in order to evidence the parties' agreement as to square footage of the
Initial Premises. American shall deliver possession of the Initial
Premises free and clear of all tenancies and occupancies to Sublessee on
the Commencement Date.
B. Phase 2 Premises. Upon written notice from Sublessee to American,
but in any event not later than June 15, 1995 ("Phase 2 Premises
Commencement Date"), Sublessee shall sublease and take from American, and
American shall sublease to Sublessee, a total of not less than five (5)
additional gates and six (6)
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additional ticket counter positions, both gates and ticket counter
positions to be contiguous to the Initial Premises, together with (i)
operations and offices space in accordance with the rules and agreements
on Exhibit D attached hereto, (ii) such baggage make-up space as shall be
mutually agreed by the parties based upon both parties' operational needs
at the time in question, and (iii) the Fixtures (hereinafter defined) and
Miscellaneous Personal Property (hereinafter defined) associated with such
space, such sublease to commence on the Phase 2 Premises Commencement Date
but otherwise on the terms and conditions set forth in this Sublease. Such
space is herein referred to as the "Phase 2 Premises". Sublessee and
American will execute an amendment to this Sublease effective as of the
Phase 2 Premises Commencement Date which will amend and restate the
original Exhibit A to this Sublease such that the Initial Premises and the
Phase 2 Premises are described therein. If there shall have occurred and
be continuing on the Phase 2 Premises Commencement Date an Event of
Default by Sublessee under this Sublease, American may, at its option,
refuse to sublease to Sublessee the Phase 2 Premises, until and unless the
breach giving rise to such Event of Default has been timely cured in
accordance with this Sublease.
C. Fixtures, Personal Property, Terminal C Systems and Services. The
passenger loading bridge connected to, and the aircraft parking apron and
apron connecting taxiways contiguous to, each gate subleased by Sublessee
hereunder, as well as counters, millwork and fixtures affixed to the space
subleased hereunder, shall be deemed to be part of the Demised Premises
(such items are herein referred to as "Fixtures"). The holdroom seats,
carpet, ash and trash receptacles, furniture, personnel lockers and
shelving and other miscellaneous personal property actually located on the
Demised Premises on the Commencement Date that are not part of Terminal C
Systems or Services (hereafter defined) (such items are herein referred to
as "Miscellaneous Personal Property") are also hereby subleased by
American to Sublessee during the Term. An inventory of the Miscellaneous
Personal Property associated with the Initial Premises, Phase 2 Premises
and Additional Premises shall be prepared prior to the Commencement Date,
Phase 2 Premises Commencement Date and each Additional Premises
Commencement Date (hereinafter defined), as applicable, and initialed by
the parties for identification.
During the Term, Sublessee shall have a reasonable non-exclusive
right to use, in connection with Sublessee's air transportation
operations, in common with other airlines or tenants or subtenants of
Terminal C, each of the following systems or services associated with or
located in Terminal C (herein referred to as "Terminal C Systems or
Services"), all of which American hereby agrees to operate and maintain
during the Term: (i) inbound and outbound baggage conveyor systems, (ii)
preconditioned air system that supplies cooled air to the aircraft at each
gate, (iii) fixed ground power system to provide electric power supply to
the aircraft at each gate, (iv) aircraft gate control and communications
system, including apron control tower and related equipment, (v) premises
and passenger security and screening systems, (vi) emergency generator and
uninterruptible power supply standby electric power sources, (vii)
aircraft and premises closed-circuit television monitoring system, (viii)
flight and baggage information display system and (ix) plumbing,
electrical and HVAC systems.
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D. Additional Premises. American hereby grants to Sublessee the
option ("Option") to sublease from American all or any portion of the
additional space in the Base Lease Premises or the Improvements
specifically described and generally depicted on Exhibit B attached hereto
(the "Option Premises"), together with the Fixtures associated therewith
and the Miscellaneous Personal Property located thereon as described
above. The term of the Option ("Option Period") shall commence as of the
Execution Date and shall expire at 5:00 p.m. Fort Worth, Texas time on
August 31, 1997 ("Option Termination Date").
Sublessee may exercise the Option by delivering to American, at any
time prior to the Option Termination Date, an unconditional written notice
of exercise ("Notice") in substantially the form of Exhibit C attached
hereto. Sublessee shall have the right to deliver any number of Notices to
American during the Term of the Option, subject to the rules and
agreements that govern the type and amount of space and Improvements that
are permitted or required to be the subject of a given exercise of the
Option that are set forth on Exhibit D attached hereto. Among other
things, each Notice shall specify (i) the portion of the Option Premises
for which the Option is exercised ("Additional Premises") and (ii) the
date of the commencement of the Sublease of the Additional Premises (the
"Additional Premises Commencement Date"), which date (a) shall not be
earlier than the later of (i) June 15, 1995 and (ii) one hundred and
twenty (120) days after the date of delivery to American of the applicable
Notice and (b) shall not be later than ninety (90) days following the
Option Termination Date. Upon delivery of the Notice, Sublessee shall be
deemed to have exercised the Option and Sublessee shall become
unconditionally and irrevocably obligated to sublease from American, and
American shall become unconditionally and irrevocably obligated to
sublease to Sublessee, the Additional Premises, with a commencement date
on the Additional Premises Commencement Date, but otherwise on the terms
and conditions set forth in this Sublease. Each time Sublessee subleases
Additional Premises, Sublessee and American will execute an amendment to
this Sublease effective as of the Additional Premises Commencement Date
which will amend and restate the original Exhibit A to this Sublease such
that the Initial Premises and the Additional Premises are described
therein. If there shall have occurred and be continuing on the date of the
Notice or on the Additional Premises Commencement Date an Event of Default
by Sublessee under this Sublease, American may, at its option, refuse to
sublease to Sublessee the Additional Premises that are the subject of such
Notice, until and unless the breach giving rise to such Event of Default
has been timely cured in accordance with this Sublease. The Initial
Premises, the Phase 2 Premises and the Additional Premises (if any) shall
be referred to herein as the "Demised Premises."
Until Sublessee exercises the Option granted herein in accordance
with the terms hereof, American may utilize the portion of the Option
Premises not taken by Sublessee to the extent and in the manner American
deems appropriate (including without limitation by American's own
utilization thereof or by American's subleasing all or part of such
portion to a third party, subject to preserving Sublessee's Option rights
granted herein). If Sublessee fails to exercise its Option within the time
and in accordance with the terms and conditions set forth herein, for any
reason whatsoever,
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the Option and the rights of Sublessee hereunder in respect to such Option
shall automatically and immediately terminate without notice.
E. No Conflict. As of the date hereof and as of the Commencement
Date, each party represents and warrants to the other that the execution,
delivery and performance of this Sublease does not violate or breach, nor
conflict with, any agreement binding upon such party. American represents
and warrants to Sublessee that the Option Premises are and shall remain
free and clear of all tenancies and occupancies contrary to or in conflict
with the Option, subject to the terms of the Base Lease and except for a
sublease by American to Air South of up to two (2) gates in Terminal C.
2. Term. The term ("Term") of this Sublease shall commence on the date
mutually agreed upon by the parties (but not later than March 2, 1995, assuming
the requisite approval(s) of the Landlord have been obtained by that date) (the
"Commencement Date") and shall expire at 11:59 p.m. on February 28, 2013 unless
sooner terminated pursuant to the provisions hereof.
3. Base Lease Incorporated.
A. Sublease Subordinate. Except as set forth herein, the subletting
under this Sublease shall be on the same terms and conditions as are
contained in the Base Lease but Sublessee does not assume any of
American's obligations to Landlord thereunder. Further, Sublessee
acknowledges and agrees that this Sublease shall be in all respects
subject and subordinate to the Base Lease and to all amendments to the
Base Lease heretofore and hereafter entered into in accordance with this
Sublease. Nothing contained in this Sublease shall be deemed to confer
upon Sublessee any rights which are in conflict with the Base Lease, as
the same may be altered or amended from time to time. Sublessee shall not
do or permit to be done any act or thing which would contravene the terms
or conditions of the Base Lease, and the Base Lease shall govern in the
event of a conflict with this Sublease. In the event that the Base Lease
is canceled or terminated for any reason, the Term of this Sublease shall
automatically terminate simultaneously therewith. Sublessee hereby
acknowledges that the Base Lease is subordinate to certain airport revenue
bonds, as described in the Base Lease.
B. Base Lease In Effect. American represents that as of the date
hereof the Base Lease is in full force and effect. American represents
that American has not received, as of the date hereof, any notice of
default from the Landlord under the Base Lease. To the best of American's
knowledge, the Landlord has no current right to terminate the Base Lease.
Except for matters contested in good faith by American (which will be paid
by American in the event American is unsuccessful in such contest),
American hereby covenants that all rent has been or will be paid through
the Commencement Date and thereafter pursuant to said Base Lease on a
timely basis. American hereby represents that the Improvements and
American's leasehold interest
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created by the Base Lease are unencumbered. So long as this Sublease is in
effect, American agrees that it will not terminate the Base Lease as
permitted pursuant to the Base Lease.
C. Base Lease Amendment American hereby agrees that it will not
initiate any amendment or modification of the Base Lease which materially
impairs Sublessee's rights under this Sublease without obtaining
Sublessee's prior written consent, which will not be unreasonably
withheld. In the event American requests Sublessee's approval of any such
amendment or modification to the Base Lease, Sublessee shall either grant
such approval or provide written notice to American setting forth in
reasonable detail Sublessee's reasons for withholding same within ten (10)
business days of receipt of request therefor from American. In the event
Sublessee fails to respond to American in writing within such ten (10)
business day period (time being of the essence), the amendment or
modification shall be deemed approved by Sublessee. American hereby agrees
that, promptly after the execution of any amendment of the Base Lease,
American shall mail a copy thereof to Sublessee. American shall not take
any discretionary action under, or fail to comply with, the Base Lease if
such action or failure materially impairs Sublessee's rights under this
Sublease.
4. Use. During the Term, Sublessee shall use and occupy the Demised Premises
for the uses allowed by the Base Lease for the Demised Premises and for no other
purpose.
5. Rent and Related Matters.
A. Rent.
(i) As rental for the Demised Premises, Sublessee shall pay
American rent at the rates set forth in Exhibit A for the actual
amount of square footage contained in the Demised Premises, without
set-off or deduction, due and payable in advance on the first day of
each month during the Term. The rates set forth on Exhibit A shall
increase by 2% (compounded annually) on January 1 of each year
during the Term, commencing January 1,1996. All rent due hereunder
is in addition to the Excepted Charges (as defined in Section
5.A.(ii)) and is in addition to the cost of utilities and services
described in Section 6. All rent, charges or other amounts due
hereunder shall be payable in lawful money of the United States of
America.
(ii) The rent due to American pursuant to this Sublease does
not include charges (herein collectively referred to as "Excepted
Charges") for Sublessee's landing fees, fueling charges, fuel
storage charges, employee parking charges (including employee
shuttle service to and from Terminal C), taxes and Common Use
Charges. For all Excepted Charges, Sublessee will either (a) pay
third parties directly or (b) reimburse American if American pays or
is billed for same. The term "Common Use Charges," as used herein,
shall mean any fee, expense or charge that Landlord may charge or
pass through to American under the Base Lease now or in the future,
together with charges for
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the following (without duplication): (a) water and sewer service for
Terminal C, as described in Section C.1. of Schedule D of the Base
Lease, (b) the service fees for Operation and General Administration
for Terminal C described in Section C.2. of Schedule D of the Base
Lease, covering the items and services therein described, (c)
private branch exchange (PBX) telephone service for Terminal C
described in Section C.3. of Schedule D of the Base Lease, (d)
American's cost of clearing and removing snow, ice and debris from
the Terminal C aircraft parking apron and other areas as American is
required to do under Section 14.1 of the Base Lease, (e) American's
cost of providing cleaning, janitorial and trash compaction and
pickup services for Terminal C common use areas as American is
required to provide under Section 13.3 of the Base Lease, (f)
electricity, gas, local and long distance telephone service (if
separate billing for such telephone service is not provided by the
phone company to Sublessee) and other utilities supplied to Terminal
C by outside utility companies as described in Section 13.2 of the
Base Lease, (g) American's cost of maintaining and operating the
Terminal C Systems or Services, (h) American's cost of repairing and
maintaining the common use areas in Terminal C and repairing and
maintaining the walls, roof, exterior and structural elements of
Terminal C and the Terminal C aircraft parking apron, excluding
repairs required due to damage or destruction resulting from fire or
other casualty provided for in Section 13, and (i) American's cost
of providing passenger assistance and skycap functions in Terminal
C. All Common Use Charges shall be allocated in accordance with the
Common Use Formula.
"Common Use Formula" means a formula that prorates a Common
Use Charge amount between American and Sublessee so that each such
airline pays that proportion thereof which the number of gates it is
then leasing or subleasing as lessee or sublessee bears to all gates
(i.e., 26) in Terminal C. The portion of the Common Use Charges
allocable to Sublessee and other items under this Sublease
calculable with reference to the Common Use Formula shall be
recalculated each month, if necessary, to account for the subleasing
of additional gates, if any, by Sublessee.
(iii) In the event this Sublease commences or terminates on
other than the last day of any particular month, all rentals,
charges or other amounts due pursuant to this Sublease shall be
prorated.
B. Default Interest. If Sublessee shall default in its payment of
any rent, charges or other amounts required to be paid pursuant to this
Sublease, such unpaid amount shall bear interest from the date of default
at the lesser of: (a) eighteen percent (18%) per annum or (b) the maximum
interest rate permitted by law.
C. Late Payment. Sublessee acknowledges that the late payment by
Sublessee of any monthly installment of rent, charges or other amounts
will cause American to incur certain costs and expenses not contemplated
under this Sublease, the exact amount of which costs are difficult or
impracticable to determine. Therefore, if any such amount owing is not
received by American within ten (10) days following
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the due date thereof, Sublessee shall immediately also pay to American a
late charge equal to three percent (3%) of such amount owing. To the
extent that any late charge provided for hereunder is determined to
constitute interest, in no event shall such late charges, plus any other
interest due on sums owed to American pursuant to this Sublease, ever
exceed the maximum interest rate permitted by law, and in the event such
amount should exceed the maximum rate, then the amount owed to American
shall automatically be reduced to equal the maximum amount permitted by
law.
D. {***}
E. {***}
F. Third Party Vendors. With respect to any Excepted Charges for
services for which American contracts with third party vendors directly,
American will endeavor to work with Sublessee and such vendors to the
extent American may legally do so, in order to assist Sublessee in
obtaining for Sublessee pricing and terms for such services no less
favorable than those enjoyed by American. There can be no assurance that
any such treatment of Sublessee will be obtained.
6. Utilities and Services: Parking. American will furnish the Demised
Premises with utilities and services to the extent that they are furnished to
American under the Base Lease and Sublessee agrees to pay for any Excepted
Charges for such utilities and services as provided above. American will
initially make available for the parking of Sublessee's employee's (or any
permitted sub-subtenant's employee's) passenger vehicles five hundred (500)
parking spaces in the Employee Parking Lot (as defined in the Base Lease) for
Sublessee's operations and reasonable, nonexclusive use, in common with other
tenants of Terminal C, of shuttle service provided by American between such
parking lot and Terminal C. Additional spaces will be made available by American
based upon Sublessee's and American's operational requirements. Sublessee shall
pay twenty-five dollars ($25.00) per
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space per month for such use of the parking lot and shuttle service. Such
amounts for utilities, services, parking and shuttle service shall be in
addition to the rents due pursuant to this Sublease. The parking rate will
increase two percent (2%) (compounded annually) on January 1 of each year during
the Term, commencing January 1, 1996.
7. Acceptance of Premises. Sublessee has inspected the Demised Premises
(whether Initial Premises, Phase 2 Premises or Additional Premises) and accepts
them AS-IS (subject to American's agreement to modify certain gates as provided
in the next sentence) and acknowledges that, except as otherwise contained
herein, American has made no representations as to the condition thereof.
American, at American's sole cost and expense, shall, to the extent necessary,
modify each gate that is part of the Initial Premises to make such gate
compatible for use with Fokker F-100 aircraft on or prior to the Commencement
Date.
8. Repairs and Maintenance. The Sublessee, at its sole cost and expense,
shall keep the Demised Premises, including the Fixtures and Miscellaneous
Personal Property, in a clean, neat and orderly condition at all times,
including cleaning, janitorial and trash compaction and pickup. Further,
Sublessee shall, at its own expense, make all necessary repairs to the Demised
Premises, including the Fixtures and Miscellaneous Personal Property, other than
the repairs that American is responsible for as provided below, so as to
maintain the Demised Premises, including the Fixtures and Miscellaneous Personal
Property, in good order and condition, reasonable wear and tear excepted.
Sublessee shall be responsible for replacing or refurbishing Fixtures and
Miscellaneous Personal Property that is lost, stolen, destroyed or worn out, but
shall obtain American's and Landlord's prior written approval prior to such
replacement or refurbishment. In the event that Sublessee fails to make any
required repair or replacement or refurbishment within ten (10) days after
receiving written notice from American that such repair or replacement or
refurbishment is needed, in cases where such repair, replacement or
refurbishment is capable of being completed within ten (10) days, or in other
cases in the event that Sublessee falls within ten (10) days to commence and
thereafter diligently pursue completion of such repair or replacement or
refurbishment, American, without being obligated to do so, may make such repairs
or replacements or refurbishments and Sublessee shall thereafter promptly
reimburse American for all expenses incurred on account thereof. Subject to
Section 13 hereof, American shall make all necessary structural repairs to the
walls, roof, exterior, plumbing, electrical and HVAC system of the Demised
Premises so as to maintain such items in good order and condition, reasonable
wear and tear excepted. Other than repairs required due to damage or destruction
resulting from fire or other casualty provided for in Section 13, Subtenant
shall pay the cost of such maintenance and repair in accordance with the Common
Use Formula as provided in Section 5.A.(ii). In the event that American fails to
commence and diligently pursue completion of any such required repair within 60
days after receiving written notice from Sublessee that such repair is needed,
Sublessee, without being obligated to do so, may make such repairs and American
shall thereafter promptly reimburse Sublessee for all expenses incurred on
account thereof.
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9. Taxes. Sublessee agrees to pay, before they become delinquent, all taxes
(both general and special), assessments or governmental charges of any kind
whatsoever, levied or assessed against the Demised Premises in the same
proportion as is provided with respect to Common Use Charges under the Common
Use Formula, or against the Miscellaneous Personal Property or against any
property of Sublessee located thereon or any business conducted by Sublessee
thereon (the "Taxes"). Sublessee agrees to use its best reasonable efforts to
cause its personal property and business operations to be assessed and taxed
separately from the Demised Premises. In the event that American shall be
assessed for Taxes on the Demised Premises or any or all of Sublessee's
leasehold improvements, equipment, furniture, fixtures, personal property or
Sublessee's business operations, Sublessee shall pay to American the amount of
the Taxes within ten (10) days after delivery to Sublessee by American of a
written statement and reasonably sufficient corresponding back-up documentation
setting forth the amount of the Taxes payable by Sublessee. On demand by
American, Sublessee shall furnish American with satisfactory evidence that the
payments required to be made by Sublessee hereunder have been made.
10. Alterations. Sublessee may not make any permanent alteration, addition or
improvement to the Demised Premises, without the prior written approval of
American (which approval by American shall not unreasonably be withheld or
delayed) and by the Landlord (if Landlord's approval is required by the Base
Lease). Unless American elects otherwise, all alterations, additions or
improvements to the Demised Premises shall become the property of American upon
the termination or expiration of this Sublease or any extension hereof. Any
alterations, additions or improvements made by Sublessee shall be removed by
Sublessee at its own cost and expense, prior to the termination or expiration of
the Term of this Sublease if American so elects at the time Sublessee requests
approval pursuant to this Section, and Sublessee shall repair any damage to the
Demised Premises caused by such removal.
11. Right of Entry. American shall have the right to enter the Demised
Premises for any reasonable purpose, including to gain access to and egress from
those portions of the Base Lease Premises or the Improvements not leased to
Sublessee hereunder and to perform such functions as may be necessary or
convenient for the repair or maintenance thereof in accordance with Section 8
above. American agrees that it will not unreasonably interfere with Sublessee's
use of the Demised Premises in connection with such entry.
12. Compliance with Law. American shall deliver possession of the Demised
Premises to Sublessee on the Commencement Date, the Phase 2 Commencement Date
and the Additional Premises Commencement Date, as applicable, in compliance with
all applicable statutes, ordinances, rules, regulations, orders and directives
of any governmental authority applicable to the Demised Premises, which covenant
shall survive the delivery of possession of the Demised Premises. Subject to the
preceding sentence, Sublessee will comply with all applicable statutes,
ordinances, rules, regulations, orders and directives of any governmental
authority applicable to the Demised Premises or to Sublessee's use or occupancy
thereof and perform, at Sublessee's own expense, all obligations imposed
thereby.
13. Casualty. In the event that the Demised Premises or any portion thereof
should be damaged or destroyed by fire or other casualty to such an extent that
Sublessee's use of the Demised Premises is substantially and adversely impaired,
American, at its option, may either
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terminate this Sublease or diligently proceed to cause the repair of the damage
to the Demised Premises. If American elects to repair or rebuild, and if the
Demised Premises are so damaged that Sublessee is unable to occupy the Demised
Premises or a portion thereof during such repair or reconstruction, then the
rental hereunder shall be appropriately abated until the Demised Premises can be
occupied by Sublessee. American will notify Sublessee of American's decision as
to whether to terminate this Sublease or repair the damage. Such notice from
American shall specify American's estimated time period for completion of
repairs, if American has chosen to repair the damage. If such estimated period
for repairs is longer than nine (9) months, Sublessee may, at its option, by
written notice to American not later than thirty (30) days after American's
notice, terminate this Sublease. American shall in no event be required to
rebuild, repair or replace any improvements, fixtures or personal property of
Sublessee; provided however, in the event the Improvements, the Demised Premises
or the Base Lease Premises are damaged or destroyed through the negligent or
willful act or negligent or willful omission to act of Sublessee, its officers,
directors, employees, agents, customers, concessionaires, vendors, contractors
or invitees, then Sublessee shall pay to American upon demand, the cost of
repairing all such damage to Sublessee's improvements, fixtures and personal
property.
14. Release and Indemnity.
A. Release. Sublessee hereby releases American and agrees that
American shall not be liable for any loss or any damage to any property
(including without limitation the property of Sublessee, its officers,
directors, employees, agents, customers, concessionaires, vendors,
contractors or invitees) or the death or injury of any persons (including
without limitation Sublessee, its officers, directors, employees, agents,
customers, concessionaires, vendors, contractors or invitees) caused by
theft, fire, acts of God, public enemy, injunction, riot, strike,
insurrection, war, or any other action of any governmental body or
authority, by other tenants of the Base Lease Premises, the Improvements,
the Demised Premises or any other matter beyond the control of American,
or for any injury or damage or inconvenience which may arise through
repair or alteration of any part of the Demised Premises, the Base Lease
Premises or the Improvements, or failure to make repairs, or for any cause
whatsoever, expressly excepting from each of the foregoing any loss or
damage to the extent caused solely by (i) the negligent or willful act or
negligent or willful omission to act of American or its officers,
directors, employees, agents, customers, concessionaires, vendors,
contractors or invitees or (ii) any breach by American of its obligations
under this Sublease.
B. Sublessee Indemnity. Sublessee hereby agrees to indemnify,
defend, protect and hold harmless American and Landlord, their respective
officers, directors, employees, agents, customers, concessionaires,
vendors, contractors and invitees (the "Indemnified Parties") from and
against any and all liabilities, claims, penalties, fines, causes of
action, suits, liens, losses, losses of use, damages, costs and expenses
of any kind (including without limitation reasonable legal fees and
disbursements) which may be suffered by, accrued against, charged to or
recoverable from the Indemnified Parties (except for excluded damages
under Section 14.D. below) by reason of (i) any Event of Default by
Sublessee under this Sublease; or (ii) any occurrence in, upon, or
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at the Demised Premises, however caused, including without limitation
occurrences caused, in whole or in part, by the negligent or willful act
or negligent or willful omission to act of Sublessee, its officers,
directors, employees, agents, customers, concessionaires, vendors,
contractors or invitees; or (iii) any occupancy, use, or misuse of the
Demised Premises, or the areas surrounding the Demised Premises or the
service areas, parking areas, pedestrian areas, pedestrian walks or
driveways in or around the Demised Premises, by Sublessee, its officers,
directors, employees, agents, customers, concessionaires, vendors,
contractors or invitees; or (iv) any occurrence elsewhere in the Base
Lease Premises or the Improvements caused in whole or in part by the act
or omission of Sublessee; or (v) any occurrence caused by the violation of
any law, regulation or ordinance by Sublessee or its employees, officers,
directors, employees, agents, customers, concessionaires, vendors,
contractors or invitees, provided that the foregoing indemnity shall not
apply to any loss or damage to the extent (i) caused solely by the
negligent or willful act or negligent or willful omission to act of
American or its officers, directors, employees, agents, customers,
concessionaires, vendors, contractors or invitees or (ii) covered by
American's indemnity in Section 14.C.
C. American Indemnity. American agrees to indemnify, defend, protect
and hold harmless Sublessee (including the payment of Sublessee's
reasonable attorneys' fees and disbursements) against and from all
liabilities, obligations, damages, penalties, claims, costs, charges, and
expenses, which may be imposed or asserted against Sublessee (except for
excluded damages under Section 14.D. below) by reason of (i) any breach by
American of its obligations under this Sublease; or (ii) any event
occurring on the Demised Premises prior to the Commencement Date of this
Sublease or (iii) any failure of American to make timely payments of rent
when due and owing under the Base Lease or other breach by American of the
Base Lease, unless such failure or breach is a result of Sublessee's
failure to pay rent or other amounts due under this Sublease or to perform
Sublessee's other obligations under this Sublease.
D. Excluded Damages. Under no circumstances shall either party be
liable to the other party hereunder for consequential, indirect, special,
exemplary or incidental damages.
15. Insurance.
A. Coverage. During the Term of this Sublease, Sublessee, at its
sole cost and expense, shall maintain with insurers reasonably acceptable
to American, the following coverage: (i) Comprehensive Airline Liability
insurance, including but not limited to Comprehensive General Liability,
Contractual Liability and Automobile Liability coverages in an amount not
less than $300 Million (for each occurrence) for bodily injury and
property damage combined single limit, and (ii) all risk property
insurance covering loss of or damage to property of the Sublessee and the
Miscellaneous Personal Property in an amount at least equal to the value
of such property. Sublessee shall also maintain Worker's Compensation and
Employer's Liability coverage as may be required by law.
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<PAGE>
B. Form and Certificates. The liability policies shall: (i) name
American and the Landlord as additional insureds; (ii) specifically insure
the liability assumed by Sublessee under Section 14; (iii) be primary
without right of contribution from any insurance carried by American or
the Landlord; (iv) provide for at least thirty (30) days prior written
notice to American and the Landlord prior to cancellation or material
change in coverage; and (v) provide for a waiver of subrogation as set
forth in Section 15.C. below. Certificates evidencing the above coverages
and special endorsements shall be provided to American and the Landlord at
least ten days prior to the date Sublessee takes possession of the Demised
Premises.
C. Waiver of Subrogation. Each of Sublessee and American, on behalf
of itself and its insurers, hereby waives any claim or right of recovery
from the other party or Landlord, their officers, directors, employees,
agents, customers, concessionaires, vendors, contractors and invitees, for
loss or damage to the other party or its property or the property of
others under such other party's control, to the extent that such loss is
required to be covered by insurance policies carried by the waiving party
pursuant to this Section. Sublessee and American shall provide notice of
this waiver of subrogation to their insurers. Sublessee and American each
hereby mutually agree that so long as such clause or endorsement is
available at commercially reasonable rates, any fire and extended coverage
insurance policies carried by the parties hereto on properties which are
the subject of this Sublease and the all risk property insurance to be
carried by Sublessee pursuant to Section 15.A. above shall include a
waiver of subrogation clause or endorsement whereby the underwriters agree
to waive any rights of subrogation against the other party hereto.
16. Liens. Sublessee hereby agrees to keep the Demised Premises, and the
improvements thereon, free and clear of mechanics' liens and other liens for
labor, services, equipment or materials unless such liens are attributable to
direct contracts with American. In the event such a lien is filed or recorded,
Sublessee shall take all action required to remove the same within thirty (30)
days of the filing or recordation. In the event that Sublessee fails to take
such action to remove the lien, then American may do so and all costs associated
therewith shall be due to American from Sublessee upon demand.
17. Condemnation.
A. Total Taking. If during the Term of this Sublease or any
extension or renewal thereof, all or a substantial part of the Demised
Premises should be taken for any public or quasi-public use under any
governmental law, ordinance or regulation or by right of eminent domain,
or should be sold to the condemning authority under threat of
condemnation, this Sublease shall terminate and the rent hereunder shall
be abated during the unexpired portion of this Sublease, effective from
the date of taking of the Demised Premises by the condemning authority.
B. Partial Taking. If less than a substantial part of the Demised
Premises is taken for public or quasi-public use under any governmental
law, ordinance or regulation, or by right of eminent domain, or is sold to
the condemning authority under threat of condemnation, American, at its
option, may by written notice terminate this
12
<PAGE>
Sublease or shall forthwith at its sole expense restore the Demised
Premises (other than leasehold improvements made by Sublessee), situated
on the Demised Premises in order to make the same reasonably tenantable
and suitable for the uses for which the Demised Premises are subleased.
Thereafter, the rent payable pursuant to this Sublease during the
unexpired portion of this Sublease shall be adjusted equitably.
C. Awards. American and Sublessee shall be entitled to receive and
retain such separate awards and portions of lump sum awards as may be
allocated to their respective interests in any condemnation proceedings.
The termination of this Sublease shall not affect the rights of the
respective parties to such awards.
18. Default and Remedies.
A. Event of Default by Sublessee. Each of the following occurrences
relative to Sublessee shall constitute an "Event of Default" by Sublessee
under this Sublease:
(i) Failure or refusal by Sublessee to make the timely payment
of any rent or other sums payable under this Sublease not later than
ten (10) days following the date the same shall become due and
payable; or
(ii) Abandonment or vacating a substantial portion or all of
the Demised Premises; or
(iii) The filing or execution or occurrence of a petition in
bankruptcy or other insolvency proceeding by or against Sublessee or
any guarantor of Sublessee; or petition or answer seeking relief
under any provision of Federal or State bankruptcy or insolvency
laws (herein collectively referred to as "Bankruptcy Laws"); or an
assignment for the benefit of creditors or composition; or a
petition or other proceeding by or against the Sublessee for the
appointment of a trustee, received or liquidator of Sublessee or any
of Sublessee's property under Bankruptcy Laws; or a proceeding by
any governmental authority for the dissolution or liquidation of
Sublessee or any guarantor of Sublessee under Bankruptcy Laws and in
the case of involuntary proceedings under Bankruptcy Laws, such
proceedings are not dismissed within sixty (60) days after the
commencement thereof; or
(iv) Failure by Sublessee in the performance or compliance
with any of the agreements, terms, covenants or conditions provided
in this Sublease, to be performed by Sublessee, other than those
referred to in (i) and (ii) above, for a period of thirty (30) days
after notice from American to Sublessee specifying the items in
default; or
(v) If (1) any breach or default occurs under any of the
following agreements under which Sublessee may be obligated,
directly or indirectly, as borrower, installment purchaser, lessee,
sublessee, guarantor or otherwise: (a) any agreement or agreements
involving the borrowing of money or the
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<PAGE>
extension of credit which exceed $250,000 in the aggregate, (b) any
leases or subleases of real or personal property pursuant to which
Sublessee's monetary obligations in the nature of rent or similar
obligations exceed either $20,000 per month in the aggregate or
$250,000 in the aggregate for the remaining term of the affected
leases and subleases (including without limitation any agreement or
agreements pursuant to which Sublessee leases or subleases real or
personal property from American or any of its Affiliates), (c) any
other agreement or agreements with American or any of its Affiliates
and (2) such breach or default consists of failure to pay any
indebtedness or other obligation when due or if such breach or
default permits or causes (or upon notice or lapse of time or both
would permit or cause) the acceleration of any indebtedness or other
obligation, or the termination of any lease, agreement or commitment
to lend and (3) such breach or default is not cured within the
applicable cure period. As used herein, the term "Person" shall mean
an individual, corporation, partnership, joint venture, association,
joint stock company, trust, unincorporated organization or
government or any group or political subdivision thereof; and the
term "Affiliate" shall mean with respect to any Person, any other
Person directly or indirectly controlling or controlled by or under
common control with such Person (and the term "control" within the
foregoing definition of Affiliate means the power, directly or
indirectly, to direct or cause the direction of the management and
policies of such Person whether through the ownership of voting
securities or by contract or otherwise).
B. Remedies of American. This Sublease and Term and estate hereby
made are subject to the limitation that if and whenever any Event of
Default by Sublessee under this Sublease shall occur, American may, at
American's option and without order of any court or further written notice
to Sublessee, in addition to all other remedies given hereunder or by law
or equity, do any one or more of the following:
(i) Terminate this Sublease in which event Sublessee shall
immediately surrender possession of the Demised Premises to
American;
(ii) Enter upon or take possession of the Demised Premises,
securing it against unauthorized entry and expel or remove Sublessee
and any other occupant therefrom with or without having terminated
the Sublease; and
(iii) Alter locks and other security devices at the Demised
Premises.
C. Acceptance of Surrender. Exercise by American of any one or more
remedies shall not constitute an acceptance of surrender of the Demised
Premises by Sublessee, whether by agreement or by operation of law, it
being understood that such acceptance of surrender can be effected only by
the written agreement of American and Sublessee.
D. Accelerated Rent. If American repossesses the Demised Premises
without terminating the Sublease, then Sublessee shall pay to American all
rent and other indebtedness accrued to the date of such repossession,
which is hereby
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<PAGE>
accelerated at such time, plus rent and other sums required to be paid by
Sublessee during the remainder of the Term, diminished by any net sums
thereafter received by American through reletting the Demised Premises
during said period (after deducting expenses incurred by American as
provided below). Re-entry by American will not affect the obligations of
Sublessee for the unexpired Term. Sublessee shall not be entitled to any
excess of any rent obtained by reletting over the rent herein reserved.
Actions to collect amounts due by Sublessee may be brought on one or more
occasions, without the necessity of American's waiting until expiration of
the Term.
E. Other Costs. Upon the occurrence of an Event of Default by
Sublessee, Sublessee shall also pay to American: the cost of removing from
the Demised Premises and storing Sublessee's or any other occupant's
property; the cost of repairing, altering, remodeling or otherwise putting
the Demised Premises into condition acceptable to a new tenant or tenants;
and all reasonable expenses incurred by American in enforcing American's
remedies, including reasonable attorney's fees and court costs.
F. Reletting Demised Premises. Upon termination of this Sublease or
repossession of the Demised Premises for an Event of Default by Sublessee,
American shall not be obligated to relet or attempt to relet the Demised
Premises, or any portion thereof, or to collect rental after reletting,
but American shall have the option to relet or attempt to relet. In the
event of reletting, American may relet the whole or any portion of the
Demised Premises for any period, to any tenant and for any use or purpose.
G. Remedial Costs. If Sublessee should fail to make any payment,
perform any obligation, or cure any default hereunder, American, without
obligation to do so and without thereby waiving such failure or default,
may make such payment, perform such obligation, and/or remedy such other
default for the account of Sublessee (and enter the Demised Premises for
such purpose), and Sublessee shall pay upon demand all costs, expenses and
disbursements (including reasonable attorney's fees) incurred by American
in taking such remedial action.
H. Sublessee Unique. American and Sublessee hereby acknowledge and
agree (i) that the passenger airline business and other services to be
provided by the Sublessee on the Demised Premises are of an unique nature,
(ii) that the Sublessee has special experience, equipment, and personnel
which make it especially suited to the operation of such a business and
the providing of such services to the Raleigh-Durham-Chapel Hill, North
Carolina market area, and (iii) that American's decision to grant this
Sublease was based materially on Sublessee's possession of such unique
experience, equipment and personnel. In addition, the Sublessee
acknowledges and agrees that the nature of its business, and the risks to
the general public inherent therewith, require constant monitoring,
maintenance and precise operation of the Demised Premises, and that
American is liable and responsible to the Landlord for the operation and
maintenance of the Demised Premises under the terms of the Base Lease.
Accordingly, upon the filing of a bankruptcy case by or against the
Sublessee, the Sublessee hereby agrees to permit American access to and
possession of the
15
<PAGE>
Demised Premises for such purposes as American deems in its and the
public's interest, notwithstanding the provisions of any automatic stay
under any applicable Bankruptcy Laws.
19. American's Lien. In addition to any statutory lien for rent, damages, and
costs of any sale as provided in this Sublease in American's favor, American
shall have and Sublessee hereby grants to American a continuing security
interest for all rentals and other sums of money becoming due hereunder from
Sublessee, upon all goods, wares, equipment, fixtures, furniture, inventory,
accounts, contract rights, chattel paper and other personal property of
Sublessee, and the proceeds and products thereof situated on the Demised
Premises, and, after the occurrence of an Event of Default by Sublessee under
this Sublease, such property shall not be removed therefrom without the consent
of American until all arrearage in rent as well as any and all other sums of
money then due to American hereunder all first have been paid and discharged.
Upon the occurrence of an Event of a Default by Sublessee under this Sublease,
American shall have, in addition to any other remedies provided herein or by
law, all rights and remedies under the Uniform Commercial Code, including,
without limitation, the right to sell the property described in this Section at
public or private sale upon five (5) days notice to Sublessee. Sublessee hereby
agrees to execute such financing statements and other instruments necessary or
desirable in American's discretion to perfect the security interest hereby
created. Any statutory lien for rent, damages and costs is not hereby waived,
the express contractual lien herein granted being in addition and supplementary
thereto.
20. Cumulative Rights. American's rights and remedies hereunder shall be
cumulative and shall not be exclusive of one another, and American shall have
the right to pursue any one or more of them. American's acceptance of any rent
or other payments due hereunder or American's failure to take any action on
account of a default if such default persists or is repeated, shall not be
deemed a waiver of any default. American's consent to any act by Sublessee
requiring American's consent or approval shall not be deemed to waive or render
unnecessary American's consent or approval to any subsequent or similar acts by
Sublessee.
21. Surrender of Premises/Holding Over. At the expiration or earlier
termination of this Sublease, Sublessee shall surrender the Demised Premises and
the Miscellaneous Personal Property to American in good condition, broom clean,
reasonable wear and tear, damage by fire or other casualty excepted. Should
Sublessee remain in possession of the Demised Premises, or any portion thereof,
after the termination of this Sublease (whether by expiration of the Term of
this Sublease or otherwise), without execution of a new Sublease, Sublessee
shall become a tenant from month to month and shall be liable to pay monthly
rental at one and one-half times the applicable rate provided hereunder, as long
as Sublessee remains in the Demised Premises. Such tenancy shall be subject to
all terms and conditions of this Sublease.
22. Assignment and Sublease. Sublessee shall not assign or transfer this
Sublease or any right hereunder or sublet the Demised Premises during the Term
of this Sublease, without the prior written consent of American and Landlord.
American agrees that its consent to a subletting to a commuter carrier that
codeshares with Sublessee shall not be unreasonably withheld or delayed;
provided, in all cases Landlord's consent must be obtained on conditions
reasonably acceptable to American; and provided further that Sublessee agrees
that it would
16
<PAGE>
be reasonable for American to withhold its consent in American's sole discretion
to any such subletting by Sublessee to such a commuter carrier that is a
Disqualified Investor (as defined below) (except for such commuter carrier's
status as an airline). Both parties acknowledge that Landlord is under no
obligation to grant its consent to any requested assignment, transfer or
subletting. For the purposes of this Sublease, the term "transfer" shall
include, without limitation, any of the following: (i) Sublessee's merger with
or into another Person (except any merger in which each of the following
conditions is satisfied: (A) the shareholders of Midway Airlines Corporation, as
of immediately prior to such merger, receive or retain 80% or more of the equity
securities of the merged entity as of immediately after such merger and (B) such
merger does not cause or result in any other event or condition specified in
this Sublease which would give American the right to terminate this Sublease);
or (ii) Sublessee's sale or other transfer of all or substantially all of its
assets to any other Person. Consent to one subletting shall not be deemed to be
consent to any subsequent subletting. In the event of subletting as provided
above, Sublessee shall remain bound and responsible for performance of all of
the terms, covenants, agreements, conditions and provisions of this Sublease,
including the payment of rents, fees and charges, to the same extent as if there
had been no subletting.
23. Accord and Satisfaction. No payment or receipt by American of a lesser
amount than the rent or other charges herein stipulated shall be deemed to be
other than on account of the rent or such charges. Further, no endorsement or
statement on any check or any letter accompanying any check shall be deemed to
be an accord and satisfaction. American may accept such check or payment without
prejudice to American's right to recover the balance of such rent or other
charges or pursue any other remedy provided in this Sublease.
24. Force Majeure. Neither party shall be deemed to be in breach of this
Sublease by reason of a failure to perform any of its obligations hereunder to
the extent that such failure is caused by a labor strike, unavailability of
materials or utilities, riots, rebellion, insurrection, invasion, war, action or
interference or governmental authorities, acts of God, or any other cause
whether similar or dissimilar to the foregoing which is reasonably beyond the
control of the parties; provided, however, this clause shall not apply to
Sublessee's obligation to pay rent or other sums due hereunder, such obligation
being absolute and unconditional.
25. Attorneys' Fees. In the event that either party hereto defaults in the
performance of any of the terms or conditions contained in this Sublease and
either party places the enforcement of all or part of this Sublease in the hands
of an attorney for enforcement, including the filing of a suit upon the same,
the prevailing party agrees to pay all of the other party's actual attorneys'
fees and costs.
26. GOVERNING LAW. THIS SUBLEASE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE
INTERNAL LAWS OF THE STATE OF NORTH CAROLINA WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES.
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<PAGE>
27. Entire Agreement/Amendment. The Sublease constitutes the complete
agreement of American and Sublessee with respect to the subject matter hereof
and supersedes all prior and contemporaneous agreements, representations,
warranties and understandings concerning the same between American and
Sublessee, whether written or oral. The provisions of the Sublease may be
modified, amended or waived only by a written instrument, executed by American
and Sublessee.
28. Waiver. A waiver by either party to this Sublease of any breach of the
covenants, conditions or agreements contained herein shall not be construed as a
waiver of any succeeding breach of the same or other covenants, conditions or
agreements.
29. Severability. If any provision or term of this Sublease shall be
determined to be illegal, invalid or unenforceable, the remainder of this
Sublease shall not be affected and shall remain valid and enforceable to the
fullest extent permitted by law.
30. Approval by Landlord. The effectiveness of this Sublease is conditioned
upon prior written consent to this Sublease being obtained from the Landlord in
a form satisfactory to American and Sublessee. In the event the Landlord does
not give such consent, either of the undersigned parties may, at its option,
rescind this Sublease and this Sublease shall thereafter be of no force or
effect.
31. Notices. All notices, reports, invoices and other communications required
or permitted hereunder to be given to or made upon any party hereto in writing,
shall be addressed as provided below and shall be considered as properly
dispatched (i) if delivered in person; (ii) if sent by an express courier
delivery service which provides signed acknowledgments of receipt; (iii) if
deposited in the U.S. mail, certified or registered first class mail, postage
prepaid, return receipt requested or (iv) if transmitted by facsimile (upon
receipt by sender thereof of evidence that a complete transmission of such copy
was made to the recipient thereof) and, if sent by facsimile, confirmed by (a)
telephone contemporaneously to the person entitled to receive such notice or to
such person's secretary, or (b) dispatching a hard copy of such notice by the
methods set forth in (i), (ii) or (iii) above. All notices shall be effective
upon receipt. For the purposes of notice, the addresses of the parties shall be
as set forth below; provided, however, that either party shall have the right to
change its address for notice to any other location by giving at least thirty
(30) days prior written notice to the other party in the manner set forth above.
When to American: AMERICAN AIRLINES, INC.
Attn: Vice President-Corporate Real Estate
P.O. Box 619616, MD 4213
DFW Airport, TX 75261-9616
Overnight Delivery Address: 4255 Amon Carter Blvd.,
MD 4213
Fort Worth, TX 76155
Facsimile Number - (817) 967-3111
18
<PAGE>
With a copy to: American Airlines, Inc.
Attn: Vice President-Corporate and Fleet Planning
P.O. Box 619616, MD 5566
DFW Airport, TX 75261-9616
Overnight Delivery Address:
4333 Amon Carter Blvd., MD 5566
Fort Worth, TX 76155
Facsimile Number - (817) 967-2199
When to Sublessee: MIDWAY AIRLINES CORPORATION
Attn: President
5713 S. Central Avenue
Chicago, IL 60638
Facsimile Number - (312) 838-2069
With Copy to: Rosenberg & Liebentritt, P.C.
Attn: Jonathan S. Waller
2 North Riverside Plaza, Suite 1600
Chicago, IL 60606
Facsimile Number - (312) 454-0335
32. Quiet Enjoyment. Upon Sublessee's payment of all sums due hereunder and
provided that Sublessee is not otherwise in default hereunder, Sublessee shall
peaceably and quietly hold, occupy and enjoy the Demised Premises for the Term
of this Sublease without hindrance, ejection or interruption by American, or
persons lawfully claiming through American.
33. Binding Effect. Subject to prohibitions against assignment, transfer and
subletting, this Sublease shall be binding upon the parties, their personal
representatives, successors and assigns.
34. Other Space. If Sublessee has not yet exercised its Option on all of the
Option Premises and it wishes to lease space in excess of the Demised Premises
at RDU, it will, prior to attempting to lease space at RDU from another person
or entity (including without limitation, Landlord), give at least thirty (30)
days prior written notice to American of the type and quantity of space desired
(the "Sublessee Excess Space Notice"). American will have the right, but not the
obligation, to sublease such space to Sublessee, subject to American's obtaining
the prior written consent of the Landlord on conditions reasonably acceptable to
American. American shall respond to Sublessee within thirty (30) days of the
date it received the Sublessee Excess Space Notice as to whether it has elected
to provide such space. If American responds that it is willing to provide such
space, it shall proceed to request consent from Landlord after the lease terms
are agreed between the parties. If Landlord fails to give its consent, American
shall not be obligated to sublease to Sublessee the requested space,
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<PAGE>
such space, or if American fails to respond within such 30-day period, Sublessee
may seek to obtain space at RDU from any other source.
35. Financial and Statistical Reports. Sublessee will deliver to American the
reports described on Exhibit E.
36. Offset If at any time there shall be amounts past due and owing from
Sublessee to American under this Sublease, American may offset any sums American
may owe under any agreement between American or its affiliates and Sublessee
against such amounts due and owing from Sublessee under this Sublease.
37. Competition. Nothing contained herein shall be deemed to restrict either
American's or Sublessee's right to fly any route such party chooses to fly out
of RDU or from any other airport.
38. American's Annual Report. On or before April 1 of each calendar year
during the Term and within 60 days following the date on which the Term expires,
American shall provide Sublessee with a report showing the amount spent by
American pursuant to Section 5.A.(ii)(b) of this Sublease or received by
American pursuant to Article 15 of the Base Lease, in each case shown on a
monthly basis during the most recently concluded calendar year, or portion
thereof (along with such supporting documents as Sublessee shall reasonably
request from time to time hereunder) and also showing American's calculations on
a monthly basis, of the amounts payable by or owing to Sublessee pursuant to
Section 5.A.(ii)(b) and Section 5.D. of this Sublease. If such report shows that
an adjustment to any amount paid by or to Sublessee is required pursuant to the
terms of this Sublease, then the party shown to be owing amounts (as a
reimbursement or otherwise) to the other party shall promptly make such payment
to the other within thirty (30) days following Sublessee's receipt of written
notice of such adjustment. American shall give Sublessee and its agents access
during normal business hours to documents and/or personnel as may be reasonably
necessary for Sublessee to review the report submitted by American to Sublessee
pursuant to this Section 38. The terms of this Section 38 shall survive the
termination of this Sublease for a period of one (1) year.
39. Construction. For convenience, the parties hereto have used the term
"sublease" to cover those portions of both the Base Lease Premises and the
Improvements to be covered hereby, and such term shall include the lease of the
applicable Improvements as well as the sublease of the applicable Base Lease
Premises to Sublessee on the terms and conditions set forth herein.
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WITNESS the signatures of the parties as of the date first written above.
AMERICAN AIRLINES, INC.
By: /s/ [ILLEGIBLE]
-------------------------------------
Its: VP CORPORATE/FLEET PLANNING
ATTEST:
/s/ Charles D. Marlett
- --------------------------------
Secretary
(Corporate Seal)
STATE OF TEXAS
COUNTY OF TARRANT
I, a Notary Public of the County and State aforesaid, do hereby certify
that Charles D. Marlett personally came before me this day and acknowledged that
he is Corporate Secretary of American Airlines, Inc., a Delaware corporation,
and that by authority duly given and as the act of the corporation, the
foregoing instrument was signed in its name by its Vice President, sealed with
its corporate seal and attested by himself as its Corporate Secretary.
Witness my hand and official stamp or seal, this the 19th day of January,
1995.
/s/ Debra J. Douglas
------------------------------------
Notary Public
My Commission Expires: 11/08/96
(Seal)
21
<PAGE>
MIDWAY AIRLINES CORPORATION
By: /s/ [ILLEGIBLE]
-------------------------------
Its: President
ATTEST:
/s/ J S Waller
- -----------------------------
Secretary
(Corporate Seal)
STATE OF ILLINOIS
COUNTY OF COOK
I, a Notary Public of the County and State aforesaid, do hereby certify
that Jonathan S. Waller personally came before me this day and acknowledged that
he is Corporate Secretary of Midway Airlines Corporation, a Delaware
corporation, and that by authority duly given and as the act of the corporation,
the foregoing instrument was signed in its name by its President, sealed with
its corporate seal and attested by himself as its Corporate Secretary.
Witness my hand and official stamp or seal, this the 20th day of January,
1995.
/s/ Tina M. Gerlach
-----------------------------------
Notary Public
My Commission Expires: ___________________
(Seal)
"OFFICIAL SEAL"
TINA M. GERLACH
NOTARY PUBLIC, STATE OF ILLINOIS
My Commission Expires Feb. 4, 1997
22
<PAGE>
ORIGINAL COPIES
<PAGE>
EXHIBIT A
INITIAL PREMISES AND RENTAL
11,686 sq. ft. Holdrooms and Related (7 Gates, numbered 1, 2, 3, 4, 7, 9
and 11) in the cross-hatched areas generally depicted within the Terminal C
Upper Level on page A-2 attached. American and Sublessee acknowledge that the
holding and access areas for Sublessee's gates within the Demised Premises and
the holding and access areas for adjacent gates operated by American are
generally open to passenger traffic, and the parties agree not to preclude or
impede access between such areas.
1,148 sq. ft. Ticket Counter (10 positions) in the cross-hatched area
generally depicted within the Terminal C Upper Level on page A-2 attached.
13,190 sq. ft. Operations/Offices in the cross-hatched areas generally
depicted within the Terminal C Upper Level and Terminal C Lower Level on pages
A-2 and A-3 attached.
5,400 sq. ft. Baggage Makeup in the cross-hatched areas generally depicted
within the Terminal C Lower Level on page A-3.
1995 Annual
Rental Rate Per
Square Foot(1)
--------------
Ticket Counter {***}
Holdrooms & Related {***}
Operations/Offices {***}
Baggage Makeup {***}
- ----------
(1) Rental rates will increase 2% (compounded annually) on January 1 of
each year during Term, commencing January 1, 1996.
A-1
<PAGE>
EXHIBIT A
A-2
Map of American Airlines
at Raleigh-Durham Airport
Terminal C
Upper Level
<PAGE>
EXHIBIT A
A-2
Map of American Airlines
at Raleigh-Durham Airport
Terminal C
Lower Level
<PAGE>
EXHIBIT B
OPTION PREMISES
See pages B-2 and B-3 attached
B-1
<PAGE>
EXHIBIT B
B-2
Map of American Airlines
at Raleigh-Durham Airport
Terminal C
Upper Level
<PAGE>
EXHIBIT B
B-3
Map of American Airlines
at Raleigh-Durham Airport
Terminal C
Lower Level
<PAGE>
SCHEDULE 1 to EXHIBIT C
NOTICE OF EXERCISE OF OPTION
Space Added
_____ sq. ft. Ticket Counter (__ positions)
_____ sq. ft. Holdrooms & Related (__ gates)
_____ sq. ft. Operations/Offices
_____ sq. ft. Baggage Makeup
Description and Location of Space Added:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
1
<PAGE>
EXHIBIT D
RULES GOVERNING AMOUNT AND TYPE OF OPTION PREMISES
The intent of the parties with respect to the rules stated herein is to
maintain the value and useability for airline operations of every type of space
in Terminal C. Sublessee shall exercise the Option in each case in a manner that
maintains proportion among the various categories of space in Terminal C in
accordance with the table set forth below.
Total Total Total Gates Total Sq. Ft.
Bag Ticket (Includes Operations/
Make-up Counter Associated Offices
Piers Positions Holdroom) Space (Range)
- ----- --------- --------- -------------
3 12 8 10,000 to 20,000
3 __ 9 10,000 to 20,000
3 14 10 10,000 to 20,000
3 __ 11 10,000 to 20,000
__ 16 12 10,000 to 20,000
4 __ 13 15,000 to 24,000
4 18 14 15,000 to 24,000
__ 20 15 15,000 to 26,000
5 22 16 15,000 to 26,000
5 __ 17 17,000 to 28,000
5 24 18 20,000 to 30,000
5 24 19 22,000 to 32,000
Ticket counter positions may be taken by Sublessee under the Option only
two at a time. The entire holdroom associated with each gate taken by Sublessee
under the Option must be taken with that gate. Ticket counter positions that are
taken by Sublessee under the Option must be contiguous to existing ticket
counter positions subleased by Sublessee. Gates and holdrooms that are taken by
Sublessee under the Option must be contiguous to existing gates and holdrooms
subleased by Sublessee.
The office space behind each ticket counter position may be taken by
Sublessee under the Option in such amounts as shall be mutually agreed in
writing by American and Sublessee, based upon American's, Sublessee's and other
Terminal C tenants' operational needs, or in the absence of such mutual
agreement, in an amount that is proportional to the number of each occupant's
ticket counter positions. The requirement stated above that a category of space
must be contiguous need not be followed if American's space, other tenants'
space or public use areas make it impossible for Sublessee to take space that is
contiguous.
D-1
<PAGE>
EXHIBIT E
SUPPLEMENTAL PROVISIONS
During the term of this Sublease, Sublessee shall furnish to American (to
4333 Amon Carter Boulevard, MD 5566, Fort Worth, Texas 76155, Attention: Vice
President - Corporate and Fleet Planning) the following:
As soon as available and in any event within one hundred eighty (180)
days after the close of each fiscal year of Sublessee, copies of the financial
statements of Sublessee for the fiscal year then ended including, without
limitation, a balance sheet of Sublessee as of the close of such fiscal year and
statements of income, shareholders equity and cash flows for such fiscal year.
As soon as available, and in any event within fifty (50) days after the
end of each fiscal quarter of Sublessee, copies of the financial statements of
Sublessee for the fiscal quarter then ended including, without limitation, a
balance sheet of Sublessee as of the end of such quarter and statements of
income, shareholders equity and cash flows for such quarter and for the portion
of the fiscal year ending with such quarter, all in reasonable detail, and
certified by the chief financial officer of Sublessee as being true and correct
and as having been prepared in accordance with generally accepted accounting
principles ("GAAP") and as fairly presenting the assets, liabilities, financial
condition and results of operations of Sublessee.
Each such financial statement shall be accompanied by a certificate signed
by the chief financial officer of Sublessee certifying as to whether Sublessee
is in default under this Sublease, any other agreement with American or its
Affiliates, or any material agreement to which Sublessee is a party or by which
it or any of its properties are bound. Further, each of the annual financial
statements shall be accompanied by a certificate from Arthur Anderson & Co.,
Sublessee's independent certified public accountants, or such other "Big Six"
independent certified public accounting firm chosen by Sublessee, stating that
(x) such financial statements have been prepared in accordance with GAAP and
fairly present the financial position, results of operations and cash flows of
Sublessee, (y) the examinations of Sublessee's accounts in connection with such
financial statements have been made in accordance with generally accepted
auditing standards and included such tests of the accounting records and such
other auditing procedures as were considered necessary in the circumstances and
(z) nothing has come to the attention of such accountants in the course of their
audit that caused them to believe there exists any set of circumstances which
would constitute a default by Sublessee under this Sublease, any other agreement
with American or its Affiliates, or any material agreement to which Sublessee is
a party or by which it or any of its properties are bound, (and, with respect to
this Subparagraph (z), such certificate may also state that such accountants
have not expanded the scope of the procedures performed in the course of their
audit in order to deliver such certificate).
If at any time any monies owed by Sublessee under this Sublease are past
due and owing, then upon the request of American, Sublessee shall also furnish
to American, as soon as available on a continuing basis, and in any event within
twenty (20) days after the end of each calendar month, copies of the summary
financial statements of Sublessee as of the end
E-1
<PAGE>
of the month most recently completed which are produced for the use of
management of Sublessee, including, without limitation, a balance sheet of
Sublessee as of the end of such month and statements of income, shareholders
equity and cash flows for such month and for the portion of the fiscal year
ending with such month, all in reasonable detail, and certified by the chief
financial officer of Sublessee as being true and correct and as having been
prepared in accordance with GAAP and as fairly presenting the assets,
liabilities, financial condition and results of operations of Sublessee.
Sublessee shall be required to give American immediate notice of any
default, event of default, right of termination, suspension, acceleration,
breach or other similar event (or any event or set of circumstances which with
notice or the lapse of time or both, would constitute any of the foregoing)
under this Sublease or with respect to any material indebtedness of Sublessee.
Sublessee's chief financial officer shall be required to provide a certificate
with each set of annual and quarterly financial statements and, if provided,
monthly financial statements, that (i) Sublessee has not received any notice of
a default, event of default, right of termination, suspension, acceleration,
breach or similar event (or any event or set of circumstances which with notice
or the lapse of time or both, would constitute any of the foregoing) regarding
this Sublease, any other agreement with American of its Affiliates, or any
agreement or instrument involving any material indebtedness of Sublessee, and
(ii) there exists no set of circumstances which would constitute or give rise to
any event or set of circumstances specified in clause (i) above.
E-2
<PAGE>
EXHIBIT C
NOTICE OF EXERCISE OF OPTION
_________ __, 199_
American Airlines, Inc.
4255 Amon Carter Blvd.
MD 4213
Fort Worth, TX 76155
Attn: Vice President - Corporate Real Estate
Re: Agreement of Sublease (the "Sublease"), dated as of January 18,
1995, between American Airlines, Inc. ("American") and Midway
Airlines Corporation ("Midway")
Dear Sir or Madam:
Pursuant to Section 1.B. of the Sublease, Midway hereby exercises its
option to sublease the portion of the Option Premises described in Schedule 1
attached hereto and incorporated herein by this reference ("Additional
Premises"). The term of the sublease of the Additional Premises shall commence
effective as of ____________ [at least 120 days after date of this letter].
Midway represents and warrants to American that (a) no Event of Default by
Midway under the Sublease has occurred and is continuing as of the date hereof
and (b) the Additional Premises type and location are in compliance with Exhibit
D of the Sublease. Midway hereby agrees to enter into an amendment which shall
modify Exhibit A of the Sublease to reflect, on an amended and restated basis,
the revised description of the premises subleased by Midway pursuant to the
Sublease.
All capitalized terms used herein and not otherwise defined herein shall
have the meaning ascribed to them in the Sublease.
Sincerely,
MIDWAY AIRLINES CORPORATION
By:____________________________
Name:__________________________
Its:___________________________
cc: American Airlines, Inc.
4333 Amon Carter Blvd.
MD 5566
Fort Worth, TX 76155
Attn: Vice President - Corporate and Fleet Planning
C-1
<PAGE>
FIRST AMENDMENT OF AGREEMENT OF SUBLEASE
This First Amendment of Agreement of Sublease (this "Amendment"), dated as
of the date set forth below, is entered into by and between American Airlines,
Inc., a Delaware corporation ("American"), and Midway Airlines Corporation, a
Delaware corporation (the "Sublessee"). Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to such terms in the
Sublease referred to below.
WITNESSETH:
WHEREAS, pursuant to that certain Raleigh-Durham Airport Facilities Lease
and Use Agreement dated as of November 1, 1985 between the Raleigh-Durham
Airport Authority, a municipal corporation of the State of North Carolina
("Landlord") and American (together with all amendments, the "Base Lease")
American leases from Landlord certain premises (the "Base Lease Premises") at
Raleigh-Durham Airport ("RDU"); and
WHEREAS, American also leases from Landlord the improvements located on
the real property described in the Base Lease, which improvements are commonly
referred to as Terminal C (the "Improvements"); and
WHEREAS, American has subleased to Sublessee a portion of each of the Base
Lease Premises and the Improvements pursuant to that certain Agreement of
Sublease dated January 18, 1995 (the "Sublease"); and
WHEREAS, Section lA of the Sublease provides that the Initial Premises
will be surveyed to determine that the exact square footage thereof and that the
parties will sign a revised Exhibit A to the Sublease in order to evidence the
parties' agreement as to such square footage; and
WHEREAS, a survey has been prepared that correctly depicts and measures
the square footage of the combined Initial Premises and Phase 2 Premises (the
"Survey") and has been attached to this Amendment as pages A-2, A-3 and A-4 of
Exhibit A attached hereto; and
WHEREAS, Section 1B of the Sublease provides that upon written notice
from Sublessee to American, Sublessee shall sublease and take from American, and
American shall sublease to Sublessee, certain additional space in the Base Lease
Premises and the Fixtures and Miscellaneous Personal Property associated with
such space, such sublease to be on the terms and conditions set forth in the
Sublease; and
WHEREAS, Sublessee has given such notice; and
WHEREAS, such additional space consists of five (5) additional gates, six
(6) additional ticket counter positions and one (1) additional bag makeup pier
as depicted as part of the combined Initial Premises and Phase 2 Premises on
Exhibit A attached hereto and is herein and in the Sublease referred to as the
"Phase 2 Premises"; and
<PAGE>
WHEREAS, Section lB of the Sublease further provides that Sublessee and
American will execute an amendment to the Sublease effective as of the Phase 2
Premises Commencement Date which will amend and restate the original Exhibit A
to the Sublease such that the Initial Premises and the Phase 2 Premises are
described therein; and
WHEREAS, Exhibit A attached hereto so describes the combined Initial
Premises and Phase 2 Premises.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, American and Sublessee hereby agree as follows:
1. Amendment. Exhibit A to the Sublease is hereby amended, restated and
replaced in its entirety by Exhibit A attached to this Amendment.
Effective June 15, 1995 (the "Phase 2 Premises Commencement Date"),
American hereby subleases to Sublessee and Sublessee hereby subleases from
American the Phase 2 Premises and the Fixtures and Miscellaneous Personal
Property associated with the Phase 2 Premises on the terms and conditions
set forth in the Sublease. American and Sublessee acknowledge and agree
that the provisions of Section 1A of the Sublease have been satisfied and
that Exhibit A attached hereto correctly reflects the combined square
footage of the Initial Premises and the Phase 2 Premises.
2. Miscellaneous. This Amendment, together with the Sublease, constitutes the
entire agreement of the parties with respect to its subject matter and
supersedes all prior agreements or understandings, whether written or
oral, if any, concerning such subject matter, including without limitation
any earlier revised Exhibit A's to the Sublease that may have been signed
or initialed by the parties. The Sublease, as specifically modified by
this Amendment, is hereby ratified and shall remain in full force and
effect in accordance with its terms.
WITNESS the signatures of the parties as of this ______ day of __________,
1996.
AMERICAN AIRLINES, INC.
By: /s/ Gary F. Kennedy
-------------------------------------
Its: Managing Director
Corporate Real Estate
ATTEST:
/s/ Charles D. MarLett
- -------------------------------
Corporate Secretary
(Corporate Seal)
2
<PAGE>
STATE OF TEXAS
COUNTY OF TARRANT
I, a Notary Public of the County and State aforesaid, do hereby certify
that Charles D. MarLett personally came before me this day and acknowledged that
he is Corporate Secretary of American Airlines. Inc., a Delaware corporation,
and that by authority duly given and as the act of the corporation, the
foregoing instrument was signed in its name by its _______________ President,
sealed with its corporate seal and attested by himself as its Corporate
Secretary.
Witness my hand and official stamp or seal, this the _____ day of
____________ 19__.
------------------------------------
Notary Public
My Commission Expires:___________
(Seal)
MIDWAY AIRLINES CORPORATION
By: [ILLEGIBLE]
--------------------------------
Its: President
ATTEST:
J S Waller
- ----------------------------
Secretary
(Corporate Seal)
STATE ILLINOIS
COUNTY OF COOK
I, a Notary Public of the County and State aforesaid, do hereby certify
that Jonathan S. Waller personally came before me this day and acknowledged that
he is Corporate Secretary of Midway Airlines Corporation, a Delaware
corporation, and that by authority duly given and as the act of the corporation,
the foregoing instrument was signed in its name by its President, sealed
3
<PAGE>
with its corporate seal and attested by himself as its Corporate Secretary.
Witness my hand and official stamp or seal, this the 6th day of February,
1996.
/s/ Tina M. Gerlach
------------------------------------
Notary Public
My Commission Expires:_____________
"OFFICIAL SEAL"
TINA M. GERLACH
NOTARY PUBLIC, STATE OF ILLINOIS
(Seal) My Commission Expires Feb. 4, 1997
APPROVED AND CONSENTED TO:
RALEIGH-DURHAM AIRPORT AUTHORITY
By: /s/ John S. Brantley
---------------------------
Name: John S. Brantley
Title: Airport Director
4
<PAGE>
EXHIBIT A
COMBINED INITIAL PREMISES AND
PHASE 2 PREMISES AND RENTAL
21,134.64 ft. Holdrooms and Related (12 Gates, numbered 1 through 12) in
the shaded areas generally depicted within the Terminal C Upper Level on page
A-3 attached. American and Sublessee acknowledge that the holding and access
areas for Sublessee's gates within the Demised Premises and the holding and
access areas for adjacent gates operated by American are generally open to
passenger traffic, and the parties agree not to preclude or impede access
between such areas.
1,856 sq. ft. Ticket Counter (16 positions) in the shaded area generally
depicted within the Terminal C Upper Level on page A-2 attached.
10,303.44 sq. ft. Operations/Offices in the shaded areas generally
depicted within the Terminal C Upper Level and Terminal C Lower Level on pages
A-2, A-3 and A4 attached.
8,307 sq. ft. Baggage Makeup in the shaded areas generally depicted within
the Terminal C Lower Level on page A-4 attached.
1995 Annual
Rental Rate Per
Square Foot(1)
--------------
Ticket Counter {***}
---
Holdrooms & Related {***}
---
Operations/Offices {***}
---
Baggage Makeup {***}
---
- ----------
(1) Rental rates will increase 2% (compounded annually) on January 1 of
each year during Term, commencing January 1, 1996.
A-1
<PAGE>
EXHIBIT A-2
American Airlines
Raleigh-Durham International Airport
Terminal C
[GRAPHIC OMITTED]
Level 3
Midway Airlines
Sub-Lease Areas
<PAGE>
EXHIBIT A-3
American Airlines
Raleigh-Durham International Airport
Terminal C
[GRAPHIC OMITTED]
Level 2
Midway Airlines
Sub-Lease Areas
<PAGE>
EXHIBIT A-4
American Airlines
Raleigh-Durham International Airport
Terminal C
[GRAPHIC OMITTED]
Level 1
Midway Airlines
Sub-Lease Areas
<PAGE>
[Letterhead of Midway Airlines]
March 12, 1997
Mr. John Brantley
Raleigh Durham Airport Authority
P.O. Box 80001
RDU Airport, North Carolina 27623
Re: Second Amendment to Agreement of Sublease
Dear Mr. Brantley:
I apologize for our failure to submit the "Second Amendment" to you for
consent by the Airport Authority at the time of its execution on April 25, 1996.
I have attached a copy of that amendment to this letter and hereby request the
Airport Authority's consent to such Second Amendment. As you review the attached
Amendment to AA Agreements, you will see that the amendment was not only an
amendment of the Sublease but also of four other agreements which exist between
American Airlines and Midway Airlines Corporation. Thus, we overlooked the
Airport Authority's consent to one of the agreements referenced therein (i.e.,
the Agreement of Sublease).
Again, I apologize for this oversight. Please contact me should you have
any questions.
Very truly yours,
MIDWAY AIRLINES CORPORATION
/s/ Jonathan S. Waller
Jonathan S. Waller
Senior Vice President and General Counsel
JSW/tmg
Enclosures
cc: Chris Collison (w/o end.)
CONSENT
Amendment to AA Agreement
identified as item (i) in the attached
Amendment to AA Agreements dated as of April 25, 1996
By: /s/ James B. Hyler, Jr.
---------------------------
Name: James B. Hyler, Jr.
Title: Chairman
<PAGE>
AMENDMENT TO AA AGREEMENTS
This Amendment to AA Agreements (the "Amendment"), dated as of April 25,
1996, by and between American Airlines, Inc. ("American"), Airline Management
Services, Inc., The SABRE Group, Inc. and Midway Airlines Corporation
("Midway"). Capitalized terms used herein and not defined herein shall have the
meanings assigned to such terms in the Deferral Agreement referred to below.
WHEREAS, the parties have entered into the following agreements (as such
agreements may be amended from time to time, the AA Agreements ):
(i) Agreement of Sublease between American and Midway, dated as of
January 18, 1995;
(ii) AAdvantage Participating Carrier Agreement between American and
Midway, dated as of January 18, 1995;
(iii) Aircraft Maintenance Agreement between American and Midway, dated as
of November 1, 1993;
(iv) SABRE Multihost Agreement executed by SABRE Decision Technologies, a
division of The SABRE Group, Inc., on March 20,1995 and executed by
Midway on February 24, 1995; and
(v) Services and Licenses Agreement between Airline Management Services,
Inc. and Midway dated December 7, 1995;
WHEREAS, Midway and American have entered into the {***} dated the date
hereof;
WHEREAS, pursuant to the {***}, dated as of the date hereof, and is
entering into a {***}, dated as of the date hereof, with American; and
WHEREAS, pursuant to the {***} Midway and American are to
enter into certain amendments to the M Agreements.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Midway and American hereby amend the AA Agreements as follows:
1. Amendments to AA Agreements
1.1 Definitions. The definitions of "American," "Midway," "Affiliates,"
{***} set forth or referred to above are hereby added to each AA
Agreement.
<PAGE>
1.2 Cross Defaults Effective as of the date hereof, each of the American
Agreements is amended by adding the following provision:
"Notwithstanding anything to the contrary herein, if, and so
long as, an Event of Default (as defined therein,
respectively) exists under the {***} shall not have been paid
in full, then American, or its Affiliates, as applicable, may
immediately terminate this Agreement without prior written
notice to Midway: provided, that upon such termination, all
monies owed to American, or its Affiliates, as applicable,
hereunder through the date of termination shall be immediately
due and payable to American, or its Affiliates, as applicable,
by Midway; and further provided the defaults described in
Schedule 3.a to the {***} shall not be deemed an
event of default, Event of Default, default or Default
(howsoever defined) or breach of this agreement so long as (i)
no Event of Default exists under the {***} and (ii) the
parties referenced in Schedule 3.a take no material adverse
action against Midway."
1.3. Change of Control. Effective as of the date hereof, each of the
American Agreements, except for the AAdvantage Participating Carrier
Agreement dated as of January 18,1995, is amended by adding the
following provision:
{***}
2. Miscellaneous
2.1 Except as set forth herein, all terms and provisions contained in
the AA Agreements shall remain in full force and effect. Nothing
contained in this Amendment shall be deemed a waiver by American or
its Affiliates of any amounts due and owing under the AA Agreements
or of any rights of American or its Affiliates, as applicable,
existing on the date hereof under the AA Agreements.
2.2 This Amendment is being delivered in the State of Texas and shall in
all respects be governed by, and construed in accordance with, the
laws of the State of Texas, including all matters of construction,
validity and performance.
<PAGE>
2.3 This Amendment 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.
IN WITNESS WHEREOF, the parties have caused Amendment to be duly executed
and delivered as of the date and year first above written.
MIDWAY AIRLINES CORPORATION AMERICAN AIRLINES, INC.
By: /s/ John Selvaggio By: [ILLEGIBLE]
------------------------- --------------------------------
Name: John Selvaggio Name:
-------------------------------
Title: President Title:
------------------------------
AIRLINE MANAGEMENT SERVICES, INC.
By: /s/ [ILLEGIBLE]
--------------------------------
Name:
-------------------------------
Title:
------------------------------
THE SABRE GROUP, INC.
By:
--------------------------------
Name:
-------------------------------
Title:
------------------------------
<PAGE>
same instrument
IN WITNESS WHEREOF, the parties have caused Amendment to be duly executed
and delivered as of the date and year first above written.
MIDWAY AIRLINES CORPORATION AMERICAN AIRLINES, INC.
By: By:
------------------------- --------------------------------
Name: Name:
------------------------- -------------------------------
Title: Title:
------------------------- ------------------------------
AIRLINE MANAGEMENT SERVICES, INC.
By:
--------------------------------
Name:
-------------------------------
Title:
------------------------------
THE SABRE GROUP, INC.
By: /s/ [ILLEGIBLE]
--------------------------------
Name:
-------------------------------
Title:
------------------------------
<PAGE>
EXHIBIT D
THIRD AMENDMENT TO AGREEMENT OF SUBLEASE
This Third Amendment to Agreement of Sublease (the "Third Amendment"),
dated as of February 10, 1997, by and between American Airlines, Inc.
("American") and Midway Airlines Corporation ("Sublessee").
WHEREAS, American and Sublessee have entered into an Agreement of Sublease
(the "Sublease") dated as of the 18th day of January, 1995, amended pursuant to
a First Amendment of Agreement of Sublease dated on or about February 6, 1996
(the "First Amendment") and Amendment to AA Agreements dated April 25, 1996 (the
"Second Amendment) (for ease in drafting the Sublease, First Amendment and
Second Amendment are collectively referred to herein as the Sublease), pursuant
to which American has subleased a portion of the Base Lease Premises and the
Improvements located thereon; and
WHEREAS, concurrently herewith, American and Sublessee are entering into a
certain Letter Agreement providing the terms and conditions under which American
has agreed to participate in a financial restructuring of Sublessee; and
WHEREAS, in connection with such restructuring, Sublessee has requested
and American has agreed to make certain amendments to the Sublease, subject to
the terms and conditions set forth in this Third Amendment.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, American and Sublessee hereby agree to amend the Sublease as
follows:
1. Section 1.D. shall be amended by changing the reference to "August 31, 1997"
in the last sentence of the first paragraph to read "August 31, 1999".
2. Section 1.D. shall further be amended by adding the following to the end
thereof:
"From the effective date of this Third Amendment until May 1, 1997,
Sublessee shall have the option to sublease from American a portion of the
additional space in the Base Lease Premises (including the Improvements
located therein), other than ticket counters and gates, identified by
American to be surplus, unused space (the "Surplus Space"). American shall
identify such Surplus Space to Sublessee by written notice on or before
March 15, 1997. The Rental Rate for any Surplus Space subleased by
Sublessee pursuant to this paragraph shall be $5.00 per square foot per
annum, subject to the yearly increases of 2%
<PAGE>
(compounded annually) on January 1 of each year during the Term, Sublessee
may exercise the option for Surplus Space by delivering to American, at
any time prior to the termination date of this option, an unconditional
written notice of exercise ("Notice") in substantially the form of Exhibit
C attached to the Sublease. Any sublease of Surplus Space shall be subject
to the terms and conditions set forth in the Sublease, unless terminated
by either party upon six (6) months prior written notice to the other
party. If Sublessee should sublease Surplus Space under this paragraph,
Sublessee and American will execute an amendment to the Sublease effective
as of the Additional Premises Commencement Date specified in the Notice
which will amend and restate Exhibit A to the Sublease. If there shall
have occurred and be continuing on the date of the Notice or on the
Additional Premises Commencement Date an Event of Default by Sublessee
under the Sublease, American may, at is option, refuse to sublease to
Sublessee any Surplus Space until and unless the breach giving rise to
such Event of Default has been cured in accordance with the Sublease.
3. Section 5.A.(i) shall be amended by adding the following to the end thereof:
"Commencing with the rental payment due on March 1,1997, the rent for the
Demised Premises payable or common use charges, at American's sole
discretion, hereunder shall be reduced by {***} per month (the
"Rental Discount") for the remainder of the term of this Sublease:
provided, however, the Rental Discount shall immediately end if (i)
Sublessee terminates its participation in American's frequent flier
mileage program (currently, the "AAdvantage Program"), (ii) American
terminates the AAdvantage Participating Carrier Agreement (the "AAdvantage
Agreement") dated January 18, 1995, as amended, between American and
Sublessee pursuant to Section 11(a)(ii) or Section 11(e) thereof, or (iii)
Sublessee fails to renew its participation in the AAdvantage Program upon
the expiration of the AAdvantage Agreement after American has offered, in
writing, the renewal of Sublessee's participation in the AAdvantage
Program on substantially the same terms as those included in the
AAdvantage Agreement, subject to an increase in the rates payable by
Sublessee under Section 8(a)(ii) thereof not to exceed the percentage
change between (a) the average of American's (including AMR Eagle)
passenger revenue per ASM (RASM) and operating cost per ASM (CASM) for the
year 1996 and (b) the average of American's (including AMR Eagle) RASM and
CASM for the 12 months immediately preceding the expiration of the
AAdvantage Agreement (or the most recent 12 months for which data is
available). Nothing herein shall, however, be construed to impose any
obligation on American to renew Sublessee's current AAdvantage Agreement
upon substantially the same terms or
2
<PAGE>
otherwise, or to offer a renewal rate for Sublessee's AAdvantage Agreement
as described above.
Should Midway exercise its Option to sublease the Option Premises as
described in Section 1.D. above, the rent for such Option Premises shall
be {***} of the rates established pursuant to this
Section 5.A.
4. Section 6 shall be amended by deleting everything after the end of the
first sentence thereof.
5. Section 38 shall be amended in its entirety to read as follows:
"On or before the fifteenth day following each calendar quarter during the
Term of the Sublease (i.e., January 15, April 15, July 15 or October 15,
as applicable) and on the first such date following the expiration or
earlier termination hereof, American shall provide Sublessee with a report
showing the amount spent by American pursuant to Section 5.A.(ii)(b) of
this Sublease or received by American pursuant to Article 15 of the Base
Lease, in each case shown on a monthly basis during the most recently
concluded calendar quarter, or portion thereof (along with such supporting
documents as Sublessee shall reasonably request from time to time
hereunder) and also showing American's calculations on a monthly basis, of
the amounts payable by or owing to Sublessee pursuant to Section
5.A.(ii)(b) and Section 5.D. of this Sublease. If such report shows that
an adjustment to any amount paid by or owed to Sublessee is proper then
the party shown to be owing amounts (as a reimbursement or otherwise) to
the other party shall promptly make such payment to the other within five
(5) business days following receipt of written notice of such adjustment.
American shall give Sublessee and its agents access during normal business
hours to documents and/or personnel as may be reasonably necessary for
Sublessee to review the report submitted by American to Sublessee pursuant
to this Section 38. The terms of this Section 38 shall survive the
termination of the Sublease for a period of six (6) months.
6. This Third Amendment, together with the Sublease, First Amendment and Second
Amendment, constitutes the entire agreement of the parties with respect to its
subject matter and supersedes all prior agreements or understandings, whether
written or oral, if any, concerning such subject matter. All defined terms used
herein without definition shall have the meanings set forth in the Sublease. As
modified hereby, the Sublease is ratified and confirmed and shall remain in full
force and effect.
3
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Third Amendment to be duly
executed and delivered as of the date and year first above written.
MIDWAY AIRLINES CORPORATION AMERICAN AIRLINES, INC.
By: J S Waller By: /s/ Andrew A. Cuomo
------------------------- -------------------------------------
Jonathan S. Waller Andrew A. Cuomo
Managing Director
Its: Senior vice President Airline Management Services, Inc.
Agreed to by Landlord this 20th day of March, 1997.
RALEIGH-DURHAM AIRPORT AUTHORITY
By: James B. Hyler, Jr.
-----------------------------
Its: Chairman
4
<PAGE>
AWAITING FULLY EXECUTED
ORIGINAL VERSION OF FOURTH
AMENDMENT TO AGREEMENT OF SUBLEASE
<PAGE>
FOURTH AMENDMENT OF AGREEMENT OF SUBLEASE
This Fourth Amendment of Agreement of Sublease ("Fourth Agreement"), dated
as of the date set forth below, is entered into by and between American
Airlines, Inc., a Delaware corporation ("American") and Midway Airlines
Corporation, a Delaware corporation (the "Sublessee"). Capitalized terms used
herein and not otherwise defined herein shall have the meanings assigned to such
terms in the Sublease referred to below.
WITNESSETH:
WHEREAS, pursuant to that certain Raleigh-Durham Airport Facilities Lease
and Use Agreement dated as of November 1, 1985, between the Raleigh-Durham
Airport Authority, a municipal corporation of the State of North Carolina
("Landlord") and American (together with all amendments, the "Base Lease"),
American leases from Landlord certain premises (the "Base Lease Premises") at
Raleigh-Durham Airport: and
WHEREAS, American also leases from Landlord the improvements located on
the real property described in the Base Lease, which improvements are commonly
referred to as Terminal C (the "Improvements"); and
WHEREAS, American has subleased to Sublessee a portion of each of the Base
Lease Premises and the Improvements pursuant to that certain Agreement of
Sublease dated January 18, 1995 (the "Sublease"), amended pursuant to a First
Amendment of Agreement of Sublease dated on or about February 6, 1996 (the
"First Amendment") and amendment to American Airlines' agreements dated April
25, 1996 (the "Second Amendment") and a Third Amendment to Agreement of Sublease
dated February 10,1997 (the "Third Amendment"); and
WHEREAS, Section 2 of the Third Amendment to Agreement of Sublease
provides Sublessee the option to sublease certain Surplus Space at a rental rate
of $5.00 per square foot per annum, subject to the yearly increases of 2%
(compounded annually) on January 1 of each year during the term; and
WHEREAS, Sublessee has exercised such option; and
WHEREAS, Exhibit 4-1 attached hereto so describes the Surplus Space added
to the premises.
NOW, THEREFORE, in consideration to the mutual promises contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, American and Sublessee hereby agree as follows:
1. Leasing of Surplus Space. Effective May 1, 1997, American hereby subleases
to Sublessee and Sublessee hereby subleases from American as part of the
Demised Premises the office spaces identified as A8, A11, C8 and C11 (the
"Surplus Space") in Exhibit 4-1 hereto. The square footage of such Surplus
Space is set forth in Exhibit 4-1. Rental for such Surplus Space will
begin to accrue on May 1, 1997 with respect to office space C-11, on June
1, 1997 with respect to office spaces A8 and A11, and on August 1, 1997
with respect to office space C8. The Rental rate for such
-1-
<PAGE>
Surplus Space shall be $5.00 per square foot per annum, subject to yearly
increases of 2% (compounded annually) on January 1 of each year during the
term.
2. Term. The subleasing of Surplus Space hereunder may be terminated any time
by either party upon not less than six (6) months prior notice to the
other party.
3. Miscellaneous. This Fourth Amendment, together with the Sublease,
constitutes the entire agreement of the parties with respect to its
subject matter and supersedes all prior agreements or understandings,
whether written or oral, if any, concerning such subject matter. The
Sublease, as specifically modified by this Amendment, is hereby ratified
and shall remain in full force and effect in accordance with its terms.
WITNESS the signatures of the parties as of this _____ day of
____________, 1997.
By:
-------------------------------
Gary F. Kennedy
Managing Director
Its: Corporate Real Estate
ATTEST:
- ------------------------------
Charles D. MarLett
Corporate Secretary
(Corporate Seal)
STATE OF TEXAS
COUNTY OF TARRANT
I, a Notary Public of the County and State aforesaid, do hereby certify
that Charles D. MarLett personally came before me this day and acknowledged that
he is Corporate Secretary of American Airlines, Inc., a Delaware corporation,
and that by authority duly given and as the act of the corporation, the
foregoing instrument was signed in its name by its _____________ President,
sealed with its corporate seal and attested by himself as its Corporate
Secretary.
Witness my hand and official stamp or seal, this the ______ day of
__________, 1997.
------------------------------
Notary Public
My Commission Expires:
------------
(Seal)
-2-
<PAGE>
MIDWAY AIRLINES CORPORATION
By: /s/ J S Waller
-----------------------------
Its: Senior Vice President
General Counsel
ATTEST:
/s/ Tina M. Gerlach
- ---------------------------
Asst. Secretary
(Corporate Seal) JONATHAN S. WALLER
SENIOR VICE PRESIDENT
GENERAL COUNSEL
STATE OF NORTH CAROLINA
COUNTY OF
I, a Notary Public of theCounty and State aforesaid, do hereby certify
that Tina Gerlach personally came before me this day and acknowledged that (she)
is Assistant Corporate Secretary of Midway Airlines Corporation, a Delaware
corporation, and that by authority duly given and as the act of the corporation,
the foregoing instrument was signed in its name by its Senior Vice President,
sealed with its corporate seal and attested by her as its Assistant Corporate
Secretary.
Witness my hand and official stamp or seal, this the 29th day of July,
1997.
/s/ Deborah Ruben
------------------------------
Notary Public
My Commission Expires: 10/22/99
(Seal)
APPROVED and CONSENTED TO:
RALEIGH-DURHAM AIRPORT AUTHORITY
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
-3-
<PAGE>
EXHIBIT 4-1
1 OF 1
American Airlines
Raleigh-Durham International airport
[GRAPHIC OMITTED]
Level 1
Midway Airlines
e 2/Sub-Lease Areas
<PAGE>
[Letterhead of American Airlines]
March 2, 1995
VIA FEDERAL EXPRESS
Jonathan S. Waller, Esq.
Rosenberg & Liebentritt, P.C.
Two North Riverside Plaza
Suite 1600
Chicago. IL 60606
Re: RDU Sublease - Midway
Dear Jon:
I have enclosed one copy of the signed Airport Authority's consent that I
received today. Please call if you have any questions.
Sincerely,
/s/ Tobin K. Clark
Tobin K. Clark
/jr
Enclosure
<PAGE>
AGREEMENT AND CONSENT TO SUBLEASE
AMERICAN AIRLINES/MIDWAY AIRLINES
TERMINAL C RALEIGH-DURHAM AIRPORT
THIS AGREEMENT AND CONSENT ("Agreement"), dated the 28th day of February,
1995, by and between AMERICAN AIRLINES, INC., a Delaware corporation
("Sublessor"); MIDWAY AIRLINES CORPORATION, a Delaware corporation
("Sublessee"); and RALEIGH-DURHAM AIRPORT AUTHORITY (the "Authority"):
WITNESSETH
WHEREAS, the Authority entered into a Facilities Lease and Use Agreement
effective June 15, 1987, including subsequent amendments thereto, (which items
are collectively referred to hereinafter as the "Lease") with Sublessor for the
occupancy and use of space at Raleigh-Durham International Airport ("RDU"),
including the occupancy and use of the facilities identified as "Terminal C", as
more particularly described therein;
WHEREAS, Sublessor has entered into a Sublease Agreement, a copy of which
is attached hereto, dated January 18, 1995 (the "Sublease") with the Sublessee
to sublease to Sublessee a portion of its leasehold interest in Terminal C and
its related leasehold facilities as more particularly described in the Sublease;
WHEREAS, the Sublessor and Sublessee have requested the Authority's
consent to the Sublease, which consent is required by the terms of the Lease and
the amendments thereto, without in any way reducing, increasing, expanding,
releasing, discharging, or modifying Sublessor's rights, duties and obligations
to the Authority, or the Authority's rights, duties and obligations to Sublessor
under the terms of the Lease or under the terms of any and all other existing
agreements between Sublessor and the Authority;
WHEREAS, the Authority has agreed to consent to the Sublease conditioned
upon the agreements and undertakings set forth hereinbelow.
NOW, THEREFORE, in consideration of these premises, the mutual promises,
agreements, covenants, conditions, and provisions contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. SUBLESSOR'S AGREEMENT.
Sublessor hereby agrees and acknowledges that it is and remains fully liable to
the Authority for all of its duties and obligations as Lessee under the Lease,
whether prior or subsequent to the execution of the Sublease and this Agreement,
and that the execution of the Sublease and of this Agreement will not reduce,
increase, expand, release, discharge, or otherwise modify Sublessor's rights or
its duties and obligations to the Authority under the Lease or under any other
agreement now existing between Sublessor and the Authority.
<PAGE>
2. SUBLESSEE'S AGREEMENT.
A. Except as expressly provided in this Agreement, Sublessee hereby agrees
and acknowledges that it shall be bound and limited by the terms of the Lease as
if Sublessee were the Lessee thereunder (without Sublessee's assumption of any
of Lessee's obligations thereunder) and that neither this Agreement nor the
Sublease shall be construed to reduce, release, discharge, amend or otherwise
modify the Lease as it applies to Sublessor and to Sublessee; and
B. Sublessee expressly acknowledges and agrees that, to the extent of its
actions and activities and the actions and activities of its agents, employees,
contractors, and invitees, the indemnification provisions of Article 23 of the
Lease shall be applicable to it as fully as if the Lease were entered into
between the Authority and Sublessee.
3. THE AUTHORITY'S AGREEMENT.
The Authority hereby consents to the Sublease between Sublessor and Sublessee
conditioned upon the agreements and acknowledgements set forth herein. This
consent by the Authority satisfies the requirement for consent as set forth in
Paragraph 30.1 of the Lease.
4. THE LEASE.
A. The Authority and Sublessor covenant and agree that the Lease, as amended,
remains in full force and effect as of the date of this Agreement and all of the
rights, duties and obligations of the Authority and the Sublessor thereunder
shall survive the execution of this Agreement; and
B. Sublessee, Sublessor, and the Authority expressly agree and acknowledge
that the inclusion of the "Phase 2 Premises" and the Additional Premises" in the
Sublease and any other restriction therein on further subleasing by Sublessor to
other air carriers does not amend the agreement between the Authority and
Sublessor to make available excess, unused gate capacity in Terminal C at RDU
for the use of additional air carriers as set forth in section 24.2 of the
Lease; provided, however, that any agreement between Sublessor and any such
additional air carriers shall be subject to the right of Sublessor, and any
assignee or sublessee (including Sublessee) of Sublessor which has the right to
occupy and use such gates in Terminal C, to recover the possession and use of
all or a portion of such gates, previously deemed to be excess, unused gates,
upon such terms and conditions as may be agreed to between Sublessor and such
additional air carriers.
5. OPERATING LETTER OF AGREEMENT.
Within 10 days of the execution of this Agreement, the Authority and Sublessee
will enter into an Operating Letter of Agreement regarding such matters as
Landing Fee charges, security for payment, scheduling, and insurance
requirements. Sublessee's failure to timely execute and return the Operating
Letter of Agreement to the Authority will terminate this Agreement.
Notwithstanding the Authority's consent to the Sublease, Sublessee's failure to
operate in compliance with the Operating Letter of Agreement, this Agreement,
the Lease, and any and all
- 2 -
<PAGE>
other applicable agreements that it may hereafter enter into with the Authority,
may result in the termination of Sublessee's right to operate as an air carrier
at RDU.
6. CONSTRUCTION OF AGREEMENT.
This Agreement shall inure to the benefit of the parties hereto and their
successors and assigns, and shall be construed and enforced exclusively under
the laws and in the courts of the State of North Carolina.
WHEREFORE, the parties have executed this Agreement and Consent under seal
to be effective only upon the duly authorized execution hereof by each of the
parties hereto.
AMERICAN AIRLINES, INC. MIDWAY AIRLINES CORPORATION
By: /s/ [ILLEGIBLE] By: /s/ J S Waller
---------------------- --------------------------------
Its: Its: Vice President
ATTEST: /s/ [ILLEGIBLE] ATTEST: /s/ [ILLEGIBLE]
------------------ ----------------------------
[Corporate Seal] [Corporate Seal]
RALEIGH-DURHAM AIRPORT AUTHORITY
By: /s/ [ILLEGIBLE] ATTEST: /s/ Margaret C. Riddle
---------------------- ----------------------------
Its Chairman [Corporate Seal]
- 3 -
<PAGE>
EXHIBIT 10.18
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF
THIS EXHIBIT. THE CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND
ARE DENOTED BY {***}. THE CONFIDENTIAL PORTIONS HAVE BEEN
SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
AADVANTAGE(1) PARTICIPATING
CARRIER AGREEMENT
This AAdvantage(1) Participating Carrier Agreement ("Agreement"), dated as
of the 18th day of January, 1995 is made by and between American Airlines, Inc.,
a Delaware corporation having its principal place of business at 4333 Amon
Carter Boulevard, Fort Worth, Texas 76155 ("American"), and Midway Airlines
Corporation, a Delaware corporation, having its principal place of business at
5713 S. Central Avenue, Chicago, Illinois 60638 ("Carrier").
WHEREAS, American has developed a promotional program hereinafter known as
the "AAdvantage Program" (as defined below);
WHEREAS, Carrier desires to participate in American's AAdvantage Program
to allow "Members" (as defined below) to earn "AAdvantage Miles" (as defined
below) for travel on Carrier and to provide "Award Travel" (as defined below) to
Members; and
WHEREAS, contemporaneously herewith, Carrier and American have entered
into an Agreement of Sublease regarding certain gates at Raleigh-Durham Airport;
NOW, THEREFORE, in consideration of the mutual covenants and promises in
this Agreement, American and Carrier hereby agree as follows:
Section 1. Definitions
For all purposes of this Agreement, the following capitalized terms shall
have the following meanings:
"AAdvantage Account" means the record maintained by American of a
Member's AAdvantage Program activity, including, without limitation, the accrual
and redemption of AAdvantage Miles by such Member.
"AAdvantage Awards" means the awards or benefits (established by American
from time to time) which Members can receive under the AAdvantage Program in
exchange for the redemption of accrued AAdvantage Miles, and if applicable,
other consideration, which awards includes, among other items, Award Travel.
"AAdvantage Gold and Platinum Member Guides" means the publications
entitled, respectively, "AAvantage Gold(R) Member Guide" and "AAdvantage
Platinum(R) Member Guide," or any successor publications thereto, which set
forth the particular AAdvantage Program Rules applicable to Top Tier Members, as
from time to time modified and issued by American, at its discretion.
- --------------
1 AAdvantage is a registered trademark of American Airlines, Inc.
1 CONFIDENTIAL
<PAGE>
"AAdvantage Miles" means the points or "miles" (including bonus points or
"miles") earned by Members pursuant to the AAdvantage Program Rules for (i)
travel on American, (ii) travel on, and/or the purchase of goods or services
from, AAdvantage Participants, or (iii) any other reason authorized by American.
"AAdvantage Participant" means any Person which (i) provides goods or
services to Members in exchange for AAdvantage Miles, or (ii) in connection with
the sale of goods or services by such Person to a Member, offers AAdvantage
Miles to such Member, in each instance pursuant to the AAdvantage Program Rules
and the agreement between American and such Person regarding the AAdvantage
Program.
"AAdvantage Program" means the frequent traveler program established and
maintained by American, as such program may from time to time be changed or
modified, pursuant to which Members (i) receive AAdvantage Miles for travel on
American, for certain transactions with an AAdvantage Participant, or for any
other reason authorized by American, and (ii) may exchange accrued AAdvantage
Miles for AAdvantage Awards.
"AAdvantage Program Rules" means the rules, regulations, terms and
conditions established or modified, from time to time, by American, in its sole
judgment and discretion, which shall govern the AAdvantage Program.
"AAdvantage Summary" means the summary Of AAdvantage Program activity
sent to Members from time to time, at intervals determined by American.
"Accrual Miles" means the AAdvantage Miles accrued by a Member for Revenue
Travel on a Carrier Flight, consisting of the AAdvantage Miles calculated as
described in Section 2.a. below on the basis of Actual Miles flown, together
with, if applicable, any Class of Service Bonus Miles, any AAdvantage Miles
earned under the Minimum Mileage Guarantee, or any Promotional Bonus Miles, all
as awarded in accordance with this Agreement and the AAdvantage Program Rules.
"Actual Miles" means the United States Department of Transportation
approved non-stop mileage between origination and destination cities of each
Carrier Flight.
"Affiliate" means, with respect to any Person, any other Person directly
or indirectly controlling or controlled by or under common control with such
Person. For purposes of this definition, "control" (including, without
limitation "controlled by" and "under common control with") shall mean the
power, directly or indirectly, to direct or cause the direction of the
management and policies of such Person whether through the ownership of voting
securities or by contract or otherwise; provided, however, that, notwithstanding
the foregoing, in the case of Carrier, (i) the above definition of "Affiliate"
shall apply for the purposes of Section 6 and only Section 6 of this Agreement,
and (ii) an "Affiliate" of Carrier for all other purposes of this Agreement
shall be any Person controlled by Carrier.
"Agreement" means this AAdvantage Participating Carrier Agreement, as it
may, from time to time, be amended or modified in writing in accordance
herewith.
"American" has the meaning assigned to such term in the preamble to this
Agreement.
2 CONFIDENTIAL
<PAGE>
"Applicable Law" means all applicable laws of any jurisdiction,
including, without limitation, securities laws, tax laws, tariff and trade laws,
ordinances, judgments, decrees, injunctions, writs and orders or like actions of
any Competent Authority and the rules, regulations, orders, interpretations,
licenses and permits of any Competent Authority.
"Award Certificate" means the document issued to a Member by American,
that entities such Member to an Award Ticket or other benefits obtained by such
Member in accordance with this Agreement and the AAdvantage Program Rules.
"Award Document" means, with respect to any request by a Member for Award
Travel, either (i) an Award Certificate, or (ii) an Award Ticket which is not
issued from an Award Certificate tendered by a Member, but may be issued from a
pro-forma Award Certificate.
"Award Flight" means (i) any on-line, regularly scheduled, passenger air
travel service operated by Carrier under the "JI" designator code between the
destinations specified on Attachment B, as amended from time to time, and (ii)
each Codeshare Flight specified on Attachment B, if any.
"Award Ticket" means the non-endorsable, non-reroutable ticket issued to
a Member, either directly or in exchange for an Award Certificate, by American
or American's authorized agents, which entities such Member to Award Travel.
"Award Travel" means the roundtrip passenger air transportation received
or obtained by a Member on Award Flights in exchange for the redemption of a
specified number of AAdvantage Miles (and, if applicable, other consideration),
pursuant to this Agreement and the AAdvantage Program Rules, which travel shall
be subject to the Blackout Dates and to other terms and conditions set forth on
Attachment B, as amended from time to time.
"Blackout Dates" shall have the meaning set forth in Section 3.d. below.
"Business Day" means any day other than a Saturday, Sunday or other day
on which banks in Fort Worth, Texas are required or authorized by law,
regulation or executive order to close.
"Carrier" has the meaning assigned to such term in the preamble to this
Agreement.
"Carrier Flight" means (i) any on-line, regularly scheduled, passenger
air travel service operated by Carrier under the "JI" designator code on any one
of the 0 & D city pairs specified in Attachment A, as amended from time to time,
and (ii) any Codeshare Flight specified on Attachment A, if any.
"Carrier Report" means the report to be delivered to American by Carrier
pursuant to Section 5.a., which report shall be substantially in the form of,
and shall have the information specified in and requested by, the Data Flow and
Input/Output Specifications attached hereto as Attachment D.
3 CONFIDENTIAL
<PAGE>
"Class of Service Bonus Miles" means Accrual Miles in excess of Actual
Miles flown accrued by a Member for Revenue Travel in First Class (if available)
on a Carrier Flight which are equal in number to the product of the Actual Miles
flown on such flight multiplied by the applicable percentage specified in
Section 2.a. hereof; Class of Service Bonus Miles will not be awarded if Accrual
Miles are awarded pursuant to the Minimum Mileage Guarantee.
"Codeshare Flights" means flights operated by third party air carriers
providing regularly scheduled, commercial passenger air transportation services
and marketed under Carrier's "JI" designator code.
"Competent Authority" means any national, federal, state, county, local
or municipal government body, bureau, commission, board, board of arbitration,
instrumentality, authority, agency, court, department, inspectorate, minister,
ministry, official or public or statutory person (whether autonomous or not)
having jurisdiction over this Agreement or any of the parties to this Agreement.
"Effective Date" means 00:01 Coordinated Universal Standard Time (UTC) on
the later to occur of (1) March 2, 1995, or (ii) the date which is the
"Commencement Date" under the RDU Sublease.
"Expiration Date" means 23:59 Coordinated Universal Standard Time (UTC)
on March 1, 2000, unless extended in accordance with the terms of this
Agreement.
"First Class" means a class of service higher and better than Coach Class
on an aircraft which offers two distinct classes of service, regardless of the
actual name Carrier may assign to such higher class of service.
"Material Adverse Effect" means, with respect to either Carrier or
American, a material adverse effect on (i) the business, assets, operations,
performance, properties, condition or prospects (financial or otherwise, taken
as a whole) of the party, or (ii) the ability of such party to perform its
obligations under this Agreement.
"Member" means, as of any date, any individual who is a member in good
standing of the AAdvantage Program.
"Minimum Mileage Guarantee" means the number of Accrual Miles guaranteed
to be earned by Members on a short haul Carrier Flight which shall be five
hundred (500) Accrual Miles and shall be earned as follows and as otherwise set
forth in Section 2.a.
below:
Actual Miles and Class
Minimum of Service Bonus Miles (if any)
Mileage Guarantee for Carrier Flight
----------------- -------------------------------
500 1-499
"0 & D" when used in the context of city pairs means origination and
destination.
"Original 0 & D City Pair" shall have the meaning described in Section
11.k.
4 CONFIDENTIAL
<PAGE>
"Paid Upgrade Sticker" means an Upgrade Sticker for which a Member has
paid consideration, and which complies with such other requirements as American
may provide to Carrier at the time Carrier introduces a First Class service.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any group or political subdivision thereof.
"Promotional Bonus Miles" means AAdvantage Miles in excess of Actual
Miles, Class of Service Bonus Miles (if any), and Accrual Miles earned under the
Minimum Mileage Guarantee, accrued by a Member pursuant to a special promotion
offered by Carrier and approved by American pursuant to Section 2.b. hereof.
"RDU Sublease" means that certain Agreement of Sublease, dated as of
January 18, 1995, by and between American and Carrier.
"Redeemed Miles" means AAdvantage Miles redeemed under the AAdvantage
Program by Members in exchange for an Award Certificate or Award Ticket, in each
case for Award Travel.
"Revenue Travel" means all travel on a Carrier Flight made by Members for
which monetary payment is made as the sole and complete form of consideration
and which otherwise complies with the terms and conditions set forth in
Attachment A.
"Top Tier Members" means, as of any date, any Member who is enrolled in
American's AAdvantage Gold(R) or AAdvantage Platinum(R) recognition programs for
Members who have achieved certain AAdvantage Mile accrual levels within a
specified period of time, as such requirements may, from time to time, be
determined and modified by American.
"Upgrade Sticker" means a sticker (i) issued by American to Members, on
either a complimentary basis or for consideration, which complies with such
other requirements as American may provide to Carrier at the time Carrier
introduces a First Class service, and (ii) which sticker may be exchanged by a
Member at the time of check-in for a reserved or instantaneous (depending on the
sticker) one-class class of service upgrade from Coach Class on, among other
flights designated by American, any Carrier Right with more than one class of
service, or any two or more such Carrier Flights to be flown consecutively under
a single flight coupon. Upgrade Stickers are further subject to the AAdvantage
Program Rules, and American may discontinue the use of Upgrade Stickers by
Members at any time at its discretion.
"US AAdvantage Summary" means the AAdvantage Summary sent to Members with
mailing addresses in the United States, Canada, Mexico and the Caribbean (and
such other countries as American may determine to include from time to time, at
its discretion).
"$" or "$U.S." means United States Dollars. Unless otherwise specifically
indicated, all such references herein shall refer to United States Dollars.
5 CONFIDENTIAL
<PAGE>
Section 2. AAdvantage Mileage Accrual For Travel on Carrier
a. Accrual Miles. Provided that (i) accumulation of Accrual Miles is
otherwise permitted by Applicable Law, and (ii) the Member has not elected to
accrue credits in any other frequent flyer or travel program for the travel,
then, subject to the terms and conditions of this Agreement (including, without
limitation, the additional criteria specified in Attachment A), on and after the
Effective Date and continuing until this Agreement terminates or expires,
American will award each Member Accrual Miles for Revenue Travel of such Member
on a Carrier Flight, as follows:
Class of Service Accrual Miles Credited
Coach Class {***} of Actual Miles
provided, however, that the total Accrual Miles credited for Coach Class
Revenue Travel shall in no event be less than the number of Accrual Miles to
be earned under the Minimum Mileage Guarantee. In addition, if Carrier
introduces a First Class service during the term of this Agreement, American
will award a bonus of {***} more Accrual Miles for Revenue Travel in such
class of service for a total of {***} of Actual Miles under criteria to be
mutually agreed between the parties and to be specified in Attachment A;
provided, however, that the total Actual Miles credited for First Class
Revenue Travel (i.e. the sum of the Actual Miles and Class of Service Bonus
Miles (if any)) shall in no event be less than the number of Accrual Miles to
be earned under the Minimum Mileage Guarantee.
b. Promotional Bonus Miles. Carrier may, from time to time, offer
Promotional Bonus Miles to Members for Revenue Travel on Carrier Flights with
the prior written consent of American.
c. Selection of Program; No Changes. On any particular Carrier Flight,
Carrier passengers can designate only one frequent flyer program for mileage.
Once the Carrier Flight departs, American will not allow a Member who has
elected to accrue mileage in the AAdvantage Program to transfer Accrual Miles to
another frequent flyer program in which American or Carrier participates.
Section 3. AAdvantage Awards For Travel an Carrier
a. Award Travel. Subject to the terms and conditions of this Agreement
(including, without limitation, the additional criteria specified in Attachment
B), on and after January 24, 1995, American may issue Award Certificates and/or
Award Tickets for Award Travel on and after the Effective Date, and subject to
the Blackout Dates, in exchange for a specified number of AAdvantage Miles or to
reaccommodate Members booked for travel on an award under the AAdvantage Program
between destinations listed on Attachment B. All Award Certificates are
non-transferable after issuance pursuant to the terms and conditions of the
AAdvantage Program and are valid for use only as specified in the AAdvantage
Program Rules which, as of the date hereof, provide for use only by (i) the
Member; (ii) the individual whose name is specified on such Award Certificate;
(iii) a family member with the same surname as, or a spouse with a different
surname than, the individual identified in (i) or (ii); or (iv) if and only if
an issued Award Certificate is personally presented to an American ticket
6 CONFIDENTIAL
<PAGE>
counter or city ticket office by the claiming Member, a passenger with a
different surname who is designated by the Member. Award Tickets are
non-transferable after issuance. As provided in the current AAdvantage Program
Rules, a Member may have Award Certificates or Award Tickets issued in the name
of another individual, provided that the Member does not sell, barter or
otherwise transfer (in each case, as determined by American) the Award
Certificates or Award Tickets for consideration.
b. Award Reservations. All reservations for Award Travel shall be made by
American, or American's authorized agents, via SABRES(R) Direct Access or any
other reasonable method designated by American.
c. Award Seat Availability.
i. Carrier will make available for Award Travel {***} Coach
Class seats on each Award Flight. Carrier will reserve and maintain the
availability of such seats solely for Award Travel on each Award Flight
until the later of (A) {***} days prior to departure of such flight or
(B) such time as the Coach Class booked load factor for such flight
exceeds {***}; at the later to occur of the events specified in clauses
(A) or (B) of this Subsection, any so reserved which have not been booked
for Award Travel will then become available for other Carrier passengers.
ii. From time to time and upon either party's request, Carrier and
American will, if mutually agreed, specify alternative arrangements
whereby Carrier will provide, for certain 0 & D city pairs or time
periods, more or fewer seats than the number of seats specified in
Subsection 3.c.i above for particular Award Flights.
iii. In the event that a seat for Award Travel specified in
Subsection 3.c.i. above is not available for the specific date and
destination requested by a Member, Carrier will accommodate the Member for
the requested travel within the period of fifteen (15) days before or
fifteen (15) days after the date originally requested. In the event no
such seats are available during such thirty-one (31) day period, Carrier
will accommodate such Member's request on the first Award Flight on or
after the date originally requested on which the desired destination is
available from non-capacity controlled seat inventory, excluding flights
on Blackout Dates.
iv. If Carrier introduces a First Class service during the term of
this Agreement, then Carrier will also make available Award Travel
pursuant to this Agreement certain First Class seats as mutually agreed
upon by Carrier and American.
d. Blackout Dates. Award Travel will not be permitted during the blackout
dates set forth in Attachment C and as established for subsequent periods
pursuant to this Section 3.d. (the "Blackout Dates"). The Blackout Dates set
forth in Attachment C are, and the Blackout Dates for calendar 1997 and
thereafter shall be, the blackout dates established for the AAdvantage Program
PlanAAhead(R) Awards; provided, however, if American changes the blackout dates
for the AAdvantage Program PlanAAhead Awards at any time during the term of this
Agreement, Carrier agrees that the Blackout Dates under this Agreement will be
changed to correspond with those of the AAdvantage Program PlanAAhead Awards,
and
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Attachment C will be amended to reflect all such changes without further action
on the part of either party. For calendar 1997 and thereafter, American shall
inform Carrier of time dates which shall be the Blackout Dates for the purposes
of this Agreement no later than fifteen (15) months prior to January 1 of the
calendar year to which the dates apply. In addition, Carrier and American may,
from time to time, mutually agree on additional blackout dates for certain time
periods on specified 0 & D city pairs. Notwithstanding the foregoing, Carrier,
in its own discretion, may allow Award Travel on any Blackout Date.
e. Award Certificates and Award Tickets. Unless otherwise mutually agreed
upon by American and Carrier, and regardless of any termination or expiration of
this Agreement, (i) all Award Certificates issued by American in accordance with
the terms of this Agreement shall be valid and shall be honored by American and
Carrier, in accordance with the terms of the Award Certificate, for a period of
one (1) year from the date of issuance, and (ii) all Award Tickets issued in
accordance with the terms of this Agreement shall be valid and shall be honored
by Carrier for a period of one (1) year from the date of issuance. In the event
that Carrier is unable to honor any valid Award Ticket on a flight operated by
Carrier for any reason, Carrier will accommodate Members holding such ticket on
a third party air carrier at Carrier's expense. The provisions of this Section
3e. shall survive the termination or expiration of this Agreement.
f. Non-Discrimination. Carrier shall offer all Members when traveling on
Award Travel the same rights and privileges afforded to revenue passengers of
Carrier traveling in the same class of service. Members shall have at least an
equal right to book capacity controlled inventory on Carrier as do members of
any other program (whether a frequent traveler program of Carrier or another
carrier, or any other program or arrangement) in which Carrier may participate
in the future; and the Blackout Dates under this Agreement shall be no more
restrictive for Members utilizing Award Travel than for such other members.
g. OSI Codes. Consistent with current practice in all reservations for
Award Travel made by American, American will make reasonable efforts to append
the following OSI codes to all Award Travel passenger reservation records:
Free Ticket OSIJIAAAD
American will make commercially reasonable efforts to provide these instructions
to American's authorized agents, but will not be responsible for the omission of
such codes by its agents.
h. Upgrade Stickers
i. If Carrier introduces a First Class service during the term of
this Agreement, and for as long as American permits Members to use Upgrade
Stickers, Carrier will accept all Upgrade Stickers and upgrade the Member
tendering such Upgrade Sticker by one class of service for Carrier Flights
with First Class service, if space is available, pursuant to the
procedures described in Subsection 3.h.ii below; provided, however, that
for the purposes of this Agreement, Accrual Miles for Revenue Travel made
in conjunction with an Upgrade Sticker shall be awarded based only on the
class of service paid for. Carrier will not charge Members for the use of
Upgrade Stickers.
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Carrier will permit American (upon American's providing to Carrier at
least two Business Days' prior written notice) to inspect Carrier's
relevant books and records to verify the numbers and types of Upgrade
Stickers honored by Carrier and the amount owing by American to Carrier
therefor.
ii. If Carrier introduces a First Class service during the term of
this Agreement, Carrier shall accept Upgrade Stickers, in accordance with
the provisions of applicable Upgrade Sticker booklets, the terms and
conditions set forth in the AAdvantage Gold and Platinum Member Guides and
other applicable AAdvantage Program Rules, and such other procedural
guidelines as shall be mutually agreed upon by Carrier and American at the
time Carrier introduces a First Class service.
Section 4. Program Administration
a. Check-in Procedures. To assure minimum inconvenience to Members,
Carrier will establish and maintain procedures whereby Members need only provide
a valid AAdvantage Account number to a reservation agent or to a ticket agent at
check-in for the Carrier Flight to earn Accrual Miles. Carrier will not require
Members to carry or fill out coupons, stickers, or other documentation, or
otherwise employ inconvenient or cumbersome procedures, in order for Members to
receive Accrual Miles.
b. Membership In AAdvantage Program. Members will be enrolled in the
AAdvantage Program in accordance with American's standard procedures, as it
currently exists or as modified from time to time, at the time of Revenue Travel
on the Carrier Flight. No Member will accumulate Accrual Miles for Revenue
Travel until an AAdvantage Account number has been assigned by American.
c. Administration By American. Subject to the terms and conditions of
this Agreement, administration of the AAdvantage Program shall be performed by
American, and all AAdvantage Program Rules shall apply to Carrier's
participation in the AAdvantage Program. American shall issue all Award
Certificates, Award Tickets, AAdvantage Summaries and AAdvantage Program
newsletters in accordance with its procedures (as now existing or which American
may, in its sole discretion, modify from time to time in the future) and at its
sole expense. Inquiries or complaints addressed to Carrier regarding the
AAdvantage Program, Carrier's participation in the AAdvantage Program, and
record keeping in connection therewith shall be referred by Carrier to
American's AAdvantage Customer Service Department which shall be responsible for
resolving such complaints. Inquiries or complaints addressed to American
regarding specific travel in progress or completed on Carrier on an Award Ticket
shall be referred to Carrier which shall be responsible for responding to either
American or the Member regarding such complaints. Inquiries or complaints
addressed to American or Carrier regarding specific travel scheduled on Carrier
on an Award Ticket will be responded to through mutual cooperation of Carrier
and American. Unless specifically agreed to by American, Carrier shall not use
its own records to respond directly to Members' general inquiries regarding the
AAdvantage Program.
d. Carrier Customer Service. At its sole expense, Carrier will designate
customer service individuals in Chicago, Illinois, and Raleigh, North Carolina,
to be available during normal business hours on normal business days in each
city, to assist American's
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AAdvantage Customer Service and Reservation Sales Departments in resolving
Member complaints. For the purposes of this Section 4.d. "normal business days"
in any city shall mean any day other than a Saturday, Sunday, or other day on
which banking institutions in such city are required by law, regulation,
executive order, or common custom to be closed. Such designated customer service
group will be staffed and supported by Carrier so that, in American's opinion,
American will be able to effectively address Members' complaints relating to
Carrier, especially concerning Award Travel. With respect to any customer
dispute, American shall not have authority to make on behalf of Carrier any
monetary commitment or other commitment which would require any action by
Carrier, or to compromise or some any dispute involving Carrier without the
prior consent of Carrier in each instance; provided however, that such consent
shall not be unreasonably withheld or delayed and Carrier shall cooperate with
American to resolve any such dispute.
e. Accrual Miles Credit. Carrier will be responsible for documenting
qualifying travel and incorporating that information into the Carrier Report to
be furnished by Carrier to American pursuant to this Agreement. Carrier
understands and agrees that American will rely on the accuracy of the Carrier
Reports submitted by Carrier to invoice Carrier and to post Accrual Miles credit
to a Members AAdvantage Account, subject to any adjustments provided for in the
balance of this paragraph and in Section 5 below. In addition, American shall
have the right to credit Accrual Miles to a Member's AAdvantage Account for
Revenue Travel on a Carrier Flight for a period of twelve (12) months following
the conclusion of such flight which credit shall be accorded as follows: (i) if
a Member with a valid AAdvantage Account number at the time of Revenue Travel on
a Carrier Flight who has not received Accrual Miles for such travel applies to
American within twelve (12) months after the conclusion of the flight and
submits documentation acceptable to American, and (ii) if American, in its sole
judgment, finds the documentation submitted is acceptable, American will credit
the Member's AAdvantage Account with the Accrual Miles corresponding to such
flight American will then bill Carrier for such Accrual Miles credited. Claims
for Accrual Miles credit on flights operated by Carrier which are not between an
O & D city pair listed on Attachment A or do not comply with the other
requirements specified on Attachment A will be rejected by American's AAdvantage
Customer Service Department and reported back to either Carrier or the Member,
whichever initiated the claim or request, that the travel is not eligible to
receive Accrual Miles. American and Carrier agree to cooperate, and will
establish procedures, to ensure that Members are not claiming Accrual Miles in
more than one frequent flyer program or travel program, whether operated by
American or Carrier, or in which American or Carrier now participates or may in
the future participate.
f. Transfer or Combining Mileage. Mileage accrued in a Members AAdvantage
Account at any time shall not be transferred to such individual's account under
Carrier's own frequent flyer program nor shall mileage from an individual's
account in Carrier's own frequent flyer program be combined with AAdvantage
Miles from his or her AAdvantage Account under any circumstance.
g. Ticketing. Pursuant to ticketing instructions issued by American and
approved in advance by Carrier, American or American's duly appointed and
authorized agents will ticket Award Travel on American's ticket stock in
accordance with American's ticketing rules.
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h. Changes to Program. Except for matters specifically provided for in
this Agreement, American has the absolute right in its sole judgment and
discretion to determine, establish, and/or change the AAdvantage Program and the
AAdvantage Program Rules, at any time and from time to time, without any
liability, compensation or additional obligation to Carrier. This means that
American may in its sole discretion initiate changes to the AAdvantage Program,
including, but not limited to, changes to the rules governing: (i) AAdvantage
Participant affiliations, (ii) the earning of AAdvantage Miles, (iii) the number
of AAdvantage Miles necessary to qualify for, and the rules for use of,
AAdvantage Awards, Upgrade Stickers, and any special AAdvantage privileges, (iv)
the continued availability of AAdvantage Awards, Upgrade Stickers, and any
special AAdvantage privileges, (v) AAdvantage Program blackout dates, (vi)
limited seating for Award Travel on American, (vii) the terms or features of
special offers, and (viii) the award levels at which Award Travel on Carrier
will be offered.
i. Minimum Market Presence. Carrier acknowledges that American's
willingness to enter into this Agreement, and other agreements with Carrier, is
based on Carrier's commitment to maintain a minimum market presence at the
Raleigh-Durham Airport. Accordingly, Carrier hereby covenants that it will
maintain the applicable minimum flight activity levels set forth in Part I of
Attachment E during the times prescribed therein.
j. Carrier New Routes: Discontinued Routes.
i. In the event that Carrier desires to introduce new
Carrier-operated service on an 0 & D city pair or to a destination, or a
new Codeshare Flight, which is not included in Attachments A and/or B of
this Agreement, as applicable, Carrier may request, in writing, that such
now 0 & D city pair or Codeshare Flight be eligible as a Carrier Flight,
or that such new destination or Codeshare Flight be eligible for Award
Flights under this Agreement and added to Attachments A and/or B, as
applicable. American shall have thirty (30) days from the receipt of the
request to evaluate Carrier's request and American shall, at its sole
discretion, decide whether or not to add the 0 & D city pair, destination
or Codeshare Flight to Attachments A and/or B, and under what conditions
(including, without limitation, if an addition to Attachment A, what
price will be paid by Carrier for each Accrual Mile earned by a Member on
such 0 & D city pair or Codeshare Flight); if American approves Carrier's
request, such 0 & D city pair, destination or Codeshare Right would be
made subject to this Agreement, provided, however, that any 0 & D city
pair or Codeshare Flight added to Attachment A pursuant to this Section
4.j. shall not be an Original 0 & D City Pair for the purposes of Section
11.k. without the express written approval of American. Neither party,
however, shall be obligated to make any changes to Attachment A or B to
this Agreement unless mutually agreed to in writing.
ii. In the event that Carrier introduces new Carrier-operated
service on an 0 & D city pair or to a destination, or a new Codeshare
Flight, which is not included in Attachments A and/or B of this Agreement
as applicable, Carrier shall promptly give American written notice
thereof.
11 CONFIDENTIAL
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iii. Notwithstanding anything to the contrary in this
Agreement, Carrier shall have the right at any time, in its sole judgment
and discretion, to cease to operate service between any of the 0 & D city
pairs on Attachment A or which includes a destination listed on
Attachment B; provided however, that Carrier shall provide American at
least sixty (60) days prior written notice of the scheduled termination
and the termination date for service between such 0 & D city pair or to
such destination. For the purposes of this Section 4.j.iii., the
off-season suspension of service for seasonal service between an 0 & D
city pair, which service has not otherwise been permanently terminated,
shall not be considered a cessation of service for which notice must be
given.
k. Carrier Participation in Other Frequent Flyer Programs. In the event
that Carrier commences a new frequent flyer program, or enters into an agreement
or other arrangement by which it becomes or will become a participant in another
frequent flyer program, or by which another commercial passenger air carrier
becomes or will become a participant in Carrier's frequent flyer program,
Carrier shall promptly give American written notice thereof, which notice shall
include the name of Carriers new program, the program in which Carrier will
participate, or the new participant in Carrier's program.
l. Principal Place of Business. If either Carrier or American shall
change its principal place of business during the term of this Agreement, such
party shall promptly notify the other party of its new address.
Section 5. Reports
a. Carrier Reports. Carrier will provide American for each semi-monthly
period with a report (the "Carrier Report") consisting of computer tapes or
transmissions listing all Revenue Travel on Carrier by Member name, AAdvantage
Account number, Carrier Flight number, origin and destination, date, class of
service and other items as specified in the Data Flow and Input/Output
Specifications attached hereto as Attachment D. Carrier shall deliver the
Carrier Report to American for the periods ending the 10th and the 26th of each
month. The Carrier Report must be received by American no later than four (4)
Business Days following the last day of the prior reporting period, and must
include all data through the end of such reporting period. Carrier understands
and agrees that all data contained in the Carrier Reports may be merged with
other information contained in the Member database maintained by American.
b. American Reports. American will provide Carrier, on a monthly basis,
with the following reports for use solely in administering the transactions
contemplated by this Agreement.
i. A report summarizing the total Accrual Miles posted by American for
Member Revenue Travel on Carrier Flights during a given calendar month
and any prior Revenue Travel not previously credited to, but submitted
by, a Member and eligible for Accrual Miles credit if any; and
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ii. Until Carrier has elected to convert to the alternative fee
structure described in Section 8.a.ii., a report summarizing the total
number of Award Documents issued and the total number reinstated to
Members' AAdvantage Accounts during a given calendar month, categorized by
award code.
c. Report Procedures. All data exchanged by American and Carrier will be
subject to the procedures outlined in Attachment D, which may be modified upon
the written agreement of the parties.
d. Additional Reports. American will be under no obligation to provide
additional reports, but will consider any request by Carrier for such reports,
and will determine, in its sole discretion, whether to honor such requests.
American may bill Carrier, and if so Carrier will pay American, for any such
additional reports a mutually agreed upon fee.
e. Origin and Destination Table Prior to February 1, 1995, Carrier will
provide to American, in a medium and format mutually acceptable to American and
Carrier, a complete table of all 0 & D city pairs set forth on Attachment A and
any combinations of such 0 & D city pairs to be serviced consecutively and
available for travel on a single flight coupon, which table shall be approved by
American, and once so approved shall be eligible for Accrual Miles as of the
Effective Date. Carrier understands that claims for Accrual Miles credit on
flights between 0 & D city pairs not listed in the then current table will be
rejected by American's AAdvantage Customer Service department and such rejection
will either be reported back to Carrier or to the Member. During the term of
this Agreement, Carrier will promptly, but no later than sixty (60) days prior
to any change relevant to this Agreement and the transactions contemplated
hereunder which has been noticed and approved or agreed upon in accordance with
this Agreement, provide to American an update to the 0 & D city pairs table as
necessary to reflect such changes, which update shall be in a medium and format
mutually acceptable to American and Carrier.
f. Additional Reports by Carrier. During the term of this Agreement,
Carrier shall furnish to American the financial statements, certificates and
other information specified in Part II of Attachment E.
Section 6. Confidentiality
a. Confidential Information. For purposes of this Agreement, confidential
information shall mean any and all (i) trade secrets, (ii) confidential or other
proprietary information of a party or its Affiliates concerning past, present or
future research, development, business activities or affairs, finances,
properties, methods of operation, processes and systems, (iii) customer lists,
(iv) other customer information, or (v) computer procedures and access codes
disclosed by one party hereto to the other at any time in connection with this
Agreement, whether the foregoing is oral or written in form or contained in any
magnetic, electronic or other media ("Confidential Information"); provided,
however, that in order for a party's information to be considered confidential
information hereunder, such information, if non-oral, must be marked or
otherwise indicated by the disclosing party as confidential; and provided,
further, that oral information must be specified as confidential at the time of
disclosure. The parties expressly acknowledge and agree that the terms and
13 CONFIDENTIAL
<PAGE>
conditions of this Agreement (other than information which is necessary and
customarily publicized in order to make Members aware of the opportunity to
accrue AAdvantage Miles) and any reports, invoices, or other communications
between American and Carrier given hereunder or in connection herewith
(excluding names, addresses, AAdvantage Account numbers and other information
relating to specific Members) constitute Confidential Information of both
parties, whether or not marked or expressly indicated as confidential, and
American and Carrier agree to keep such information confidential and not to
disclose such information to any third party, except as permitted in Section
6.b. below. Carrier also expressly acknowledges and agrees that American's
Confidential Information also includes all procedures regarding the AAdvantage
Program and any names, addresses, AAdvantage Account numbers and other
information regarding any Member disclosed or made available to Carrier pursuant
to this Agreement whether or not marked or expressly indicated as confidential.
The party which receives Confidential Information agrees to maintain such
information in secrecy at all times, using the same degree of care with respect
to such Confidential Information as it uses in protecting its own proprietary
information, trade secrets and similar terms. Information of either party which
would otherwise be considered Confidential Information shall not be considered
Confidential Information if such information is in the public domain, is placed
in the public domain, through no violation of this Agreement, or is lawfully
obtained from another source free of restriction.
b. Use of Confidential Information. Except as expressly provided below,
neither party shall sell, transfer, publish, disclose, display or otherwise make
available the Confidential Information of the other party to any third party
(and third parties shall be deemed also to include Affiliates of the party so
restricted), except as may be required by Applicable Law (including, without
limitation, requirement by oral questions, interrogatories, subpoenas, civil
investigative demands or similar processes), in which case the party from whom
disclosure is sought (or, if applicable, who is seeking to make disclosure as
required by Applicable Law) shall promptly notify the other party and shall
provide the other party (if the other party so requests) with a copy of the
information proposed to be disclosed and all related descriptions thereof within
a reasonable period (which period shall generally be at least five days) in
advance of the proposed disclosure. To the extent that the other party objects
to disclosure of such Confidential Information, the party from which disclosure
is sought (or, if applicable, who is seeking to make disclosure as required by
Applicable Law) shall (i) use reasonable and lawful efforts to resist making any
disclosure of such Confidential Information, (ii) use reasonable and lawful
efforts to limit the amount of such Confidential Information to be disclosed
(and, in connection therewith, shall reasonably consider all modifications,
deletions and additions to such information, and related descriptions, proposed
by the other party), and (iii) use all reasonable efforts to obtain a protective
order or other appropriate relief to minimize the further dissemination of any
Confidential Information to be disclosed. In addition, neither party shall
disclose the Confidential Information received to any of its directors,
officers, employees, Affiliates, or professional advisors (collectively,
"Representatives") except on a need-to-know basis for the purposes of
implementing and administering this Agreement; provided, however, that prior to
any such disclosure, the party shall inform all such Representatives of the
confidential nature of the information, and that it is subject to this
non-disclosure obligation, and shall further instruct such Representatives to
treat such information confidentially. American and Carrier each agrees to be
responsible for any breach of this Section 6 by their respective
Representatives. Furthermore, neither party shall use the
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Confidential Information of the other party for any purpose other than as
expressly provided in this Agreement.
c. Termination. Upon termination of this Agreement for any cause or
reason, each party shall promptly, but no later than ninety (90) days after
termination, either deliver to the other party, or if instead so instructed by
the other party, shall destroy all of such other party's Confidential
Information (including all copies thereof other than copies of this Agreement)
then in its possession and shall purge any copies thereof encoded or stored on
magnetic or other electronic media or processors; provided, however, that
neither American nor Carrier shall be required to purge or destroy any
Confidential Information that is (i) in the case of American, necessary for the
continued administration and operation of the AAdvantage Program, or (ii)
reasonably necessary in connection with the resolution of any disputes which may
have at the time arisen pursuant to the terms of this Agreement.
d. No Adequate Remedy. Each party acknowledges and agrees that the party
disclosing Confidential Information under this Agreement will have no adequate
remedy at law if there is a breach or threatened breach of this Section 6 and,
accordingly, that the disclosing party shall be entitled to an injunction or
other equitable or preventative relief against the other party or its
Representatives for such breach or threatened breach. Nothing herein shall be
construed as a waiver of any other legal or equitable remedies which may be
available to the disclosing party in the event of a breach or threatened breach
of this Section 6 and the disclosing party may pursue any other such remedy,
including, without limitation, the recovery of damages.
e. Survival. The provisions of this Section 6 shall survive the
termination or expiration of this Agreement.
f. Prior Confidentiality Agreement. Carrier and American have previously
entered into a Non-Disclosure and Confidentiality Agreement dated as of November
11, 1994 (the "1994 Confidentiality Agreement") in connection with the
commencement of exploratory discussions concerning this Agreement and proposed
related transactions. The provisions of Sections 6.a. through e. of this
Agreement are intended by the parties to cover information which may be
communicated from one party to the other in connection with this Agreement and
the implementation and administration of Carrier's participation in the
AAdvantage Program, and, to the extent that any other unrelated information is
covered by both Sections 6.a. through 6.e. of this Agreement and the 1994
Confidentiality Agreement, the provisions of the 1994 Confidentiality Agreement
(including, without limitation, the termination provisions of the 1994
Confidentiality Agreement) shall govern to the exclusion of the provisions set
forth in Sections 6.a. though 6.e. of this Agreement.
Section 7. Promotional Activities and Advertising
a. Materials. Carrier will be identified as an AAdvantage Participant in
appropriate (as determined by American) AAdvantage Program materials as soon as
practicable after the Effective Date at no additional cost to Carrier except as
set forth below. Except as provided in Section 7.h. below, the content of any
AAdvantage newsletter or other promotional materials shall be subject to the
sole discretion, and the sole responsibility, of American.
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b. Announcements. Carrier will be identified as an Advantage Participant
in appropriate (as determined by American) AAdvantage announcements.
c. Inserts. Subject to the guidelines established by American, the
existence of sufficient space to place the insert in the U.S. AAdvantage Summary
envelope, and American's mailing schedule, Carrier may have the option to
include insert(s) in the U.S. AAdvantage Summary pursuant to the terms and
conditions set forth in this Section 7.c. If, in response to request, American
informs Carrier that space is available for a Carrier insert in a specific U. S.
AAdvantage Summary mailing, Carrier, at its sole cost and expense, shall create,
produce and deliver to American any insert(s) no less than five (5) Business
Days prior to the proposed date of mailing of the relevant U.S. AAdvantage
Summary. American shall have the right to approve the form and content of each
Carrier insert. American shall pay the costs associated with incorporating the
proposed Carrier insert into the U.S. AAdvantage Summary envelope, provided the
insert does not increase postal charges or require special handling by the
mailing vendor. In the event that such insert will require extra postage or any
additional or special handling charges (collectively "Extra Charges"), Carrier
shall have the option (i) to pay such Extra Charges, (ii) to reschedule the
insert to another U.S. AAdvantage Summary mailing when no Extra Charges will be
required (provided space is available in such mailing), or (iii) to cancel the
insert in the event Carrier decides to proceed and pay the Extra Charges,
American will provide Carrier with an invoice, itemizing the Extra Charges, and
the total amount of such invoice will be due and payable by Carrier to American
no later than thirty (30) days following the date of the invoice. In the event
Carrier chooses not to include any insert previously requested and accepted for
mailing, then Carrier shall provide American with written notice of such
cancellation not less than sixty (60) days prior to the previously requested
mailing date. Nothing herein shall be construed as giving Carrier the right to
include an insert in any, or any particular, U.S. AAdvantage Summary mailing.
d. Direct Mail. Subject to the terms of this Section 7.d., Carrier may,
from time to time at its option and sole expense, create, produce, and
distribute direct mail promotional materials related to special AAdvantage
Program offers. American will, upon Carrier's request and at Carrier's sole
expense, use reasonable efforts to identify, from among the AAdvantage
membership, recipients for such mailings pursuant to criteria provided by
Carrier. The form and content of all such direct mailings will comply with
American's guidelines therefor and will be further subject to (i) American's
prior written consent and approval, (ii) the terms of this Agreement, and (iii)
American's prior approval of the mailing vendor. Any Member names and addresses
provided hereunder to Carrier shall be deemed Confidential Information of
American, subject to the provisions of Section 6 of this Agreement. All mailing
tapes provided by American to Carrier under this Section 7.d. must be returned
to American within ten (10) days of the direct mailing, and Carrier and its
agents shall simultaneously purge and destroy any and all information obtained
or derived from all copies of such mailing tape(s). The obligation of Carrier
under this Section 7.d. shall be deemed an obligation of confidentiality
described in Section 6 of this Agreement and subject to the same obligation,
rights, and remedies as set forth in Section 6.
e. Special Offers. All special offers made by Carrier through any
AAdvantage Program promotional material, including, but not limited to, articles
or inserts in the applicable AAdvantage Program newsletter or the U.S.
AAdvantage Summary, as well as Carrier direct
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mail promotions, (i) may only be made for the AAdvantage Program, (ii) must
enable the Member to earn Accrual Miles or claim Award Travel as a part of such
offer or promotion, and (iii) must have the AAdvantage logo prominently
displayed, along with the statement that "AAdvantage is a registered trademark
of American Airlines, Inc."
f. Cancellation. Notwithstanding anything in this Agreement to the
contrary, American shall have the right to limit, delay or cancel any AAdvantage
Program materials or mailings at any time, without liability or compensation to
Carrier.
g. Prior Approval - American. Notwithstanding any provision of this
Agreement to the contrary, Carrier shall submit to American, and American shall
have the right to review and approve or disapprove, prior to publication, the
portion of any and all art work, copy, advertising, promotional materials,
direct mail, press releases, newsletters or other public or promotional
communications, or any other publicity published or distributed by Carrier (or
at its direction or authorization) that references this Agreement, the
AAdvantage Program, or American (or any of its Affiliates), or uses any
trademark, service mark or trade name of American or any of its Affiliates,
including but not limited to the name "AAdvantage". American will review and
approve or disapprove such publicity materials within five (5) Business Days
after receipt from Carrier, and If requested to do so by Carrier from time to
time under unusual circumstances, will use its reasonable efforts to approve or
disapprove such publicity materials on a more time sensitive basis.
Notwithstanding any provision to this Agreement, Carrier acknowledges and agrees
that all trademarks, service marks, or trade names of American or any of its
Affiliates, including but not limited to the trademark "AAdvantage", are and
shall remain the sole property of American.
h. Prior Approval - Carrier. American shall submit to Carrier, and Carrier
shall have the right to review and approve or disapprove, prior to publication,
the portion of any and all art work, copy, advertising, promotional materials,
direct mail, press releases, Award Certificates, AAdvantage newsletters or other
public or promotional communications, or any other publicity published or
distributed by American (or at its direction or authorization) that specifically
references this Agreement or Carrier (or any of its Affiliates), or uses any
trademark, service mark or trade name of Carrier or any of its Affiliates.
Carrier will review and approve or disapprove such publicity materials within
(5) Business Days after receipt from American, and if requested to do so by
American, from time to time under unusual circumstances, will use its reasonable
efforts to approve or disapprove such publicity materials on a more time
sensitive basis; provided, however, that no such approval is required for merely
listing Carrier as an AAdvantage Participant in any publication or promotional
material distributed by American. Notwithstanding any provision of this
Agreement, American acknowledges and agrees that all trademarks, service marks,
or trade names of Carrier or any of its Affiliates are and shall remain the sole
property of Carrier.
Section 8. Charges
a. Fees Payable to American.
{***}
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{***}
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{***}
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{***}
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{***}
Section 9. Term of Agreement
a. Term. Unless sooner terminated in accordance with this Agreement, this
Agreement shall continue for an initial term extending through the Expiration
Date; provided, however, that so long as the RDU Sublease remains in effect and
no notice (which is then in effect) of termination has been given for that
agreement, this Agreement may thereafter be renewed for one or more successive
two (2) year periods, in each instance only upon the mutual agreement of Carrier
and American. Expiration of this Agreement or termination on any date
established as a termination date pursuant to this Agreement shall be effective
at 23:59 Coordinated Universal Standard Time (UTC) on such date (except for such
liabilities, obligations, duties, rights and powers of the parties which
expressly survive the termination of this Agreement).
b. Public Notice. All required notices to the general public and Members
of the termination of Carrier's participation in the AAdvantage Program will be
the sole responsibility of American and shall be undertaken at American's sole
cost and expense.
c. Effect of Termination. On and after expiration or termination for any
reason of this Agreement:
i. American will not credit, and Carrier will not indicate to any
Member that he or she will receive credit for, Accrual Miles for Revenue
Travel taken after the date on which termination or expiration of this
Agreement becomes effective (except for Accrual Miles earned prior to such
termination or expiration date and credited pursuant to Sections 4.d. or
e.);
ii. American will no longer issue Award Certificates for Award
Travel, except those which have been requested by Members prior to the
termination or expiration date and processed after such date. American
will, however, continue to issue Award Tickets from unexpired, outstanding
Award Certificates which have been issued in accordance with this
Agreement;
iii. American may, at its sole discretion, reinstate Redeemed Miles
to Members' AAdvantage Accounts for unused and unexpired Award
Certificates or Award Tickets tendered by Members for reinstatement;
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iv. Carrier will continue to honor any Award Ticket Issued by
American pursuant to this Agreement for a period of one (1) year from the
date of issuance of such document; and
v. Other than in the case of a termination under Section 11 of this
Agreement, all monies due from or owed by one party to the other through
the date of termination shall become immediately due and payable, and all
monies which may become due from or owed by a party after the termination
date shall be immediately due and payable as such obligations arise.
Termination or expiration of this Agreement shall be without prejudice to
any rights or remedies available to a party resulting from breach of this
Agreement by the other party.
d. Survival. Without limiting the effectiveness of any other provision
hereof which expressly states that it shall survive the termination of this
Agreement, the provisions of Sections 5 and 8 shall survive the termination or
expiration of this Agreement and remain in effect following the effective date
of termination or expiration of this Agreement for a period of three (3) years
(or such shorter period as may be mutually agreed upon by the parties) to permit
final reconciliation of the transactions hereunder.
e. Termination of AAdvantage Program. Carrier agrees that, notwithstanding
any other provisions of this Agreement, American has the right, for whatever
reason and in American's sole discretion, to terminate the AAdvantage Program
upon providing at least ninety (90) days prior written notice to Carrier, in
which event this Agreement will terminate in accordance with the foregoing
provisions effective upon the termination of the AAdvantage Program, and without
any liability, compensation or obligation by American to Carrier.
f. Termination of Other Agreements.
i. In the event the RDU Sublease is terminated for any reason,
American shall have the option, exercisable for ninety (90) days
following termination of such agreement, to terminate this Agreement
upon at least ninety (90) days prior written notice to Carrier of
such election.
ii. In the event the RDU Sublease is terminated by American for any
reason, Carrier shall have the option, exercisable for ninety (90)
days following termination of such agreement, to terminate this
Agreement upon at least ninety (90) days prior written notice to
American of such election.
Section 10. Indemnification
a. Carrier Indemnity. Carrier shall indemnify, defend and hold harmless
American, its Affiliates and each of their respective directors, officers,
employees and agents (individually, an "American Indemnified Party") from all
liabilities, losses, damages, claims, suits, actions, recoveries, awards,
judgments or executions of any nature or kind whatsoever (including, without
limitation, costs of investigation, litigation costs, court costs, expert
witness fees, litigation support services costs, settlement costs and reasonable
attorneys' fees) which may be made, asserted, had, brought, or recovered by any
third party against an American
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Indemnified Party by reason of or in any way arising out of (i) travel on
Carrier or any Codeshare Flight, (ii) use of Carrier's facilities, (iii)
Carrier's performance, failure to perform or improper performance of this
Agreement, or (iv) any claims or statements made by Carrier in its advertising
or promotional activities which are in conflict or inconsistent with the terms
of this Agreement.
b. American Indemnity. American shall indemnify, defend and hold harmless
Carrier, its Affiliates and each of their respective directors, officers,
employees and agents (individually, a "Carrier Indemnified Party") from all
liabilities, losses, damages, claims, suits, actions, recoveries, awards,
judgments or executions of any nature or kind whatsoever (including, without
limitation, costs of investigation, litigation costs, court costs, expert
witness fees, litigation support services costs, settlement costs and reasonable
attorneys' fees) which may be made, asserted, had, brought or recovered by any
third party against a Carrier Indemnified Party by reason of or in any way
arising out of (i) travel on American, (ii) use of American's facilities
(excluding the facilities subject to the RDU Sublease),(iii) American's
performance, failure to perform or improper performance of this Agreement, (iv)
any claim or statements made by American in its advertising or promotional
activities which are in conflict or inconsistent with the terms of this
Agreement, or (v) any claim that the use of "AAdvantage" infringes any existing
trademark or other property right.
Hereinafter, any claim which gives rise to a right to indemnification under
Sections 10.a. or 10.b. is referred to as a "10.0 Claim".
c. 10.0 Claims Against American. In the event a 10.0 Claim is made or
asserted, or any action with respect thereto is brought, against an American
Indemnified Party, the appropriate American Indemnified Party shall promptly,
but no later than twenty (20) days after the receipt of any such claim or demand
(including but not limited to notice of any action, suit or proceeding) give
Carrier written notice thereof; provided, however, that the failure to so notify
Carrier shall not relieve Carrier of any liability that Carrier may have to the
American Indemnified Party under Section 10, except to the extent that Carrier
demonstrates that the defense of such 10.0 Claim is prejudiced by such failure
to notify. Upon receipt of such notice (i) Carrier shall assume all
responsibility for such defense, and (ii) the American Indemnified Party shall
provide reasonable assistance and cooperation during the defense or settlement
of such 10.0 Claim; provided, however, that if Carrier does not notify the
American Indemnified Party in writing that it has assumed such defense within
ten (10) Business Days of receipt of such notice of the 10.0 Claim, the American
Indemnified Party may proceed to defend against the 10.0 Claim, the expense of
which defense shall in turn also be deemed an obligation of and an amount due
and payable as incurred to the American Indemnified Party by Carrier if the
claim is ultimately found to be a 10.0 Claim. Except as limited as provided
below, if Carrier assumes the defense, Carrier shall have complete control of
the defense or settlement of such 10.0 Claim; provided, however, that counsel
selected by Carrier shall be reasonably acceptable to American. No compromise or
settlement of any 10.0 Claim may be effected by Carrier without the prior
written consent of the relevant American Indemnified Party, which consent shall
not be unreasonably withheld or delayed; provided, however, such consent shall
not be required if (x) there is no finding or admission of any violation of any
law by any American Indemnified Party or of any violation by any American
Indemnified Party of the rights of any person, (y) such compromise or settlement
does not otherwise adversely affect any claim that may be made by American or
any American Indemnified Party, and (z) such
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compromise or settlement does not provide for any relief from any American
indemnified Party (other than any monetary relief that Carrier expressly agrees
in writing to pay contemporaneously with such compromise or settlement). In the
event Carrier assumes the defense of a 10.0 Claim, each American indemnified
Party shall have the right, but not the duty, at its own expense, to participate
in the defense and settlement of any 10.0 Claim with counsel of its own choosing
without relieving Carrier of any obligations hereunder. Carrier shall cooperate
with the American indemnified Party's or Parties' counsel, but control of the
matter shall remain with Carrier.
d. Claims Against Carrier. In the event a 10.0 Claim is made or asserted,
or any action with respect thereto is brought against a Carrier indemnified
Party, the appropriate Carrier Indemnified Party shall promptly, but no later
than twenty (20) days after the receipt of any such claim or demand (including
but not limited to notice of any action, suit or proceeding) give American
written notice therewith; provided, however, that the failure to so notify
American shall not relieve American of any liability that American may have to
the Carrier Indemnified Party under Section 10, except to the extent that
American demonstrates that the defense of such 10.0 Claim is prejudiced by such
failure to notify. Upon receipt of such notice (i) American shall assume all
responsibility for such defense, and (ii) the Carrier Indemnified Party shall
provide reasonable assistance and cooperation during the defense or settlement
of such 10.0 Claim; provided, however, that if American does not notify the
Carrier Indemnified Party in writing that it has assumed such defense within ten
(10) Business Days of receipt of such notice of the 10.0 Claim, the Carrier
indemnified Party may proceed to defend against the 10.0 Claim, the expense of
which defense shall in turn also be deemed an obligation of and an amount due
and payable as incurred to the Carrier Indemnified Party by American if the
claim is ultimately found to be a 10.0 Claim. Except as limited as provided
below, if American assumes the defense, American shall have complete control of
the defense or settlement of such 10.0 Claim or action; provided, however, that
counsel selected by American shall be reasonably acceptable to Carrier. No
compromise or settlement of any 10.0 Claim may be effected by American without
the prior written consent of the relevant Carrier Indemnified Party, which
consent shall not be unreasonably withheld or delayed; provided, however, such
consent shall not be required if (x) there is no finding or admission of any
violation of any law by any Carrier Indemnified Party or of any violation by any
Carrier Indemnified Party, of the rights of any person, (y) such compromise or
settlement does not otherwise adversely affect any claim that may be made by
Carrier or any Carrier Indemnified Party, and (z) such compromise or settlement
does not provide for any relief from any Carrier Indemnified Party (other than
any monetary relief that American expressly agrees in writing to pay
contemporaneously with such compromise or settlement). In the event American
assumes the defense of a 10.0 Claim, each Carrier Indemnified Party shall have
the right, but not the duty, at its own expense, to participate in the defense
and settlement of any 10.0 Claim with counsel of its own choosing without
relieving American of any obligations hereunder. American shall cooperate with
the Carrier Indemnified Party's or Parties' counsel, but control of the matter
shall remain with American.
e. Survival. The provisions of this Section 10 shall survive the
termination or expiration of this Agreement.
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Section 11. Default and Termination for Cause.
a. Breach.
i. General. In the event of a breach of any term, representation, or
warranty of this Agreement by American or Carrier (other than a breach of
a payment obligation under Section 8 hereof, the failure to pay any other
sums owed hereunder, or any other event separately covered elsewhere in
this Section 11), the non-breaching party may terminate this Agreement
without further liability on pending at least thirty (30) days prior
written notice to the other party, which notice shall describe, with as
much particularity as reasonably practicable, the alleged breach.
Termination under this Section 11.a.i., shall not be effective, however,
if the allegedly breaching party shall, within fifteen (15) days following
receipt of such notice, completely cure such breach.
ii. Payment Obligations. In the event of a breach of a payment
obligation under Section 8 or the failure to pay any other sums owed
hereunder, the non-breaching party may terminate this Agreement without
further liability on providing at least fifteen (15) days prior written
notice to the other party, which notice shall describe, with as much
particularity as reasonably practicable, the alleged breach and the total
sums due and owing. Termination under this Section 11.a.ii. shall not be
effective, however, if the allegedly breaching party shall, within seven
(7) days following receipt of such notice, cure the breach by making the
full payment described in the notice.
iii. Cross Defaults.
(1) If (A) any material breach or default (including, without
limitation, the failure to pay any indebtedness or obligations as they
become due) occurs under the RDU Sublease, and (B) such breach or default
is not cured within the applicable cure period (if any) specified in the
relevant agreement or any other cure period which may be permitted or
mutually agreed upon by the parties to the agreement, then and in any such
event, for a period of thirty (30) days following a party's receipt of
notice of such event or at any time thereafter that such breach or default
may be continuing, Carrier or American, whichever is the non-breaching
party, may elect to terminate this Agreement upon providing at least
thirty (30) days prior written notice to the other party.
(2) If (A) any breach or default occurs under any other agreements
(not described in Subsection 11.a.iii.(1) above) under which Carrier may
be obligated, directly or indirectly, as borrower, installment purchaser,
lessee, sublessee, guarantor or otherwise, and which agreements involve:
(y) the borrowing of money or the extension of credit in excess of Two
Hundred Fifty Thousand Dollars ($250,000) in the aggregate, or (z) any
lease or sublease of real or personal property pursuant to which Carrier's
monetary obligations in the nature of rent or similar obligations exceed
either Twenty Thousand Dollars ($20,000) per month in the aggregate or Two
Hundred Fifty Thousand Dollars ($250,000) in the aggregate for the
remaining term of the affected lease and/or sublease, (B) such breach or
default consists of failure to pay any
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indebtedness or other obligation when due or if such breach or default
permits or causes (or upon notice or lapse of time or both would permit or
cause) the acceleration of any indebtedness or other obligation, or the
termination of any lease, agreement or commitment to lend, and (C) such
breach or default is not cured within the applicable cure period (if any)
specified in the relevant agreement then, in any such event and at any
time thereafter, American may elect to terminate this Agreement upon
providing at least thirty (30) days prior written notice to Carrier.
b. Carrier Assignment to Benefit Creditors. If Carrier either (i) makes an
assignment for the benefit of its creditors, (ii) suspends the payment of,
admits in writing its inability to pay, or generally fails to pay its debts as
they become due, (iii) has suspended its transactions with banks and other
financial institutions (iv) has issued against it any writ, execution, process,
or abstract of judgment which may have a Material Adverse Effect on Carrier and
which is not dismissed, satisfied or stayed within sixty (60) days, or (v) files
a petition for bankruptcy, corporate reorganization, corporate liquidation,
arrangement or special liquidation proceedings under any Applicable Law, then
American may, at its option, immediately terminate this Agreement upon written
notice to Carrier.
c. American Assignment to Benefit Creditors. If American either (i) makes
an assignment for the benefit of its creditors, (ii) suspends the payment of,
admits in writing its inability to pay, or generally fails to pay its debts as
they become due, (iii) has suspended its transactions with banks and other
financial institutions, (iv) has issued against it any writ, execution, process,
or abstract of judgment which may have a Material Adverse Effect on American and
which is not dismissed, satisfied or stayed within sixty (60) days, or (v) files
a petition for bankruptcy, corporate reorganization, corporate liquidation,
arrangement or special liquidation proceedings under any Applicable Law, then
Carrier may, at its option, immediately terminate this Agreement upon written
notice to American; provided, however, that notwithstanding any provision to the
contrary contained herein, Carrier shall continue to honor any Award Tickets for
Award Travel issued in accordance with the terms of this Agreement for a period
of one (1) year from the date of issuance.
d. Bankruptcy Petition. In the event (i) other party petitions for or is
granted relief under Title 11 of the United States Code (the "Bankruptcy Code")
or files a petition or initiates analogous proceedings under any similar
Applicable Law, (ii) an involuntary bankruptcy petition is commenced or any
comparable proceeding initiated against either party under the Bankruptcy Code
or any Applicable Law, or (iii) either party exercises its rights under or is
made subject to any federal, state or other bankruptcy, reorganization,
insolvency or analogous laws of any applicable jurisdiction. and if this
Agreement has not otherwise terminated, then the other party may suspend all
further performance of this Agreement until such party assumes or rejects this
Agreement pursuant to Section 365 of the Bankruptcy Code or any successor
statute, or otherwise acknowledges its obligations under this Agreement under
any similar (or successor) provision of Applicable Law. Any such suspension of
further performance by the other party pending assumption, rejection, or other
acknowledgment shall not be deemed a breach of this Agreement and shall not
affect the other party's right to pursue or enforce any of its rights under this
Agreement or otherwise.
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e. Carrier Corporate Changes. If, during the term of this Agreement:
(i) Carrier ceases its operations or a substantial portion thereof; (ii)
merges with or into or is acquired, in whole or in part, by any other Person
(except any merger in which each of the following conditions is satisfied:
(A) Carrier is the surviving corporation in such merger, (B) the shareholders
of Carrier, as of immediately prior to such merger, receive or retain 80% or
more of the equity securities of Carrier as of immediately after such merger,
and (C) such merger does not cause or result in any other event or condition
specified in this Agreement which would give American the right to terminate
this Agreement); (iii) Carrier sells or otherwise transfers all or
substantially all of its assets to any other Person; (iv) Carrier makes
material changes to Carrier's frequent flyer program, or sells, transfers, or
disposes of any part or all of such program, or merges or otherwise
integrates such program with or into another frequent flyer program(s) (other
than the AAdvantage Program) which is not wholly owned and operated by
Carrier; (v) Carrier commences a new frequent flyer program, or enters into
an agreement or other arrangement by which it becomes or will become a
participant in another frequent flyer program, or by which another commercial
passenger air carrier becomes or will become a participant in Carrier's
frequent flyer program; (vi) any Person (or group of two or more Persons who
have agreed to act or are acting in concert becomes (by stock purchase,
merger or otherwise) the beneficial owner of {***} or more of the outstanding
voting securities of Carrier (for purposes of this Section 11.e.(vi) and
11.e.(vii) below, the terms "group" and "beneficial ownership" shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended (the "1934 Act"), and the rules and regulations of the
Securities and Exchange Commission ("SEC") promulgated thereunder); {***} (viii)
Carrier makes an acquisition (whether through a stock purchase, asset
acquisition, merger or otherwise) of any business of another Person
("Acquired Business") if (x) revenues for the four then most recently
completed quarters attributable to the Acquired Business exceed ten percent
(10%) of Carrier's revenues for the comparable period, or (y) the book value
of the assets of the Acquired Business as of the end of the most recently
completed quarter exceed ten percent (10%) of the total assets of Carrier as
of the end of the comparable period, or (z) the total value of the
consideration paid or to be paid in such acquisition by Carrier exceeds Ten
Million Dollars ($10,000,000); or (viii) {***} then, in each such case, Carrier
shall immediately give American written notice of such event, addressed to
the American officer and given in accordance with the procedure specified
below, and American shall have the right, exercisable for forty five (45)
days following the receipt of such written notice by the American officer
specified below (the "Written Notice Period") (or, if American elects,
following American's actual knowledge gained through pubic information or
otherwise of the occurrence of any such event), to terminate this Agreement
upon providing at least thirty (30) days advance written notice to Carrier;
provided, however, that if Carrier, at its sole option, elects to request in
advance of any contemplated transaction a waiver from American of American's
right to terminate under this Section 11.e. (which request must be submitted
to American according to the procedures filed below), American will notify
Carrier, no later than ten (10) Business Days following the receipt of the
request by the American officer
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specified below, whether it will (i) waive such right, or (ii) require
additional time to decide on the requested waiver, in which case American will
have an additional forty five (45) days to determine and notify Carrier whether
it will waive its right to terminate or whether it would exercise such right if
the proposed transaction were to be undertaken as described; any waiver by
American of this Section 11.e. shall be valid only with respect to the
transaction as described in the written request for waiver. If American has not
responded to Carrier by the end of the forty five day period which is the
Written Notice Period described above, or by the end of the forty five day
period described in clause (ii) of the foregoing sentence, whichever is
applicable, such lack of response shall be deemed to be a waiver of American's
right to terminate with respect to the particular transaction described in
Carrier's written notice or request, as applicable.
If American so elects to terminate this Agreement, American may, at
Carrier's expense, take any and all reasonable actions necessary in American's
sole judgment and discretion to provide for air fare and related incidental
travel expenses to ensure that Members at the time holding or traveling on Award
Tickets are able to conclude their planned trip, and all amounts so incurred by
American on Carrier's behalf shall be immediately due and payable to American as
incurred.
As used in Section 11.e. (vii), above, {***}
For the purposes of this Section 11.e., Carrier's request for a waiver
must be in writing, describing with reasonable specificity the contemplated
transaction and the proposed participating parties. To be effective, any such
request and any other written notice of an event described in this Section 11.e.
must be sent by facsimile with (i) a contemporaneous telephone call by Carrier
to the American officer to whom the request is addressed (or his or her
secretary) confirming receipt by the American officer, and (ii) a hard copy sent
the same day by certified or registered United States Mail, first class postage
prepaid, return receipt requested, addressed to:
American Airlines, Inc.
P.O. Box 619616, MD 5359
Dallas/Ft. Worth Airport, Texas 75261-9616
Attention: Henry C. Joyner
Vice President - Marketing Planning
Phone: (817) 967-2803
Facsimile: (817) 967-9697
or to such other person, address, fax or phone number as American may from time
to time provide Carrier in a written notice given in accordance with the
provisions of Section 17 below. Any forty five day Written Notice Period or ten
Business Day period described above in this
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Section 11.e. shall commence as of the day the request is completely faxed and
the confirming telephone call successfully made.
f. American Corporate Changes. If American: (i) permanently ceases its
operations or a substantial portion thereof; (ii) merges with or into or is
acquired, in whole or in part, by any Person (other than an Affiliate) (except
any merger in which (A) American is the surviving entity; or (B) American is not
the surviving corporation, but as a result of the merger the shareholders of
American, as of immediately prior to such merger, receive or retain 80% or more
of the equity securities of American as of immediately after such merger); or
(iii) sells or otherwise transfers all or substantially all of its assets to any
Person (other than an Affiliate), American shall immediately give Carrier
written notice of such event, and Carrier shall have the right in its sole
judgment and discretion to terminate this Agreement upon at least ninety (90)
days written notice to American.
g. Compliance with Start Up Schedule. In the event Carrier has not
complied with any of the following requirements by the date indicated, and
American and Carrier have not otherwise agreed to an extension of the applicable
deadline, American may, at its option, terminate this Agreement, upon giving
five (5) days notice to Carrier of such election to terminate:
i. No later than February 10, 1995, Carrier will provide American
with adequate test data for simulated Accrual Mile postings to demonstrate
to the satisfaction of American functional integration into American's
automated customer service system.
ii. No later than March 15, 1995, Carrier will be capable of
automated transmissions through American's customer service system of
posting information for Accrual Miles.
h. Carrier Performance Requirements.
i. In the event of a failure by Carrier to maintain at all times the
applicable minimum flight activity levels as set forth in Part I of
Attachment E, then, upon the occurrence of such event and at any time
thereafter, American may elect to terminate this Agreement upon providing
at least ninety (90) days prior written notice to Carrier, which notice
shall describe the grounds upon which such election to terminate is based.
Termination under this Section 11.h.i. shall not be effective, however, if
Carrier shall, within sixty (60) days following receipt of such notice,
completely cure such breach.
ii. In the event Carrier, on two or more occasions in any twelve
(12) month period during the term of this Agreement, fails to maintain the
applicable minimum flight activity levels as set forth in Part I of
Attachment E (regardless of whether such breaches are ultimately cured),
then American may elect to terminate this Agreement upon providing at
least thirty (30) days prior written notice to Carrier.
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i. Additional Reports by Carrier. In the event that Carrier fails to
comply with any of the provisions of Section 5.f above in a timely manner,
American may elect to terminate this Agreement upon providing at least ten (10)
days prior written notice to Carrier; provided, however, that such termination
shall not be effective if Carrier cures such noncompliance within five (5) days
after receipt of American's notice.
j. Governmental Approvals. In the event that Carrier fails to obtain and
maintain the authorizations, licenses, approvals, certificates, permits,
registrations and filings from all governmental and regulatory authorities
necessary to conduct its business as an authorized air carrier, American may
elect to terminate this Agreement upon providing at least thirty (30) days prior
written notice to Carrier; provided, however, that such termination shall not be
effective if Carrier cures such noncompliance within fifteen (15) days after
receipt of American's notice.
k. AAdvantage Miles Opportunities. If (i) American enters into an
agreement or other final arrangement by which it agrees to award AAdvantage
Miles for travel on another commercial passenger air carrier (other than
American, American Eagle, or any carrier that is an AAdvantage Participant as of
the date hereof) for non-stop service between any of the O & D city pairs listed
on Attachment A as of the date hereof and designated as an "Original O & D City
Pair" (which shall exclude any O & D city pair which may be added as a Carrier
Flight to Attachment A in the future unless the same is expressly designated as
an Original O & D City Pair by American), and (ii) such Original O & D City Pair
is, at that time, still a Carrier Flight for which Accrual Miles will be
awarded, American shall give Carrier written notice of such event at least
thirty (30) days prior to the first date on which AAdvantage Miles may be
accrued for travel on the other air carrier, and Carrier shall have the right in
its sole judgment and discretion to terminate this Agreement upon at least one
hundred twenty (120) days written notice to American.
l. Payments upon Termination. In the event of termination under this
Section 11 (other than Section 11.k.), all monies owed, or due and payable to
the terminating party from the other party through the date of termination shall
become immediately due and payable, and all monies which may become due or owed
to the terminating party from the other party after the termination date shall
be immediately due and payable as such obligations arise.
Section 12. Representations and Warranties by American
In order to induce Carrier to enter into this Agreement, American makes
the following representations and warranties to Carrier, such representations
and warranties to be effective as of the date hereof:
a. Organization and Qualification. American is a duly incorporated and
validly existing corporation, in good standing under the laws of the State of
Delaware with its principal place of business as reflected in the preamble to
this Agreement, is an air carrier duly authorized to act as such by the
government of the United States of America, holds all licenses, certificates and
permits from all governmental and regulatory authorities necessary to conduct
its business (except where the failure to obtain such licenses and permits would
not have a Material Adverse Effect on American), and has the requisite corporate
power and
30 CONFIDENTIAL
<PAGE>
authority to own, operate and lease the properties and assets it now owns,
operates and leases (except where the failure to have such authority would not
have a Material Adverse Effect on American), to conduct its business as it is
now being conducted, and to enter into and perform its obligations under this
Agreement. American is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the nature of its
activities makes such qualification or license necessary, other than in any
jurisdiction where the failure to so qualify would not have a Material Adverse
Effect on American or its operations.
b. Authority. The execution and delivery of, and the performance by
American of its obligations under, this Agreement have been duly authorized by
all necessary corporate action and no other corporate proceedings are necessary
in conjunction therewith. This Agreement has been duly executed and delivered by
American, and, assuming due authorization, execution and delivery by Carrier,
this Agreement constitutes the legal, valid and binding obligation of American,
enforceable against American in accordance with the terms and conditions hereof,
except as the same may be limited or modified by the effect of bankruptcy,
insolvency, moratorium or other similar laws affecting creditors' rights
generally, and the application of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or law).
c. No Violation. Neither the execution, delivery or performance by
American of this Agreement nor the consummation by American of any of the
transactions contemplated hereby, will (i) contravene or conflict with or cause
default under (A) any Applicable Law binding on American, or (B) any provision
of the Certificate of Incorporation or the Bylaws of American, (ii) result in
the creation of any lien, mortgage, claim, pledge, or other encumbrance on any
asset of American, or (iii) result in the breach of any agreement or instrument
to which American is a party or by which it is bound.
d. No Approvals. Neither the execution, delivery or performance by
American of this Agreement, nor the consummation by American of any of the
transactions described herein, requires the consent or approval of, or the
giving of notice to, the registration with, the recording or filing of any
documents with, or the taking of any other action in respect of, any Competent
Authority, any trustee or holder of any indebtedness or obligation of American,
any stockholder of American, or any other Person.
e. No Defaults. American is (i) not in default, and no condition exists
that with notice or lapse of time or both would constitute a default, under any
mortgage, deed of trust, indenture, or other instrument or agreement to which it
is a party, or by which it or any of its properties or assets may be bound, and
(ii) not in breach of any Applicable Law, where such default or breach would
have a Material Adverse Effect on it, or a material adverse effect on any of the
transactions described in this Agreement.
f. No Proceedings. American is not involved as a debtor in any bankruptcy,
receivership, insolvency or similar proceeding before any Competent Authority.
g. AAdvantage Participants. As of the date of this Agreement, American
does not award AAdvantage Miles for travel on a commercial passenger air carrier
which is an AAdvantage Participant as of the date hereof (other than American
Eagle) for non-stop service
31 CONFIDENTIAL
<PAGE>
on any of the Original O & D City Pairs (as defined in Section 11.k.); provided,
however, that nothing in this Agreement shall be construed as limiting
American's right, or a commitment by American to limit its right, and American
hereby expressly reserves the right, to award AAdvantage Miles for such travel
at any time after the date hereof. American acknowledges that the foregoing
reservation is not intended to limit Carrier's right to terminate this Agreement
pursuant to Section 11.k. above upon the occurrence of an event described in
Section 11.k.
h. Survival. Each of the foregoing representations and warranties shall
survive the execution and delivery of this Agreement, and the termination or
expiration of this Agreement.
Section 13. Representations and Warranties by Carrier
In order to induce American to enter into this Agreement Carrier makes the
following representations and warranties to American, such representations and
warranties to be effective as of the date hereof:
a. Organization and Qualification. Carrier is a duly incorporated and
validly existing corporation, in good standing under the laws of the State of
Delaware with its principal place of business, as of the date hereof, as
reflected in the preamble to this Agreement, is an air carrier duly authorized
to act as such by the government of the United States of America, holds all
licenses, certificates and permits from all governmental and regulatory
authorities necessary to conduct its business, and has the requisite corporate
power and authority to own, operate and lease the properties and assets it now
owns, operates and leases (except where the failure to have such authority would
not have a Material Adverse Effect on Carrier), to conduct its business as it is
now being conducted, and to enter into and perform its obligations under this
Agreement. Carrier is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the nature of its
activities makes such qualification or license necessary, other than in any
jurisdiction where the failure to so qualify would not have a Material Adverse
Effect on Carrier.
b. Authority. The execution and delivery of, and the performance by
Carrier of its obligations under this Agreement have been duly authorized by all
necessary corporate action and no other corporate proceedings are necessary in
conjunction therewith. This Agreement has been duly executed and delivered by
Carrier, and, assuming due authorization, execution and delivery by American,
this Agreement constitutes the legal, valid and binding obligation of Carrier,
enforceable against Carrier in accordance with the terms and conditions hereof,
except as enforcement may be limited by bankruptcy, insolvency, moratorium or
other laws affecting creditor' rights generally, and the application of general
principles of equity (regardless of whether such enforceability is considered a
proceeding in equity or law).
c. No Violation. Neither the execution, delivery or performance by Carrier
of this Agreement nor the consummation by Career of any of the transactions
contemplated hereby, will (i) contravene or conflict with or cause a default
under (A) any Applicable Law binding on Carrier, or (B) any provision of the
Certificate of Incorporation or the Bylaws of Carrier, (ii) result in the
creation of any lien, mortgage, claim, pledge, or other encumbrance on any asset
32 CONFIDENTIAL
<PAGE>
of Carrier, or (iii) result in the breach of any agreement or instrument to
which Carrier is a party or by which it is bound.
d. No Approvals. Neither the execution, delivery or performance by Carrier
of this Agreement, nor the consummation by Carrier of any of the transactions
described herein, requires the consent or approval of, or the giving of notice
to, the registration with, the recording or filing of any documents with, or the
taking of any other action in respect of, any Competent Authority, any trustee
or holder of any indebtedness or obligation of Carrier, any stockholder of
Carrier, or any other Person.
e. No Defaults. Carrier is (i) not in default and no condition exists that
with notice or lapse of time or both would constitute a default, under any
mortgage, deed of trust, indenture, or other instrument or agreement to which it
is a party, or by which it or any of its properties or assets may be bound, and
(ii) not in breach of any Applicable Law, where such default or breach would
have a Material Adverse Effect on it, or a material adverse effect on any of the
transactions described in this Agreement.
f. No Proceedings. Carrier is not involved as a debtor in any bankruptcy,
receivership, insolvency or similar proceeding before any Competent Authority.
g. No Other Program Participation. Carrier has established only one
frequent traveler program (or any other similar program or arrangement), the
"Midway Merits" Program, in which Carrier is the sole participant. Carrier is
not a participant in, nor has it agreed to be a participant in, any frequent
traveler program (or other similar program or arrangement) of any other Person.
h. No Codeshare Flights. As of the date hereof, Carrier currently has no
Codeshare Flights and has not entered into any agreement or arrangement for any
future Codeshare Flights.
i. Survival. Each of the foregoing representations and warranties shall
survive the execution and delivery of this Agreement, and the termination or
expiration of this Agreement
Section 14. Notice to Personnel
American and Carrier will each use reasonable efforts to make all
appropriate personnel of each carrier aware of the fact that Carrier is an
AAdvantage Participant. All necessary and appropriate personnel of Carrier shall
be made fully aware of the contents of Section 3.f. above.
Section 15. AAdvantage Program Abuse
Carrier will cooperate with all reasonable requests of American concerning
any investigation and/or prosecution of anyone engaging in AAdvantage Program
abuse or fraud, including but not limited to verification of AAdvantage Member
status, passenger interviews, Member interviews, ticket confiscation, and
cooperating with any civil or criminal prosecution.
33 CONFIDENTIAL
<PAGE>
Section 16. Assignment
Neither party may assign or otherwise convey this Agreement, or any of
such party's rights under this Agreement, or delegate any of its duties
hereunder, without the prior written consent of the other party; provided,
however, that without Carrier's consent, American may assign any and all of its
rights and delegate its obligations hereunder to an Affiliate of American which
(i) is American's wholly-owned subsidiary corporation, or a wholly-owned
subsidiary of American's parent corporation, (ii) has reasonably sufficient or
comparable resources to perform under this Agreement, and (iii) assumes all of
the obligations of American hereunder; provided, however, that such assignment
or delegation shall not relieve American of any of its obligations under this
Agreement. Any attempted assignment or delegation which violates the terms of
this Section 16 shall be null and void.
Section 17. Notices
Except as otherwise expressly set forth in this Agreement, all notices,
reports, invoices and other communications required or permitted hereunder to be
given to or made upon any party hereto shall be in writing, and shall be
considered as properly given if addressed as provided below and either (i)
delivered in person; (ii) sent by a commercial express or overnight courier
delivery service which provides a signed acknowledgment of receipt; (iii)
deposited in the U.S. mail, certified or registered first-class mail, postage
prepaid, return receipt requested (provided, however, that invoices may be sent
by first-class mail alone); or (iv) transmitted by facsimile (upon receipt by
sender thereof of evidence that a complete transmission of such copy was made to
the recipient thereof) and, if sent by facsimile, confirmed by (a) telephone
call contemporaneously made to the person entitled to receive such notice or to
such person's secretary, or (b) dispatching a hard copy of such notice by
first-class U.S. mail, postage prepaid, or any of the methods set forth in (i),
(ii) or (iii) above. Unless otherwise expressly set forth in this Agreement, all
notices shall be effective upon receipt. For the purposes of notice, the
addresses of the parties shall be as set forth below; provided, however, that
either party shall have the right to change its address for notice to any other
location by giving at least thirty (30) days prior written notice to the other
party in the manner set forth above.
By Mail & By Hand: Midway Airlines Corporation
5713 S. Central Avenue
Chicago, IL 60638
Attention: President
Phone: (312) 838-2036
Facsimile: (312) 838-2069
With a copy to: Jonathan S. Waller
Rosenberg & Liebentritt, P.C.
Two North Riverside Plaza, Suite 1600
Chicago, IL 60606
34 CONFIDENTIAL
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Phone: (312) 466-3649
Facsimile: (312) 454-0335
By Mail: American Airlines, Inc.
Managing Director - Marketing Programs
P.O. Box 619616, MD 5321
Dallas/Ft. Worth Airport, Texas 75261-9616
By Hand: 4333 Amon Carter Boulevard, MD 5321
Fort Worth, Texas 76155
Phone: (817) 967-2777
Facsimile: (817) 967-3037
Section 18. Governing Law and Dispute Resolution
a. Choice of Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by and construed in accordance with the laws
of the State of Texas, without regard to choice of law principles.
b. Jurisdiction. Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the United States District Court for the Northern
District of Texas and, if such court does not have jurisdiction, of the courts
of the State of Texas in Tarrant County for the purposes of any suit, action or
other proceeding arising out of this Agreement or the subject matter hereof
brought by any other party. American and Carrier each agrees that neither of
them will bring any suit, action or other proceeding arising out of this
Agreement the subject matter herein, or any of the transactions described
hereof, in any jurisdiction other than the jurisdiction described above.
c. Waiver of Defenses. To the extent permitted by applicable law, each
party hereby waives and agrees not to assert, by way of motion, as a defense or
otherwise, in any such suit, action or proceeding, any claim (i) that it is not
personally subject to the jurisdiction of the above-named courts, (ii) that the
suit, action or proceeding is brought in an inconvenient forum, (iii) that it is
immune from any legal process with respect to itself or its property, (iv) that
the venue of the suit, action or proceeding is improper, or (v) that this
Agreement or the subject matter hereof may not be enforced in or by such courts.
d. Service of Process. Each party agrees that, even if at any time during
the term of this Agreement Carrier is not qualified to do business as a foreign
corporation in the State of Texas, Carrier shall and does hereby irrevocably
designate and appoint the Secretary of State of the State of Texas as its agent
for service of process in any action, suit or proceeding with respect to any
matter as to which it submits to jurisdiction as set forth above, it being
agreed that any method of service upon such agent, with a copy sent to Carrier
in the manner set forth in Section 17 above, shall constitute valid service upon
Carrier. American designates CT Corporation as its agent for service of process
in Texas. American and Carrier each agrees that submission to jurisdiction and
designation of an agent for service of process set
35 CONFIDENTIAL
<PAGE>
forth above is made for the express benefit of the other party and is effective
solely for purposes of this Agreement.
e. Enforcement of Judgment. Final judgment against a party in any suit in
any court of competent jurisdiction shall be conclusive, and may be enforced in
other jurisdictions, to the extent permitted by Applicable Law, by suit on the
judgment, a certified and true copy of which, to the extent permitted by
Applicable Law, shall be conclusive evidence of the fact and the amount of any
indebtedness or liability of the party therein described.
f. Waiver of Immunity. To the extent that any party or any of its property
is or becomes entitled at any time to any immunity on the grounds of sovereignty
or otherwise, from any legal action, suit, arbitration or other proceeding, from
setoff or counterclaim, from the jurisdiction of any competent court (including
the courts referred to above), from service of process, from attachment prior to
judgment, from attachment in aid of execution, from execution prior to judgment,
from judgment, from jurisdiction, or from other legal process in any
jurisdiction, that party for itself and its property does hereby irrevocably and
unconditionally waives, and agrees not to plead or claim, any such immunity with
respect to its obligations, liabilities or any other matter arising out of or in
connection with this Agreement or the subject matter hereof. Such waiver and
agreement regarding immunity shall be irrevocable and not subject to withdrawal
in any and all jurisdictions including under the Foreign Sovereign immunities
Act of 1976 of the United States of America.
Section 19. No Waiver
No failure to exercise and no delay in exercising, on the part of any
party, any right, remedy, power or privilege hereunder, shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not exclusive
of any rights, remedies, powers and privileges provided by law. The failure of
any party to insist upon a strict performance of any of the terms or provisions
of this Agreement, or to exercise any option, right or remedy herein contained,
shall not be construed as a waiver or as a relinquishment for the future of such
term, provision, option, right or remedy, but the same shall continue and remain
in full force and effect. No waiver by any party of any term or provision of
this Agreement shall be deemed to have been made unless expressed in writing and
signed by an officer of the waiving party.
Section 20. Captions
The captions appearing in this Agreement have been inserted as a matter of
convenience and in no way define, limit or enlarge the scope of this Agreement
or any of the provisions hereto.
Section 21. Compliance with Applicable Laws
a. Compliance. Each party will comply with all Applicable Laws with
respect to this Agreement, the performance of its obligations hereunder, its
respective role in connection with the AAdvantage Program, and the products and
services to be provided by such party
36 CONFIDENTIAL
<PAGE>
hereunder. Each party will, at its expense. obtain and maintain the governmental
authorizations, licenses, approvals, certificates, permits, registrations and
filings that may be required of it under Applicable Law to execute or perform
this Agreement, which, in the case of Carrier shall include all licenses,
certificates and permits from all governmental and regulatory authorities
necessary to conduct its business as an authorized air carrier.
b. Unlawful Payments. Neither party hereto will offer, promise or pay any
money, gift or any other thing of value to any person for the purpose of
influencing official actions or decisions affecting this Agreement or the
transactions contemplated hereby. while knowing or having reason to know that
any portion of such money, gift, or thing will, directly or indirectly, be
given, offered or promised to (i) an employee, officer or other person acting in
an official capacity for any government or its agencies or instrumentalities, or
(ii) any political party, party official or candidate for political office.
Section 22. Force Majeure
Except with respect to the performance of a party's payment obligations
under this Agreement, neither party shall be liable for delays or failure in its
performance hereunder to the extent that such delay or failure of performance
(i) is caused by any act of God, war, strike, natural disaster, lockout, labor
dispute, work stoppage, fire, act of government, or any other cause, whether
similar or dissimilar, beyond the control of that party, and (ii) is not the
result of that party's lack of reasonable diligence.
Section 23. Independent Contractor
Each of Carrier and American is an independent contractor. Nothing in this
Agreement is intended or shall be construed to create or establish any agency,
partnership, joint venture or fiduciary relationship between the parties.
Neither Carrier nor any of its Affiliates has any authority to act for or to
incur any obligations on behalf of or in the name of American or any of its
Affiliates.
Section 24. Successor and Assigns
This Agreement shall be binding upon and shall inure to the benefit of the
permitted successors and assigns of each party hereto.
Section 25. Entire Agreement
This Agreement constitutes the entire agreement between the parties
relating to the AAdvantage Program and, as of the date first written above,
terminates and supersedes all prior or contemporaneous agreements, discussions,
undertakings, and understandings, whether written or oral, express or implied,
between the parties covering the AAdvantage Program. The attachments, exhibits
and schedules (if any) to this Agreement are incorporated into this Agreement
and form a part hereof for all intents and purposes. This Agreement may not be
amended or modified except in writing signed by an authorized officer of each
party hereto.
37 CONFIDENTIAL
<PAGE>
American and Carrier each expressly acknowledges and agrees that the
subject matter of this Agreement is Carriers participation in the AAdvantage
Program, and that this Agreement is in no way intended to limit or affect the
right of either American or Carrier to provide air transportation service on
such routes and to such destinations as each carrier independently determines to
be appropriate for its respective business.
Section 26. Title
Title and full and complete ownership rights to AAdvantage Program
membership data and information developed by American, wherever located, shall
remain the property of American and constitute Confidential information under
Section 6 above. Carrier understands and agrees that all such data and
information constitute American's proprietary information whether or not any
portion thereof is or may be validly copyrighted. Carrier agrees that any
membership lists, labels, reports, data or other compiled membership information
supplied to Carrier in any form by American and any and all copies thereof will
be used by Carrier exclusively in its performance of its obligations under this
Agreement and will not be sold, licensed, leased, transferred, stored in a
retrieval system, duplicated, or transmitted, in any form or by any means, or
used for any other purpose without the prior written consent of American. All
such information is subject to the provisions of Section 6.c. of this Agreement.
Nothing in this Agreement, however, shall prevent Carrier from independently
compiling information regarding its revenue passengers so long as (i) the status
of being an AAdvantage Member, AAdvantage Account numbers, any other AAdvantage
membership data, or any reference to or other association with American is not
identified in, or used as a factor or criteria in compiling, such information,
and (ii) any promotions or communications directed at such revenue passengers,
or any partial grouping thereof, by Carrier or by Carrier jointly with another
Person or Persons, are not directed exclusively to such individuals, and will
not reference such individuals, as Members or travelers on American.
Section 27. No Third Party Beneficiaries
All rights, remedies and obligations of the parties under this Agreement,
shall accrue or apply solely to the parties hereto or their permitted successors
or assigns and there is no intent to benefit any third parties, including,
without limitation, Members.
Section 28. Time
Time is of the essence with respect to the performance of the material
provisions hereunder.
38 CONFIDENTIAL
<PAGE>
Section 29. Further Assurances
Each party hereto shall do and perform such further acts and execute and
deliver such further instruments at such party's expense as may be required by
Applicable Law or reasonably requested by any other party to carry out and
effectuate this Agreement and the transactions contemplated hereunder.
Section 30. Severability
If any indication is received in writing by either party from any
Competent Authority to the effect that any part of this Agreement contravenes
any Applicable Law and cannot qualify for any applicable clearance or exemption,
or if any part of this Agreement is, or shall become, or shall be declared
illegal, invalid or unenforceable in any jurisdiction for any reason whatsoever
(including both by reason of the provisions of any legislation and also by
reason of any decision of any Competent Authority, either having jurisdiction
over this Agreement or any party to this Agreement), such part shall be severed
from this Agreement in the jurisdiction in question and such contravention,
illegality, invalidity or unenforceability shall not in any way whatsoever
prejudice or effect the remaining parts of this Agreement which shall continue
in full force and effect provided, always, that if, in the reasonable opinion of
any party to this Agreement, any such severance affects the commercial basis of
this Agreement, such party shall so inform the other party, whereupon the
parties shall negotiate to agree upon an amendment to the Agreement which will
maintain the balance of the commercial interests of the parties under this
Agreement. If, however, such negotiations shall not be successfully concluded
within thirty (30) days, either party shall have the right to terminate this
Agreement upon giving at least ninety (90) days written notice to the other
party.
Section 31. Legal Representation
Each party hereto hereby acknowledges that this Agreement has been
negotiated at arms-length through legal counsel of its own choosing. If a party
has not been represented by legal counsel, it hereby acknowledges that it was
given the opportunity to engage legal counsel and decided to waive that right.
Section 32. Effective Data
The effectiveness of this Agreement and the obligations of Carrier and
American hereunder are subject to, and shall be conditioned upon, the RDU
Sublease becoming effective and commencing.
Section 33. Counterparts
The Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute but one and the same
instrument.
39 CONFIDENTIAL
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Section 34. Exclusion of Consequential Damages
EXCEPT FOR INDEMNIFICATION OBLIGATIONS, NEITHER PARTY WILL BE LIABLE FOR
ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT LIMITATION LOST
REVENUES, LOST PROFITS, OR LOST PROSPECTIVE ECONOMIC ADVANTAGE, ARISING FROM ANY
PERFORMANCE OR FAILURE TO PERFORM UNDER THIS AGREEMENT, EVEN IF SUCH PARTY KNEW
OR SHOULD HAVE KNOWN OF THE EXISTENCE OF SUCH DAMAGES, AND EACH PARTY HEREBY
RELEASES AND WAIVES ANY CLAIMS AGAINST THE OTHER PARTY FOR SUCH DAMAGES.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
MIDWAY AIRLINES CORPORATION AMERICAN AIRLINES, INC.
By: /s/ John Selvaggio By: /s/ M. W. Gunn
------------------------ -------------------
John Selvaggio M. W. Gunn
President Senior Vice President - Marketing
40 CONFIDENTIAL
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ATTACHMENT A
ACCRUAL MILES
Only regularly scheduled, on-line air travel service operated by Carrier
on each of the following O & D city pairs, in both directions ("Carrier
Flights"), are eligible for Accrual Miles credit for Revenue Travel by Members:
{***}
{***}
{***}
{***}
{***}
{***}
{***}
{***}
{***}
{***}
{***}
{***}
{***}
{***}
The foregoing fourteen (14) O & D city pairs shall each be an
Original O & D City Pair for the purposes of Section 11.k. of
the Agreement
RDU-MDW Provided, however, that on and after July 1, 1995, Carrier
shall pay to {***} Accrual Mile posted for Revenue
Travel on the {***} city pair, which shall be the
applicable fee for the purposes of Section 8.a. of the
Agreement, whether or not Carrier has elected to convert to
the alternative fee structure described in that Section.
A-1 CONFIDENTIAL
<PAGE>
No Codeshare Flights shall be eligible for Accrual Miles credit as a Carrier
Flight unless approved for such credit by American pursuant to Section 4.j. of
the Agreement.
Accrual Mile Guidelines
American will award Accrual Miles for Revenue Travel in the following
booking classes pursuant to the terms of Section 2.a. of the Agreement:
Coach Class: Y, B, H, Q, V, K, M (or any surviving codes designated
by Carrier from time to time).
If Carrier introduces a First Class:
F (or any surviving codes designated by Carrier from time to time).
For Revenue Travel which involves consecutive travel under a single flight
coupon on any two or more of the O & D city pairs listed in this Attachment A,
and only the O & D city pairs listed on this Attachment A, Actual Miles and
Accrual Miles will be calculated based on the United States Department of
Transportation approved non-stop mileage between the city were the Member
commenced such travel on the coupon and the city where the Member finished such
travel on the coupon.
Accrual Miles will not be awarded for any travel on free AAdvantage
Awards, Midway Merits Program awards or other free ticket promotions, including
free or reduced rate companion tickets, any industry or agency discount tickets
or passes, charter flight tickets, infant and unpublished fare tickets, or
tickets issued subject to special provisions.
In the case of upgraded travel through the use of an Upgrade Sticker,
Accrual Miles will be awarded based on the paid class of service.
A-2 CONFIDENTIAL
<PAGE>
ATTACHMENT B
AWARD TRAVEL
Only regularly scheduled, on-line air travel service operated by Carrier
between any of the following destinations, in any direction ("Award Flights"),
are available to all Members for Award Travel:
{***}
{***}
{***}
{***}
{***}
{***}
{***}
{***}
{***}
{***}
{***}
{***}
{***}
{***}
{***}
{***}
The following Codeshare Flights between the following destinations, in any
direction, are available to all Members for Award Travel, so long as such
Codeshare Flights are operated are marketed under Carrier's "JI" designator
code:
None.
Provided, however, that the above described travel is not available for
Award Travel during the Blackout Dates, or for First Class travel (if offered)
or any other class other than Coach Class.
B-1 CONFIDENTIAL
<PAGE>
Award Prices
(The following prices are applicable only until Carrier elects (if over) to
convert to the alternative fee structure described in Section 8.a. of the
Agreement)
The following zone definitions apply for Award Travel on Carrier:
ZONE 1: {***}
ZONE 2: {***}
For each Award Document issued pursuant to this Agreement, American shall
owe Carrier the applicable amount set forth below (all prices are stated and
shall be paid in U.S. Dollars):
Award Price
One Free Round Trip Ticket
------------------------------
Coach First
Class Class
Travel between any destination
within Zone 1 {***} N/A
-----
Travel between Zone 1 {***} N/A
destinations and Zone 2 -----
destinations
All of the above Award Travel is valid for round trip travel between the
applicable destinations, but may be used for one way travel if desired; however,
the award will not be reduced based on a one way trip.
B-2 CONFIDENTIAL
<PAGE>
ATTACHMENT C
AWARD TRAVEL BLACKOUT DATES
Blackout dates for Award Travel:
1995 1996
---- ----
January l, 2 January l
November 22, 26 March 8-10, 15-17
December 23, 24, 31 April 5-7
November 27, December 1, 2
December 20-22, 24, 27-29
C-1 CONFIDENTIAL
<PAGE>
ATTACHMENT D
DATA FLOW AND INPUT/OUTPUT SPECIFICATIONS
Carrier
Table of Contents
Data Flow:
1.0 Data Posting-AAdvantage Transactions
2.0 Data Reconciliation
3.0 Definitions and Record Layouts
4.0 Monthly Billing-Mileage Postings
5.0 Monthly Billing-Mileage Redemption
6.0 Allowable Characters
7.0 Check Digit Routine
8.0 Transmittal Form
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DATA FLOW AND INPUT/OUTPUT SPECIFICATIONS
Carrier
1.0 Data Posting - AAdvantage Transactions
1.1 Carrier will provide transmissions listing by AAdvantage number,
Members with qualified flights for posting to the AAdvantage
database. The transmission will include the following data elements:
(See Section 3.0 for record format and definitions)
Transaction Type Board Point
Partner ID Off-point
Partner Service Term Code Scheduled Departure Time
Member ID Scheduled Arrival Time
Member Last Name Cabin Purchased
Member First initial Booking Class
Flight Date Input Record Number
Carrier ID Flight Number
1.1.1 Accurate name and AAdvantage number data transfer is
paramount. See Sections 6 and 7 of Data Flow.
1.2 Carrier will provide weekly transmissions to the AAdvantage
department.
1.2.1 Each transmission will include the previous period's data and
any corrected data from earlier posting tapes.
1.2.2 The weekly transmission must be delivered by the Tuesday
following the reporting period.
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DATA FLOW AND INPUT/OUTPUT SPECIFICATIONS
Carrier
2.0 Data Reconciliation
2.1 All Member flight information that is rejected during the
autoposting procedure (outlined in Section 1.0) will be displayed in
an error file. The report will list only Carrier data.
2.2 The AAdvantage Customer Service Department will review this error
file and make any reasonable corrections on a manual basis to the
Member name and/or AAdvantage number only. The error report of
uncorrected errors will be sent to Carrier for reconciliation.
2.3 The error report will include the following data elements:
AAdvantage Number Flight Number
Last Name Class of Service
First Initial Board Point
Transaction Code Off Point
Flight Date Type of Error
2.4 Carrier will research any records that the AAdvantage department is
unable to manually correct. These records will be retransmitted on a
subsequent transmissions within a thirty (30) day period.
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DATA FLOW AND INPUT/OUTPUT SPECIFICATIONS
Carrier
3.0 Data Element Definitions - AAdvantage Transactions
Transaction Type One character (alpha).
The allowable transaction codes is "A".
Partner ID Three characters (alpha).
Industry standard airline code ("{XX}").
Left justified, blank filled.
Partner Service Five characters (alpha/numeric).
Term Code Value provided by American ("{XX001}").
Member ID Seven character AAdvantage number
(alpha/numeric).
Member Last Name Twenty characters
Left justified, blank filled.
See Allowable Characters in Section 6.
Member First One character (alpha).
Flight Date Eight characters (numeric).
Formatted YYYYMMDD.
Carrier ID Three characters (alpha).
Industry standard airline code.
Left justified, blank filled.
Flight Number Four characters (numeric).
Right justified, leading zeroes.
Board Point Three characters (alpha).
IATA Airport Code
Off-point Three characters (alpha).
IATA Airport Code.
Scheduled Departure Four characters (numeric).
24 - Time hour clock (Optional).
Scheduled Arrival Four characters (numeric).
24 - Time hour clock. (Optional).
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DATA FLOW AND INPUT/OUTPUT SPECIFICATIONS
Carrier
3.0 Data Element Definitions - AAdvantage Transactions (cont.)
Cabin Purchased Four characters (alpha).
Left justified, trailing spaces.
Booking Class One character (alpha).
Input Record Five characters (numeric).
Number
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DATA FLOW AND INPUT/OUTPUT SPECIFICATIONS
Carrier
3.1 Flight Posting Transmission Format
Field No. Field Title Length From - To Type Notes
- --------- ----------- ------ --------- ---- -----
1 Trans. Type 1 001-001 Char 'A'
2 Partner ID 3 002-004 Char '{XX}'
3 Part. Svc Term 5 005-009 Char '{XX001}'
Code
4 Member ID 7 010-016 Char AAdvantage Number
5 Member Last 20 017-036 Char Left justified;
Name trailing spaces
6 Member First 1 037-037 Char
Initial
7 Flight Date 8 038-045 Num YYYYMMDD
8 Carrier ID 3 046-048 Char '{XX}'
9 Flight Number 4 049-052 Num Right justified;
leading zeroes.
10 Board Point 3 053-055 Char IATA Airport Code
11 Filler 2 056-057 Char Reserved: spaces.
12 Off Point 3 058-060 Char IATA Airport Code
13 Filler 2 061-062 Char Reserved; spaces.
14 Scheduled 4 063-066 Num 24-hour clock
Departure Time
15 Scheduled 4 067-070 Num 24-hour clock
Arrival Time
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DATA PLOW AND INPUT/OUTPUT SPECIFICATIONS
Carrier
3.1 Flight Posting Transmission Format (cont.)
Field No. Field Title Length From - To Type Notes
- --------- ----------- ------ --------- ---- -----
16 Class of Svc 4 071-074 Char Y=Coach;
C=Business;
F=First
17 Filler 1 075-075 Char Reserved; spaces.
18 Filler 1 076-076 Char Reserved; spaces.
19 Filler 1 077-077 Char Reserved; spaces.
20 Input Record 5 078-082 Num Batch Sequence
Number Number
21 Filler 16 083-098 Char Reserved; spaces
22 Filler 7 099-105 Char Reserved; spaces
23 Filler 5 106-110 Char Reserved; spaces
Transmission LRECL=110 BLKSIZE=27940 RECFM=FB
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DATA FLOW AND INPUT/OUTPUT SPECIFICATIONS
Carrier
4.0 Monthly Billing - Mileage Posting
4.1 On a monthly basis, American will provide supporting detail
for all transactions for which Carrier is being billed,
including all data provided by Carrier and data posted
manually by the AAdvantage department.
4.2 An invoice and a mileage posting summary report (hard copy)
are sent monthly. The mileage posting detail is provided via
transmission..
4.2.1 The billing detail includes the following
Member Information
o AAdvantage number (sorted in numeric sequence)
o Last Name
o First Initial
Flight Information
o Flight Date
o Flight Number
o Transaction Code
o Board Point
o Off Point
o Class of Service
o Base Miles
o Bonus Miles (Class of Service, and Promotional)
o Total Miles
o Source code (V,D) (V=Vendor or {XX} and
D=Manual or AA)
4.2.2 The summary report (hard copy) includes the following by
Class of Service
o Base Miles
o Class of Service Bonus Miles
o Promotional Bonus Miles
o Credited miles for each of the four mileage
categories listed above.
4.2.3 Additionally the summary report includes a trip grid by
Class of Service
o Number of accounts with trips
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o Number of trips
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DATA FLOW AND INPUT/OUTPUT SPECIFICATIONS
Carrier
4.0 Monthly Billing - Mileage Postings (continued)
4.3 Mileage fields may be negative values if credits are posted.
4.4 No other mileage posting reports will be generated.
4.5 All paper reports will include totals for all applicable
columns.
5.0 Monthly Billing - Mileage Redemption
5.1 On a monthly basis, American will provide a summary of all the
AAdvantage awards claimed for travel on Carrier.
5.2 The awards summary report (hard copy) includes the following
data:
o Award Code
o Award Description
o Awards Issued
o Awards Reinstated
o Net Awards Issued
5.3 No other mileage redemption reports will be generated
6.0 Allowable characters with the Name Fields
The only acceptable characters within the name fields are:
- All alpha characters.
- ' (apostrophe).
- # (pound sign) [used only to designate blanks
embedded in the name field].
- - (hyphen).
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DATA FLOW AND INPUT/OUTPUT SPECIFICATIONS
Carrier
7.0 Check Digit Routine
7.1 The last digit of the AAdvantage number is a check digit to be
used by Carrier to verify the validity of the number before
providing it to American. American will also perform a last
name/number match before posting mileage to a Member's
account.
7.2 The check digit is equal to the first digit of the remainder
of the following q calculation.
(A1 + A3) x 2 +(A3 + A5) x 2 + (A4 + A6) x 2
--------------------------------------------
10
Where Al is the value of the first position of the AAdvantage
number and A3 is the value of the third position, etc. The
value of a position is determined using the decimal equivalent
of the EBCDIC code as defined in the IBM system 370 reference
summary code translation table, as shown below.
Character Value Character Value
--------- ----- --------- -----
0 240 I 201
1 241 J 209
2 242 K 210
3 243 L 211
4 244 M 212
5 245 N 213
6 246 O 214
7 247 P 215
8 248 Q 216
9 249 R 217
A 193 S 226
B 194 T 227
C 195 U 228
D 196 V 229
E 197 W 230
F 198 X 231
G 199 Y 232
H 200 Z 233
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DATA FLOW AND INPUT/OUTPUT SPECIFICATIONS
Carrier
7.0 Check Digit Routine (continued)
7.2 (continued)
Example: For the AAdvantage number AX65266 the calculation is
(193 + 246) x 2 + (246 + 242) x 2 + (245 + 246) x 2
---------------------------------------------------
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=283.6
Therefore, the check digit is 6, confirming that the AAdvantage
number is valid as it equals the last digit of the AAdvantage
number.
7.3 The following parameters are also applicable in determining
the validity of an AAdvantage number:
o The letters G and S may appear only in the first
position of a valid AAdvantage number.
o The letters I, O, Q and Z never appear in any position
of a valid AAdvantage number.
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DATA FLOW AND INPUT/OUTPUT SPECIFICATIONS
Carrier
8.0 Transmittal Form
Transaction/Bonus Transmission
To be completed by Carrier
Starting Flight Date:_______
Ending Flight Date:_____
Record Count:___________
Submitted by:
Date:______
Telephone number:_______
Fax copy of this form to:
American Airlines
Manager AAdvantage Administration
MD 1395 CP2
4200 Amon Carter Blvd.
Fort Worth, TX 76155
Fax Number: (817) 963-7702
Phone number: (817) 963-7718 - Mr. Tom Reilly
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ATTACHMENT E
SUPPLEMENTAL PROVISIONS
Part I. Minimum Flight Activity Levels:
The following minimum flight activity level shall be required of Carrier
during the term of this Agreement:
(i) From the Effective Date through and including July 15, 1995,
Carrier will operate a minimum of twenty (20) daily non-stop jet
departures (in the aggregate) from Raleigh/Durham International Airport
(RDU) on the O & D city pair routes set forth on Attachment A.
(ii) From July l6,1995 through and including the date the Agreement
expires or terminates, Carrier will operate a minimum of thirty-five (35)
daily non-stop jet departures (in the aggregate) from Raleigh/Durham
International Airport (RDU) on the O & D city pair routes set forth on
Attachment A.
Part II. Additional Reports by Carrier:
During the term of this Agreement, Carrier shall furnish to American (to
4333 Amon Carter Boulevard, MD 5566, Fort Worth, Texas 76155, Attention: Vice
President - Corporate and Fleet Planning) the following:
A. As soon as available and in any event within one hundred eighty
(180) days after the close of each fiscal year of Carrier, copies of
the financial statements of Carrier for the fiscal year then ended
including, without limitation, a balance sheet of Carrier as of the
close of such fiscal year and statements of income, shareholders
equity and cash flows for such fiscal year.
B. As soon as available, and in any event within fifty (50) days after
the end of each fiscal quarter of Carrier, copies of the financial
statements of Carrier for the fiscal quarter then ended including,
without limitation, a balance sheet of Carrier as of the end such
quarter and statements of income, shareholders equity and cash flows
for such quarter and for the portion of the fiscal year ending with
such quarter, all in reasonable detail, and certified by the chief
financial officer of Carrier as being true and correct and as having
been prepared in accordance with generally accepted accounting
principles ("GAAP") and as fairly presenting the assets,
liabilities, financial condition and results of operations of
Carrier.
Each such financial statement shall be accompanied by a certificate signed
by the chief financial officer of Carrier certifying as to whether Carrier is in
default under this Agreement any other agreement with American or its
Affiliates, or any material agreement to which Carrier is a party or by which it
or any of its properties are bound. Further, each of the
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annual financial statements shall be accompanied by a certificate from Arthur
Anderson & Co., Carrier's independent certified public accountants, or such
other "Big Six" independent certified public accounting firm chosen by Carrier,
stating that (x) such financial statements have been prepared in accordance with
GAAP and fairly present the financial position, results of operations and cash
flows of Carrier, (y) the examinations of Carrier's accounts in connection with
such financial statements have been made in accordance with generally accepted
auditing standards and included such tests of the accounting records and such
other auditing procedures as were considered necessary in the circumstances and
(z) nothing has come to the attention of such accountants in the course of their
audit that caused them to believe there exists any set of circumstances which
would constitute a default by Carrier under this Agreement, any other agreement
with American or its Affiliates, or any material agreement to which Carrier is a
party or by which it or any of its properties are bound, (and, with respect to
this Subparagraph (z), such certificate may also state that such accountants
have not expanded the scope of the procedures performed in the course of their
audit in order to deliver such certificate).
If at any time any monies owed by Carrier under this Agreement are past
due and owing, then upon the request of American, Carrier shall also furnish to
American, as soon as available on a continuing basis, and in any event within
twenty (20) days after the end of each calendar month, copies of the summary
financial statements of Carrier as of the end of in month most recently
completed which are produced for the use of management of Carrier, including,
without limitation, a balance sheet of Carrier as of the end of such month and
statements of income, shareholders equity and cash flows for such month and for
the portion of the fiscal year ending with such month, all in reasonable detail,
and certified by the chief financial officer of Carrier as being true and
correct and as having been prepared in accordance with GAAP and as fairly
presenting the assets, liabilities, financial condition and results of
operations of Carrier.
Carrier shall be required to give American immediate notice of any
default, event of default, right of termination, suspension, acceleration,
breach or other similar event (or any event or set of circumstances which with
notice or the lapse of time or both, would constitute any of the foregoing)
under this Agreement or with respect to any material indebtedness of Carrier.
Carrier's chief financial officer shall be required to provide a certificate
with each set of annual and quarterly financial statements and, if provided,
monthly financial statements that (i) Carrier has not received any notice of a
default, event of default, right of termination, suspension, acceleration,
breach or similar event (or any event or set of circumstances which with notice
or the lapse of time or both, would constitute any of the foregoing) regarding
this Agreement, any other agreement with American or its Affiliates, or any
agreement or instrument involving any material indebtedness of Carrier, and (ii)
there exists no set of circumstances which would constitute or give rise to any
event or set of circumstances specified in claim (i) above.
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CONFIDENTIAL
FIRST AMENDMENT TO
AADVANTAGE(R) PARTICIPATING CARRIER AGREEMENT
This First Amendment to AAdvantage Participating Carrier Agreement (this
"Amendment"), dated as of October 1, 1995, is made by and between American
Airlines, Inc., a Delaware corporation having its principal place of business at
4333 Amon Carter Boulevard, Fort Worth, Texas 76155 ("American"), and Midway
Airlines Corporation, a Delaware corporation, having its principal place of
business at 300 W. Morgan Street, 12th Floor, Durham, North Carolina 27701
("Carrier")
WHEREAS, American and Carrier are parties to that certain AAdvantage
Participating Carrier Agreement, dated as of January 18, 1995 (the "Agreement");
and
WHEREAS, American and Carrier desire to amend the Agreement to provide for
(i) an expanded description of the reports required to be provided by Carrier in
connection with the acceptance of Upgrade Stickers; (ii) the addition of certain
O & D city pairs as Carrier Flights and Award Flights: and (iii) the addition of
certain Codeshare Rights as Carrier Flights and Award Flights, all upon the
terms and subject to the conditions of this Amendment;
NOW THEREFORE, in consideration of the mutual covenants and promises in
this Amendment, American and Carrier agree as follows:
1. The definition of "Paid Upgrade Sticker" in Section 1 of the Agreement
is hereby amended and restated in its entirety to read as follows:
"Paid Upgrade Sticker" means an Upgrade Sticker for which a Member
has paid consideration to American and which bears one of the following
sticker codes: AP, SG, GP or SR.
2. The first sentence of Section 3.c.i. of the Agreement is hereby amended
and restated in its entirety as follows:
{***}
3. Section 3.h.i. of the Agreement is hereby amended and restated in its
entirety to read as follows:
"i. If Carrier offers a First Class service during the term of this
Agreement, and for as long as American permits Members to use Upgrade
Stickers, Carrier will accept all Upgrade Stickers and upgrade the Member
tendering such Upgrade Sticker by one class
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of service for Carrier Flights with First Class service, if space is
available, pursuant to the procedures described in Subsection 3.h.ii
below; provided, however, that for the purposes of this Agreement, Accrual
Miles for Revenue Travel made in conjunction with an Upgrade Sticker shall
be awarded based only on the class of service paid for. Carrier will not
charge Members for the use of Upgrade Stickers. Carrier will permit
American (upon American's providing to Carrier at least two Business Days'
prior written notice) to inspect Carrier's relevant books and records to
verify the numbers and types of Upgrade Stickers honored by Carrier and
the amount owing by American to Carrier therefor."
4. Section 8.c.iii. of the Agreement is hereby amended and restated in its
entirety to read as follows:
"iii. American will pay Carrier for Paid Upgrade Stickers accepted
and honored by Carrier (if any) in a given month, no later than thirty
(30) days following receipt of an invoice (if any) from Carrier for the
month in question, which invoice shall be supported by a detailed report
listing, for each segment for which a Paid Upgrade Sticker was accepted
and an upgrade provided, (i) the date of travel, (ii) the Carrier Flight
number, (iii) the O&D city pair flown, (iv) the ticket number, (v) the
sticker code of the Paid Upgrade Sticker used, and (vi) the applicable
price (as set forth in Section 8.b. above) for the Paid Upgrade Sticker
being reported. The report will present such information grouped and
totaled by Paid Upgrade Sticker code, and will also show the total due for
all Paid Upgrade Stickers being reported."
5. Section 17 of the Agreement is hereby amended by deleting the address
of Midway Airlines Corporation and that of Jonathan S. Waller in their entirety
and by inserting in lieu thereof the following information:
Midway Airlines Corporation
300 W. Morgan Street, 12th Floor
Durham, North Carolina 27701
Attention: President (and)
Attention: General Counsel
Phone: (919) 956-4800
Fax: (919) 956-4801
6. Attachment A and Attachment B of the Agreement are hereby amended and
restated in their entireties to read as set forth in Exhibit A and Exhibit B to
this Amendment.
7. The Agreement is hereby amended to add a new Attachment F which reads
as set forth in Exhibit C to this Amendment.
8. Unless the context otherwise requires, all capitalized terms used in
this Amendment but not herein defined shall have the meanings ascribed such
terms in the Agreement. Carrier and American agree that, except for those
modifications expressly set forth in this Amendment, all terms and provisions of
the Agreement shall remain unchanged and in full force and effect. No waiver or
modification of the terms or provisions of the Agreement is
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intended or is to be inferred, except as expressly provided in this Amendment.
This Amendment and the Agreement shall hereafter be read and construed together
as a single document, and all references in the Agreement to the Agreement shall
hereafter refer to the Agreement as amended by this Amendment. This Amendment is
intended for the sole benefit and use of Carrier and American or their permitted
successors or assigns and is not intended to confer rights upon any third
parties, including, without limitation, Members.
9. This Amendment may be executed by Carrier and American in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute but one and the same
instrument. Confirmation of the execution of this Agreement by a telefax of a
facsimile signature page or pages executed by Carrier and American shall be
binding upon the parties hereto.
IN WITNESS WHEREOF, American and Carrier have executed this Amendment as
of the date and year first above written.
MIDWAY AIRLINES CORPORATION AMERICAN AIRLINES, INC.
By: /s/ Joanne Smith By: /s/ Henry C. Joyner
-------------------------- ------------------------------------
Name: Joanne Smith Name: Henry C. Joyner
------------------------ ----------------------------------
Title: Senior Vice President Title: Vice President Marketing Planning
------------------------ ---------------------------------
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EXHIBIT A
{***}
A-1 CONFIDENTIAL
<PAGE>
Effective as of October 1,1995, and subject to the terms and conditions of
this Agreement (including, without limitation, the terms and conditions set
forth in Attachment F to this Agreement), the Codeshare Flights operated between
each of the following O & D city pairs (in both directions) by Great Lakes
Aviation, Ltd. or its wholly-owned subsidiary, d/b/a Midway Connection
("Commuter"), will be Carrier Flights eligible for Accrual Miles credit for
Revenue Travel by Members, all according to the terms of this Agreement: All O &
D city-pairs listed above as eligible for Accrual Miles credit for Revenue
Travel by Members.
Carrier will be solely responsible for, and will pay American for, Accrual
Miles awarded for Member's Revenue Travel on the above Codeshare Flights, all in
accordance with the terms and conditions of this Agreement. For the purposes of
the transactions contemplated by the Agreement, Carrier will be responsible for
all of the above Codeshare Flights as if they were flights operated by Carrier.
Except as otherwise provided in this Agreement, the above Codeshare Rights will
be treated in accordance with the terms and conditions of this Agreement as
Carrier Flights.
Except for the Codeshare Flights listed above, no other Codeshare Flights
shall be eligible for Accrual Miles credit as a Carrier Flight unless approved
for such credit by American pursuant to Section 4.j. of the Agreement.
Accrual Mile Guidelines
American will award Accrual Miles for Revenue Travel in the following
booking classes pursuant to the terms of Section 2.a. of the Agreement:
Coach Class: Y, B, H, Q, V, K, M, Z
(or any surviving codes designated by Carrier from time to time).
First Class (where available): F
(or any surviving codes designated by Carrier from time to time).
For Revenue Travel which involves consecutive travel under a single flight
coupon on any two or more of the O & D city pairs listed in this Attachment A,
and only the O & D city pairs listed on this Attachment A, Actual Miles and
Accrual Miles will be calculated based on the United States Department of
Transportation approved non-stop mileage between the city were the Member
commenced such travel on the coupon and the city where the Member finished such
travel on the coupon.
Accrual Miles will not be awarded for any travel on free AAdvantage
Awards, Midway Merits Program awards or other free ticket promotions, including
free or reduced rate companion tickets, any industry or agency discount tickets
or passes, charter flight tickets, infant and unpublished fare tickets, or
tickets issued subject to special provisions.
In the case of upgraded travel through the use of an Upgrade Sticker or
any similar promotions, Accrual Miles will be awarded based on the paid class of
service."
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EXHIBIT B
"ATTACHMENT B
AWARD TRAVEL
Only regularly scheduled, on-line air travel service operated by Carrier
between any of the following destinations, in any direction, either connecting
through RDU or as a non-stop to or from RDU ("Award Flights"), are available to
all Members for Award Travel: All O & D city-pairs listed on Attachment A as
eligible for Accrual Miles credit for Revenue Travel by Members.
Effective as of October 1,1995, and subject to the terms and conditions of
this Agreement (including, without limitation, the terms and conditions set
forth in Attachment F to this Agreement). the Codeshare Flights operated between
the following destinations, in any direction either connecting through RDU or as
a non-stop to or from RDU by Commuter (as defined in Attachment A of this
Agreement), will be Award Flights for the purposes of the Agreement, available
to all Members for Award Travel according to the terms of this Agreement: All O
& D city-pairs listed on Attachment A as eligible for Accrual Miles credit for
Revenue Travel by Members.
Provided, however, that the above described travel is not available for
Award Travel during the Blackout Dates, or for First Class travel (if offered)
or any other class other than Coach Class.
Award Prices. (The following prices are applicable only until Carrier elects
(if ever) to convert to the alternative fee structure described
in Section 8.a. of the Agreement.)
The following zone definitions apply for Award Travel on Carrier and Commuter:
ZONE 1: All O & D city-pairs eligible for Award Travel on Carrier and
Commuter that are not listed under Zone 2 below.
ZONE 2: {***}
For each Award Document issued pursuant to this Agreement, American shall
owe Carrier the applicable amount set forth below (all prices are stated and
shall be paid in U.S. Dollars):
Award Price
One Free Round Trip Ticket
--------------------------
Coach First
Class Class
Travel between any destination
within Zone 1 $50 N/A
-----
Travel between Zone 1 $60 N/A
destinations and Zone 2 -----
destinations
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All of the above Award Travel is valid for round trip travel between the
applicable destinations, but may be used for one way travel if desired; however,
the award price will not be reduced based on a one way trip."
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EXHIBIT C
ATTACHMENT F
TERMS AND CONDITIONS REGARDING THE INCLUSION
OF CERTAIN CODESHARE FLIGHTS
In addition to all other rights of termination and cancellation provided
under this Agreement, American may terminate the inclusion of all of the
Codeshare Flights operated by Commuter (as defined in Attachment A of this
Agreement) ("Commuter Codeshare Flights") as Carrier Flights or Award Flights
under this Agreement, at any time, for any reason (with or without cause), and
without any liability or obligation to Carrier or Commuter (except for payment
of amounts due and owing and performance of obligations accrued, in each case on
or prior to the date of termination of inclusion of the above Codeshare Flights)
by providing at least thirty (30) days prior written notice to Carrier.
In addition to all other rights of termination and cancellation provided
under this Agreement, inclusion of the above Codeshare Flights as Carrier
Flights or Award Flights under this Agreement may be canceled by either American
or Carrier (at their respective options), for all purposes under this Agreement,
simultaneously with the termination or expiration of (i) the Airline Services
Agreement, dated as of August 8, 1995, between Carrier and Commuter and (ii) the
Agreement of Sublease, dated as of January 18, 1995, between American and
Commuter relating to RDU.
American and Carrier (i) acknowledge and agree that Commuter is not a
third party beneficiary under this Agreement (pursuant to Section 27 or
otherwise), and (ii) acknowledge receipt of the letter, dated effective October
1, 1995 signed by Commuter and confirming Commuter's agreement to and acceptance
of the same.
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October 26, 1995
Great Lakes Aviation, Ltd.
190 Norwest Financial Center
7900 Xerxes Avenue South
Bloomington, Minnesota 55431
Re: First Amendment to AAdvantage Participating Carrier Agreement (the
"Amendment") between American Airlines, Inc. ("American") and Midway
Airlines Corporation ("Midway")
Dear Sir or Madam:
As you know, the Amendment addresses coverage of certain Codeshare Flights
of Great Lakes Aviation, Ltd. or any wholly-owned subsidiary thereof, d/b/a
Midway Connection ("MC"), under the AAdvantage Participating Carrier Agreement,
dated as of January 18, 1995, between American and Midway, as amended (the
"Agreement"). Prior to entering into the Amendment, American will require that
MC confirm the following points:
1. MC has read and understands the Amendment (in the attached form);
and
2. MC is not a third party beneficiary of any kind to or under the
Agreement or the Amendment.
Please confirm your agreement to and acceptance of the foregoing by
countersigning the enclosed originals of this letter and returning one such
original to the undersigned.
Sincerely,
AMERICAN AIRLINES, INC.
By: /s/ Henry C. Joyner
---------------------------
Name: Henry C. Joyner
Title: Vice President Marketing Planning
CONFIRMED (as of the date first written above):
GREAT LAKES AVIATION, LTD., on its own behalf and on behalf of and as authorized
agent for Northern Star Airlines, Inc., a wholly owned subsidiary of Great Lakes
Aviation, Ltd., and for RDU, Inc., a wholly-owned subsidiary of Great Lake
Aviation, Ltd.
By: /s/ George A. Rasmusson
---------------------------------
Name: George A. Rasmusson
-------------------------------
Title: Exec. V.P. Cust Svc & Admin.
------------------------------
<PAGE>
cc: Midway Airlines Corporation
300 West Morgan Street
Suite 1200
Durham, North Carolina 27701
ATTN: Joanne Smith
<PAGE>
SECOND AMENDMENT TO
AADVANTAGE PARTICIPATING CARRIER AGREEMENT
This Second Amendment to AAdvantage Participating Carrier Agreement (this
"Second Amendment"), dated as of December 10,1996, is by and between AMERICAN
AIRLINES, INC., a Delaware corporation having its principal place of business at
4333 Amon Carter Boulevard, Fort Worth, Texas 76155 ("American"), and Midway
Airlines Corporation, a Delaware corporation, having its principal place of
business at 300 W. Morgan Street, 12th Floor, Durham, North Carolina, 27701
("Carrier").
WHEREAS, American and Carrier are parties to that certain AAdvantage
Participating Carrier Agreement, dated January 18, 1995 ("the Agreement"), as
amended; and
WHEREAS, American and Carrier desire to amend the Agreement to provide for
an alternative fee structure upon the terms and subject to the conditions of
this Second Amendment; and
NOW, THEREFORE, in consideration of the mutual covenants and promises in
this Second Amendment, the parties hereto agree as follows:
1. Carrier will exercise the option (per Section 8a.ii.A. of the Agreement) to
convert on a permanent basis (without retroactive application) to the following
alternative fee structure in lieu of the fees set forth in Section 8.a.i.
effective December 1,1996.
A. Carrier shall pay American on a monthly basis, for every Accrual
Mile posted to a Member's AAdvantage Account as follows:
{***}
{***}
{***}
B. American shall not owe Carrier any amounts for Award Documents
issued for Award Travel.
<PAGE>
2. Except for the modifications expressly set forth in this Second Amendment,
all provisions of the Agreement will remain unchanged and in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment
as of the date first written above.
Signed for and on behalf of Signed for and on behalf of
MIDWAY AIRLINES CORPORATION AMERICAN AIRLINES, INC.
By: /s/ Joanne Smith By: /s/ Henry C. Joyner
----------------------- ------------------------
Joanne Smith Henry C. Joyner
Senior Vice President Vice President
Marketing Marketing Planning
<PAGE>
EXHIBIT E
THIRD AMENDMENT TO AADVANTAGE
PARTICIPATING CARRIER AGREEMENT
This Third Amendment to AAdvantage Participating Carrier Agreement ("Third
Amendment"), dated as of February 10, 1997, by and between American Airlines,
Inc. ("American") and Midway Airlines Corporation ("Carrier).
WHEREAS, American and Carrier have entered into an AAdvantage
Participating Carrier Agreement (the "Agreement") dated as of the 18th day of
January, 1995, amended pursuant to the Amendment to AA Agreements dated as of
April 25,1996 (the "First Amendment") and as of December 10,1996 (the "Second
Amendment") (for ease in drafting the Agreement, the First Amendment and the
Second Amendment are collectively referred to herein as the Agreement), pursuant
to which Carrier participates in American's AAdvantage Program; and
WHEREAS, concurrently herewith, American and Carrier are entering into a
certain Letter Agreement providing the terms and conditions under which American
has agreed to participate in a financial restructuring of Carrier; and
WHEREAS, in connection with such restructuring, Carrier has requested and
American has agreed to make certain Amendments to the Agreement, subject to the
terms and conditions set forth in this Third Amendment.
NOW, THEREFORE, in consideration of the mutual covenants and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, American and Carrier agree to amend the Agreement as follows:
1. Section 1 is amended to change the definition of "Expiration Date" in its
entirety to read as follows:
"Expiration Date" means 23.59 Coordinated Universal Standard Time (UTC) on
April 30, 2001, unless this Agreement is extended or terminated earlier in
accordance with the terms of this Agreement, in which case the last day of
the extended term of the date on which this Agreement is earlier
terminated shall be the Expiration Date."
2. Section 8.a.ii.A. shall be amended in its entirety to read as follows:
"Carrier shall pay to American on a monthly basis, for every Accrual Mile
posted to a Member's AAdvantage Account as follows (except as otherwise
specified on Attachment A attached hereto):
<PAGE>
{***}
{***}
{***}
In addition, Carrier shall pay American, on a monthly basis, for the
reinstatement in a given month of any Award Certificate and/or Award
Ticket which was issued prior to the effective date of Carrier's
conversion (if any) to the alternative fee structure."
3. This Third Amendment, together with the Agreement, First Amendment and Second
Amendment, constitutes the entire agreement of the parties with respect to its
subject matter and supersedes all prior agreements or understandings, whether
written or oral, if any, concerning the subject matter. All defined terms used
herein without definition shall have the meanings set forth in the Agreement. As
modified hereby, the Agreement is ratified and confirmed and shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties have caused this Third Amendment to be duly
executed and delivered as of the date and year first above written.
MIDWAY AIRLINES CORPORATION AMERICAN AIRLINES, INC.
By: /s/ Jonathan S. Waller By: /s/ Andrew A. Cuomo
-------------------------- -----------------------------
Andrew A. Cuomo
Its: Senior Vice President Managing Director
------------------------- Airline Management Services, Inc.
2
<PAGE>
EXHIBIT 10.19
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY {***}. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
EXHIBIT C
SECURED PROMISSORY NOTE
Forth Worth, Texas
{***} February 7, 1997
FOR VALUE RECEIVED, the undersigned MIDWAY AIRLINES CORPORATION, a
Delaware corporation (the "Maker") hereby promises to pay to the order of
{***} or its assigns (the "Payee") at Payee's address set forth in the
Mortgage referred to below, or at such other place as the holder (the
"Holder") of this Promissory Note (the "Note") may from time to time
designate in writing, in lawful money of the United States and in immediately
available funds, at the times and in the manner provided hereinbelow, the
principal sum of {***} together with interest in accordance with the terms
stated below.
1. Calculations of Interest. Interest shall accrue from the date hereof on
the outstanding principal balance of, and accrued unpaid interest on, this
Note at a fixed rate per annum of eight percent (8.0%) until such
principal and interest amount shall be paid. Interest hereunder shall be
calculated on the basis of the number of days in the relevant period
compared to the actual number of days in the annual period, at the rate
aforesaid, and shall accrue on balances of principal and interest
outstanding from time to time from and after the date hereof.
2. Time for Payment. Principal and interest under this Note shall be due and
payable in equal installments of {***} the principal sum hereof, together
with all accrued but unpaid interest due and payable on the date
specified by the Holder in such notice (which date may be the date of
such notice by the Maker). The principal sum hereof, together with all
accrued but unpaid interest, may be prepaid by Maker at any time in whole
or in part without premium or penalty. All prepayments hereunder shall
be applied as follows: first, to any and all costs, fees or expenses
(if any) due and owing hereunder and/or under the Mortgage; second, to
any and all accrued and unpaid interest hereunder; and third, to
outstanding principal hereunder.
From and after maturity (whether by acceleration or otherwise), the entire
principal balance and (to the extent permitted by law) all accrued and
unpaid interest and all other sums (if any) due and owing hereunder shall
be payable on demand and shall bear interest until paid at a fixed rate of
eighteen percent (18%) per annum.
If any payment of principal, interest or other charges is stated hereunder
to be due and payable on a day which is not a Business Day (as defined
hereinbelow), then the due date for such payment shall be extended to the
next succeeding Business Day.
<PAGE>
provided that, in any such event, such payment shall include interest
accruing during such extension in accordance with the terms of this Note.
As used herein, the term "Business Day" means any day other than any
Saturday, Sunday or other day on which commercial banking institutions in
Fort Worth, Texas are authorized or required by law, regulation or
executive order to be closed.
All agreements between Maker and the Holder hereof are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason
of deferment, acceleration of maturity of the principal amount evidenced
hereby, payment of interest, fees or other charges hereunder, or
otherwise, shall the amount paid or agreed to be paid to the Holder
hereunder exceed the maximum permissible under applicable law. If, from
any circumstance whatsoever, fulfillment of any provision hereof or of any
other agreement between the undersigned and the Holder, at the time
performance of such provision shall be due, shall involve transcending the
limit of validity prescribed by law, then, ipso facto, the obligation to
be fulfilled shall be reduced to the limit of such validity. If,
notwithstanding the foregoing limitations, any excess interest shall be
determined to have been received, the same shall be deemed to have been
held as additional security for repayment of the indebtedness evidenced
hereby. This provision shall never be superseded or waived and shall
control every other provision of this Note and all agreements between
Maker and the Holder.
For purposes of this Note, a "Change of Control" means the acquisition by
any individual, corporation, partnership, joint venture, association,
joint-stock company, trust, unincorporated organization or other form of
entity (including but not limited to a governmental entity) or 13D Group
of beneficial ownership (within the meaning of Rule 13-d-3 of the
Securities Exchange Act of 1934, as amended) of any securities of the
Maker entitled to vote generally in the election of directors, or
securities convertible into or exercisable or exchangeable for such
securities (the "Voting Securities"), representing 30% or more of the
outstanding Voting Securities, except for any change of control associated
with the merger of GoodAero, Inc. into Maker pursuant to the Agreement and
Plan of Merger between the parties dated January 17, 1997. A 13D Group
shall mean any partnership, limited partnership syndicate or other
"group", as such term is used in Section 13(d)(3) of the Exchange Act.
3. Supporting Documents. {***} be secured by certain property of Maker
pursuant to the Mortgage, which is incorporated herein by reference
{***}.
4. Acceleration. In the event that an Event of Default (as defined
hereinbelow) shall occur and be continuing, then, and in any such event
and at any time thereafter, so long as such Event of Default shall then be
continuing, (i) all amounts of principal, interest and
2
<PAGE>
other sums and charges hereunder and under the Mortgage may, at the option
of the Holder, be declared (by written notice to the Maker at its address
set forth in the Mortgage but without presentment, demand, protest, notice
or any other formality, all of which are hereby waived; provided, that if
an Event of Default referred to in Section 5(e) or (f) shall have
occurred, then in every such case, all amounts of principal, interest, and
other charges hereunder and the Mortgage shall immediately, and without
further act, become due and payable) to be, whereupon the same shall
become, immediately due and payable, anything herein to the contrary
notwithstanding and (ii) Holder may pursue all remedies available under
applicable law or agreement, including remedies available under the
Mortgage.
If the Maker shall default in any of its payment obligations hereunder,
Maker further promises to pay (to the extent permitted by law) reasonable
internal and external attorneys' fees and costs and expenses incurred by
the Holder in connection with any such default or in any action or other
proceeding brought to enforce any of the provisions of this Note and/or
the Mortgage.
5. Events of Default. As used herein, the term "Event of Default" shall mean
each and any of the following events:
(a) Maker shall fail to make any payment under this Note on the date
when due; or
(b) Maker shall default in any of its obligations under the American
Agreements (as defined in the Letter Agreement between the parties
dated February 10, 1997) and in case of defaults with respect to
matters other than payment obligations, such default shall continue
for a period of thirty (30) days after notice from Payee to Maker
specifying such default and requiring that the same be remedied; or
(c) Any material representation or warranty made by Maker in or
pursuant to this Note, the Mortgage or the American Agreements shall
prove to have been incorrect in any material respect when made; or
(d) All or substantially all of Maker's airline operations are
suspended for more than two days unless resulting from any act of
God, war, strike, natural disaster, lockout, labor dispute, work
stoppage, fire, act of government, or any other cause beyond Maker's
reasonable control; or
(e) Maker shall consent to the appointment of a custodian, receiver,
trustee or liquidator (or other similar official) of itself or of a
substantial part of its property, or Maker shall be unable to pay
its debts generally as they become due, or shall make a general
assignment for the benefit of creditors, or Maker shall file a
voluntary petition in bankruptcy or a voluntary petition or an
answer seeking reorganization in a proceeding under any bankruptcy
law (as now or hereafter in effect) or an answer admitting the
material allegations of a petition filed against Maker in any such
proceeding, or Maker by voluntary petition, answer or consent shall
seek relief as debtor under the provisions of any other present or
future bankruptcy or other similar law providing for the
reorganization or winding-up of corporations, or providing for an
agreement, composition,
3
<PAGE>
extension or adjustment with its creditors or Maker shall take any
corporate action to authorize any of the foregoing;
(f) A petition against Maker in a proceeding under any bankruptcy or
other insolvency law (as now or hereafter in effect) shall be filed,
and any decree or order adjudging Maker a bankrupt or insolvent in
such proceeding shall remain in force undismissed and unstayed for a
period of sixty (60) days after such adjudication or, in the case
the approval of such petition by a court of competent jurisdiction
is required, the petition as filed or amended shall be approved by
such a court as properly filed and such approval shall not be
withdrawn and the proceeding shall not be dismissed within sixty
(60) days thereafter, or if, under the provisions of any law
providing for reorganization or winding-up of corporations which may
apply to Maker, any court of competent jurisdiction shall enter an
order or decree assuming custody or control of Maker or of any
substantial part of its property and such custody or control remains
in force unrelinquished, unstayed and unterminated for a period of
thirty (30) days; or
(g) Maker shall pay any dividends or make any other cash or asset
distributions to its shareholders without Holder's prior written
consent.
6. Choice of Law. This Note shall be governed by and construed in accordance
with the laws of the State of Texas, without regard to its conflicts of
laws principles.
IN WITNESS WHEREOF, this Note has been duly executed as of the date first
above written.
MIDWAY AIRLINES CORPORATION
By: /s/ Jonathan S. Waller
-------------------------------
Name: Jonathan S. Waller
Title: Senior Vice President
4
<PAGE>
EXHIBIT 10.20
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY {***}. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
CONFIDENTIAL
February 10, 1997
Midway Airlines Corporation
300 West Morgan Street
Suite 1200
Durham, NC 27701
Attention: John Selvaggio, President
Re: Participation in the Restructuring of Midway Airlines
Corporation
Dear Mr. Selvaggio:
This letter agreement sets forth the general terms and conditions under
which American Airlines, Inc. ("American") is prepared to waive its right to
accelerate payment under the {***} and waive its right to terminate certain of
the American Agreements as a result of, and to participate in, the {***}.
In consideration of the mutual covenants contained herein, we agree as
follows:
{***}
<PAGE>
{***}
2
<PAGE>
{***}
3
<PAGE>
8. Conditions Precedent. American's and its affiliates' participation in,
and its agreement to waive its right to accelerate payment under the {***} and
waive its right to terminate certain of the American Agreements as a result of
the Equity Investment shall be subject to the following conditions precedent:
(a) Equity Investment. Midway shall successfully complete the proposed
merger with GoodAero, Inc. in substantially the same manner as set forth in the
Agreement and Plan of Merger between the companies dated January 17, 1997 (the
"Plan of Merger") a copy of which has been provided to American, resulting in a
minimum of $22,000,000 in gross proceeds to be available as working capital for
Midway as of the Closing Date (the "Equity Investment").
(b) Creditor Participation. Prior to or as of the Closing Date, Midway
shall have entered into agreements with the Aircraft Creditors and Ameritech
Corporation substantially consistent with Exhibit 6.02(k) attached hereto,
pertaining to their participation in Midway's restructuring, on terms reasonably
satisfactory to American. Further, Midway shall have resolved obligations owed
to AVSA, S.A.R.L. in accordance with Jon Waller's letter dated February 10, 1997
addressed to Andrew Cuomo.
(c) Other Conditions Precedent. The agreements of American set forth in
this Letter Agreement are subject to the satisfaction or waiver by American on
or before the Closing Date of the following conditions:
{***}
(4) The receipt by American on or prior to the Closing Date, a final
Certificate of Merger of GoodAero, Inc. and Midway, a Restated Certificate
of Incorporation of Midway certified by the Secretary of State of Delaware,
and bylaws of Midway, all in substantially the same form as attached to the
Plan of Merger, certified to be true and up to date by a duly authorized
officer thereof or certifying no changes or amendments to
4
<PAGE>
such documents since the date they were last certified to American or
attaching copies of such amendments.
{***}
(6) Copies of resolutions of the board of directors of Midway authorizing
Midway to enter into and perform the transactions contemplated by the Plan
of Merger, certified to be true and up to date copies by a duly authorized
officer of Midway.
(7) A closing certificate and an incumbency certificate of duly authorized
officers of Midway setting out the names and signatures of the person or
persons authorized to sign the documents contemplated by this agreement.
(8) The receipt by American of opinions of counsel to Midway, which may be
internal counsel, dated as the Closing Date, in the form of the attached
Exhibit I.
(9) No Event of Default shall have occurred and be continuing under any of
the American Agreements.
9. Waiver. American hereby waives any rights it might have to terminate the
American Agreement identified as items (i), (ii), (iv), (v) and (viii) in
Exhibit A attached hereto or to accelerate payments under the {***} arising
solely from the Change of Control (as defined in such identified American
Agreements) resulting from the Equity Investment.
10. Expenses. American and Midway shall bear their respective costs,
expenses and charges incurred by them in connection with the negotiations
contemplated herein, including, but not limited to, fees of their respective
counsel, advisors and accountants.
11. Governing Law and Dispute Resolution. This Letter Agreement and the
rights and obligations of the parties hereunder shall be governed by and
construed in accordance with the laws of the State of Texas, without regard to
choice of law principles. Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the United States District Court for the Northern
District of Texas and, if such court does not have jurisdiction, of the courts
of the State of Texas in Tarrant County for the purposes of any suit, action or
other proceeding arising out of this Letter Agreement or the subject matter
hereof or
5
<PAGE>
thereof brought by any other party. American and Midway each agrees that neither
of them will bring any suit, action or other proceeding arising out of this
Letter Agreement or any of the transactions described herein or therein, in any
jurisdiction other than the jurisdiction described above. To the extent
permitted by applicable law, each party hereby waives and agrees not to assert,
by way of motion, as a defense or otherwise, in any such suit, action or
proceeding, any claim (i) that it is not personally subject to the jurisdiction
of the above-named courts, (ii) that the suit, action or proceeding is brought
in an inconvenient forum, (iii) that it is immune from any legal process with
respect to itself or its property, (iv) that the venue of the suit, action or
proceeding is improper, or (v) that this Letter Agreement or the subject matter
hereof or thereof may not be enforced in or by such courts. Each party agrees
that, even if at any time during the term of this Agreement Midway is not
qualified to do business as a foreign corporation in the State of Texas, Midway
shall and does hereby irrevocably designate and appoint the Secretary of State
of the State of Texas as its agent for service of process in any action, suit or
proceeding with respect to any matter as to which it submits to jurisdiction as
set forth above, it being agreed that any method of service upon such agent,
with a copy sent to Midway's address as reflected in the records of American
shall constitute valid service upon Midway. American designates CT Corporation
as its agent for service of process in Texas.
12. Confidentiality. Midway and American expressly acknowledge and agree
that the terms and conditions of this Letter Agreement constitute confidential
information of both parties (the "Confidential Information"), whether or not
marked or expressly indicated as confidential, and American and Midway each
agrees to keep such information confidential, using the same degree of care with
respect to such Confidential Information as it uses in protecting its own
proprietary information, trade secrets and similar items, and not to disclose
such information to any third party, except as permitted hereby. Notwithstanding
the foregoing, Confidential Information shall not include any information which
is in the public domain; is placed in the public domain, through no violation of
the this Letter Agreement; or is lawfully obtained from another source free of
restriction. Except as expressly provided below, neither party shall sell,
transfer, publish, disclose, display or otherwise make available the
Confidential Information to any third party (and third parties shall be deemed
also to include Affiliates of the party so restricted), except as may be
required by applicable law (including, without limitation, requirement by oral
questions, interrogatories, subpoenas, civil investigative demands or similar
processes), in which case the party from whom disclosure is sought (or, if
applicable, who is seeking to make disclosure as required by applicable law)
shall promptly notify the other party and shall provide the other party (if the
other party so requests) with a copy of the information proposed to be disclosed
and all related descriptions thereof within a reasonable period (which period
shall generally be at least five days) in advance of the proposed disclosure. To
the extent that the other party objects to disclosure of such Confidential
Information, the party from which disclosure is
6
<PAGE>
sought (or, if applicable, who is seeking to make disclosure as required by
Applicable Law) shall (i) use reasonable and lawful efforts to resist making any
disclosure of such Confidential Information, (ii) use reasonable and lawful
efforts to limit the amount of such Confidential Information to be disclosed
(and, in connection therewith, shall reasonably consider all modifications,
deletions and additions to such information, and related descriptions, proposed
by the other party), and (iii) use all reasonable efforts to obtain a protective
order or other appropriate relief to minimize the further dissemination of any
Confidential Information to be disclosed. In addition, neither party shall
disclose the Confidential Information received to any of its directors,
officers, employees, Affiliates, or professional advisors (collectively,
"Representatives") except on a need-to-know basis for the purposes of
implementing and giving effect to the transactions contemplated by this Letter
Agreement; provided, however, that prior to any such disclosure, the party shall
inform all such Representatives of the confidential nature of the information,
and that it is subject to this non-disclosure obligation, and shall further
instruct such Representatives to treat such information confidentially. American
and Midway each agrees to be responsible for any breach of this Section by their
respective Representatives. Each party acknowledges and agrees that the other
party will have no adequate remedy at law if there is a breach or threatened
breach of this Section and, accordingly, that such other party shall be entitled
to an injunction or other equitable or preventative relief against the allegedly
breaching party or its Representatives for such breach or threatened breach.
Nothing herein shall be construed as a waiver of any other legal or equitable
remedies which may be available to the non-breaching party in the event of a
breach or threatened breach of this Section, and the non-breaching party may
pursue any other such remedy, including, without limitation, the recovery of
damages. Notwithstanding anything herein to the contrary, American hereby
permits Midway to disclose the Confidential Information to Zell/Chilmark Fund
L.P., debis AirFinance B.V., Wings Aircraft Finance, Inc., DASA Aircraft Finance
XVI, B.V., Ameritech Services Corporation, AVSA, S.A.R.L., GoodAero, Inc.,
Stockholm Aircraft Finance V, B.V. and/or International Aero Engines; provided,
however, that upon any such parties receipt of such confidential information it
shall be deemed to have accepted the terms of confidentiality set forth in this
provision and Midway shall be liable for any breach of such obligation, unless
otherwise agreed in a separate agreement between American and any such other
party; provided, however, that the terms of the new promissory note referred to
in paragraph 1 of this letter may be disclosed by any holder of the promissory
note executed by Midway Airlines corporation in favor of Daimler-Benz Aerospace
A.G. or the promissory note executed by Midway Airlines Corporation in favor of
debis AirFinance B.V., each dated as of January 31, 1997, in connection with any
action taken to enforce such notes; and may otherwise be disclosed to any person
with a need to know the terms thereof, provided that such person agrees to keep
such information confidential in accordance with the terms hereof; and provided,
further, that the terms and conditions of this Letter Agreement may be
7
<PAGE>
disclosed to affiliates of the holders of those Notes, provided that such
persons agree to keep such information confidential in accordance with the terms
hereof. The provisions of this Section shall survive the execution, expiration
or termination of this Letter Agreement and the consummation of the transactions
contemplated hereby.
13. Entirety and Amendments. This Letter Agreement contains the entire
agreement between the parties with respect to the subject matter hereof. This
Letter Agreement may be amended only by an instrument in writing executed by the
party against whom such amendment is sought to be enforced. The parties
acknowledge that nothing herein shall in any manner be construed to be a
novation of the Security Agreement.
14. Parties Bound. This Letter Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, assigns and
legal representatives; provided however, that Midway may not, without the prior
written consent of American, assign any rights, powers, duties or obligations
hereunder.
The foregoing sets forth American's agreement in respect to the subject
matter hereof. If the terms of this Letter Agreement are satisfactory to Midway,
an authorized officer of Midway should execute this Letter Agreement in the
space provided below and return the executed counterpart to the attention of Mr.
Andrew Cuomo by telefax at 817-963-1924, with the manually executed original
counterpart to be delivered promptly thereafter.
AMERICAN AIRLINES, INC.
By: /s/ Andrew A. Cuomo
------------------------------
Andrew A. Cuomo
Managing Director
Airline Management Services, Inc.
AGREED AND ACCEPTED AS OF THE
10th DAY OF FEBRUARY, 1997.
MIDWAY AIRLINES CORPORATION
By: /s/ Jonathan S. Waller
---------------------------
Name: Jonathan S. Waller
Senior Vice President
8
<PAGE>
EXHIBIT A
"American Agreements" means all of the following agreements, as they may be
amended from time to time and all replacement or renewal agreements:
(i) Agreement of Sublease between American and Midway, dated as of January 18,
1995;
(ii) AAdvantage Participating Carrier Agreement between American and Midway,
dated as of January 18, 1995 (as amended on December 10, 1996);
(iii) AAirpass Agreement between American and Midway, dated March 2, 1995;
(iv) Aircraft Maintenance Agreement between American and Midway, dated as of
November 1, 1993 (as amended on February 17, 1995);
(v) SABRE Multihost Agreement executed by SABRE Decision Technologies, a
division of The SABRE Group, Inc., on March 20, 1995 and executed by Midway on
February 24, 1995;
(vi) SABRE Participating Carrier Distribution and Services Agreement between
American and Jet Express, Inc. (now known as Midway Airlines Corporation), dated
as of May 14, 1993;
(vii) Inbound Reservations Services Agreement between American Airlines Direct
Marketing Corporation (now known as Teleservice Resources, Inc.) and Jet
Express, Inc. (now known as Midway Airlines Corporation) dated April 13, 1993,
as renewed under the Services and Licenses Agreement Annex B dated on or about
February 1, 1997;
(viii) Services and Licenses Agreement between Airline Management Services, Inc.
and Midway dated December 7, 1995;
(ix) Standard Ground Handling Agreement between American and Midway, dated
effective November 15, 1993, and all Annexes thereto including without
limitation B7.0 (BOS), B4.1 (DCA), B6.0 (EWR), B1.1 (LGA), B8.0 (MCO), B1.0
(CUN), B10.0 (PHL), B18.0 (RDU-Facility Maintenance and Facility Services), B8.0
(RDU-City Ticket Offices), and B10.0 (RDU-Admirals Club);
(x) Bilateral Traffic Agreement between American and Jet Express, Inc. d/b/a
Midway Airlines, dated July 12, 1993;
(xi) Chattel Mortgage and Security Agreement between American and Midway, dated
April 25,1996; and
(xii) all other agreements in effect as of January 31, 1997 of any nature
between Midway or any of Midway's affiliates and American or any of American's
affiliates.
<PAGE>
EXHIBIT B
See final Warrant issued on 2/11/97
<PAGE>
EXHIBIT C
{***} (4 pages omitted)
<PAGE>
EXHIBIT D
THIRD AMENDMENT TO AGREEMENT OF SUBLEASE
This Third Amendment to Agreement of Sublease (the "Third Amendment"),
dated as of February 10, 1997, by and between American Airlines, Inc.
("American") and Midway Airlines Corporation ("Sublessee").
WHEREAS, American and Sublessee have entered into an Agreement of Sublease
(the "Sublease") dated as of the 18th day of January, 1995, amended pursuant to
a First Amendment of Agreement of Sublease dated on or about February 6, 1996
(the "First Amendment") and Amendment to AA Agreements dated April 25, 1996 (the
"Second Amendment)(for ease in drafting the Sublease, First Amendment and Second
Amendment are collectively referred to herein as the Sublease), pursuant to
which American has subleased a portion of the Base Lease Premises and the
Improvements located thereon; and
WHEREAS, concurrently herewith, American and Sublessee are entering into a
certain Letter Agreement providing the terms and conditions under which American
has agreed to participate in a financial restructuring of Sublessee; and
WHEREAS, in connection with such restructuring, Sublessee has requested and
American has agreed to make certain amendments to the Sublease, subject to the
terms and conditions set forth in this Third Amendment.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, American and Sublessee hereby agree to amend the Sublease as
follows:
1. Section 1.D. shall be amended by changing the reference to "August 31, 1997"
in the last sentence of the first paragraph to read "August 31, 1999".
2. Section 1.D. shall further be amended by adding the following to the end
thereof:
"From the effective date of this Third Amendment until May 1, 1997,
Sublessee shall have the option to sublease from American a portion of the
additional space in the Base Lease Premises (including the Improvements
located therein), other than ticket counters and gates, identified by
American to be surplus, unused space (the "Surplus Space"). American shall
identify such Surplus Space to Sublessee by written notice on or before
March 15, 1997. The Rental Rate for any Surplus Space subleased by
Sublessee pursuant to this paragraph shall be {***} per square foot per
annum, subject to the yearly increases of 2%
<PAGE>
(compounded annually) on January 1 of each year during the Term. Sublessee
may exercise the option for Surplus Space by delivering to American, at any
time prior to the termination date of this option, an unconditional written
notice of exercise ("Notice") in substantially the form of Exhibit C
attached to the Sublease. Any sublease of Surplus Space shall be subject to
the terms and conditions set forth in the Sublease, unless terminated by
either party upon six (6) months prior written notice to the other party.
If Sublessee should sublease Surplus Space under this paragraph, Sublessee
and American will execute an amendment to the Sublease effective as of the
Additional Premises Commencement Date specified in the Notice which will
amend and restate Exhibit A to the Sublease. If there shall have occurred
and be continuing on the date of the Notice or on the Additional Premises
Commencement Date an Event of Default by Sublessee under the Sublease,
American may, at is option, refuse to sublease to Sublessee any Surplus
Space until and unless the breach giving rise to such Event of Default has
been cured in accordance with the Sublease.
3. Section 5.A.(i) shall be amended by adding the following to the end thereof:
"Commencing with the rental payment due on March 1, 1997, the rent for the
Demised Premises payable or common use charges, at American's sole
discretion, hereunder shall be reduced by {***} per month (the
"Rental Discount") for the remainder of the term of this Sublease;
provided, however, the Rental Discount shall immediately end if (i)
Sublessee terminates its participation in American's frequent flier mileage
program (currently, the "AAdvantage Program"), (ii) American terminates the
AAdvantage Participating Carrier Agreement (the "AAdvantage Agreement")
dated January 18, 1995, as amended, between American and Sublessee pursuant
to Section 11 (a)(ii) or Section 11(e) thereof, or (iii) Sublessee fails to
renew its participation in the AAdvantage Program upon the expiration of
the AAdvantage Agreement after American has offered, in writing, the
renewal of Sublessee's participation in the AAdvantage Program on
substantially the same terms as those included in the AAdvantage Agreement,
subject to an increase in the rates payable by Sublessee under Section
8(a)(ii) thereof not to exceed the percentage change between (a) the
average of American's (including AMR Eagle) passenger revenue per ASM
(RASM) and operating cost per ASM (CASM) for the year 1996 and (b) the
average of American's (including AMR Eagle) RASM and CASM for the 12 months
immediately preceding the expiration of the AAdvantage Agreement (or the
most recent 12 months for which data is available). Nothing herein shall,
however, be construed to impose any obligation on American to renew
Sublessee's current AAdvantage Agreement upon substantially the same terms
or
2
<PAGE>
otherwise, or to offer a renewal rate for Sublessee's AAdvantage Agreement
as described above.
Should Midway exercise its Option to sublease the Option Premises as
described in Section 1.D. above, the rent for such Option Premises shall be
{***}
4 Section 6 shall be amended by deleting everything after the end of the
first sentence thereof.
5. Section 38 shall be amended in its entirety to read as follows:
"On or before the fifteenth day following each calendar quarter during the
Term of the Sublease (i.e., January 15, April 15, July 15 or October 15, as
applicable) and on the first such date following the expiration or earlier
termination hereof, American shall provide Sublessee with a report showing
the amount spent by American pursuant to Section 5.A.(ii)(b) of this
Sublease or received by American pursuant to Article 15 of the Base Lease,
in each case shown on a monthly basis during the most recently concluded
calendar quarter, or portion thereof (along with such supporting documents
as Sublessee shall reasonably request from time to time hereunder) and also
showing American's calculations on a monthly basis, of the amounts payable
by or owing to Sublessee pursuant to Section 5.A.(ii)(b) and Section 5.D.
of this Sublease. If such report shows that an adjustment to any amount
paid by or owed to Sublessee is proper then the party shown to be owing
amounts (as a reimbursement or otherwise) to the other party shall promptly
make such payment to the other within five (5) business days following
receipt of written notice of such adjustment. American shall give Sublessee
and its agents access during normal business hours to documents and/or
personnel as may be reasonably necessary for Sublessee to review the report
submitted by American to Sublessee pursuant to this Section 38. The terms
of this Section 38 shall survive the termination of the Sublease for a
period of six (6) months.
6. This Third Amendment, together with the Sublease, First Amendment and Second
Amendment, constitutes the entire agreement of the parties with respect to its
subject matter and supersedes all prior agreements or understandings, whether
written or oral, if any, concerning such subject matter. All defined terms used
herein without definition shall have the meanings set forth in the Sublease. As
modified hereby, the Sublease is ratified and confirmed and shall remain in full
force and effect.
3
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Third Amendment to be duly
executed and delivered as of the date and year first above written.
MIDWAY AIRLINES CORPORATION AMERICAN AIRLINES INC.
By: /s/ Jonathan S. Waller By: /s/ Andrew A/ Cuomo
----------------------------- -----------------------------
Jonathan S. Waller Andrew A. Cuomo
Managing Director
Its: Senior Vice President Airline Management Services, Inc.
Agreed to by Landlord this ___ day of _________________, 1997.
RALEIGH-DURHAM AIRPORT AUTHORITY
By:
------------------------------
Its:
-----------------------------
4
<PAGE>
EXHIBIT E
THIRD AMENDMENT TO AADVANTAGE
PARTICIPATING CARRIER AGREEMENT
This Third Amendment to AAdvantage Participating Carrier Agreement ("Third
Amendment"), dated as of February 10, 1997, by and between American Airlines,
Inc. ("American") and Midway Airlines Corporation ("Carrier").
WHEREAS, American and Carrier have entered into an AAdvantage Participating
Carrier Agreement (the "Agreement") dated as of the 18th day of January, 1995,
amended pursuant to the Amendment to AA Agreements dated as of April 25, 1996
(the "First Amendment") and as of December 10, 1996 (the "Second Amendment")
(for ease in drafting the Agreement, the First Amendment and the Second
Amendment are collectively referred to herein as the Agreement), pursuant to
which Carrier participates in American's AAdvantage Program; and
WHEREAS, concurrently herewith, American and Carrier are entering into a
certain Letter Agreement providing the terms and conditions under which American
has agreed to participate in a financial restructuring of Carrier; and
WHEREAS, in connection with such restructuring, Carrier has requested and
American has agreed to make certain Amendments to the Agreement, subject to the
terms and conditions set forth in this Third Amendment.
NOW, THEREFORE, in consideration of the mutual covenants and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, American and Carrier agree to amend the Agreement as follows:
1. Section 1 is amended to change the definition of "Expiration Date" in its
entirety to read as follows:
"Expiration Date" means 23.59 Coordinated Universal Standard Time (UTC) on
April 30, 2001, unless this Agreement is extended or terminated earlier in
accordance with the terms of this Agreement, in which case the last day of
the extended term of the date on which this Agreement is earlier terminated
shall be the Expiration Date."
2. Section 8.a.ii.A. shall be amended in its entirety to read as follows:
"Carrier shall pay to American on a monthly basis, for every Accrual Mile
posted to a Member's AAdvantage Account as follows (except as otherwise
specified on Attachment A attached hereto):
<PAGE>
{***}
In addition, Carrier shall pay American, on a monthly basis, for the
reinstatement in a given month of any Award Certificate and/or Award Ticket
which was issued prior to the effective date of Carrier's conversion (if
any) to the alternative fee structure."
3. This Third Amendment, together with the Agreement, First Amendment and Second
Amendment, constitutes the entire agreement of the parties with respect to its
subject matter and supersedes all prior agreements or understandings, whether
written or oral, if any, concerning the subject matter. All defined terms used
herein without definition shall have the meanings set forth in the Agreement. As
modified hereby, the Agreement is ratified and confirmed and shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties have caused this Third Amendment to be duly
executed and delivered as of the date and year first above written.
MIDWAY AIRLINES CORPORATION AMERICAN AIRLINES, INC.
By: /s/ Jonathan S. Waller By: /s/ Andrew A. Cuomo
----------------------------- -----------------------------
Jonathan S. Waller Andrew A. Cuomo
Its: Senior Vice President Managing Director
Airline Management Services, Inc.
2
<PAGE>
EXHIBIT F
FIRST AMENDMENT TO AAIRPASS
AGREEMENT
This First Amendment to AAirpass Agreement ("First Amendment"), dated as of
February 10, 1997, by and between American Airlines, Inc. ("American") and
Midway Airlines Corporation ("Carrier").
WHEREAS, American and Carrier have entered into an AAirpass Agreement (the
"Agreement") dated as of the March 2, 1995, pursuant to which American has
granted Carrier the right to carry AAirpass members and their companions on
Carrier Flights in accordance with the terms of the Agreement; and
WHEREAS, concurrently herewith, American and Carrier are entering into a
certain Letter Agreement providing the terms and conditions under which American
has agreed to participate in a financial restructuring of Carrier; and
WHEREAS, in connection with such restructuring, Carrier has requested and
American has agreed to make certain amendments to the Agreement, subject to the
terms and conditions set forth in this First Amendment.
NOW, THEREFORE, in consideration of the mutual covenants and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, American and Carrier agree to amend the Agreement as follows:
1. Section 7 is amended in its entirety to read as follows:
"Unless sooner terminated in accordance with this Agreement, this Agreement
shall terminate on April 30, 2001."
2. This First Amendment together with the Agreement constitutes the entire
agreement of the parties with respect to its subject matter and supersedes all
prior agreements or understandings, whether written or oral, if any, concerning
the subject matter. All defined terms used herein without definition shall have
the meanings set forth in the Agreement. As modified hereby, the Agreement is
ratified and confirmed and shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have caused this First Amendment to be duly
executed and delivered as of the date and year first above written.
MIDWAY AIRLINES CORPORATION AMERICAN AIRLINES, INC.
By: /s/ Jonathan S. Waller By: /s/ Andrew A. Cuomo
------------------------------ ------------------------------
Jonathan S. Waller Andrew A. Cuomo
Managing Director
Its: Senior Vice President Airline Management Services, Inc.
<PAGE>
EXHIBIT G
FIRST AMENDMENT TO CHATTEL MORTGAGE
AND SECURITY AGREEMENT
This First Amendment to Chattel Mortgage and Security Agreement ("First
Amendment"), dated as of February 10, 1997, by and between American Airlines,
Inc. ("Secured Party") and Midway Airlines Corporation ("Grantor").
WHEREAS, Secured Party and Grantor have entered into a Chattel Mortgage and
Security Agreement (the "Agreement) dated as of the April 25, 1996, pursuant to
which Grantor has granted Secured Party as security interest and lien to certain
Collateral and the proceeds therefrom to secure the Note and other Obligations
owed to the American Entities; and
WHEREAS, concurrently herewith, Secured Party and Grantor are entering into
a certain Letter Agreement providing the terms and conditions under which
Secured Party has agreed to participate in a financial restructuring of Grantor;
and
WHEREAS, in connection with such restructuring, Grantor has requested and
Secured Party has agreed to make certain amendments to the Agreement, subject to
the terms and conditions set forth in this First Amendment.
NOW, THEREFORE, in consideration of the mutual covenants and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Secured Party and Grantor agree to amend the Agreement as follows:
1. Section 2.6 shall be amended by changing the last sentence thereof in its
entirety to read as follows:
"In addition, the Secured Party will release from the Lien of this Security
Agreement items of Collateral specified by the Grantor in the event Grantor
is able to obtain additional cash financing utilizing such Collateral."
2. This First Amendment together with the Agreement constitutes the entire
agreement of the parties with respect to its subject matter and supersedes all
prior agreements or understandings, whether written or oral, if any, concerning
the subject matter. All defined terms used herein without definition shall have
the meanings set forth in the Agreement. As modified hereby, the Agreement is
ratified and confirmed and shall remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this First Amendment to be duly
executed and delivered as of the date and year first above written.
MIDWAY AIRLINES CORPORATION AMERICAN AIRLINES, INC.
By: /s/ Jonathan S. Waller By: /s/ Andrew A. Cuomo
------------------------------ ------------------------------
Jonathan S. Waller Andrew A. Cuomo
Managing Director
Its: Senior Vice President Airline Management Services, Inc.
2
<PAGE>
February 7, 1997
EXHIBIT H
Mr. John Selvaggio
President
Midway Airlines
300 W. Morgan Street, Suite 1200
Durham, NC 27701
Subject: AA / JI Agreement
Reference 1) T. Duffy memo to J. Frame dated 12/20/96
2) J. Frame letter to T. Duffy dated January 16, 1997 Proposal
Revision 1
3) J. Frame letter to T. Duffy dated February 4,1997 Proposal
Revision 2
4) S. Westberg letter to J. Frame dated February 6, 1997 Proposal
Revision 3
Dear John:
{***}
Page 1 of 6
<PAGE>
Mr. Tom Duffy
February 7, 1997
{***}
Page 2 of 6
<PAGE>
Mr. Tom Duffy
February 7, 1997
The new agreement would end at the completion of the last JI C4 aircraft check
or May 1, 1999, whichever occurs first.
If you are in agreement with the above proposals, please sign and return. This
offer expires February 28, 1997. Nothing herein shall be considered as legally
binding upon either party until a definitive agreement pertaining to the subject
matter hereof has been duly executed by both parties.
Please contact myself or Jim Martin should you have any questions on any of the
information above.
Sincerely,
/s/ John Frame
John Frame
Managing Director
Finance and Planning
office 918-292-3158
fax 918-292-2717
cc: Steven Westberg
Tom Duffy
/gm
Attachments
/s/ John N. Selvaggio
- -------------------------------
Accepted by Midway Airlines
John N. Selvaggio
President
Page 3 of 6
<PAGE>
Attachment I
February 7, 1997
{***}
Page 4 of 6
<PAGE>
Attachment II
February 7, 1997
Tay Engine Lease Rates
AA's current Tay engine lease rates are:
Daily {***}
Hourly {***}
Transaction Fee {***}
Note: These rates are subject to change.
Page 5 of 6
<PAGE>
Attachment III
February 7, 1997
Exhibit A-1
{***}
Page 6 of 6
<PAGE>
RIDER
to February 7, 1997 Letter Agreement
between Midway Airlines Corporation and American Airlines, Inc.
{***}
AGREED:
American Airlines, Inc. Midway Airlines Corporation
By: /s/ John K. Frame By: John Selvaggio
-------------------------- --------------------------
Name: John K. Frame Name: John Selvaggio
Title: Mang. Dir. M&E Fin. & Plng. Title: Chief Financial Officer
<PAGE>
[Letterhead of Midway Airlines]
Exhibit I
(919) 956-4810 (Direct Dial)
(919) 956-7568 (Direct FAX)
February 11, 1997
American Airlines, Inc.
4333 Amon Carter Blvd.
Ft. Worth, Texas 76155
Re: Letter Agreement dated February 10, 1997 (the "Letter Agreement")
between Midway Airlines Corporation ("Midway") and American Airlines,
Inc. ("American")
Ladies and Gentlemen:
I am Senior Vice President and General Counsel of Midway and as such have
acted as an attorney for Midway in connection with the execution and delivery by
Midway of by following:
(A) The Letter Agreement;
(B) {***}
(C) Third Amendment to Agreement of Sublease dates as of February 10, 1997
between Midway and American;
(D) Third Amendment to AAdvantage Participating Carrier Agreement dated as
of February 10, 1997 between Midway and American;
(E) First Amendment to AAirpass Agreement dated as of February 10, 1997
between Midway and American; and
(F) {***}
Such documents are referred to collectively herein as the "Agreements".
In connection with this opinion, I have examined originals or copies
certified or otherwise identified to my satisfaction as being true copies of the
Agreements and I have examined or I am familiar with the original or a copy, the
authenticity of which has been established to my satisfaction, of such other
documents, corporate records, agreements and instruments and certificates of
public officials and officers of Midway as I have deemed necessary or
appropriate to enable me to express the opinions set forth below. As to
questions of fact material to such opinions, I have, when relevant facts were
not independently established, relied upon certifications by officers of Midway
which I believe to be reliable.
The opinions hereinafter expressed are subject to the following
qualifications:
A. I have assumed, without investigation, that the parties (other than
Midway) to the Agreements, or any document or oral agreement relating thereto,
are not subject to any statute, rule, or
<PAGE>
[Letterhead of Midway Airlines]
February 11, 1997
Page 2
regulations, or to any impediment to which contracting parties are generally not
subject; which requires Midway to obtain the consent of or to make a declaration
or filing with any governmental entity.
B. The validity, binding effect and enforceability of the Agreements (or
any portion of such documents) and the rights and remedies of the parties
thereunder are subject to, and limited by, the following: (a) the effect of the
federal and state bankruptcy laws, (the "Bankruptcy Code"), insolvency,
reorganization, receivership, moratorium, and other similar laws; (b) principles
of equity and the doctrine of commercial reasonableness (and I express no
opinion as to the availability of any equitable remedies); (c) the power of
federal and state courts to refuse to enforce (or to stay enforcement of) any
provision of the Agreements which purports to: (i) establish evidentiary
standards, (ii) waive the right of Midway to due notice and hearing, (iii) waive
the right of Midway to assert defenses available to Midway by statute, common
law or in equity, (iv) declare the Lessee to be in default in the event of the
institution of any proceeding in bankruptcy (whether voluntary or involuntary)
pursuant to the Bankruptcy Code, (v) waive the right of personal service of
process, or (vi) provide for self-help remedies.
C. Intentionally Omitted.
D. The opinions set forth above are based upon and limited to the laws of
the State of Illinois, and the Federal laws of the United States applicable
therein, the Bankruptcy Code of 1978, as amended (11 U.S.C. ss.101 et. seq.) and
the general corporate law of the State of Delaware. I note that the Agreements
are stated to be governed by the laws of the State of Texas and I am not
familiar with those laws and render no opinion about them.
E. This letter is limited to the matters expressly set forth herein; no
statements or opinions may be inferred beyond such matters.
F. The opinions set forth herein are based upon and limited to the law as
is in effect on the date of this letter and my knowledge of the facts relevant
to such opinions on the date of this letter. I assume no obligation to update
the opinions set forth in this letter.
Based upon the foregoing and having regard to legal considerations which I
have deemed relevant, it is my opinion that:
1) Midway is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the requisite corporate
power to own and operate its assets and to carry on and conduct its business as
now conducted and is qualified as a foreign corporation authorized to conduct
business and is in good standing in all jurisdictions where qualification is
necessary except where the failure to be so qualified would not have a material
adverse effect on the business, assets or financial condition of Midway.
2) Midway has the full right, power and authority to execute and deliver
the Agreements and to perform its obligations thereunder; and the execution,
delivery and performance of the Agreements by Midway will not contravene any
articles of incorporation or bylaw provision of Midway or any provision of any
contract to which Midway is a party. The Agreements have been duly authorized,
executed and delivered by Midway and constitute the legal, valid and binding
obligation of Midway, enforceable against
<PAGE>
[Letterhead of Midway Airlines]
February 11, 1997
Page 3
Midway in accordance with their terms. There is no law, rule or regulation that
would be contravened by the execution, delivery or performance by Midway of the
Agreements.
3) Neither the execution and delivery by Midway of the Agreements, the
performance by Midway of its respective obligations thereunder nor the
consummation of the transactions contemplated thereby constitute (or will
constitute, as the case may be) a violation of any applicable Federal law,
governmental rule or regulation or, to my actual knowledge, any order of any
court or governmental authority that is applicable to Midway.
4) No consent, approval or authorization of; and no registration,
declaration or filing with any administrative, governmental or other public
authority of the United States of America is required by law to be obtained or
made in connection with the execution, delivery and performance by Midway, or
for the validity or enforceability against Midway, of any of the Agreements
other than (i) such consents, approvals, authorizations, registrations,
declarations and filings that have been made or obtained on or prior to the data
hereof and remain in full force and effect, and (ii) such consents, approvals,
authorizations, registrations, declarations and filings, the failure to make or
obtain (a) which would not have a material adverse effect on the business,
condition or results of operation of Midway, and (b) which would not adversely
affect the validity or enforceability of any of the Agreements or the right as
or remedies of American or its affiliates.
This opinion is rendered to American and its affiliates in connection with
the Agreements and may not be relied upon by any person in any other context,
provided that American and its affiliates may provide this opinion (i) to
regulatory authorities should they so request or in connection with their normal
examinations, (ii) to their respective independent auditors and attorneys, (iii)
pursuant to order or legal process of any court or governmental agency, or (iv)
in connection with any legal action to which American or any of its affiliates
is a party arising out of the transactions contemplated by the Agreements.
Very truly yours,
MIDWAY AIRLINES CORPORATION
/s/ Jonathan S. Waller
Jonathan S. Waller
Senior Vice President and General Counsel
<PAGE>
EXHIBIT 10.21
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY {***}. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISISON.
AGREEMENT
BETWEEN
ROLLS-ROYCE AERO ENGINE SERVICES LIMITED
AND
MIDWAY AIRLINES CORPORATION
RELATING TO REPAIR AND OVERHAUL OF
ROLLS-ROYCE TAY ENGINES
<PAGE>
THIS AGREEMENT is made this 10th day of May 1996
BETWEEN
ROLLS-ROYCE AERO ENGINE whose registered office is at Moor Lane.
SERVICES LIMITED Derby, DE24 8BJ, England on its own behalf
and as agent on behalf of ROLLS-ROYCE plc
(hereinafter called "RRAES") of the first
part,
AND
MIDWAY AIRLINES CORPORATION whose registered office is at 300 West Morgan
Street, Suite 1200 Durham, North Carolina,
USA, 27701 (hereinafter called "MIDWAY") of
the second part.
WHEREAS
A. MIDWAY has acquired certain ROLLS-ROYCE TAY engines for use by MIDWAY in
Fokker 100 aircraft manufactured by Fokker BV.
B. ROLLS-ROYCE and MIDWAY have entered into a Warranty Agreement reference
CE117 incorporated in Fleet Support Agreement reference ISE dated _______
which is hereinafter called the "WARRANTY".
C. MIDWAY desires that RRAES shall undertake certain WORK on TAY engines used
in the operation of its aircraft.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
<PAGE>
INDEX
RECITALS
Clause 1 Definitions
Clause 2 Exclusion of Other Terms and Previous Understandings
Clause 3 Subject of Contract
Clause 4 Delivery
Clause 5 Standard
Clause 6 Charges
Clause 7 Payment
Clause 8 Turn Round Time and Delay in Delivery
Clause 9 General Provisions
Clause 10 Warranty and Liability
Clause 11 Patents
Clause 12 Additional Levies
Clause 13 Assignment
Clause 14 Termination
Clause 15 Amendment
Clause 16 Conflict
Clause 17 Notices
Clause 18 Headings
Clause 19 Survival
Clause 20 Law
Appendix 'A' Description and List of Engines
Appendix 'B' Planned Operating Parameters
Appendix 'C' Aircraft Lease Periods
<PAGE>
INDEX
RECITALS
Clause 1 Definitions
Clause 2 Exclusion of Other Terms and Previous Understandings
Clause 3 Subject of Contract
Clause 4 Delivery
Clause 5 Standard
Clause 6 Charges
Clause 7 Payment
Clause 8 Turn Round Time and Delay in Delivery
Clause 9 General Provisions
Clause 10 Warranty and Liability
Clause 11 Patents
Clause 12 Additional Levies
Clause 13 Assignment
Clause 14 Termination
Clause 15 Amendment
Clause 16 Conflict
Clause 17 Notices
Clause 18 Headings
Clause 19 Survival
Clause 20 Law
Appendix 'A' Description and List of Engines
Appendix 'B' Planned Operating Parameters
Appendix 'C' Aircraft Lease Periods
<PAGE>
Clause 1 DEFINITIONS
In this AGREEMENT unless the context otherwise requires:
1.1 "ENGINES" shall mean all the ROLLS-ROYCE engines listed and
described in Appendix 'A' to this AGREEMENT.
1.2 "PART" shall mean any part of an ENGINE acquired from
ROLLS-ROYCE or from a source approved by ROLLS-ROYCE.
1.3 "SUPPLIES" shall mean ENGINES, PARTS and any other items of
associated equipment delivered to RRAES by MIDWAY.
1.4 "RUNNING TIME" shall mean the number of hours flown by an
ENGINE as logged under the standards and procedures employed
by MIDWAY at the date of this AGREEMENT and acceptable to the
Federal Aviation Authority.
1.5 "TAKE-OFFS" shall mean the number of take-offs by an ENGINE as
logged under the standards and procedures employed by MIDWAY
at the date of this AGREEMENT and acceptable to the Federal
Aviation Authority.
1.6 "FLIGHT CYCLE" shall mean one operation of an ENGINE to
achieve one aircraft take-off and subsequent landing.
1.7 "ENGINE MANAGEMENT PROGRAMME" shall mean Midway's approved
Engine Management Programme which may be amended from time to
time by Midway and Rolls-Royce in accordance with any
applicable laws and regulations. This programme will define
the Engineering responsibilities and practices.
1.8 "SCHEDULED OVERHAUL" shall mean the WORK required in an
Overhaul Base following the removal of an ENGINE, PART or
assembly of PARTS to comply with the ENGINE MANAGEMENT
PROGRAMME and such other WORK as may then be necessary to
enable such ENGINE, PART or assembly of PARTS to be released
for further operation in service.
1.9 "UNSCHEDULED OVERHAUL" shall mean work other than SCHEDULED
OVERHAUL which is required when an ENGINE, PART or assembly of
PARTS has become unserviceable and which enables such ENGINE,
PART or assembly of PARTS to be released for further operation
in service.
1.10 "OVERHAUL" shall mean SCHEDULED OVERHAUL or UNSCHEDULED
OVERHAUL as the case may be.
<PAGE>
Clause 1 DEFINITIONS (Continued)
1.11 "REPAIR" shall mean work other than OVERHAUL which is required
when an ENGINE, PART or assembly of PARTS has become
unserviceable and which is necessary to render the ENGINE,
PART or assembly of PARTS serviceable such that it can
continue in service.
1.12 "WORK" shall mean OVERHAUL, REPAIR or any other work in
respect of which in each case RRAES accepts orders from MIDWAY
pursuant to this Agreement.
1.13 "OVERHAUL BASE" shall mean the Overhaul Base stipulated by
RRAES from time to time during the period of this AGREEMENT.
1.14 "AIRCRAFT LEASE PERIOD" shall mean the period of lease of each
aircraft as detailed in Appendix 'C'.
Clause 2 EXCLUSION OF OTHER TERMS AND PREVIOUS UNDERSTANDINGS
2.1 This AGREEMENT contains the only provisions governing REPAIR
or OVERHAUL of SUPPLIES and shall apply to the exclusion of
any other provisions on or attached to or otherwise forming
part of any order form of MIDWAY or any acknowledgement or
acceptance by RRAES or of any other document which may be
issued by either party relating to REPAIR or OVERHAUL of
SUPPLIES.
2.2 The parties have negotiated this AGREEMENT on the basis that
its provisions represent their entire agreement relating to
REPAIR or OVERHAUL by RRAES of SUPPLIES. This AGREEMENT shall
supersede all representations, agreements, statements and
understandings made prior to the execution of this AGREEMENT
whether orally or in writing relating to REPAIR or OVERHAUL by
RRAES of SUPPLIES. The parties further agree that neither of
them has placed any reliance whatsoever on any such
representations, agreements, statements or understandings
other than those expressly incorporated in this AGREEMENT.
<PAGE>
Clause 3 SUBJECT OF CONTRACT
3.1 The parties hereto agree that RRAES will carry out REPAIR or
OVERHAUL described in clauses 6.2.1 through 6.2.5 to all
ENGINES and PARTS which develop a requirement for OVERHAUL or
an OVERHAUL BASE REPAIR during the AIRCRAFT LEASE PERIOD and
which are delivered to the OVERHAUL BASE not later than 30
(thirty) days after expiry of that period.
Clause 4 DELIVERY
4.1 MIDWAY will deliver ENGINES and PARTS requiring REPAIR or
OVERHAUL to the OVERHAUL BASE at its own expense.
4.2 MIDWAY will not later than the time of delivery of ENGINES and
PARTS pursuant to Sub-clause 4.1 above, also deliver to RRAES
the completed ENGINE Log Book (or such other Log Book as may
be applicable).
4.3 MIDWAY will notify RRAES in writing at least 1 (one) week
before the time for re-delivery of its instructions as to the
marking and shipping of the SUPPLIES after notification from
RRAES of scheduled redelivery.
4.4 Following WORK, RRAES will re-deliver SUPPLIES to MIDWAY fas
(Incoterms 1990) Great Britain port or any other destination
in Great Britain as specified by MIDWAY.
4.5 A sufficient number of packing cases, stands and
transportation parts for use in transporting SUPPLIES to and
from the OVERHAUL BASE shall be procured and maintained in
usable condition by MIDWAY at MIDWAY'S expense.
Clause 5 STANDARD
5.1 Unless otherwise mutually agreed, RRAES will carry out WORK on
SUPPLIES in accordance with the ENGINE MANAGEMENT PROGRAMME in
a professional and workmanlike manner.
5.2 Unless otherwise agreed, RRAES will carry out REPAIRS or
OVERHAULS to the modification standard generally recommended
by ROLLS-ROYCE for ENGINES of the same type and model as the
ENGINES.
<PAGE>
Clause 6 CHARGES
6.1 In respect of RUNNING TIME and TAKE-OFFS of the ENGINES during
the period of this AGREEMENT, MIDWAY shall pay to RRAES: (as
adjusted in accordance with the provisions of sub-clause 6.6)
multiplied by the RUNNING TIME of the ENGINES.
6.1.1 an amount equal to {***} United States Dollars for the
period 01 September 1995 to 31 August 1997 (24 payments)
6.1.2 an amount equal to {***} United States Dollars for the
period 01 September 1997 to 31 May 1999 (21 payments)
6.2 The Basic Charges under clause 6.1 above are in consideration
of RRAES undertaking to carry out:
6.2.1 SCHEDULED OVERHAULS, and
6.2.2 REPAIRS and UNSCHEDULED OVERHAULS arising from failures
of ENGINES and PARTS caused by the breakdown or
deterioration of the ENGINES or PARTS due to defects in
design, material or workmanship in the manufacture,
REPAIR or OVERHAUL of the ENGINE or PART, and;
6.2.3 REPAIRS and UNSCHEDULED OVERHAULS arising from failures
of ENGINES and PARTS caused by the breakdown or
deterioration of the ENGINES or PARTS due to foreign
object damage.
6.2.4 REPAIRS arising from the introduction of Mandatory
Modifications required by RRAES and/or airworthiness
directives issued by any applicable governmental
authority.
6.2.5 REPAIRS and OVERHAULS arising from ENGINE removals
generally recommended by ROLLS-ROYCE with respect to the
same type and model of ENGINE as the ENGINES.
6.3 MIDWAY shall pay RRAES at the RRAES normal commercial rates
current at the date of presentation of RRAES invoice for
REPAIRS and UNSCHEDULED OVERHAULS arising from failures of
ENGINES and PARTS due to causes outside the reasonable control
of RRAES including but not limited to failures of ENGINES and
PARTS, which:
6.3.1 have been caused by MIDWAY'S failure to operate an
ENGINE in accordance with the procedures laid down in
Appendix 'D' to the WARRANTY, or
6.3.2 have been caused by misuse, negligence, improper
operation or failures due to negligent foreign object
damage.
<PAGE>
Clause 6 CHARGES (Continued)
6.3.3 have been caused by MIDWAY failure to properly store,
install, maintain, utilise or pack for transport such
ENGINE and /or PART in accordance with the then current
RRAES written recommendations, or
6.3.4 have been caused by the primary breakdown or
deterioration of any constituent or component which was
not acquired by MIDWAY from RRAES or through channels
specifically approved in writing by ROLLS-ROYCE, unless
such constituent or component PART was installed by
RRAES.
6.4 With the exception of the obligation provided for in Clause
10.5, RRAES shall not be liable for any expenses, costs or
liabilities sustained in connection with the removal of an
ENGINE or PART from, or the replacement in an aircraft or the
removal of a PART from, or the replacement in an ENGINE other
than those sustained by RRAES in carrying out REPAIRS and
OVERHAULS pursuant to this AGREEMENT at the OVERHAUL BASE.
6.5 In respect of PARTS supplied pursuant to sub-clause 5.4 above,
MIDWAY shall pay RRAES at the RRAES commercial prices and
rates current at the installation of such PARTS.
6.6 The Basic Charges shown in sub-clause 6.1 are based on 1995
values and will be subject to annual variation prospectively
on 01 September 1996 and each 01 September thereafter in
accordance with the formula:
C = Co (0.35L +0.65P )
-- --
Lo Po
Where C = The charge per hour of RUNNING TIME or the
charge per TAKE-OFF as the case may be.
Co = Basic charge per hour of RUNNING TIME or the
basic charge per TAKE-OFF as the case may be.
Lo = All employees: By Industry for Mechanical
Engineering (Table 5.3) "Index Number of
Average Earnings" published by the British
Government for the month of February 1995.
L = The corresponding Index Number published for
the month of February preceding the year for
which the adjustment is to be made.
<PAGE>
Clause 6 CHARGES
6.6 (Continued)
P = The Index of Rolls-Royce Tay Parts Prices
current on 01 September for the year for
which the adjustment is to be made relative
to the Base Prices as at 01 September 1995.
Po = The index relative to the Base Level of
Rolls-Royce Tay Parts as at 01 September
1995, ie 100.
If the indices herein specified be discontinued or should the
basis of their calculations be modified proper and
substantially equivalent indices shall be substituted by
mutual agreement of the parties.
6.7 It is understood that the charges specified in sub-clause 6.1
above have been calculated with regard to the overall
operation of the ENGINES by MIDWAY as detailed in Appendix
'B'.
In the event that MIDWAY should take any action or any event
should occur which is reasonably likely to materially change
the overall operation of the ENGINES such that the basis upon
which such charges were calculated no longer remains the same,
including without limitation the sale or other disposition of
any of the ENGINES or the use of the ENGINES on routes other
than as described in Appendix 'B', then RRAES may at its
discretion reasonably revise the charges specified in
sub-clause 6.1 in accordance with its customary standards.
Clause 7 PAYMENT
7.1 Within ten days of the end of each month of operation of the
ENGINES, MIDWAY will supply to RRAES a certified statement of
actual RUNNING TIME and TAKE-OFFS by ENGINE serial number for
the previous month.
7.2 Payment of charges pursuant to clause 6.1:
7.2.1 shall be made in US Dollars within 14 days of the end of
the month to which the charges apply and for any amount
due pursuant to clause 6.3 or 6.5 within 14 days of
redelivery of the ENGINE or PART concerned.
<PAGE>
Clause 7 PAYMENT (Continued)
7.2.2 which became due prior to signature of this AGREEMENT
shall be made on 1996, subject to the deduction of an
amount equal to the engine maintenance reserve paid by
Midway to the aircraft lessors at that date.
7.3 Subject to Clause 12 below, MIDWAY undertakes that RRAES shall
receive in the United Kingdom, the full amount of payments
falling due under this AGREEMENT without any withholding or
deduction whatsoever.
7.4 All payments under clause 7.3 above shall be made by
telegraphic transfer to the following address:
National Westminster Bank plc
Overseas Branch
LONDON
for telephone credit to:
Rolls-Royce CD Account Number
140-2-00772224
at 15 Bishopsgate Office
Clause 8 TURN ROUND TIME AND DELAY IN DELIVERY
8.1 Subject to sub-clause 8.2 below and provided MIDWAY delivers
ENGINES and if the WORK is to be performed on a PART, then
such PART to the OVERHAUL BASE for WORK at a reasonably
consistent rate, RRAES will carry out WORK in accordance with
the following turn round times which will commence when the
ENGINE or PART reaches the OVERHAUL BASE and which will end
when such ENGINE or PART is available fully prepared for
despatch ex-works at the OVERHAUL BASE.
8.1.1 ENGINES returned for REPAIR or OVERHAUL not requiring
defect investigation - 8 (eight) weeks.
8.1.2 ENGINES returned for REPAIR or OVERHAUL due to unusual
failures requiring defect investigation or life
development purposes - 10 (ten) weeks.
8.1.3 ENGINES returned for REPAIR not requiring disassembly of
any MODULE - 4 (four) weeks.
8.1.4 PARTS returned for REPAIR or OVERHAUL - to be quoted by
RRAES on request.
<PAGE>
Clause 10 WARRANTY AND LIABILITY (Continued)
10.4 The following Notional Warranty benefits will be applied for
the purposes of sub-clause 6.1 hereof:
10.4.1 In respect of all PARTS incorporated in the course of
WORK pursuant to this AGREEMENT, the WARRANTY shall
apply subject to all the provisions contained therein.
10.4.2 Subject to the 'Governing Conditions' section of the
WARRANTY, if it is shown to the reasonable satisfaction
of RRAES that before the expiration of twelve months
from the date of redelivery or within six months or
1,500 hours flown from the date of installation of an
ENGINE or PART into an aircraft, whichever is the
sooner, a defect, deficiency, failure, malfunction or
failure to function shall have become apparent in an
ENGINE or PART due in all or in part to the use by
RRAES of faulty workmanship during the last REPAIR or
OVERHAUL then RRAES shall REPAIR such ENGINE OR part
and grant MIDWAY a 100% credit against the REPAIR
costs.
10.5 In the event of a valid WARRANTY claim, RRAES will be
responsible for reasonable charges incurred by MIDWAY for
removal, installation and transportation from and to MIDWAY'S
base in Raleigh, North Carolina, USA for ENGINES removed
pursuant to clause 10.4 above.
Clause 11 PATENTS
11.1 Subject to the conditions set out in this Clause 11, RRAES
shall indemnify MIDWAY against any claim that the use by
MIDWAY of any of the PARTS supplied hereunder infringes any
patent, design or model duly granted or registered provided,
however, that RRAES shall not be liable to MIDWAY for any
consequential damages or any loss of use of such PARTS or of
the ENGINE or aircraft in which such PARTS may be incorporated
arising as a result directly or indirectly of any such claim.
11.2 MIDWAY will give immediate notice in writing to RRAES of any
such claim whereupon RRAES shall have the right at its own
expense to assume the defence of or to dispose of or to settle
such claim in its sole discretion and MIDWAY will give RRAES
all reasonable assistance and will not by any act or omission
do anything which may directly or indirectly prejudice RRAES
in this connection.
<PAGE>
Clause 5 STANDARD (Continued)
5.3 MIDWAY shall have the right to appoint a representative at the
OVERHAUL BASE to consult with RRAES representatives with
respect to technical matters arising in the course of the WORK
to be performed by RRAES hereunder.
5.4 In the event that ENGINES are delivered to RRAES by MIDWAY
which do not contain each PART described in the Engine Receipt
List attached hereto as Part 1, Section 1 in Sub-clause 1.1
(Appendix 'A') above, then RRAES will advise MIDWAY of those
missing PARTS exceeding US Dollars 500 at the then current
RRAES Catalogue value and unless otherwise instructed by
MIDWAY, RRAES reserves the right to replace any missing PARTS
and shall be entitled to charge MIDWAY for the same at the
RRAES commercial prices and rates current at the date of
presentation of RRAES' invoice.
5.5 Any PARTS incorporated in the course of REPAIR or OVERHAUL
pursuant to this AGREEMENT shall be deemed to have been sold
to the owner of the SUPPLIES, and title to and risk of loss of
and damage to such PARTS subject to the terms of Clause 10
below, shall pass to the owner of the SUPPLIES upon
re-delivery of the SUPPLIES by RRAES to MIDWAY pursuant to
Sub-clause 4.4 above.
5.6 RRAES reserves the right at its sole discretion to fit new or
repaired replacement PARTS in the course of REPAIR or OVERHAUL
pursuant to this AGREEMENT at no additional cost to MIDWAY
unless pursuant to Clause 5.4 above. Such new or replacement
PARTS to be in as good operating condition, have substantially
similar hours available until the next SCHEDULED OVERHAUL and
have the same interchangeable modification standard. Title to
and risk of loss of or damage to any PARTS so replaced whether
scrap or repairable shall pass to RRAES upon removal from the
ENGINE or from the assembly of PARTS.
5.7 The REPAIR or OVERHAUL of SUPPLIES shall be deemed to have
been accepted by MIDWAY on its signature of the relevant
Release Note/Approved Certificate of Inspection. Such
acceptance shall not be deemed a waiver of any rights or
remedies of MIDWAY including without limitation any claim for
warranty under Clause 10 hereof.
<PAGE>
Clause 8 TURN ROUND TIME AND DELAY IN DELIVERY (Continued)
8.2 In the event that the actual turn round time in respect of any
ENGINE exceeds the turn round time agreed pursuant to
Sub-clause 8.1 above (as such period may be extended pursuant
to Sub-clause 8.3 below) and MIDWAY is unable to operate an
aircraft due to such delay, RRAES will either provide a lease
engine subject to availability and waive any daily rental
charges or be responsible for charges incurred by MIDWAY for
the daily rental of a lease engine until such times as such
delayed ENGINE is returned to MIDWAY. Such responsibility for
charges incurred by MIDWAY will not exceed those generally
charged by Rolls-Royce Leasing Limited, provided that MIDWAY
proves that it has suffered such damage and provided that
MIDWAY makes claims hereunder within three (3) months after
redelivery.
8.3 If RRAES is hindered or prevented from carrying out WORK or
redelivering any of the SUPPLIES within the time for
re-delivery specified in Sub-clause 8.1 above by reason of:
8.3.1 any cause beyond the reasonable control of RRAES, or
8.3.2 fires or industrial disputes or introduction of
mandatory modifications,
the time for re-delivery shall be extended by a period equal
to the period during which the WORK or re-delivery shall have
been so hindered or prevented and provided RRAES uses its best
efforts to promptly complete the WORK, RRAES shall be under no
liability whatsoever in respect of such delay.
Clause 9 GENERAL PROVISIONS
9.1 MIDWAY shall keep records of ENGINE operation, maintenance,
RUNNING TIME and TAKE-OFFS and shall permit RRAES to inspect
such records. MIDWAY shall submit to RRAES each month a
certified statement of RUNNING TIME and TAKE-OFFS listed by
ENGINE serial number in respect of the previous month.
9.2 If any SUPPLIES delivered to RRAES are lost, destroyed or
damaged during the time between such delivery and return by
RRAES to MIDWAY then RRAES will either:
9.2.1 repair such damage free of charge, or
9.2.2 pay to MIDWAY the value of such SUPPLIES which has been
agreed between RRAES and MIDWAY provided that in the
absence of agreement the liability of RRAES shall not
exceed the original RRAES sale price of the SUPPLIES.
<PAGE>
Clause 9 GENERAL PROVISIONS
9.2 (Continued)
provided always that RRAES will at MIDWAY'S request use its
best endeavours to provide an adequate replacement for any
such SUPPLIES lost or destroyed. In the event that a
replacement ENGINE is provided, such ENGINE shall be
substituted for the ENGINE lost or destroyed and Appendix 'A'
hereto shall be amended accordingly.
9.3 MIDWAY shall operate the ENGINES in accordance with the
Flexible Take-off Thrust Procedures as recommended by Fokker
BV.
Clause 10 WARRANTY AND LIABILITY
10.1 Subject to sub-clause 10.2 below in respect of all PARTS
incorporated in the course of OVERHAUL or REPAIR pursuant to
this or any other AGREEMENT or incorporate as spares in
service, the WARRANTY shall apply subject to all the
provisions contained therein.
10.2 MIDWAY shall not be entitled to receive any benefit whatsoever
whether by way of repair, replacement, parts cost allowance,
labour charges or otherwise under the WARRANTY in relation to
SCHEDULED OVERHAULS and any failures of ENGINES or PARTS which
are covered by the charges under sub-clause 6.1 above and are
specified in sub-clause 6.2 above, but save as expressly
provided above the WARRANTY shall remain in full force and
effect.
10.3 MIDWAY accepts that the express benefits provided to MIDWAY by
virtue of the charges under sub-clause 6.1 above, together
with the express remedies provided to MIDWAY in respect of the
SUPPLIES in accordance with this AGREEMENT and WARRANTY
represent the entire responsibility and liability of RRAES to
MIDWAY in respect of all terms, conditions and warranties
express or implied whether statutory or otherwise and any
other obligations and liabilities whatsoever of RRAES relating
to the OVERHAUL and REPAIR of SUPPLIES or any other goods or
services to be supplied pursuant to this AGREEMENT.
<PAGE>
Clause 11 PATENTS (Continued)
11.3 RRAES shall have the right to substitute for any allegedly
infringing PARTS substantially equivalent non-infringing
PARTS.
11.4 The indemnity contained in Sub-clause 11.1 above shall not
apply to and RRAES shall have no liability in respect of
claims for infringement in respect of:
11.4.1 PARTS manufactured to the specific design instructions
of MIDWAY, or
11.4.2 PARTS not of RRAES design but RRAES shall, in the event
of any claim for infringement, pass on to MIDWAY so far
as it has the right to do so the benefits of any
indemnity given to RRAES by the designer, manufacturer
or supplier of such PARTS, or
11.4.3 the manner or method in which any of the PARTS is
installed in the aircraft, or
11.4.4 any combination of any of the PARTS with any item or
items other than PARTS.
Clause 12 ADDITIONAL LEVIES
12.1 Subject to Sub-clause 12.2 below RRAES shall pay all imposts,
duties, fees, taxes and other like charges levied by the
United Kingdom Government or any agency thereof in connection
with the OVERHAUL or REPAIR of ENGINES and PARTS prior to
their redelivery.
12.2 MIDWAY shall pay all other imposts, duties, fees, taxes and
other like charges levied by the United States of America or
any subdivision thereof.
Clause 13 ASSIGNMENT
Neither party may assign any of its rights or obligations hereunder
without the written consent of the other party except that:
13.1 RRAES may assign its rights to receive money hereunder and
13.2 RRAES reserves the right, in its discretion, to sub-contract
any part of the WORK required to be performed by it hereunder.
<PAGE>
Clause 14 TERMINATION
If MIDWAY makes any agreement with creditors compounding debts,
enters into liquidation whether compulsory or voluntary (otherwise
than for the purpose of amalgamation or re-construction) becomes
insolvent, suffers a receiver of the whole or part of its assets to
be appointed, or commits a breach of any of its obligations under
this AGREEMENT (provided that, except in the case of breach in
respect of payment obligations, MIDWAY shall be allowed 30 (thirty)
days in which to remedy such breach) RRAES shall have the right,
without prejudice to its other rights or remedies:
14.1 to stop any REPAIR or OVERHAUL already commenced and to refuse
to commence any further REPAIR or OVERHAUL, and
14.2 to revise the charges under Sub-clause 6.1 to take account of
any cessation or change in the overall operation of the
ENGINES resulting from any of the events covered by this
Clause 14, and
14.3 to declare and require that notwithstanding Clause 7 above,
all amounts due on the date of termination referred to in
Sub-clause 6.1 shall become immediately due and payable.
Clause 15 AMENDMENT
This AGREEMENT shall not be amended in any way other than by
agreement in writing executed by the parties hereto after the date
of this AGREEMENT, which is expressly stated to amend this
AGREEMENT.
Clause 16 CONFLICT
In the event of any conflict or discrepancy between the Appendices
forming part of this AGREEMENT and any other part of this AGREEMENT,
then the latter shall prevail.
<PAGE>
Clause 17 NOTICES
Any notice to be served pursuant to this AGREEMENT is to be sent by
registered post or by telex:
In the case of RRAES to:
Rolls-Royce Aero Engine Services Limited
Repair and Overhaul Manager - Spey and Tay
EAST KILBRIDE
Glasgow G74 4PY
Scotland
or such other place of business as may be notified in writing by
RRAES to MIDWAY from time to time.
In this case of MIDWAY to:
Midway Airlines Corporation
300 West Morgan Street
Suite 1100
DURHAM
North Carolina USA 27701
for the attention of Vice President Maintenance
or such other place of business as may be notified in writing by
MIDWAY to RRAES from time to time.
Clause 18 HEADINGS
The clause `Headings' and the Index do not form part of this
AGREEMENT and shall not affect the interpretation of this AGREEMENT.
Clause 19 SURVIVAL
The provisions of Clauses 10, 15, 20 and 21 hereof shall survive and
continue to have effect after termination for any reason whatsoever
of this AGREEMENT or after this AGREEMENT becomes impossible of
performance or is otherwise frustrated.
Clause 20 LAW
This AGREEMENT shall be subject to and interpreted and construed in
accordance with the Laws of England.
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this AGREEMENT to be entered
into on the day and year first before written.
For ROLLS-ROYCE AERO ENGINE /s/ John R. Agar
SERVICES LIMITED ------------------------------
In the presence of /s/ John Foeland
------------------------------
For MIDWAY AIRLINES CORPORATION /s/ Jonathan D. Waller
------------------------------
Senior Vice President
General Counsel
In the presence of /s/ Thomas Duffy Jr.
------------------------------
<PAGE>
APPENDIX 'A'
DESCRIPTION AND LIST OF THE ENGINES
<PAGE>
APPENDIX 'A'
1. LIST OF ENGINES
The following RRAES Tay Mk 650-15 ENGINES serially numbered:
17288
17289
17290
17291
17650
17651
17667
17668
A. DESCRIPTION OF ENGINES
Rolls-Royce Tay Mk 650-15 ENGINES
Description: Turbofan Engine incorporating a single fan and a three stage
intermediate compressor driven by a three stage turbine, a
twelve stage high pressure compressor driven by a two stage
turbine, and a turbo annular split combustion chamber
containing ten straight flow flame tubes and an internal
mixer unit.
MODULES
Each Engine comprises the following modules:
01 LP compressor
02 IP compressor
03 HP compressor
04 Combustion assembly and HP turbine
05 LP turbine
06 High speed gearbox
07 Intermediate casing
Together with these items the definitive basic specification includes the
following:
<PAGE>
ENGINE RECEIPT LIST
TAY ENGINE
PART 1 SECTION 1
Item
Fig Number Description Qty ATA Ref
- --- ------ ----------- --- -------
1 1 AFCR assembly 1 75-32-02
1 2 TCPL phial assembly 1 75-32-40
1 3 Micro switch and actuator 1 36-11-01
1 4 12th stage BV micro switch housing assy 1 75-32-33
1 5 12th stage air off-take cover 1 72-71-01
1 6 7th stage air off-take cover 1 72-71-01
1 7 Fuel temp transmitter 1 77-42-02
1 8 Oil cooler case assembly 1 79-22-01
1 9 Oil temperature transmitter 1 77-47-02
1 10 HP filter housing assembly 1 79-21-01
1 11 LP FWS assembly 1 73-34-01
1 12 Fuel filter assembly 1 73-11-03
1 13 LP tacho generator 1 77-43-01
2 14 Throttle relay lever transmitter 1 76-11-02
2 15 Fuel flow regulator 1 73-21-01
2 16 LP governor assembly 1 73-21-02
2 17 HP fuel shut-off valve assembly 1 73-11-07
2 18 AFC rpm signal transmitter assembly 1 75-32-20
2 19 Fuel diff pressure switch 1 77-42-03
2 20 HP fuel pump 1 73-11-05
2 21 Oil tank assembly 1 79-10-01
2 22 Oil tank level indicator 1 79-10-01
2 23 LP warning switch 1 79-32-01
2 24 Oil pressure trans assembly 1 77-47-01
2 25 Ejector pump unit 1 73-11-01
2 26 Fuel drain tank collector assembly 1 71-71-01
2 27 IDG surface oil cooler 1 24-13-01
2 28 Thermocouple terminal 1 77-45-03
2 29 Cooling air outlet switch assembly 1 75-21-02
2 30 Oil diff pressure switch 1 77-47-02
2 31 Oil diff pressure switch housing 1 77-47-02
2 32 Oil pump assembly 1 72-61-30
2 33 HP tacho generator 1 77-43-01
2 34 LP fuel pump assembly 1 73-11-04
2 35 Fuel inlet tube to LP fuel pump clamp assy 1 73-21-06
2 36 Fuel solenoid valve assembly 1 73-21-06
3 39 Engine rating, ID plug 1 72-71-03
3 40 Electrical harness 1 71-50-01
<PAGE>
APPENDIX 'B'
PLANNED OPERATING PARAMETERS
<PAGE>
PLANNED OPERATING PARAMETERS
Fleet Utilisation: A minimum of 92,000 FLIGHT HOURS in the
aggregate for all ENGINES during the
effective period of the AGREEMENT.
Stage Length: Average (take-off to touch down) of not less
than 1.30 hours.
Environment: East Coast and Mid-West North America for 90%
of FLIGHT HOURS of the ENGINES.
<PAGE>
APPENDIX 'C'
AIRCRAFT LEASE PERIODS
<PAGE>
AIRCRAFT LEASE PERIODS
Aircraft Designation Period of Lease
- -------------------- ---------------
MSN 13329 24 August 1995 to 22 March 1999
MSN 11323 03 October 1995 to 30 November 1998
MSN 11321 13 November 1995 to 31 October 1998
MSN 11330 20 December 1995 to 03 May 1999
<PAGE>
EXHIBIT 10.22
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY [***]. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
BOMBARDIER REGIONAL AIRCRAFT DIVISION
PURCHASE AGREEMENT
PA-0393
BETWEEN
BOMBARDIER INC.
AND
MIDWAY AIRLINES CORPORATION
Relating to the Purchase of
Ten (10) Canadair Regional Jet aircraft
Including related Customer Support Services
1
<PAGE>
TABLE OF CONTENTS
ARTICLE
1 INTERPRETATION
2 SUBJECT MATTER OF SALE
3 CUSTOMER SUPPORT SERVICES AND WARRANTY
4 PRICE
5 PAYMENT
6 DELIVERY PROGRAM
7 BUYER INFORMATION
8 CERTIFICATION FOR EXPORT
9 ACCEPTANCE PROCEDURE
10 TITLE AND RISK
11 CHANGES
12 BUYER'S REPRESENTATIVES AT MANUFACTURE SITE
13 EXCUSABLE DELAY
14 NON-EXCUSABLE DELAY
15 LOSS OR DAMAGE
16 TERMINATION
17 NOTICES
18 INDEMNITY AGAINST PATENT INFRINGEMENT
19 LIMITATION OF LIABILITY
20 ASSIGNMENT
21 SUCCESSORS
22 APPLICABLE LAWS
23 CONFIDENTIAL NATURE OF AGREEMENT
24 AGREEMENT
APPENDIX
I ECONOMIC ADJUSTMENT FORMULA
II DELIVERY SCHEDULE
III SPECIFICATION
IV BUYER SELECTED OPTIONAL FEATURES
EXHIBIT
I CERTIFICATE OF ACCEPTANCE
II BILL OF SALE
III CERTIFICATE OF RECEIPT OF AIRCRAFT
IV CHANGE ORDER
ANNEX A CUSTOMER SUPPORT SERVICES
ANNEX B WARRANTY AND SERVICE LIFE POLICY
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INDEX OF LETTER AGREEMENTS
B97-7701-RJTL-CRJ0393-001 Option Aircraft
B97-7701-RJTL-CRJ0393-002 Shadow Option Aircraft
B97-7701-RJTL-CRJ0393-003 Financing
B97-7701-RJTL-CRJ0393-004 Deposit
B97-7701-RJTL-CRJ0393-005 Customer Support
B97-7701-RJTL-CRJ0393-006 Spares
B97-7701-RJTL-CRJ0393-007 Airworthiness Directives
B97-7701-RJTL-CRJ0393-008 Airframe Direct Maintenance Cost
B97-7701-RJTL-CRJ0393-009 Dispatch Reliability
B97-7701-RJTL-CRJ0393-010 Performance
B97-7701-RJTL-CRJ0393-011 Configuration
3
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This Agreement is made on the 17th day of September 1997.
BY AND BETWEEN: BOMBARDIER INC., a Canadian corporation represented by its
BOMBARDIER REGIONAL AIRCRAFT DIVISION ("BRAD") having an
office at 123 Garratt Boulevard, Downsview, Ontario, Canada.
AND: MIDWAY AIRLINES CORPORATION, with offices at 300 West Morgan
Street, Suite 1200, Durham, North Carolina, United States of
America ("Buyer")
WHEREAS Bombardier Inc. through its Canadair Manufacturing Division,
is engaged in the manufacture of the Canadair Regional Jet
aircraft products; and
BRAD has been created for the purpose of providing marketing,
sales and customer support services for the Canadair Regional
Jet aircraft and related products;
WHEREAS Buyer desires to purchase ten (10) Aircraft (as later defined)
and related data, documents, and services under this Agreement
(as later defined), and BRAD desires to arrange the sale of
such Aircraft, data, documents and services to Buyer,
NOW THEREFORE, in consideration of the mutual covenants herein contained, Buyer
and BRAD agree as follows:
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ARTICLE 1. INTERPRETATION
1.1 The recitals above have been inserted for convenience only and do not form
part of the agreement.
1.2 The headings in this agreement are included for convenience only and shall
not be used in the construction and interpretation of this agreement.
1.3 In this agreement, unless otherwise expressly provided, the singular
includes the plural and vice-versa.
1.4 In this agreement the following expressions shall, unless otherwise
expressly provided, mean:
(a) "Acceptance Period" shall have the meaning attributed to it in
Article 9.3;
(b) "Acceptance Date" shall have the meaning attributed to it in Article
9.7.(a);
(c) "Agreement" means this Agreement, including its Exhibits, Annexes,
Appendices and Letter Agreements, if any, attached hereto (each of
which is incorporated in the Agreement by this reference), as they
may be amended pursuant to the provisions of the Agreement;
(d) "Aircraft" shall have the meaning attributed to it in Article 2.1
(e) "Aircraft Purchase Price" shall have the meaning attributed to it in
Article 4.2;
(f) "Base Price" shall have the meaning attributed to it in Article 4.1;
(g) "Bill of Sale" shall have the meaning attributed to it in Article
9.7 (c);
(h) "BFE" shall have the meaning attributed to it in Article 11.1;
(i) "Buyer Selected Optional Features" shall have the meaning attributed
to it in Article 2.1;
(j) "Delivery Date" shall have the meaning attributed to it in Article
9.7.(c);
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(k) "Economic Adjustment Formula" shall have the meaning attributed to
it in Article 4.2;
(l) "Excusable Delay" shall have the meaning attributed to it in Article
13.1;
(m) "FAA" shall have the meaning attributed to it in Article 8.1;
(n) N/A
(o) "Non-Excusable Delay" shall have the meaning attributed to it in
Article 14.1;
(p) "Notice" shall have the meaning attributed to it in Article 17.1;
(q) "Other Patents" shall have the meaning attributed to it in Article
18.1;
(r) "Permitted Change" shall have the meaning attributed to it in
Article 11.2;
(s) "Readiness Date" shall have the meaning attributed to it in Article
9.1;
(t) "Regulatory Change" shall have the meaning attributed to it in
Article 8.4;
(u) "Scheduled Delivery Dates" shall have the meaning attributed to it
in Article 6;
(v) "Specification" shall have the meaning attributed to it in Article
2.1;
(w) "Taxes" shall have the meaning attributed to it in Article 4.3: and
(x) "TC" shall have the meaning attributed to it in Article 8.1.
1.5 All dollar amounts in this Agreement are in United States Dollars.
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ARTICLE 2 - SUBJECT MATTER OF SALE
2.1 Subject to the provisions of this Agreement, BRAD will sell and Buyer will
purchase ten (10) Canadair Regional Jet aircraft model CL600-2B19 Version
200ER manufactured pursuant to specification no. RAD-601R-153 issue NC
dated September, 1997, attached hereto as Appendix III, as that
specification may be modified from time to time in accordance with this
Agreement (the "Specification"), as supplemented to reflect the
incorporation of the Buyer selected optional features ("Buyer Selected
Optional Features") set forth in Appendix IV hereto (collectively the
"Aircraft").
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<PAGE>
ARTICLE 3 - CUSTOMER SUPPORT SERVICES AND WARRANTY
3.1 BRAD shall provide to Buyer the customer support services pursuant to the
provisions of Annex A attached hereto.
3.2 BRAD shall provide to Buyer the warranty and the service life policy
described in Annex B attached hereto which except as otherwise expressly
set forth in this Agreement, including without limitation the letter
agreements that supplement this Agreement, shall be the exclusive warranty
applicable to the Aircraft.
3.3 Unless expressly stated otherwise, the services referred to in 3.1 and 3.2
above are incidental to the sale of the Aircraft and are included in the
Aircraft Purchase Price.
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ARTICLE 4 - PRICE
4.1 The base price for each of the Aircraft (including the Buyer Selected
Optional Features listed in Appendix IV but excluding any other available
optional features) Ex Works (Incoterms 1990) BRAD's facilities in
Montreal, Quebec, (the "Base Price") is [***] expressed in
November 1997 dollars.
4.2 The price of the Aircraft shall be the Base Price adjusted for changes
made pursuant to Article 11 and any Regulatory Changes pursuant to Article
8.4, and further adjusted to the Delivery Date to reflect economic
fluctuations during the period from November 1, 1997 to the Delivery Date
of each Aircraft ("Aircraft Purchase Price"). Such adjustments shall be
based on the economic adjustment formula attached as Appendix I ("Economic
Adjustment Formula").
4.3 The Aircraft Purchase Price does not include any taxes, fees or duties
including, but not limited to, sales, use, value added (including the
Canadian Goods and Services Tax), personal property, gross receipts,
franchise, excise taxes, assessments or duties ("Taxes") which are or may
be imposed by law upon BRAD, any affiliate of BRAD, Buyer or the Aircraft
whether or not there is an obligation for BRAD to collect same from Buyer,
by any taxing authority or jurisdiction occasioned by, relating to or as a
result of the execution of this Agreement or the sale, lease, delivery,
storage, use or other consumption of any Aircraft, BFE or any other
matter, good or service provided under or in connection with this
Agreement. According to current legislation, Canadian taxes, duties and
Goods and Services Tax are not applicable to aircraft sold and immediately
exported from Canada. If changes to Canadian tax legislation result in
taxes being imposed on Buyer, BRAD will cooperate with Buyer to mitigate
the effect of such taxes on Buyer, at Buyer's expense
4.4 Notwithstanding any of the above, if any Taxes (other than Canadian income
taxes charged on the income of BRAD) are imposed upon Buyer or become due
or are to be collected from BRAD by any taxing authority, BRAD shall
notify Buyer and Buyer shall promptly, but no later than ten (10) working
days after receiving such notice, pay such Taxes directly to the taxing
authority, or reimburse BRAD for such Taxes, as the case may be, including
interest and penalties, so long as such interest or penalties are not
attributable to the gross negligence or willful misconduct of BRAD. Buyer
retains the right to contest, at Buyer's expense and by appropriate lawful
proceedings, the imposition of such Taxes.
4.5 Upon BRAD's request, Buyer shall execute and deliver to BRAD any documents
that BRAD reasonably deems necessary or desirable in connection with any
exemption from or reduction of or the contestation of or the defense
against any imposition of Taxes.
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<PAGE>
ARTICLE 5 - PAYMENT
5.1 BRAD acknowledges having previously received from Buyer
[***] per Aircraft, totaling [***]. Such amount shall be
applied against the balance of the Aircraft Purchase Price in accordance
with the provisions of Article 5.2.
5.2 Buyer shall make payment or cause payment to be made for each Aircraft
(expressed below as a percentage of the Base Price adjusted for changes
made pursuant to Article 11 and any Regulatory Changes pursuant to
Article 8.4 escalated at an assumed escalation factor of [***] per year
(the "Estimated Purchase Price")) as follows:
(a) [***] of the Estimated Purchase Price, less the amounts previously
received referred to in Article 5.1, [***] months prior
to its Scheduled Delivery Date;
(b) [***] of the Estimated Purchase Price [***] months prior to
its Scheduled Delivery Date; and
(c) [***] of the Estimated Purchase Price [***] months prior to its
Scheduled Delivery Date;
(d) the Aircraft Purchase Price less the payments referred to in Article
5.1 and subparagraphs (a), (b) and (c) above, on or before the
Delivery Date of such Aircraft to Buyer.
Receipt of payment in full of all amounts referred to in Articles 5.1 and
5.2 shall constitute payment in full of the Aircraft Purchase Price for
the relevant Aircraft.
All payments referred to in paragraphs (a) to (c) above are to be made on
the first day of the applicable month.
Any payments for which, upon execution of the Agreement, the time of
payment has already passed, will be made within ten (10) business days of
execution of the Agreement.
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<PAGE>
5.3 Subject to the provisions of Article 9.9 hereof, should Buyer fail to make
any of the aforementioned payments on or before the stipulated date (BRAD
will use reasonable efforts to provide timely notice of Buyer's failure to
make payments, for information purposes only) and Buyer does not correct
the failure within a period of thirty (30) days after such stipulated
date, Buyer shall be in default of the Agreement and this Agreement shall
automatically terminate and BRAD shall have no further obligation to Buyer
under this Agreement, including the obligation to proceed further with the
manufacture of the Aircraft on behalf of Buyer or the sale and/or delivery
of the Aircraft to Buyer. Notwithstanding the preceding sentence BRAD
shall have the option (but not the obligation) of waiving such termination
should Buyer make arrangements satisfactory to BRAD for such payment and
all future payments within ten (10) calendar days of Buyer's default.
5.4 Buyer shall pay BRAD daily interest on late payments, from the date that
any payment becomes due up to and including the day prior to receipt of
payment, at a rate of two per cent (2%) per annum over the prime rate
charged by the Chase Manhattan Bank, New York Branch, or its successor,
from time to time, calculated and compounded monthly.
5.5 Buyer shall make all payments due under this Agreement in immediately
available funds by deposit on or before the due date to BRAD's account in
the following manner:
(a) Transfer to: [***]
(b) For credit to: [***]
(c) For further credit to: [***]
5.6 All other amounts due from Buyer with respect to each Aircraft shall be
paid on or prior to the Delivery Date of the respective Aircraft.
11
<PAGE>
5.7 All payments provided for under this Agreement shall be made so as to be
received in immediately available funds on or before the dates stipulated
herein.
5.8 BRAD shall remain the exclusive owner of each Aircraft, free and clear of
all rights, liens, charges or encumbrances created by or through Buyer,
until such time as all payments referred to in this Article 5, with
respect to that Aircraft, have been made.
12
<PAGE>
ARTICLE 6 - DELIVERY PROGRAM
6.1 The Aircraft shall be offered for inspection and acceptance to Buyer at
BRAD's facility in Montreal, Quebec during the months set forth in
Appendix 11 attached hereto (the "Scheduled Delivery Dates").
13
<PAGE>
ARTICLE 7 - BUYER INFORMATION
7.1 During the manufacture of the Aircraft, Buyer shall provide to BRAD on or
before the date required by BRAD, all information as BRAD may reasonably
request to manufacture the Aircraft including, without limitation, the
selection of furnishings, internal and external colour schemes.
Within seven (7) calendar days following the signing this Agreement, Buyer
will:
(a) provide BRAD with an external paint scheme agreed on by the parties;
and
(b) select interior colours (from BRAD's standard colours).
Failure of Buyer to comply with these requirements may result in an
increase in price, a delay in delivery of the Aircraft, or both.
7.2 On or before execution of this Agreement Buyer shall notify BRAD in
writing of the BFE (if any) that Buyer wishes to have incorporated into
each Aircraft. Buyer shall also provide details of:
a. weights and dimensions of the BFE;
b. test equipment or special tools required to incorporate the BFE; and
c. any other information BRAD may reasonably require.
Within one hundred and twenty (120) calendar days thereafter, BRAD shall
advise Buyer of its acceptance or rejection of the BFE and of the dates by
which each item of BFE is required by BRAD. If required the parties hereto
shall execute a Change Order in accordance with Article 11.1 to cover
those BFE accepted by BRAD.
14
<PAGE>
7.3 The BFE accepted by BRAD pursuant to this Article shall be incorporated in
the manufacturing process of the Aircraft subject to the following
conditions:
a. Title to the BFE shall remain at all times with Buyer and risk of
loss of the BFE shall remain at all times with Buyer except for
damages caused by BRAD's gross negligence.
b. The BFE must be received Carriage Paid To (Incoterms 1990) BRAD's
plant or such other place as BRAD may designate, no later than the
date notified pursuant to Article 7.2, free and clear of any taxes,
duties, licenses, charges, liens or other similar claims;
c. The BFE shall meet:
1) customary industry standards of quality (with the exception of
any paint to be supplied by Buyer, which must meet BRAD's
requirements and specifications), and
2) the requirements of the applicable airworthiness certification
agency;
d. The BFE shall be delivered to BRAD in good condition and ready for
immediate incorporation into the Aircraft. BRAD shall, upon receipt,
inspect the BFE as to quantity and apparent defects and inform Buyer
of any discrepancies and the required corrective actions to be
taken;
e. BRAD shall only be responsible for the fitment and testing of the
BFE in the Aircraft using reasonable care and good manufacturing
practices, in accordance with Buyer's written detailed description
of the dimensions and weight of such BFE. Buyer shall also furnish
information necessary for its proper storage, fitment, servicing,
maintenance and operation and availability of test equipment or
special tools;
15
<PAGE>
f. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH, BRAD SHALL HAVE NO
LIABILITY OR OTHER OBLIGATIONS AND IS HEREBY RELIEVED OF ANY
LIABILITY, WARRANTY OR OTHER OBLIGATION WITH RESPECT TO THE BFE AND
BUYER HEREBY WAIVES ALL EXPRESS OR IMPLIED WARRANTIES OR CONDITIONS
INCLUDING THOSE OF MERCHANTABILITY OR FITNESS OR OTHERWISE AND ALL
OTHER LIABILITY (STRICT OR OTHERWISE) ON THE PART OF BRAD, BE IT IN
FACT, IN LAW, IN CONTRACT, OR IN TORT (INCLUDING WITHOUT LIMITATION
THE ACTIVE, PASSIVE OR IMPUTED NEGLIGENCE OR STRICT PRODUCTS
LIABILITY OF BRAD OR ITS AFFILIATES), OR OTHERWISE, IN CONNECTION
WITH THE BFE OR ITS DESIGN, SUITABILITY, USE OR OPERATION.
7.4 If at any time between receipt of the BFE by BRAD and the Delivery Date,
it is determined by BRAD that an item of BFE supplied does not meet the
standards and requirements described above or its fitment, integration and
testing in the Aircraft or Aircraft systems create delays in the
manufacturing or certification process, then such BFE may be removed and
replaced by other BFE or by BRAD's equipment. Any costs associated with
the removal, refitment, replacement, testing, certification and/or delays
in the Delivery Date of the Aircraft shall be borne by Buyer.
7.5 In the event that the delivery of an Aircraft is delayed due to any delay
caused by Buyer's failure to:
a. deliver or have BFE delivered by the date required;
b. ensure satisfactory design, suitability, use or operation of the
BFE;
c. furnish or obtain applicable BFE data;
d. perform any adjusting, calibrating, retesting or updating of BFE;
e. furnish or obtain any approvals in compliance with the provisions of
this Article; or
f. comply with the conditions of this Article.
BRAD agrees to discuss with Buyer the steps to be taken to minimize, cure,
eliminate or work around the delay, but any delay incurred shall be the
responsibility of Buyer and Buyer shall pay to BRAD any costs and expenses
reasonably incurred by BRAD due to such delay.
16
<PAGE>
7.6 Should there be a delay in delivery caused either by a failure of Buyer
described in Article 7.5, or by an event to which reference is made in
Article 13.0 in connection with the BFE, and if such delay cannot
reasonably be minimized, cured, eliminated or worked around by agreement
of the parties, Buyer agrees that BRAD may deliver the Aircraft without
installing the unapproved, delayed or nonconforming BFE, and Buyer agrees
to take delivery of and pay for the Aircraft.
7.7 If this Agreement is terminated in whole or in part in accordance with the
provisions hereof BRAD may elect to, by written notice to Buyer, either:
a. purchase the BFE ordered by Buyer and/or received by BRAD at the
invoice price paid by Buyer; or
b. return the BFE to Buyer Free Carrier (Incoterms 1990) BRAD's plant,
or such other place that BRAD may designate.
17
<PAGE>
ARTICLE 8 - CERTIFICATION FOR EXPORT
8.1 BRAD has obtained from Transport Canada ("TC"), a TC Type Approval
(Transport Category) and from the Federal Aviation Administration of the
United States ("FAA") an FAA Type Certificate for the type of aircraft
purchased under this Agreement.
8.2 For each Aircraft, BRAD shall provide to Buyer a TC Certificate of
Airworthiness (Transport Category) for export, on or before the Delivery
Date of such Aircraft.
8.3 BRAD shall not be obligated to obtain any other certificates or approvals
as part of this Agreement. The obtaining of any import license or
authority required to import or operate the Aircraft into any country
outside of Canada shall be the responsibility of Buyer. BRAD will, to the
extent permitted by law, and with Buyer's assistance, seek the issuance of
a Canadian export license to enable Buyer to export the Aircraft from
Canada subject to prevailing export control regulations in effect on the
Delivery Date.
8.4 If any addition or change to, or modification or testing of the Aircraft
is required by any law or governmental regulation or requirement or
interpretation thereof by any governmental agency having jurisdiction in
order to meet the requirements of Article 8.2 (a "Regulatory Change"),
such Regulatory Change shall be made to the Aircraft prior to Delivery
Date, or at such other time after the Delivery Date as the parties may
agree upon.
8.5 [***]
8.6 If delivery of the Aircraft is delayed by the incorporation of any
Regulatory Change, such delay shall be an Excusable Delay within the
meaning of Article 13.
8.7 BRAD shall issue a Change Order, reflecting any Regulatory Change required
to be made under this Article 8, which shall set forth in detail the
particular changes to be made and the effect, if any, of such changes on
design, performance, weight, balance, time of delivery, Base Price and
Aircraft Purchase Price. Any Change Orders issued pursuant to this Article
shall be effective and binding upon the date of BRAD's transmittal of such
Change Order.
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8.8 If the use of any of the certificates identified in this Article 8 are
discontinued during the performance of this Agreement, reference to such
discontinued certificate shall be deemed a reference to any other
certificate or instrument which corresponds to such certificate or, if
there should not be any such other certificate or instrument, then BRAD
shall be deemed to have obtained such discontinued certificate(s) upon
demonstrating that the Aircraft complies substantially with the
Specification.
8.9 Reference to a regulatory authority shall include any succeeding
department or agency then responsible for the duties of said regulatory
authority.
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ARTICLE 9 - ACCEPTANCE PROCEDURE
9.1 No earlier than [***] prior to the first day of the Scheduled
Delivery Date, Buyer may request from BRAD, by facsimile or telegraphic
communication or other expeditious means, [***]
No later than [***] prior to the first day of the Scheduled
Delivery Date, BRAD shall inform Buyer by facsimile or telegraphic
communication or other expeditious means, [***].
BRAD shall give Buyer at least thirty (30) days advance notice, by
facsimile or telegraphic communication or other expeditious means, of the
projected date of readiness of each Aircraft for inspection and delivery.
BRAD shall give Buyer at least ten (10) working days advance notice, by
facsimile or telegraphic communication or other expeditious means, of the
date on which an Aircraft will be ready for Buyer's inspection, flight
test and acceptance (the "Readiness Date").
9.2 Within two (2) days following receipt by Buyer of the notice of Readiness
Date Buyer shall:
(a) provide notice to BRAD as to the source and method of payment of the
balance of the Aircraft Purchase Price;
(b) identify to BRAD the names of Buyer's representatives who will
participate in the inspection, flight test and acceptance; and
(c) provide evidence of the authority of the designated persons to
execute the Certificate of Acceptance and other delivery documents
on behalf of Buyer.
9.3 Buyer shall have three (3) consecutive working days commencing on the
Readiness Date in which to complete the inspection and flight test (such
three (3) working day period being the "Acceptance Period").
20
<PAGE>
9.4 Up to four (4) representatives of Buyer may participate in Buyer's ground
inspection of the Aircraft and two (2) representatives of Buyer may
participate in the flight test. BRAD shall, if requested by Buyer, perform
an acceptance flight of not less than one (1) and not more than three (3)
hours duration. Ground inspection and flight test shall be conducted in
accordance with BRAD's acceptance procedures (a copy of which shall be
provided to Buyer at least 30 days prior to the Scheduled Delivery Date of
the First Aircraft hereunder) and at BRAD's expense. At all times during
ground inspection and flight test, BRAD shall retain control over the
Aircraft.
9.5 If no Aircraft defect or discrepancy is revealed during the ground
inspection or flight test, Buyer shall accept the Aircraft on or before
the last day of the Acceptance Period in accordance with the provisions of
Article 9.7.
9.6 If any material defect or discrepancy in the Aircraft is revealed by
Buyer's ground inspection or flight test, the defect or discrepancy will
promptly be corrected by BRAD, at no cost to Buyer, which correction may
occur during the Acceptance Period (in which case the Acceptance Period
will be extended accordingly) or after the Acceptance Period depending on
the nature of the defect or discrepancy and of the time required for
correction. To the extent necessary to verify such correction, BRAD shall
perform one (1) or more further acceptance flights
9.7 Upon completion of the ground inspection and acceptance flight of the
Aircraft and correction of any defects or discrepancies:
(a) Buyer will sign a Certificate of Acceptance (in the form of Exhibit
I hereto) for the Aircraft. Execution of the Certificate of
Acceptance by or on behalf of Buyer shall be evidence of Buyer
having examined the Aircraft and found it in accordance with the
provisions of this Agreement. The date of signature of the
Certificate of Acceptance shall be the "Acceptance Date";
(b) BRAD will supply a TC Certificate of Airworthiness for Export; and
(c) Buyer shall pay BRAD the balance of the Aircraft Purchase Price and
any other amounts due, at which time BRAD shall issue a bill of sale
(in the form of Exhibit 11 hereto) passing to Buyer good title to
the Aircraft free and clear of all liens, claims, charges and
encumbrances except for those liens, charges or encumbrances created
by or claimed through Buyer (the "Bill of Sale"). The date on which
BRAD delivers the Bill of Sale and Buyer takes delivery of the
Aircraft shall be the "Delivery Date".
21
<PAGE>
Delivery of the Aircraft shall be evidenced by the execution and delivery
of the Bill of Sale and of the Certificate of Receipt of Aircraft (in the
form of Exhibit III hereto).
9.8 Provided that BRAD has met all of its obligations under this Article 9,
should Buyer not accept, pay for and take delivery of any of the Aircraft
within ten (10) calendar days after the end of the Acceptance Period of
such Aircraft, Buyer shall be deemed to be in default of the terms of this
Agreement.
9.9 Buyer shall promptly, upon demand, reimburse BRAD for all costs and
expenses reasonably incurred by BRAD as a result of Buyer's failure to
accept or take delivery of the Aircraft, including but not limited to
reasonable amounts for storage, insurance, taxes, preservation or
protection of the Aircraft. Provided that BRAD has met all of its
obligations under this Article 9, should Buyer not accept, pay for and/or
take delivery of any one of the Aircraft within thirty (30) calendar days
following the end of the Acceptance Period, the present Agreement shall
automatically terminate. BRAD shall however, have the option (but not the
obligation) of waiving such termination should Buyer, within ten (10)
calendar days following such termination, make arrangements satisfactory
to BRAD to accept delivery and provide payment for all amounts owing or to
become due pursuant to this Agreement.
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ARTICLE 10 - TITLE AND RISK
10.1 Title to the Aircraft and risk of loss of or damage to the Aircraft passes
to Buyer when BRAD presents the Bill of Sale to Buyer on the Delivery
Date.
10.2 If, after transfer of title on the Delivery Date, the Aircraft remains in
or is returned to the care, custody or control of BRAD, Buyer shall retain
risk of loss of; or damage to the Aircraft and for itself and on behalf of
its insurer(s) hereby waives and renounces to, and releases BRAD and any
of BRAD's affiliates from any claim, whether direct, indirect or by way of
subrogation, for damages to or loss of the Aircraft arising out of, or
related to, or by reason of such care, custody or control, except in the
case of BRAD's willful misconduct or gross negligence.
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ARTICLE 11 - CHANGES
11.1 Other than a Permitted Change as described in Article 11.2, or a
Regulatory Change as described in Article 8.4, any change to this
Agreement (including without limitation the Specification) or any features
or Buyer Furnished Equipment ("BFE"), if any, changing the Aircraft from
that described in the Specification attached hereto, requested by Buyer,
and as may be mutually agreed upon by the parties hereto, shall be made
using a change order ("Change Order") substantially in the format of
Exhibit IV hereto. Should Buyer request a change, BRAD shall advise Buyer,
to the extent reasonably practical, of the effect, if any, of such change
request on:
(a) the Scheduled Delivery Date;
(b) the price and payment terms applicable to the Change Order; and
(c) any other material provisions of this Agreement which will be
affected by the Change Order.
Such Change Order shall become effective and binding on the parties hereto
when signed by a duly authorized representative of each party.
11.2 BRAD, prior to the Delivery Date and without a Change Order or Buyer's
consent, may:
(a) substitute the kind, type or source of any material, part, accessory
or equipment with any other material, part, accessory or equipment
of like, equivalent or better kind or type; or
(b) make such change or modification to the Specification as it deems
appropriate to:
1) improve the Aircraft, its maintainability or appearance, or
2) to prevent delays in manufacture or delivery, or
3) to meet the requirements of Articles 2 and 8, other than for a
Regulatory Change to which the provisions of Articles 8.4 and
8.5 shall apply,
provided that such substitution, change or modification shall not affect
the Aircraft Purchase Price or materially affect the Scheduled Delivery
Date, interchangeability or replaceability of spare parts or performance
characteristics of the Aircraft. Any change made in accordance with the
provisions of this Article 11.2 shall be deemed to be a "Permitted Change"
and the cost thereof shall be borne by BRAD.
24
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ARTICLE 12 - BUYER'S REPRESENTATIVES AT MANUFACTURE SITE
12.1 From time to time, commencing with the date of this Agreement and ending
with the Delivery Date of the last Aircraft purchased hereunder, BRAD
shall furnish, without charge, office space at BRAD's facility for one (1)
representative of Buyer. Buyer shall be responsible for all expenses of
its representative and shall notify BRAD at least thirty (30) calendar
days prior to the first scheduled visit of such representative and three
(3) days for each subsequent visit.
12.2 BRAD's and BRAD's affiliates' facilities shall be accessible to Buyer's
representative during normal working hours. Buyer's representative shall
have the right to periodically observe the work at BRAD's or BRAD's
affiliates' facilities where the work is being carried out provided there
shall be no disruption in the performance of the work.
12.3 BRAD shall advise Buyer's representative of BRAD's or BRAD's affiliates'
rules and regulations applicable at the facilities being visited and
Buyer's representative shall conform to such rules and regulations.
12.4 At any time prior to delivery of the Aircraft, Buyer's representative may
request, in writing, correction of parts or materials which they
reasonably believe are not in accordance with the Specification. BRAD
shall provide a written response to any such request. Communication
between Buyer's representative and BRAD shall be solely through BRAD's
Contract Department or its designate.
12.5 BUYER HEREBY RELEASES AND AGREES TO DEFEND, INDEMNIFY AND HOLD HARMLESS
BRAD, ITS ASSIGNEES AND AFFILIATES AND THEIR OFFICERS, DIRECTORS, AGENTS,
EMPLOYEES AND CONTRACTORS FROM AND AGAINST ALL LIABILITIES, DAMAGES,
LOSSES, COSTS AND EXPENSES RESULTING FROM INJURIES TO OR DEATH OF OR LOSS
OF OR DAMAGE TO PROPERTY OF BUYER OR BUYER'S REPRESENTATIVES WHILE AT
BRAD'S OR BRAD'S AFFILIATES OR SUBCONTRACTOR'S FACILITIES AND/OR DURING
INSPECTION, FLIGHT TEST OR ACCEPTANCE OF THE AIRCRAFT, WHETHER OR NOT
CAUSED BY THE ACTIVE, PASSIVE OR IMPUTED NEGLIGENCE OR STRICT PRODUCTS
LIABILITY OF BRAD, ITS ASSIGNEES, AFFILIATES OR THEIR OFFICERS, DIRECTORS,
AGENTS, EMPLOYEES OR CONTRACTORS.
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12.6 BRAD HEREBY RELEASES AND AGREES TO DEFEND, INDEMNIFY AND HOLD HARMLESS
BUYER, ITS ASSIGNEES AND AFFILIATES AND THEIR OFFICERS, DIRECTORS, AGENTS,
EMPLOYEES AND CONTRACTORS FROM AND AGAINST ALL LIABILITIES, DAMAGES,
LOSSES, COSTS AND EXPENSES RESULTING FROM INJURIES TO OR DEATH OF OR LOSS
OF OR DAMAGE TO PROPERTY OF BRAD OR BRAD'S REPRESENTATIVES WHILE AT
BUYER'S OR BUYER'S AFFILIATES OR SUBCONTRACTOR'S FACILITIES AND/OR DURING
INSPECTION, FLIGHT TEST OR ACCEPTANCE OF THE AIRCRAFT, WHETHER OR NOT
CAUSED BY THE ACTIVE, PASSIVE OR IMPUTED NEGLIGENCE OR STRICT PRODUCTS
LIABILITY OF BUYER, ITS ASSIGNEES, AFFILIATES OR THEIR OFFICERS,
DIRECTORS, AGENTS, EMPLOYEES OR CONTRACTORS.
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ARTICLE 13 - EXCUSABLE DELAY
13.1 In the event of a delay on the part of BRAD in the performance of its
obligations or responsibilities under the provisions of this Agreement due
directly or indirectly to a cause which is beyond the reasonable control
or without the fault or negligence of BRAD (an "Excusable Delay"), BRAD
shall not be liable for, nor be deemed to be in default under this
Agreement on account of such delay in delivery of the Aircraft or other
performance hereunder and the time fixed or required for the performance
of any obligation or responsibility in this Agreement shall be extended
for a period equal to the period during which any such cause or the effect
thereof persist. Excusable Delay shall be deemed to include, without
limitation, delays occasioned by the following causes:
(a) force majeure or acts of God;
(b) war, warlike operations, act of the enemy, armed aggression, civil
commotion, insurrection, riot or embargo;
(c) fire, explosion, earthquake, lightning, flood, draught, windstorm or
other action of the elements or other catastrophic or serious
accidents;
(d) epidemic or quarantine restrictions;
(e) any legislation, act, order, directive or regulation of any
governmental or other duly constituted authority;
(f) strikes, lock-out, walk-out, and/or other labour troubles causing
cessation, slowdown or interruption of work;
(g) delay or inability to procure supplies, materials, components,
accessories, equipment, tools or parts after due and timely
diligence by BRAD;
(h) delay or failure of common carriers; or
(i) delay in obtaining any airworthiness approval or certificate, or any
equivalent approval or certification, by reason of any law or
governmental order, directive or regulation or any change thereto,
or interpretation thereof, by a governmental agency, the effective
date of which is subsequent to the date of this Agreement, or by
reason of any change or addition made by BRAD or its affiliates or
requested by a governmental agency to the compliance program of BRAD
or of its affiliate, or any part thereof, as same may have been
approved by TC, or change to the interpretation thereof to obtain
any such airworthiness approval or certificate.
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<PAGE>
13.2 (a) If BRAD concludes, based on its appraisal of the facts and normal
scheduling procedures, that due to Excusable Delay delivery of the
Aircraft will be delayed for more than twelve (12) months after the
originally Scheduled Delivery Date or any revised date agreed to in
writing by the parties, BRAD shall promptly notify Buyer in writing
and either party may then terminate this Agreement with respect to
the Aircraft by giving written notice to the other within fifteen
(15) days after receipt by Buyer of BRAD's notice.
(b) If, due to Excusable Delay, delivery of any Aircraft is delayed for
more than twelve (12) months after the Scheduled Delivery Date,
either party may terminate this Agreement with respect to such
Aircraft by giving written notice to the other within fifteen (15)
days after the expiration of such twelve (12) month period.
13.3 Termination under Article 13.2 shall discharge all obligations and
liabilities of Buyer and BRAD hereunder with respect to such delayed
Aircraft and all related undelivered items and services, except that BRAD
shall promptly repay to Buyer, and BRAD's sole liability and
responsibility shall be limited to the repayment to Buyer, of all advance
payments for such Aircraft received by BRAD less any amount due by Buyer
to BRAD.
13.4 The termination rights set forth in Article 13.2 are in substitution for
any and all other rights of termination or contract lapse arising by
operation of law in connection with Excusable Delays.
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ARTICLE 14 - NON-EXCUSABLE DELAY
14.1 If delivery of the Aircraft is delayed beyond the end of the Scheduled
Delivery Date, by causes not excused under Article 13.1, this shall
constitute a non-excusable delay (a "Non-Excusable Delay").
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ARTICLE 15 - LOSS OR DAMAGE
15.1 In the event that prior to the Delivery Date of any Aircraft, the Aircraft
is lost, destroyed or damaged beyond repair due to any cause, BRAD shall
promptly notify Buyer in writing. Such notice shall specify the earliest
date reasonably possible, consistent with BRAD's other contractual
commitments and production schedule, by which BRAD estimates it would be
able to deliver a replacement for the lost, destroyed or damaged Aircraft.
This Agreement shall automatically terminate as to such Aircraft unless
Buyer gives BRAD written notice, within thirty (30) days of BRAD's notice,
that Buyer desires a replacement for such Aircraft. If Buyer gives such
notice to BRAD, the parties shall execute an amendment to this Agreement
which shall set forth the Delivery Date for such replacement aircraft and
corresponding new replacement Aircraft Purchase Price; provided, however,
that nothing herein shall obligate BRAD to manufacture and deliver such
replacement aircraft if it would require the reactivation or acceleration
of its production line for the model of aircraft purchased hereunder. The
terms and conditions of this Agreement applicable to the replaced Aircraft
shall apply to the replacement aircraft.
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<PAGE>
ARTICLE 16 - TERMINATION
16.1 This Agreement may be terminated, in whole or in part, with respect to any
or all of the Aircraft before the Delivery Date by BRAD or Buyer by notice
of termination to the other party upon the occurrence of any of the
following events:
(a) a party makes an assignment for the benefit of creditors or admits
in writing its inability to pay its debts or the other party has
reasonable evidence that it generally does not pay its debts as they
become due; or
(b) a receiver or trustee is appointed for a party or for substantially
all of such party's assets and, if appointed without such party's
consent, such appointment is not discharged or stayed within thirty
(30) calendar days thereafter; or
(c) proceedings or action under any law relating to bankruptcy,
insolvency or the reorganization or relief of debtors are instituted
by or against a party, and, if contested by such party, are not
dismissed or stayed within thirty (30) calendar days thereafter; or
(d) any writ of attachment or execution or any similar process, that has
the effect of materially affecting the business or operations of a
party, is issued or levied against a parry or any significant part
of its property and is not released, stayed, bonded or vacated
within forty-five (45) calendar days after its issue or levy.
(e) Buyer shall fail to hold an effective air carrier operating
certificate issued by the Secretary of Transportation pursuant to
Chapter 447 of the Federal Aviation Act (or successor provision of
law) for aircraft capable of carrying ten (10) or more individuals
or 6000 pounds or more of cargo.
16.2 In addition, this Agreement may be terminated, in whole or in part, before
the Delivery Date with respect to any or all undelivered Aircraft:
(a) as otherwise provided in this Agreement; or
(b) by BRAD, if Buyer is in default or breach of any material term or
condition of this Agreement and Buyer does not cure such default or
breach within forty-five (45) calendar days after receipt of notice
from BRAD specifying such default or breach; or
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(c) by Buyer, if BRAD is in default or breach of any material term or
condition of this Agreement and such breach remains uncured for a
period of forty-five (45) calendar days following receipt of a
notice from Buyer specifying the nature of default or breach; or
(d) [***]
16.3 In case of termination of this Agreement under Articles 5.3 or 9.9, or
by BRAD pursuant to Articles 16.1 or 16.2 [***]:
(a) all rights (including property rights), if any, which Buyer or its
assignee may have or may have had in or to any or all of the
undelivered Aircraft and any rights of Buyer hereunder (including
property rights) with respect to any or all undelivered Aircraft
shall become null and void with immediate effect;
(b) BRAD may sell, lease or otherwise dispose of such Aircraft to
another party free of any claim by Buyer; and
(c) all amounts paid by Buyer with respect to the applicable undelivered
Aircraft shall be retained by BRAD and shall be applied against the
costs, expenses, losses and damages incurred by BRAD as a result of
Buyer's default and/or termination of this Agreement. To the extent
that the amount so retained by BRAD exceeds such damages, such
excess shall be returned to Buyer. if such amount so retained by
BRAD is insufficient to cover such damages BRAD shall have all
rights permitted by law to recover from Buyer the full amount of
such damages.
In the event of termination of this Agreement by Buyer or BRAD pursuant to
Article 16.2(d) hereof, Buyer's sole rights, remedies and recourses
against BRAD and BRAD's obligations to Buyer shall be limited to only the
return by BRAD of those amounts paid by Buyer to BRAD hereunder on account
of the undelivered Aircraft.
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<PAGE>
ARTICLE 17 - NOTICES
17.1 Any notice, request, approval, permission, consent or other communication
("Notice"), to be given or required under this Agreement shall be provided
in writing, by registered mail, facsimile, courier, telegraphic or other
electronic communication providing reasonable proof of transmission,
except that no notice shall be sent by mail if disruption of postal
service exists or is threatened either in the country of origin or of
destination, by the party giving the Notice and shall be addressed as
follows:
(a) Notice to BRAD shall be addressed to:
Bombardier Inc.
Bombardier Regional Aircraft Division
123 Garratt Boulevard
Downsview, Ontario
Canada
M3K 1Y5
Attention: Director of Contracts
Facsimile: (416) 375-4533
(b) Notice to Buyer shall be addressed to:
Midway Airlines Corporation
300 W. Morgan Street, Suite 1200
Durham, NC 27701
Attention: Chief Financial Officer Attention: General Counsel
Facsimile: 919-956-8619 Facsimile: 919-956-7568
17.2 Notice given in accordance with Article 17.1 shall be deemed sufficiently
given to and received by the addressees:
(a) if delivered by hand, on the day when the same shall have been so
delivered; or
(b) if mailed or sent by courier on the day indicated on the
corresponding acknowledgment of receipt; or
(c) if sent by telex or facsimile on the day indicated by the
acknowledgment or the answer back of the receiver in provable form.
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<PAGE>
ARTICLE 18 - INDEMNITY AGAINST PATENT INFRINGEMENT
18.1 In the case of any actual or alleged infringement of any Canadian or
United States patent or, subject to the conditions and exceptions set
forth below, any patent issued a under the laws of any other country in
which Buyer from time to time may lawfully operate the Aircraft ("Other
Patents"), by the Aircraft, or by any system, accessory, equipment or part
installed in such Aircraft at the time title to such Aircraft passes to
Buyer, BRAD shall indemnify, protect and hold harmless Buyer from and
against all claims, suits, actions, liabilities, damages and costs
resulting from the infringement, excluding any incidental or consequential
damages (which include without limitation loss of revenue or loss of
profit) and BRAD shall, at its option and expense:
(a) procure for Buyer the right under such patent to use such system,
accessory, equipment or part; or
(b) replace such system, accessory, equipment or part with one of the
similar nature and quality that is non-infringing; or
(c) modify such system, accessory, equipment or part to make same non-
infringing in a manner such as to keep it otherwise in compliance
with the requirements of this Agreement.
BRAD's obligation hereunder shall extend to Other Patents only if from the
time of design of the Aircraft, system, accessory, equipment or part until
the alleged infringement claims are resolved:
[6~
(d) such other country and the country in which the Aircraft is
permanently registered have ratified and adhered to and are at the
time of the actual or alleged infringement contracting parties to
the Chicago Convention on International Civil Aviation of December
7, 1944 and are Rally entitled to all benefits of Article 27
thereof; and
(e) such other country and the country of registration shall each have
been a party to the International Convention for the Protection of
Industrial Property (Paris Convention) or have enacted patent laws
which recognize and give adequate protection to inventions made by
the nationals or other countries which have ratified, adhered to and
are contracting parties to both of the forgoing conventions.
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<PAGE>
18.2 The foregoing indemnity does not apply to BFE, or to avionics, engines or
any system, accessory, equipment or part that was not manufactured to
BRAD's detailed design or to any system, accessory, equipment or part
manufactured by a third party to BRAD's detailed design without BRAD's
authorization. [***]
18.3 Buyer's remedy and BRAD's obligation and liability under this Article are
conditional upon (i) Buyer giving BRAD written notice within ten (10) days
after Buyer receives notice of a suit or action against Buyer alleging
infringement or within twenty (20) days after Buyer receives any other
written claim of infringement (ii) Buyer uses reasonable efforts in full
cooperation with BRAD to reduce or mitigate any such expenses, damages,
costs or royalties involved, and (iii) Buyer furnishes promptly to BRAD
all data, papers and records in its possession or control necessary or
useful to resist and defend against such claim or suit. BRAD may at its
option conduct negotiations with any party claiming infringement and may
intervene in any suit or action. Whether or not BRAD intervenes, BRAD
shall be entitled at any stage of the proceedings to assume or control the
defense. Buyer's remedy and BRAD's obligation and liability are further
conditional upon BRAD's prior approval of Buyer's payment or assumption of
any liabilities, expenses, damages, royalties or costs for which BRAD may
be held liable or responsible.
18.4 THE INDEMNITY, OBLIGATIONS AND LIABILITIES OF BRAD AND REMEDIES OF BUYER
SET OUT IN THIS ARTICLE ARE EXCLUSIVE AND ACCEPTED BY BUYER TO BE IN LIEU
OF AND IN SUBSTITUTION FOR, AND BUYER HEREBY WAIVES, RELEASES AND
RENOUNCES, ALL OTHER INDEMNITIES, OBLIGATIONS AND LIABILITIES OF BRAD AND
OF ITS AFFILIATES AND ALL OTHER RIGHTS, REMEDIES AND CLAIMS, INCLUDING
CLAIMS FOR DAMAGES, DIRECT, INCIDENTAL OR CONSEQUENTIAL, OF BUYER AGAINST
BRAD AND ITS AFFILIATES EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE,
WITH RESPECT TO ANY ACTUAL OR ALLEGED PATENT INFRINGEMENT BY THE AIRCRAFT
OR ANY INSTALLED SYSTEM, ACCESSORY, EQUIPMENT OR PART.
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<PAGE>
ARTICLE 19 - LIMITATION OF LIABILITY AND INDEMNIFICATION
19.1 BRAD SHALL HAVE NO OBLIGATION OR LIABILITY (AT LAW OR IN EQUITY), WHETHER
ARISING IN CONTRACT (INCLUDING WITHOUT LIMITATION, WARRANTY), IN TORT
(INCLUDING THE ACTIVE, PASSIVE OR IMPUTED NEGLIGENCE OR STRICT PRODUCTS
LIABILITY OF BRAD OR ITS AFFILIATES), OR OTHERWISE, FOR LOSS OF USE,
REVENUE OR PROFIT OR FOR ANY OTHER INDIRECT, INCIDENTAL, CONSEQUENTIAL OR
PUNITIVE DAMAGES OF ANY KIND OR NATURE, FOR ANY LOSSES OR DAMAGES FOR OR
ARISING OUT (I) OF ANY NON-CONFORMANCE OR DEFECT IN OR DESIGN OR CONDITION
OF ANY AIRCRAFT, EQUIPMENT, BRAD PARTS, VENDOR PARTS, SPARE PART, GROUND
SUPPORT EQUIPMENT, TECHNICAL PUBLICATION OR DATA OR ANY SERVICES TO BE
PROVIDED HEREUNDER, OR (II) ANY OTHER FAILURE BY BRAD TO PERFORM ANY
OBLIGATION HEREUNDER.
19.2 ANNEX B HERETO EXCLUSIVELY SETS FORTH BRAD'S OBLIGATIONS WITH RESPECT TO
ANY NON-CONFORMANCE OF THE AIRCRAFT WITH THE SPECIFICATION OR ANY DEFECT
IN THE AIRCRAFT.
EXCEPT AS SET FORTH IN ANNEX B THERE ARE NO UNDERSTANDINGS,
REPRESENTATIONS, CONDITIONS OR WARRANTIES, EXPRESS OR IMPLIED, BETWEEN THE
PARTIES WITH RESPECT TO ANY NON-CONFORMANCE OF THE AIRCRAFT WITH THE
SPECIFICATION OR ANY DEFECT IN THE AIRCRAFT OR ANY OTHER THING DELIVERED
UNDER THIS AGREEMENT.
19.3 THE WARRANTY AND SERVICE LIFE POLICY PROVIDED IN ANNEX B, ARTICLE 18 OF
THE AGREEMENT, AND THE GUARANTEES CONTAINED IN LETTER AGREEMENTS NO. 007,
008, 009 AND 010 TO THIS AGREEMENT AND THE OBLIGATIONS AND LIABILITIES OF
BRAD UNDER THE AFORESAID WARRANTY, SERVICE LIFE POLICY, ARTICLE 18, AND
GUARANTEES ARE ACCEPTED BY BUYER TO BE EXCLUSIVE AND IN LIEU OF, AND BUYER
HEREBY WAIVES, RELEASES AND RENOUNCES ALL OTHER REMEDIES, WARRANTIES,
GUARANTEES, OBLIGATIONS, REPRESENTATIONS OR LIABILITIES, EXPRESS OR
IMPLIED, OF BRAD AND ITS AFFILIATES WITH RESPECT TO DEFECTS IN EACH
AIRCRAFT OR PART THEREOF, PRODUCT, DOCUMENT OR SERVICE DELIVERED OR
PROVIDED UNDER THIS AGREEMENT, ARISING IN FACT, IN LAW, IN CONTRACT, IN
TORT, OR OTHERWISE, INCLUDING, WITHOUT LIMITATION,
36
<PAGE>
A. ANY IMPLIED WARRANTY OR CONDITION OF MERCHANTABILITY OR FITNESS;
B. ANY IMPLIED WARRANTY OR CONDITION ARISING FROM COURSE OF
PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE;
C. ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN TORT, WHETHER
OR NOT ARISING FROM THE ACTIVE, PASSIVE OR IMPUTED NEGLIGENCE OR
STRICT PRODUCTS LIABILITY OF BRAD OR ITS AFFILIATES, BY REASON OF
THE DESIGN, MANUFACTURE, SALE, REPAIR, LEASE OR USE OF THE AIRCRAFT
OR PRODUCT AND SERVICES DELIVERED HEREUNDER; AND
D. ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS OF OR
DAMAGE TO ANY AIRCRAFT OR PART THEREOF, ANY BRAD PARTS, ANY POWER
PLANT PARTS, ANY VENDOR PARTS, ANY SPARE PARTS OR ANY TECHNICAL
DATA.
19.4 BUYER HEREBY RELEASES AND AGREES TO DEFEND, INDEMNIFY AND HOLD HARMLESS
BRAD, ITS SUBSIDIARIES, AFFILIATES, SUBCONTRACTORS AND LESSORS, AND THEIR
RESPECTIVE EMPLOYEES, DIRECTORS, OFFICERS AND AGENTS, AND EACH OF THEM,
FROM AND AGAINST ALL LIABILITIES, CLAIMS, DAMAGES, LOSSES, COSTS AND
EXPENSES FOR LOSS OF OR DAMAGE TO PROPERTY INCLUDING ANY AIRCRAFT, AND
LOSS OF USE THEREOF, OR INJURIES TO OR DEATH OF ANY AND ALL PERSONS
(INCLUDING
BUYER'S DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES BUT EXCLUDING BRAD'S
DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES), ARISING DIRECTLY OR INDIRECTLY
OUT OF OR IN CONNECTION WITH ANY SERVICE PROVIDED UNDER ANNEX A WHETHER OR
NOT CAUSED BY THE ACTIVE, PASSIVE OR IMPUTED NEGLIGENCE OR STRICT PRODUCTS
LIABILITY OF BRAD, ITS SUBSIDIARIES, AFFILIATES, SUBCONTRACTORS AND
LESSORS, OR THE EMPLOYEES, DIRECTORS, OFFICERS AND AGENTS OF ANY OF THEM.
37
<PAGE>
ARTICLE 20 - ASSIGNMENT
20.1 Either party may assign, sell, transfer or dispose of(in whole or in part)
any of its rights and obligations hereunder to a wholly owned subsidiary
or affiliate provided that there is no increase to the liability and/or
responsibility of the non-assigning party and that the assigning party
remains jointly and severally liable with any assignee for the performance
of its obligation under this Agreement.
20.2 Except as provided in Article 20.1, Buyer shall not assign, sell, transfer
or dispose of (in whole or in part) any of its rights or obligations
hereunder without BRAD's prior written consent. In the event of such
assignment, sale, transfer or disposition Buyer shall remain jointly and
severally liable with any assignee for the performance of all and any of
Buyer's obligations under this Agreement and BRAD reserves the right as a
condition of its consent to amend one or more of the terms and conditions
of this Agreement.
20.3 Notwithstanding Article 20.2 above, Buyer may assign, after transfer of
title of the Aircraft, its rights under the Agreement to a third-party
purchaser of any one of the Aircraft, provided said third party
acknowledges in writing to be bound by the applicable terms and conditions
of this Agreement, including but not limited to the provisions and
limitations as detailed Annex A, Customer Support Services, Annex B,
Warranty and Service Life Policy and of the provisions and limitations in
Limitation of Liability as defined in Article 19 hereof and Indemnity
Against Patent Infringement as defined in Article 18 hereof and any other
on-going obligations of Buyer, which shall apply to it to the same extent
as if said third party was Buyer hereunder and provided that there is no
increase to the liability and/or responsibility of BRAD.
20.4 BRAD may assign any of its rights to receive money hereunder without the
prior consent of Buyer.
20.5 Notwithstanding the other provisions of this Article 20, BRAD shall, at
Buyer's cost and expense, if so requested in writing by Buyer, take any
action reasonably required for the purpose of causing any of the Aircraft
to be subjected (i) to, after the Delivery Date, an equipment trust,
conditional sale or lien, or (ii) to another arrangement whether before,
on or after the Delivery Date, for the financing (including lease
financing) of the Aircraft by Buyer, providing, however, there shall be no
increase to the liability and/or responsibility of BRAD arising through
such financing.
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ARTICLE 21 - SUCCESSORS
This Agreement shall inure to the benefit of and be binding upon each of
BRAD and Buyer and their respective successors and permitted assignees.
39
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ARTICLE 22 - APPLICABLE LAWS
22.1 THIS AGREEMENT SHALL BE SUBJECT TO AND CONSTRUED IN ACCORDANCE WITH AND
THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY THE DOMESTIC LAWS OF THE
STATE OF NEW YORK, AND THE PARTIES HAVE AGREED THAT THE APPLICATION OF THE
UNITED NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS
IS HEREBY EXCLUDED.
22.2 Each party's obligations under this Agreement shall be subject to and
apply only to the extent permitted by applicable laws, regulations,
directives and/or orders regarding export controls.
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ARTICLE 23 - CONFIDENTIAL NATURE OF AGREEMENT
23.1 This Agreement and all information furnished or obtained pursuant to this
Agreement is confidential. Each party hereto agrees to keep confidential
this Agreement and all information so furnished to or so obtained by it
pursuant to this Agreement and not to disclose the same, in whole or in
part, to third parties; provided, however, that a party (the "Disclosing
Party") may disclose this Agreement, its contents and any such
information:
(a) as has become public (other than as a result of disclosure by or on
behalf of the Disclosing Party) or has become known to such
Disclosing Party other than pursuant to this Agreement and without
any breach of any confidentiality obligation being known to such
Disclosing Party; and
(b) to the independent auditors and attorneys of the Disclosing Party
(who shall be advised of the confidential nature of this Agreement
and such information); and
(c) with respect to technical data or similar information received by
Buyer, as such may be used by Buyer for the normal operation,
maintenance, overhaul and repair of the Aircraft; and
(d) in response to any summons or subpoena or in connection with any
litigation, provided that, if practicable and not in violation of
any applicable law, rule, regulation or order, notice of such
disclosure shall be given to the other party hereto, and (if
applicable and not so in violation) in advance of such disclosure,
and such other party shall be permitted to resist such disclosure by
the appropriate legal proceedings, provided such resistance does not
materially adversely affect the Disclosing Party; and
(e) to the extent that such Disclosing Party reasonably believes it is
required in order to comply with any law, rule, regulation or order
applicable to such party, provided that, if practicable and not in
violation of any such applicable law, rule, regulation or order,
notice of such disclosure shall be given to the other party, and (if
practicable and not so in violation) in advance of such disclosure,
and such other party shall be permitted (if practicable and not so
in violation) to resist or seek confidential treatment of such
disclosure and the Disclosing Party shall use all reasonable efforts
to cooperate with and assist the other party in resisting or seeking
confidential treatment of such disclosure, including undertaking the
appropriate proceedings or making the appropriate applications or
requests (at the cost of the other party) for such purpose where
such other party is not entitled to do so on its own behalf; and
41
<PAGE>
(f) as may be reasonably necessary for either party to carry out its
obligations or enforce or protect its rights under this Agreement or
other agreements related to this Agreement to which it is a party
and provided that to the extent practicable such disclosure shall be
made under a confidentiality undertaking; and
(g) as may be required by financial institutions or arrangers involved
with the financing of the Aircraft, which financial institutions or
arrangers shall be advised of the confidential nature of this
Agreement and such information and shall undertake to keep same
confidentially; and
(h) as may be reasonably required by BRAD for purposes of analytical or
technical product support or improvement or enhancement of customer
support services or otherwise in the ordinary course of its aircraft
manufacturing, marketing or service business and operations; and
(i) as may be required by financial institutions or arrangers engaged in
extending or considering extension of credit or other financing to
Buyer, which institutions or arrangers shall be advised of the
confidential nature of this Agreement and such information, and such
disclosure being made under a confidentiality undertaking; and
(j) as Buyer may be advised by its counsel is necessary or advisable to
be filed with the Securities & Exchange Commission (the
"Commission") in connection with any offering of securities by Buyer
or as to which the Commission shall have denied a request by Buyer
for confidential treatment. Provided that BRAD shall have five (5)
business days after receipt of Buyer's proposed redacted version of
this Agreement to be submitted to the Commission to submit its
comments and recommendations to Buyer, provided that Buyer or its
counsel shall notify BRAD prior to filing with the Commission of any
decision made on the advice of Buyer's counsel to file any portion
of the Agreement which BRAD has proposed to be redacted without
seeking confidential treatment from the Commission for such portion
which advice and decision shall take into consideration BRAD's
request for confidential treatment.
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23.2 Without limiting the provisions of Article 23.1(j) with respect to a
securities offering by Buyer, in connection with any other filing as part
of a reporting requirement of the Commission, the provisions of this
Article 23.2 shall apply.
Promptly following the execution and delivery hereof, BRAD and Buyer will
consult and cooperate reasonably with each other in order to prepare and
file a request for confidential treatment pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934 covering this Agreement in any filing with
the Commission in which this Agreement would be a "material contract" of
Buyer required to be filed pursuant to Item 601 of Commission Regulation
S-K. In particular, BRAD shall have ten (10) business days after the
receipt from Buyer of its proposed redacted version of this Agreement to
be submitted to the Commission to provide its comments and recommendation
thereon. Buyer shall use commercially reasonable efforts to work with BRAD
to agree on a final form of confidentiality request and redacted form of
this Agreement and to file and appropriately pursue the same with the
Commission as part of any filing in which this Agreement would otherwise
be required to be filed with the Commission. BRAD acknowledges that Buyer
shall not be in breach of any confidentiality obligation hereunder should
all or any portion of such request for confidential treatment not be
granted by the Commission.
23.3 Either party may announce the signing of this Agreement by means of a
notice to the press provided that the content and date of the notice has
been agreed to by the other party.
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ARTICLE 24 - AGREEMENT
24.1 This Agreement and the matters referred to herein constitute the entire
Agreement between BRAD and Buyer and supersede and cancel all prior
representations, brochures, alleged warranties, statements, negotiations,
undertakings, letters, memoranda of agreement, proposal, acceptances,
agreements, understandings (including the Memorandum of Understanding
between BRAD and Buyer dated August 29, 1997), contracts and
communications, whether oral or written, between BRAD and Buyer or their
respective agents, with respect to or in connection with the subject
matter of this Agreement and no agreement or understanding varying the
terms and conditions hereof shall be binding on either BRAD or Buyer
hereto unless an amendment to this Agreement is issued and duly signed by
their respective authorized representatives pursuant to the provisions of
this Article hereof. In the event of any inconsistencies between this
Agreement and any of the Appendices, Exhibits and Annexes or other
documents referred to herein, the provisions of this Agreement shall
prevail.
24.2 If any of the provisions of this Agreement are for any reason declared by
judgment of a court of competent jurisdiction to be unenforceable or
ineffective, those provisions shall be deemed severable from the other
provisions of this Agreement and the remainder of this Agreement shall
remain in hill force and effect.
24.3 THE BENEFIT OF THE WAIVER, RELEASE, RENUNCIATION AND EXCLUSION OF
LIABILITY IN EACH OF ARTICLES 7.3(f), 12.5, 18.4, 19, ANNEX A ARTICLE
2.9.4.5 AND ANNEX B ARTICLE 5.1 EXTENDS ALSO TO THE OTHER DIVISIONS, OTHER
SUBSIDIARIES, AND OTHER AFFILIATES OF BOMBARDIER INC., INCLUDING DE
HAVILLAND INC. (COLLECTIVELY THE "BOMBARDIER GROUP") AND TO THE OFFICERS,
DIRECTORS, EMPLOYEES AND REPRESENTATIVES OF THE BOMBARDIER GROUP, ON WHOSE
BEHALF AND FOR WHOSE BENEFIT BRAD IS, FOR PURPOSES OF THIS ARTICLE 24.3,
ACTING AS AGENT AND TRUSTEE.
24.4 BRAD and Buyer confirm to each other they have each obtained the required
authorizations and fulfilled any conditions applicable to enable each of
them to enter into this Agreement.
24.5 Buyer and BRAD agree that this Agreement has been the subject of
discussion and negotiation and is fully understood by the parties hereto
and that the price of the Aircraft and the other mutual agreements of the
parties set forth herein were arrived at in consideration of the
provisions contained in Article 19.
44
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In witness whereof this Agreement was signed on the date written hereof
For and on behalf of For and on behalf of
MIDWAY AIRLINES CORPORATION: BOMBARDIER, INC.:
Per: /s/[SIGNATURE ILLEGIBLE] Per: /s/[SIGNATURE ILLEGIBLE]
---------------------------- ----------------------------
Title: CEO Title: MANAGER, CONTRACTS
---------------------------- ----------------------------
45
<PAGE>
APPENDIX I
REGIONAL JET AIRCRAFT
ECONOMIC ADJUSTMENT FORMULA
Pursuant to the provision of Article 4 of the Agreement, economic adjustment
will be calculated using the following Economic Adjustment Formula:
Pp = PO[(0.28 LD) + (0.35 ED) + (0.20 CD + (0.15 MD) + (0.02 FD)]
-- -- -- -- --
LO EO CO MO FO
where:
Pp = Aircraft Purchase Price;
PO = Basic Price expressed in November 1, 1997 US dollars;
LD = the Canadian labour index based upon the indices for the last full
month preceding the month of delivery of the relevant Aircraft;
LO = the Canadian labour index which, as at November 1, 1997 is TBD;
ED = the U.S. labour index based upon the indices for the last full month
preceding the month of delivery of the relevant Aircraft;
EO = the U.S. labor index which, as at November 1, 1997 is TBD;
CD = the Industrial Commodities index based upon the indices for the last
full month preceding the month of delivery of the relevant Aircraft;
CO = the Industrial Commodities index which, as at November 1, 1997 is
TBD;
MD = the material index based upon the indices for the last full month
preceding the month of delivery of the relevant Aircraft;
MO = the material index which, as at November 1, 1997 is TBD;
FD = the fuel index based on the indices for the last full month
preceding the month of delivery of the relevant Aircraft; and
FO = the fuel index which, as at November 1, 1997 is TBD.
46
<PAGE>
For the purpose of the Economic Adjustment Formula and the calculation of the
economic adjustment:
(a) the Canadian labour index shall be the index provided in the
Standard Industrial Classification (S.I.C.) Code 321 for Average
Hourly Earnings for the Aircraft and Parts Industry (Canada)
published by Statistics Canada in "Employment Earnings and Hours"
Table 3.1.
(b) the U.S. labour index shall be the index provided in the Bureau of
Labor Statistics (B.L.S.) Code 372 Gross Hourly Earnings of
production and non-supervisory workers in the Aircraft and Aircraft
Parts Industry as published by the U.S. Department of Labor, Bureau
of Labor Statistics in "Employment and Earnings" Table C-2.
(c) the Industrial Commodities index shall be the index provided in the
Producer Price Index as Industrial Commodities as published by the
U.S. Department of Labor, Bureau of Labor Statistics in "Producer
Prices and Price Indexes" Table 6.
(d) the material index shall be the index provided in the Producer Price
Index for Code 10 Metals and Metals Products as published by the
U.S. Department of Labor, Bureau of Labor Statistics in "Producer
Prices and Price Indexes" Table 6.
(e) the fuel index shall be the index provided in the Bureau of Labor
Statistics (B.L.S.) Code 5 "Fuel and Related Products and Power"
Table 6 as published by the U.S. Department of Labor.
(f) in the event that BRAD shall be prevented from calculating the
Aircraft Purchase Price of each Aircraft due to any delay in the
publication of the required indices, BRAD shall use the last
provisionally published indices, and in the event that provisional
indices are not available, BRAD shall extrapolate from the last
three (3) months of published indices and where the balance of the
Aircraft Purchase Price payable is calculated on the provisionally
published indices, and/or extrapolation, BRAD will amend such
installment on publication of the final indices and will submit
supplementary claims or provide credit notes in respect of any
adjustment so caused.
(g) the indices used in the Economic Adjustment Formula and the
weighting assigned to them represent the projection by BRAD of the
manner in which BRAD will incur cost in the production of the
Aircraft. In the event there is a change in circumstances which
materially affects the indices chosen or the weighting assigned to
them, the indices and/or the weighting shall be amended accordingly.
The change in circumstances referred to above shall include but not
be limited to:
47
<PAGE>
1) Any change in the basis upon which the chosen indices have been
calculated or if any of said indices are discontinued or withdrawn
from publication,
2) Any change in manufacturing plan involving the letting of a new sub-
contract or the termination of an existing sub-contract, and
3) Any change in the escalation or Economic Adjustment Formula used in
a Vendor or sub-contractor contract with BRAD, so long as this does
not represent any duplication with other indeces; and
In the calculation of the Aircraft Purchase Price the following guidelines in
respect of decimal places shall apply:
(a) All indices in the Economic Adjustment Formula shall be used to the
second decimal place,
(b) The Economic Adjustment Formula shall be calculated to four decimal
places, and
(c) The Aircraft Purchase Price resulting from the Economic Adjustment
Formula shall be corrected to the nearest dollar.
48
<PAGE>
APPENDIX II
DELIVERY SCHEDULE
Aircraft Scheduled Delivery Date
First Aircraft [***]
Second Aircraft [***]
Third Aircraft [***]
Fourth Aircraft [***]
Fifth Aircraft [***]
Sixth Aircraft [***]
Seventh Aircraft [***]
Eighth Aircraft [***]
Ninth Aircraft [***]
Tenth Aircraft [***]
** This Aircraft shall have a grace period of 15 days
49
<PAGE>
APPENDIX III
SPECIFICATION
TYPE SPECIFICATION
Number RAD-601R-153 Issue NC
September 1997
50
<PAGE>
APPENDIX IV
BUYER SELECTED OPTIONAL FEATURES
Price
(in July 1,
1995
CR No. Description US $)
00-008 Extended Range Version (51,000 lb MTOW) - ER [***]
00-009 Centre Wing Fuel Tank [***]
00-012 Take-off Flap Setting (8 deg) [***]
00-013 FAA Collins Strapping [***]
21-009 Ground Air Conditioning Connection [***]
23-005 Single SELCAL System [***]
23-012 Third VHF Comm. Radio - Full Provisions [***]
25-093 Customized Cabin Interior - Midway Airlines [***]
- 50 pax with FAA Type III exit
- GI Galley - Cold Snack, Hot beverage, two (2)
Coffeemakers and two (2) Carafes, provisions for two
half size carts and five (5) standard containers
- life vest pouches under seat
25-083 Exterior Paint - Midway Airlines [***]
25-099 Reclining Seats [***]
25-108 Leather Seat Covers [***]
25-350 Structure for Universal provisions [***]
25-351 Second Flight Attendant position [***]
30-001 Red anti ice warning light (FAA) [***]
51
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33-002 Logo Lights [***]
33-003 Red Strobe Lights [***]
33-004 Cargo Door Light [***]
34-013 Collins FMS - provisions only [***]
34-019 On Board Data Loader [***]
34-026 Ground Proximity Warning System audio Call-out [***]
34-027 Altimeter Reset Auto Flash [***]
34-035 Single Collins FMS 4200 [***]
34-037a Single Collins GPS 4000 - not certified until 3Q 1997 [***]
35-004 EROS Magic Mask - installation only [***]
35-XXX Additional oxygen mask on LHS [***]
72-001 General Electric CF34-3B1 Engine Series 200 [***]
Total Technical Features [***]
All prices listed above are expressed in July 1,1995 US dollars, and are subject
to economic adjustment to the date of aircraft delivery. This list and all
prices are subject to change without notice
52
<PAGE>
EXHIBIT I
CERTIFICATE OF ACCEPTANCE
The undersigned hereby acknowledges on behalf of Buyer acceptance of the
Aircraft bearing manufacturer's serial number ______________________ fitted with
two (2) General Electric CF-34-3B1 turbofan engines bearing serial numbers
_______________________ and ____________________ as being in accordance with the
terms and conditions of this Agreement signed on the ____ day of ________, 19___
between Bombardier Regional Aircraft Division and Midway Airlines Corporation.
Place:_____________________________ Date:_____________________________
Signed for and on behalf of
Midway Airlines Corporation
Per: _______________________
Title: _______________________
53
<PAGE>
EXHIBIT II
WARRANTY BILL OF SALE
1. For valuable consideration, Bombardier Inc., represented by its Bombardier
Regional Aircraft Division, owner of the full and beneficial title of the
aircraft described as follows:
One (1) Canadair Regional Jet Model CL-600-2B19 aircraft bearing:
Manufacturer's serial number: XXXX
with:
Two (2) CF34-3B1 engine serial numbers: XXXXXX AND XXXXXX
together with all avionics, appliances, instruments, appurtenances,
accessories, furnishings and/or other equipment or property incorporated
in or installed on or attached to said aircraft and engines (hereinafter
referred to as the 'Aircraft').
does this ____ day of ________ 199___ hereby convey, sell, grant, transfer,
bargain and deliver and send over to _________________ (hereinafter referred to
as 'Buyer'), and unto its successors and assigns forever all of Bombardier
Inc.'s rights, title and interest in and to the Aircraft.
2. Bombardier Inc. represents and warrants to Buyer:
(i) that Bombardier Inc. has good and marketable title to the Aircraft
and the good and lawful right to the Aircraft and the good and
lawful right to sell the same; and
(ii) the good and marketable title to the Aircraft is hereby duly vested
in Buyer free and clear of all claims, liens, encumbrances and
rights of others of any nature. Bombardier Inc. hereby covenants and
agrees to defend such title forever against all claims and demands
whatsoever.
This full Warranty Bill of Sale is governed by the laws of the state of New
York, United States of America.
IN WITNESS WHEREOF, Bombardier Inc. has caused this instrument to be executed
and delivered by its duly authorized personnel.
BOMBARDIER INC.
- -------------------------
Name:
- -------------------------
Title
54
<PAGE>
EXHIBIT III
CERTIFICATE OF RECEIPT OF AIRCRAFT
THE UNDERSIGNED HEREBY ACKNOWLEDGES TO HAVE RECEIVED FROM BOMBARDIER INC., AT
THE DORVAL AIRPORT, ADJACENT TO BRAD'S PLANT IN MONTREAL, PROVINCE OF QUEBEC,
CANADA, ON THE _________ DAY OF __________, AT THE HOUR OF _________ O'CLOCK,
ONE (1) CANADAIR REGIONAL JET AIRCRAFT MODEL CL-600-2B19, BEARING SERIAL NUMBER
__________, INCLUDING WITH THE AIRCRAFT TWO (2) CF34-3B1 TURBOFAN ENGINES
BEARING MANUFACTURER'S SERIAL NUMBERS _________ & _____________ AND OTHER MAJOR
REPLACEABLE ACCESSORIES ATTACHED TO THE AIRCRAFT AND ENGINES.
Signed for and on behalf of
Midway Airlines Corporation:
Per:______________________________________
Title:____________________________________
55
<PAGE>
EXHIBIT IV
CHANGE ORDER
(PRO FORMA)
56
<PAGE>
- --------------------------------------------------------------------------------
CONTRACT CHANGE ORDER
================================================================================
PURCHASER:
PURCHASE AGREEMENT NO.: AIRCRAFT TYPE:
C.C.O. NO.: DATED:
PAGE __ of __
REASON FOR CHANGE:
- --------------------------------------------------------------------------------
DESCRIPTION OF CHANGE:
ALL OTHER TERMS AND CONDITIONS OF THE AGREEMENT WILL REMAIN
UNCHANGED
For administrative purposes only, a consolidation of the amendments contained in
this CCO is attached. In the event of inconsistencies between the consolidation
and this CCO, this CCO shall prevail.
- --------------------------------------------------------------------------------
FOR AND ON BEHALF OF: FOR AND ON BEHALF OF:
Bombardier Regional Aircraft Division Midway Airlines Corporation
Signed:________________________ Signed:___________________________
Date:__________________________ Date:_____________________________
- --------------------------------------------------------------------------------
57
<PAGE>
CUSTOMER SUPPORT SERVICES
ANNEX A - TECHNICAL SUPPORT, SPARE PARTS, TRAINING AND TECHNICAL DATA
The following Customer Support Services are those services to which reference is
made in Article 3 of the Agreement.
ARTICLE 1 - TECHNICAL SUPPORT
1.1 Factory Service
BRAD agrees to maintain or cause to be maintained the capability to
respond to Buyer's technical inquiries, to conduct investigations
concerning repetitive maintenance problems and to issue findings and
recommend action thereon. This service shall be provided for as long as
ten (10) CL-600-2B19 aircraft remain in commercial air transport service.
1.2 Field Service Representative
1.2.1 Services
BRAD shall assign one (1) Field Service Representative ("FSR") to
Buyer's main base of operation or other location as may be mutually
agreed.
1.2.2 Term
Such assignment shall be commence approximately one (1) month prior
to the Delivery Date of the first Aircraft and continue until
October 1999. The FSR assignment may be extended on terms and
conditions to be mutually agreed.
1.2.3 Responsibility
The FSR's responsibility shall be to provide technical advice to
Buyer for the line maintenance and operation of the Aircraft systems
and troubleshooting during scheduled and unscheduled maintenance by
Buyer's designated personnel ("FSR Services").
C-1
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1.2.4 Travel
If requested by Buyer, the FSR may, at Buyer's expense, travel to
another location to provide technical advice to Buyer.
1.2.5 Office Facilities
Buyer shall furnish the FSR, at no charge to BRAD, suitable and
private office facilities and related equipment including desk, file
cabinet, access to two telephone lines, facsimile and photocopy
equipment conveniently located at Buyer's main base of operation or
other location as may be mutually agreed.
1.2.6 Additional Expenses
Buyer shall reimburse BRAD (net of any additional taxes on such
reimbursement) the amount of any and all taxes (except Canadian
taxes on the income of the FSR) and fees of whatever nature,
including any customs duties, withholding taxes or fees together
with any penalties or interest thereon, paid or incurred by BRAD or
the FSR or other BRAD employee as a result of or in connection with
the rendering of the services.
1.2.7 Right to Stop Work
BRAD shall not be required to commence or continue the FSR Services
when:
a.) there is a labour dispute or work stoppage in progress at
Buyer's facilities;
b.) there exist war, risk of war or warlike operations, riots or
insurrections;
c.) there exist conditions that are dangerous to the safety or
health of the FSR or other BRAD employee; or
d.) the Government of the country where Buyer's facilities are
located or where Buyer desires the FSR to travel refuses the
BRAD employee permission to enter said country or Buyer's base
of operations.
C-2
<PAGE>
1.2.8 Work Permits and Clearances
Buyer shall arrange for all necessary work permits and airport
security clearances required for the FSR or other BRAD employee to
permit timely accomplishment of the FSR services.
1.3 Maintenance Planning Support
1.3.1 Scheduled Maintenance Task Cards
As described in Annex A Attachment A, BRAD shall provide Buyer
BRAD's standard format scheduled maintenance task cards that shall
conform to the Aircraft at the Delivery Date. At Buyer's request
BRAD shall provide a proposal for task cards produced to Buyer's
format.
1.3.2 In-Service Maintenance Data
Buyer agrees to provide to BRAD in-service maintenance data in order
to provide updates to BRAD's recommended maintenance program. Buyer
and BRAD shall agree on standards and frequency for communication of
such data.
1.4 Additional Services
At Buyer's request BRAD shall provide a proposal to provide such
additional support services as the parties may agree upon, which may
include special investigations, maintenance and repair of the Aircraft.
C-3
<PAGE>
ARTICLE 2- SPARE PARTS, GSE, TOOLS AND TEST EQUIPMENT
2.1.1 Definitions
a. "BRAD Parts":
any spare parts, ground support equipment, tools and test
equipment which bear an inhouse Cage Code number in the BRAD
Provisioning Files (as that expression is defined in ATA
Specification 2000).
b. "Power Plant Parts":
any power plant or power plant part or assembly carrying the
power plant manufacturer's part number or any part furnished
by the power plant manufacturer for incorporation on the
Aircraft.
c. "Vendor Parts":
any spare parts, ground support equipment, tools and test
equipment for the Aircraft which are not BRAD Parts or Power
Plant Parts.
d. "Spare Parts":
all materials, spare parts, assemblies, special tools and
items of equipment, including ground support equipment,
ordered for the Aircraft by Buyer from BRAD. The term Spare
Parts includes BRAD Parts, Power Plant Part and Vendor Parts.
e. "Order":
any order for Spare Parts issued by Buyer to BRAD; and
f. "Technical Data":
shall have the meaning attributed to it in Annex A Article
4.1.
C-4
<PAGE>
2.1 Term and Applicability
The term of this Annex A Article 2 shall become effective on the date
hereof and shall remain in full force and effect with respect to the
purchase and sale of Spare Parts for each Aircraft so long as at least ten
(10) of the CL-600-2B19 aircraft remain in commercial air transport
service. The provisions of Annex A Articles 2.2, 2.6.5, 2.24 and Annex B
Article 5.0 shall survive expiration or termination of this Agreement.
2.2 Order Terms
Terms and conditions hereof shall apply to all Orders placed by Buyer with
BRAD in lieu of any terms and conditions in Buyer's purchase orders.
2.3 Purchase and Sale of Spare Parts
2.3.1 Agreement to Manufacture and Sell
BRAD shall manufacture, or procure, and make available for sale to
Buyer suitable Spare Parts in quantities sufficient to meet the
reasonably anticipated needs of Buyer for normal maintenance and
normal spares inventory replacement for each Aircraft. During the
term specified in Annex A Article 2.1 above, BRAD shall also
maintain a shelf stock of certain BRAD Parts selected by BRAD to
ensure reasonable re-order lead times and emergency support. BRAD
shall maintain a reasonable quantity of BRAD insurance parts.
Insurance parts as used herein shall include, but not be limited to,
dispatch-essential parts such as major flight control surfaces.
2.4 Agreement to Purchase BRAD Parts
2.4.1 Purchase of BRAD Parts
In consideration of BRAD's obligation under Annex A Article 2.3.1,
during the term stated in Annex A Article 2.1., Buyer agrees to
purchase BRAD Parts only from BRAD or from airlines operating the
same type aircraft purchased herein, or from any source provided
that such source is approved by BRAD and/or the FAA. Where Buyer
selects another source, BRAD shall have no liability or obligation
whatsoever of any kind with respect to or arising from any parts
purchased from such other sources. Buyer may however purchase BRAD
Parts from any source whatsoever, redesign BRAD Parts, or have them
redesigned, manufacture BRAD Parts, or have them manufactured, under
the following conditions:
C-5
<PAGE>
a) when less than ten (10) aircraft of the type purchased
hereunder are operated in scheduled commercial air transport
service;
b) Any time BRAD Parts are needed to effect emergency repairs on
the Aircraft, provided that such purchase, redesign or
manufacture by or from sources other than BRAD allows Buyer to
obtain BRAD Parts in less time than BRAD requires to furnish
them; or
c) if Buyer has notified BRAD in writing that any BRAD Parts are
defective or unsatisfactory in use and if within a reasonable
period thereafter BRAD has not provided a satisfactory
resolution or made redesigned BRAD Parts available.
2.4.2 Buyer's Right to Purchase, Redesign or Manufacture
Buyer's right to purchase, redesign or to have redesigned or
manufacture or to have manufactured BRAD Parts under the preceding
Article shall not be construed as a granting of a license by BRAD
and shall not obligate BRAD to disclose to anyone Technical Data or
other information nor to the payment of any license fee or royalty
or create any obligation whatsoever to BRAD and BRAD shall be
relieved of any obligation or liability with respect to patent
infringement in connection with any such redesigned part. Buyer
shall be responsible for obtaining all regulatory authority
approvals required by Buyer to repair the Aircraft using redesigned
or manufactured BRAD Parts as described in the preceding Article.
Any such redesigned part shall be identified with Buyer's part
number only.
2.4.3 Notice to BRAD of Redesigned Parts
BRAD reserves the right to negotiate with Buyer the access to
redesigned parts, drawings and the exclusive manufacturing rights of
the redesigned part, if Buyer redesigns or has had any BRAD parts
redesigned.
C-6
<PAGE>
2.5 Purchase of Vendor Parts & Power Plant Parts
BRAD shall not be obligated to maintain a stock of Vendor Parts or Power
Plant Parts. BRAD may elect to maintain a spares stock of selected Vendor
Parts at its own discretion to support provisioning and replenishment
sales. BRAD agrees to use reasonable efforts to require its vendors to
comply with the terms and conditions of this Annex A Article 2 as they
apply to Vendor Parts. Vendor Parts shall be delivered in accordance with
the vendor's quoted lead time plus BRAD's internal processing time.
2.6 Spare Parts Pricing
2.6.1 Spare Parts Price Catalogue
Prices for commonly used BRAD Parts stocked by BRAD shall be
published in the spare parts price catalogue ("Spare Parts Price
Catalogue"). BRAD shall hold the published prices firm for catalogue
stock class items for a period of twelve (12) months and shall
provide at least ninety (90) calendar days notice prior to changing
the published price.
2.6.2 BRAD prices for Vendor Parts
If Buyer orders Vendor Parts from BRAD, the price shall be as
published in the Spare Parts Price Catalogue.
2.6.3 Quotations
Price and delivery quotations for items not included in the Spare
Parts Price Catalogue shall be provided at Buyer's request by BRAD.
Price quotations will be held firm for a period of ninety (90)
calendar days or as otherwise specified by BRAD. Responses to
quotation requests will be provided within ten (10) calendar days.
C-7
<PAGE>
2.6.4 Price Applicability
The purchase price of BRAD Parts shall be the applicable price set
forth in the Spare Parts Price Catalogue at time of receipt by BRAD
of Buyer's Order or as quoted by BRAD to Buyer upon request. If
Buyer requests accelerated delivery or special handling for BRAD
Parts not included in the Spare Parts Price Catalogue, BRAD may
increase the price from the original quotation to cover any
additional costs to BRAD.
2.6.5 Currency and Taxes
All Spare Parts Price Catalogue and quotation prices shall be in
U.S. dollars and exclusive of transportation, taxes, duties and
licenses.
Buyer shall pay to BRAD upon demand the amount of any sales, use,
value-added, excise or similar taxes imposed by any federal,
provincial or local taxing authority within Canada, and the amount
of all taxes imposed by any taxing authority outside Canada,
required to be paid by BRAD as a result of any sale, use, delivery,
storage or transfer of any Spare Parts. If BRAD has reason to
believe that any such tax is applicable, BRAD shall separately state
the amount of such tax in its invoice. if a claim is made against
BRAD for any such tax, BRAD shall promptly notify Buyer.
In addition, Buyer shall pay to BRAD on demand the amount of any
customs duties required to be paid by BRAD with respect to the
importation by Buyer of any Spare Parts.
2.6.6 Vendor Pricing
BRAD shall use reasonable efforts to require its major vendors to
maintain any published price for their parts for a period of at
least twelve (12) months with a ninety (90) calendar day notice
period prior to changing a published price.
C-8
<PAGE>
2.7 Provisioning
2.7.1 Pre-provisioning/Provisioning Conference
Pre-provisioning and provisioning conferences shall be convened on
dates to be mutually agreed between Buyer and BRAD in order to:
(i) discuss the operational parameters to be provided by Buyer to
BRAD which BRAD considers necessary for preparing its quantity
recommendations for initial provisioning of Spare Parts to be
purchased from BRAD or vendors ("Provisioning Items");
(ii) review Buyer's ground support equipment and special tool
requirements for the Aircraft;
(iii) discuss the format of the provisioning documentation to be
provided to Buyer from BRAD for the selection of Provisioning
Items; and
(iv) arrive at a schedule of events for the initial provisioning
process, including the establishment of a date for the initial
provisioning conference ("Initial Provisioning Conference")
which shall be scheduled on or before September 21, 1997.
The time and location of the pre-provisioning conference shall be
mutually agreed upon between the parties; however, BRAD and Buyer
shall use their best efforts to convene such meeting within thirty
(30) days after execution of the Agreement.
2.8 Initial Provisioning Documentation
Initial provisioning documentation for BRAD Parts and Vendor Parts shall
be provided by BRAD as follows:
a) BRAD shall provide, as applicable to Buyer, no later than eighteen
(18) months prior to the Scheduled Delivery Date of the first
Aircraft, or as may be mutually agreed, the initial issue of
provisioning files as required by ATA Specification 2000, Chapter 1
(as may be amended by BRAD);
C-9
<PAGE>
Revisions to this provisioning data shall be issued by BRAD every
ninety (90) calendar days until ninety (90) calendar days following
the Delivery Date of the last Aircraft or as may be mutually agreed;
b) BRAD shall provide, as required by Buyer, all data files defined in
Chapter 1 of ATA Specification 2000; and
c) the Illustrated Parts Catalogue designed to support provisioning
shall be issued concurrently with provisioning data files and
revised at ninety (90) calendar day intervals.
2.8.1 Obligation to Substitute Obsolete Spare Parts
In the event that, prior to delivery of the first Aircraft, any
Spare Part purchased by Buyer from BRAD is rendered obsolete or
unusable due to the redesign of the Aircraft or of any accessory,
equipment or part thereto (other than a redesign at Buyer's
request), BRAD shall deliver to Buyer new and usable Spare Parts in
substitution for such obsolete or unusable Spare Parts upon return
of such Spare Parts to BRAD by Buyer. BRAD shall credit Buyer's
account with BRAD with the price paid by Buyer for any such obsolete
or unusable Spare Part and shall invoice Buyer for the purchase
price of any such substitute Spare Part delivered to Buyer.
2.8.2 Delivery of Obsolete Spare Parts and Substitutes
Obsolete or unusable Spare Parts returned by Buyer pursuant to Annex
A Article 2.8.1. shall be delivered to BRAD at its plant in Ontario
or Quebec, or such other destination as BRAD may reasonably
designate. Spare Parts substituted for such returned obsolete or
unusable Spare Parts shall be delivered to Buyer from BRAD's plant
in Ontario or Quebec, or such other BRAD shipping point as BRAD may
reasonably designate. BRAD shall pay the freight charges for the
shipment from Buyer to BRAD of any such obsolete or unusable Spare
Part and for the shipment from BRAD to Buyer of any such substitute
Spare Part.
C-10
<PAGE>
2.8.3 Obligation to Repurchase Surplus Provisioning Items
During a period commencing one (1) year after the Delivery Date of
the first Aircraft, and ending five (5) years after such Delivery
Date, BRAD shall, upon receipt of Buyer's written request and
subject to the exceptions in Annex A Article 2.8.4, repurchase
unused and undamaged Provisioning Items which: (i) were recommended
by BRAD as initial provisioning for the Aircraft, (ii) were
purchased by Buyer from BRAD, and (iii) are surplus to Buyer's
needs.
2.8.4 Exceptions
BRAD shall not be obligated under Annex A Article 2.8.3 to
repurchase any of the following: (i) quantities of Provisioning
Items in excess of those quantities recommended by BRAD in its
Recommended Spare Parts List ("RSPL") for the Aircraft, (ii) Power
Plant Parts, QEC Kits, standard hardware, bulk and raw materials,
ground support equipment and special tools, (iii) Provisioning Items
which have become obsolete or have been replaced by other
Provisioning Items as a result of (a) Buyer's modification of the
Aircraft or (b) design improvement by the Aircraft manufacturer or
the vendor (other than Provisioning Items which have become obsolete
because of a defect in design if such defect has not been remedied
by an offer by BRAD or the vendor to provide no charge retrofit kits
or replacement parts which correct such defect), and (iv)
Provisioning Items which become surplus as a result of a change in
Buyer's operating parameters provided to BRAD pursuant to Annex A
Article 2.7, which were the basis of BRAD's initial provisioning
recommendations for the Aircraft.
2.8.5 Notification and Format
Buyer shall notify BRAD, in writing, when Buyer desires to return
Provisioning Items which Buyer's review indicates are eligible for
repurchase by BRAD under the provisions of Annex A Article 2.8.3.
Buyer's notification shall include a detailed summary, in part
number sequence, of the Provisioning Items Buyer desires to return.
Such summary shall be in the form of listings as may be mutually
agreed between BRAD and Buyer, and shall include part number,
nomenclature, purchase order number, purchase order date and
quantity to be returned.
Within five (5) business days after receipt of Buyer's notification
BRAD shall advise Buyer, in writing, when BRAD's review of such
summary from Buyer will be completed.
C-11
<PAGE>
2.8.6 Review and Acceptance by BRAD
Upon completion of BRAD's review of any detailed summary submitted
by Buyer pursuant to Annex A Article 2.8.5., BRAD shall issue to
Buyer a Material Return Authorization notice ("MRA") for those
Provisioning Items BRAD agrees are eligible for repurchase in
accordance with Annex A Article 2.8.3. BRAD will advise Buyer of the
reason that any Provisioning Items included in Buyer's detailed
summary are not eligible for return. The MRA notice shall state the
date by which Provisioning Items listed in the MRA notice must be
redelivered to BRAD and Buyer shall arrange for shipment of such
Provisioning Items accordingly.
2.8.7 Price and Payment
The price of each Provisioning Item repurchased by BRAD pursuant to
Annex A Article 2.8.6 will be the original invoice price thereof
BRAD shall pay the repurchase price by issuing a credit memorandum
in favour of Buyer which may be applied against amounts due BRAD for
the purchase of Spare Parts and services.
2.8.8 Return of Surplus Provisioning Items
Provisioning Items repurchased by BRAD pursuant to Annex A Article
2.8.6 shall be delivered to BRAD Free Carrier (Incoterms), at its
plant in Ontario or Quebec, or other such destination as BRAD may
reasonably designate.
2.8.9 Obsolete Spare Parts and Surplus Provisioning Items - Title and Risk
of Loss
Title to and risk of loss of any obsolete or unusable Spare Parts
returned to BRAD pursuant to Annex A Article 2.8.8 shall pass to
BRAD upon delivery thereof to BRAD. Title to and risk of loss of any
Spare Parts substituted for an obsolete or unusable Spare Part
pursuant to Annex A Article 2.8.1 shall pass to Buyer upon delivery
thereof to Buyer. Title to and risk of loss of any Provisioning
Items repurchased by BRAD pursuant to Annex A Article 2.8.3 shall
pass to BRAD upon delivery thereof to BRAD.
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<PAGE>
With respect to the obsolete or unusable Spare Parts which may be
returned to BRAD and the Spare Parts substituted therefor, pursuant
to Annex A Article 2.8.1, and the Provisioning Items which may be
repurchased by BRAD, pursuant to Annex A Article 2.8.3, the party
which has the risk of loss of any such Spare Part or Provisioning
Item shall have the responsibility of providing any insurance
coverage thereon desired by such party.
2.9 Procedure for Ordering Spare Parts
Orders for Spare Parts may be placed by Buyer to BRAD by any method of
order placement (including but not limited to SITA, ARINC, telecopier,
letter, telex, facsimile, telephone or hard copy purchase order).
2.9.1 Requirements
Orders shall include at a minimum order number, part number,
nomenclature, quantity, delivery schedule requested, shipping
instructions and BRAD's price, if available. Buyer agrees that
orders placed with BRAD shall conform to the requirements and
procedures contained in ATA Specification 2000, as applicable to
Buyer.
2.9.2 Processing of Orders
Upon acceptance of any Order, unless otherwise directed by Buyer,
BRAD shall, if the Spare Parts are in stock, proceed immediately to
prepare the Spare Parts for shipment to Buyer. If BRAD does not have
the Spare Parts in stock, BRAD shall proceed immediately to acquire
or manufacture the Spare Parts. Purchase order status and actions
related to the shipment of Spare Parts shall be generally consistent
with the provisions of the World Airline Suppliers Guide and the
applicable portions of ATA Specification 2000, as applicable to
Buyer.
C-13
<PAGE>
2.9.3 Changes
BRAD reserves the right, without Buyer's consent, to make any
necessary corrections or changes in the design, part number and
nomenclature of Spare Parts covered by an Order, to substitute Spare
Parts and to adjust prices accordingly, provided that
interchangeability is not affected and the unit price is not
increased by more than 10% or $50.00, whichever is less. BRAD shall
promptly give Buyer written notice of corrections, changes,
substitutions and consequent price adjustments. Corrections,
changes, substitutions and price adjustments which affect
interchangeability or exceed the price limitations set forth above
may be made only with Buyer's consent, which consent shall
conclusively be deemed to have been given unless Buyer gives BRAD
written notice of objection within fifteen (15) business days after
receipt of BRAD's notice. In case of any objection, the affected
Spare Part will be deemed to be deleted from Buyer's Order.
2.9.4 Electronic Data Interchange
2.9.4.1 Use of Electronic Data Interchange (EDI)
The SPEC 2000 Protocol shall be used for any EDI
transaction. Buyer and BRAD shall implement security
procedures to ensure proper use of this communication. A
message will be considered received only at the point where
it is in a format which can be accepted by the receiving
computer according to ATA SPEC 2000 rules on transmissions.
If garbled transmissions are received, the receiver shall
promptly notify the sender through use of the S1REJECT
command.
2.9.4.2 Acceptance of EDI Transactions
The SIBOOKED transaction creates an obligation on the part
of Buyer to purchase the material and quantities as
specified in the transmission. BRAD is obliged to sell the
material and quantities as specified except as may be
identified in a subsequent SIORDEXC message. With respect to
a S1QUOTES transaction, Buyer and BRAD are bound to respect
the prices quoted in the transmission in any resultant
S1BOOKED order transaction based upon that S1QUOTES message
within the validity period of the S1QUOTES message. An
S1NVOICE message will be considered as the official
commercial invoice for the goods shipped. An S1STOCKS,
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<PAGE>
S1SHIPPD, S1POSTAT or S1PNSTAT message creates no
obligations on either the Buyer or BRAD.
If an S1BOOKED acknowledgment is not sent within 24 hours by
BRAD then Buyer shall resend the original message.
Any document which has been properly received shall not give
rise to any obligation unless and until the party receiving
such document has properly transmitted in return an
acknowledgment document according to SPEC 2000 Protocol.
2.9.4.3 Systems Operations
Buyer and BRAD, at their own expense, shall provide and
maintain the equipment, software, services and testing
necessary to effectively and reliably transmit and receive
documents.
2.9.4.4 Validity of Documents
Annex A Article 2.9.4 has been agreed to by Buyer and BRAD
to evidence their mutual intent to create binding purchase
and sale obligations pursuant to the electronic transmission
and receipt of documents as described herein.
Such documents properly transmitted pursuant to this Annex A
Article 2.9.4 shall be considered, in connection with any
transaction or any other agreement, to be a "writing" or "in
writing" and shall be deemed for all purposes (a) to have
been "signed" and (b) to constitute an "original" when
printed from electronic files or records established and
maintained in the normal course of business.
[6~ Buyer and BRAD agree not to contest the validity or
enforceability of signed documents under the provisions of
any applicable law relating to whether certain agreements
are to be in writing or signed by either party to be bound
thereby. Signed documents, if introduced as evidence on
paper in any judicial, arbitration, mediation or
administrative proceedings, will be admissible as between
Buyer and BRAD to the same extent and under the same
conditions as other business records originated and
maintained in documentary form. Neither Buyer nor BRAD shall
contest the admissibility of copies of signed documents
under either the business records exception to the
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<PAGE>
hearsay rule or the best evidence rule on the basis that the
signed documents were not originated or maintained in
documentary form.
2.9.4.5 Limitation of Liability
NEITHER BUYER NOR BRAD SHALL BE LIABLE TO THE OTHER FOR ANY
INDIRECT, SPECIAL, INCIDENTAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES ARISING FROM OR AS A RESULT OF ANY
DELAY, OMISSION OR ERROR IN THE ELECTRONIC TRANSMISSION OR
RECEIPT OF ANY DOCUMENTS PURSUANT TO THIS ANNEX A ARTICLE
2.9.4, EVEN IF EITHER PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
2.10 Packing
All Spare Parts ordered shall receive standard commercial packing suitable
for export shipment via air freight. Such standard packing will generally
be to ATA 300 standards as amended from time to time. All AOG orders will
be handled, processed, packed and shipped separately.
2.11 Packing List
BRAD shall insert in each shipment a packing list/release note itemized to
show:
(i) the contents of the shipment,
(ii) the approved signature of BRAD's TC authority attesting to the
airworthiness of the Spare Parts.
(iii) value of the shipment for customs clearance if required.
2.12 Container Marks
Upon Buyer's request each container shall be marked with shipping marks as
specified on the Order. In addition BRAD shall, upon request, include in
the markings: gross weight and cubic measurements.
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<PAGE>
2.13 Delivery, Title and Risk of Loss
2.13.1 Delivery Point
Spare Parts shall be delivered to Buyer in one of the
following manners at BRAD's sole option:
(i) Free Carrier (Incoterms 1990) BRAD's plant in either Ontario
or Quebec, Canada; or
(ii) Free Carrier (Incoterms 1990) other BRAD depots or shipping
points; or
(iii) Free Carrier (Incoterms 1990) vendor's or subcontractor's
plant.
2.13.2 Delivery Time
BRAD shall use reasonable efforts so that shipment of BRAD Parts to
Buyer be as follows:
a) AOG Orders
Ship AOG Orders within four (4) hours of receipt of Order.
Buyer's affected Aircraft factory production number shall be
required on AOG Orders;
b) Critical Orders (A1)
Ship critical Orders within twenty-four (24) hours of order
receipt;
c) Expedite Orders (A2)
Ship expedite Orders within seven (7) calendar days of order
receipt;
d) Initial Provisioning Orders
Prior to the Delivery Date of the first Aircraft or as may be
mutually agreed; and
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<PAGE>
e) Other Orders
Shipment of stock items shall be approximately thirty (30)
calendar days after BRAD's receipt of Buyer's Order. Shipment
of non-stock items shall be in accordance with quoted lead
times or lead times published in the current Spare Parts
Price Catalogue, procurement data, or provisioning data.
2.14 Collect Shipments
Where collect shipments are not deemed practicable by BRAD, charges for
shipment, insurance, prepaid freight charges and all other costs paid by
BRAD shall be paid by Buyer promptly upon presentation to Buyer of
invoices covering the same.
2.15 Freight Forwarder
If Buyer elects to use the services of a freight forwarder for the onward
movement of Spare Parts, Buyer agrees to release BRAD from and indemnify
it for any liability for any fines or seizures of Spare Parts imposed
under any governmental Goods in Transit regulations. Any such fines levied
against BRAD will be invoiced to Buyer and any Spare Parts seized under
such regulations will be deemed to be received, inspected, and accepted by
Buyer at the time of seizure.
2.16 Reimbursement of Expenses
If BRAD gives Buyer written notice that an Order is ready for shipment and
shipment is delayed more than thirty (30) days at Buyer's request or
without BRAD's fault or responsibility, Buyer shall promptly reimburse
BRAD upon demand for all costs and expenses, including but not limited to
reasonable amounts for storage, handling, insurance and taxes, incurred by
BRAD as a result of such delay.
2.17 Title and Risk of Loss
Property and title to the Spare Parts will pass to Buyer upon payment for
the Spare Parts in full. Until payment in full for Spare Parts, (a) title
to them will not pass to Buyer, and (b) BRAD maintains a purchase money
security interest in them. Risk of loss of the Spare Parts will pass to
the Buyer upon delivery by BRAD. With respect to Spare Parts rejected by
Buyer pursuant to Annex A Article 2.19, risk of loss shall remain with
Buyer until such Spare Parts are re-delivered to BRAD.
BRAD agrees to notify Buyer when material is shipped and shall provide
carrier's reference information (i.e., waybill number)
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<PAGE>
2.18 Inspection and Acceptance
All Spare Parts shall be subject to inspection by Buyer at destination.
Use of Spare Parts or failure of Buyer to give notice of rejection within
thirty (30) days after receipt shall constitute acceptance. Acceptance
shall be final and Buyer waives the right to revoke acceptance for any
reason, whether or not known to Buyer at the time of acceptance. Buyer's
remedies for defects discovered before acceptance are exclusively provided
for in Annex A Article 2.19 herein.
2.19 Rejection
Any notice of rejection referred to in Annex A Article 2.18 shall specify
the reasons for rejection. If BRAD concurs with a rejection, BRAD shall,
at its option, correct, repair or replace the rejected Spare Parts. Buyer
shall, upon receipt of BRAD's written instructions and Material Return
Authorization ("MRA") number, return the rejected Spare Parts to BRAD at
its specified plant, or other destination as may be mutually agreeable.
The return of the rejected Spare Parts to BRAD and the return or delivery
of a corrected or repaired rejected Spare Part or any replacement for any
such Spare Part to Buyer shall be at BRAD's expense. Any corrected,
repaired or replacement Spare Parts shall be subject to the provisions of
this Agreement.
2.20 Payment
Except as provided in Annex A Article 2.22 below, payment terms shall be
net thirty (30) calendar days of invoice date for established open
accounts. Any overdue amount shall bear interest from the due date until
actual payment is received by BRAD at an annual rate of interest equal to
the U.S. prime interest rate as established from time to time by the Chase
Manhattan Bank, New York Branch, or its successor, plus two percent (2%)
calculated and compounded monthly.
2.21 Payment for Provisioning Items
Payment for Provisioning Items shall be made by Buyer as follows:
a) a deposit of [***] of the total price of the Provisioning Items as
selected by Buyer, upon signature of the spares provisioning
document; and
b) the balance of the total price of Provisioning Items upon their
delivery.
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<PAGE>
2.22 Modified Terms of Payment
BRAD reserves the right to alter the terms of payment:
(i) at any time by giving Buyer thirty (30) days' prior written notice
of the new terms, provided Buyer is not adversely discriminated
against with respect to other customers of BRAD currently operating
the Canadair Regional Jet aircraft, and
(ii) without prior notice if Buyer fails to pay when due an amount Buyer
owes under any agreement with BRAD.
2.23 Regulations
Buyer shall comply with all applicable monetary and exchange control
regulations and shall obtain any necessary authority from the governmental
agencies administering such regulations to enable Buyer to make payments
at the time and place and in the manner specified herein.
2.24 Warranty
ANNEX B HERETO EXCLUSIVELY SETS FORTH BRAD'S WARRANTY OBLIGATIONS WITH
RESPECT TO SPARE PARTS. EXCEPT AS EXPRESSLY SET OUT IN ANNEX B, THERE ARE
NO UNDERSTANDINGS, REPRESENTATIONS, CONDITIONS OR WARRANTIES, EXPRESS OR
IMPLIED, BETWEEN THE PARTIES WITH RESPECT TO ANY DEFECT IN THE SPARE PARTS
2.25 Cancellation of Orders
Except as otherwise may apply to initial provisioning, if Buyer cancels an
Order, BRAD, at its option, shall be entitled to recover actual damages,
but not less than the following cancellation charges or more than the
purchase price of the Spare Parts covered by the Order:
a) if work accomplished on the Order has been limited to BRAD Spares
Department, or the part has been identified as "shelf stock" in the
Spare Parts Price Catalogue, no cancellation charges shall be made;
C-20
<PAGE>
b) if production planning has been completed on the Order and shop
orders have been written, but no shop time or material charges have
been made against the Order, the cancellation charge shall be 10% of
the price but not to exceed $100 per unit;
c) if shop time or material charges have been made against the Order,
the cancellation charge shall be based on the cost of such time and
materials, plus overhead; and
d) if the Spare Parts covered by the Order can be absorbed into BRAD's
inventory without increasing BRAD's normal maximum stock level, no
cancellation charges shall be made.
2.26 Lease
BRAD shall select and make available certain parts for lease, subject to
availability. Buyer has the option to negotiate a lease agreement with
BRAD separate from this Agreement.
2.27 Additional Terms and Conditions
BRAD's conditions of sale are deemed to incorporate the terms and
conditions stated herein. Additional terms and conditions applicable at
time of receipt of each order from Buyer may be added providing (i) such
terms and conditions do not conflict with the terms and conditions
provided herein, and (ii) Buyer is not adversely discriminated against
with respect to other customers of BRAD currently operating the Canadair
Regional Jet aircraft. Such additional terms and conditions shall be
provided to Buyer at least ninety (90) calendar days prior to their
effective date.
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<PAGE>
ARTICLE 3 - TRAINING
3.1 General Terms
3.1.1 The objective of the training programs (the "Programs"), as
described herein, shall be to familiarize and assist Buyer's
personnel in the introduction, operation, and maintenance of the
Aircraft.
BRAD shall offer to the Buyer the Programs in the English language
at a BRAD designated facility; the Programs shall be completed prior
to the Delivery Date of the last Aircraft purchased herein.
3.1.2 Buyer shall be responsible for all travel and living expenses,
including local transportation, of Buyer's personnel incurred in
connection with the Programs.
3.1.3 The Programs shall be designed to reflect the model and/or
configuration of the Aircraft and may include differences training
to identify such configuration or model. Manuals which are provided
during the Programs exclude revision service.
3.1.4 A training conference shall be held where possible no later than
twelve (12) months prior to the Scheduled Delivery Date of the first
Aircraft to the Buyer, or as may be otherwise agreed, to establish
the Programs' content and schedule.
3.2 Flight Crew Training
3.2.1 Flight Crew Ground Training
At no additional charge, BRAD will provide with each delivered
Aircraft, a TC or FAA approved transition training for [***] of
Buyer's crews ([***] pilots) who meet the minimum entry
requirement provided in the applicable training manual. Each course
shall consist of up to [***] hours of classroom instruction
which may include part task trainer, Computer Based Training (CBT),
and/or Flight Training Device (FTD). BRAD shall furnish each of
Buyer's licensed pilots attending the course one copy of the Flight
Crew Operating Manual.
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<PAGE>
3.2.2 Pilot Simulator Training
BRAD shall provide access to a TC or FAA approved flight simulator
for the crew trained under Annex A Article 3.2.1. BRAD shall provide
a simulator instructor for [***] missions for the crew trained
on BRAD's designated simulator in Montreal; each mission shall
consist of [***] hours in the simulator and required
briefing/debriefing sessions.
3.2.3 In-Flight Training
Should Buyer require aircraft flight training, such training shall
be conducted in Buyer's Aircraft after the Delivery Date for up to a
maximum of [***] of Buyer's pilots. BRAD shall provide an
instructor pilot at no additional charge; Buyer shall be responsible
for the cost of fuel, oil, landing fees, taxes, insurance,
maintenance, and other associated operating expenses required for
the Aircraft during such training.
3.2.4 Flight Attendant Course
A familiarization course for up to [***] of Buyer's flight
attendant personnel shall be conducted. Each course shall be for a
maximum of [***] working days duration. This course shall present
general information on the Aircraft and detailed information on the
operation of the passenger safety equipment and emergency equipment.
BRAD shall furnish for each participant in this course one (1) copy
of the Flight Attendant Training Guide which shall not be revised.
Buyer shall assist BRAD in the development of the Flight Attendant
Training Guide to incorporate Buyer's specific equipment and
procedures.
3.2.5 Flight Dispatcher Course
A course for up to [***] of Buyer's flight dispatch personnel
shall be conducted. Each course shall be for a maximum of [***]
working days duration. The course shall consist of classroom
instruction covering general Aircraft familiarization, coverage of
performance, flight planning, weight and balance and the Minimum
Equipment List. BRAD shall furnish for each participant in this
course [***] copy of the Flight Crew Operating Manual which shall
not be revised.
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<PAGE>
3.2.6 Recurrent Pilot Training
BRAD shall, upon Buyer's request, provide a proposal for a TC or FAA
approved course for type rated pilots, customized in content to meet
the recurrent training of Buyer's pilots.
3.2.7 Course Training Material
BRAD shall, upon Buyer's request, present a proposal to provide one
(1) set of the materials (without revision service) used to conduct
the Flight Crew Ground Training course, as follows:
i) 35 mm slides;
ii) Instructional Narrative and/or Instruction Guides;
iii) Overhead Projection Transparencies;
iv) Motion picture and/or Video tapes; and
v) Audio cassettes tapes.
3.3 Maintenance Training
3.3.1 Customized Maintenance Course
[***]
3.3.2 Engine Run-up Course
[***]
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<PAGE>
3.3.3 Specialist Courses
At Buyer's request, BRAD shall make a proposal for specialist
courses which will be derived from BRAD's standard courses detailed
herein.
3.3.4 Recurrent Training
At Buyer's request, BRAD shall make a proposal for a Regulatory
Authority approved training plan for maintenance recurrent training.
3.3.5 Vendor Training
At Buyer's request, BRAD shall assist Buyer to obtain vendor
maintenance training.
3.3.6 Course Training Material
BRAD, upon Buyer's request, shall present a proposal to provide one
(1) set of the training materials (without revision service) used to
conduct BRAD's standard training as detailed herein:
i) 35 mm slides;
ii) Lesson Guides;
iii) Overhead Projection Transparencies;
iv) Motion picture and/or Video tapes; and
v) Audio cassettes tapes.
3.4 Insurance
3.4.1 Buyer shall at all times during flight training in Buyer's Aircraft
secure and maintain in effect, at its own expense, insurance
policies covering the Aircraft including without limitation:
a) liability insurance covering public liability, passenger,
crew, property and cargo damage in amounts not less than three
hundred million U.S. dollars ($300,000,000) for any single
occurrence;
b) all risk aircraft hull and engine insurance for an amount
which is not less than its then fair market value.
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<PAGE>
3.4.2 The liability policy shall name BRAD (and its affiliates) as
additional insured. The hull policy shall contain a waiver of
subrogation in favour of BRAD (and its affiliates). All insurance
policies shall provide for payments despite any misrepresentations
or breach of warranty by any person (other than the assured
receiving payments) and shall not be subject to any offset by any
other insurance carried by BRAD except that Buyer shall not be
required to provide insurance with respect to the manufacturing,
repair and maintenance activities of BRAD (and of its affiliates)
and the related potential liability (product or otherwise) arising
therefrom.
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<PAGE>
ARTICLE 4 - TECHNICAL DATA
4.1 Technical Data Provided
BRAD shall furnish to Buyer the Technical Data described in Attachment A
hereto (the "Technical Data"). The Technical Data shall be in the English
language and shall provide information on items manufactured according to
BRAD's detailed design and in those units of measures used in the
Specification or as may otherwise be required to reflect Aircraft
instrumentation as may be mutually agreed. BRAD will provide all of its
technical publications in a medium designated by Buyer (e.g., CD-ROM
(applicable to the IPC, AMM and WM only), hardcopy, or microfilm), if BRAD
makes such medium available to the market.
[***]
4.2 Shipment
All Technical Data provided hereunder shall be delivered to Buyer Free
Carrier (Incoterms) BRAD's designated facilities and at the time indicated
in Attachment A.
4.3 Proprietary Information
It is understood and Buyer acknowledges that the Technical Data
provided herein [***] (the "Proprietary Information") is proprietary to
BRAD and all rights to copyright belong to BRAD and the Proprietary
Information shall be kept confidential by Buyer. Buyer agrees to use
the Proprietary Information solely to maintain, operate, overhaul or
repair the Aircraft or to make installation or alteration thereto
allowed by BRAD.
Proprietary Information shall not be disclosed to third parties without
BRAD's prior written consent, which shall not be unreasonably withheld, or
used by Buyer or furnished by Buyer for the design or manufacture of any
aircraft or Spare Parts including BRAD Parts or items of equipment, except
when manufacture or redesign is permitted under the provisions of Annex A
Article 2.4 hereof and then only to the
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<PAGE>
extent and for the purposes expressly permitted therein, and provided
further the recipient shall provide a non-disclosure undertaking
acceptable to BRAD. Notwithstanding the foregoing, Buyer may disclose
Proprietary Information to any government authority, provided that (i)
Buyer will notify BRAD of any government request for Proprietary
Information, (ii) Buyer will mark such Proprietary Information as being
confidential, and (iii) Buyer will not give permission to such receiving
government authority to release such Proprietary Information.
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<PAGE>
ATTACHMENT A
LIST OF TECHNICAL DATA
COLUMN HEADING AND EXPLANATION OF CODES
ITEM
1 DOC DOCUMENT
Title of Technical Data provided.
2 CONFIG CONFIGURATION
G = Contains data common to all aircraft of the same type
(Generic).
C = Contains data unique to Buyer's Aircraft (Customized).
3 MEDIUM Buyer selects one of the following media specified in the table:
1 = Print two sides
2 = Microfilm
3 = Print one side
4 = Laminated Cardboard
4 REVISION Y = Periodic revision service applies
N = Revision service not applicable
S = Revised as required by BRAD
5 QUANTITY
(Number) = Quantity per the Agreement
(Number) PER = Quantity per Aircraft
6 DELIVERY
ATD = At time of the Delivery Date of the first Aircraft.
PTD = Prior to the Delivery Date of each or the first
Aircraft (as applicable).
7 ATA Y = Document is per ATA Specification 100, Revision
26.
N = Document is to BRAD's existing commercial
practices.
With the delivery of the first Aircraft, BRAD will provide to Buyer at no
additional charge one set of the technical manuals listed below
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<PAGE>
TECHNICAL DATA
REGIONAL JET
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
ITEM DOC CONF MEDIUM QTY REV DEL ATA REMARKS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. AIRCRAFT MAINTENANCE MANUAL (AMM) G 1 [***] Y PTD Y
- ----------------------------------------------------------------------------------------------------------
2. ILLUSTRATED PARTS MANUAL/CATALOG (IPC) G 1 [***] Y PTD Y
- ----------------------------------------------------------------------------------------------------------
3. STRUCTURAL REPAIR MANUAL (SRM) G 1 [***] Y PTD Y
- ----------------------------------------------------------------------------------------------------------
4. COMPONENT MAINTENANCE MANUAL (CMM) G 1 [***] Y PTD Y
- ----------------------------------------------------------------------------------------------------------
5. POWER PLANT BUILD-UP MANUAL G 1 [***] Y PTD Y
- ----------------------------------------------------------------------------------------------------------
6. WIRING DIAGRAM MANUAL C 1 [***] Y PTD Y
- ----------------------------------------------------------------------------------------------------------
7. ILLUSTRATED TOOL & EQUIPMENT MANUAL G 1 [***] Y PTD Y
(ITEM)
- ----------------------------------------------------------------------------------------------------------
8. SERVICE BULLETINS G 1 [***] S PTD Y SEE NOTE 2
- ----------------------------------------------------------------------------------------------------------
9. NON DESTRUCTIVE TEST MANUAL (NDT) G 1 [***] Y PTD Y
- ----------------------------------------------------------------------------------------------------------
10. MAINTENANCE PROGRAM DOCUMENT (MPD) G 1 [***] S PTD Y SEE NOTE 3
- ----------------------------------------------------------------------------------------------------------
11. FAA OR DOT AIRPLANE FLIGHT MANUAL C 1 [***] S ATD N
(AFM)
- ----------------------------------------------------------------------------------------------------------
12. WEIGHT & BALANCE MANUAL G 1 [***] Y ATD Y
- ----------------------------------------------------------------------------------------------------------
13. MASTER MINIMUM EQUIPMENT LIST (MMEL) G 1 [***] S ASAP N
- ----------------------------------------------------------------------------------------------------------
14. QUICK REFERENCE HANDBOOK C 1 [***] S ATD N
- ----------------------------------------------------------------------------------------------------------
15. FLIGHT CREW OPERATING MANUAL (FCOM) C 1 [***] S ATD N SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------
16. MAINTENANCE TASK CARDS C 3 [***] S PTD N
- ----------------------------------------------------------------------------------------------------------
17. FLIGHT PLANNING & CRUISE CONTROL G 1 [***] S ASAP N
MANUAL
- ----------------------------------------------------------------------------------------------------------
18. AIRCRAFT CHARACTERISTICS FOR AIRPORT G 1 [***] N ASAP N SEE NOTE 4
PLANNING
- ----------------------------------------------------------------------------------------------------------
19. MAINTENANCE FACILITIES & EQUIPMENT G 1 [***] S ASAP N
PLANNING MANUAL
- ----------------------------------------------------------------------------------------------------------
20. SYSTEM SCHEMATIC MANUAL (SSM) G 1 [***] Y ATD Y SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------
21. PASSENGER INFORMATION SHEET G 3 [***] S ATD N SEE NOTE 6
- ----------------------------------------------------------------------------------------------------------
22. PILOT CHECKLIST C 4 [***] S ATD N
- ----------------------------------------------------------------------------------------------------------
23. CRASH CREW CHART G 4 [***] S ATD N
- ----------------------------------------------------------------------------------------------------------
24. DISPATCH DEVIATION GUIDE G 1 [***] S PTD N
- ----------------------------------------------------------------------------------------------------------
25. POWERPLANT GROUND RUN MANUAL G 1 [***] N ATD N
- ----------------------------------------------------------------------------------------------------------
26. FAULT ISOLATION MANUAL G 1 [***] N ATD N
- ----------------------------------------------------------------------------------------------------------
27. COMPUTER SELFTEST/BITE/RESET USER G 1 [***] N PTD N
GUIDE
- ----------------------------------------------------------------------------------------------------------
28. REFUEL/DEFUEL HANDBOOK G 1 [***] N PTD N
- ----------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 1: REVISION SERVICE
A. Revision services shall only be available for [***]
following the Delivery Date of Buyer's last Aircraft.
Subsequent revision service shall be provided dependent upon
incorporation of BRAD issued Service Bulletins.
B. Revisions to the Technical Data to reflect the Aircraft at
Delivery Date shall be provided to Buyer within six (6) months
following the Delivery Date of each of the Aircraft,
respectively.
C. Provided the revision service is being supplied under the
terms of this Agreement or by subsequent purchase order, BRAD
shall incorporate in the applicable documents all applicable
BRAD originated Service Bulletins in a regular revision
following formal notification by Buyer that such Service
Bulletins shall be accomplished on the Buyer's Aircraft. The
manuals shall then contain both original and revised
configuration until Buyer advises BRAD in writing that one
configuration is no longer required.
C-30
<PAGE>
NOTE 2: SERVICE BULLETINS
Aperture cards of the service drawing(s) will be provided in lieu of
drawings when practical.
NOTE 3: MAINTENANCE PROGRAM DOCUMENT
This manual provides the basis for Buyer's initial maintenance
program.
NOTE 4: AIRCRAFT CHARACTERISTICS FOR AIRPORT PLANNING
This manual contains data on Aircraft ground maneuver and handling.
NOTE 5: ON-BOARD WIRING DIAGRAM BOOK
This book contains wiring diagrams for interim reference until the
Wiring Diagram Manual is revised to reflect the Aircraft at the
Delivery Date.
NOTE 6: PASSENGER INFORMATION CARDS
BRAD will provide one (1) reproducible master for the preparation of
passenger information cards. For an additional cost, subject to
negotiation, BRAD will provide full colour laminated passenger
information cards in quantities required.
C-31
<PAGE>
ANNEX B - WARRANTY AND SERVICE LIFE POLICY
ARTICLE 1 - WARRANTY
The following warranty is that to which reference is made in Article 3 of the
Agreement.
1.1 Warranty
1.1.1 Subject to Annex B Articles 1.9, 1.10, and 2.0, BRAD warrants that,
at the date of delivery of the Aircraft or BRAD Part, as applicable:
a) the Aircraft shall conform to the Specification, except that
any matter stated in the Specification as type
characteristics, estimates or approximations is excluded from
this Warranty;
b) the Aircraft shall be free from defects caused by the failure
of BRAD to install a Vendor Part or Powerplant Part in
accordance with reasonable instructions of the vendor;
c) the BRAD Parts shall be free from defects in material or
workmanship; and
d.) the BRAD Parts shall be free from defects in design, having
regard to the state of the art as of the date of such design.
1.1.2 The Warranty set forth in Annex B Article 1.1.1(c) and (d) above
shall also be applicable to BRAD Parts purchased as Spare Parts.
1.1.3 BRAD further warrants that, at the time of delivery, the Technical
Data shall be free from error.
1.2 Warranty Period
1.2.1 The Warranty set forth in Annex B Article 1.1 shall remain in effect
for any defect covered by the Warranty (a "Defect") becoming
apparent during the following periods (individually, the "Warranty
Period"):
a) for failure to conform to the Specification and in the
installation referred to in Annex B Article 1.1.1(a) and 1.1.1
(b), thirty-six (36) months from the Delivery Date;
C-32
<PAGE>
b) for those Defects in material or workmanship in BRAD Parts
referred to in Annex B Article 1.1.1(c) and 1.1.2, [***]
from the date of delivery of such parts;
c) for those Defects in design referred to in Annex B Article
1.1.1 (d), [***] from the date of delivery of such parts; and
d) for errors in the Technical Data referred to in Annex B
Article 1.1.3, [***] from the date of delivery of the
applicable Technical Data.
1.3 Repair, Replacement or Rework
As to each matter covered by this Warranty BRAD's sole obligation and
liability under this Warranty is expressly limited to, at BRAD's election,
correction by the repair, replacement or rework of the defective part or
item of Technical Data. The repaired, replaced or reworked part or item of
Technical Data which is the subject of the Warranty claim shall then be
warranted under the same terms and conditions for the then unexpired
portion of the Warranty Period.
In the case of a Defect relating to non-conformance with the
Specification, BRAD shall correct that Defect in the equipment item or
part in which the Defect appears, except that BRAD will not be obligated
to correct any Defect which has no material adverse effect on the
maintenance, use or operation of the Aircraft.
1.4 Claims Information
BRAD's obligations hereunder are subject to a Warranty claim to be
submitted in writing to BRAD's warranty administrator, which claim shall
include but not be limited to the following information:
a) the identity of the part or item involved, including the Part
number, serial number if applicable nomenclature and the quantity
claimed to be defective;
b) the manufacturer's serial number of the Aircraft from which the part
was removed;
c) the date the claimed Defect became apparent to Buyer;
d) the total flight hours (and cycles if applicable) accrued on the
part at the time the claimed Defect became apparent to Buyer; and
C-33
<PAGE>
e) a description of the claimed Defect and the circumstances pertaining
thereto.
1.5 BRAD's Approval
Within ten (10) working days following receipt of Buyer's Warranty claim
for a Defect accompanied by Buyer's request for permission as applicable
to correct a Defect, BRAD shall notify Buyer of its decision on the
request. Approval under this Article shall not constitute a determination
as to the existence of a Defect as described in Annex B Article 1.1 above.
1.6 Timely Corrections
BRAD shall make the repair, replacement or rework, following receipt of
the defective part or item, with reasonable care and dispatch.
1.7 Labour Reimbursement
For correction of Defects BRAD shall establish a reasonable estimate for
the labour hours required for the repair, replacement or rework of the
defective BRAD Part and, if the repair, replacement or rework is performed
by Buyer, BRAD shall reimburse Buyer for BRAD estimated hours or for
Buyer's actual labour hours, whichever is less, for the repair,
replacement or rework of the defective BRAD Part excluding any work
necessary to gain access to said BRAD Part. Such reimbursement shall be
based upon Buyer's direct labour rate per man-hour plus burden rate of
[***] subject to annual review and adjustment of such labour
rate as mutually agreed; provided, however, that this amount shall not
exceed [***] of the BRAD published selling labour rate.
C-34
<PAGE>
1.8 Approval, Audit, Transportation and Waiver
All Warranty claims shall be subject to audit and approval by BRAD. BRAD
will use reasonable efforts to advise in writing the disposition of
Buyer's Warranty claim within thirty (30) days following the receipt of
the claim and (if requested) return of the defective BRAD Part to BRAD's
designated facility. BRAD shall notify Buyer of BRAD's disposition of each
claim.
Buyer shall pay all costs of transportation of the defective part from
Buyer to BRAD, and BRAD shall pay all costs of transportation of the
repaired, corrected or replacement parts back to Buyer.
1.9 Limitations
1.9.1 BRAD shall be relieved of and shall have no obligation or liability
under this Warranty if:
a) the Aircraft was operated with any products or parts not
specifically approved by BRAD, unless Buyer furnishes
reasonable evidence acceptable to BRAD that such products or
parts were not a cause of the Defect; or
b) the Aircraft was not operated or maintained in accordance with
the Technical Data listed in Attachment A of Annex A and the
manufacturer's documentation furnished to Buyer (including
Service Bulletins and airworthiness directives) unless Buyer
furnishes reasonable evidence acceptable to BRAD that such
operation or maintenance was not a cause of the Defect; or
c) the Aircraft was not operated under normal airline use, unless
Buyer furnishes reasonable evidence acceptable to BRAD that
such operation was not a cause of the Defect; or
d) Buyer does not
1) report the Defect in writing to BRAD's Warranty
administrator within thirty (30) calendar days following
such Defect becoming apparent, and
C-35
<PAGE>
2) retain the BRAD Part claimed to be defective until
advised by BRAD to return such BRAD Part to BRAD's
designated facility in order for BRAD to finalize its
evaluation of the Warranty claim or to otherwise dispose
of such BRAD Part; or
e) Buyer does not submit reasonable proof to BRAD within thirty
(30) calendar days after the Defect becomes apparent that the
Defect is due to a matter covered within this Warranty; or
f) Buyer does not allow BRAD reasonable opportunity to be present
during the disassembly and inspection of the BRAD Part claimed
to be defective.
1.9.2 The above warranties do not apply to Buyer Furnished Equipment.
1.10 Normal Usage
Normal wear and tear and the need for regular maintenance and overhaul
shall not constitute a Defect or failure under this Warranty.
1.11 Overhaul of Warranty Parts
BRAD's liability for a BRAD Part which has a Defect and is overhauled by
Buyer within the Warranty Period shall be limited only to that portion of
the labour and material replacement related to the Defect.
1.12 No Fault Found
In the event that a BRAD Part returned under a Warranty claim is
subsequently established to be serviceable then BRAD shall be entitled to
charge and recover from Buyer any reasonable costs incurred by BRAD in
connection with such Warranty claim. Providing, however, in the event that
repetitive in-service failure occurs on the particular BRAD Part which is
subsequently identified by BRAD on a repeated basis to be "no fault
found," then BRAD and Buyer shall discuss and mutually agree a course of
further action to help identity the problem. In the event the fault is
ultimately confirmed to be a legitimate Warranty claim then the above
mentioned costs incurred by BRAD and charged to Buyer shall be waived.
C-36
<PAGE>
ARTICLE 2 - VENDOR WARRANTIES
2.1 Warranties from Vendors
The Warranty provisions of this Annex B apply to BRAD Parts only. However,
BRAD has made or shall make reasonable efforts to obtain favourable
warranties from vendors, with respect to Vendor Parts and Power Plant
Parts. Except as specifically provided under this Annex B Article 2, BRAD
shall have no liability or responsibility for any such Vendor Parts and
Power Plant Parts and the warranties for those Vendor Parts and Power
Plant Parts shall be the responsibility of the vendor and a matter as
between Buyer and vendor.
2.2 Vendor Warranty Backstop
For those Vendor Parts installed on the Aircraft at the Delivery Date or
subsequently purchased through BRAD, excluding the Powerplant or the Power
Plant Parts, in the event the parties agree that a vendor is in default in
the performance of any material obligation under any applicable warranty
obtained by BRAD from such vendor pursuant to Annex B Article 2.1 above,
the warranties and all other terms and conditions of Annex B Article 1
shall become applicable as if the Vendor Parts had been a BRAD Part,
except that the warranty period shall be the Warranty Period as set forth
herein or by the vendor's warranty, whichever is shorter and all
transportation costs associated with the Vendor Parts shall be borne by
Buyer.
2.3 BRAD's Interface Commitment
In the event of a dispute in the application of a Vendor Part warranty, at
Buyer's request addressed to BRAD's warranty administrator, BRAD shall,
without charge, conduct an investigation and analysis of any such dispute
resulting from a technical interface problem to determine, if possible,
the cause of the interface problem and then recommend feasible corrective
action. Buyer shall furnish to BRAD all data and information in Buyer's
possession relevant to the interface problem and shall cooperate with BRAD
in the conduct of its investigation and such tests as may be required.
BRAD, at the conclusion of its investigation, shall advise Buyer in
writing of BRAD's opinion as to the cause of the problem and BRAD's
recommended corrective action.
C-37
<PAGE>
ARTICLE 3- SERVICE LIFE POLICY
3.1 Applicability
The Service Life Policy ("SLP") described in this Annex B Article 3 shall
apply if fleetwide and repetitive failures occur in any Covered Component
which is defined in Annex B Article 3.7 below.
3.2 Term
3.2.1 Should such failures occur in any Covered Component within [***]
following delivery of the Aircraft containing such Covered
Component, BRAD shall, as promptly as practicable and at its option;
a) design and/or furnish a correction for such failed Covered
Component; or
b) furnish a replacement Covered Component (exclusive of standard
parts such as bearings, bushings, nuts, bolts, consumables and
similar low value items).
3.3 Price
Any Covered Component which BRAD is required to furnish under this SLP
shall be provided for at a price calculated in accordance with the
following formula:
P = CxT
---
144
Where:
P = Price of Covered Component to Buyer;
C = BRAD's then current price for the Covered Component;
T = The total time to the nearest month since the Aircraft containing the
Covered Component was delivered by BRAD
C-38
<PAGE>
3.4 Conditions and Limitations
3.4.1 The following general conditions and limitations shall apply to the
SLP:
a) the transportation cost for the return to BRAD's designated
facility, if practicable, of any failed Covered Component
necessary for failure investigation or redesigning studies
shall be borne by Buyer;
b) BRAD's obligations under this SLP are Conditional upon the
submission of reasonable proof acceptable to BRAD that the
failure is Covered hereby;
c) Buyer shall report any failure of a Covered Component in
writing to BRAD's Warranty administrator within two (2) months
after such failure becomes evident. Failure to give this
required notice shall excuse BRAD from all obligations with
respect to such failure;
d) the provisions of Annex B Article 1.9 of the Warranty (except
for subparagraphs (d) and (e) thereof) are incorporated by
this reference and shall condition BRAD's obligations under
this SLP with respect to any Covered Component;
e) BRAD's obligations under this SLP shall not apply to any
Aircraft which has not been correctly modified in accordance
with the specifications or instructions contained in the
relevant Service Bulletins which are furnished to Buyer prior
to receipt by BRAD from Buyer of any notice of an occurrence
which constitutes a failure in a Covered Component. The
provisions of this subparagraph shall not apply in the event
that Buyer furnishes reasonable evidence acceptable to BRAD
that such failure was not caused by Buyer's failure to so
modify the Aircraft;
f) this SLP shall not apply to a failure of a Covered Component
if BRAD determines that such failure may not reasonably be
expected to occur on a fleetwide and repetitive basis; and
C-39
<PAGE>
g) this SLP shall not apply to a Covered Component where the
failure results from an accident, abuse, misuse, degradation,
negligence or wrongful act or omission, unauthorized repair or
modification adversely affecting a Covered Component, impact
or foreign object damage, to any Covered Component.
3.5 Coverage
This SLP is neither a warranty, performance guarantee nor an agreement to
modify the Aircraft to conform to new developments in design and
manufacturing art. BRAD's obligation is only to provide correction
instructions to correct a Covered Component or furnish replacement at a
reduced price as provided in this SLP.
3.6 Assignment
Buyer's rights under this SLP shall not be assigned, sold, leased,
transferred or otherwise alienated by contract, operation of law or
otherwise, without BRAD's prior written consent. Any unauthorized
assignment, sale, lease, transfer, or other alienation of Buyer's rights
under the SLP shall immediately void all of BRAD's obligations under the
SLP.
3.7 Covered Component
Only those items or part thereof listed in Attachment A to this Annex B
shall be deemed to be a Covered Component, and subject to the provisions
of this SLP.
ARTICLE 4 - GENERAL
4.1 It is agreed that BRAD shall not be obligated to provide to Buyer any
remedy which is a duplicate of any other remedy which has been provided to
Buyer under any other part of this Annex B.
C-40
<PAGE>
Annex B - Attachment A
COVERED COMPONENTS
1. WING
a. Upper and lower integral stringer machined wing planks.
b. Machined spar, including auxiliary spars.
c. Caps, webs and stiffeners on fabricated spars.
d. Front spar to rear spar wing box ribs.
e. Main landing gear (MLG) machined trunnion rib.
f. MLG side stay machined attachment fittings.
g. Wing/fuselage machined attachment fittings.
2. FUSELAGE
a. Window and windshield frame structure, but excluding the windows and
windshield. Exterior skins, doublers, circumferential frames but
excluding all Systems, fairings, insulation, lining and decorative
clips and brackets.
b. Engine mount support box structure and machined pylon attachment
fittings. Primary structure frames around body openings for
passenger door, baggage door, avionics door, flying control access
door, APU access door and emergency exits.
c. Nose landing gear well structure, including wheel well walls,
ceiling, pressure bulkheads and pressure floor structural components
at fuselage wing cutout.
C-41
<PAGE>
3. VERTICAL STABILIZER
a. All spars.
b. Horizontal to vertical stabilizer machined attachment fillings.
c. Front spar to fuselage frame machined attachment fittings.
d. Exterior skins, ribs, stringers between front and rear spars and
machined closing rib.
4. HORIZONTAL STABILIZER
Front and rear spars and exterior skins, rib and stringers between front
and rear spars.
C-42
[6~<PAGE>
[LOGO] Bombardier Inc.
Bombardier Regional Aircraft Division
123 Garratt Boulevard
Downsview, Ontario, Canada M3K 1Y5
Telephone (416) 633-7310
Contracts Facsimile (416) 375-4533
September 17th, 1997
Our Ref: B97-7701-RJTL-CRJ0393-001
Midway Airlines Corporation
300 West Morgan Street, Suite 1200
Durham, NC 27701
USA
Attention: Mr. Robert Ferguson, Chairman, President & CEO
Gentlemen,
Re: Letter Agreement No. 001 (Re: Option Aircraft)
Reference is made to Purchase Agreement No. PA-0393 (the "Agreement") between
Bombardier Inc., represented by its Bombardier Regional Aircraft Division
("BRAD") and Midway Airlines Corporation ("Buyer") for the sale of ten (10)
Canadair Regional Jet Aircraft (the "Aircraft").
This letter, when accepted and agreed to by Buyer contemporaneously with
execution of the Agreement, will become part of the Agreement and will evidence
our further agreement with respect to the matters set forth below.
All terms used herein and in the Agreement not defined herein, shall have the
same meaning as in the Agreement.
Subject: Option Aircraft
1.0 [***]
1
<PAGE>
1.1 The Option Aircraft will be as described in Article 2 of the Agreement.
1.2 The base price (the "Base Price") for each of the Option Aircraft
including the Buyer Selected Optional Features listed in Appendix IV to
the Agreement, Ex Works (Incoterms 1990) BRAD's facilities in Montreal,
Quebec shall be [***] expressed in November 1, 1997 dollars.
This Base Price does not include any Taxes, fee or duties and is subject
to escalation in accordance with the Economic Adjustment Formula attached
as Appendix I to the Agreement for the period from November 1, 1997 to the
date of delivery of each Option Aircraft ("Option Aircraft Purchase Price.
1.3 Buyer shall exercise its right to purchase the Option Aircraft by
providing written notice to BRAD of its intention to do so in accordance
with the following schedule: (i) the first Option Block may be exercised
[***] months prior to the first day of the Scheduled Delivery Date of
the first Option Aircraft in the first Option Block, (ii) the second
Option Block may be exercised [***] months prior to the first day of
the Scheduled Delivery Date of the first Option Aircraft in the second
Option Block, and (iii) the third Option Block may be exercised
[***] prior to the first day of the Scheduled Delivery Date of the
first Option Aircraft in the third Option Block.
[***]
2
<PAGE>
1.4 The Scheduled Delivery Dates of the Option Aircraft are as follows:
Block 1 [***]
[***]
[***]
Block 2 [***]
[***]
[***]
Block 3 [***]
[***]
[***]
[***]
1.5 As consideration for this option, Buyer shall make or cause to make
payment to BRAD a non-refundable deposit of [***] per Option Aircraft
(the "Option Deposit") in each block totaling [***] upon execution of
the Agreement.
1.6 Upon exercise of an Option Block, Buyer will make or cause to make the
progress payments specified in Articles of the Agreement within [***]
business days of the exercise of the option.
2.0 [***]
2.1 [***]
3
<PAGE>
2.2 Unless expressly provided for in this Agreement, the terms and conditions
of the Agreement shall apply mutatis mutandis to the Option Aircraft, with
the exception Annex A Technical Support as specified in Article 1.2 (Field
Service Representative, except as noted in Article 2.0 of this Letter
Agreement), Annex A training courses as specified in Article 3.2.4 (flight
attendant), Article 3.2.5 (flight dispatch), Article 3.3.1 (customized
maintenance course), Article 3.3.2 (engine run-up)); the Technical Data
identified in Article 4 Attachment A (except for Aircraft specific manuals
only), and the courses specified in the following Articles of Letter
Agreement No. 005: Article 1.1.2 (flight attendant), Article 1.3 (training
materials), Article 1.4 (dispatcher training) and Article 2.0 (start up
support).
Furthermore, the following Letter Agreements are also not applicable to
the Option Aircraft and are hereby excluded:
[***]
[***]
[***]
[***]
[***]
3.0 In the event of the termination of the Agreement, this Letter Agreement
shall become automatically null and void.
4.0 Upon exercise of Buyer's rights to purchase in accordance with this Letter
Agreement, the parties shall amend the Agreement or enter into an
additional purchase agreement in order to give effect to the purchase of
Option Aircraft in accordance with the terms and conditions thereof.
5.0 The provisions of this Letter Agreement are personal to Buyer and shall
not be assigned or otherwise disposed of by Buyer without the prior
written consent of BRAD.
4
<PAGE>
Should there be any inconsistency between this Letter Agreement and the
Agreement with respect to the subject matter covered by the terms hereof, then
this Letter Agreement shall prevail.
Yours truly
BOMBARDIER NC.
By: /s/[SIGNATURE ILLEGIBLE]
---------------------------------
Title: Manager, Contracts
---------------------------------
ACCEPTED AND AGREED TO:
this 17th day of September, 1997
Midway Airlines Corporation
By: /s/[SIGNATURE ILLEGIBLE]
---------------------------------
Title: CEO
---------------------------------
5
<PAGE>
[LOGO] Bombardier Inc.
Bombardier Regional Aircraft Division
123 Garratt Boulevard
Downsview, Ontario, Canada M3K 1Y5
Telephone (416) 633-7310
Contracts Facsimile (416) 375-4533
September 17th, 1997
Our Ref: B97-7701-RJTL-CRJ0393-002
Midway Airlines Corporation
300 West Morgan Street, Suite 1200
Durham, NC 27701
USA
Attention: Mr. Robert Ferguson, Chairman, President & CEO
Gentlemen,
Re: Letter Agreement No. 002 [***]
Reference is made to Purchase Agreement No. PA-0393 (the "Agreement") between
Bombardier Inc., represented by its Bombardier Regional Aircraft Division
("BRAD") and Midway Airlines Corporation ("Buyer") for the sale of ten (10)
Canadair Regional Jet Aircraft (the "Aircraft").
This letter, when accepted and agreed to by Buyer contemporaneously with
execution of the Agreement, will become part of the Agreement and will evidence
our further agreement with respect to the matters set forth below.
All terms used herein and in the Agreement not defined herein, shall have the
same meaning as in the Agreement.
Subject: [***]
1.0 [***]
1
<PAGE>
[***]
1.1 [***] will be as described in Article 2 of the Agreement.
1.2 [***] This Base Price does not include any Taxes, and is subject to
escalation in accordance with the Economic Adjustment Formula attached
as Appendix I to the Agreement for the period from November 1, 1997 to
the date of delivery of each [***].
1.3 [***] Should Buyer choose to exercise the right to purchase to
purchase a [***], Buyer and BRAD agree to make all reasonable efforts
to execute a definitive agreement within twenty-one (21) days of notice
having been given.
2
<PAGE>
1.4 [***]
1.5 As consideration for this [***], Buyer shall make or cause to make
payment to BRAD a refundable deposit of [***] upon execution of the
Agreement. Upon receipt of the [***], BRAD agrees to [***] set forth in
paragraph 1.4 pending receipt of Buyers conditional notice of intention
to exercise fifteen (15) months prior to [***] in the applicable [***],
as set forth in paragraph 1.3.
1.6 Upon exercise of a [***], Buyer will make or cause to make the [***]
specified in Article 5 of the Agreement within ten (10) business days
of the [***].
2.0 [***], and provided Buyer continues to operate a minimum of ten (10)
Canadair Regional Jet aircraft, BRAD will [***].
3
<PAGE>
2.1 With the exercise of a [***], BRAD will also provide airframe,
powerplant, avionics and electrical training for a total of [***]
of Buyer's personnel per Shadow Option Aircraft exercised, which could
be a combination of maintenance technicians and avionic technicians.
2.2 Unless expressly provided for in this Agreement, the terms and conditions
of the Agreement shall apply mutatis mutandis to the [***],
with the exception Annex A Technical Support as specified in
Article 1.2 (Field Service Representative, except as noted in Article 2.0
of this Letter Agreement), Annex A training courses as specified in
Article 3.2.4 (flight attendant), Article 3.2.5 (flight dispatch), Article
3.3.1 (customized maintenance course), Article 3.3.2 (engine run-up); the
Technical Data identified in Article 4 Attachment A (except for Aircraft
specific manuals only) and the courses specified in the following Articles
of Letter Agreement No. 005: Article 1.1.2 (flight attendant), Article 1.3
(training materials), Article 1.4 (dispatcher training) and Article 2.0
(start up support).
Furthermore, the following Letter Agreements are also not applicable to
the [***] and are hereby excluded:
[***]
[***]
[***]
[***]
[***]
3.0 In the event of the termination of the Agreement, this Letter Agreement
shall become automatically null and void.
4.0 Upon exercise of Buyer's rights to purchase in accordance with this Letter
Agreement, the parties shall amend the Agreement or enter into an
additional purchase agreement in order to give effect to the purchase of
[***] in accordance with the terms and conditions thereof.
4
<PAGE>
5.0 The provisions of this Letter Agreement are personal to Buyer and shall
not be assigned or otherwise disposed of by Buyer without the prior
written consent of BRAD.
Should there be any inconsistency between this Letter Agreement and the
Agreement with respect to the subject matter covered by the terms hereof, then
this Letter Agreement shall prevail.
Yours truly
BOMBARDIER INC.
By: /s/[SIGNATURE ILLEGIBLE]
---------------------------------
Title: Manager, Contracts
---------------------------------
ACCEPTED AND AGREED TO:
this 17th day of September, 1997
Midway Airlines Corporation
By:
---------------------------------
Title:
---------------------------------
5
<PAGE>
5.0 The provisions of this Letter Agreement are personal to Buyer and shall
not be assigned or otherwise disposed of by Buyer without the prior
written consent of BRAD.
Should there be any inconsistency between this Letter Agreement and the
Agreement with respect to the subject matter covered by the terms hereof, then
this Letter Agreement shall prevail.
Yours truly
BOMBARDIER INC.
By:
---------------------------------
Title:
ACCEPTED AND AGREED TO:
this 17th day of September, 1997
Midway Airlines Corporation
By: /s/[SIGNATURE ILLEGIBLE]
---------------------------------
Title: CEO
5
<PAGE>
[LOGO] Bombardier Inc.
Bombardier Regional Aircraft Division
123 Garratt Boulevard
Downsview, Ontario, Canada M3K 1Y5
Telephone (416) 633-7310
Contracts Facsimile (416) 375-4533
September 17th, 1997
Our Ref: B97-7701-RJTL-CRJ0393-003
Midway Airlines Corporation
300 West Morgan Street, Suite 1200
Durham, NC 27701
USA
Attention: Mr. Robert Ferguson, Chairman, President & CEO
Gentlemen,
Re: Letter Agreement No. 003 [***]
Reference is made to Purchase Agreement No. PA-0393 (the "Agreement") between
Bombardier Inc., represented by its Bombardier Regional Aircraft Division
("BRAD") and Midway Airlines Corporation ("Buyer") for the sale of ten (10)
Canadair Regional Jet Aircraft (the "Aircraft").
This letter, when accepted and agreed to by Buyer contemporaneously with
execution of the Agreement, will become part of the Agreement and will evidence
our further agreement with respect to the matters set forth below.
All terms used herein and in the Agreement not defined herein, shall have the
same meaning as in the Agreement.
Subject: [***]
1
<PAGE>
1.0 FINANCING ASSISTANCE
1.1 [***]
1.2 [***]
1.3 [***]
1.4 [***]
2
<PAGE>
[***]
1.5 [***]
3
<PAGE>
1.6 BRAD's obligation to provide [***] in accordance with
this Letter Agreement will be contingent upon the satisfaction of the
following conditions:
(a) [***]
(b) [***]
(c) [***]
(d) [***]
(e) [***]
Terms of BRAD's [***]
(a) [***]
(b) [***]
(c) [***]
4
<PAGE>
1.7 [***]
1.8 [***]
1.9 [***]
5
<PAGE>
2.0 [***]
2.1 [***]
2.2 [***]
(a) [***]
(b) [***]
(c) [***]
(d) [***]
(e) [***]
6
<PAGE>
2.3 [***]
2.4 [***]
2.5 [***]
3.0 [***]
4.0 [***]
7
<PAGE>
5.0 The provisions of this Letter Agreement are personal to Buyer and shall
not be assigned or otherwise disposed of by Buyer without the prior
written consent of BRAD.
Should there be any inconsistency between this Letter Agreement and the
Agreement with respect to the subject matter covered by the terms hereof, then
this Letter Agreement shall prevail.
Yours truly
BOMBARDIER INC.
By: /s/ Robert Ferguson
---------------------------------
Title: Manager, Contracts
---------------------------------
ACCEPTED AND AGREED TO:
this 17th day of September, 1997
Midway Airlines Corporation
By: /s/ Robert Ferguson
---------------------------------
Title: CEO
---------------------------------
<PAGE>
[LOGO] Bombardier Inc.
Bombardier Regional Aircraft Division
123 Garratt Boulevard
Downsview, Ontario, Canada M3K 1Y5
Telephone (416) 633-7310
Contracts Facsimile (416) 375-4533
September 17th, 1997
Our Ref: B97-7701-RJTL-CRJ0393-004
Midway Airlines Corporation
300 West Morgan Street, Suite 1200
Durham, NC 27701
USA
Attention: Mr. Robert Ferguson, Chairman, President & CEO
Gentlemen,
Re: Letter Agreement No. 004 (Re: Deposit)
Reference is made to Purchase Agreement No. PA-0393 (the "Agreement") between
Bombardier Inc., represented by its Bombardier Regional Aircraft Division
("BRAD") and Midway Airlines Corporation ("Buyer") for the sale of ten (10)
Canadair Regional Jet Aircraft (the "Aircraft").
This letter, when accepted and agreed to by Buyer contemporaneously with
execution of the Agreement, will become part of the Agreement and will evidence
our further agreement with respect to the matters set forth below.
All terms used herein and in the Agreement not defined herein, shall have the
same meaning as in the Agreement.
1
<PAGE>
Subject: Deposit
1.0 [***]
2.0 [***]
3.0 In the event of the termination of the Agreement, this Letter Agreement
shall become automatically null and void.
4.0 The provisions of this Letter Agreement are personal to Buyer and shall
not be assigned or otherwise disposed of by Buyer without the prior
written consent of BRAD.
2
<PAGE>
Should there be any inconsistency between this Letter Agreement and the
Agreement with respect to the subject matter covered by the terms hereof, then
this Letter Agreement shall prevail.
Yours truly
BOMBARDIER INC.
By: /s/[SIGNATURE ILLEGIBLE]
---------------------------------
Title: Manager, Contracts
---------------------------------
ACCEPTED AND AGREED TO:
this 17th day of September, 1997
Midway Airlines Corporation
By: /s/ Robert Ferguson
---------------------------------
Title: CEO
---------------------------------
3
<PAGE>
[LOGO] Bombardier Inc.
Bombardier Regional Aircraft Division
123 Garratt Boulevard
Downsview, Ontario, Canada M3K 1Y5
Telephone (416) 633-7310
Contracts Facsimile (416) 375-4533
September 17th, 1997
Our Ref: B97-7701-RJTL-CRJ0393-005
Midway Airlines Corporation
300 West Morgan Street, Suite 1200
Durham, NC 27701
USA
Attention: Mr. Robert Ferguson, Chairman, President & CEO
Gentlemen,
Re: Letter Agreement No. 005 (Re: Customer Support)
Reference is made to Purchase Agreement No. PA-0393 (the "Agreement") between
Bombardier Inc., represented by its Bombardier Regional Aircraft Division
("BRAD") and Midway Airlines Corporation ("Buyer") for the sale of ten (10)
Canadair Regional Jet Aircraft (the "Aircraft").
This letter, when accepted and agreed to by Buyer contemporaneously with
execution of the Agreement, will become part of the Agreement and will evidence
our further agreement with respect to the matters set forth below.
All terms used herein and in the Agreement not defined herein, shall have the
same meaning as in the Agreement.
1
<PAGE>
Subject: Customer Support
1.0 [***]
1.1 [***]
1.1.1 [***]
[***]
1.1.2 [***]
[***]
1.3 Training Materials
For Buyer's in-house Flight Attendant and dispatcher courses, BRAD shall
provide one set of the training materials (without revision service) used
to conduct BRAD's standard training.
1.4 Dispatcher Training
The course referred to in Annex A Article 3.2.5 will be formatted as a
"Train the trainer" course, and BRAD will assist these two dispatchers (as
part of the Start Up Support outlined in paragraph 2.0) in the formulation
of an in-house course for the balance of Buyer's dispatchers.
2
<PAGE>
1.3 [***]
[***]
2.0 [***]
2.1 [***]
3.0 [***]
3.1 [***]
4.0 In the event of the termination of the Agreement, this Letter Agreement
shall become automatically null and void except that the provisions of
this Letter Agreement shall survive with respect to delivered Aircraft.
5.0 The provisions of this Letter Agreement are personal to Buyer and shall
not be assigned or otherwise disposed of by Buyer without the prior
written consent of BRAD.
3
<PAGE>
Should there be any inconsistency between this Letter Agreement and the
Agreement with respect to the subject matter covered by the terms hereof, then
this Letter Agreement shall prevail.
Yours truly
BOMBARDIER INC.
By: /s/[SIGNATURE ILLEGIBLE]
---------------------------------
Title: Manager, Contracts
---------------------------------
ACCEPTED AND AGREED TO:
this 17th day of September, 1997
Midway Airlines Corporation
By: /s/ Robert Ferguson
---------------------------------
Title: CEO
---------------------------------
4
<PAGE>
[LOGO] Bombardier Inc.
Bombardier Regional Aircraft Division
123 Garratt Boulevard
Downsview, Ontario, Canada M3K 1Y5
Telephone (416) 633-7310
Contracts Facsimile (416) 375-4533
September 17th, 1997
Our Ref: B97-7701-RJTL-CRJ0393-006
Midway Airlines Corporation
300 West Morgan Street, Suite 1200
Durham, NC 27701
USA
Attention: Mr. Robert Ferguson, Chairman, President & CEO
Gentlemen,
Re: Letter Agreement No. 006 (Re: Spares)
Reference is made to Purchase Agreement No. PA-0393 (the "Agreement") between
Bombardier Inc., represented by its Bombardier Regional Aircraft Division
("BRAD") and Midway Airlines Corporation ("Buyer") for the sale of ten (10)
Canadair Regional Jet Aircraft (the "Aircraft").
This letter, when accepted and agreed to by Buyer contemporaneously with
execution of the Agreement, will become part of the Agreement and will evidence
our further agreement with respect to the matters set forth below.
All terms used herein and in the Agreement not defined herein, shall have the
same meaning as in the Agreement.
Subject: Spares
1.0 In consideration of Buyer having entered into the above referenced
Agreement, BRAD shall issue to Buyer, at the time of delivery of each of
1
<PAGE>
[***]
2.0 [***]
(i) [***]
a.) [***]
b.) [***]
c.) [***]
d.) [***]
e.) [***]
f.) [***]
g.) [***]
2
<PAGE>
(ii) [***]
3.0 In the event of the termination of the Agreement, this Letter Agreement
shall become automatically null and void.
4.0 The provisions of this Letter Agreement are personal to Buyer and shall
not be assigned or otherwise disposed of by Buyer without the prior
written consent of BRAD.
3
<PAGE>
Should there be any inconsistency between this Letter Agreement and the
Agreement with respect to the subject matter covered by the terms hereof, then
this Letter Agreement shall prevail.
Yours truly
BOMBARDIER INC.
By: /s/[SIGNATURE ILLEGIBLE]
---------------------------------
Title: Manager, Contracts
---------------------------------
ACCEPTED AND AGREED TO:
this 17th day of September, 1997
Midway Airlines Corporation
By: /s/ Robert Ferguson
---------------------------------
Title:
---------------------------------
4
<PAGE>
[LOGO] Bombardier Inc.
Bombardier Regional Aircraft Division
123 Garratt Boulevard
Downsview, Ontario, Canada M3K 1Y5
Telephone (416) 633-7310
Contracts Facsimile (416) 375-4533
September 17th, 1997
Our Ref: B97-7701-RJTL-CRJ0393-007
Midway Airlines Corporation
300 West Morgan Street, Suite 1200
Durham, NC 27701
USA
Attention: Mr. Robert Ferguson, Chairman, President & CEO
Gentlemen,
Re: Letter Agreement No. 007 (Re: Airworthiness Directives)
Reference is made to Purchase Agreement No. PA-0393 (the "Agreement") between
Bombardier Inc., represented by its Bombardier Regional Aircraft Division
("BRAD") and Midway Airlines Corporation ("Buyer") for the sale of ten (10)
Canadair Regional Jet Aircraft (the "Aircraft").
This letter, when accepted and agreed to by Buyer contemporaneously with
execution of the Agreement, will become part of the Agreement and will evidence
our further agreement with respect to the matters set forth below.
All terms used herein and in the Agreement not defined herein, shall have the
same meaning as in the Agreement.
1
<PAGE>
Subject: Airworthiness Directives
1.0 [***]
2.0 In the event of the termination of the Agreement, this Letter Agreement
shall become automatically null and void except that the provisions of
this Letter Agreement shall survive with respect to delivered Aircraft.
3.0 The provisions of this Letter Agreement are personal to Buyer and shall
not be assigned or otherwise disposed of by Buyer without the prior
written consent of BRAD.
2
<PAGE>
Should there be any inconsistency between this Letter Agreement and the
Agreement with respect to the subject matter covered by the terms hereof, then
this Letter Agreement shall prevail.
Yours truly
BOMBARDIER INC.
By: /s/[SIGNATURE ILLEGIBLE]
---------------------------------
Title: Manager, Contracts
---------------------------------
ACCEPTED AND AGREED TO:
this 17th day of September, 1997
Midway Airlines Corporation
By: /s/ Robert Ferguson
---------------------------------
Title: CEO
---------------------------------
3
<PAGE>
[LOGO] Bombardier Inc.
Bombardier Regional Aircraft Division
123 Garratt Boulevard
Downsview, Ontario, Canada M3K 1Y5
Telephone (416) 633-7310
Contracts Facsimile (416) 375-4533
September 17th, 1997
Our Ref: B97-7701-RJTL-CRJ0393-008
Midway Airlines Corporation
300 West Morgan Street, Suite 1200
Durham, NC 27701
USA
Attention: Mr. Robert Ferguson, Chairman, President & CEO
Gentlemen,
Re: Letter Agreement No. 008 (Re: Airframe Direct Maintenance Cost)
Reference is made to Purchase Agreement No. PA-0393 (the "Agreement") between
Bombardier Inc., represented by its Bombardier Regional Aircraft Division
("BRAD") and Midway Airlines Corporation ("Buyer") for the sale of ten (10)
Canadair Regional Jet Aircraft (the "Aircraft").
This letter, when accepted and agreed to by Buyer contemporaneously with
execution of the Agreement, will become part of the Agreement and will evidence
our further agreement with respect to the matters set forth below.
All terms used herein and in the Agreement not defined herein, shall have the
same meaning as in the Agreement.
Subject: Airframe Direct Maintenance Cost
1.0 Intent
1.1 The intent of the Airframe direct maintenance cost guarantee is to achieve
the full potential of the maintainability of the Aircraft through the
joint
1
<PAGE>
efforts of BRAD and Buyer. To that end, BRAD agrees to provide credits
under the terms and conditions hereof and Buyer agrees to provide data
defined below.
1.2 The "Airframe" shall mean the Aircraft excluding Power Plant Parts and
related maintenance activities (such as overhaul, hot section inspection,
basic unscheduled repairs, LCF components, scheduled and unscheduled line
replaceable unit repair and overhaul), Auxiliary Power Unit (APU), Buyer
Furnished Equipment (BFE) and Ground Support Equipment (GSE).
2.0 [***]
2.1 [***]
2.1.1 [***]
2.1.2 Appropriate reductions shall be made in labour man-hours per flight
hour and material costs per flight hour for the following:
a) Labour and material costs resulting from maintenance not
performed in accordance with approved written procedures or
from configuration changes made by Buyer without BRAD's
written agreement, or because recommended Service Bulletins
which cause a reduction in direct maintenance cost have not
been incorporated, provided Buyer has had sufficient time to
incorporate said Service Bulletins consistent with Buyer's
maintenance program. BRAD shall not make reductions when Buyer
has demonstrated that such change is not cost effective for
Buyer. In the event of a disagreement between BRAD and Buyer
as to the cost-effectiveness of a recommended Service
Bulletin change proposed by BRAD, Buyer will explain its
financial analysis used to evaluate the implementation of such
Service Bulletin change;
2
<PAGE>
b) Labour and material costs incurred to repair damages resulting
from accidents, foreign object damage (FOD) or negligence in
maintaining the Aircraft, or for modification of the Aircraft,
which may be capitalized by Buyer (except for actions on
Airworthiness Directives);
c) Credits, warranty payments, guarantee payments or other
payments such as parts or services at reduced cost that BRAD
or vendors have made that compensate Buyer for or reduce
Buyer's direct maintenance cost;
d) Aircraft that have not been maintained in accordance with
Buyer's regulatory agency approved initial maintenance program
unless mutually agreed to by Buyer and BRAD; and
e) Scheduled maintenance checks which are not accomplished
consistent with Buyer's standard maintenance practices.
f) Labour and material costs incurred due to shipping,
transportation and handling delays.
3.0 Calculation of Cost
3.1 Airframe Direct Maintenance Labour Cost ("ADML")
The ADML man-hours shall be defined as the annual man-hours in Buyer
cost allocation system assigned to collect direct labour charges,
without burden, expended in direct maintenance of the Aircraft.
Notwithstanding Buyer's internal cost allocation system all elements
of indirect labour such as shop cleaning, workplace maintenance,
material handling, overtime premium, idle time and inventory control
or labour resulting from damage, misdiagnosis (no fault found) or
misuse shall be excluded from the calculation of Airframe direct
maintenance man-hours; and
3
<PAGE>
3.2 Airframe Direct Maintenance Material Cost ("ADMMC")
The ADMMC is defined as the annual cost of material consumed, which
excludes initial provisioning purchases, for the direct airframe
maintenance of the aircraft, less any transportation, duties, taxes
or license fees. Notwithstanding Buyer's internal cost allocation
system all elements of indirect material such as cleaning supplies,
consumable tools, hydraulic fluids, oils and greases, welding
supplies, sealant, paints, protective coatings, adhesives or
material resulting from damage, misdiagnosis (no fault found) or
misuse are excluded from the calculation of ADMMC.
3.3 Airframe Direct Outside Service Cost ("ADOSC")
The ADOSC is defined as the annual cost expended in outside services
for direct airframe maintenance of the aircraft. The ADOSC shall
include the total outside service charges of both labour and
material costs, but excluding transportation and taxes.
3.4 Hourly Airframe Direct Maintenance Cost ("ADMC")
The following formula shall be used to calculate the annual hourly
ADMC:
ADMC = (ADML)(LC) + ADMMC + ADOSC
--------------------------
T
where:
ADML = Airframe Direct Maintenance Labour
expressed in man-hours,
LC = Labour cost from Appendix A, item 4,
ADMMC = Airframe Direct Maintenance Material
Service Cost,
ADOSC = Airframe Direct Outside Service Cost,
T = Total flight hours for the Aircraft
recorded for the applicable year.
4
<PAGE>
4.0 Credit Calculation
4.1 The actual hourly Airframe Direct Maintenance Cost (ADMC) shall be
compared by BRAD against the ADMCG on an annual basis.
4.2 If the ADMC exceeds the ADMCG by more than ten percent (10%) Buyer's
balance account will be credited with a compensation credit
calculated in accordance with the formula in Article 4.3.
Qb = 0.6 (ADMC-ADMCG) T
where:
Qb = Buyer's compensation credit in dollars when Qb is positive,
ADMC = The average of the ADMC values on an annual basis,
G = Airframe Direct Maintenance Cost Guarantee,
T = As per 3.4
4.3 If the ADMC is less than the ADMCG, BRAD shall accrue an incentive
credit which shall be used as an offset against any potential
liabilities of BRAD during the term of this ADMCG in accordance with
the following formula:
Qs = 0.4 (ADMCG - ADMC) T
where:
Qs = BRAD's incentive credit in dollars when Qs is positive.
ADMC, ADMCG and T shall have the same meaning as used in Article 4.2
above.
5
<PAGE>
5.0 Credit Payment
5.1 At the end of the term of this Letter Agreement, Buyer's total
compensation credit calculated under Article 4.2 above, and BRAD's
total incentive credit calculated in Article 4.3 above, shall be
compared by the following formula to determine if a credit is due to
Buyer.
Credit due Buyer = Qb - Qs
Qb and Qs shall have the same meaning as used in Article 4.2 and
Article 4.3 above.
5.2 If the credit due to Buyer is positive, BRAD shall issue to Buyer a
credit memorandum for the purchase of BRAD goods and services for an
amount up to a maximum of [***] per Aircraft, and up to a
maximum credit equal to the product of the following:
[***]
the Agreement
for the term of this Letter Agreement.
5.3 If the credit due to Buyer is negative, Buyer will be under no
obligation to compensate BRAD, nor shall BRAD owe any compensation
to Buyer.
6.0 Audit
Upon five (5) business days prior written notification by BRAD to Buyer
and at BRAD's expense, BRAD shall have the right during normal business
hours to audit all charges reported under this Letter Agreement, Buyer's
applicable maintenance practices and procedures, and applicable Aircraft
records, where normally and customarily maintained, relative to
maintenance, Service Bulletin incorporation and modification of the
Aircraft. Such audit shall not interfere with the conduct of business by
Buyer nor shall Buyer be required to undertake or incur additional
liability or obligations with respect to the audit.
6
<PAGE>
7.0 Reporting
7.1 BRAD shall provide a quarterly report to Buyer on the status of the
Airframe direct maintenance cost based on data submitted by Buyer
and approved by BRAD. Failure of Buyer to provide the required data,
in spite of BRAD'S notice and within thirty (30) days thereof, shall
void this Airframe direct maintenance cost guarantee.
7.2 The ADMCG was based upon the assumption outline in Appendix 2 to
this Letter Agreement. Any deviation from the assumptions outlined
in Appendix 2 shall cause a modification in the ADMCG by BRAD.
8.0 Limitation of Liability
THE AIRFRAME DIRECT MAINTENANCE COST GUARANTEE PROVIDED IN THIS LETTER
AGREEMENT AND THE OBLIGATIONS AND LIABILITIES ON THE PART OF BRAD UNDER
THE AFORESAID GUARANTEE ARE ACCEPTED BY BUYER AND ARE EXCLUSIVE AND IN
LIEU OF, AND BUYER HEREBY WAIVES, RELEASES AND RENOUNCES ALL OTHER
REMEDIES, WARRANTIES, GUARANTEES OR LIABILITIES, EXPRESSED OR IMPLIED,
WITH RESPECT TO THE MATTERS COVERED BY THIS GUARANTEE CONCERNING EACH
AIRCRAFT DELIVERED UNDER THE AGREEMENT, ARISING IN FACT, CONTRACT, LAW,
TORT, STRICT PRODUCTS LIABILITY OR OTHERWISE INCLUDING, WITHOUT
LIMITATION, ANY OBLIGATION, LIABILITY, CLAIM OR REMEDY WHETHER OR NOT
ARISING FROM NEGLIGENCE (WHETHER ACTIVE, PASSIVE OR IMPUTED) OF BRAD, ITS
OFFICERS, EMPLOYEES, AGENTS OR ASSIGNEES, OR WITH RESPECT TO ANY IMPLIED
WARRANTY OF FITNESS OR MERCHANTABILITY, ANY IMPLIED CONDITION, ANY IMPLIED
WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING OR USAGE OF
TRADE, LOSS OF USE, REVENUE OR PROFIT.
9.0 The provisions of this Letter Agreement are personal to Buyer and shall
not be assigned or otherwise disposed of by Buyer without the prior
written consent of BRAD.
7
<PAGE>
8.0 In the event of the termination of the Agreement, this Letter Agreement
shall become automatically null and void except that the provisions of
this Letter Agreement shall survive with respect to delivered Aircraft and
the guarantee value and assumptions will be revised to reflect the actual
number of Aircraft delivered under the Agreement.
10.0 This Letter Agreement constitutes an integral part of the Agreement and
subject to the terms and conditions contained therein.
Should there be any inconsistency between this Letter Agreement and the
Agreement with respect to the subject matter covered by the terms hereof, then
this Letter Agreement shall prevail.
Yours truly
BOMBARDIER INC.
By: /s/[SIGNATURE ILLEGIBLE]
---------------------------------
Title: Manager, Contracts
ACCEPTED AND AGREED TO:
this 17th day of September, 1997
Midway Airlines Corporation
By: /s/ Robert Ferguson
---------------------------------
Title: CEO
8
<PAGE>
Appendix 1
ADMCG Economic Adjustment Formula
The Airframe Direct Maintenance Cost Guarantee (ADMCG) Adjustment will be
calculated using the following Guarantee Adjustment (GA) Formula. The ADMCG term
is specified in Section 2.1.1 of the Letter Agreement.
GA = G1 - G0
where G1 = G0 [0.60 (L1/L0) + 0.40 (M1/M0)]
GA = ADMCG Value Adjustment
G0 = ADMCG Value
G1 = ADMCG Value adjusted to the final year
L1 = the final year index for labour obtained by calculating the
arithmetic average of the labour indexes published by the United
States Department of Labour Statistics - Employer and Earnings Index
for the fourth, fifth and sixth months prior to the month in the
final year which completes the ADMCG term.
L0 = the delivery year index for labour obtained by calculating the
arithmetic average of the labour indexes published by the United
States Department of Labour Statistics - Employer and Earnings Index
for the fourth, fifth and sixth months prior to the month of the
delivery of the Aircraft which begins the ADMCG term.
M1 = the final year index for material obtained by calculating the
arithmetic average of the material indexes published by the United
States Department of Labour - Material Industrial Commodities,
Producer Price Index, for the fourth, fifth and sixth months prior
to the month in the final year which completes the ADMCG term.
M0 = the delivery year index for material obtained by calculating the
arithmetic average of the material indexes published by the United
States Department of Labour - Material Industrial Commodities,
Producer Price Index, for the fourth, fifth and sixth months prior
to the month of the delivery of the Aircraft which begins the ADMCG
term.
In the event that either or both indices decline during the term of
the guarantee, negative indices will be assumed to equal delivery
year indices.
9
<PAGE>
Appendix 2
Airframe Direct Maintenance Cost Guarantee
Guarantee Value Assumptions
The following is a listing of all assumptions used to determine the ADMCG per
flight hour. It Is understood by the parties that these assumptions may change
in which case the parties, with mutual agreement, will adjust the ADMCG.
1. M1 costs are based upon Specification.
2. All costs are based on the maintenance inspection intervals in the Buyer's
regulatory agency approved initial maintenance program.
3. All costs expressed in July 1, 1997 United States Dollars and are rounded
to the nearest whole dollar subject to escalation in accordance with
Appendix 1.
4. Buyer's in-house airframe labour rate per man-hour is Thirty United States
Dollars ($30.00 U.S.).
5. Buyer's subcontract airframe labour rate per man-hour is Sixty United
States Dollars ($60.00 U.S.).
6. All component repair and overhaul is subcontracted.
7. Annual average Aircraft utilization is not less than three thousand
(3,000) flight hours per year.
8. Buyer's average annual flight duration for the Aircraft will be seventy
eight (78) minutes per departure.
10
<PAGE>
Annex A
Yearly Airframe Direct Maintenance Costs
For information purposes only, the following [***]
comprise the final guaranteed value for the guarantee term:
YEARLY FLEET
AVERAGE
YEAR ($/hr)
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
Note that these [***].
11
<PAGE>
Annex B
Average flight time adjustment formula
Should Buyer's average annual flight duration change throughout the ten year
term of this guarantee, a new Airframe Direct Maintenance Cost Guarantee value
will be generated as per the following formula:
ADMCG (new) = [***]
---------------------
T
where:
ADMCG (new) = Revised Airframe Direct Maintenance Cost
Guarantee (US Dollars/FH) for years one (1)
through [***]
T = Average flight time (in hours) at new
average stage length
12
<PAGE>
[LOGO] Bombardier Inc.
Bombardier Regional Aircraft Division
123 Garratt Boulevard
Downsview, Ontario, Canada M3K 1Y5
Telephone (416) 633-7310
Contracts Facsimile (416) 375-4533
September 17th, 1997
Our Ref: B97-7701-RJTL-CRJ0393-009
Midway Airlines Corporation
300 West Morgan Street, Suite 1200
Durham, NC 27701
USA
Attention: Mr. Robert Ferguson, Chairman, President & CEO
Gentlemen,
Re: Letter Agreement No. 009 (Re: Dispatch Reliability)
Reference is made to Purchase Agreement No. PA-0393 (the "Agreement") between
Bombardier Inc., represented by its Bombardier Regional Aircraft Division
("BRAD") and Midway Airlines Corporation ("Buyer") for the sale of ten (10)
Canadair Regional Jet Aircraft (the "Aircraft").
This letter, when accepted and agreed to by Buyer contemporaneously with
execution of the Agreement, will become part of the Agreement and will evidence
our further agreement with respect to the matters set forth below.
All terms used herein and in the Agreement not defined herein, shall have the
same meaning as in the Agreement.
Subject: Dispatch Reliability
1
<PAGE>
1.0 Intent
The intent of the Dispatch Reliability Guarantee ("DRG") is to achieve the
full potential of the inherent technical reliability of the Aircraft
through the joint efforts of BRAD and Buyer. To that end, BRAD agrees to
take action as specified below and Buyer agrees to set its Aircraft fleet
dispatch reliability target equal to or greater than the sum of the
Guarantee Value plus four tenths of a point so that both Buyer and BRAD's
technical staff can pursue attainment of the Guarantee Value.
2.0 Definition
As defined in World Airlines Technical Operations Glossary (W.A.T.O.G.), a
chargeable technical delay shall be any delay greater than fifteen (15)
minutes beyond scheduled revenue departure time caused by malfunction of
equipment affecting any of the Aircraft ("Chargeable Technical Delay") and
a cancellation shall be the deletion of the flight from Buyer's operating
schedule, provided that no more than one (1) delay or cancellation shall
be charged to a specific malfunction ("Cancellation").
3.0 Guarantee Value
BRAD guarantees that the Aircraft dispatch reliability with respect to
avoidance of Chargeable Technical Delays or Cancellations shall, at the
end of the period indicated below, meet the guarantee value percentages
specified below ("Guarantee Value"):
Period Guarantee Value (%)
------ -------------------
First six months N/A
[***] [***]
[***] [***]
[***] [***]
4.0 Term of Guarantee
The term of this guarantee shall commence on the date of start of revenue
service of Buyer's first delivered Aircraft and shall expire [***]
years thereafter or whenever the six month rolling average is equal to or
exceeds [***] dispatch reliability for [***], whichever comes first.
2
<PAGE>
5.0 Formula
As the term is used herein, "dispatch reliability" shall be a six (6)
month moving average numerical value (expressed as a percentage) which
shall be calculated by application of the following formula:
DR = 100(1 - CD/SD)
Where:
DR = Dispatch Reliability (expressed as percentage)
CD = Total Chargeable Technical Delays and Cancellations.
SD = Total Scheduled Revenue Departures
6.0 Assumptions
[***]
7.0 Conditions and Limitations
7.1 Any delay or cancellation due to any one or more of the following
causes shall not be considered a Chargeable Technical Delay or
Cancellation in computing compliance with this DRG:
a) Delay or cancellation due to operation or maintenance of
equipment in the Aircraft not being in accordance with the
approved Technical Data;
b) Delay or cancellation due to acts or omissions of Buyer
including but not limited to unavailability of serviceable
spare parts, ground support equipment or personnel, and not
dispatching in accordance with the approved Minimum Equipment
List;
3
<PAGE>
c) Delay or cancellation caused by problems that have had
relevant recommended Service Bulletins or Airworthiness
Directives issued against them, if Buyer has not incorporated
the bulletin on the Aircraft in question, provided that Buyer
has had reasonable time to incorporate said bulletin or
directive consistent with Buyer's maintenance program;
d) Delay or cancellation caused by BFE of Buyer or Buyer
designated equipment (equipment designated by Buyer and
purchased by BRAD on behalf of Buyer);
e) Delay or cancellation caused by Power Plant Parts;
f) Delay or cancellation due to any modifications to the Aircraft
made by Buyer without BRAD's written approval unless Buyer
furnishes reasonable evidence that such modification was not a
prime cause of the delay; or
g) Any delay or cancellation due to acts of God or acts of third
parties or force majeure.
7.2 Reporting
Buyer shall provide to BRAD not later than thirty (30) days after
the last day of each month all reports as required by Buyer's
regulatory authority. Buyer shall also provide a report to BRAD of
the corrective action for such Chargeable Technical Delays or
Cancellations, and the information on modifications or Service
Bulletins relevant to such Chargeable Technical Delays or
Cancellations accomplished during each month. Buyer shall also
provide BRAD such other information and data as BRAD may reasonably
request for the purpose of analyzing Chargeable Technical Delays or
Cancellations. BRAD shall respond to the data in a timely manner and
shall provide Buyer with a summary of fleetwide reliability reports
on a monthly basis.
4
<PAGE>
7.3 Master Record
The master record of dispatch reliability will be maintained by BRAD
based upon information provided by Buyer's maintenance control
program as requested herein.
BRAD shall format the data into BRAD's format.
8.0 Corrective Action
8.1 In the event the achieved dispatch reliability, as reported to Buyer
by BRAD, fails to equal the Guarantee Value for the applicable
period, BRAD and Buyer will jointly review the performance for that
period to identify improvement changes required. BRAD shall also
provide, at no charge, if requested by Buyer:
a) Technical service support to analyze Buyer's operating
procedures, maintenance practices, training programs, manuals
and publications and related procedures, practices, policies
and programs that can have an adverse effect on dispatch
reliability and recommend any changes in such procedures,
practices, policies and programs reasonably indicated to
improve the dispatch reliability;
b) Review of data related to parts, material, components,
accessories and equipment incorporated in, and used in
connection with, the Aircraft and furnish technical advice and
information to Buyer for the purpose of improving the dispatch
reliability of the Aircraft;
c) Corrective BRAD engineering design changes and modification
kits of BRAD Parts and material for the Aircraft which will,
in the joint opinion of Buyer and BRAD, cause the performance
of the Aircraft upon Buyer's installation, to meet or exceed
the dispatch reliability guarantee. The modification kits and
design changes supplied by BRAD which provide added value to
Buyer beyond that required to reach the specified guarantee
value will be negotiated by BRAD and Buyer to define the cost
allocation of the "Added Value". BRAD will pay for direct
labour hours incurred based on BRAD's estimated labour hours
or Buyer's actual labour hours, whichever is less, for the
percentage as determined above of the installation cost
necessary to meet the Guarantee Value. Buyer and BRAD agree
that Buyer's obligations to install such modification kits
shall be
5
<PAGE>
consistent with Buyer's maintenance program. Thereafter,
failure by Buyer to install a BRAD change shall result in the
exclusion of the associated malfunction from the dispatch
reliability computation, unless Buyer can demonstrate to
BRAD's reasonable satisfaction that the change would not have
eliminated the malfunction; and
d) BRAD shall use its reasonable efforts to require its suppliers
to provide corrective action at no charge to Buyer to the
extent required when Chargeable Technical Delays or
Cancellations exceed the guaranteed dispatch reliability as a
direct result of failure of equipment designed by such
suppliers.
8.2 BRAD's liability to investigate and provide corrective action under
the terms of this DRG shall be dependent upon the quality, extent
and regularity of information and data reported to BRAD by Buyer.
9.0 Implementation of Changes
Buyer may, at its option, decline to implement any change proposed by BRAD
under Article 8.0 above. If Buyer so declines, BRAD may adjust the number
of Chargeable Technical Delays or Cancellations by an amount consistent
with the expected reduction in Chargeable Technical Delays or
Cancellations based on reasonable substantiation to Buyer and on other
operator experience, if any, as if such change has been incorporated. BRAD
shall not make adjustments when Buyer has demonstrated to BRAD's
reasonable satisfaction that such change is not cost effective to Buyer.
10.0 Duplicate Remedies
It is agreed that BRAD shall not be obligated to provide to Buyer any
remedy which is a duplicate of any other remedy which has been provided to
Buyer elsewhere under the Agreement, by the Power Plant manufacturer or by
any vendor.
6
<PAGE>
11.0 Limitation of Liability
THE DISPATCH RELIABILITY GUARANTEE PROVIDED IN THIS LETTER AGREEMENT AND
THE OBLIGATIONS AND LIABILITIES ON THE PART OF BRAD UNDER THE AFORESAID
GUARANTEE ARE ACCEPTED BY BUYER AND ARE EXCLUSIVE AND IN LIEU OF, AND
BUYER HEREBY WAIVES, RELEASES AND RENOUNCES ALL OTHER REMEDIES,
WARRANTIES, GUARANTEES OR LIABILITIES, EXPRESS OR IMPLIED, WITH RESPECT TO
THE MATTERS COVERED BY THIS GUARANTEE CONCERNING EACH AIRCRAFT DELIVERED
UNDER THE AGREEMENT, ARISING IN FACT, CONTRACT, LAW, TORT, STRICT PRODUCTS
LIABILITY OR OTHERWISE INCLUDING, WITHOUT LIMITATION, ANY OBLIGATION,
LIABILITY, CLAIM OR REMEDY WHETHER OR NOT ARISING FROM NEGLIGENCE (WHETHER
ACTIVE, PASSIVE OR IMPUTED) OF BRAD, ITS OFFICERS, EMPLOYEES, AGENTS OR
ASSIGNEES, OR WITH RESPECT TO ANY IMPLIED WARRANTY OF FITNESS OR
MERCHANTABILITY, ANY IMPLIED CONDITION, ANY IMPLIED WARRANTY ARISING FROM
COURSE OF PERFORMANCE, COURSE OF DEALING OR USAGE OR TRADE, LOSS OF USE,
REVENUE OR PROFIT.
12.0 The provisions of this Letter Agreement are personal to Buyer and shall
not be assigned or otherwise disposed of by Buyer without the prior
written consent of BRAD.
13.0 This Letter Agreement constitutes an integral part of the Agreement and
subject to the terms and conditions contained therein.
14.0 In the event of the termination of the Agreement, this Letter Agreement
shall become automatically null and void except that the provisions of
this Letter Agreement shall survive with respect to delivered Aircraft and
the guarantee value and assumptions will be revised to reflect the actual
number of Aircraft delivered under the Agreement.
7
<PAGE>
Should there be any inconsistency between this Letter Agreement and the
Agreement with respect to the subject matter covered by the terms hereof then
this Letter Agreement shall prevail.
Yours truly
BOMBARDIER INC.
By: /s/[SIGNATURE ILLEGIBLE]
---------------------------------
Title: Manager, Contracts
ACCEPTED AND AGREED TO:
this 17th day of September, 1997
Midway Airlines Corporation
By: /s/ Robert Ferguson
---------------------------------
Title: CEO
8
<PAGE>
[LOGO] Bombardier Inc.
Bombardier Regional Aircraft Division
123 Garratt Boulevard
Downsview, Ontario, Canada M3K 1Y5
Telephone (416) 633-7310
Contracts Facsimile (416) 375-4533
September 17th, 1997
Our Ref: B97-7701-RJTL-CRJ0393-010
Midway Airlines Corporation
300 West Morgan Street, Suite 1200
Durham, NC 27701
USA
Attention: Mr. Robert Ferguson, Chairman, President & CEO
Gentlemen,
Re: Letter Agreement No. 010 (Re: Performance)
Reference is made to Purchase Agreement No. PA-0393 (the "Agreement") between
Bombardier Inc., represented by its Bombardier Regional Aircraft Division
("BRAD") and Midway Airlines Corporation ("Buyer") for the sale of ten (10)
Canadair Regional Jet Aircraft (the "Aircraft").
This letter, when accepted and agreed to by Buyer contemporaneously with
execution of the Agreement, will become part of the Agreement and will evidence
our further agreement with respect to the matters set forth below.
All terms used herein and in the Agreement not defined herein, shall have the
same meaning as in the Agreement.
Subject: Performance
1
<PAGE>
1.0 AIRCRAFT CONFIGURATION
The [***] listed below are based on the CRJ-200-ER Aircraft
configuration as defined in Canadair Customized Specification
RAD-601R-153, issue NC, and equipped with GE GF34-3B1 engines as defined
in GE Engines Specification E1271A. The weight data corresponds to the
51000 lb (23133 kg) MTOW design weight option and includes the weight
changes associated with the centre-wing fuel tank. Appropriate adjustments
shall be made for changes in configuration approved by the Buyer and BRAD
or otherwise allowed by the Purchase Agreement which cause changes to the
performance of the Aircraft.
2.0 AIRPORT CONDITIONS
2.1 RDU - Raleigh/Durham
Runway: 05L
Elevation: 436 ft
Ambient temperature: ISA+15 degrees C
Runway available-take-off: 10000 ft (3048 m)
Clearway: 0 ft (0 m)
Stopway: 0 ft (0 m)
Line-up allowance: 82 ft (25 m)
Runway available-landing: 8114 ft (2473 m)
Wind: none
Slope: 0.4% (uphill)
Obstacles (relative to brake release point)
dist(ft/m) height(ft)
11474/3497 48
12556/3827 81
12848/3916 94
2.2 [***]
Page 2
<PAGE>
[***]
(15 pages omitted)
Page 3
<PAGE>
10.0 The provisions of this Letter Agreement are personal to Buyer and shall
not be assigned or otherwise disposed of by Buyer without the prior
written consent of BRAD.
11.0 This Letter Agreement constitutes an integral part of the Agreement and
subject to the terms and conditions contained therein.
12.0 In the event of the termination of the Agreement, this Letter Agreement
shall become automatically null and void except that the provisions of
this Letter Agreement shall survive with respect to delivered Aircraft.
Should there be any inconsistency between this Letter Agreement and the
Agreement with respect to the subject matter covered by the terms hereof, then
this Letter Agreement shall prevail.
Yours truly
BOMBARDIER INC.
By: /s/[SIGNATURE ILLEGIBLE]
---------------------------------
Title: Manager, Contracts
ACCEPTED AND AGREED TO:
this 17th day of September, 1997
Midway Airlines Corporation
By: /s/ Robert Ferguson
---------------------------------
Title: CEO
18
<PAGE>
[LOGO] Bombardier Inc.
Bombardier Regional Aircraft Division
123 Garratt Boulevard
Downsview, Ontario, Canada M3K 1Y5
Telephone (416) 633-7310
Contracts Facsimile (416) 375-4533
September 17th, 1997
Our Ref: B97-7701-RJTL-CRJ0393-011
Midway Airlines Corporation
300 West Morgan Street, Suite 1200
Durham, NC 27701
USA
Attention: Mr. Robert Ferguson, Chairman, President & CEO
Gentlemen,
Re: Letter Agreement No. 011 (Re: Configuration)
Reference is made to Purchase Agreement No. PA-0393 (the "Agreement") between
Bombardier Inc., represented by its Bombardier Regional Aircraft Division
("BRAD") and Midway Airlines Corporation ("Buyer") for the sale of ten (10)
Canadair Regional Jet Aircraft (the "Aircraft").
This letter, when accepted and agreed to by Buyer contemporaneously with
execution of the Agreement, will become part of the Agreement and will evidence
our further agreement with respect to the matters set forth below.
All terms used herein and in the Agreement not defined herein, shall have the
same meaning as in the Agreement.
1
<PAGE>
Subject: Configuration
1.0 [***]
2.0 [***]
3.0 The provisions of this Letter Agreement are personal to Buyer and shall
not be assigned or otherwise disposed of by Buyer without the prior
written consent of BRAD.
4.0 This Letter Agreement constitutes an integral part of the Agreement and
subject to the terms and conditions contained therein.
5.0 In the event of the termination of the Agreement, this Letter Agreement
shall become automatically null and void except that the provisions of
this Letter Agreement shall survive with respect to delivered Aircraft.
2
<PAGE>
Should there be any inconsistency between this Letter Agreement and the
Agreement with respect to the subject matter covered by the terms hereof, then
this Letter Agreement shall prevail.
Yours truly
BOMBARDIER INC.
By: /s/[SIGNATURE ILLEGIBLE]
---------------------------------
Title: Manager, Contracts
ACCEPTED AND AGREED TO:
this 17th day of September, 1997
Midway Airlines Corporation
By: /s/ Robert Ferguson
---------------------------------
Title: CEO
3
<PAGE>
ANNEX A
CONFIGURATION DIFFERENCES FOR FIRST FOUR AIRCRAFT
Option No. Description Comments
25-108 [***] [***]
25-093 [***] [***]
25-351 [***] [***]
25-TBD [***] [***]
34-019 [***] [***]
34-350 [***] [***]
35-TBD [***] [***]
4
<PAGE>
EXHIBIT 10.23
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY [***]. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
SERVICES AND LICENSES AGREEMENT
between
MIDWAY AIRLINES CORPORATION
and
AIRLINE MANAGEMENT SERVICES, INC.
<PAGE>
TABLE OF CONTENTS
Section Page
1 DEFINITIONS ....................................................... 1
1.1 Defined Terms ............................................... 1
2 SERVICES .......................................................... 4
2.1 Appointment as Vendor ....................................... 4
2.2 Company Retention of Control and Decision Making ............ 4
2.3 Services .................................................... 4
2.4 Performance ................................................. 4
2.5 Scope of Services ........................................... 4
2.6 Opportunity for Vendor to Bid for Services .................. 5
2.7 Subsidiary Services ......................................... 5
2.8 Agreement Administration .................................... 5
3 LICENSES .......................................................... 6
3.1 License to Use Licensed Systems ............................. 6
3.2 License to Copy Licensed Systems Documentation .............. 6
3.3 Sublicensing ................................................ 6
4 SERVICES FEE ...................................................... 7
4.1 Calculation of Fees ......................................... 7
4.2 Invoices and Payment of Fees ................................ 7
4.3 Late Payment ................................................ 7
4.4 Audit of Fees ............................................... 7
4.5 No Suspension of Fees ....................................... 7
5 REPRESENTATIONS AND WARRANTIES .................................... 7
5.1 Representations and Warranties of the Company ............... 7
5.2 Representations and Warranties of Vendor .................... 9
6 COVENANTS ......................................................... 10
6.1 Covenants of Vendor ......................................... 10
6.2 Covenants of the Company .................................... 13
6.3 Taxes ....................................................... 17
7 EXTENSION AND TERMINATION ......................................... 18
7.1 Extension of Services Period ................................ 18
7.2 Termination by Vendor ....................................... 19
7.3 Termination by Company ...................................... 20
7.4 Termination of Services or Licensed Systems ................. 21
7.5 Remedies: Waiver ............................................ 21
8 WARRANTY DISCLAIMERS, WAIVERS AND FURTHER RELEASES ................ 23
8.1 Warranty Disclaimers ........................................ 23
8.2 Waiver of Consumer Protection Laws .......................... 23
i
<PAGE>
8.3 Survival .................................................... 24
9 MEDIATION AND ARBITRATION ......................................... 24
9.1 Mediation ................................................... 24
9.2 Arbitration ................................................. 25
9.3 Emergency Relief and Relief from Certain Violations ......... 26
10 INDEMNIFICATION ................................................... 27
10.1 Indemnification of Vendor ................................... 27
10.2 Indemnification for Negligent Acts .......................... 28
10.3 Indemnification of Company .................................. 28
10.4 Participation and Cooperation ............................... 29
10.5 Defense of Claims; Settlement ............................... 30
10.6 Survival .................................................... 30
11 MISCELLANEOUS ..................................................... 30
11.1 Amendment; Waiver ......................................... 30
11.2 Assignment; Subcontracting ................................ 31
11.3 Rights and Licenses Granted to Vendor ..................... 31
11.4 Notices ................................................... 31
11.5 Counterparts .............................................. 32
11.6 Severability .............................................. 32
11.7 Integration ............................................... 32
11.8 Governing Law ............................................. 33
11.9 Further Assurances ........................................ 33
11.10 Publicity ................................................. 33
11.11 Expenses .................................................. 33
11.12 Brokers ................................................... 33
11.13 Annexes, Exhibits, Schedules and Transition Plan .......... 33
11.14 Independent Contractor .................................... 33
11.15 Setoff .................................................... 33
11.16 Product Knowledge ......................................... 34
11.17 Interpretation; Governing Language ........................ 34
11.18 Force Majeure ............................................. 34
11.19 Successors and Assigns .................................... 34
11.20 No Third Party Beneficiaries .............................. 34
ii
<PAGE>
LIST OF ANNEXES
Annex A ............................................. Yield Management Services
iii
<PAGE>
LIST OF EXHIBITS
Exhibit 5.2.4 ....................................................... Insurance
iv
<PAGE>
THIS SERVICES AND LICENSES AGREEMENT, dated as of _______, 1995 (the
"Effective Date"), between Midway Airlines Corporation, a Delaware corporation,
having its principal place of business at 300 West Morgan Street, Suite 1200,
Durham, North Carolina 27701 (the "Company") and Airline Management Services,
Inc., a Delaware corporation, having its principal place of business at 4333
Amon Carter Boulevard, Fort Worth, Texas 75261 ("Vendor").
WITNESSETH
WHEREAS, the Company is engaged in the business of providing airline
travel services;
WHEREAS, the Company desires Vendor to provide it with certain
services with respect to such airline services; and
WHEREAS, Vendor is willing to perform such services on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises contained
herein and for other good and valuable consideration, the receipt of which is
acknowledged, the parties hereby agree as follows:
1 DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms have
the following meanings:
"AA": American Airlines, Inc., a Delaware corporation.
"Actual Knowledge": the actual knowledge of any officer or director
of the Company, Vendor or Vendor Affiliates, as the case may be.
"Affiliate": a Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under
common control with, the specified Person. For purposes of this
definition, "control" when used with respect to any specified Person
means the power to direct or cause the direction of the management
and policies of such Person, and is deemed to Exist when at least
51% of the voting capital stock of the controlled Person is directly
or indirectly owned by the controlling Person.
"Agreement": this Services and Licenses Agreement including the
Annexes and Exhibits hereto, as amended, supplemented or otherwise
modified from time to time.
"Annex(es)": the annexes attached hereto which set out the specific
services to be provided by Vendor to Company under this Agreement.
"Applicable Law": all applicable laws (including securities laws,
tax laws, tariff and trade laws), ordinances, judgments, treaties,
conventions, protocols, international
1
<PAGE>
agreements, decrees, injunctions, writs, orders, regulations,
interpretations, licenses and permits of any Governmental Authority
having jurisdiction over this Agreement, the transactions
contemplated hereby, or any document related hereto or thereto or
delivered in connection herewith or therewith.
"Business Day": any day other than a Saturday, Sunday or other day
on which commercial banking institutions in Fort Worth, Texas are
authorized or required by Applicable Law to be closed.
"Change in Ownership": whenever, at any time during the term of this
Agreement, a Disqualified Investor that is not the recorded or
beneficial owner of 10% or more of the capital stock of Company as
of the Effective Date (i) acquires 10% or more of the equity shares
of Company, whether directly or indirectly through intermediaries,
or (ii) increases its equity ownership of the capital stock of
Company by 100% or more, such acquisition or subsequent increase in
ownership will be considered a Change of Ownership.
"Company Affiliate": an Affiliate of the Company.
"Confidential Information": information that is considered
confidential and/or proprietary by the party disclosing, such
information including without limitation, software and other
technical information (including functional and technical
specifications, designs, drawings, analysis, research, processes,
computer programs, methods, ideas, know-how and the like), business
information (sales and marketing research, materials, plans,
accounting and financial information, personnel records and the
like), and specifically including, without limitation, the terms and
conditions of this Agreement.
"Consumer Price Index": the Consumer Price Index - All Urban
Consumers, All Items (1982-84 = 100), as published by the US
Department of Labor, Bureau of Labor Statistics, or a successor
index which measures general wage and price inflation in the US.
"Disqualified Investor": means (i) any other airline or
airline-related services company, (ii) any Person that Vendor
believes would likely, by virtue of such Person's affiliation with
Company, materially adversely affect Vendor's interests or
objectives under any agreements between Vendor (or any of Vendor
Affiliates) and Company, or (iii) any affiliate of a Person
identified in clauses (i) or (ii) of this paragraph.
"Governmental Authority": any government, any political subdivision,
any agency and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of government.
"Intellectual Property": (a) any idea, design, concept, technique,
invention, discovery or improvement, whether or not patentable, and
including trade secrets and know-how, (b) any confidential or
proprietary work of authorship, whether or
2
<PAGE>
not copyrightable, including without limitation, the Licensed
Systems, (c) any trademarks, service marks, trade names, trade
styles and logos, and (d) any other similar right in intellectual
property, in each case on a worldwide basis.
"Licensing Systems": the licensing systems as defined in the
applicable Annexes.
"Losses": any and all liabilities, obligations, losses, damages,
claims, deficiencies, penalties, taxes, levies, actions, judgments,
settlements, suits, costs, legal fees, accountants' fees,
disbursements or expenses.
"Material Adverse Effect": with respect to any Person, a material
adverse effect on (a) the business, assets, operations, performance,
properties or condition (financial or otherwise) of such Person or
(b) the ability of such Person to perform its material obligations
under this Agreement.
"Material Contract" as to any Person, each contract (including,
without limitation, collective bargaining agreements, aircraft
leases, terminal leases and other real estate leases) to which such
Person is a party involving aggregate consideration payable to or by
such Person of U.S. $100,000 or more per year or otherwise material
to the business, condition (financial or otherwise), operations,
performance, properties or prospects of such Person.
"Person": an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated
association, joint venture or other entity or a government or any
political subdivision or agency thereof.
"Service(s)": as defined in Section 2.3.
"Services Period": the period commencing on the Effective Date and
continuing to but not including the tenth (10th) anniversary
thereof, unless extended or sooner terminated pursuant to the
provisions of Section 7 hereof.
"Taxes": as defined in Section 6.3.
"Taxing Authority": means any Governmental Authority, any
international authority and any taxing authority of any other
government or political subdivision or territory or possession
thereof.
"US": United States of America.
"US $": United States Dollars.
"US GAAP": generally accepted accounting principles (as such
principles are applied in the United States of America as of the
date of the financial statement with respect to which the term is
used), consistently applied.
"Unauthorized Use or Disclosure": as defined in Section 6.1.4 (ii).
3
<PAGE>
"Vendor": Airline Management Services, Inc. and any parent or
affiliate thereof providing Services pursuant to this Agreement.
"Vendor Affiliate": an Affiliate of Vendor providing Services
pursuant to this Agreement.
"Yield Management": the Service described in Annex A to this
Agreement.
2 SERVICES
2.1 Appointment as Vendor. Subject to the terms and conditions of this
Agreement, the Company hereby appoints Vendor as the Company's
exclusive vendor to provide the Services during the Services Period.
Vendor hereby accepts such appointment and shall be responsible to
provide the Services during the Services Period in accordance with
the terms and conditions of this Agreement. Any services not
specifically assigned to Vendor in this Agreement shall continue to
be performed by the Company or its subcontractors.
2.2 Company Retention of Control and Decision Making. The Company and
its officers and employees will retain and exercise managerial
control and decision making authority for the Company in every
respect, including without limitation, decisions to implement,
modify or reject any course of action recommended by Vendor in
connection with Services; provided, however, that Vendor shall have
the authority to make routine administrative decisions to the extent
specifically provided in any Annex.
2.3 Services. During the Services Period Vendor shall be the exclusive
vendor to the Company of services in the areas set out and more
fully described in the Annexes (the "Services"). Each Annex contains
the terms and conditions applicable exclusively to the Service
described therein, including without limitation, the method of
calculating the fee payable to Vendor by the Company with respect to
such Service.
2.4 Performance. If performed in accordance with the terms of this
Agreement and if authorized by the terms of this Agreement, the
performance of Services by Vendor is solely on behalf of the
Company. Company has the right to request Services for Company
Affiliates. Upon request in writing by Company, Vendor will use all
reasonable best efforts to provide Services to the identified
Company Affiliate. Unless otherwise expressly provided in this
Agreement, Vendor does not assume and shall not be liable for any
obligation of the Company or any Company Affiliate, financial or
otherwise, to any Person.
2.5 Scope of Services. Both the Company and the Vendor acknowledge that
the manner in which the Services are performed, as well as the
elements and functions within the Annex, may need to change
regularly and frequently for various reasons, and they agree to use
reasonable best efforts to accommodate all changes that may be
necessary or desirable but which do not materially and adversely
impact either party's operations.
4
<PAGE>
2.6 Opportunity for Vendor to Bid for Services. In the event that the
Company or any Company Affiliate determines to seek services from a
third party vendor, which services Vendor is qualified to render,
the Company shall use reasonable best efforts to notify and give
Vendor the opportunity to make a proposal to provide such services
by delivering to Vendor, concurrently with the first delivery to any
such third party vendor, a written request for proposal which shall
describe the service to be provided and state the terms and
conditions under which such service shall be rendered. Vendor may
make a proposal which shall state the fees and other terms and
conditions under which Vendor is willing to provide the service.
Company's failure to notify and/or give Vendor such opportunity to
make a proposal shall not constitute a breach of this Agreement.
2.7 Subsidiary Services. Unless provided for in an Annex, or unless
otherwise agreed to in writing by the parties in the future, Vendor
shall not be obligated to provide Services to Company Affiliates.
Notwithstanding the foregoing, Vendor agrees to use reasonable best
efforts to accommodate all changes to the Services that may be
necessary or desirable to include the Company Affiliates when
requested to do so by the Company.
2.8 Agreement Administration.
2.8.1 Agreement Coordinator. The Company and Vendor shall each
designate a person with responsibility for overseeing the
implementation and performance of this Agreement (the
"Agreement Coordinators"). Each party agrees to use all
commercially reasonable efforts to keep the Agreement
Coordinator of the other party informed concerning
communications between the parties and the other material
matters relating to this Agreement. Upon the execution of this
Agreement, the Company and Vendor shall each submit to the
other party in writing the name, business address and
telephone number of its initial Agreement Coordinator. Either
party may change its Agreement Coordinator from time to time
by giving written notice to the other party. The
responsibilities of the Agreement Coordinators are as follows:
(i) Administer and coordinate the performance of Services
described in the Annexes hereto:
(ii) Administer and coordinate the authorization and
execution of any Annexes for Services entered into
hereunder;
(iii) Coordinate amendments (including documenting such
amendments and securing authorized signatures) to this
Agreement including the Annexes hereto;
(iv) Serve as primary point of contact for the other party
with respect to non-technical matters; and
(v) Be primarily responsible for the maintenance of good
working relations between the Company and Vendor in
respect of the
5
<PAGE>
Services by establishing and fostering effective
communication between the respective Agreement
Coordinators and Service Coordinators and providing an
effective method for the rapid and effective resolution
of any issues which may arise, in an effort to avoid
such issues becoming disputes requiring dispute
resolution under Section 9 hereof.
2.8.2 Service Coordinators. Each Annex, at the time entered into by
the parties, shall list the name, business address and
telephone number of each party's Service Coordinator, who
shall be responsible for coordinating all technical matters
relating to such Annex (the "Service Coordinators"). The same
person may serve as both the Agreement Coordinator and a
Service Coordinator, and may serve as Service Coordinator for
any number of Annexes, in the discretion of each party. The
responsibilities of the Service Coordinators are as follows:
(i) Arrange meetings, visits and consultations between the
parties concerning technical matters;
(ii) Administer and coordinate the technical aspects of the
applicable Annex, including the performance of Vendor's
work and services;
(iii) Chair periodic technical status reviews; and
(iv) Supervise performance of work and services, and
submission and acceptance of all items pursuant to the
applicable Annex.
3 LICENSES
3.1 License to Use Licensed Systems. Subject to the terms and conditions
of this Agreement and each applicable Annex, Vendor may grant to
Company and Company accepts from Vendor, (i) for the Services
Period, a nonexclusive and nontransferable license to access the
Licensed Systems and (ii) the right to receive certain related
training and database support services according to the terms of the
applicable Annex.
3.2 License to Copy Licensed Systems Documentation. Vendor may grant to
Company, for the Service Period, a nonexclusive and nontransferable
license to copy for Company's internal use only, in connection with
Company's use of the Licensed Systems, any documentation provided to
Company under this Agreement or the applicable Annex. Company agrees
that it will not sell, transfer or otherwise disclose such
documentation to any third party.
3.3 Sublicensing. Company shall not transfer, assign or sublicense any
of the Licensed Systems under this Agreement or any of the Annexes
or any component of the Licensed Systems to any Person or entity,
whether by operation of law or otherwise, without the prior written
consent of Vendor.
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4 SERVICES FEE
4.1 Calculation of Fees. In consideration of the Services to be
performed by Vendor during the Services Period, Company shall pay to
Vendor a Fee calculated and payable in accordance with each Annex to
this Agreement.
4.2 Invoices and Payment of Fees. Vendor shall submit Invoices to
Company on the fifth (5th) Business Day of the following month for
the Fees incurred during the previous month. Each invoice shall
Identify the Services performed or to be performed during the month,
and the Fees associated with each of the foregoing. Company shall
pay each invoice in full in U.S. $ by wire transfer of immediately
available funds to an account designated by Vendor on or prior to
ten (10) calendar days following receipt of Vendor's invoice.
Additional payment terms may exist and be applicable in some
Annexes. All payments by Company for Fees due hereunder shall be in
U.S. $ sourced from a U.S. situs bank account identified by Company
to Vendor and tender of payment by Company in any currency other
than U.S. $ shall not be effective to discharge Company's obligation
to pay the Fees hereunder.
4.3 Late Payment. All Fees not paid within the time limits set out in
Section 4.2 above shall accrue interest at the rate of ten percent
(10%) per annum or the highest amount permitted by law, whichever is
less.
4.4 Audit of Fees. In the event Company disputes the amount of any Fees
as reflected on any invoice, Company shall have the right, during
regular business hours and upon reasonable notice to Vendor, to have
an independent auditor reasonably satisfactory to Vendor in Vendor's
sole discretion inspect the financial books and records of Vendor
relating to the calculation of such Fees for the limited purpose of
conducting an audit thereof. Company shall pay the entire cost of
any such audit. If the audit shows an overpayment by Company, Vendor
shall credit the amount of such overpayment to the account of
Company within five (5) Business Days of such audit finding and
shall reimburse the reasonable costs of such audit to Company if
overpayment is equal to $50,000 or more. Absent good cause, such
audit rights may be exercised by Company no more frequently than two
(2) times per calendar year.
4.5 No Suspension of Fees. Except in the event of force majeure, the
Fees accrued hereunder shall be due and payable by Company
notwithstanding (i) any interruption of Services which is not caused
by the gross negligence, willful misconduct or breach of this
Agreement by Vendor or (ii) any audit or dispute concerning the
amount of any Fees as specified in Section 4.4 above or otherwise,
until such time as the audit or dispute is completed or resolved and
appropriate adjustments made.
5 REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of the Company. The Company
represents and warrants to Vendor as follows:
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5.1.1 Organization and Standing. The Company is a corporation duly
organized and validly existing under the laws of Delaware. The
Company has full corporate power to own or lease its
properties and to conduct its business as presently conducted.
The Company is duly authorized, qualified or licensed to do
business and validly existing as a foreign corporation in each
other jurisdiction in which it is so required to be
authorized, qualified or licensed unless the failure to be so
authorized, qualified or licensed would not have a Material
Adverse Effect on the Company.
5.1.2 Authority. Each of Company and the Company Affiliates has all
requisite corporate power and authority to execute, enter into
and carry out the terms and conditions of this Agreement, the
Annexes hereto, agreements and instruments contemplate hereby,
and to perform its obligations hereunder and thereunder. This
Agreement has been duly executed and delivered and is a legal,
valid and binding agreement of the Company, enforceable in
accordance with its terms, except that the enforceability of
this Agreement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally
and that the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any
proceeding therefor may be brought.
5.1.3 No Violation. Neither the execution nor delivery of this
Agreement, nor the consummation of the transactions
contemplated hereby, will conflict with or result in the
material breach of any term or provision of, or constitute a
material default under, or give any third party the right to
accelerate any material obligation under, any charter
provision, bylaw, Material Contract, order, Applicable Law or
regulation to which Company is a party or by which Company or
any Company Affiliate or any of their material assets or
properties are in any way bound or obligated except where any
such event would not have a Material Adverse Effect on Company
and Company Affiliates, taken as a whole.
5.1.4 Governmental and Third Party Consents. No consent, approval,
order or authorization of, or registration, qualification,
designation, declaration or filing with, any Governmental
Authority is required on the part of the Company or any
Company Affiliate in connection with the transactions
contemplated by this Agreement, except for those which have
been obtained and for those in respect of which the failure to
obtain would not have a Material Adverse Effect on the Company
and the Company Affiliates, taken as a whole. No consent,
approval, waiver or other action by any Person under any
Material Contract is required or necessary for the execution,
delivery and performance of this Agreement, or the
consummation of the transactions contemplated hereby, except
for those which have been obtained and for those in respect of
which the failure to obtain would not have a Material Adverse
Effect on the Company and the Company Affiliates, taken as a
whole.
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5.1.5 Title to Intellectual Property of Company. The Company owns,
or is licensed or otherwise has the full rights to use and to
grant to Vendor the right to use, copy or modify, the
Intellectual Property of Company to the extent necessary for
Vendor to provide the Services.
5.1.6 Assets. Company has assets in excess of U.S. $5,000,000.00
according to its most recent financial statement prepared In
accordance with U.S. GAAP and is not a "consumer" as that term
is defined in Section 17.45 of the Texas Deceptive Trade
Practices - Consumer Protection Act.
5.2 Representations and Warranties of Vendor. Vendor represents and
warrants to the Company as follows:
5.2.1 Organization and Standing. Vendor and the Vendor Affiliates
are corporations duly organized and validly existing under the
laws of their respective jurisdictions of formation. Vendor
and the Vendor Affiliates have full corporate power to own or
lease their respective properties and to conduct their
business as presently conducted. Vendor and the Vendor
Affiliates are duly authorized, qualified or licensed to do
business and validly existing as a foreign corporation in each
other jurisdiction in which they are so required to be
authorized, qualified or licensed unless the failure to be so
authorized, qualified or licensed would not have a Material
Adverse Effect on Vendor or the Vendor Affiliates, taken as a
whole.
5.2.2 Authority. Each of Vendor and the Vendor Affiliates has all
requisite corporate power and authority to execute, enter into
and carry out the terms and conditions of this Agreement, the
Annexes hereto, agreements and instruments contemplated
hereby, and to perform its obligations hereunder and
thereunder. This Agreement has been duly executed and
delivered and is a legal, valid and binding agreement of
Vendor, enforceable in accordance with its terms, except that
the enforceability of this Agreement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors'
rights generally and that the remedy of specific performance
and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the
court before which any proceeding thereof or may be brought.
5.2.3 No Violation. Neither the execution nor delivery of this
Agreement, nor the consummation of the transactions
contemplated hereby, will conflict with or result in the
material breach of any term or provision of, or constitute a
default under, any charter provision, Material Contract,
bylaw, order, Applicable Law or regulation to which Vendor or
any Vendor Affiliate is a party or by which Vendor or any
Vendor Affiliate or any of their material assets or properties
are in any way bound or obligated.
5.2.4 Governmental and Third Party Consents. No consent, approval,
order or authorization of, or registration, qualification,
designation, declaration or filing with, any Governmental
Authority is required on the part of Vendor or
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<PAGE>
any Vendor Affiliate in connection with the transactions
contemplated by this Agreement, except for those which have
been obtained. No consent. Approval, waiver or other action by
any Person under any agreement to which Vendor or any Vendor
Affiliate is a party is required or necessary for the
execution, delivery and performance of this Agreement, or the
consummation of the transactions contemplated hereby.
5.2.5 Title to Intellectual Property of Vendor. Except as previously
disclosed in writing to the Company, Vendor owns, or is
licensed or otherwise has the full rights to use, the
Intellectual Property of Vendor necessary to provide the
Services.
6 COVENANTS
6.1 Covenants of Vendor. During the Services Period, Vendor covenants
and agrees as follows:
6.1.1 Assistance. Vendor shall render to the Company such assistance
and cooperation in the performance of the Company's duties
hereunder and take such other actions in furtherance thereof
as the Company may reasonably request.
6.1.2 Confidentiality. In the course of this Agreement, it is
anticipated that Vendor will learn of and have access to
Confidential Information of the Company and Company
Affiliates. When practical, Company will identify information
in Vendor's possession that Company considers to be
Confidential Information of Company or Company Affiliates. The
failure of Company to so identify any information will not
raise a presumption that such information is not Confidential
Information. Vendor hereby agrees to retain in confidence and
not disclose any and all Confidential Information of the
Company and Company Affiliates, except as may be required by
Applicable Law or to the extent necessary to comply with
applicable legal requirements of any Governmental Authority,
in which case Vendor shall promptly notify the Company. To the
extent that the Company objects to disclosure of such
Confidential Information, Vendor shall (i) use reasonable and
lawful efforts to resist making any disclosure of such
Confidential Information, (ii) use reasonable and lawful
efforts to limit the amount of such Confidential Information
to be disclosed, and (iii) use all reasonable efforts to
obtain a protective order or other appropriate relief to
minimize the further dissemination of any Confidential
Information to be disclosed, in each case in a manner similar
to that which Vendor would take with respect to its own
Confidential Information. In addition, Vendor shall not
disclose the Confidential Information of the Company (i) to
any employee, accountant, or agent except on a "need-to-know"
basis, and (ii) except to such other recipients as the Company
may approve in writing. Vendor hereby agrees to retain in
confidence all Confidential Information of the Company and
Company Affiliates. Data and information of the Company
provided to Vendor in order to enable Vendor to perform the
Services and information generated by the parties as a result
of the
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Services performed under this Agreement are also Confidential
Information and shall be maintained in confidence. Unless
otherwise hereafter agreed by the Company in writing.
Confidential Information of the Company and Company Affiliates
shall be used by Vendor solely for the purpose of fulfilling
its obligations under this Agreement and shall not be used by
Vendor for any other purpose. Vendor shall have no rights to
use Confidential Information of the Company and Company
Affiliates following the termination of this Agreement, except
as specifically set forth in any Annex. Confidential
Information of the Company and Company Affiliates is
nontransferable and cannot be assigned by Vendor. Confidential
Information of the Company and Company Affiliates shall not be
disclosed by Vendor to any third party without the prior
written consent of the Company. Vendor shall have no
confidentiality obligation with respect to Confidential
Information of the Company and Company Affiliates, or any part
thereof, which is:
(i) already known to Vendor at the time of the disclosure as
demonstrated by written record;
(ii) becomes publicly known without the wrongful act or
breach of this Agreement by Vendor;
(iii) rightfully received from a third party on a
nonconfidential basis as demonstrated by written record;
or
(iv) approved for release by written authorization of the
Company.
These confidentiality undertakings will survive the termination or
expiration of this Agreement and Annexes attached hereto.
6.1.3 Protection of Intellectual Property of the Company.
(i) Vendor acknowledges that it obtains pursuant to this
Agreement only the right to use Intellectual Property of
the Company and Company Affiliates on the terms and
conditions set forth herein and that no right, title or
interest in or to the Intellectual Property of the
Company is granted or transferred to Vendor hereunder.
Vendor agrees not to provide or otherwise make available
the Intellectual Property of the Company and Company
Affiliates in any form to any person, other than as
provided for in this Agreement, without the prior
written consent of the Company or the relevant Company
Affiliate.
(ii) Vendor will use all commercially reasonable efforts and
will take all reasonable steps to protect the
Intellectual Property of the Company and Company
Affiliates from any use, reproduction, publication,
disclosure or distribution except as specifically
authorized by this Agreement (collectively,
"Unauthorized Use or Disclosure"). Vendor acknowledges
and agrees that the
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Intellectual Property of the Company and Company
Affiliates contains Confidential Information and trade
secrets developed or acquired by the Company and Company
Affiliates through the expenditure of a great deal of
time and money. The Vendor agrees (A) to observe
complete confidentiality with respect to the
Intellectual Property of Company and Company Affiliates,
(B) not to disclose to or permit any Person access to
the Intellectual Property of Company and Company
Affiliates or any portion thereof without Company's
prior written consent (except that such disclosure or
access shall be permitted to any employee of the Vendor
to the extent required for such employee to perform
duties hereunder not inconsistent with the terms of this
Agreement), and (C) to ensure that any employees of the
Vendor who receive access to the Intellectual Property
of Company and Company Affiliates are advised of its
confidential and proprietary nature and that they are
prohibited from copying, utilizing or revealing the
Intellectual Property at Company and Company Affiliates
or any portion thereof or from taking any action
prohibited to the Vendor under this Agreement. Without
limiting the foregoing and to the extent possible, the
Vendor agrees to keep the Intellectual Property of
Company and Company Affiliates in a secure place and to
employ with regard to such Intellectual Property
procedures no less restrictive than the strictest
procedures used by the Vendor to protect its own trade
secrets.
(iii) Vendor shall not remove, alter, cover or obfuscate any
copyright notice, trademark or other proprietary rights
notice placed by the Company or Company Affiliates in or
on any portion of the Intellectual Property of the
Company or Company Affiliates and shall ensure that all
such notices are reproduced on all copies of any portion
of such Intellectual Property made by Vendor. Vendor
shall comply with directions submitted by the Company or
Company Affiliates from time to time regarding the form
and placement or copyright notices and other proprietary
rights on any portion of the Intellectual Property of
the Company or Company Affiliates.
(iv) Vendor shall promptly notify the Company of any known
Unauthorized Use or Disclosure of the Intellectual
Property of the Company or Company Affiliates and will
cooperate with the Company or Company Affiliates in any
litigation brought by the Company or Company Affiliates
against third parties to protect their respective
proprietary rights. Vendors compliance with the
provisions of this Section 6.1 2(iv) shall not be
construed as a waiver of any of the Company's or Company
Affiliates' rights hereunder.
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(v) Vendor's obligations and the Company's or Company
Affiliates' rights under this Section 6.1.3 shall
survive any expiration or termination of this Agreement
for any reason whatsoever. On the expiration or
termination of this Agreement for any reason, or the
expiration or termination of any of its Annexes, each
party shall return to the other all Confidential
Information of that party in its possession relating to
the Agreement as a whole or the specific Annex or
Annexes terminated and including all copies in whatever
media represented and certify to such destruction or
return if so requested by the other party.
6.1.4 Notices. Vendor shall promptly after the commencement
thereof, give notice to the Company of all actions, suits and
proceedings before any Governmental Authority involving Vendor
that are directly related to the Services or the Licensed
Systems.
6.2 Covenants of the Company. During the Services Period, the Company
covenants and agrees as follows:
6.2.1 Assistance. The Company shall render to Vendor such assistance
and cooperation in the performance of Vendor's duties
hereunder and take such other actions in furtherance thereof
as Vendor may reasonably request Except where otherwise
expressly provided for in a particular Annex hereto, the
Company shall at all times be responsible for interpreting and
advising Vendor of the effect of any non-U.S. Governmental
Authority laws, rules, regulations and orders in effect from
time to time, insofar as such may have an impact on the
provision of the Services and Licensed Systems.
6.2.2 Confidentiality. In the course of this Agreement, it is
anticipated that the Company will learn of and have access to
Confidential Information of Vendor and Vendor Affiliates. When
practical, Vendor will identify information in Company's
possession that Vendor considers to be Confidential
Information of Vendor or Vendor Affiliates. The failure of
Vendor to so identify any information will not raise a
presumption that such information is not Confidential
Information. The Company hereby agrees to retain in confidence
and not disclose all Confidential Information of Vendor and
Vendor Affiliates, except as may be required by Applicable Law
or to the extent necessary to comply with applicable legal
requirements of any Governmental Authority, in which case the
Company shall promptly notify Vendor. To the extent Vendor
objects to disclosure of such Confidential Information, the
Company shall (i) use reasonable and lawful efforts to resist
making any disclosure of such Confidential Information, (ii)
use reasonable and lawful efforts to limit the amount of such
Confidential Information to be disclosed, and (iii) use all
reasonable efforts to obtain a protective order or other
appropriate relief to minimize the further dissemination of
any Confidential Information to be disclosed, in each case in
a manner similar to that which Company would take with respect
to its own Confidential Information. In addition, the Company
shall
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<PAGE>
not disclose the Confidential Information of Vendor (i) to any
employee, accountant, or agent except on a "need-to-know"
basis, and (ii) except to such other recipients as Vendor may
approve in writing. Data and information of Vendor provided to
the Company in connection with Vendor's performance of the
Services are also Confidential Information and shall be
maintained in confidence. Unless otherwise agreed by the
Vendor in writing, Confidential Information of Vendor and
Vendor Affiliates shall be used by the Company solely for the
purposes of fulfilling the obligations and achieving the
benefits contemplated by this Agreement and shall not be used
by the Company for any other purposes. The Company shall have
no rights to use Confidential Information of Vendor and Vendor
Affiliates following the termination of this Agreement.
Confidential Information of Vendor is nontransferable and
cannot be assigned by the Company. Confidential Information of
Vendor and Vendor Affiliates shall not be disclosed by Company
to any third party without the prior written consent of
Vendor. The Company shall have no confidentiality obligation
with respect to Confidential Information of Vendor and Vendor
Affiliates, or any part thereof, which is:
(i) already known to the Company at the time of the
disclosure as demonstrated by written record;
(ii) becomes publicly known without the wrongful act or
breach of this Agreement by the Company;
(iii) rightfully received from a third party on a
nonconfidential basis as demonstrated by written record;
or
(iv) approved for release by written authorization of Vendor.
The confidentiality undertakings will survive the termination or
expiration of this Agreement.
6.2.3 Protection of Intellectual Property of Vendor and Vendor
Affiliates.
(i) During the Services Period, it is anticipated that
Company may learn of and have access to Intellectual
Property of Vendor and Vendor Affiliates. The Company
acknowledges that it has no right, title or interest in
or to the Intellectual Property of Vendor and Vendor
Affiliates and that this Agreement does not confer to
the Company any ownership rights in the Intellectual
Property of Vendor and Vendor Affiliates. The Company
agrees not to provide or otherwise make available the
Intellectual Property of Vendor and Vendor Affiliates in
any form to any person, other than as provided for in
this Agreement, without the prior written consent of
Vendor. Company acknowledges that the Licensed Systems
and trademarks and accompanying documentation are trade
secrets and Vendor's proprietary information, whether or
not any portion thereof is or may be validly copyrighted
or patented.
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(ii) The Company shall use all commercially reasonable
efforts and shall take all reasonable steps to protect
the Intellectual Property of Vendor and Vendor
Affiliates from Unauthorized Use or Disclosure. The
Company acknowledges and agrees that the Intellectual
Property of Vendor and Vendor Affiliates contains
Confidential Information and trade secrets developed or
acquired by Vendor and Vendor Affiliates through the
expenditure of a great deal of time and money. The
Company agrees (A) to observe complete confidentiality
with respect to the Intellectual Property of Vendor and
Vendor Affiliates, (B) not to disclose to or permit any
Person access to the Intellectual Property of Vendor and
Vendor Affiliates or any portion thereof without
Vendor's prior written consent (except that such
disclosure or access shall be permitted to any employee
of the Company to the extent required for such employee
to perform duties hereunder not inconsistent with the
terms of this Agreement) and (C) to ensure that any
employees of the Company who receive access to the
Intellectual Property of Vendor and Vendor Affiliates
are advised of its confidential and proprietary nature
and that they are prohibited from copying, utilizing or
revealing the Intellectual Property of Vendor and Vendor
Affiliates or any portion thereof or from taking any
action prohibited to the Company under this Agreement.
Without limiting the foregoing and to the extent
possible, the Company agrees to keep the Intellectual
Property of Vendor and Vendor Affiliates in a secure
place and to employ with regard to such Intellectual
Property procedures no less restrictive than the
strictest procedures used by the Company to protect its
own trade secrets.
(iii) The Company shall not remove, alter, cover or obfuscate
any copyright notice, trademark or other proprietary
rights notice placed by Vendor or Vendor Affiliates in
or on any portion of the Intellectual Property of Vendor
and Vendor Affiliates and shall ensure that all such
notices are reproduced on all copies of any portion of
the Intellectual Property of Vendor and Vendor
Affiliates made by the Company. The Company shall comply
with directions submitted by Vendor or Vendor Affiliates
from time to time regarding the form and placement or
copyright notices and other proprietary rights notices
on any portion of the Intellectual Property of Vendor or
Vendor Affiliates.
(iv) The Company shall promptly notify Vendor of any known
Unauthorized Use or Disclosure of the Intellectual
Property of Vendor and Vendor Affiliates and will
cooperate with Vendor or Vendor Affiliates in any
litigation brought by Vendor or Vendor Affiliates
against third parties to protect their respective
proprietary rights. The Company's compliance with the
provisions of this Section 6.2.3(iv) shall not be
construed as a waiver of any of Vendor's or Vendor
Affiliates' rights hereunder.
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<PAGE>
(v) The Company's obligations and Vendor's or Vendor
Affiliates' rights under this Section 6.2.3 shall
survive any expiration or termination of this Agreement
for any reason whatsoever. On the expiration or
termination of this Agreement for any reason, or the
expiration or termination of any of its Annexes each
party shall return to the other all Confidential
Information of that party in its possession relating to
the Agreement as a whole or the specific Annex or
Annexes terminated and including all copies in whatever
media represented and certify to such destruction or
return if so requested by the other party.
6.2.4 Insurance.
(i) The Company shall maintain with financially sound and
reputable insurance companies satisfactory to Vendor
insurance in at least such amounts, of such character
and against at least such risks as is maintained by the
Company on the date of this Agreement and described in
Exhibit 6.2.4 to this Agreement or, if such insurance is
not available on a commercially reasonable basis with
Vendor's prior written consent, such insurance in at
least such amounts, of such character and as against at
least such risks as are usually insured against in the
air travel industry, including without limitation all
risk hull, aircraft liability, passenger liability,
public liability, property liability, freight cargo
liability, workers compensation, employers liability,
and comprehensive general liability. The Company shall
furnish to Vendor, upon written request, full
information as to the insurance in effect at any time.
(ii) The Company shall cause (A) all insurance policies to
name Vendor as an additional insured to the extent of
the Company's obligations to indemnify Vendor pursuant
to Section 10.1 hereunder, (B) all insurance policies to
provide that no cancellation, reduction in amount or
material adverse change in coverage thereof shall be
effective until at least thirty (30) days after receipt
by Vendor of written notice thereof and (C) all
insurance policies to provide that Vendor shall have no
obligation or liability for premiums, commissions,
assessments or calls in connection with such insurance
or in connection with any representation or warranty
made by the Company in connection with obtaining of such
insurance.
(iii) Each policy of insurance carried in accordance with this
Section 6.2A shall (A) be primary without right of
contribution from any other insurance which is carried
by Vendor and its Affiliates and directors, officers,
employees, servants and agents of Vendor or its
Affiliates as additional insureds (each such person an
"Additional Insured"), (B) expressly provide that all of
the provisions thereof, except the limits of liability,
shall operate in the same manner as if there were a
separate policy covering any Additional Insured, and
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<PAGE>
(C) waive any right of the insurers to any subrogation
set-off or counterclaim or any other deduction, whether
by attachment or otherwise in respect of any liability
of any Additional Insured or Company to the extent of
any moneys due to such Additional Insureds.
(iv) Fifteen (15) Business Days prior to the expiration date
of each policy maintained hereunder the Company shall
either (A) deliver to Vendor Certificates of Insurance
with respect to the renewals of the insurance policies
maintained by the Company as required by this Section
6.2.4, or (B) notify Vendor of the policies which have
not been renewed. To the extent available Company will
deliver to Vendor copies of such policies.
(v) Company shall forthwith notify Vendor of any event of
which Company has knowledge or of which Company ought
reasonably to know that may give rise to a claim under
the insurance required pursuant to this Section 6.2.4.
(vi) Company's obligations under this Section 6.2.4 shall
continue for a period of three (3) years following the
expiration or termination of this Agreement.
6.2.5 Notice of Material Events. The Company shall promptly give
Vendor written notice of the entering into of any material
transactions or commitments or the occurrence of any event,
that affects the Company which reasonably could be expected to
materially impact Vendor's performance of Services or
provision of Licensed Systems, any of Vendor's rights under
this Agreement or the Company's performance of its agreements
hereunder.
6.2.6 Intellectual Property. The Company shall grant to Vendor and
Vendor Affiliates the full rights to use, copy or modify the
Intellectual Property of the Company to the extent reasonably
necessary for Vendor and Vendor Affiliates to provide the
Services or Licensed Systems.
6.2.7 Non-Solicitation. Company agrees that it shall not directly
solicit current or former employees or consultants of Vendor
or Vendor Affiliates during the Services Period and for a
period of two (2) years thereafter.
6.3 Taxes.
6.3.1 Prompt Payment by Company. Company will pay when due all
present and future taxes and levies, imposts, deductions,
charges and stamp taxes whether collected by withholding or
otherwise, including. without limitation, sales, use, excise
or goods and services taxes (collectively the "Taxes")
imposed. assessed, levied or collected by any taxing
jurisdictions together with any interest thereon and
penalties, fines and surcharges with respect thereto, if any,
on or in respect of any payments made or to be
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<PAGE>
made by the Company under this Agreement but excluding (i) any
such Taxes arising from or measured by Vendor's gross or net
income, receipts, capital or net worth, franchises, excess
profits or conduct of business taxes (including minimum taxes,
withholding taxes and taxes on or measured by any item of tax
preference) and taxes in the nature of employment taxes; (ii)
taxes arising from the gross negligence or willful misconduct
of Vendor; or (iii) interest, penalties, fines or additions to
tax resulting from Vendor's failure to file tax returns timely
and properly (such non-excluded taxes are collectively
referred to as "Company Taxes").
6.3.2 Indemnity for Taxes. Without limiting the foregoing, the
Company will indemnify Vendor against, and reimburse Vendor
upon demand for, any Company Taxes which Vendor is obligated
to pay or has paid.
6.3.3 Gross-up of Payments. In the event the Company is required by
applicable law, decree or regulation to deduct or withhold
Company Taxes from any amounts payable under or in respect of
this Agreement, the Company shall (i) pay to Vendor such
additional amounts as may be required, so that after the
deduction or withholding of such Company Taxes, Vendor will
receive from the Company on the due date thereof any amount
equal to the amount stated to be payable to Vendor under this
Agreement had such Company Taxes not been imposed, (ii) make
the required deduction or withholding. and (iii) promptly pay
the authorities before penalties attached thereto or interest
accrued thereon.
6.3.4 Additional Tax Payments. The Company will pay to Vendor an
additional amount equal to any income tax imposed on or
assessed against Vendor as Company Taxes.
6.3.5 Withheld Taxes. To the extent any Company Tax is withheld by
the Company and paid on behalf of Vendor, the Company shall
provide Vendor upon request with documentation evidencing that
such Taxes were, in fact, paid to the applicable authority.
6.3.6 Assessments. Vendor shall, promptly after the receipt of any
assessment for Company Taxes, send a copy of such assessment
to the Company. Vendor shall not have the right to settle any
dispute with the applicable Taxing Authority without the
consent of Company, which will not be unreasonably withheld if
to do so would materially prejudice Vendor; provided, however,
Vendor consults with the Company prior to such settlement and
such settlement is reasonable and made in good faith.
7 EXTENSION AND TERMINATION
7.1 Extension of Services Period. Subject to Sections 7.2, 7.3 and 7.4
below, this Agreement and the Services Period shall terminate on the
earlier to occur of (i) the tenth (10th) anniversary of the
Effective Date or (ii) the termination of Services in accordance
with the terms of the applicable Annex; provided, however. that this
Agreement may be extended for successive additional five (5)
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year terms if the Company and Vendor agree in writing on or prior to
the date which is six (6) months prior to the end of each such
additional successive five (5) year term; and provided further, that
the term of the Services to be provided and the extension of such
term shall be governed by the provisions of any Annex attached
hereto relating to such Services.
7.2 Termination by Vendor. Vendor shall have the right, at its option,
to terminate this Agreement as follows:
7.2.1 if Company defaults in payment to Vendor of any Fees or in the
performance of its obligations under Section 6.2 or under any
Annex, and such default is not cured within five (5) Business
Days following notice of termination from Vendor and Company;
7.2.2 if Company breaches any of its obligations under any Annex and
such default is not cured within thirty (30) days after
written notice from Vendor to Company.
7.2.3 if Company breaches any of the Company's other material
obligations under this Agreement if such breach is not capable
of being cured within ten (10) Business Days after written
notice from Vendor to the Company, or if such breach is
curable, the Company fails to cure it within thirty (30)
Business Days after written notice from Vendor to the Company;
7.2.4 upon not less than fifteen (15) days' prior written notice by
Vendor to Company, if Company has materially breached any of
its representations and warranties contained herein and such
breach is not cured within thirty (30) Business Days after
written notice from Vendor to Company;
7.2.5 immediately upon written notice of termination by Vendor to
Company if a petition against Company in a proceeding under
any bankruptcy or other insolvency law (as now or hereafter in
effect) shall be filed, and any decree or order executed by
any court of competent jurisdiction adjudging Company a
bankrupt or insolvent in such proceeding shall remain in force
undismissed and unstayed for a period of sixty (60) days after
such adjudication or, in case the approval of such petition by
a court of competent jurisdiction is required, the petition as
filed or amended shall be approved by such a court as properly
filed and such approval shall not be withdrawn and the
proceeding shall not be dismissed within sixty (60) days
thereafter, or if, under the provisions of any law providing
for reorganization or winding-up of corporations which may
apply to Company, any court of competent jurisdiction shall
enter an order or decree assuming custody or control of
Company or of any substantial part of its property and such
custody or control remains in force unrelinquished, unstayed
and unterminated for a period of thirty (30) days;
7.2.6 with no less than one hundred and eighty (180) days' prior
notice from Vendor to Company of the effective date of
termination, if a Change of Ownership occurs at any time
during the term of this Agreement;
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provided, however, that Company may notify Vendor no less than
thirty (30) days in advance of the effective date of a Change
of Ownership, specifying the parties involved and other
details of the Change of Ownership of which the Company is
aware or which Vendor may reasonably request, in which case
Vendor must respond within ten (10) days of receiving such
notice, stating whether Vendor agrees to waive its right to
terminate with respect to the impending Change of Ownership or
whether Vendor objects to the Change of Ownership - and
briefly describing, in the latter case, its reasons therefor
and/or conditioning its willingness to waive this right.
Vendor will not unreasonably refuse to waive its right to
terminate under this Section 7.2.6.
7.2.7 at any time Company or any of Its Affiliates (collectively,
the "Company Group") shall breach or commit an event of
default under any agreement between any member of the Company
Group and any Affiliate of AMR Corporation (collectively, the
"AMR Group"), and such breach is not cured within thirty (30)
Business Days after written notice from Vendor to Company.
7.3 Termination by Company. Company shall have the right at its option
to terminate this Agreement as follows:
7.3.1 if Vendor breaches any of its obligations under (i) Section
6.1 and such default is not cured within thirty (30) days
after written notice from Company to Vendor, or (ii) Annex A
and such default is not commenced to be cured within seven (7)
days and ultimately cured within thirty (30) days after
written notice from Company to Vendor.
7.3.2 upon not less than fifteen (15) days' prior written notice of
termination by Company to Vendor, if Vendor breaches any of
Vendor's material obligations, representations or warranties
under this Agreement and such breach is not cured within
thirty (30) days after written notice from Company to Vendor.
7.3.3 immediately upon written notice of termination by Vendor to
Company if AA shall consent to the appointment at a custodian,
receiver, trustee or liquidator (or other similar official) of
itself or of a substantial part of the property, or AA shall
be unable to pay its debts generally as they become due, or AA
substantially ceases to conduct its business as it is
currently conducted, or shall make a general assignment for
the benefit of creditors, or AA shall file a voluntary
petition in bankruptcy or a voluntary petition or an answer
seeking reorganization in a proceeding under any bankruptcy
law (as now or hereafter in effect) or an answer admitting the
material allegations of a petition filed against AA in any
such proceeding, or AA by voluntary petition, answer or
consent shall seek relief as debtor under the provisions of
any other present or future bankruptcy or other similar law
providing for the reorganization or winding-up of
corporations, or providing for an agreement, composition,
extension or adjustment with its creditors or AA shall take
any corporate action to authorize any of the foregoing, or
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AA shall take any similar corporate action under the laws of
any jurisdiction.
7.4 Termination of Services or Licensed Systems. Each Annex to this
Agreement may contain termination provisions in addition to those
provided in Sections 7.2 and 7.3 above related to the Service,
specified therein. To the extent such termination provisions apply,
either party may terminate the Services specified in such Annex
pursuant thereto without terminating this Agreement or the Services
or Licensed Systems provided under any other Annex.
7.5 Remedies: Waiver.
7.5.1 General. Except as set forth in Sections 7.5.2, 7.5.4 and
10.3, in the event a party breaches this Agreement, the other
party shall have all rights and remedies for such breach
available under Applicable Law; provided, however, that a
party may terminate this Agreement only as provided in
Sections 7.2, 7.3 and 7.4, as applicable.
7.5.2 Release. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE
CONTRARY, IN NO EVENT WILL VENDOR OR ANY OF VENDOR AFFILIATES,
PERMITTED ASSIGNEES OR SUBCONTRACTORS (INCLUDING OFFICERS,
DIRECTORS, AGENTS, EMPLOYEES, ATTORNEYS, REPRESENTATIVES,
SUCCESSORS AND ASSIGNEES OF THE FOREGOING) BE LIABLE TO THE
COMPANY OR ANY OF THE COMPANY AFFILIATES, SUBCONTRACTORS,
EMPLOYEES OR AGENTS FOR ANY CLAIM FOR DAMAGES (INCLUDING
DIRECT, INDIRECT, INCIDENTAL, CONSEQUENTIAL, OR PUNITIVE
DAMAGES), WHETHER IN TORT (INCLUDING CLAIMS BASED UPON THE
NEGLIGENCE OF VENDOR OR ANY OF VENDOR AFFILIATES, PERMITTED
ASSIGNEES OR SUBCONTRACTORS), CONTRACT, STRICT LIABILITY OR
OTHERWISE, ARISING OUT OF OR PERTAINING TO THE SUBJECT MATTER
OF THIS AGREEMENT UNLESS SUCH CLAIM IS BASED UPON A BREACH OF
THIS AGREEMENT BY VENDOR OR THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF VENDOR OR VENDOR AFFILIATES, PERMITTED ASSIGNEES
OR SUBCONTRACTORS IN PERFORMANCE OR NONPERFORMANCE OF THIS
AGREEMENT, AND THE COMPANY FOR ITSELF AND ITS AFFILIATES,
SUBCONTRACTORS, EMPLOYEES AND AGENTS HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, RELEASES AND COVENANTS NOT TO SUE UPON
ANY SUCH CLAIM, UNLESS SUCH CLAIM IS BASED UPON A BREACH OF
THIS AGREEMENT BY VENDOR, OR THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF VENDOR OR VENDOR AFFILIATES, PERMITTED ASSIGNEES
OR SUBCONTRACTORS IN THE PERFORMANCE OR NONPERFORMANCE OF THIS
AGREEMENT AND THEN ONLY TO THE EXTENT THAT THE AMOUNT OF SUCH
CLAIM OR CLAIMS EXCEEDS IN THE AGGREGATE $100,000. THE
FOREGOING $100,000 LIMITATION ON CLAIMS SHALL NOT APPLY IN THE
EVENT THAT A CLAIM ARISES OUT OF A MATTER UNDER
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ARTICLE 4.4.
7.5.3 RELEASE AND WAIVER OF REMEDY FOR NEGLIGENT ACTS. WITHOUT
LIMITING SECTIONS 7.5.2 OR 8.1, IT IS THE EXPRESS INTENT OF
COMPANY AND VENDOR THAT (A) COMPANY AND COMPANY AFFILIATES,
SUBCONTRACTORS, EMPLOYEES AND AGENTS RELEASE, WAIVE, AND
COVENANT NOT TO SUE VENDOR AND VENDOR AFFILIATES, OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS, REPRESENTATIVES,
SUCCESSORS AND ASSIGNEES AGAINST CLAIMS DESCRIBED IN SECTION
7.5.2 ABOVE (OTHER THAN CLAIMS THAT ARE EXPRESSLY EXCEPTED IN
SECTION 7.5.2), AND (B) VENDOR DISCLAIMS ANY OBLIGATION,
LIABILITY, RIGHT, CLAIM OR REMEDY HEREUNDER, ARISING FROM THE
NEGLIGENCE (ACTIVE, PASSIVE OR IMPUTED) OF VENDOR OR VENDOR
AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS,
REPRESENTATIVES, SUCCESSORS AND ASSIGNEES AND AS A RESULT OF
THE JOINT OR CONCURRENT NEGLIGENCE (WHETHER ACTIVE, PASSIVE OR
IMPUTED) OF VENDOR OR VENDOR AFFILIATE, OFFICER, DIRECTOR,
EMPLOYEE, AGENT, ATTORNEY, REPRESENTATIVE, SUCCESSOR OR
ASSIGNEE AND COMPANY.
7.5.4 Limitation on Damages. NOTWITHSTANDING ANYTHING IN THIS
AGREEMENT TO THE CONTRARY, IN NO EVENT SHALL VENDOR OR ANY OF
VENDOR AFFILIATES, ANY MEMBER OF THE AMR GROUP, OR ANY OF
THEIR RESPECTIVE PERMITTED ASSIGNEES OR SUBCONTRACTORS
(INCLUDING OFFICERS, DIRECTORS, AGENTS, EMPLOYEES, ATTORNEYS,
REPRESENTATIVES, SUCCESSORS AND ASSIGNEES OF THE FOREGOING) BE
LIABLE TO COMPANY OR ANY OF COMPANY AFFILIATES,
SUBCONTRACTORS, EMPLOYEES OR AGENTS FOR ANY CLAIM FOR DAMAGES
(INCLUDING DIRECT, INDIRECT, INCIDENTAL, CONSEQUENTIAL, OR
PUNITIVE DAMAGES). WHETHER IN TORT (INCLUDING CLAIMS BASED
UPON THE NEGLIGENCE, GROSS NEGLIGENCE OR WILFUL MISCONDUCT OF
VENDOR OR ANY OF VENDOR AFFILIATES, ANY MEMBER OF THE AMR
GROUP, OR ANY OF THEIR RESPECTIVE PERMITTED ASSIGNEES OR
SUBCONTRACTORS), CONTRACT, STRICT LIABILITY OR OTHERWISE,
ARISING OUT OF OR PERTAINING TO THE SUBJECT MATTER OF THIS
AGREEMENT, IN AN AGGREGATE AMOUNT IN EXCESS OF AN AMOUNT EQUAL
TO THE TOTAL PAYMENTS MADE TO VENDOR DURING THE TWELVE (12)
MONTHS PRECEDING A CLAIM ARISING OUT OF ANY ANNEX.
7.5.5 Survival. THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS
SECTION 7.5 SHALL SURVIVE FOREVER AND SHALL SPECIFICALLY
SURVIVE ANY TERMINATION OR EXPIRATION OF THIS AGREEMENT OR ANY
IMPOSSIBILITY OF PERFORMANCE OF THIS AGREEMENT OR FRUSTRATION
OF PURPOSE OF THIS AGREEMENT.
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8 WARRANTY DISCLAIMERS, WAIVERS AND FURTHER RELEASES
8.1 Warranty Disclaimers. EXCEPT AS OTHERWISE PROVIDED IN THIS
AGREEMENT, ALL SUPPORT SERVICES AND LICENSED SYSTEMS SHALL BE
PERFORMED OR DELIVERED BY VENDOR, ITS AFFILIATES, SUBCONTRACTORS,
EMPLOYEES OR AGENTS PURSUANT TO THIS AGREEMENT "AS-IS", "WHERE-IS,"
AND VENDOR FOR ITSELF AND ITS AFFILIATES, SUBCONTRACTORS, EMPLOYEES,
AND AGENTS HEREBY DISCLAIMS WITH RESPECT TO ALL SUCH SUPPORT
SERVICES AND LICENSED SYSTEMS OR ANY OTHER SERVICES OR MATERIALS
PROVIDED HEREUNDER, ALL EXPRESS AND IMPLIED WARRANTIES, INCLUDING
ANY IMPLIED WARRANTIES OF MERCHANTABILITY, TITLE OR FITNESS FOR A
PARTICULAR PURPOSE. SUBJECT ONLY TO THE EXPRESS WARRANTIES IN
SECTION 5.2 ABOVE, THERE ARE NO WARRANTIES MADE HEREUNDER BY VENDOR
OF ANY KIND OR NATURE WHATSOEVER AND COMPANY HEREBY DISCLAIMS,
WAIVES, RELEASES AND RENOUNCES, ALL WARRANTIES, EXPRESS OR IMPLIED,
ARISING BY STATUTE OR OTHERWISE, WITH RESPECT TO ANY DEFECT OR
NONCONFORMANCE IN ANY SERVICE PERFORMED FOR COMPANY PURSUANT TO THIS
AGREEMENT OR ANYTHING DELIVERED TO OR PROVIDED TO COMPANY PURSUANT
TO THIS AGREEMENT, INCLUDING:
8.1.1 ANY STATUTORY OR IMPLIED WARRANTY OF MERCHANTABILITY OR
FITNESS FOR ANY PURPOSE; AND
8.1.2 ANY IMPLIED WARRANTY ARISING FROM COURSE OF DEALING, COURSE OF
PERFORMANCE OR USAGE OF TRADE.
COMPANY REPRESENTS AND WARRANTS THAT NONE OF THE SERVICES OR MATERIALS
PROVIDED HEREUNDER OR WHICH MAY BE PROVIDED PURSUANT HERETO CONSTITUTE
"CONSUMER PRODUCTS" WITHIN THE MEANING OF THE MAGNUSON-MOSS WARRANTY ACT
AND THAT IF ANY WARRANTY IS NEVERTHELESS IMPOSED UNDER THAT ACT IT SHALL
BE LIMITED TO A PERIOD OF THIRTY (30) DAYS.
The parties acknowledge that Sections 7.5 and 8.1 have been the subject of
full discussion and negotiation between the parties, with the advice of
their respective legal counsel, and that the provisions of this Agreement
were arrived at in consideration of the provisions of Sections 7.5 and
8.1. including the disclaimers, waivers, releases and renunciations set
forth herein. Vendor would not have entered into this Agreement for the
consideration provided herein but for Company's agreement to release
Vendor and Vendor Affiliates, officers, directors, employees, agents,
attorneys, representatives, successors and assignees as provided in this
Agreement.
8.2 Waiver of Consumer Protection Laws.
8.2.1 Texas. IN ACCORDANCE WITH SECTION 17.42 OF THE TEXAS BUSINESS
AND COMMERCE CODE, COMPANY AND VENDOR EACH
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ACKNOWLEDGES THAT IT IS A BUSINESS CONSUMER HAVING KNOWLEDGE
AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT ENABLE
IT TO EVALUATE THE MERITS AND RISKS OF THIS TRANSACTION AND
THAT IT IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING
POSITION, AND HEREBY WAIVES, TO THE EXTENT PERMITTED BY LAW,
THE PROVISIONS OF SUBCHAPTER E OF CHAPTER 17 OF THE TEXAS
BUSINESS AND COMMERCE CODE, TO THE EXTENT ANY SUCH PROVISIONS
MAY BE APPLICABLE TO COMPANY, VENDOR, THIS AGREEMENT, OR
EITHER OF THEIR PERFORMANCE HEREUNDER.
7.2.2 IN ADDITION, IT IS COMPANY'S AND VENDOR'S INTENTION TO WAIVE
ANY ACTIONS OR REMEDIES UNDER ANY OTHER CONSUMER PROTECTION OR
DECEPTIVE TRADE PRACTICES ACTS (WHETHER DOMESTIC OR FOREIGN)
WHICH MAY BE APPLICABLE TO COMPANY, VENDOR, THIS AGREEMENT, OR
EITHER OF THEIR PERFORMANCE HEREUNDER.
8.3 Survival. THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS
SECTION 8 SHALL SURVIVE FOREVER AND SHALL SPECIFICALLY SURVIVE ANY
TERMINATION OR EXPIRATION OF THIS AGREEMENT OR ANY IMPOSSIBILITY OF
PERFORMANCE OF THIS AGREEMENT OR FRUSTRATION OF PURPOSE OF THIS
AGREEMENT.
9 MEDIATION AND ARBITRATION
9.1 Mediation.
9.1.1 General. Subject to Section 11.16, the parties will attempt in
good faith to resolve any controversy or claim arising out of
or relating to the execution, interpretation and performance
of this Agreement (including the validity, scope and
enforceability of this mediation and arbitration provision)
promptly by negotiations between the parties other than
controversies or claims involving or allegedly involving the
subject matter of Sections 6.2.3 and 6.2.4.
9.1.2 Meeting of Agreement Coordinators. If a controversy or claim
should arise, the respective Agreement Coordinators of Vendor
and Company will meet at least once and will attempt to
resolve the matter. Either Agreement Coordinator may request
the other to meet within seven (7) days at a mutually agreed
time.
9.1.3 Meeting of Designated Senior Executives. If the matter has not
been resolved within ten (10) days of their first meeting,
each Agreement Coordinator shall refer the matter to a senior
executive from its company, which senior executive shall have
authority to settle the dispute (the "Designated Senior
Executive"). Thereupon, the Agreement Coordinators shall
promptly prepare and exchange memoranda stating the issues in
dispute and their positions, summarizing the negotiations
which have
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taken place, and attaching relevant documents. The Designated
Senior Executives will meet for negotiations within seven (7)
days of the end of the ten-day period referred to above, at a
mutually agreed time. The first meeting shall be held at the
offices of the Agreement Coordinator receiving the request to
meet. If more than one meeting is held, the meetings shall be
held in rotation at the offices of Company and Vendor.
9.1.4 Resolution by Arbitration. If the matter has not been resolved
within seven (7) days of the meeting of the Designated Senior
Executives (which period may be extended by mutual agreement),
the controversy or claim shall be resolved pursuant to Section
9.2.
9.2 Arbitration.
9.2.1 General. Subject to Section 11.16, any controversy or claim
that is not fully resolved pursuant to Section 9.1 shall be
solely and finally settled by arbitration other than
controversies or claims involving or allegedly involving the
subject matter of Sections 6.2.3 and 6.2.4 of this Agreement.
The arbitration proceedings shall be held in Dallas or Forth
Worth, Texas, and shall be conducted in accordance with the
Arbitration Rules of the American Association of Arbitrators
("AAA Rules"). The arbitration shall be conducted by a sole
arbitrator appointed in accordance with the AAA Rules (the
"Arbitrator"). All arbitration proceedings commenced with
respect to this Agreement shall be consolidated for hearing
before a sole Arbitrator as prescribed herein. The language to
be used in any arbitration proceedings shall be English. The
foregoing does not limit the ability of the parties to
mutually agree, for the purposes of expediency and expertise,
to different arbitration rules and procedures, such as, for
example, arbitration procedures under the auspices of IATA.
9.2.2 Written Statement. If a party hereto determines to submit a
dispute for arbitration pursuant to this Section 9, such party
(the "Petitioner") shall furnish the party with whom it has
the dispute (the "Respondent") with a dated, written statement
(the "Arbitration Notice") indicating (i) such party's intent
to commence arbitration proceedings, (ii) the nature, with
reasonable detail, of the dispute, and (iii) the remedy such
party will seek.
9.2.3 Discovery. At any time within forty (40) days after the date
of the Arbitration Notice, the Petitioner and Respondent can
make discovery requests of the other in any form permitted
under the United States Federal Rules of Civil Procedure. The
recipient of a discovery request shall have ten (10) days
after the receipt of such request to object to any or all
portions of such request, and shall respond to any portions of
such request not so objected to within twenty (20) days of the
receipt of such request. All objections shall be in writing
and shall indicate the reasons for such objections. The
objecting party shall ensure that all objections and responses
are received by other parties within the above time periods.
Any party seeking to compel discovery following receipt of an
objection shall file with the other parties and the Arbitrator
a motion to compel,
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including a copy of the initial request and the objection. The
Arbitrator shall allow five (5) days for responses to the
motion to compel before ruling. Claims of privilege and other
objections shall be determined as they would be in United
States federal court in a case applying Texas law.
9.2.4 Hearings. Hearings must commence no later than the eighty
third (83rd) day following the date of the Arbitration Notice
and such hearings shall be conducted for ho more than five (5)
days, unless otherwise agreed by the parties or ordered by the
Arbitrator.
9.2.5 Briefs. Each of the Petitioner and Respondent shall submit a
brief, outlining such party's claim for relief or defense to
any claim, to the other and to the Arbitrator on or before the
tenth (10th) day following the last day of the hearing. Reply
briefs must be exchanged and submitted to the Arbitrator on or
before the twentieth (20th) day following the last day of the
hearing. The Arbitrator shall choose the form of final
decision that, in his judgment, is most consistent with the
terms of this Agreement and Applicable Law.
9.2.6 Amendment of Time Periods and Procedural Steps. The foregoing
time periods and procedural steps may be modified or extended
by agreement of the parties or by the Arbitrator in his
discretion to the extent it deems necessary to prevent
fundamental unfairness; provided, however, that at all times
the Arbitrator shall be mindful of the parties' desire for the
most expeditious possible resolution of their disputes; and
provided, further, that a final decision of the Arbitrator
shall be rendered within one hundred and twenty (120) days of
the Arbitration Notice.
9.2.7 Finality. To the extent permissible under Applicable Law, the
Company and Vendor agree that the award of the Arbitrator
shall be final. Judgment on the arbitration award may be
entered and enforced in any court having jurisdiction over the
parties or their assets. It is the intent of the parties that
the arbitration provisions hereof be enforced to the fullest
extent permitted by Applicable Law.
9.2.8 Limitation on Damages. The Arbitrator may not award punitive
damages, and the parties hereby irrevocably waive any right to
punitive damages.
9.3 Emergency Relief and Relief from Certain Violations.
9.3.1 Certain Matters Not Subject to Mediation or Arbitration.
Notwithstanding anything contained in Section 9.2 to the
contrary, either party may seek from a court (i) any
provisional remedy that may be necessary to protect any rights
or property of such party pending the establishment of the
arbitral tribunal or its determinations of the merits of any
claim or controversy, or (ii) any preventative or provisional
order, decree or remedy under the laws of any jurisdiction for
a violation or alleged violation of Sections 6.2.3 or 6.2.4.
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9.3.2 Specific Performance. The parties acknowledge that violation
by the Company or any Company Affiliate of Section 6.2.3 or
6.2.4 of by Vendor of Section 6.1.3 would cause irreparable
harm to Vendor or Company, respectively, not adequately
compensable by monetary damages. In addition to other relief,
it is agreed that injunctive relief shall be available to
prevent any actual or threatened violation of such provisions.
9.3.3 Jurisdiction. In connection with only the provisions of this
Section 9.3, each party hereto hereby irrevocably submits to
the nonexclusive jurisdiction of the United States District
Court for the Northern District of Texas and, if such court
does not have jurisdiction, of the courts of the State of
Texas in Tarrant County, for the purpose of any suit, action
or other proceeding arising out of this Agreement or the
subject matter hereof brought by the other party under this
Section 9.3 and irrevocably waives, to the fullest extent
permitted by law, any objection to the laying of venue of any
such suit, action or proceeding in any such court or any claim
that any such suit, action or proceeding has been brought in
an inconvenient forum. Each party consents to process being
served in any such suit, action or proceeding by serving a
copy thereof upon its agent for service of process referred to
below, provided that service shall also be mailed to each such
party. Each such party agrees that such service shall be
deemed in every respect effective service of process in any
such suit, action or proceeding and shall, to the fullest
extent permitted by law, be taken and held to be valid
personal service upon and personal delivery to such party.
Vendor hereby appoints CT Corporation System as its agent for
service of process in the State of Texas. Company hereby
appoints The Prentice-Hall Corporation System, Inc., Dallas,
Texas as its agent for service of process in the State of
Texas. Each party agrees to maintain such agents at all times
unless it shall designate a successor agent or agents
reasonably satisfactory to the other party.
10 INDEMNIFICATION
10.1 Indemnification of Vendor. COMPANY SHALL INDEMNIFY, DEFEND AND HOLD
HARMLESS VENDOR, ITS AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES,
AGENTS, ATTORNEYS, REPRESENTATIVES, SUCCESSORS AND ASSIGNEES (EACH
THEREOF, WITH ITS RESPECTIVE AFFILIATES, SUCCESSORS, ASSIGNS AND
AGENTS REFERRED TO HEREIN AS AN "INDEMNIFIED VENDOR PARTY") FROM AND
AGAINST ANY AND ALL LOSSES, CLAIMS, DAMAGES, JUDGMENTS, LIABILITIES,
ACTIONS, SUITS, RECOVERIES, EXECUTIONS OR EXPENSES, INCLUDING,
WITHOUT LIMITATION, (i) COSTS OF INVESTIGATION, LITIGATION COSTS,
COURT COSTS, EXPERT WITNESS FEES, LITIGATION SUPPORT SERVICES,
SETTLEMENT COSTS AND REASONABLE ATTORNEYS' FEES AND EXPENSES, AND
(ii) LIABILITIES FOR LATENT OR OTHER DEFECTS WHETHER OR NOT
DISCOVERABLE, PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT, TAXES,
BODILY INJURY, DEATH, AND PROPERTY DAMAGE, INCURRED OR SUFFERED BY
ANY INDEMNIFIED VENDOR PARTY ARISING IN CONNECTION WITH, OR RELATED
TO, A BREACH OF THIS
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AGREEMENT BY COMPANY OR THE ACTS OR OMISSIONS TO ACT OF COMPANY
(WHICH OMISSIONS TO ACT CONSTITUTE A BREACH OF THIS AGREEMENT BY
COMPANY). COMPANY ALSO AGREES TO INDEMNIFY AND HOLD HARMLESS
INDEMNIFIED VENDOR PARTY FROM AND AGAINST ANY AND ALL LOSSES,
CLAIMS, DAMAGES, JUDGMENTS, LIABILITIES, ACTIONS, SUITS, RECOVERIES,
EXECUTIONS OR EXPENSES SUFFERED BY INDEMNIFIED VENDOR PARTY RELATED
TO CLAIMS MADE AGAINST THE INDEMNIFIED VENDOR PARTY BY ANY THIRD
PARTY, INCLUDING, WITHOUT LIMITATION (i) ANY CLAIM MADE BY ANY
GOVERNMENTAL OR REGULATORY AUTHORITY HAVING JURISDICTION OVER
COMPANY AND ARISING FROM THE OPERATIONS OF COMPANY (AS OPPOSED TO
THE MERE PROVISION OF ANY OF THE SERVICES UNDER ANY OR ALL OF THE
ANNEXES), OR (ii) ANY CLAIM MADE BY ANY PASSENGER OF COMPANY OR
OTHER PERSON OR ENTITY DOING BUSINESS WITH COMPANY (INCLUDING BUT
NOT LIMITED TO PASSENGERS OR OTHER PERSONS LOCATED ON COMPANY'S
PREMISES). THE FOREGOING INDEMNIFICATION OBLIGATIONS SHALL NOT
INCLUDE THE OBLIGATION TO INDEMNIFY ANY INDEMNIFIED VENDOR PARTY FOR
LIABILITIES RESULTING FROM A BREACH OF THIS AGREEMENT BY VENDOR,
ACTS OF GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE INDEMNIFIED
VENDOR PARTY.
10.2 Indemnification for Negligent Acts. WITHOUT LIMITING SECTION 10.1,
IT IS THE EXPRESS INTENT OF COMPANY AND VENDOR THAT COMPANY DEFEND
AND INDEMNIFY EACH INDEMNIFIED VENDOR PARTY AGAINST CLAIMS DESCRIBED
IN SECTION 10.1 ABOVE (OTHER THAN CLAIMS THAT ARE EXPRESSLY EXCEPTED
IN SECTION 10.1) THAT ARISE FROM THE NEGLIGENCE (ACTIVE, PASSIVE OR
IMPUTED) OF VENDOR OR ANY OTHER INDEMNIFIED VENDOR PARTY AND AS A
RESULT OF THE JOINT OR CONCURRENT NEGLIGENCE (WHETHER ACTIVE,
PASSIVE OR IMPUTED) OF VENDOR, ANY OTHER INDEMNIFIED VENDOR PARTY
AND COMPANY.
10.3 Indemnification of Company. VENDOR SHALL INDEMNIFY, DEFEND AND HOLD
HARMLESS COMPANY, ITS AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES,
AGENTS, ATTORNEYS, REPRESENTATIVES, SUCCESSORS AND ASSIGNEES (EACH
THEREOF, WITH ITS RESPECTIVE AFFILIATES, SUCCESSORS, ASSIGNS AND
AGENTS REFERRED TO HEREIN AS AN "INDEMNIFIED COMPANY PARTY") FROM
AND AGAINST ANY AND ALL LOSSES, CLAIMS, DAMAGES, JUDGMENTS,
LIABILITIES, ACTIONS, SUITS, RECOVERIES, EXECUTIONS OR EXPENSES,
INCLUDING, WITHOUT LIMITATION, (i) COSTS OF INVESTIGATION,
LITIGATION COSTS, COURT COSTS, EXPERT WITNESS FEES, LITIGATION
SUPPORT SERVICES, SETTLEMENT COSTS AND REASONABLE ATTORNEYS' FEES
AND EXPENSES, AND (ii) LIABILITIES FOR LATENT OR OTHER DEFECTS,
WHETHER OR NOT DISCOVERABLE, PATENT, TRADEMARK OR COPYRIGHT
INFRINGEMENT, TAXES, BODILY INJURY, DEATH, AND PROPERTY DAMAGE,
INCURRED OR SUFFERED BY ANY INDEMNIFIED COMPANY PARTY ARISING IN
CONNECTION WITH, OR RELATED TO, A BREACH OF
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THIS AGREEMENT BY VENDOR OR THE ACTS OR OMISSIONS TO ACT OF VENDOR
(WHICH OMISSIONS TO ACT CONSTITUTE A BREACH OF THIS AGREEMENT BY
VENDOR). VENDOR ALSO AGREES TO INDEMNIFY AND HOLD HARMLESS
INDEMNIFIED COMPANY PARTY FROM AND AGAINST ANY AND ALL LOSSES,
CLAIMS, DAMAGES, JUDGMENTS, LIABILITIES, ACTIONS, SUITS, RECOVERIES,
EXECUTIONS OR EXPENSES SUFFERED BY INDEMNIFIED COMPANY PARTY RELATED
TO CLAIMS MADE AGAINST THE INDEMNIFIED COMPANY PARTY BY ANY THIRD
PARTY, INCLUDING, WITHOUT LIMITATION, (i) ANY CLAIM MADE BY ANY
GOVERNMENTAL OR REGULATORY AUTHORITY HAVING JURISDICTION OVER VENDOR
AND ARISING FROM THE OPERATIONS OF VENDOR (AS OPPOSED TO THE MERE
PROVISION OF ANY OF THE SERVICES UNDER ANY OR ALL OF THE ANNEXES),
OR (ii) ANY CLAIM MADE BY ANY PASSENGER OF VENDOR OR OTHER PERSON OR
ENTITY DOING BUSINESS WITH VENDOR (INCLUDING BUT NOT LIMITED TO
PASSENGERS OR OTHER PERSONS LOCATED ON VENDOR'S PREMISES). THE
FOREGOING INDEMNIFICATION OBLIGATIONS SHALL NOT INCLUDE THE
OBLIGATION TO INDEMNIFY ANY INDEMNIFIED COMPANY PARTY FOR
LIABILITIES RESULTING FROM A BREACH OF THIS AGREEMENT BY COMPANY,
ACTS OF GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE INDEMNIFIED
COMPANY PARTY.
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IT IS
THE EXPRESS INTENT OF COMPANY AND VENDOR THAT THE REMEDY SET FORTH
IN SECTIONS 10.1 AND 10.3 ARE TO BE EXCLUSIVE FOR THE MATTERS SET
OUT IN SECTIONS 10.1 AND 10.3, AND THAT NO PARTY SHALL BE ABLE TO
AVOID THE LIMITATIONS EXPRESSLY SET FORTH IN SECTIONS 10.1 AND 10.3
BY ELECTING TO PURSUE ANY OTHER REMEDY, WHETHER PURSUANT TO THIS
AGREEMENT OR OTHERWISE.
The parties acknowledge that Sections 10.1, 10.2 and 10.3 have been
the subject of full discussion and negotiation between the parties,
with the advice of their respective legal counsel, and that the
provisions of this Agreement were arrived at in consideration of the
provisions of Sections 10.1, 10.2 and 10.3. Vendor would not have
entered into this Agreement for the consideration provided herein
but for Company's agreement to indemnify each Indemnified Vendor
Party as provided in this Agreement
10.4 Participation and Cooperation. If any Indemnified Vendor Party or
Indemnified Company Party (herein referred to as the "Indemnified
Party", as appropriate) shall have knowledge of any claim or
liability required to be indemnified against under this Section 10,
such Indemnified Party shall give reasonably prompt written notice
thereof to the party from whom indemnification under this Section 10
is sought (hereinafter referred to as the "Indemnifying Party")
after becoming aware of such claim, but the failure of such
Indemnified Party so to notify the Indemnifying Party shall not
relieve the Indemnifying Party from any liability that it would
otherwise have to such Indemnified Party hereunder except to the
extent, and only to the extent, that the Indemnifying Party
demonstrates that the defense of such claim or liability is
prejudiced thereby. The Indemnifying Party and the Indemnifying
Party's insurers shall have the right, at their sole cost and
expense,
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to investigate, defend or compromise any claim for which
indemnification is sought under this Section 10 upon acknowledgment
by the Indemnifying Party or such insurer of its liabilities to each
Indemnified Party in respect thereof, and each Indemnified Party
shall cooperate with the Indemnifying Party and such insurer or
insurers with respect thereto by, among other things, (i) responding
fully to any reasonable request by such Indemnifying Party or such
insurer or insurers for information and (ii) not taking any
voluntary action that such Indemnified Party could reasonably
foresee would materially prejudice Indemnifying Party's or such
insurer's or insurers' defense efforts to reach settlement or
pursuit of any cross-claim or counterclaim.
10.5 Defense of Claims; Settlement. Except as limited herein, the
Indemnifying Party shall have complete control of the defense or
settlement of such claim or compromise thereof; provided, that
counsel selected by the Indemnifying Party shall be acceptable to
the Indemnified Party in the Indemnified Party's reasonable sole
discretion. No compromise or settlement of any claim may be effected
by the Indemnifying Party without the Indemnified Party's consent,
which consent shall not be unreasonably withheld; provided, no
consent shall be required if (i) there is no finding or admission of
any violation of any law by the Indemnified Party or any violation
of the rights of any person by the Indemnified Party, (ii) there is
no effect on any claim that may be made by the Indemnified Party,
and (iii) the relief provided is the sole responsibility of the
Indemnifying Party. Each Indemnified Party shall have the right, but
not the duty, at its own expense, to participate in the defense
and/or settlement of any claim with counsel of its own choosing
without relieving the Indemnifying Party of any obligations
hereunder. The Indemnifying Party and its counsel shall cooperate
with the Indemnified Party's counsel and shall supply the
Indemnified Party with such information reasonably requested by the
Indemnified Party as is necessary or advisable for the Indemnified
Party to participate in any proceeding to the extent permitted by
this Section 10, but control of the matter shall remain with the
Indemnifying Party.
10.6 Survival. THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS
SECTION 10 SHALL SURVIVE FOREVER AND SHALL SPECIFICALLY SURVIVE ANY
TERMINATION OR EXPIRATION OF THIS AGREEMENT OR ANY IMPOSSIBILITY OF
PERFORMANCE OF THIS AGREEMENT OR FRUSTRATION OF PURPOSE OF THIS
AGREEMENT.
11 MISCELLANEOUS
11.1 Amendment; Waiver. This Agreement may be amended only by a written
instrument signed by the parties hereto. No failure to exercise and
no delay in exercising, on the part of any party, any right, remedy,
power or privilege hereunder, shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof
or the exercise of any other right, remedy, power or privilege. The
rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law. The failure of any party to insist upon
a strict performance of any of the terms or provisions of this
Agreement, or to exercise any option, right or
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remedy herein contained, shall not be construed as a waiver or as a
relinquishment for the future of such term, provision, option, right
or remedy, but the same shall continue and remain in full force and
effect. No waiver by any party of any term or provision of this
Agreement shall be deemed to have been made unless expressed in
writing and signed by such party.
11.2 Assignment; Subcontracting. This Agreement shall bind and benefit
Vendor, Company, and their respective successors and permitted
assigns. Vendor may assign any rights or delegate or subcontract any
obligations hereunder to any Affiliate of Vendor. Any assignee,
delegatee or subcontractor of Vendor shall automatically be entitled
to all the rights of Vendor hereunder. Except as expressly permitted
in this Section 11.2, neither Vendor nor Company may (either
voluntarily or involuntarily) assign any of its rights or delegate
any of its obligations hereunder without the prior written consent
of the other party. In this regard, Vendor will not unreasonably
withhold its consent to any assignment by Company to a Company
Affiliate with comparable assets and resources as part of a
corporate reorganization.
11.3 Rights and Licenses Granted to Vendor. All rights and licenses
granted to Vendor and Company under this Agreement shall be deemed
to have been also granted to any Person who is directly or
indirectly wholly-owned by Vendor or Company, respectively, without
necessity for further act or formality, provided that, in the event
that any such Person ceases to be an Affiliate of Vendor or Company
respectively, such rights and licenses shall automatically cease and
terminate, without necessity for further act or formality.
11.4 Notices. All notices, requests and demands to or upon the respective
parties hereto to be effective must be in writing (including by
telecopy), must be addressed as provided below, must be delivered
during normal business hours (unless otherwise expressly provided
herein), and will be considered as properly given (i) if delivered
in person; (ii) if sent by an express courier delivery service which
provides a signed acknowledgment of receipt; or (iii) if transmitted
by telex, telecopier or facsimile machine (upon receipt by sender
thereof of evidence that a complete transmission of such telex,
telecopy or facsimile was made to the recipient thereof) and, in
such case, confirmed by dispatching a copy of such notice by
certified or registered first class air mail or express courier
service. All notices are effective upon receipt. Either party may
change its address for notices hereunder by giving thirty (30) days'
notice to the other party in the manner set forth above.
If to Vendor:
Airline Management Services, Inc.
P.O. Box 619616, Mail Drop 5220
Dallas/Fort Worth Airport, Texas 75261-9616
Attention: Managing Director
Fax No.: (817)963-1924
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with a copy to:
AMR Corporation
4333 Amon Carter Boulevard
P.O. Box 619616, Mail Drop 5675
Dallas/Fort Worth Airport, Texas 75261-9616
Attention: Senior Vice President of Administration
and General Counsel
Fax No.: (817) 967-2937
If to Company:
Midway Airlines Corporation
300 West Morgan Street
Suite 1200
Durham, North Carolina 27701
Attention: Senior Vice President and General Counsel
Fax No.: (919) 956-7568
11.5 Counterparts. This Agreement may be executed by one or more of the
parties hereto on any number of separate counterparts and all of
said counterparts taken together shall be deemed to constitute one
and the same instrument.
11.6 Severability. If any provision of this Agreement is or becomes
wholly or partly invalid, illegal, or unenforceable, the validity,
legality, and enforceability of the remaining provisions shall
continue in force unaffected and the parties must meet as soon as
possible (but no later than ten (10) Business Days) and negotiate in
good faith upon a replacement provision that is legally valid and
that as nearly as possible achieves the objectives of the Agreement
and produces an equivalent economic effect. If the parties cannot
agree on a replacement provision within twenty (20) Business Days,
but the lack of the unenforceable provisions does not materially
alter the terms, benefits and/or obligations of this Agreement, the
remaining terms of the Agreement shall remain in full force and
effect. If the parties cannot agree and the lack of the
unenforceable provisions materially alters the terms, benefits
and/or obligations of this Agreement, this Agreement will terminate.
Any prohibition or unenforceability of any provision in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
11.7 Integration. This Agreement represents the entire agreement of the
Company and Vendor with respect to the subject matter hereof, and
there are no promises, undertakings, representations or warranties
or implied duties by the Company or Vendor relative to the subject
matter hereof not expressly set forth or referred to herein or
therein. This Agreement shall terminate and supersede all prior or
contemporaneous agreements, discussions, undertakings, and
understandings, whether written or oral, express or implied, between
the parties hereto with respect to the subject matter hereof.
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11.8 Governing Law. This Agreement and the rights and obligations of the
parties under this Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of Texas,
excluding its rules of conflicts of law.
11.9 Further Assurances. Each party hereto agrees to execute any and all
documents and to perform such other acts as may be necessary or
expedient to further the purposes of this Agreement and the
transactions contemplated hereby.
11.10 Publicity. Neither the Company nor Vendor shall issue or make, or
cause to have issued or made, any press release or announcement
concerning the transactions contemplated hereby without the advance
approval in writing of the form and substance thereof by the other
party, unless otherwise required by Applicable Law.
11.11 Expenses. Except as otherwise provided herein, each of the parties
hereto shall bear its own attorneys', accountants' or other fees,
costs and expenses incurred in connection with the negotiation,
execution and performance of this Agreement or any of the
transactions contemplated hereunder.
11.12 Brokers. Each party to this Agreement agrees that it will indemnify
and hold harmless the other party against any claim for brokerage,
finders' fees, agents' or investment bankers' or commissions in
connection with the negotiation or consummation of the transactions
contemplated by this Agreement.
11.13 Annexes, Exhibits, Schedules and Transition Plan. All Annexes and
Exhibits to this Agreement, are incorporated herein and made a part
hereof for all purposes.
11.14 Independent Contractor. Vendor is and shall remain an independent
contractor with respect to all performance rendered pursuant to this
Agreement. Notwithstanding anything in this Agreement to the
contrary, neither Vendor nor its employees shall be considered an
employee, agent, partner or joint venturer of the Company or any
Affiliate of the Company for any purpose. Vendor shall have sole
responsibility for the supervision, daily direction and control,
payment of salary (including withholding of income taxes and social
security), workers' compensation, disability benefits and the like
of its personnel.
11.15 Setoff. Notwithstanding anything to the contrary set forth in this
Agreement, if any monies are past due and owing from any member of
the Company Group to the AMR Group under any contract or
arrangement, members of the AMR Group may withhold any amounts due
and owing from any member of the AMR Group to any member of the
Company Group and such members of the AMR Group may apply such
amounts in satisfaction of the amounts past due and owing to a
member of the AMR Group. The AMR Group shall provide notice to the
Company Group within a reasonable period of time following such
withholding to the effect that such withholding has occurred and
identifying the indebtedness with respect to which such withheld
amounts have been applied.
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11.16 Product Knowledge. Nothing in this Agreement, the Exhibits hereto or
the Annexes, shall prohibit, or in any way limit, Vendor's rights to
use, develop or market existing or subsequently developed or
modified software, technology, ideas, inventions or concepts, or to
use Vendor's expertise, skills or knowledge acquired in the
performance of services rendered under this Agreement or the Annexes
in any current or subsequent endeavors. Company shall have no right
or interest in such endeavors.
11.17 Interpretation; Governing Language. This Agreement is the result of
both parties' review, discussion and negotiation. Accordingly, this
Agreement will be construed as if jointly prepared and drafted and
any uncertainties or ambiguities will not be interpreted against a
party by virtue of its actual role in preparing this Agreement
11.18 Force Majeure. Neither party shall be liable for a delay or failure
in its performance hereunder if such delay or failure of performance
arises from any cause beyond such party's control, including (but
not limited to) an act of God, war, strike including any mechanic,
flight attendant or pilot strike), slowdown, sickout, lockout, labor
dispute, work stoppage, any act or regulation of any Governmental
Authority, fire, the elements, flood, earthquake, explosion,
accident, mechanical or electrical failure, civil disturbance,
rebellion, insurrection, or any other cause, whether it be similar
or dissimilar, beyond the control of such party; provided, however,
that in no event shall any such occurrence relieve: (a) Company of
Company's responsibilities (i) to pay Vendor any Fees accrued
hereunder subject, however to reduction on a pro rata basis for the
day or days that Vendor was unable to provide Services due to one or
more of the foregoing events, or (ii) under Sections 6.22 and 6.2.3;
or (b) Vendor of Vendor's responsibilities under Section 6.1.2 and
6.1.3.
11.19 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the permitted successors and assigns
of each party hereto.
11.20 No Third Party Beneficiaries. Except for rights and benefits
conferred on certain Affiliates of Vendor as set forth in this
Agreement, all rights, remedies and obligations of the parties
hereunder shall accrue or apply solely to the parties herein or
their permitted successors or assigns and there is no intent to
benefit any third parties.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
VENDOR:
AIRLINE MANAGEMENT SERVICES, INC.
By: /s/ Jeffrey M. Jackson
-------------------------------------
Name: J. M. Jackson
Title: Vice President
COMPANY:
MIDWAY AIRLINES CORPORATION
By: /s/ J S Waller
-------------------------------------
Name: Jonathan S. Waller
Title: Senior Vice President
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EXHIBIT 6.2.4
Insurance
Company, at its sole cost and expense, shall procure and maintain during
the term of this Agreement and for a period of three years after the termination
of the Agreement, with insurers of recognized financial responsibility,
reasonably satisfactory to Vendor and approved in writing the following
insurance:
A. Comprehensive airline liability insurance, including airport liability,
comprehensive general liability (including premises, products and completed
operations, contractual liability, liquor liability, advertiser's liability and
personal injury coverage), automobile liability covering all operations
performed by Company under this contract including the ownership, operation or
use of all licensed and unlicensed vehicles used in the performance of such
service, and war risk liability. Such coverage shall be in an amount of not less
than $600,000,000 per occurrence bodily injury and property damage combined,
$25,000,000 per offense and annual aggregate in respect of personal injury but
$600,000,000 limit in respect of personal injury to passengers.
B. All risk hull insurance (including hull war risk) in an amount not less
than the amount normally carried by other airlines flying similar type aircraft.
C. Workers Compensation - Statutory Limits
Employers Liability - $1,000,000
Company may maintain deductibles which are customary in the aviation
industry for the type of aircraft flown. If Company maintains higher
deductibles, Vendor must be advised and prior to operation of any aircraft for
which this Agreement applies approve same, such approval not to be unreasonably
withheld. Company may not maintain any self insurance retentions above such
deductibles.
Such insurance shall (exclusive of workers compensation) include the
following special provisions:
1. Name Vendor and its Affiliates and their respective officers, agents,
and employees as additional insureds (collectively "Insured Parties").
2. Insure the liability assumed by Company in this Agreement.
3. Be primary without any right of contribution from any insurance which
is carried by the Insured Parties.
4. Waive any and all rights of subrogation Company's insurers may or could
have against the Insured Parties.
5. Include insurer's agreement that as respects the interest of the
Insured Parties, this insurance shall not be invalidated by any action or
inaction of Company and shall insure the Insured Parties regardless of any
breach or violation of any warranties, declarations, or conditions contained in
the policies by Company.
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6. The Insured Parties shall be given at least thirty (30) days (seven (7)
days, or such other period as may from time to time be customarily obtainable in
the industry in the case of any war risk or allied perils coverage) prior
written notice of any cancellation, termination, potential lapse or adverse
material change in such policy(ies). Such cancellation, termination, potential
lapse or adverse material change shall not be effective as to the Insured
Parties for at least thirty (30) days after receipt of same at the Insured
Parties Corporate Insurance Department, Mail Drop 5658,4333 Amon Carter Blvd.,
Fort Worth, Texas 76155 (Mailing address: American Airlines, P.O. Box 619616,
Mall Drop 5658, DFW Airport, Texas 75261-9616).
The Company shall provide the Insured Parties with a Certificate of
Insurance evidencing the coverages required herein on or before the Effective
Date of this Agreement and thereafter upon renewal of such policies.
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ANNEX A
YIELD MANAGEMENT SERVICES
RECITALS
All capitalized terms not otherwise defined in this Annex shall have the
same meaning assigned to such term in the Services and Licenses Agreement dated
as of the date hereof between the Vendor (as defined herein) and the Company (as
defined herein) (the "Agreement"). In the event of a conflict between this Annex
and Sections 1 through 11 of the Agreement (the "General Terms"), the provisions
of the General Terms will control with respect to the subject matter thereof.
ARTICLE 1
GENERAL DESCRIPTION OF SERVICES
Vendor will implement, operate and manage an operation in the United
States to provide Pre-Departure Yield Management services and Yield Management
Development services as defined herein to the Company, all of which services
will be provided in a manner designed to maximize, to the fullest extent
possible, the revenue earned from scheduled airline flights operated by the
Company and its Code Commuters. These services do not include any pricing
services, Product Distribution and Display services, Day of Departure Operations
services, or any other services not defined herein.
ARTICLE 2
DEFINITION OF TERMS
For the purposes of this Annex, the following terms shall have the
meanings set forth below:
"AA" shall mean American Airlines, Inc., a Delaware corporation.
"Agreement" shall mean the Services and Licenses Agreement between Midway
Airlines Corporation and Airline Management Services, Inc., including the
Annexes and Exhibits attached and incorporated by reference, as any of the
foregoing may be amended, supplemented or otherwise modified from time to time.
"AIRMAX" shall mean a yield management software application that forecasts
passenger demand and computes inventory authorization levels.
Note: AIRMAX(R) is a Registered Trademark of the SABRE Group Inc. All rights
reserved.
<PAGE>
"AMS" shall mean Airline Management Services, Inc., a Delaware
corporation.
"Base Operating Statistics" shall mean one-hundred sixty (160) airline
departures per day, forty (40) airports served, and three million (3,000,000)
airline passengers boarded annually, for the Company and its Code Commuters.
"Code Commuters" shall mean those commuter air carriers utilizing the JI
airline code designator, hosted in the Company's SABRE partition.
"Company" shall mean Midway Airlines Corporation, a Delaware corporation.
"Critical Flight Identification" shall mean identification of flights that
have a high probability of being oversold.
"Day of Departure Operations" shall mean performing yield management
functions on flights that are generally within twenty-four (24) hours of
departure, such as yield managing off-schedule operations.
"Demand Forecasting" shall mean the process of anticipating passenger
demand using reservations and post-departure data.
"Discount Allocation" shall mean the maximum number of potential
reservations allocated for each inventory class for a flight.
"Effective Date" shall mean the effective date as defined in the
Agreement.
"Firming Notification" shall mean a notification sent by Yield Management
Services analysts to the Company to firm (or determine the firmness of bookings
on) a flight.
"Implementation Date" shall mean the date on which the Vendor provides
Yield Management Services to the Company using the Yield Management Systems.
"Implementation Fees" shall mean charges to the Company based on the
initial hardware, software and implementation costs for the Vendor to perform
Yield Management Services for the Company, excluding the Yield Management
Systems license cost and taxes.
"Indexing" shall mean grouping like valued market fareclasses for Virtual
Nesting.
"Inventory" shall mean a seat on a flight.
"Inventory Optimization" shall mean using Overbooking Levels, Discount
Allocations, and Indexing to manage the revenue opportunity of a flight.
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"Operating Statistics" shall mean airline departures, airports served, and
airline passengers boarded, for the Company and its Code Commuters.
"Overbooking Levels" shall mean inventory authorizations of potential
reservations, which are above or equal to the flight's capacity.
"Platform Support" shall mean support provided to ensure the effectiveness
of hardware and software systems for the purposes of providing Yield Management
Services.
"Pre-Departure Yield Management" shall mean yield management functions
performed on flights from three hundred thirty-one (331) days to generally
twenty-four (24) hours prior to departure as described in Article 4 of this
Annex.
"Pre-Removal" shall mean a notification sent by Yield Management Services
analysts to the Company to pre-remove passengers from a flight.
"Product Distribution and Display" shall mean services performed to ensure
the accuracy of an airline's flight schedule in computer reservations systems
and to enhance an airline's screen presence in computer reservations systems.
"Queue Processing" shall mean processing of requests queued from the
Company and its Code Commuters to Yield Management Services analysts for
overbooking consideration.
"SABRE" shall mean the computerized reservations system and related data
processing services used in relation to the provision of air transport services.
"Service Coordinators" shall mean the persons from the Company and the
Vendor who have responsibility for overseeing the implementation and performance
of this Annex.
"Services Period" shall mean the period commencing on the Effective Date
and continuing until terminated in accordance with Article 10 of this Annex.
"Vendor" shall mean AMS.
"Virtual Nesting" shall mean a method of controlling inventory based on
itinerary values.
"Yield Management Development" shall refer to developing and maintaining
systems and techniques for performing yield management functions, as described
in Article 4 of this Annex.
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"Yield Management Services" or "Services" shall mean those yield
management services provided by the Vendor to the Company, as described in
Article 4 of this Annex.
"Yield Management Services Fees" shall mean the monthly fees paid by the
Company for Yield Management Services analyst expenses, hardware and software
maintenance, and AIRMAX license and support costs, excluding taxes.
"Yield Management Systems" shall mean the automated systems used to
provide Yield Management Services to the Company as described in Article 6.1 of
this Annex.
ARTICLE 3
SERVICE COORDINATORS
All notices required to be made under this Annex shall be effective upon
receipt, delivered in person, by registered mail or sent by telecopy
transmission to the Service Coordinator. The name, business address, and
telephone number of each party's Service Coordinator are as follows:
Company:
Midway Airlines Corporation
300 West Morgan Street, Suite 1200
Durham, North Carolina 27701
Attention: Director of Market Planning
Telephone No.: (919) 956-4875
Fax No.: (919) 956-8619
Vendor:
Airline Management Services, Inc.
P.O. Box 619616, MD 5220
Dallas/Fort Worth Airport, Texas
75261-9616
Attention: Managing Director
Telephone No.: (817) 963-1601
Fax No.: (817) 963-1924
with a copy to:
American Airlines, Inc.
P.O. Box 619616, MD 5220
Dallas/Fort Worth Airport, Texas
75261-9616
Attention: Managing Director, PYM Services
Telephone No.: (817) 967-9902
Fax No.: (817) 967-9955
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Each party must rely upon the representations and agreements of the other
party's designated Service Coordinator. A party may designate a successor
Service Coordinator at any time by providing written notice of the successor to
the other party. In addition to the responsibilities set forth in the General
Terms, each party's Service Coordinator shall be authorized to: (i) administer
and coordinate the Yield Management Services provided to the Company by the
Vendor; (ii) serve as primary point of contact for the other party; and (iii)
provide the other party with timely authorizations, approvals, consents or
waivers as the other party may reasonably request from time to time. The Company
hereby agrees that the Vendor's Service Coordinator shall have overall authority
in connection with all aspects of the implementation of Yield Management
Services under the terms of this Annex.
ARTICLE 4
DESCRIPTION OF SERVICES
4.1 Pre-Departure Yield Management Services. The Vendor will perform
Pre-Departure Yield Management functions for all scheduled flights of the
Company and its Code Commuters. These functions are: Demand Forecasting and
Inventory Optimization; performance measurement, tracking and reporting;
Pre-Removal; Firming Notification; and manual Queue Processing. Pre-Departure
Yield Management analysts will also recommend to the Company yield management
strategies and will implement those strategies approved by the Company.
4.2 Yield Management Development Services. The Vendor will perform Yield
Management Development functions for the Company. Yield Management Development
analysts will consult and support Pre-Departure Yield Management analysts on the
following: Yield Management Systems, Critical Flight Identification, Indexing,
and data access. Yield Management Development will also provide Platform
Support.
4.3 Scope of Services. Both the Company and the Vendor acknowledge that
the manner in which the services of this Annex are performed, as well as the
elements and functions within the Annex, may need to change regularly and
frequently for various reasons, and they agree to use reasonable best efforts to
accommodate all changes that may be necessary or desirable but which do not
materially and adversely impact either company's operations. Any additional
services not mentioned in Articles 4.1 and 4.2 may be provided by the Vendor to
the Company only with the mutual agreement of both parties, and may require an
additional charge to the Company. The Vendor intends to subcontract Yield
Management Services upon execution of this Annex A to AA, and AA will perform
such services in accordance with the Agreement.
4.4 Operating Hours. Normal working hours for Yield Management Services
are between 8:15 a.m. and 4:45 p.m. Central Time Monday through Friday,
excluding holidays recognized by the Vendor.
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Attached as Exhibit 1 are the remaining holidays in 1995 and the holidays
in 1996 recognized by the Vendor for the 1996 calendar year. Holidays recognized
by the Vendor are subject to change, and Vendor agrees to provide the Company
with the list of recognized holidays for each calendar year when such days are
determined by the Vendor.
Any request by the Company that would necessitate the group of employees
performing Yield Management Services to work beyond normal working hours as
defined herein will be performed only in accordance with procedures mutually
agreed to in writing by the Company and the Vendor.
4.5 Operating Procedures. Pre-Departure Yield Management Services will be
performed up to twenty-four (24) hours prior to departure for all scheduled
flights of the Company and its Code Commuters during the times specified in
Article 4.4. The Vendor will perform Pre-Departure Yield Management Services for
the Company's and the Code Commuters' flights as close to twenty-four (24) hours
prior to departure as possible, within the times set forth in Article 4.4.
ARTICLE 5
GENERAL PROCEDURES
5.1 Company's Responsibilities and Authority. Subject to the terms and
conditions of this Annex and the Agreement, the Company hereby engages the
Vendor to provide Yield Management Services during the Services Period.
The Company shall retain and exercise managerial control and decision
making authority for the Company in every aspect, including and without
limitation, the decision making authority to implement, modify, or reject any
course of action recommended by the Vendor.
The Company agrees to provide the Vendor with such cooperation and shall
deliver to the Vendor such information and data concerning the Company and its
Code Commuters, their business and operations, as the Vendor may reasonably
request, in order to enable the Vendor to have full and complete access to any
and all information, which is necessary in connection with providing Yield
Management Services.
The Company agrees to notify the Vendor prior to taking any action that
will affect the Vendor's ability to effectively yield manage the Company's and
its Code Commuters' flights.
The Company agrees to work with the Vendor to prepare inputs for the Yield
Management Systems and manual processes, including but not limited to: revenue
accounting data for AIRMAX and post-departure closing information for AIRMAX.
The Company shall be responsible for paying denied boarding compensation.
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The Company agrees to take all reasonably necessary actions to facilitate
communication between the Company's field locations and the Vendor. The Vendor
may accompany the Company on any field location visits made by the Company. In
addition, the Company may make periodic visits to the Vendor to review
performance with the Vendor and to facilitate communication between the Company
and the Vendor.
The Company agrees to obtain from its Code Commuters, that desire to
obtain Services, an agreement in which the Code Commuters are subject to all the
terms and conditions of the Agreement and this Annex, and the Vendor shall be
expressly named in such third party agreements as an intended third party
thereof. The Company shall provide such agreements to the Vendor upon execution.
5.2 Vendor's Responsibilities and Authority. Vendor hereby agrees to
perform the Yield Management Services during the Services Period, in accordance
with the terms and conditions of the Agreement.
The Vendor will make Yield Management Services decisions based on
strategic objectives, policies and guidelines provided by the Company. The
Vendor shall have the authority to make routine administrative decisions on the
Company's behalf.
In the event that the Vendor cannot contact the Company as needed to make
a timely decision, the Vendor shall use reasonable best business judgment to
make the required decisions on the Company's behalf.
The Vendor shall ensure that the group of employees performing Yield
Management Services for the Company and its Code Commuters will generally
include not less than 6.5 analysts, including a supervisor, prior to the
Implementation Date and not less than 5.0 analysts, including a supervisor,
for the remainder of the Services Period, and who collectively as a group
will be of the same experience level as those performing like functions for
AA. Furthermore, due to the current size of the group performing Yield
Management Services for the Company and its Code Commuters, the Vendor shall
ensure that there is not more than one employee in the group with less than
three (3) months of yield management related experience.
ARTICLE 6
AUTOMATED SYSTEMS
6.1 Yield Management Systems. The primary automated system used by the
Vendor to perform yield management services for the Company will be the SABRE
Group Inc.'s AIRMAX system.
The Vendor will also use Indexing processes customized from AA systems to
optimize Virtual Nesting.
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All Yield Management Systems for the Company are expected to be
implemented approximately six (6) months after the Effective Date.
Prior to the Implementation Date, the Vendor will manually set, track and
monitor Inventory Optimization for the Company's and its Code Commuters' flights
using SABRE functionality. If the implementation of the Yield Management Systems
is delayed, the Vendor will continue to manually perform the yield management
functions until the Yield Management Systems are implemented.
Under this Annex, the Vendor's AIRMAX system will be entitled to receive
periodic (currently estimated to be one (1) per year) upgrades offered by the
SABRE Group to its AIRMAX clients as part of the software support fee described
in Article 8.2. Such upgrades do not include customization designed for use with
other AIRMAX clients or the Company that may be provided upon mutual agreement
between the Vendor and the Company and such customization may require additional
fees to the Company.
The Company does not have data available to calibrate the Yield Management
Systems. The Vendor will calibrate the Yield Management Systems as data are
collected after the Implementation Date. Furthermore, the available historical
data from AA's operations in the Company's markets will be adapted and used for
this purpose, as feasible.
6.2 Hardware and Other Applications Software. With a portion of the
Implementation Fees, the Vendor will purchase UNIX and workstation hardware and
software for the Vendor to provide Yield Management Services to the Company and
its Code Commuters.
ARTICLE 7
YIELD MANAGEMENT SERVICES COSTS
7.1 Implementation Fees. Initial hardware, software and implementation
costs for the Vendor to perform Yield Management Services for the Company,
excluding Yield Management Services Fees, will be equal to the actual costs
incurred by the Vendor, [***]. The estimated Implementation Fees are based on
expenses, time, and materials estimates. A breakdown of the estimated costs
is provided in Exhibit 2.
7.2 Yield Management Services Fees. The Vendor's monthly Yield
Management Services Fees, including the license fee for Yield Management
Systems as defined in Article 8.2 (option (i)) and the software support fee
also defined in Article 8.2, from the Effective Date until the Implementation
Date are [***], excluding taxes. These fees are identified as the Start-Up
Monthly Yield Management Services Fees as set out in Exhibit 2.
8
<PAGE>
The Vendor's monthly Yield Management Services Fees, including the license
fee for Yield Management Systems as defined in Article 8.2 (option (i)) and the
software support fee also defined in Article 8.2, after the implementation Date
until this Annex is terminated are [***], excluding taxes. These fees are
identified as the Steady-State Monthly Yield Management Services Fees as set out
in Exhibit 2.
7.3 General Increase Provision. Yield Management Services Fees (except for the
portion thereof attributable to the license fee for Yield Management Systems and
the software support fee) may increase on each anniversary date of this Annex
based on the lesser of the following:
(i) the Consumer Price index increase between the Effective Date and
the first anniversary thereof and thereafter between each succeeding
anniversary date; or
(ii) the percentage change in actual costs for the Vendor to provide
Yield Management Services to the Company between the Effective Date and
the first anniversary thereof and thereafter between each succeeding
anniversary date.
7.4 Operations Increase Provision. The Vendor may reasonably adjust Yield
Management Services Fees under the following terms and conditions:
(i) If any of the Operating Statistics increase, the Vendor may
adjust upward the Yield Management Services Fees at each occurrence of an
increase equaling twenty percent (20%) or more of the respective Base
Operating Statistics during the Services Period. If any of the Operating
Statistics decrease subsequent to a previous increase as described in the
preceding sentence, the Vendor agrees to adjust downward the Yield
Management Services Fees at each occurrence of a decrease equaling twenty
percent (20%) or more of the respective Base Operating Statistics during
the Services Period.
(ii) if the Company enters into a codeshare agreement with an
airline, other than Code Commuters during the Services Period, the Vendor
may adjust the Yield Management Services Fees.
Increases in Yield Management Services Fees under this Article 7.4, if
any, will be based upon reasonable and necessary staffing increases, and/or
reasonable and necessary hardware, software, and maintenance requirements.
7.5 SABRE Provision. The estimates provided in this Annex are based on the
Company being hosted in SABRE. Should the Company choose to host in another
computer reservations system other than SABRE during the Services Period, the
Company agrees to pay all agreed upon incremental fees associated with this
change for the continued use of Yield Management Services and Yield Management
Systems.
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7.6 Travel and Incidentals. The Company agrees to reimburse the Vendor for
all food, lodging and expenses reasonably incurred by the Vendor in connection
with Company approved travel by Vendor's employees and contractors under this
Annex.
The Company agrees to provide to Vendor at no cost, space available air
transportation on Company's flights as required to employees and contractors of
the Vendor who need travel in connection with performing services under this
Annex.
The Vendor agrees to provide to Company at no cost, space available air
transportation on Vendor's flights as required to employees of the Company who
need travel in connection with this Annex.
7.7 Currency. All charges referred to in this Annex shall be in United
States dollars. All payments shall be made in United States dollars.
ARTICLE 8
FINANCING
8.1 Implementation Fees. The Vendor will finance for the Company, the
actual Implementation Fees under the following terms and rates:
(i) The Vendor will finance the actual Implementation Fee for
[***] at an interest rate of [***] annually commencing on the Effective
Date;
(ii) For the period commencing on the Effective Date and ending
three (3) months after the Implementation Date, monthly principal and
interest payments from the Company to the Vendor will be [***],
excluding taxes, based on the current estimate of the Implementation Fees.
(iii) For the remainder of the [***], monthly principal and
interest payments from the Company to the Vendor will be adjusted to
reflect the actual Implementation Fees as described in Article 7.1
taking into consideration principal already paid by the Company in
prior months.
(iv) The Company will have the option to repay the Vendor at any
time after three (3) months after the Implementation Date by remitting the
entire remaining principal on the actual Implementation Fees.
An Implementation Fees schedule based on the current estimate of the
Implementation Fees is attached as Exhibit 3. This Exhibit 3 will be
recalculated and reissued three (3) months after the Implementation Date to set
out the repayment schedule based on the Implementation Fees, determined in
accordance with Article 7.1 of this Annex. At that time, the Vendor shall
provide to the Company a breakdown of the actual Implementation Fees, including
actual amounts or costs (with supporting
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documentation/invoices) of expenses, time and materials, and the like, included
in the Implementation Fees.
8.2 Yield Management Systems License. The Company shall obtain a
temporary license for the Vendor to use the Yield Management Systems for the
Company's and its Code Commuters' flights for a [***] month period commencing
on the Implementation Date ("Temporary License"). The Company shall pay the
Vendor [***] for the Temporary License. The Vendor will finance for the
Company the [***] for the Temporary License over the [***] month period at an
interest rate of [***], resulting in a monthly principal and interest payment
from the Company to the Vendor of [***], excluding taxes. If this Annex is
terminated and termination of this Annex is not the result of a breach by the
Company of this Annex and/or the Agreement, both parties agree to execute a
new agreement consistent with the then-current terms and conditions of SABRE
Decision Technologies', a division of the SABRE Group, Inc., AIRMAX
agreements, to be effective upon termination of this Annex under the terms
and conditions set out in Exhibit 6, attached hereto, to cover the use of the
Yield Management Systems by the Company. Until such an agreement is executed,
the Company shall have no rights to use the Yield Management Systems as
described in this Annex.
Upon expiration or termination of this Annex, the Company shall have the
option to obtain a perpetual license to use the Yield Management Systems for the
Company's and its Code Commuters' flights indefinitely ("Perpetual License"). In
order to obtain the Perpetual License, the Company shall pay the Vendor the
difference between [***] and the principal paid by the Company under the
terms of the Temporary License as set out above, provided that both parties
execute a new agreement consistent with the then-current terms and conditions of
SABRE Decision Technologies', a division of the SABRE Group, Inc., AIRMAX
agreements and assuming termination of this Annex is not the result of a breach
by the Company of this Annex and/or the Agreement, to be effective upon
expiration or termination of this Annex under the terms and conditions set out
in Exhibit 6, attached hereto, to cover the use of the Yield Management Systems
by the Company. Until such an agreement is executed, the Company shall have no
rights to use the Yield Management Systems as described in this Annex.
The Yield Management Systems License schedule containing a principal and
interest schedule for the Temporary License and the Perpetual License conversion
payoff is attached as Exhibit 4.
With the Temporary License, the Company shall also purchase from the
Vendor software support for the Yield Management Systems. With the Perpetual
License, the Company may also purchase, but is not obligated to purchase,
software support from the Vendor. The software support fee associated with the
Yield Management Systems is an additional flat rate fee of [***] per month
through the term of this Annex.
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<PAGE>
ARTICLE 9
PAYMENT
9.1 Monthly Payment. Payments of the fees described herein shall be made
in accordance with the terms set out in Section 4 of the Agreement, and Article
7 of this Annex. Furthermore, payments will vary as follows:
(i) For months one (1) through the Implementation Date, the monthly
amount due is [***] and is equal to the sum of the financing payments on
the estimated Implementation Fees of [***], the Yield Management
Services Fees, and sales tax.
(ii) For the three (3) month period following the Implementation
Date, the monthly amount due is [***] and is equal to the sum of the
financing payments on the estimated Implementation Fees of [***], the
Yield Management Services Fees, and sales tax.
(iii) For the subsequent months through the thirty-sixth (36th)
month, the monthly amount due is estimated to be [***] and will be equal
to the sum of the financing payments on the Implementation Fees determined
in accordance with Article 7.1, the Yield Management Services Fees, and
sales tax.
(iv) For the remaining months in the Services Period, the monthly
amount due is estimated to be [***] and will be equal to the sum of the
Yield Management Services Fees and sales tax.
The Schedule of Estimated Payments based on the Implementation Date
occurring six (6) months from the Effective Date is attached as Exhibit 5. This
Exhibit 5 will be recalculated and reissued three (3) months after the
Implementation Date to set out the repayment schedule determined in accordance
with Article 7.1.
9.2 Pass-through of Taxes Paid by Company. The Vendor shall pass-through
all required sales tax payments made by the Company to the appropriate
government authorities.
ARTICLE 10
TERM AND TERMINATION
10.1 Term. This Annex shall become effective upon execution and shall
continue for a term of five (5) years from the Effective Date or fifty-four (54)
months from the Implementation Date, whichever is longer.
10.2 Early Termination. The Company shall have the right to terminate this
Annex effective at any time after twenty-four (24) months from the Effective
Date upon
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not less than ninety (90) days prior written notice to the Vendor and upon
the Company's payment of all amounts due and the Early Termination Fee. [***]
As to transactions occurring and rights and obligations maturing prior to any
such termination becoming effective, this Annex, the Agreement, and all
relevant provisions thereto will survive and remain in full effect.
10.3 Transfer of Purchased Hardware and Software After Termination. Upon
termination of this Annex, the Vendor shall convey and deliver to the Company or
its designee, at the Company's expense, the hardware purchased and software
licensed or obtained (excluding Yield Management Systems) by the Company by
virtue of it having paid the cost thereof in the Implementation Fees. If the
termination of the Annex occurs prior to the Company's full payment of such
Implementation Fees, then the Vendor's conveyance and delivery of the hardware
and software shall be conditioned upon full payment of the Implementation Fees
to the Vendor.
10.4 Transfer of License to Use Yield Management Systems After
Termination. Upon termination of this Annex, the Company shall have the option
to purchase a license to use the Yield Management Systems under the following
conditions:
(i) If termination of this Annex occurs prior to the Company's full
payment of the license fee as described in Section 8.2, then the Company's
purchase of a license to use the Yield Management Systems shall be
conditioned upon full payment of the license fee.
(ii) The Company's purchase of the license to use the Yield
Management Systems shall be conditioned upon execution of the newly
negotiated agreement described in Section 8.2.
Upon transfer, the Company shall assume responsibility for paying all
third party licenses and maintenance fees required to operate the Yield
Management Systems.
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IN WITNESS WHEREOF, the parties hereto have caused this Annex to be duly
executed and delivered by their proper and duly authorized officers as of
_______________, 1995.
VENDOR:
AIRLINE MANAGEMENT SERVICES INC.
By: /s/ Jeffrey Jackson
------------------------------------
Name: J. M. Jackson
Title: Vice President
MIDWAY AIRLINES CORPORATION
By: /s/ J S Waller
------------------------------------
Name: Jonathan S. Waller
Title: Senior Vice President
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Exhibit 1
1995/1996 Vendor Holidays
The following are the remaining 1995 Holidays that staff employees of the
Vendor will recognize.
Christmas Monday December 25
Tuesday December 26
The following are the 1996 Holidays that staff employees of the Vendor will
recognize.
New Year's Monday January 1
Tuesday January 2
Good Friday Friday April 5
Memorial Day Monday May 27
Independence Day Thursday July 4
Labor Day Monday September 2
Thanksgiving Thursday November 28
Friday November 29
Christmas Tuesday December 24
Wednesday December 25
New Year's Eve Tuesday December 31
<PAGE>
Exhibit 2
[***]
<PAGE>
Exhibit 3
[***]
<PAGE>
Exhibit 4
[***]
<PAGE>
Exhibit 4
[***]
<PAGE>
Exhibit 5
[***]
<PAGE>
EXHIBIT 10.24
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY [***]. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
LETTER AGREEMENT
LA-Midway-FS-0103
between
Midway Airlines Corporation
and
Fokker Services, Inc.
relating to Aircraft Support Services for its Fokker 100 Aircraft
Dated as July 1, 1996
<PAGE>
CONTENTS
GENERAL TERMS AND CONDITIONS
FOR AIRCRAFT SUPPORT SERVICES
ARTICLE Title Page
------- ----- ----
Contents
Preamble 1
1 Definitions 2
2 General 3
3 Ordering Procedure 3
4 Terms and Conditions of Payment 4
5 Taxes, Duties, Licenses and Special Documents 4
6 Delay 5
7 Indemnity 6
8 Assignment 6
9 Non-Disclosure 7
10 Applicable Law and Forum 7
11 Miscellaneous 8
<PAGE>
LETTER AGREEMENT NO. LA-Midway-FS-0103 (hereinafter called the "Agreement")
dated as of July 1, 1996 between
Midway Airlines Corporation
a Delaware corporation,
(hereinafter referred to as "Buyer")
and
Fokker Services, Inc.
a Virginia corporation
(hereinafter referred to as "Seller").
WHEREAS Buyer desires to obtain Services (as hereinafter defined)
from Seller;
WHEREAS Seller desires to render Services to Buyer, subject to the
terms and conditions set forth in this Agreement.
NOW THEREFORE in consideration of the mutual covenants hereinafter
contained, the parties hereto agree as follows
<PAGE>
ARTICLE I Definitions
For all purposes of this Agreement the following definitions shall apply (such
definitions to be equally applicable to both singular and plural forms of the
terms defined unless the context otherwise requires).
Aircraft shall mean all aircraft manufactured by Manufacturer or by
its predecessors or successors and owned or operated by
Buyer.
ATA shall mean the Air Transport Association of America.
Employee shall mean any person or persons in the employ of, or any
officer, director, subcontractor or agent of, Seller, Fokker
Services (including any of its subsidiary or affiliated
companies) or any of their assignees.
Ex-works shall mean 'ex-works' as defined in Incoterms 1990, or any
subsequent edition thereof; issued by the International
Chamber of Commerce, Paris, France.
FAA shall mean the Federal Aviation Administration of the U.S.A.
or any successor thereof.
Fokker Industries shall mean Fokker Elmo B.V. in Woensdrecht, Fokker
Aerostructures B.V. and Fokker Special Products B.V. or its
successors.
Fokker Services shall mean Fokker Aircraft Services B.V. in Woensdrecht, the
Netherlands and Fokker Product Support B.V. in Amsterdam, the
Netherlands.
Manufacturer shall mean Fokker Aircraft B.V., a Netherlands corporation
with its principal office in Amsterdam, The Netherlands.
Manufacturer's shall mean the detailed design and detailed specification
Design originated by Manufacturer; or by Shorts Brothers PLC,
Belfast, Northern Ireland; or by Daimler-Benz Aerospace
Airbus GmbH, Federal Republic of Germany.
RLD shall mean The Netherlands Department of Civil Aviation
(Rijksluchtvaartdienst) and any other Netherlands
Governmental authority or successor authority having like
jurisdiction.
Seller's Facility shall mean such plant or facility as may be designated by
Seller.
Seller Parts shall mean Aircraft components, systems, accessories,
equipment and parts, including ground support equipment and
special tools for the Aircraft, manufactured by or on behalf
of Fokker Services and/or Fokker Industries to Manufacturer's
Design and not incorporated in any Aircraft at the time of
delivery thereof.
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<PAGE>
Services shall mean Aircraft support services described in the
Attachments hereto rendered by Seller to Buyer and such other
services requested by Buyer that Seller agrees to provide.
Spare Parts shall mean both Seller Parts and Vendor Parts not
incorporated in any Aircraft at the time of delivery thereof.
Vendor shall mean any manufacturer or supplier (other than Seller)
of a Vendor Part.
Vendor Parts shall mean Aircraft components, systems, accessories,
equipment and parts including ground support equipment and
special tools for the Aircraft other than Seller Parts.
ARTICLE 2 General
This Agreement shall govern the provision of Services by Seller to Buyer. Any
Service shall also be subject to (a) the relevant standard conditions applicable
to such Service stated in the Attachment hereto related to such Service or (b)
if a Service is not covered by an Attachment, to such additional terms and
conditions as are agreed upon by Seller and Buyer in writing.
ARTICLE 3 Ordering Procedure
Upon Buyer's request, Seller shall make price and schedule quotations for
Services, which quotations shall be valid for a period of 90 (ninety) days after
date of issue, unless otherwise stated in the relevant quotation.
Unless otherwise agreed in writing, Services shall be rendered by or through
Seller only on the basis of an order in writing by Buyer and either accepted in
writing by Seller or by its provision of such Services to Buyer.
All quotations and agreements entered into by Seller with respect to Services
shall be governed exclusively by this Agreement, without regard to any purchase
orders, letters, general conditions and other documents issued by Buyer, unless
otherwise stated in such quotation or agreement, purchase orders, letters,
general conditions and other documents which have been accepted or otherwise
agreed to by Seller.
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<PAGE>
ARTICLE 4 Terms and Conditions of Payment
(a) Payment for Services in an amount not exceeding the credit limit fixed
by Seller (in its sole discretion) from time to time shall be due and
payable within thirty (30) days after the date of the relevant invoice,
which in no event will be earlier than the date any particular Service
is provided hereunder or the date any particular Seller part, Vendor
part, or repaired or overhauled component is delivered to Buyer by
Seller; all other amounts shall be due and payable in advance of
rendering the Service. The date of confirmation of credit by Seller's
bank shall be the date of payment.
(b) If Seller incurs any cost in connection with additional Services
rendered to Buyer upon Buyer's request and with Buyer's prior written
approval of such costs and additional Services, which costs were not
mentioned in any quotation or Order Acknowledgement of Seller, then
Buyer shall pay such costs within thirty (30) days after the date of
Seller's invoice. Notwithstanding the foregoing, in an AOG situation,
Seller may rely upon the verbal approval of Buyer's Vice President of
Maintenance or of its Director of Materials in undertaking additional
Services and incurring costs in connection therewith, in such a case
written confirmation by Buyer will follow.
(c) If any amount due Seller is not received on the date when due
hereunder, Buyer shall pay Seller interest on such overdue amount,
together with any reasonable expenses of collection (including
reasonable attorneys' fees) actually incurred by Seller in connection
with such overdue amount. Such interest shall be calculated on the
basis of the Prime Rate (U.S. $) as quoted by the Nations Bank in
effect at the time such payment is due, plus two percent (2%),
calculated on the basis of a 360-day year and actual days elapsed.
Claiming or refraining from claiming such compensation from Buyer shall
not prejudice any rights of Seller under this Agreement.
(d) Payments by Buyer shall be applied first to any charges or interest owed
pursuant to Article 4(c) and then to other amounts owed. If payments are
received while amounts owed hereunder are past due, Seller may apply such
payments to any amount then due, provided such application is made to
amounts Seller in good faith determines are due (of which Seller will give
notice to Buyer).
ARTICLE 5 Taxes, Duties, Licenses and Special Documents
(a) Any taxes, duties, imposts or other charges levied by any authority in The
Netherlands (including taxes, duties, imposts or other charges in the
nature of sales, use, rental or value added taxes) or imposed on or
measured by the net income, profits or capital of Seller on Services or on
payments to be made to Seller shall be for the account of Seller.
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<PAGE>
(b) Any taxes, duties, imposts or other charges which are not covered under
Article 5(a) above shall be for the account of Buyer. If, under the
provisions of any applicable law or regulation, such charges are to be
paid by Seller, Buyer shall reimburse Seller. If a claim for any such
charges is made against Seller, Seller shall, at Buyer's request and
expense, take such action as Buyer may reasonably direct to recover any
amount paid by Seller or permit Buyer to file a claim or prosecute an
action in Seller's name to recover such payment.
(c) Seller shall obtain and pay for any licenses or special documents required
by any authority in The Netherlands for Services to be rendered by or
through Seller.
(d) Buyer shall obtain and pay for any licenses or special documents not
covered in Article 5(c). Any licenses or special documents to be
obtained from the country of origin of any Service and required in
Buyer's country of residence shall be arranged, if possible, by Seller.
Any costs incurred in obtaining such licenses or special documents
shall be borne by Buyer and Buyer shall promptly reimburse Seller for
any such costs; provided, however Buyer shall not be responsible for
any costs incurred by Seller in performing engineering and related
services or providing data or other information in connection with
Buyer's receipt of licenses or special documents issued by the FAA
necessary to operate the Aircraft unless Buyer elects to obtain
licenses or special documents from the FAA in a manner different from
that recommended by Seller generally for the Aircraft and other
aircraft of the same type.
ARTICLE 6 Delay
Excusable Delay
Seller shall not be responsible for nor be in default under this Agreement on
account of any delay in delivery of any Service or other performance hereunder
due to any of the following causes: ACTS OF GOD; WAR, WARLIKE SITUATIONS,
INSURRECTIONS OR RIOTS, FIRES, ACCIDENTS, FLOODS, EARTHQUAKES, OR NATURAL
DISASTERS, EPIDEMICS OR QUARANTINE RESTRICTIONS; ANY GOVERNMENTAL ACT, PRIORITY
ALLOCATION REGULATION OR ORDER AFFECTING SERVICES, PRODUCTION, MATERIALS,
FACILITIES OR COMPLETED AIRCRAFT; STRIKES OR SIMILAR LABOR TROUBLES CAUSING
CESSATION, SLOW-DOWN OR INTERRUPTION OF WORK, WEATHER UNFAVORABLE FOR FLYING,
DELAY IN TRANSPORTATION; OR INABILITY AFTER DUE AND TIMELY DILIGENCE TO PROCURE
AIRCRAFT COMPONENTS, SYSTEMS, MATERIALS, ACCESSORIES, EQUIPMENT OR PARTS;
PREVENTIVE MEASURES TO AVOID DAMAGE TO MATERIALS, FACILITIES OR AIRCRAFT; OR DUE
TO ANY OTHER CAUSE BEYOND SELLER'S CONTROL OR NOT OCCASIONED BY SELLER'S FAULT
OR NEGLIGENCE.
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<PAGE>
Delays resulting from any of the foregoing causes are referred to as "Excusable
Delay(s)."
Promptly upon the occurrence of any such cause which may result in a delay in
the delivery of any Service or in the performance of any other obligation of
Seller hereunder, Seller shall give notice of such anticipated delay to Buyer,
which notice shall identify such occurrence and specify the period of delay
which may be reasonably expected to result therefrom.
ARTICLE 7 Indemnity
BUYER SHALL RELEASE AND DEFEND, HOLD HARMLESS AND INDEMNIFY SELLER, ITS
ASSIGNEES AND EACH EMPLOYEE THEREOF, FROM AND AGAINST ALL CLAIMS AND
LIABILITIES, DIRECT AND CONSEQUENTIAL DAMAGES, LOSSES AND JUDGMENTS, INCLUDING
COSTS AND EXPENSES INCIDENTAL THERETO, WHICH MAY BE SUFFERED BY, ACCRUED
AGAINST, BE CHARGED TO OR RECOVERABLE FROM SELLER, ITS ASSIGNEES OR ANY OF THEIR
EMPLOYEES, FOR A: DEATH OF OR INJURY TO A PERSON OR PERSONS, SAVE EMPLOYEES OF
SELLER OR ITS ASSIGNEES, OR FOR B: LOSS OF OR DAMAGE TO ANY PROPERTY, INCLUDING
ANY AIRCRAFT, SAVE PROPERTY OF SELLER, ITS ASSIGNEES OR THEIR EMPLOYEES, ARISING
OUT OF OR IN ANY WAY CONNECTED WITH THE PERFORMANCE BY SELLER, ITS ASSIGNEES OR
THEIR EMPLOYEES, OF SERVICES IN CONNECTION WITH ANY AIRCRAFT AND WHETHER OR NOT
ARISING IN TORT OR STRICT LIABILITY OR OCCASIONED IN WHOLE OR IN PART BY THE
FAULT OR NEGLIGENCE OF SELLER, ITS ASSIGNEES OR THEIR EMPLOYEES. THE FOREGOING
INDEMNITY SHALL NOT APPLY TO THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
SELLER OR TO LIABILITY TO PERSONS OR PARTIES OTHER THEN BUYER ARISING OUT OF AN
ACCIDENT CAUSED SOLELY BY A PRODUCT DEFECT IN ANY SPARE PART OR OTHER THING
DELIVERED UNDER THIS AGREEMENT. ANY CLAIM RECEIVED BY OR SUIT INSTITUTED AGAINST
SELLER FOR WHICH INDEMNIFICATION BY BUYER IS SOUGHT UNDER THIS ARTICLE 7 SHALL
BE REPORTED TO BUYER PROMPTLY IN WRITING. UPON BUYER'S ACCEPTANCE OF SELLER'S
TENDER OF THE CLAIM OR SUIT TO BUYER HEREUNDER, BUYER SHALL HAVE THE OPTION AT
ANY TIME TO CONDUCT NEGOTIATIONS WITH RESPECT TO SETTLEMENT OF THE CLAIM OR
SUIT, TO INTERVENE IN ANY SUCH SUIT, AND TO ASSUME, CONDUCT OR CONTROL THE
DEFENSE THEREOF. FOR THE PURPOSE OF THIS ARTICLE, "SELLER" SHALL MEAN
MANUFACTURER, FOKKER SERVICES, FOKKER INDUSTRIES AS WELL AS SELLER.
ARTICLE 8 Assignment
This Agreement is for the benefit of and binding upon each of the parties hereto
and their respective successors and assigns. The rights and obligations
hereunder may not be assigned in whole or in part by either party without the
prior written consent of the other party, except that Seller may assign any of
its rights to receive money hereunder.
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ARTICLE 9 Nondisclosure
Except as required by law, neither Buyer nor Seller shall disclose the contents
of this Agreement or data (including computer software) and documents furnished
under this Agreement to any third party without the prior written consent of the
other party. If any disclosure is required by law, then the disclosing party
shall use its best efforts to limit or prevent disclosure, including requesting
confidential treatment or implementing other means reasonably requested by the
non-disclosing party.
ARTICLE 10 Applicable Law and Forum
(a) THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCLUDING PRINCIPLES OF
CHOICE OF LAW AND THE UNITED NATIONS CONVENTION ON INTERNATIONAL SALES OF
GOODS.
(b) ALL DISPUTES ARISING IN CONNECTION WITH THIS AGREEMENT AND ITS
ATTACHMENT(S) WHICH CANNOT BE SOLVED BY AMICABLE NEGOTIATIONS, SHALL BE
FINALLY SETTLED THROUGH ARBITRATION IN ACCORDANCE WITH THE RULES OF THE
INTERNATIONAL CHAMBER OF COMMERCE BY ONE OR MORE ARBITRATORS APPOINTED IN
ACCORDANCE WITH SAID RULES. JUDGMENT UPON ANY AWARD MAY BE ENTERED IN ANY
COURT HAVING JURISDICTION THEREOF. THE PLACE OF ARBITRATION SHALL BE NEW
YORK, NEW YORK.
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ARTICLE 11 Miscellaneous
(a) Notices
All notices and requests in connection with this Agreement shall be given
in writing and may be given by airmail, facsimile, cable, telex, teletype
or any other customary means of communication addressed as follows:
Buyer: Midway Airlines Corporation
300 W. Morgan Street, Suite 1200
Durham, NC 27701
United States of America
Attn: Vice President-Maintenance and General Counsel
Telefax: +1.919-956 4801
Seller: Fokker Services Inc.
5169 Southridge Parkway
Suite 100
Atlanta, GA 30349
United States of America
Attn. The Secretary
Telefax +1.770-991 4608
or to such other addresses as may be specified elsewhere herein or as the
party to receive the notice or request shall designate by written notice
to the other reasonably in advance of any change. Any notice or request
given in connection with this Agreement shall be deemed received, in the
case of a facsimile transmission, at the time receipt is confirmed by the
addressee or upon the business day following dispatch thereof, in the case
of ordinary mail, five days after being deposited in the mail with first
class postage prepaid, and in the case of courier service, two days after
being sent.
(b) Headings
Article and paragraph headings used in this Agreement are for convenient
reference only and shall not affect the construction or the interpretation
of this Agreement.
(c) Fokker Services' and Manufacturer's Role
To the extent that Buyer has expressly waived any rights hereunder with
respect to Seller or has agreed to indemnify or otherwise protect Seller,
such waiver, indemnity or protection shall also apply to Manufacturer. To
the extent that Seller has disclaimed or is relieved of any liabilities
hereunder, such disclaimer or discharge shall apply in the same manner and
to the same extent to Fokker Services (or any of its subsidiary or
affiliated companies) and Manufacturer. To the extent that certain
obligations of Seller under this Agreement are to be performed by Fokker
Services (or any of its subsidiary or affiliated companies), Seller shall
cause the subject company to perform such obligations.
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(d) Amendments
This Agreement may be amended, waived or supplemented only by a writing
signed by the parties hereto.
Entire Agreement
This Agreement contains the entire agreement of the parties and there are
no promises, understandings or agreements pertaining to this Agreement
other than as stated herein.
(f) Attachments etc.
Any Attachments, Exhibits and Annexes hereto are part of this Agreement.
(g) Termination, etc.
(1) Seller may terminate this Agreement instantly upon a material breach
of this Agreement by Buyer, provided that Buyer has received
written notice of such breach from Seller and has been afforded at
least a ten (10) business day period to cure such breach. Prior
notice shall not be required, if Buyer is insolvent or if a
proceeding is commenced by or against Buyer seeking relief under the
laws relating to bankruptcy or insolvency.
(2) Seller reserves the right to suspend delivery of Spare Parts or the
performance of any other Service or obligation or to cancel any
outstanding order therefor in the event any amount due hereunder has
not been paid within ten (10) business days following notice from
Seller. Any costs incurred by Seller as a result of such suspension
or cancellation shall be paid promptly by Buyer. If Seller has
suspended performance, then Seller shall, after payment of all
amounts due and receipt of adequate assurance of future performance
by Buyer, resume the delivery of Spare Parts or the rendering of any
other Service pursuant to price and delivery conditions prevailing
at that time. The failure of Seller to enforce any of its remedies
or to require strict performance of any obligations of Buyer
hereunder shall not constitute a present or future waiver of such
remedy or obligation.
(3) Any obligation of a party hereto which accrued prior to such
termination, suspension or cancellation and remains unsatisfied as
of the date thereof shall survive the termination, suspension or
cancellation of this Agreement until satisfied.
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IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the
date first above written.
Midway Airlines Corporation
By: /s/ J S Waller
---------------------------
Title: SENIOR VICE PRESIDENT
GENERAL COUNSEL
Date: September 23, 1996
Place: Durham, N.C.
Midway Airlines Corporation
By:
---------------------------
Title:
Date:
Place:
Fokker Services Incorporated
By: [ILLEGIBLE]
---------------------------
Title: [ILLEGIBLE]
Date: [ILLEGIBLE]
Place: [ILLEGIBLE]
Fokker Services, Incorporated
By:
---------------------------
Title:
Date:
Place:
10
<PAGE>
ATTACHMENT A
STANDARD CONDITIONS FOR SPARE PARTS
SUPPLY FOR THE AIRCRAFT
1
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CONTENTS - ATTACHMENT A
ARTICLE Title Page
------- ----- ----
Contents
1 Procurement and Order Processing 3
2 Delivery 5
3 Pricing 6
4 Acceptance 7
5 Warranty 7
6 Vendor Warranties 12
2
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ARTICLE 1 Procurement and Other Processing
(a) Ordering
Orders for Spare Parts shall be placed by Buyer by a written purchase
order ("Purchase Order"), or by telex, facsimile or any other written
instrument confirmed by Purchase Order, or electronic ordering as
specified in Spec 2000 unless the parties have agreed in writing to an
alternative ordering procedure.
Each Purchase Order shall include an order number or the specific contract
number, part number, quantity, nomenclature, required delivery schedule,
and detailed forwarding instructions, such as forwarding address,
accounting address and the marking required to be put on the packing, if
such instructions have not been agreed upon or differ from those agreed
upon.
(b) Order Acknowledgement
Seller shall accept Buyer's Purchase Order in writing by means of an order
acknowledgement ("Order Acknowledgement"), unless the parties have agreed
in writing to an alternative acknowledgement procedure. Seller's Order
Acknowledgement shall include Buyer's order number or specific contract
number and, for each part, the part number, applicable unit price,
extended value and the scheduled delivery date. An order is not binding
upon Seller unless accepted by Seller in accordance with this Article 1(b)
or by Sellers' provision of items requested in such Purchase Order.
Buyer shall inform Seller within thirty (30) days after the date of
Seller's Order Acknowledgement of any discrepancy between Seller's Order
Acknowledgement and Buyer's Purchase Order.
(c) Purchase Order Fulfillment
In filling Purchase Orders for Spare Parts, Seller reserves the right to
make any necessary corrections or changes in part number and nomenclature
or to substitute parts, provided that interchangeability between the Spare
Parts is not affected. Seller shall give Buyer prompt written notice of
any such correction, change or substitution and any effect on price
resulting therefrom. Promptly after the receipt of such notice, Buyer
shall advise Seller (in the same manner in which Buyer received notice
from Seller) whether or not such change of price is acceptable to Buyer.
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(d) Cancellation of Orders
Buyer may cancel a Purchase Order for any Spare Part prior to delivery
thereof. Upon any such cancellation, Seller may recover any actual damages
arising therefrom in an amount not more than the purchase price of the
Spare Parts covered by the Purchase Order:
(1) If work accomplished on the Purchase Order has been limited to
Seller's Spare Parts department or the part has been identified as
"shelf stock" in the Seller Parts price list, no cancellation
charges shall be assessed;
(2) If production planning has been completed on the Purchase Order and
shop orders have been written, but no shop time or material charges
have been made against the Purchase Order, the cancellation charge
shall be ten percent (10%) of the purchase price; or
(3) If shop time or material charges have been incurred solely in
connection with the fulfillment of the Purchase Order, the
cancellation charge shall be based on the cost of such time,
materials and transportation costs, if any.
(e) Urgent Demand Service
Seller operates a twenty-four (24) hour-a-day, seven (7) day-a-week
emergency Spare Parts supply service in order to facilitate the prompt
supply to Buyer of spare Parts for AIRCRAFT ON GROUND ("A.O.G.") and
CRITICAL (imminent A.O.G. or work stoppage) purposes only.
If Seller receives an urgent order from Buyer for specific Spare Parts,
Seller shall promptly confirm receipt of the order and advise Buyer about
the action taken in the case of:
(1) an A.O.G. order, within four (4) hours after receipt of the relevant
order;
(2) a Critical order, within twenty-four (24) hours after receipt of the
relevant order;
(3) an Expedite (less than published or quoted leadtime) order, within
seven (7) days after receipt of the relevant order.
In the event of any inquiry from Buyer for delivery of Spare Parts under
this Article 1(e), Seller will respond within the same time periods stated
herein. Orders and inquiries for A.0.G. or Critical service shall state
"A.O.G. repeat A.O.G." or "Critical repeat Critical", respectively, and
the serial number of the affected Aircraft.
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ARTICLE 2 Delivery
(a) Delivery of Spare Parts
All deliveries of Spare Parts shall be made Ex-works William B. Hartsfield
Airport, Atlanta, Georgia, unless otherwise specified by Seller. A.O.G.
and/or Critical drop shipment out of Amsterdam, the Netherlands, or by any
supplier will be for the account of Buyer.
(b) Packing
All Spare Parts shall be packed in suitable export packing generally in
accordance with ATA Specification 300 Cat. II. If specifically requested
by Buyer, ATA Specification 300 Cat. containers or equivalents shall be
used and the extra costs involved shall be for Buyer's account.
(c) Shipment
(1) If Seller, pursuant to Buyer's request, arranges transportation of
Spare Parts to Buyer, all costs and expenses incurred by Seller in
connection therewith shall be for Buyer's account unless agreed
otherwise. To the extent practicable, all transportation of Spare
Parts shall be arranged by Seller by air-freight, freight payable at
destination by Buyer.
(2) All Spare Parts shipments shall be accompanied by packing documents
indicating Buyer's Purchase Order number, quantity shipped, part
number, key word and total value.
(3) Upon request, Seller shall inform Buyer as soon as practicable about
shipping arrangements made.
(d) Certification
All Spare Parts delivered by Seller to Buyer shall be accompanied by an
Authorized Release Certificate or a similar document issued by a duly
authorized person.
(e) Title and Risk
(1) Risk of loss of or damage to the Spare Parts supplied by Seller to
Buyer shall pass from Seller to Buyer at delivery of the Spare Parts
in accordance with Article 2(a). Risk of loss of or damage to Spare
Parts rejected by Buyer pursuant to Article 4 shall remain with
Buyer until such Spare Parts are redelivered to Seller in accordance
with Article 4.
(2) Seller will convey to Buyer good title to each Spare Part free and
clear of all liens, claims, charges and encumbrances upon the later
of (A) delivery of such Spare Part or (B) receipt of full payment
for such Spare Part.
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(3) Upon request of Seller and at Buyer's expense, Buyer shall cooperate
in vesting a perfected security interest or other first lien, valid
under applicable law, on Spare Parts supplied or to be supplied by
Seller to Buyer hereunder, to secure Seller's rights with respect to
Spare Parts for which Seller has not yet received full payment.
ARTICLE 3 Pricing
(a) Seller Parts
Seller shall issue price lists for Seller Parts and, except as otherwise
provided in this Article 3, such prices shall be firm for the period of
time stated in the price list. The prices charged will be those in effect
on the date of receipt of Buyer's Purchase Order. Seller reserves the
right to revise the prices quoted in Seller's price lists, but such price
revisions shall only be effective ninety (90) days after notifying Buyer
of such price revisions.
(b) Vendor Parts
Vendor Parts shall be priced in accordance with Seller's sales price for
such Vendor Parts prevailing on the date of receipt by Seller of Buyer's
Purchase Order, except that the price stated in any Seller quotation for a
Vendor Part shall be applicable if Buyer places its Purchase Order within
the validity period and otherwise complies with any other conditions of
said quotation.
(c) Price Revisions
Seller shall issue to Buyer price lists for Seller Parts and prices shall
be firm for the calendar year stated in the price list. The prices charged
will be those in effect on the date of receipt of Buyer's Purchase Order.
Seller reserves the right to revise the price for Spare Parts from the
date of quotation, and unless Buyer's Purchase Order has been accepted by
Seller pursuant to this Agreement, until delivery to Buyer in the
following cases:
- significant revision in the price charged to Seller by Vendors or
suppliers;
- significant revision due to variation in currency exchange rates; or
- significant error in estimation or expression of any price, which will
be effective immediately after notification of Buyer.
For the purpose of this Article 3(c), a significant price revision or
error shall mean a discrepancy in the extended orderline price published
or quoted by Seller of at least twenty percent (20%) or One Thousand
Dollars (U.S. $1,000.00).
Seller shall notify Buyer of any such revision or error and, upon request,
submit to Buyer reasonable proof of such significant revision or error.
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(d) General
Any services ancillary to the sale of Spare Parts that are requested by
Buyer and not covered under Article 3(a) or (b) above shall be charged
according to Seller's sales prices prevailing on the date on which such
ancillary services are rendered to Buyer.
Requests for urgent demand service pursuant to Article 1(e) will result in
a price increase to cover Seller's additional out-of-pocket-costs. Upon
request, Seller shall substantiate such costs to Buyer.
ARTICLE 4 Acceptance
(a) Within fourteen (14) days ("Inspection Period") after the receipt by Buyer
of any Spare Part, Buyer shall notify Seller in writing of any alleged
nonconformity of the Spare Part with Buyer's Purchase Order as
acknowledged by Seller, taking into account Seller's customer order status
information or other formal written information concerning such Purchase
Order and Order Acknowledgement. Such notice shall state the grounds for
Buyer's conclusion of nonconformity.
(1)) Upon receipt of such notice, Seller shall promptly notify Buyer whether
Seller agrees that such a nonconformity exists and any corrective
procedure which Seller will apply. Upon Seller's request, Buyer shall
return any such nonconforming Spare Part to Seller in accordance with
article 5(f) and Seller will reimburse Buyer for all freight charges
incurred in connection with such return.
(c) If Seller is not notified by Buyer of any nonconformity within the
Inspection Period, Buyer shall be deemed to have accepted the Spare Part
and to have waived all its claims in respect thereto, except the
contractual warranty provisions.
(d) Any damage or defect attributable to transportation or handling after
delivery to Buyer are for Buyer's account and shall be dealt with by Buyer
directly with the insurance company or carrier involved.
ARTICLE 5 Warranty
(a) Subject to the limitations and conditions hereinafter set forth, Seller
warrants that each Seller Part supplied hereunder shall at the time of
delivery by Seller be free from defects in material and workmanship
(hereinafter collectively referred to as "defects"). The warranty set
forth above shall apply to factory-new Seller Parts only.
7
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(b) Exceptions
(1) The warranties set forth in Article 5(a) shall not apply to Vendor
Parts.
(2) Seller shall be relieved from its warranty obligations under this
Article 5 with respect to the particular defect if the defect
results from:
(a) Buyer's failure to operate, maintain and repair the Seller
Part or the Aircraft in which the Seller Part was installed in
accordance with Buyer's maintenance and operating programs
approved by the airworthiness authority having jurisdiction
over Buyer and Seller's written instructions; or
(b) the Seller Part being used in combination with any part not
specifically approved by Seller, unless Buyer furnishes
reasonable evidence that use of such part was not a direct or
indirect cause of the defect.
(c) Warranty and Notice Periods
Buyer's remedy and Seller's obligation and liability under this Article 5,
with respect to each defect, are conditioned upon the defect having become
apparent to Buyer within the applicable warranty period and Seller's
warranty administrator at Seller's Facility having received prompt written
notice of the defect from Buyer not later than ninety (90) calendar days
after the defect becomes apparent to Buyer. The warranty period is
eighteen (18) months after delivery of each Seller Part, with a specific
serial number, and six (6) months after delivery of other Seller parts.
(d) Return and Notification
Buyer's remedy and Seller's obligation and liability under this Article 5,
with respect to each defect, are also conditioned upon:
(1) the prompt return by Buyer if requested by Seller of the Seller Part
claimed to be defective to Seller's Facility, provided that such
return shall not be required if Buyer elects to scrap nonrepairable
defective Seller Parts at Buyer's facilities in accordance with
Article 5(g);
(2) the submission by Buyer at Seller's Facility of a warranty claim
form relating to such defect that includes the following
information:
(a) identification of the Seller Part involved, including Seller's
part number, serial number (if such part has a serial number),
nomenclature, delivery date and the quantity claimed to be
defective;
(b) identification of the Aircraft (serial number) from which each
Seller Part was removed;
(c) the position of the Seller Part in the Aircraft;
(d) date the claimed defect became apparent to Buyer and, if
available, the total number of flight hours or cycles
accumulated by the Seller Part at that date; and
(e) description of the claimed defect and applicable circumstances
requiring removal.
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(3) reasonable proof that the claimed defect is subject to the warranty
set forth in Article 5(a) and that such defect did not result from
any act or omission of Buyer described in Article 5(b)(2); and
(4) investigation by Seller of all warranty claims.
Seller shall notify Buyer in accordance with Article 5(i) of the
disposition of each such claim, including the remedy specified in Article
5(e) that Seller reasonably elects to apply.
(e) Remedies
(1) Buyer's remedy and Seller's obligation and liability under this
Article 5, with respect to each defect, are limited to the repair of
such defect in the Seller Part in which the defect appears, or, at
Seller's option, to the furnishing of a replacement Seller Part, and
(2) as to any Seller Part repaired or furnished as a replacement by
Seller pursuant to Article 5(e)(1), to the repair or replacement of
such Seller Part for any further defect in material or workmanship,
provided:
(i) such further defect becomes apparent to Buyer within any
unexpired remainder of the warranty period specified in
Article 5(c); and
(ii) Seller's warranty administrator at Seller's Facility receives
written notice of such further defect from Buyer within ninety
(90) calendar days after it first becomes apparent to Buyer.
(f) Returned Items
All repairs, replacements and corrections described in Article 5(e)
performed by Seller shall be at Seller's expense and at Seller's Facility
or at such other place as may be mutually agreeable and with reasonable
care and dispatch in order that the Seller Part involved will not be out
of service longer than necessary.
Buyer shall pay the cost of transportation (in accordance with common
industry practices) to Seller's Facility or such other place as may be
mutually agreeable of any Seller Part claimed to be defective. Seller
shall reimburse Buyer for all freight charges incurred by Buyer in
connection with such return of any Seller Part determined to be defective
under the terms of this Article 5. Seller will pay all freight charges (in
accordance with common industry practices) for the return to Buyer of any
Seller Part repaired or corrected or of any replacement Seller Part.
9
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If Seller furnishes a replacement Seller Part for any Seller Part returned
by Buyer, title to the returned Seller Part shall pass to Seller
concurrently with delivery of such replacement to Buyer. Any such
replacement shall be delivered Ex-works William B. Hartsfield Airport,
Atlanta, Georgia.
Title to and risk of loss of or damage to any Seller Part returned by
Buyer to Seller, and for which no-replacement Seller Part is being
provided, shall at all times remain with Buyer, except as to loss or
damage chargeable to Seller according to applicable law, provided that, in
no event shall Seller be liable for loss of use or any other indirect or
consequential damages. Under this Article 5(f), the party that has the
risk of loss or damage with respect to any Seller Part shall have the
responsibility of providing adequate insurance for said Seller Part.
(g) Nonrepairable Seller Part
Buyer may scrap any defective nonrepairable Seller Part at Buyer's
Facility, provided that Seller's authorized representative has confirmed
in writing that such Seller Part is nonrepairable and is not required for
investigation by Seller.
(h) Wear and Tear
Normal wear and tear and the need for regular maintenance and overhaul in
accordance with Seller's provided instructions in whatever form, shall not
constitute a defect under this warranty. The warranty period set forth in
Article 5(c) shall not apply to items such as rubber parts, filters, shelf
life limited parts or similar items which Seller demonstrates are unable
to meet such standards because of their ultimate design life or function
(determined by the state of the art at the time of design).
(i) Seller's Nonresponse
If Buyer is not notified by Seller of the disposition of Buyer's warranty
claim within sixty (60) days after receipt by Seller of the claim
including all written information required by Article 5(d)(2) and the
defective Seller Part if so requested by Seller, the defect shall be
deemed covered by Seller's warranty.
(j) Applicability of Seller's Warranty
It is Seller's intention that replacement, repair or correction of Seller
Parts claimed by Buyer to be defective be implemented with the least
possible delay and to this end any action taken by Seller, prior to
completion of its review of Buyer's warranty claim, shall not prejudice
Seller's right thereafter to dispute the applicability of Seller's
warranty to any item so replaced, repaired or corrected and to recover its
reasonable costs and expenses with such replacement, repair or correction,
in the event that Seller's warranty is determined not to apply.
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(k) THE WARRANTIES, OBLIGATIONS AND LIABILITIES OF SELLER AND REMEDIES OF
BUYER SET FORTH IN THIS ARTICLE AND ARTICLE 6 OF THIS ATTACHMENT A ARE
EXCLUSIVE AND IN SUBSTITUTION FOR, AND BUYER HEREBY WAIVES, RELEASES AND
RENOUNCES ALL OTHER WARRANTIES, OBLIGATIONS AND LIABILITIES OF SELLER, ITS
ASSIGNEES AND EACH EMPLOYEE THEREOF AND RIGHTS, CLAIMS AND REMEDIES OF
BUYER AGAINST SELLER, ITS ASSIGNEES OR ANY OF THEIR EMPLOYEES, EXPRESS OR
IMPLIED, ARISING BY LAW OR OTHERWISE, WITH RESPECT TO ANY NONCONFORMITY OR
DEFECT IN, OR DELAY IN DELIVERY OF, ANY SPARE PART DELIVERED OR SERVICE
RENDERED UNDER THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO (1) ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS, (2) ANY IMPLIED WARRANTY
ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE,
(3) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN TORT, WHETHER OR
NOT ARISING FROM THE NEGLIGENCE OR STRICT LIABILITY OF SELLER, ITS
ASSIGNEES OR ANY OF THEIR EMPLOYEES, ACTUAL OR IMPUTED, AND (4) ANY
OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS OF OR DAMAGE TO ANY
AIRCRAFT, SPARE PART OR OTHER THING, FOR LOSS OF USE, REVENUE OR PROFIT
WITH RESPECT TO ANY AIRCRAFT, SPARE PART OR OTHER THING OR FOR ANY OTHER
DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES. FOR THE PURPOSE OF THIS
ARTICLE 5(k), "SELLER" SHALL MEAN MANUFACTURER, FOKKER SERVICES, FOKKER
INDUSTRIES AS WELL AS SELLER.
However this clause shall not in any way limit Buyer's right to recover
any amount according to Article 10 of the GTA, including those costs
covered under any judgment of the ICC.
(l) The warranty set forth herein is personal to Buyer and shall not be
assigned or transferred in whole or in part except with the prior written
consent of Seller.
(m) In the event that any part of the provisions of this Article is held
ineffective or unenforceable, Seller shall advise Buyer of the
implications thereof and the effect on the terms and conditions of this
Article.
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ARTICLE 6 Vendor Warranties
(a) Vendor Parts purchased by Buyer from Seller shall be subject to the
warranty conditions of the particular Vendor of such Vendor Parts.
(b) If Vendor Parts are modified by Seller and due to such modification the
warranty conditions of the Vendor of such Vendor Parts are invalidated,
such warranty conditions shall be enforceable by Buyer against Seller. In
such case the provisions of Seller's warranty as set forth in Article 5(e)
through (m) shall be applicable.
(c) If Buyer has made a warranty claim under a Vendor warranty in accordance
with the conditions set forth in such warranty, and the Vendor defaults in
the performance of any material obligation contained in such warranty,
Buyer may request Seller for assistance in Buyer's actions against such
Vendor and shall provide Seller with (1) Buyer's official claim report and
any evidence supporting Buyer's claim against such Vendor and (2)
reasonable proof that such a default has occurred.
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ATTACHMENT B
STANDARD CONDITIONS FOR
AIRCRAFT COMPONENT REPAIR AND OVERHAUL
1
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CONTENTS - ATTACHMENT B
ARTICLE Title Page
------- ----- ----
1 Definitions 3
2 Arranging Component Repair and Overhaul 3
3 Delivery 5
4 Warranty 6
5 Repair Station Warranty 9
2
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ARTICLE 1 Definitions
The following capitalized terms used in this Attachment without definition shall
have the following meanings:
Component means any self-contained part, combination of parts,
sub-assembly or unit, which performs a distinctive function
necessary to the operation of a system.
Investigation Report means a report which states the possible cause of a
malfunction or describes observed damage of a Component and
provides detailed findings with regard to rectification of
said malfunction or sampling requirements.
Overhaul means the restoration of a Component in accordance with the
instructions in the relevant manual therefor.
Repair means the restoration of a defective Component to a
serviceable condition only.
Repair Station means Fokker Services' repair facilities located at
Amsterdam, with FAA Repair Station Certificate No. CL5Y83M,
and at Woensdrecht, with FAA Repair Station Certificate No.
NQ1Y357K.
ARTICLE 2 Arranging Components Repair and Overhaul
(a) Ordering Procedure
Buyer shall place a written order ("Order"), if at all after receipt by
Buyer of a quotation from Seller stating an estimate of costs involved,
including all relevant costs and leadtimes, for each Component sent to
Seller to arrange Repair or Overhaul. Each Order shall contain an adequate
description of the Component, the reason for removal and the requested
action, including an order number, part number, quantity, nomenclature,
serial number, number of hours consumed since factory-new or last Repair
or Overhaul, number of landings, modifications carried out in the
Component, and any non-mandatory modifications Buyer wishes incorporated
in the Component at the time of Repair or Overhaul. Seller reserves the
right to return any Component to Buyer at Buyer's expense for which Seller
does not receive an Order.
(b) Order Acknowledgment
An Order is not binding upon Seller unless accepted by Seller in writing
("Order Acknowledgment") or repaired or overhauled by Seller.
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(c) Modification Standard
Seller shall cause incorporation of all mandatory modifications as
indicated by the relevant airworthiness authority due at the time of
Repair or Overhaul. Seller shall cause Buyer to be informed of all such
modifications incorporated during Repair and/or Overhaul.
(d) Price
Seller shall charge Buyer the amount for the Repair, Overhaul or Service
related thereto, plus, if the Repair or Overhaul is not to be performed by
the Repair Station, Seller's then current handling fee for making such
arrangements as disclosed in the quotation.
(e) Beyond Economical Repair
if the cost of Repair or Overhaul of any Component will exceed sixty per
cent (60%) of Seller's latest factory-new sales price for such Component,
then the Component shall be deemed "beyond economical repair" and Seller
shall advise Buyer accordingly, provided Seller receives notice from the
Repair Station or the repair station not being Fokker Services Promptly
following any such advice, Buyer shall provide Seller with one of the
following instructions:
(1) Repair or Overhaul at Buyer's expense;
(2) Destroy without compensation to Buyer; or
(3) Return to Buyer at Buyer's expense without Repair or Overhaul.
Seller will dispose of the Component without compensation to Buyer, if
Buyer fails to provide the required instruction within two weeks after
Seller's advice.
Buyer shall pay Seller for any work performed on such a Component prior to
the determination that it is beyond economical repair. The failure of
Seller to give the advice described in this Section is not an undertaking
to limit the charges with respect to an Overhaul or Repair to an amount
less than 60% of the latest factory-new sales price of such Component.
(f) Shop-Finding Report
A Shop-Finding Report shall be provided by Seller at no additional charge
for any Component that Seller sends to the Repair Station for Repair or
Overhaul.
(g) Investigation Report
Seller is prepared, at Buyer's request and expense, to obtain
Investigation Reports of specific Components sent to the Repair Station
for Repair or Overhaul or sampling.
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<PAGE>
(h) Order Status Report
Seller shall issue Order Status Reports at least monthly listing
Components sent for Repair or Overhaul including information regarding the
status thereof and shipping information with respect to Components
Repaired or Overhauled in the monthly reporting period.
ARTICLE 3 DELIVERY
(a) Delivery to Seller
Buyer shall bear all costs and expenses and the risks of loss or damage in
the transportation of Components to Seller's Facility and during the
period the Components are being Repaired or Overhauled. All Components
sent to Seller's Facility shall be properly packed and labeled, and
freight shall be prepaid by Buyer.
(b) Delivery to Buyer
Components shall be re-delivered to Buyer Ex-works Seller's Facility.
Buyer expressly agrees that Seller may withhold from Buyer any Component
for which it has not been paid in accordance with this Agreement.
Packaging
Repaired or Overhauled Components shall be packed in suitable packaging.
(d) Shipment
(1) If Seller, pursuant to Buyer's request, arranges transportation of
any Repaired or Overhauled Components, all costs and expenses
incurred by Seller in connection therewith shall be for Buyer's
account. To the extent practicable, all shipments of Repaired or
Overhauled Components shall be arranged by Seller by air freight,
freight payable at destination by Buyer.
(2) All shipments of Repaired or Overhauled Components shall be
accompanied by packing documents indicating Buyer's Order number,
quantity shipped, part number, keyword and total value.
(3) Upon request, Seller shall inform Buyer, as soon as practicable,
about shipping arrangements made.
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(e) Certification
Upon completion of Repair or Overhaul, Seller shall return the Component
to Buyer accompanied by an FAA Form 8130-3, if the Repair or Overhaul was
performed by the Repair Station or, in the event the Repair or Overhaul
was performed by a repair station not being Fokker Services, by the
airworthiness documentation supplied by such repair station.
ARTICLE 4 Warranty
(a) General
(1) Seller does not Repair or Overhaul Components, but arranges the
Repair or Overhaul by the Repair Station or a repair station not
being Fokker Services.
(2) Subject to the limitations and conditions hereinafter set forth,
Seller warrants that each Component Repaired or Overhauled by the
Repair Station shall at the time of delivery by Seller be free from
defects in material and workmanship involved in the Repair or
Overhaul (hereinafter collectively referred to as "defects").
(b) Exceptions
Seller shall be relieved from its warranty obligations under this Article
4 with respect to the particular defect if the defect results from:
(a) Buyer's failure to operate and maintain the Component or the
Aircraft in which the Component was installed in accordance
with Buyer's maintenance and operating programs approved by
the airworthiness authority having jurisdiction over Buyer and
Seller's written instructions; or
(b) the Component being used in combination with any part not
specifically approved by Seller, unless Buyer furnishes
reasonable evidence that use of such part was not a direct or
indirect cause of the defect.
(c) Warranty and Notice Periods
The warranty period is the later of (i) (6) months or five hundred flight
hours, whichever expires first, or (ii) (if) in the event Article 5
hereunder is applicable, the period of warranty given by the repair
station not being Fokker Services, after delivery of the Component to
Buyer.
(d) Return and Notification
Buyer's remedy and Seller's obligation and liability under this Article 4,
with respect to each defect, are also conditioned upon Buyer fulfilling to
as much as reasonably possible, with respect to each Component, the
requirements set forth in Article 5(d)(2) of Attachment A. Seller shall
notify Buyer in accordance with Article 4(i) of the disposition of each
such claim. However in the event Buyer does not fulfill any or all of the
requirements set forth in Article 5(d)(2) of Attachment A, Seller reserves
the right to reject subject warranty claim.
6
<PAGE>
(e) Remedies
Buyer's remedy and Seller's obligation and liability under this Article 4,
with respect to each defect, are limited to the repair or correction of
such defect in the Repaired or Overhauled Component
(f) Returned Items
Every repair and correction described in Article 4(e) shall be performed
at Seller's expense with reasonable care and dispatch in order that the
Component involved will not be out of service longer than necessary.
Buyer shall pay the cost of transportation (in accordance with common
industry practices) to Seller's Facility or such other place as may be
mutually agreeable of any Component claimed to be defective. Seller shall
reimburse Buyer for all freight charges incurred by Buyer in connection
with such return of any Component determined to be defective under the
terms of this Article 4. Seller will pay all freight charges (in
accordance with common industry practices) for the return to Buyer of any
Component repaired or corrected or of any replacement Component.
Title to and risk of loss of or damage to any Component returned by Buyer
to Seller shall at all times remain with Buyer, except as to loss or
damage chargeable to Seller according to applicable law, provided that, in
no event shall Seller be liable for loss of use or any other indirect or
consequential damages. Under this Article 4(f), the party that has the
risk of loss or damage with respect to any Component shall have the
responsibility of providing adequate insurance for said Component.
(g) Wear and Tear
Normal wear and tear and the need for regular maintenance and overhaul
shall not constitute a defect under this warranty. The warranty period set
forth in Article 4(c) shall not apply to items such as rubber parts,
filters, shelf life limited parts or similar items which Seller
demonstrates are unable to meet such standards because of their ultimate
design life or function (determined by the state of the art at the time of
design).
7
<PAGE>
(h) Seller's Nonresponse
If Buyer is not notified by Seller of the applicability of Buyer's
warranty claim within thirty (30) days after receipt by Seller of the
claim including all written information required by Article 4(d) and the
defective Component if so requested by Seller, the defect shall be deemed
covered by Seller's warranty.
(i) Applicability of Seller's Warranty
It is Seller's intention that replacement, repair or correction of
Components claimed by Buyer to be defective be implemented with the least
possible delay and to this end any action taken by Seller, prior to
completion of its review of Buyer's warranty claim, shall not prejudice
Seller's right thereafter to dispute the applicability of Seller's
warranty to any item so replaced, repaired or corrected and to recover its
reasonable costs and expenses in connection therewith in the event that
Seller's warranty is determined not to apply.
(j) THE WARRANTIES, OBLIGATIONS AND LIABILITIES OF SELLER AND REMEDIES OF
BUYER SET FORTH IN THIS ARTICLE AND ARTICLE 5 OF THIS ATTACHMENT d ARE
EXCLUSIVE AND IN SUBSTITUTION FOR, AND BUYER HEREBY WAIVES, RELEASES AND
RENOUNCES ALL OTHER WARRANTIES, OBLIGATIONS AND LIABILITIES OF SELLER, ITS
ASSIGNEES AND EACH EMPLOYEE THEREOF AND RIGHTS, CLAIMS AND REMEDIES OF
BUYER AGAINST SELLER, ITS ASSIGNEES OR ANY OF THEIR EMPLOYEES, EXPRESS OR
IMPLIED, ARISING BY LAW OR OTHERWISE, WITH RESPECT TO ANY NONCONFORMITY OR
DEFECT IN, OR DELAY IN DELIVERY OF, ANY COMPONENT OR SERVICE RENDERED BY
SELLER FOR THE REPAIR OR OVERHAUL OF SUCH COMPONENT, UNDER THIS AGREEMENT,
INCLUDING BUT NOT LIMITED TO (1) ANY IMPLIED WARRANTY OF MERCHANTABILITY
OR FITNESS, (2) ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE,
COURSE OF DEALING OR USAGE OF TRADE, (3) ANY OBLIGATION, LIABILITY, RIGHT,
CLAIM OR REMEDY IN TORT, WHETHER OR NOT ARISING FROM THE NEGLIGENCE OR
STRICT LIABILITY OF SELLER, ITS ASSIGNEES OR ANY OF THEIR EMPLOYEES,
ACTUAL OR IMPUTED, AND (4) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR
REMEDY FOR LOSS OF OR DAMAGE TO ANY AIRCRAFT, COMPONENT OR OTHER THING,
FOR LOSS OF USE, REVENUE OR PROFIT WITH RESPECT TO ANY AIRCRAFT, COMPONENT
OR OTHER THING OR FOR ANY OTHER DIRECT, INCIDENTAL OR CONSEQUENTIAL
DAMAGES. FOR THE PURPOSE OF THIS ARTICLE 4(j), "SELLER" SHALL MEAN
MANUFACTURER, FOKKER SERVICES, FOKKER INDUSTRIES AS WELL AS SELLER.
8
<PAGE>
(k) The warranty set forth herein is personal to Buyer and shall not be
assigned or transferred in whole or in part except with the prior written
consent of Seller.
(l) In the event that any part of the provisions of this Article is held
ineffective or unenforceable, Seller shall advise Buyer of the
implications thereof and the effect on the terms and conditions of this
Article
ARTICLE 5 WARRANTY REPAIR STATION OTHER THEN FOKKER SERVICES
Seller shall use its best efforts to obtain from repair stations other then
Fokker Services performing Repairs or Overhauls arranged by Seller adequate
warranties enforceable by Buyer; provided that Seller does not guarantee that
such a warranty will be extended by the Repair Station with respect to any
particular Repair or Overhaul.
9
<PAGE>
ATTACHMENT C
STANDARD CONDITIONS FOR TECHNICAL SUPPORT SERVICES
This text is deleted intentionally, as the technical support services will be
agreed by the Customized Service Package.
Until the finalization of the Customized Service Package between Midway Airlines
Co. and Fokker Services Inc., the terms in the General Terms Agreement
GTA-Midway-FS-0103, Attachment C dated May 10, 1996 will govern the technical
support services.
1
<PAGE>
ATTACHMENT D
STANDARD CONDITIONS FOR DOCUMENTATION FOR THE AIRCRAFT
This text is deleted intentionally, as the documentation support services will
be agreed by the Customized Service Package.
Until the finalization of the Customized Service Package between Midway Airlines
Co. and Fokker Services Inc., the terms in the General Terms Agreement
GTA-Midway-FS-0103, Attachment D dated May 10, 1996 will govern the
documentation support.
1
<PAGE>
[LETTERHEAD OF FOKKER SERVICES, INC.]
April 1, 1997
Midway Airlines Corporation
3000 W Moran Street
Suite 1200
Attention: Jonathan Waller
Subject: Customized Service Agreement
Dear Mr. Waller:
Enclosed please find your copy of the Customized Service Agreement with Fokker
Services, Inc. for your files. This agreement is in addition to your previously
signed Letter Agreement with our company.
As always, Fokker Services, Inc. looks forward to being of service to you and
your organization. If you have any questions, please feel free to call me.
Sincerely,
/s/ Henk Kleef
Henk Kleef
Managing Director
encl.
HK:cls
<PAGE>
Customized Services Agreement
for
Midway Airlines Corporation
Customized Services Agreement
The attached services agreement offered by Fokker to Midway Airlines Corporation
consists of two major areas, being 1. Technical support and 2. Material supply.
- --------------------------------------------------------------------------------
Continued Service Agreement - 1 - February 14, 1997
Midway Airlines Corp.
<PAGE>
This Customized Services Agreement (hereinafter the "Agreement") is entered
into effective as of July 1,1996 by and between Midway Airlines Corporation
("Midway"), and Fokker Services, Inc., ("Fokker"), and in consideration of
the mutual covenants and agreements contained herein, the parties agree as
follows:
Fokker will provide Midway with the technical support services and material
supply as set forth herein.
The Letter Agreement LA-Midway-FS-0103 (herein after the "LA"), a copy of which
is attached hereto and incorporated herein by reference, shall apply to this
Agreement, unless specifically indicated otherwise herein. If there is a
conflict between the terms of this Agreement and the terms of the LA, this
Agreement shall control. All defined terms used in this Agreement shall have the
same meanings as the definitions set forth in the LA unless otherwise provided
herein.
Fokker has the right to have any or all of the services described herein
executed by Fokker Services B.V. at its facilities in The Netherlands. In such
event, Fokker shall remain primarily liable for such services as if it had
performed such services itself. This will not in any way mean that a contractual
relation shall exist between Midway and Fokker Services B.V.
1. Technical support
The products and services to be provided by Fokker in the area of
technical support are split into the following three categories:
1. Continued Airworthiness Services Agreement
2. Maintenance and Operational Documentation
3. Engineering and Operational Support
A more detailed description of the content of each of these categories is
given below.
1.1. Continued Airworthiness Services Agreement
ARTICLE 1. Subject matter and services to be provided.
In order to support Midway to maintain a continued airworthy operation of
any aircraft operated by Midway and manufactured by Fokker Aircraft B.V.
or its affiliates (principally including Fokker 100 or Fokker 70
aircraft), Fokker will support Midway in meeting the requirements
regarding the availability of up-to-date airworthiness data for Midway's
Aircraft by providing the following baseline documentation and services
package:
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Continued Service Agreement - 3 - February 14, 1997
Midway Airlines Corp.
<PAGE>
1. All-Operator Messages (AOM's) intended to rapidly alert operators to
fleet airworthiness issues and resolution of these issues.
2. Technical or Operational Notices which address airworthiness issues
not requiring the same level of urgency as AOM's, but which
nevertheless may require certain measures at short notice.
3. All Service Bulletins (SB's) which are issued.
Note: For those SB's issued in the form of a pro-forma, only the
pro-forma section of the SB (i.e. the planning information) will be
covered by this service.
4. All Service Letters/Notices to Operators which are issued.
5. A document listing the disposition of Vendor Service Bulletins as
determined by Fokker Services in its capacity as the holder of the
type certificates of the Aircraft.
6. Updates to the Service Experience Digest which provides data and
background information on commonly experienced technical and
operational in-service issues. This information is of great value to
the operator in quickly and effectively resolving in-service
problems as they arise, thereby improving availability of the
Aircraft and lowering costs.
7. Manual Change Notifications for maintenance and operational manuals
which are recommended from an airworthiness standpoint, and/or which
result from the introduction of a modification mandated by the Dutch
Airworthiness Authorities (The RLD). This may be applicable (but is
not limited to) the following manuals:
- Aircraft Maintenance Manual (AMM),
- Structural Repair Manual (SRM),
- wiring Manual (WM),
- Troubleshooting and Schematics Manual (TSSM),
- Aeroplane Flight Manual (AFM).
Note: the actual documentation revisions are not part of the services of
this Article 1.
8. Utilization Data. This document is issued twice a year and contains
registration and utilization data for every Fokker commercial
aircraft delivered (all types).
9. Engineering, Maintenance, and Operational Support with a maximum of
man-hours per year (incl. AOG-service 24 hours a day) as set forth
in Article 1.3. below.
10. Maintenance Requirements documents, namely the Maintenance Review
Board (MRB) and Maintenance Planning Document (MPD) for the Fokker
70/100, including applicable revisions.
As a member of the Continued Airworthiness Service Agreement, Midway will
be invited to participate in the Maintenance Steering Committee,
Structures Working Group meetings, etc.
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Continued Service Agreement - 4 - February 14, 1997
Midway Airlines Corp.
<PAGE>
1.2. Maintenance and Operational Documentation
Fokker will continue to support the complete maintenance and operational
documentation package as available to Midway before the bankruptcy of
Fokker N.V.
With this service Fokker ensures that the applicable aircraft
documentation is maintained to the latest revision status. It offers
Midway an integrated and fast response to relevant changes and enables
Midway to maintain its Aircraft safe and economically and includes:
Alterations of technical contents to reflect Fokker current
recommendations and procedures based on worldwide gained experiences, and
incorporation of;
o All outstanding Temporary Revisions;
o Mandatory Fokker Service Bulletins in the pre/post status;
o Optional Fokker Service Bulletins in the pre/post status after
notification by Midway;
o Publication Change Requests (correction of technical errors, major
omissions and efficiency improvements);
o All corrections to maintain a safe and airworthy aircraft as
dictated by Airworthiness Directives (AD) issued by the Netherlands
Department of Civil Aviation (RLD).
The above mentioned is applicable to all documentation listed in Midway
Documentation Revision Services Package. This package is specified later in this
paragraph. Temporary Revisions (TR's), Service Bulletins (SB's), Service Letters
(SL's) and Service Experience Digest (SED's) will be issued throughout the year
as necessary or reasonably required. The other documents will be revised with a
maximum of two revisions each year. All man-hours, expenses, production or other
costs related to the aforementioned updates and changes are included in the firm
and fixed price of the Customized Services Agreement for the duration of
contract.
Revision of manuals as result of Customer Originated Changes (COC's) will be
provided on an on-request basis. In each case will be preceded by a quotation
and delivery date.
Fokker has developed CD-ROM as a media for part of the documentation (Aircraft
Maintenance Manual (AMM) and Illustrated Parts Catalogue (IPC)).
In addition to the Continued Airworthiness Service Agreement the Midway
Documentation Revision Services Package includes:
1. The one-time integration of the Transwede- and Midway-microfilm manuals of
the Fokker 100 aircraft with serial numbers 11321, 11323, 11329 and 11330
for the following customized manuals: Aircraft Maintenance Manual (AMM),
Illustrated Parts Catalog (IPC), Wiring Manual (WM) and Troubleshooting
and Schematics Manual (TSSM). After this integration, each of these
manuals will reflect the status of all current 12 Midway Fokker 100
aircraft per manual.
2. A maximum of two revisions per year for the following maintenance and
operational manuals in the specified quantities per medium (hard-copy and
microfilm);
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Continued Service Agreement - 5 - February 14, 1997
Midway Airlines Corp.
<PAGE>
Manual Qty Qty Qty
------ --- --- ---
Hard-copy M'film Silvernegative
--------- ------ --------------
- Aircraft Maintenance Manual (AMM) 1 1 1
- Illustrated Parts Catalog (IPC) 1 1 1
- Wiring Manual (WM) 1 1 1
- Troubleshooting and Schematics Manual
(TSSM) 4 1 1
- Aircraft Flight Manual (AFM) 12 - -
- Structural Repair Manual (SRM) 2 3 -
- Non-Destructive Testing Manual (NDT) 2 1 -
- Consumable Material List (CML) 2 1 -
- Component Maintenance Manual (CMM) 3 - -
- Illustrated Tool and Equipment Manual
(ITEM) 1 1 -
- Powerplant Build-up Manual (PBM) 2 - -
- Maintenance Planning Document (MPD) 2 - -
- Aircraft Operating Manual (AOM) 4 - -
- Weight and Balance Manual (WBM) 2 - -
- Quick Reference Handbook (QRH) 10 - -
- Master Minimum Equipment List (MMEL) 2 - -
The revisions will cover changes in the technical content due to;
- - outstanding Temporary Revisions
- - mandatory Service Bulletins and/or other airworthiness related changes
issued by the Dutch airworthiness authorities (RLD).
1.2.1. General
(a) Documentation furnished to Midway is solely for the purpose of
operation, repair and overhaul of the Aircraft or a part thereof,
including applicable support equipment. The use of any Documentation
shall be at Midway's sole risk provided, that Fokker has the
obligation to submit technical correct information. In case Midway
performed in full compliance with any instructions or Documentation
issued by Fokker or any subsequent amendments thereto and it can be
provided that Midway carrying out of such instructions resulted in
damage to any Aircraft, Fokker will be hold liable for the cost
necessary to rectify or replace such damage or part of the Aircraft.
(b) Nothing contained in the Documentation shall be deemed to convey to
Midway a right or license under patents or intellectual property
rights held or controlled by Fokker.
(c) Midway does not have the right to reproduce Documentation or have it
reproduced other than for Midway's own use.
(d) Documentation is delivered Ex-works Fokker's Facility in Atlanta,
GA, USA or another Fokker Facility in the USA.
(e) Midway shall not disclose the Documentation except as permitted by
Article 9 of the LA.
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Continued Service Agreement - 6 - February 14, 1997
Midway Airlines Corp.
<PAGE>
1.3. Engineering and Operational Support
This service provides day-to-day support on technical and operational
issues in order to assist Midway in achieving high levels of availability
with their Fokker fleet. Aspects which will be covered by this service
include;
o Assistance in troubleshooting in-service defects and provision of
advice utilizing the fleetwide experience available to Fokker
Services;
o Development and written RLD-approval of deviations from approved
data when requested and technically feasible. This would include
assistance in the development of Alternate Means of Compliance
(AMOC's) to mandatory SB's, the provision of No Technical Objection
statements for alternative procedures, materials, and/or allowable
limits, and the design of repairs beyond the scope of those
published in the relevant manuals;
o Clarification of maintenance and operational procedures and
provision of advanced versions of such procedures when required to
safeguard operational availability;
o Investigating, in consultation with Midway, the feasibility of
possible product improvements required to improve the
cost/availability performance of the Fokker fleet;
Note : The actual development of a product improvement falls outside
the scope of this service and will be subject to a separate
agreement between Midway and Fokker on a case-by-case basis.
This service will be provided from the facilities of Fokker Services B.V. in the
Netherlands, although on-site assistance can also be arranged at Midway's
request.
For AOG-situations outside Amsterdam office hours, engineering and operational
support is still available via the Fokker Services Continuous Support Desk;
Phone: (international)+31.20.60.54200, Telefax: (international)+31.20.60.52030.
In addition to the [***] man-hours for the Continued Airworthiness Services
Agreement, Midway will receive [***] man-hours per Aircraft per year. With
the current fleet of 12 Aircraft, this results in a total of [***] man-hours
per year. Fokker will notify Midway in advance when support requested by
Midway hereunder is likely to exceed [***] man-hours of time and will obtain
Midway's specific authorization to proceed prior to commencing the services.
In case Midway does not use its yearly allotment for a specific year, Midway
is allowed to transfer all remaining man-hours to the following year up to a
maximum of [***] man-hours. Fokker will provide an overview of used man-hours
to Midway every two months.
However Midway will have for the period until June 30, 1997 a total of [***]
man-hours available as yearly allotment. All man-hours used by Midway before
December 19,1996 will be free of charge and are not considered to be part of
this remaining allotment.
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Continued Service Agreement - 7 - February 14, 1997
Midway Airlines Corp.
<PAGE>
1.3.1. On-site assistance: If Midway requires to have Technical Support Services
or part thereof to be performed at a facility designated by Midway:
(1) all reasonable and customary additional costs and expenses connected with
assignment of Fokker's personnel such as reasonable and customary board
and lodging, daily subsistence, daily transportation and round trip air
transportation for Fokker's personnel in accordance with Fokker's company
regulations for staff travel shall be borne by Midway.
(2) Midway shall provide to Fokker's personnel suitable office facilities,
on-line communication (telephone, telex and facsimile) and other necessary
services (such as copying machine and nonexclusive secretarial
assistance), if required. The facilities and services as mentioned above,
and the use thereof, shall be made available at no cost to Fokker.
1.3.2, Field Service When requested by Midway, Fokker shall furnish field
service representative(s) to advise Midway on maintenance and operation of the
Aircraft. Such representative(s) shall act in an advisory capacity only and are
not employees or agents of Midway.
(1) Such assistance shall be provided at or near Midway's main maintenance
facility. The field service representative(s) will be assigned to Midway's
main base of operation or major designated line station for the period of
the contract on an exclusive basis. Further visits will take place on a
non-exclusive basis by Fokke's local residential representative. The costs
and period of the field service specialist(s) assistance period will be
mutually agreed upon between Midway and Fokker. The costs will be
separately invoiced from the flat fee per Aircraft.
(2) Midway shall furnish, at no additional charge to Fokker, suitable office
space, including office furniture, non-exclusive secretarial assistance,
provisions and assistance for installing computer systems and one (1)
telephone lines as well as one (1) telecopier line.
(3) In the event services are required from the representative away from
Midway's main maintenance or designated line station facilities, all
reasonable costs in connection therewith shall be borne by Midway.
(4) During each period of one (1) full year the field service
representative(s) is/are advising Midway hereunder, he/she together with
his/her direct family up to a total of four (4) family members, including
the representative will be permitted to make two (2) round flights between
Midway's main maintenance or designated line station facilities and
Schiphol Airport, Amsterdam, The Netherlands. Airline tickets will be made
available by Midway at no additional costs to Fokker provided such field
representative gives Midway 45 days advance notice of his/her travel
dates, times and other reasonably necessary information.
All of the above provisions shall apply as appropriate for any location
where Midway determines field service representative(s) should be
stationed.
The cost for the use of communication equipment for (inter)national
transmissions shall be for the account of Midway.
1.3.3. Flight Operations Procedure Fokker will amend Midway's Aircraft Flight
Manual to incorporate a limitation change (reference F28 Mk0100 AFM subsection
2.08.01) from "Minimum height during non-precision approach: 500 Ft" to "Maximum
demonstrated height loss during non-precision approaches: 105 Ft."
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Continued Service Agreement - 8 - February 14, 1997
Midway Airlines Corp.
<PAGE>
2. Material supply
Fokker will supply vendor as well as proprietary parts, tooling and other
ground support equipment, Fokker modifications kits, and Fokker structural
parts kits for damage repairs. Fokker's Component Repair & Overhaul
division offers complete repair and overhaul services for all structural
parts (e.g. ailerons, rudders, etc.), as well as Line Replaceable Units
(LRU's) for avionics, electronics, mechanical instruments and hydraulic
systems. A wide range of communications equipment, flight control
computers, flight augmentation systems, and fuel and hydraulic components
as well as flight data recorders and inertial navigation systems, can be
processed by this division.
Customized Material Support includes various other services such as:
- Material flighthour agreements;
- Lease service for insurance parts and loan tools.
2.1. Distribution Centers
Two key Spares Centers serve Fokker's material support and component
repair & overhaul services. Major Spares inventories for Fokker aircraft
are located at Schiphol Airport Amsterdam, the Netherlands and at
Hartsfield Airport, Atlanta GA, USA for delivery within North America.
2.2. AOG/Critical orders
Fokker offers a 24-hours a day, seven days a week emergency spare parts
supply service to facilitate prompt delivery to AOG (Aircraft On Ground)
and Critical (imminent AOG or work stoppage) situations.
Customers are informed within four hours of action being taken on AOG's,
and within 24-hours on Critical Orders, in accordance with the World
Airline Suppliers Guide.
2.3. Communications
Please send all orders and inquiries for material support to:
Fokker Services Inc.
5169 Southridge Parkway
Suite 100,
Atlanta, GA 30349
USA
Phone +1.770.991.4600
Fax +1.770.991.4608
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Continued Service Agreement - 9 - February 14, 1997
Midway Airlines Corp.
<PAGE>
2.4. Availability of major airframe Darts for damage repairs
During the term of this Agreement, Fokker will make available for Midway's
purchase suitable Spare Parts in quantities sufficient to meet Midway's
needs for normal repairs and spares inventory replacement for its Fokker
fleet.
Fuselage parts shall be covered in Fokker's stock. Fokker shall restock
skin-panels for the F100 Aircraft within 3 months following the execution
of this Agreement. Fokker's stock shall at all times contain the
structural insurance parts for continued worldwide coverage of damage
repairs.
Fokker will replenish the stock of insurance parts as required from time
to time, it being understood that nothing herein shall be construed in a
way as to restrict Fokker from selling insurance parts to other Fokker
operators so long as the stock of such parts is promptly replenished.
2.5. Sales
All sales of spare parts, component repair & overhaul services are subject
to the Letter Agreement LA-Midway-FS-0103.
3. Term
The term of this Agreement shall run for a period of 5 years, effective as
of July 1,1996, unless terminated by Midway upon ninety (90) day advance
written notice to Fokker.
4. Fees, Adjustments and Payments
4.1. Flat Fee Per Aircraft
The fee for technical support services, the provision of the maintenance and
operational documentation package, the provisioning of engineering and
operational support, the provision of material supply related services and
Midway's membership in the Continued Airworthiness Services Agreement shall
be [***] per year for each Fokker 100 aircraft (the "Flat Fee Per Aircraft")
operated by Midway during the term of this Agreement, subject to adjustment
and additional charges as provided in this Article 4. The Flat Fee Per
Aircraft is fixed without taking into account the yearly, hourly utilization
of the Aircraft. The Flat Fee per Aircraft shall be prorated for any Aircraft
by Midway for less than the yearly period July 1 -June 30 on the basis of
Midway's operation of such Aircraft during such period compared to 12 months.
- --------------------------------------------------------------------------------
Continued Service Agreement - 10 - February 14, 1997
Midway Airlines Corp.
<PAGE>
4.2. Adjustments to the Flat Fee Per Aircraft
4.2.1. Fleetsize adjustments The Flat Fee Per Aircraft is based upon Midway's
operation of a fleet of less than [***] Fokker 100 aircraft during
any year. Adjustments to the Flat Fee Per Aircraft shall thus be made as
follows:
(a) if Midway operators [***] or more Fokker 100 aircrafts
during the year, the Flat Fee Per Aircraft payable hereunder shall
be reduced to [***] for that year;
(b) If Midway operates [***] or more Fokker 100 aircraft
during the year, the Flat Fee Per Aircraft payable hereunder shall
be reduced to [***] for that year;
4.2.2 Yearly price escalation The above mentioned Flat Fee Per Aircraft
(1-1-1996 price level) is subject to a yearly escalation rate in an amount equal
to the yearly composite number for Metal- and electrical engineering as
published in `The Monthly Bulletin of Socioeconomic' from Statistics Netherlands
Voorburg/Heerlen and a maximum of three (3) percent per year. In November, the
Index rate to be used for the upcoming calendar year, will be specified. For
1997 the escalation rate will be 1.5%.
Engineering and documentation support above and beyond the yearly man-hour
allotment will be charged at a rate of [***].
4.3. Payments
Midway shall pay the Flat Fee Per Aircraft in arrears in monthly installments of
U$ 16,500 (sixteen thousand and five hundred dollars). All payments shall be
made in US Dollars. The payment schedule for the Customized Services Agreement
to Fokker Services Inc. will be as follows:
Before March l, 1997: [***]
(being the agreed upon fee for the first six
monthly payment of the Customized Services
Agreement: [***]
Per April 1, 1997, and
every Month thereafter
unto, January 1, 1998 [***]
and every Month thereafter
unto, including
July 1, 2001 [***] the yearly escalation
correction;
4.4. Reports
Midway shall report utilization data to Fokker every 3 (three) months period
during the term of this Agreement in a mutually agreed format and the same shall
be reported to Fokker within 30 days of the end of each preceding quarterly
period for such preceding quarterly period.
- --------------------------------------------------------------------------------
Continued Service Agreement - 11 - February 14, 1997
Midway Airlines Corp.
<PAGE>
IN WITNESS WHEREOF the parties have entered into this Agreement effective as of
the 1st day of July 1996 until June 30, 2001 unless otherwise agreed in writing.
Midway Airlines Corporation Fokker Services Inc.
By: /s/ J S Waller By: /s/ G. Hamers
--------------------------- ---------------------------------
Title: SENIOR VICE PRESIDENT Title: President
GENERAL COUNSEL
Place: Durham, N.C. USA Place: Amsterdam
Date: February 18, 1997 Date: 25 March 1997
By: By: /s/ H.J. Kleef
--------------------------- ----------------------------------
Title: Title: Managing Director
-------------------------
Place: Place: Atlanta
-------------------------
Date: Date: March 14, 1997
--------------------------
---------------------------
- --------------------------------------------------------------------------------
Continued Service Agreement - 12 - February 14, 1997
Midway Airlines Corp.
<PAGE>
EXHIBIT 10.25
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY [***]. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
AIRCRAFT MAINTENANCE SERVICES AGREEMENT made effective the 27 day of August,
1997.
BETWEEN:
TIME AIR INC., doing business as CANADIAN
REGIONAL, a body corporate, with head office in
the City of Calgary, in the Province of Alberta.
(hereinafter called "Time")
OF THE FIRST PART
AND:
MIDWAY AIRLINES CORPORATION a body corporate,
having its principal place of business at the
City of Durham, in the State of North Carolina.
(hereinafter called the "Customer")
OF THE SECOND PART
WHEREAS:
A. Customer has certain aircraft bearing manufacturer's serial numbers and
United States registrations as more particularly identified by Customer to
Time from time to time (hereinafter called the "Aircraft") and requires
certain services to be performed on the Aircraft from time to time; and
B. Time operates a maintenance facility located at Calgary International
Airport (the "Facility") and has the facilities and capabilities to
carry out the performance of the required services on the Aircraft upon
and subject to the terms and conditions hereinafter set forth;
NOW, THEREFORE, THIS AGREEMENT WITNESSETH that in consideration of the premises
and the mutual covenants, terms, conditions and warranties herein contained, the
parties hereto agree each with the other as follows:
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<PAGE>
1 SERVICES TO BE PERFORMED BY TIME
1.1 Time agrees, subject to the terms and conditions of this Agreement, to
perform at the Facility the following services:
a) maintenance services on the Aircraft delivered by Customer from time
to time during the term of this Agreement as agreed in writing
between Customer and Time in substantially the format described in
Schedule "A" (the "Maintenance Services");
b) Additional work identified after commencement of the Maintenance
Services using Time's non-routine work cards, which are legally
acceptable pursuant to Customer's approved maintenance program (the
"Program") provided that such additional work is first approved in
writing by Customer's representative. Such additional work may
include the removal, overhaul or shop check and the re-installation
of rotables and repairables upon the Aircraft as requested by
Customer in writing, concurrently with the Maintenance Services (the
"Additional Services") (Maintenance Services and Additional
Services, if any, are referred to in this Agreement collectively as
the "Services");
c) Upon the completion of the Services, certify the same and forward
all records, airworthiness tags or certificates to Customer for its
log book and filing;
d) Provide the required parts for the Services not supplied by
Customer. Parts supplied by Customer will be transported to the
Facility at the sole cost and risk of Customer.
e) Provide all tooling necessary to perform the Services, however, if
Customer provides tooling to Time to complete the Services, then
Customer shall receive an appropriate credit against the invoice for
the Services (to be agreed in writing prior to commencement of use
by Time of such Customer supplied tooling) for providing such
tooling and the tooling will be returned to Customer at the
completion of Services in as good a condition as it was when
provided to Time, reasonable wear and tear excepted.
1.2 In order to schedule and formalize the performance of Services by Time
hereunder, not less than six (6) months prior to the date which Customer
desires to deliver an Aircraft to Time hereunder, it shall submit to Time,
a Customer signed agreement in the form of Schedule "A" attached hereto (a
"Service Order Request"). If Time has an available slot to perform the
Services described in the Service Order Request, then it shall promptly
execute such Service Order Request, then it shall promptly execute such
Service Order Request and return it to Customer and the parties will be
bound to perform their respective obligations under this Agreement with
respect to the Aircraft identified in such Service Order Request during
the period set forth therein and the same shall be deemed a "Service
Order" for purposes of this
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<PAGE>
Agreement. If Time does not have an available slot to perform the
Services described in such Service Order Request during the period set
forth in item 2 of the same, then it will promptly notify Customer in
writing and if Time has alternate available slots, offer alternate slots
to Customer. Customer may then choose such an alternate slot and Time and
Customer will promptly execute an agreement in the form of Schedule "A"
consistent with Customer's selection and the same shall be deemed a
Service Order hereunder. Upon execution of any Service Order, the parties
will be bound to perform their respective obligations under this
Agreement with respect to the Aircraft identified in such Service Order.
With respect to Aircraft identified as N130ML and N131ML, Customer and
Time have entered into the Service Orders attached hereto in Schedule
"C". Notwithstanding the foregoing, Customer shall have no obligation to
deliver an Aircraft to Time for the performance of Services hereunder at
a particular time unless Customer has executed a Service Order with
respect to the performance of Services on such Aircraft at such time.
1.3 Before commencing work on Additional Services, Time will obtain written
acceptance of Time's estimate of costs to complete such Additional
Services from Customer's Representative (as defined in Section 1.4 below).
Time's estimate must include costs allocable to labour for production,
inspection, planning, engineering and administration, as the case may be.
Acceptance or rejection of such estimate will not be ureasonably delayed
by Customer's Representative. If Customer's Representative does not accept
such estimate, in writing, within 24 hours of its submission by Time, then
the estimate will be deemed to have been rejected and the subject
Additional Services will not be performed. If non-performance of such
Additional Services will prevent Time from completing the Maintenance
Services, Time will promptly notify Customer in writing.
1.4 For each Aircraft delivered by Customer to Time for Services hereunder,
Customer shall designate a Customer representative ("Customer's
Representative") and shall provide Time with that person's telephone
numbers, pager number and facsimile number. If Customer's Representative
will not be available at any time during the performance of Services by
Time hereunder, then that person shall designate another Customer
Representative and provide Time with the alternate's telephone numbers,
pager number and facsimile number.
2 GENERAL CONDITIONS
2.1 If requested by Customer, Time shall perform its standard maintenance
run-up on completion of the Services on any of the Aircraft, for which
Customer shall bear the costs of all required fuel and oil.
2.2 Customer shall provide flight crew should an acceptance test flight be
required before Customer takes re-delivery of an Aircraft pursuant to
paragraph 3.1, and such acceptance flight shall be carried out at the sole
risk of Customer. Customer shall bear all fuel, oil and landing fee costs
therefore, except to the extent such test flight is required to retest the
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<PAGE>
Aircraft prior to re-delivery due to the discovery or confirmation of a
defect relating to the services in the previous test flight.
2.3 Time shall perform all of the Services hereunder in accordance with Time's
standard practices and the Program. Time represents and warrants to
Customer that it has all necessary approvals and/or licenses to perform
the Services hereunder pursuant to the rules and regulations of the
Canadian Ministry of Transport ("MOT"). Time shall maintain the necessary
records, on its standard forms, covering the Services furnished hereunder,
including records of all labour hours expended. The records shall be open
to examination and inspection by Customer during Time's normal business
hours and Time, upon request by Customer, shall furnish to Customer all
current information with respect thereto.
2.4 In order to assist Time in carrying out the Services pursuant hereto,
Customer has already delivered to Time and will deliver any subsequent
changes or supplements to Time such technical, operational and maintenance
records, books, logs, drawings and publications in its control or
possession that relate to the applicable Aircraft, line replacement unit
("LRU") or part, including the Program, and Time shall be entitled to rely
thereon and complete the Services in accordance therewith. Time shall keep
accurate records of the Services it performs hereunder in accordance with
the approved procedures of the MOT, together with such other records as
the parties may, from time to time, agree upon in writing, and shall make
such records available to Customer upon request by Customer.
2.5 On any exchange of rotables Time shall request that Customer furnish
appropriate technical history including back to birth records (if required
by regulation of MOT) and airworthiness certification documents evidencing
title to such equipment or the Customer's right to make such exchange and
in such case Customer shall furnish documents forthwith upon demand.
2.6 Time shall furnish all engineering services as required at rates specified
in Article 4.
2.7 Time, together with Customer's Representative, shall carry out and
document an equipment check on Time's receipt of the Aircraft and again on
the re-delivery of the Aircraft to Customer.
2.8 Time may subcontract Services pertaining to the repair or overhaul of a
component or of the Aircraft's structure (provided such structural repairs
are completed at Time's Facility) to subcontractors approved by Customer's
Representative, such approval or rejection not to be unreasonably delayed.
If approved, Time shall be responsible for ensuring such subcontractor's
performance is in accordance with this Agreement as if the latter were a
party hereto.
3 CUSTOMER COVENANTS
4
<PAGE>
3.1 Customer shall, at its sole expense and risk, deliver the Aircraft to the
Facility and following the completion of the Services shall take
re-delivery of the Aircraft at the Facility.
4 PAYMENT
4.1 For and in consideration of Time performing the Services pursuant to this
Agreement, Customer shall pay to Time at the rates set out in Schedule "B"
as follows:
a) prior to commencement of the Services, Customer shall pay to Time
the amount as set forth in Schedule "A" hereto;
b) on completion of the Services by Time, Time will invoice Customer at
the address set out in Article 9.7 for the remaining balance owing
for the Services, and Customer undertakes to pay such invoices in
accordance with Section 4.2, within thirty (30) days of the date of
such invoice.
4.2 All amounts payable herein by Customer to Time shall be paid by Customer
by wire transfer to the account of Time at:
Pay to: Chase Manhattan Bank, New York
ABA No. 021 00 00 21
Furtherance to: The Royal Bank of Canada
Main Branch
335 - 8th Avenue S.W.
Calgary, Alberta T2P 1C9
Canada
Transit No. 00009
Credit to: Time Air Inc.
Account No.: 400-442-0
or at such other account or in such other manner as Time may from time to
time advise Customer by notice in writing.
4.3 Customer agrees that it will pay to Time all taxes of whatsoever kind or
nature (but excluding taxes arising on the net income or gain of Time),
all as further detailed in Section 9.2 hereof.
4.4 Should any payment hereunder not be made to Time within the time periods
established, Customer shall pay Time, in addition to the amount
outstanding, interest calculated at one and one half (1.5%) percent per
annum over the base interest rate of the Bank of Montreal,
5
<PAGE>
Canada, established from time to time from the date the payment was due
until received by Time.
4.5 Notwithstanding any provision hereof, Customer shall pay to Time any
amounts assessed at any time or from time to time by the Canadian tax
authorities under a Goods and Services Tax ("GST") on account of goods
and/or services sold hereunder provided that Time shall remit the GST to
the tax authorities and any credit arising on account of GST paid under
this Agreement shall be credited to Customer. All invoices submitted by
Time pursuant hereto shall have the applicable GST clearly identified
thereon. Time and Customer shall each endeavour to lawfully minimize the
payment of the GST.
5 TURNAROUND TIMES
5.1 Time shall use its best efforts but shall not be bound to complete the
Services within the period set forth in Schedule "A" hereof.
6 WARRANTY
6.1 Time warrants that all of the Services performed by Time pursuant to
this Agreement shall be performed in accordance with this Agreement and
free from defects in material and/or workmanship. This warranty shall
apply in the event it is established to Time's reasonable satisfaction
that the Services were not so performed, that a defect is or was
present or that an Aircraft has become unserviceable within [***]
operating hours or [***] operating cycles of being refurbished or
repaired by Time, or within [***] of the date of redelivery thereof to
Customer, whichever shall first occur, provided written notice of such
warranty claim has been given by Customer to Time within thirty (30)
days of the discovery thereof by Customer.
6.2 Time hereby warrants that all parts, components and materials shall be
free and clear of all liens, charges and encumbrances whatsoever (other
than those arising by or through Customer).
6.3 Subject to Sections 6.4 and 6.5, Time's obligations pursuant to this
Article 6 shall be as follows:
a) to supply the labour required to correct such defective material
and/or workmanship by Time to meet Customer's Program standards; and
b) to repair or replace the equipment that is defective to meet
Customer's Program standards.
Subject to the terms of the next paragraph, the obligations set forth
herein shall only require Time to return equipment that is defective in
material or workmanship to the condition it was in at the time the defect
occurred. The cost of any replacement parts pursuant to this
6
<PAGE>
warranty shall be calculated by prorating the current replacement cost
thereof in proportion to the hours or cycles remaining on the defective
parts or portions thereof at the time the defect occurred. Additional work
requested by Customer shall be at Customer's sole expense.
Notwithstanding the preceding paragraph, in the event Customer deems it
impracticable to return the Aircraft or any part to Time's facility,
Customer may effect repair of same, subject to all remaining terms and
conditions within this Article pertaining to WARRANTY, provided that
Customer submits prior notice to Time of Customer's intention to effect
the repairs, including particulars of the party who would be doing the
repairs, and further provided that Time shall have given its consent
(i.e., via return teletype or facsimile within a reasonable time of
Customer's request) in advance of Customer undertaking such repairs (which
consent will not be unreasonably withheld or delayed). Time shall pay for
such repairs at a rate not to exceed its own labour rates set forth in
Schedule "B".
6.4 Time's obligations under this Article 6 shall be subject to the
following conditions:
a) that Customer shall pay all transportation charges and delivery
costs of returning the equipment to the Facility and Time agrees to
credit such costs if the warranty is accepted;
b) that defective equipment has been operated in accordance with
Customer's approved manuals or the instructions and recommendations
of the manufacturer, as the case may be;
c) that the defective equipment has been used under normal operating
conditions, has not been subject to misuse, neglect, accident or
ingestion of foreign material and has not been refurbished, altered
or repaired by anyone other than Time or Time's contractors or
subcontractors in any manner that could contribute to or cause any
claim with respect to defective workmanship by Time;
d) that Time shall have the sole right to determine whether such repair
or replacement of any defective material and/or workmanship or part
or portion thereof shall be required; and
e) that there shall not be included any labour charges of Customer for
replacement of parts, adjustments or repairs or any other work
unless such charges receive the prior authorization in writing of
Time.
6.5 THE AFORESAID WARRANTY IS IN SUBSTITUTION OF AND EXCLUDES ALL WARRANTIES,
GUARANTEES, CONDITIONS AND LIABILITIES WITH RESPECT TO THE QUALITY OF THE
SERVICES OR MATERIALS PROVIDED BY TIME HEREUNDER, WHETHER STATUTORY,
EXPRESS OR IMPLIED, ARISING BY LAW
7
<PAGE>
OR OTHERWISE (INCLUDING WITHOUT LIMITATION, ANY OBLIGATION OF TIME WITH
RESPECT TO FITNESS, MERCHANTABILITY, RELIABILITY, DURABILITY,
MAINTAINABILITY, SPECIFICATION REQUIREMENTS, AND CONSEQUENTIAL DAMAGES)
AND WHETHER OR NOT ARISING OR SOUNDING IN CONTRACT OR TORT, INCLUDING
NEGLIGENCE. TIME FURTHER DOES NOT WARRANT NOR IS IT IN ANY WAY LIABLE TO
CUSTOMER FOR THE QUALITY AND SUITABILITY OF NEW PARTS PURCHASED BY TIME
OR CUSTOMER AND INSTALLED IN OR ON AN AIRCRAFT OR PART THEREOF AS PART OF
THE PERFORMANCE BY TIME OR ANY SERVICE RENDERED PURSUANT TO THIS
AGREEMENT. THE AFORESAID WARRANTY SHALL NOT BE EXTENDED, ALTERED OR
VARIED EXCEPT BY A WRITTEN INSTRUMENT SIGNED BY TIME AND CUSTOMER. IN THE
EVENT THAT ANY PROVISIONS HEREOF SHOULD, FOR ANY REASON, BE HELD INVALID
OR INEFFECTIVE, THE REMAINDER OF THIS SECTION 6 SHALL REMAIN IN FULL
FORCE AND EFFECT.
7 WAIVER, INDEMNIFICATION AND INSURANCE
7.1 For the purposes of this Article 7, the term "Time" shall be deemed to
include the parent, subsidiary, associate and affiliate corporations of
Time, together with such corporation's directors, officers, servants,
agents and employees.
7.2 "Claim" for the purposes of this Agreement includes demands, claims,
reasonable actions, causes of action, judgments and liabilities of any
nature whatsoever (together with reasonable legal fees incurred by Time in
resisting same or any of them) for injury, including death, loss or damage
when the same is based upon or arises out of:
a) any of the Services, parts or material provided by Time pursuant
to this Agreement;
b) any negligent or defective workmanship on the part of Time or its
contractors or subcontractors in providing such service, parts or
material;
c) loss of or damage (including any resultant damage) to the
Aircraft negligently or otherwise caused or contributed to by
Time or its contractors or subcontractors.
7.3 Customer hereby undertakes:
a) that it shall not make or bring any Claim against Time, or its
contractors or subcontractors unless caused by the wilful
misconduct of Time or its contractors or subcontractors while
engaged in performing the Services;
b) to indemnify and hold harmless Time and its contractors and
subcontractors against each and every Claim brought or prosecuted
by anyone claiming by, through or under Customer (specifically
excluding any employee or agent of Time, its contractors or
8
<PAGE>
subcontractors or any agent or employee of the same unless the Claim
arises from transportation on Customer's aircraft as a revenue
passenger) unless caused by the wilful misconduct of Time or its
contractors and subcontractors while acting within the scope of
their duties, employment, or contract; and
c) that it shall, at its expense, obtain and maintain in full force and
effect comprehensive legal liability insurance of not less than
Three Hundred Million ($300,000,000.00) Dollars (U.S. funds) per any
one occurrence, Aircraft Hull Insurance covering the Aircraft or any
part thereof, and All Risks Property Insurance on parts, materials,
inventories, kits and any other property of Customer while not
installed on the Aircraft. Such insurance policies shall provide
that:
i) Customer's insurers agree and accept the contractual liability
assumed by Customer under this Agreement,
ii) Time and its contractors or subcontractors are included as
additional insureds under the comprehensive legal liability
insurance and the policy contains a standard cross liability
clause,
iii) the insurance policies contain a breach of warranty clause
whereby the insurers agree that a breach of the insurance
conditions by Customer shall not invalidate the coverage
provided by the insurance as to the interests of Time,
iv) the insurers agree that the insurance shall be primary without
right of contribution from any other insurance carried by
Time,
v) the insurers of Customer's Aircraft Hull Insurance and All
Risks Property Insurance agree to waive all rights of
subrogation they may have against Time or its contractors or
subcontractors,
vi) notwithstanding any right of cancellation or material change
reserved by Customer's insurers, the insurances shall continue
in force for the benefit of Time until at least thirty (30)
days after notice of such cancellation or material change
shall have been received by Time, and
vii) Customer shall furnish to Time forthwith upon the execution of
this Agreement a certificate of insurance certifying that such
policies of insurance endorsed as required are in full force
and effect.
7.4 The provisions of this Article 7 shall not apply to the warranty
obligations set forth in Article 6 hereof.
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<PAGE>
7.5 All waivers and indemnifications or warranties made in respect of the
subject matter hereof, including Articles 6 and 7, shall survive the
termination of this Agreement and shall bind Customer and Time and their
successors and permitted assigns.
8 WARRANTIES AND INDEMNIFICATIONS FROM MANUFACTURERS
8.1 Time shall provide an extension to Customer of commercial warranties and
indemnities (for those that are available) against patent infringement
from manufacturers of parts furnished to Customer by Time, and Time shall
inform Customer of the names of manufacturers from whom such extensions
have been received.
8.2 Upon request and to the best of its ability, Time shall give Customer
technical assistance in processing any warranties, claims, including
claims asserted by Customer against the manufacturer of parts used in the
Services hereunder.
9 MISCELLANEOUS
9.1 For the purpose of this Section 9.1 "event of force majeure" shall include
but shall not be limited to, acts of God or of the public enemy, war,
declared or undeclared, revolution, riot, insurrection, civil commotion,
fires, floods, storms, slides, epidemics, quarantine restrictions, strikes
or lockouts, including illegal work stoppages or slowdowns, embargoes,
power failures, failure of transportation, or the requirement of any
lawful authority affecting the services contemplated by this Agreement;
provided that any such event or circumstance is a disabling event or
circumstance that is beyond the reasonable control of the party affected
and results in a material delay, interruption or failure by the affected
party in carrying out its duties or obligations under this Agreement.
Under no circumstances shall lack of money, financing or credit be deemed
to be an event of force majeure. If an event of force majeure occurs or is
likely to occur, the party directly affected shall promptly notify the
other of the particulars thereof and, if possible, supply supporting
evidence. The party so affected shall use its best efforts to remove,
curtail or contain the event of force majeure and to resume with the least
possible delay compliance with its duties, covenants and obligations under
this Agreement. No party shall be liable to the other for any delay,
interruption or failure in the performance of its duties, covenants or
obligations hereunder if and to the extent the same are caused by an event
of force majeure; the date limited for the performance of such duties or
obligations hereunder shall be postponed for a period equal to the delay
occasioned by such event of force majeure. While Time's performance
hereunder is affected by an event of force majeure, Customer shall be
entitled to terminate any Service Order which is then in effect between
the parties and obtain a refund of all payments made in advance of the
performance of Services which were not performed prior to such
termination. In addition, at no cost to Customer, Time will provide
assistance reasonable in the circumstances in preparing for the removal of
the Aircraft which is the subject of any terminated Service Order from
Time's Facility upon Customer's request.
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<PAGE>
9.2 In addition to the charges to be paid for Services provided or goods sold
hereunder, Customer shall pay and agrees to indemnify and hold harmless
Time from and against any and all taxes, customs duties, levies or
assessments of whatsoever nature, including but not limited to sales taxes
payable as a result of the sale to Customer of Services or parts pursuant
to this Agreement and all reasonable attorneys' fees, costs and expenses
incurred in connection therewith (excluding any taxes based upon the net
income or gain of Time) which are or may be assessed against, chargeable
to or collectable from either Customer or Time by any lawful taxing
authority and which are based upon or levied by any lawful taxing
authority in respect of the performance of this Agreement or the sale,
delivery or furnishing of any parts, materials or any of the Services
hereunder; provided, however, Customer shall only be liable for taxes
assessed on parts, equipment or materials to the extent the same has been
sold to Customer by Time hereunder for value. If a claim is made against
either Customer or Time for any tax, customs duty, levy or assessment,
Time, upon receiving notice of such claim, shall promptly notify Customer.
If reasonably requested by Customer in writing, Time upon receipt of the
aforesaid indemnification shall not pay any such tax or penalty or
interest assessed except under protest and if payment is made Time shall
use its reasonable efforts to obtain a refund thereof or permit Customer
to protest such tax in Time's name. If all or any part of such tax,
penalty or interest shall be refunded, Time shall repay to Customer the
equivalent amount to that paid by Customer to Time. Customer shall pay to
Time upon demand all reasonable expenses incurred by Time in protesting
payment of such tax and endeavouring to obtain the aforesaid refund at
Customer's request.
9.3 This Agreement and each Service Order executed pursuant to this Agreement
represents the entire agreement of the parties hereto with respect to the
subject matter hereof and shall supersede all prior verbal and/or written
agreements and shall enure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns.
9.4 In the event Customer shall file a voluntary petition in bankruptcy, make
any assignment for the benefit of creditors of all or substantially all of
its assets, or fail to secure dismissal of an involuntary petition in
bankruptcy within sixty (60) days after the filing thereof, or take
advantage of any act for the benefit of creditors or for the orderly
composition of debts or suffer any property to be taken in execution, then
Time may terminate this Agreement upon one (1) day written notice to
Customer.
9.5 The rights of the parties to require strict performance and observance of
any obligations hereunder shall not be affected in any way by any previous
waiver, forbearance or course of dealing. Exercise by either party of its
right to terminate hereunder shall in no way affect or impair its right to
bring suit for any default or breach of this Agreement.
9.6 In the event of termination of this Agreement, as provided in section 9.1
above, Customer shall pay to Time the charges computed at the applicable
rates established in this Agreement for any costs or expenses that Time
may have incurred prior to Customer giving notice of such termination to
Time. Time shall use its reasonable efforts to reduce such termination
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costs and expenses so as to include only work in process (including
project kits) and items ordered from vendors.
9.7 Either party hereto may give to the other any notice required or permitted
by the terms of this Agreement by personal delivery, telex, facsimile or
by mailing same by prepaid registered mail (in which event, in the absence
of a postal disruption, receipt shall be deemed to occur within five (5)
days after mailing) addressed to:
a) if to Time:
Time Air Inc., doing business
as Canadian Regional
Suite 2800, 700 2nd Street S.W.
Calgary, Alberta, Canada T2P 2W2
Attention: Supervisor, Contracts
Telefax: (403) 294-6295
with a copy to:
Time Air Inc., doing business
as Canadian Regional
Hangar #59, 393 Palmer Road N.E.
Calgary, Alberta Canada T2E 7G4
Attention: Manager, Maintenance
Phone: (403) 974-2336
Telefax: (403) 974-3874
b) if to Customer:
Midway Airlines Corporation
300 W. Morgan Street, Suite 1200
Durham, North Carolina
27701
Attention: Mr. Thomas Duffy Jr., Vice-President of
Maintenance and Engineering
Phone: (919) 956-4903
Telefax: (919) 682-1690
12
<PAGE>
With a copy to:
Midway Airlines Corporation
300 W. Morgan Street
Durham, North Carolina
27701
Attention: General Counsel
Phone: (919) 956-4810
Telefax: (919) 956-7568
9.8 Customer shall not assign its rights, interest and obligations under this
Agreement either in whole or in part. Time may assign its rights,
interests and obligations (other than pursuant to Article 6 above)
hereunder to any affiliated or successor corporation of Time.
9.9 This Agreement shall not be amended except by written instrument executed
by the respective authorized signing officers of each of the parties
hereto.
9.10 This Agreement shall commence on the 27 day of August, 1997, and shall
continue to and including the 1st day of June 1998, provided that either
party may terminate this Agreement with respect to any Aircraft for which
an uncompleted Service Order is not then in effect upon providing sixty
(60) days prior written notice to the other party. This Agreement shall
renew automatically for successive periods of one (1) year unless either
party gives notice of its election to reject such renewal not less than
sixty (60) days prior to the renewal date.
9.11 This Agreement shall be governed by and construed in accordance with the
laws of the Province of Alberta and the federal laws of Canada applicable
therein.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed
by the hands of their respective authorized signing officers as of the day and
year first above written.
TIME AIR INC. doing business as
CANADIAN REGIONAL
Per: D Bell
--------------------
Per: Barabara J Snowdon
--------------------
MIDWAY AIRLINES CORPORATION
Per: J S Waller
--------------------
13
<PAGE>
SCHEDULE "A"
Service Order
Pursuant to the Agreement between Time Air Inc. ("Time") and Midway Airlines
Corporation ("Customer") with respect to Maintenance Services to be provided
pursuant to an Aircraft Maintenance Services Agreement made effective the 27 day
of August, 1997, between Time and Customer.
1. Description of Aircraft
Manufacturer: Fokker
Model: F100
Hull Serial Number: __________________
Engine Make and Model: Rolls Royce Tay
Engine Serial Numbers: _________________ and _________________
2. Time of Delivery and Turn Around Time
Customer will deliver the Aircraft to Time on ____________, 19__.
Time shall use its best efforts but shall not be bound to complete the
Maintenance Services within _______ working days of receipt of the
Aircraft at the Facility or as soon as practicable depending on the extent
of the Services required to be performed by Time.
3. Description of Maintenance Services
4. Special Agreement with Respect to Rates and/or Invoice Procedures (if
any)
Pursuant to Article 4.1(a) of this Agreement, Customer shall pay to Time
an amount equal to $ in United States dollars representing fifty (50%)
percent of the costs to complete (including parts and labour) the routine
work package for an Aircraft prior to Time commencing Services on an
Aircraft.
5. All capitalized terms used in this Service Order will have the same
meanings attributed to them in the Aircraft Maintenance Services
Agreement.
AGREED this ______ day of _______________, 1997
TIME AIR INC. MIDWAY AIRLINES CORPORATION
Per: ____________________________ Per: ______________________________
<PAGE>
SCHEDULE "B"
RATES
Customer shall pay to Time:
a) The cost of direct labour used by Time in performing the Maintenance
Services and/or Additional Services at a rate of $40.00USD per man hour,
except NDT time which will be at $40.00USD per man hour;
b) Time's replacement costs for parts and materials provided by Time in
connection with each service rendered excluding shop consumable items
(that is, the invoice price and taxes payable by Time in respect of the
purchase of same) together with a twelve and one half (12.5%) percent
mark-up per line item (but in no event more than $2,500.00USD mark-up per
line item) and all taxes which Time must pay or withhold by reason of
Customer acquiring title to such parts or materials;
c) Two per cent (2%) of the cost of direct labour referred to in paragraph
(a) above, in payment for shop consumable items utilized and hazardous
materials handling and disposal undertaken to perform the Services;
d) For any agreed upon exchange of rotables and repairables between Time and
Customer, a charge of fifteen (15%) percent of unit value of each such
rotable, plus Time's overhaul and repair charges, to restore such rotable
to serviceable condition and equivalent modification status;
e) The costs of any work performed hereunder by contractors or
subcontractors other than Fokker Services, Inc. retained by Time
pursuant to paragraph 2.8 as billed to Time together with a handling
charge of ten (10%) percent. Transportation expenses shall be charged
at cost;
f) For fuel supplied by Time and not Customer in making tests of the
Services, performed pursuant hereto, a charge shall be levied which is
equivalent to the cost to Time of such fuel (including taxes payable in
respect of the purchase of same by Time) plus ten (10%) percent and in
addition, all tax which Time must pay or withhold by reason of Customer
acquiring title to such fuel;
During the term of this Agreement, should any engineering services of Fokker
Services, Inc. ("Fokker") be used, and if Customer has credit in its existing
Customized Service Package contract with Fokker, then the cost for such
engineering services can be charged to that agreement and will not be charged to
Customer under this Agreement.
<PAGE>
SCHEDULE "C"
Service Order
Pursuant to the Agreement between Time Air Inc. ("Time") and Midway Airlines
Corporation ("Customer") with respect to Maintenance Services to be provided
pursuant to an Aircraft Maintenance Services Agreement made effective the 27 day
of August, 1997, between Time and Customer.
1. Description of Aircraft
Manufacturer: Fokker
Model: F100
Hull Serial Number: 11329-N130ML
Engine Make and Model: Rolls Royce Tay
Engine Serial Numbers: 17667 and 17650
2. Time of Delivery and Turn Around Time
Customer will deliver the Aircraft to Time on September 3, 1997.
Time shall use its best efforts but shall not be bound to complete the
Maintenance Services within 10 working days of receipt of the Aircraft at
the Facility or as soon as practicable depending on the extent of the
Services required to be performed by Time.
3. Description of Maintenance Services
C4 workdeck and modifications provided to Time.
4. Special Agreement with Respect to Rates and/or Invoice Procedures (if
any)
Pursuant to Article 4.1(a) of this Agreement, Customer shall pay to Time
an amount equal to [***] in United States dollars representing fifty
(50%) percent of the costs to complete (including parts and labour) the
routine work package for an Aircraft prior to Time commencing Services on
an Aircraft.
5. All capitalized terms used in this Service Order will have the same
meanings attributed to them in the Aircraft Maintenance Services
Agreement.
AGREED this 27 day of August, 1997
TIME AIR INC MIDWAY AIRLINES CORPORATION
Per: /s/ D Bell Per: /s/ J S Waller
-------------------- -------------------------
Per: Barbara J Snowdon
--------------------
<PAGE>
SCHEDULE "C"
Service Order
Pursuant to the Agreement between Time Air Inc. ("Time") and Midway Airlines
Corporation ("Customer") with respect to Maintenance Services to be provided
pursuant to an Aircraft Maintenance Services Agreement made effective the 27
day of August, 1997, between Time and Customer.
1. Description of Aircraft
Manufacturer: Fokker
Model: F100
Hull Serial Number: 11323-N13lML
Engine Make and Model: Rolls Royce Tay
Engine Serial Numbers: 17203 and 17291
2. Time of Delivery and Turn Around Time
Customer will deliver the Aircraft to Time on September 13, 1997.
Time shall use its best efforts but shall not be bound to complete the
Maintenance Services within 10 working days of receipt of the Aircraft at
the Facility or as soon as practicable depending on the extent of the
Services required to be performed by Time.
3. Description of Maintenance Services
C4 workdeck and modifications provided to Time.
4. Special Agreement with Respect to Rates and/or Invoice Procedures (if any
Pursuant to Article 4.1(a) of this Agreement, Customer shall pay to Time
an amount equal to [***] in United States dollars representing fifty
(50%) percent of the costs to complete (including parts and labour) the
routine work package for an Aircraft prior to Time commencing Services on
an Aircraft.
5. All capitalized terms used in this Service Order will have the same
meanings attributed to them in the Aircraft Maintenance Services
Agreement.
AGREED this 27 day of August, 1997.
TIME AIR INC. MIDWAY AIRLINES CORPORATION
Per: /s/ D Bell Per: /s/ J S Waller
-------------------- -------------------------
Per: Barbara J Snowdon
--------------------
<PAGE>
EXHIBIT 10.26
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY [***]. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
EXECUTION COPY
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES
NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS,
WHICH, IN THE OPINION OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO COUNSEL FOR THIS CORPORATION IS AVAILABLE.
Void After 5:00 p.m., New York City Time,
on February 11, 2002
----------------------------
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF MIDWAY AIRLINES CORPORATION
Midway Airlines Corporation, a Delaware corporation (the "Company"),
hereby certifies that in consideration of amendments to certain agreements
and/or deferral of payments thereunder and other good and valuable
consideration, AMR Corporation is entitled, subject to the terms set forth
below, to purchase from the Company upon surrender of this Warrant, at any time
or times up to 5:00 p.m., New York City time, on February 11, 2002, the
expiration date of this Warrant, Five Hundred Seventy Two (572) fully paid and
non-assessable shares of the common stock, $0.01 par value per share (the
"Common Stock") of the Company at an initial purchase price of $1.00 per share,
payable in lawful money of the United States of America, as the same may be
adjusted in accordance with the provisions hereof (the "Exercise Price") .
As used herein, the term "Company" includes any corporation which
shall succeed to or assume the obligations of the Company hereunder, and the
term "Shares" includes all stock of any class, classes or series whether now or
hereafter authorized, (however designated) of the Company, the holders of which
shall have the right (without limitation as to amount) either to all or to a
share of the balance of current dividends and liquidating distributions after
the payment of dividends and distributions on any shares entitled to preference.
The number and character of the Shares which may be purchased upon
exercise of this Warrant and the purchase price per share in effect from time to
time are subject to adjustment from time to time as hereinafter provided.
<PAGE>
1. Compliance with the Securities Act of 1933.
The Shares issuable upon exercise of this Warrant have not been
registered under the Securities Act of 1933, as amended (the "Act"). The holder
hereof, by acceptance hereof, agrees that this Warrant and all Shares purchased
upon exercise hereof will be disposed of only in accordance with the Act and the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder. The Shares shall bear an appropriate legend to such effect.
2. Adjustments of Exercise Price and Number of Shares Issuable upon Exercise
of Warrants.
(a) Adjustment of Exercise Price. Subject to the provisions of this
Section 2, the Exercise Price in effect from time to time shall be subject to
adjustment, as follows:
(i) Without the prior written consent of the holder of the Warrant,
the Company shall not at any time or from time to time (i) issue or sell
any Shares without consideration, or for consideration per share less than
the Fair Market Value (as hereinafter defined), or (ii) issue or sell any
securities convertible into, or exchangeable for, Shares ("Convertible
Securities") at a conversion price per Share of less than the Fair Market
Value, or (iii) issue or sell any warrants or other rights to subscribe to
or purchase, or any options for the purchase of Shares or Convertible
Securities ("Rights or Options") at an exercise price per share of less
than the Fair Market Value (aa) to employees of the Company beyond that
number of Shares reserved for issuance to such employees pursuant to that
certain Merger Agreement dated as of January 17, 1997, as amended as of
January 31, 1997 and February 7, 1997, by and among the Company, GoodAero,
Inc., Zell/Chilmark Fund L.P., James H. Goodnight and John P. Sall or (bb)
to Zell/Chilmark Fund L.P., James H. Goodnight or John P. Sail or any
Affiliate (as hereafter defined) of any of them. As used herein, an
"Affiliate" shall mean (x) in the case of an individual, the spouse or an
immediate family member of such individual, a trust for the benefit of
such individual, spouse or immediate family member or any partnership,
corporation or other entity controlled by such individual, spouse or
immediate family member, (y) in the case of a partnership, any of its
limited or general partners, and any other partnership, corporation or
other entity controlled, controlling or under common control with such
partnership or general partners thereof; and (z) in the case of a
corporation, any corporation, partnership or other entity controlled,
controlling or under common control with such corporation.
(ii) In case the Company at any time or from time to time shall
distribute to holders of Shares, as such, (i) evidences of indebtedness or
assets (excluding regular cash dividends or cash distributions payable out
of consolidated retained earnings) of the Company or any corporation or
other legal entity a majority of the voting equity securities or equity
interests of which are owned, directly or indirectly, by the Company (a
"Subsidiary"), (ii) shares of capital stock of any Subsidiary, (iii)
securities convertible into or exchangeable
<PAGE>
for capital stock of any Subsidiary, or (iv) any rights, options or
warrants to purchase any of the foregoing, then and thereafter
successively upon each such distribution, the Exercise Price in effect
immediately prior to such issue or sale (the "Current Exercise Price")
shall, simultaneously with such distribution, be reduced to a price
(calculated to the nearest cent) determined by multiplying, (x) the
Current Exercise Price by (y) a fraction, the numerator of which will be
the Current Exercise Price less the fair value (as determined in good
faith by the Board of Directors of the Company, whose determination will
be conclusive if based on the financial advice of a nationally recognized
investment banking firm) of the portion of the evidences of indebtedness,
assets, securities or rights, options or warrants so distributed on
account of one Share on the record date of such distribution, and the
denominator of which will be such Current Exercise Price. Such adjustment
will be made whenever any such distribution is made, and will become
effective immediately after the record date for the determination of
stockholders entitled to receive such distribution.
(iii) In case the Company shall (i) subdivide or reclassify the
outstanding shares of its Common Stock into a greater number of shares, or
(ii) combine or reclassify the outstanding shares of its Common Stock into
a smaller number of shares, the Exercise Price in effect immediately after
the record date for such dividend or distribution or the effective date of
such subdivision, combination or reclassification shall be adjusted so
that it shall equal the price determined by multiplying the Current
Exercise Price by a fraction, of which the numerator shall be the number
of shares of Common Stock outstanding immediately before such subdivision,
combination or reclassification, and of which the denominator shall be the
number of shares of Common Stock outstanding immediately after such
subdivision, combination or reclassification. Such adjustment shall be
made successively whenever any event specified above shall occur.
(iv) Notwithstanding the foregoing, no adjustment to the Current
Exercise Price will be made in any case in which the Company shall issue
(i) Shares upon conversion or exchange of any Convertible Securities, (II)
Shares or Convertible Securities upon exercise of any Rights or Options or
(iii) in consideration of the acquisition by the Company of all or
substantially all of the stock of another company or all or substantially
all of the assets of another company (whether by merger, acquisition of
assets or otherwise), any Shares or any Convertible Securities or any
Rights or Options.
(v) Calculations pursuant to this Section 2(a) shall be made in
accordance with the following provisions:
(i) "Fair Market Value" of the Common Stock on any day shall
be determined as follows:
(x) If the Common Stock is not then regularly traded in
the securities markets, the Fair Market Value thereof shall
be determined in good faith by the Board of Directors of the
Company, and the Company shall deliver to the holder of the
Warrant a
-3-
<PAGE>
certificate of the Company's Secretary as to the adoption of
the Board resolution making such determination.
(y) If the Common Stock is then traded on a national
securities exchange or in the over-the-counter market, the
Fair Market Value thereof shall mean the average of the daily
closing prices of the Common Stock for the 30 consecutive
business days before the date of determination. The closing
price for each day shall be the last reported sale price
regular way or, in case no such reported sale takes place on
such date, the average of the bid and asked prices regular
way, on the principal national securities exchange on which
such stock is then listed or admitted to trading, or, if not
listed or admitted to trading on any national securities
exchange, the average of the closing bid and asked prices in
the over-the-counter market, as furnished by any national
brokerage firm selected from time to time by the Company for
that purpose.
(ii) In case of the issuance or sale of any securities of the
Company for cash, the consideration received by the Company therefor
shall be deemed to be the amount of cash received by the Company for
such security (or if such securities are sold to underwriters or
dealers for public offering without a subscription offer, the
initial public offering price), without deducting therefrom any
compensation or discount paid or allowed to underwriters or dealers
or others performing similar services or for any expenses incurred
in connection therewith.
(iii) In case of the issuance or sale of any securities of the
Company for consideration other than cash or a consideration a part
of which is other than cash, the amount of the consideration other
than cash received by the Company shall be deemed to be the fair
value of such consideration as determined by its Board of Directors,
which determination may be inconsistent with the accounting
treatment thereof.
(iv) In the case of the issuance or sale of Convertible
Securities, the aggregate consideration therefor shall be deemed to
be the consideration, if any, received at the time of such issuance
or sale, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or
exchange of such Convertible Securities at the time such Convertible
Securities first become convertible or exchangeable.
(v) In case of the issuance or sale of Rights or Options, the
aggregate consideration therefor shall be deemed to be the
consideration, if any, received at the time of such issuance or
sale, plus the minimum aggregate amount of additional consideration,
if any, payable to the Company upon the exercise of such Rights or
Options plus in the case of Rights or Options to purchase
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable to the
-4-
<PAGE>
Company upon the conversion or exchange of such Convertible
Securities at the time such Convertible Securities first become
convertible or exchangeable.
(vi) In case of the issuance or sale of Convertible Securities
or Rights or Options, the conversion or exercise price per Share
shall be determined by dividing the aggregate consideration for such
Convertible Securities or Rights or Options by the maximum number of
Shares issuable with respect to such Convertible Securities or
Rights or Options.
(vii) The maximum number of Shares issuable with respect to
Convertible Securities or Rights or Options shall include the number
of Shares issuable upon conversion or exchange of such Convertible
Securities or exercise of such Rights or Options, plus, in the case
of Rights or Options to purchase Convertible Securities, the number
of Shares issuable upon conversion or exchange of such Convertible
Securities.
(viii) In case of the issuance of additional Shares as a
dividend or as the distribution on any capital stock of the Company,
the aggregate number of Shares issued in payment of such dividend or
distribution shall be deemed to have been issued on the record date
for the determination of the stockholders entitled to receive such
dividends or distributions and shall be deemed to have been issued
without consideration.
(ix) The reclassification of securities other than Shares into
securities including Shares shall be deemed to involve the issuance
for consideration other than cash of such Shares on the record date
for the determination of stockholders entitled to receive such
Shares.
(x) The number of Shares at any time outstanding shall include
the maximum number of Shares issuable at such time with respect to
all Convertible Securities and Rights or Options then outstanding
and unconverted or exchanged or unexercised.
(b) No Adjustments to Exercise Price. No adjustment in the Exercise Price
in accordance with the provisions of paragraph (a) hereof need be made if such
adjustment would amount to a change in such Exercise Price of less than $.05;
provided, however, that the amount by which any adjustment is not made by reason
thereof shall be carried forward and taken into account at the time of any
subsequent adjustment in the Exercise Price.
(c) Adjustment to Number of Shares. Upon each adjustment of the Current
Exercise Price pursuant to paragraph (a), each Warrant shall thereupon evidence
the right to purchase that number of shares of Common Stock (calculated to the
nearest hundredth of a share) obtained by multiplying the number of shares of
Common Stock purchasable immediately prior to such adjustment upon exercise of
the Warrant by the Current Exercise Price and dividing the product so obtained
by the Exercise Price in effect immediately after such adjustment.
-5-
<PAGE>
(d) Reorganizations. In case of any capital reorganization, other than in
the cases referred to in paragraph (a) hereof, or the consolidation or merger of
the Company with or into another corporation (other than a merger or
consolidation in which the Company is the continuing corporation and which does
not result in any reclassification of the outstanding shares of Common Stock or
the conversion of such outstanding shares of Common Stock into shares of other
stock or other securities or property), (collectively such actions being
hereinafter referred to as "Reorganizations"), there shall thereafter be
deliverable upon exercise of any Warrant (in lieu of the number of shares of
Common Stock theretofore deliverable) the number of shares of stock or other
securities or property to which a holder of the number of shares of Common Stock
which would otherwise have been deliverable upon the exercise of such Warrant
would have been entitled upon such Reorganization if such Warrant had been
exercised in full immediately prior to such Reorganization. In case of any
Reorganization, appropriate adjustment, as determined in good faith by the Board
of Directors of the Company, shall be made in the application of the provisions
herein set forth with respect to the rights and interests of Warrant holders so
that the provisions set forth herein shall thereafter be applicable, as nearly
as possible, in relation to any shares or other property thereafter deliverable
upon exercise of Warrants. Any such adjustment shall be made by and set forth in
a supplemental agreement between the Company, or any successor thereto, and the
Warrant holders and shall for all purposes hereof conclusively be deemed to be
an appropriate adjustment. The Company shall not effect any such Reorganization,
unless upon or prior to the consummation thereof the successor corporation, or
if the Company shall be the surviving corporation in any such Reorganization and
is not the issuer of the shares of stock or other securities or property to be
delivered to holders of shares of the Common Stock outstanding at the effective
time thereof, then such issuer, shall assume by written instrument the
obligation to deliver to the registered holder of any Warrant Certificate such
shares of stock, securities, cash or other property as such holder shall be
entitled to purchase in accordance with the foregoing provisions. In the event
of sale or conveyance or other transfer of all or substantially all of the
assets of the Company as a part of a plan for liquidation of the Company, all
rights to exercise any Warrant shall terminate thirty (30) days after the
Company gives written notice to each registered holder of a Warrant Certificate
that such sale or conveyance or other transfer has been consummated.
(e) Exercise Price Not Less Than Par Value. In no event shall the Exercise
Price be adjusted below the par value per share of the Common Stock.
(f) Notice of Certain Actions. In the event the Company shall:
(i) declare any dividend payable in stock to the holders of its
Common Stock or make any other distribution in property other than cash to
the holders of its Common Stock; or
(ii) offer to the holders of its Common Stock rights to subscribe
for or purchase any shares of any class of stock or any other rights or
options; or
(iii) effect any reclassification of its Common Stock (other than a
reclassification involving merely the subdivision or combination of
outstanding
-6-
<PAGE>
shares of Common Stock), any capital reorganization, any consolidation or
merger (other than a merger in which no distribution of securities or
other property is made to holders of Common Stock), or any sale, transfer
of all or substantially all of the assets of the Company, or the
liquidation, dissolution or winding up of the Company; or
(iv) issue any shares of Common Stock in exchange for shares of
preferred stock of the Company, other than upon conversion of such shares
of preferred stock;
then, in each such case, the Company shall cause notice of such proposed action
to be mailed to each Warrant holder. Such notice shall specify the date on which
the books of the Company shall close, or a record be taken, for determining
holders of Common Stock entitled to receive such stock dividend or other
distribution or such rights or options, or the date on which such
reclassification, reorganization, consolidation, merger, sale, transfer, other
disposition, liquidation, dissolution, winding up or exchange shall take place
or commence, as the case may be, and the date as of which it is expected that
holders of record of Common Stock shall be entitled to receive securities or
other property deliverable upon such action, if any such date has been fixed.
Such notice shall be mailed in the case of any action covered by Subsection
(f)(i) or (f)(11) above, at least ten (10) days prior to the record date for
determining holders of the Common Stock for purposes of receiving such payment
or offer, and in the case of any action covered by Subsection (f)(iii) or
(f)(iv) above, at least ten (10) days prior to the earlier of the date upon
which such action is to take place or any record date to determine holders of
Common Stock entitled to receive such securities or other property.
(g) Notice of Adjustments. Whenever the Exercise Price shall be adjusted
as herein provided, and from time to time, at the reasonable request of a holder
of the Warrant, the Company, will forthwith deliver to such holder a certificate
signed by the President or a Vice President and by the Treasurer or an Assistant
Treasurer of the Company, showing in reasonable detail the facts requiring any
such adjustment and stating the Exercise Price in effect on the date of such
certificate after giving effect to any such adjustment and the number of shares
of Common Stock or other securities then purchasable upon the exercise hereof.
The Company may retain, but shall not be required to retain, a firm of
independent public accountants of recognized standing to make any computation
required under this Section 2(g), and the certificate signed by such firm shall
be conclusive evidence of the correctness of any such computation.
(h) Warrant Certificate Amendments. Irrespective of any adjustments
pursuant to this Section 2, Warrant Certificates theretofore or thereafter
issued need not be amended or replaced, but certificates thereafter issued shall
bear an appropriate legend or other notice of any adjustments.
(i) Fractional Shares. The Company shall not be required upon the exercise
of any Warrant to issue fractional shares of Common Stock which may result from
adjustments in accordance with this Section 2 to the Exercise Price or number of
shares of Common Stock purchasable under each Warrant. If more than one Warrant
is
-7-
<PAGE>
exercised at one time by the same registered holder, the number of full shares
of Common Stock which shall be deliverable shall be computed based on the number
of shares deliverable in exchange for the aggregate number of Warrants
exercised. With respect to any final fraction of a share called for upon the
exercise of any Warrant or Warrants, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to the same fraction of the
market value of a share of Common Stock, as determined by the Company on the
basis of the market price per share of Common Stock on the business day next
preceding the date of such exercise. The registered holder of each Warrant
Certificate, by his acceptance of the Warrant Certificate, shall expressly waive
any right to receive any fractional share of Common Stock upon exercise of the
Warrants. For the purposes hereof, the market price share of Common Stock at any
date shall mean the last reported sale price regular way or, in case no such
reported sale takes place on such date, the average of the last reported bid and
asked prices regular way, in either case on the principal national securities
exchange on which the Common Stock is admitted to trading or listed if that is
the principal market for the Common Stock or if not listed or admitted to
trading on any national securities exchange or if such national securities
exchange is not the principal market for the Common Stock, the closing bid price
as reported by the NASDAQ System or its successor, if any. If the price of the
Common Stock is not so reported, then such market price shall mean the last
known price paid per share by a purchaser of such stock in an arms-length
transaction. All calculations made hereunder shall be to the nearest 1/100th of
a share.
(j) The Company shall at all times reserve and keep available, out of its
treasury stock or authorized and unissued stock, solely for the purpose of
effecting the exercise of this Warrant, such number of shares of Common Stock
and other securities of the Company as shall, from time to time, be sufficient
to effect the exercise of this Warrant. All shares of Common Stock issued on
exercise of this Warrant shall be validly issued, fully paid and nonassessable.
3. Expiration.
This Warrant shall be void after 5:00 p.m., New York City time, on
February 11,2002, and no rights herein given to the holder of this Warrant shall
exist thereafter.
4. Warrant Holder Not Deemed a Stockholder.
No holder of this Warrant as such shall be entitled to vote or
receive dividends or be deemed the holder of shares of the Company for any
purpose, nor shall anything contained in this Warrant be construed to confer
upon the holder hereof, as such, any of the rights of a stockholder of the
Company or any right to vote, give or withhold consent to any corporate action
(whether any reorganization, issue of stock, reclassification of stock,
consolidation, merger, conveyance or otherwise), receive notice of meetings,
receive dividends or subscription rights, or otherwise, prior to the issuance of
record to the holder of this Warrant of the Shares which he is then entitled to
receive upon the due exercise of this Warrant.
-8-
<PAGE>
5. No Limitation on Corporate Action.
Except as otherwise provided herein, no provisions of this Warrant
and no right or option granted or conferred hereunder shall in any way limit,
affect or abridge the exercise by the Company of any of its corporate rights or
powers to recapitalize, amend its Certificate of Incorporation, reorganize,
consolidate or merge with or into another corporation, or to transfer all or any
part of its property or assets, or the exercise of any other of its corporate
rights and powers.
6. Exercise of Warrant.
(a) Full Exercise. This Warrant may be exercised as a whole by the
holder hereof by surrendering this Warrant, with the form of subscription at the
end hereof duly executed by such holder, to the Company at any time before 5:00
p.m., New York City time, on February 11, 2002, at the principal office of its
transfer agent accompanied by payment in cash or by certified or official bank
check, payable to the order of the Company, of the product obtained by
multiplying the number of Shares called for on the face of this Warrant (giving
effect to any adjustments therein) by the purchase price then in effect.
(b) Partial Exercise. This Warrant also may be exercised in part by
surrendering this Warrant in the manner specified in subsection (a) of this
Section 6, except that the number of Shares or other securities or property
receivable upon the exercise of this Warrant as a whole shall be proportionately
reduced. Upon any such partial exercise, the Company, at its expense, will
forthwith issue to the holder hereof a new Warrant or Warrants (herein
collectively referred to as "this Warrant") of like tenor evidencing the rights
of such holder to purchase a number of shares with respect to which the Warrant
shall not have been exercised (as such number would be constituted on the date
hereof.)
(c) Delivery of Stock Certificates, etc. As soon as practicable
alter any exercise of this Warrant and payment of the sum payable upon such
exercise, and in any event within 10 days thereafter, the Company, at its
expense (including the payment by it of any applicable issue taxes), will cause
to be issued in the name of and delivered to the holder hereof, or as such
holder (upon payment by such holder of any applicable transfer taxes) may
direct, a certificate or certificates for the number of fully paid and
non-assessable Shares or other securities or property to which such holder shall
be entitled upon such exercise, plus, in lieu of any fractional Shares to which
such holder would otherwise be entitled, cash equal to such fraction multiplied
by the Fair Market Value of a Share. Issuance and delivery of the Shares
deliverable on the due exercise of this Warrant may be postponed by the Company
and its transfer agent during any period, not exceeding forty days, for which
the transfer books of the Company for the Shares are closed between (1) the
record date set by the Board of Directors for the determination of stockholders
entitled to vote at or to receive notice of any stockholders' meeting, or
entitled to receive payment of any dividends or to any allotment of rights or to
exercise rights in respect of any change, conversion or exchange of capital
stock, and (2) the date of such meeting of stockholders, the date for the
payment of such dividends, the date for such allotment of rights, or the date
when
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any such change or conversion or exchange of capital stock shall go into effect,
as the case may be.
7. Exchange and Transfer of Warrants.
Subject to the provisions of Section 1 hereof, upon surrender for
exchange of this Warrant (in negotiable form, if not surrendered by the holder
named on the face thereof) to the Company or its transfer agent's principal
office, the Company, at its expense, will issue and deliver new Warrants of like
tenor, calling in the aggregate for the same dollar value of Shares, in the
denomination or denominations requested, to or on the order of such holder and
in the name of such holder or as such holder (upon payment by such holder of any
applicable transfer taxes) may direct; provided that the Warrant may be
transferred solely to Permitted Transferees as such term is defined in the
Stockholders Agreement referred to in Section 9 below. Until this Warrant is
transferred on the books of the Company, the Company may treat the registered
holder of this Warrant as absolute owner for all purposes without being affected
by any notice to the contrary.
8. Notices.
All communications hereunder shall be in writing and, if sent to the
holder hereof shall be mailed by registered or certified mail or delivered or
telegraphed and confirmed in writing to such holder at such holder's address as
set forth below, and if sent to the Company, shall be mailed by registered or
certified mail or delivered or telegraphed and confirmed in writing to the
Company at its address as set forth below.
to the Company:
Midway Airlines Corporation
300 West Morgan Street, 12th Floor
Durham, North Carolina 27701
Attention: Chief Executive Officer
to AMR Corporation:
American Airlines, Inc.
MD 5675 HDQ
P.O. Box 619616
DFW Airport, EC 75261-9616
Attention: Corporate Secretary
with a required copy to:
Airline Management Services, Inc.
MD 5220
P.O. Box 619616
DFW Airport, TX 75261-9616
Attention: Managing Director
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<PAGE>
9. STOCKHOLDERS AGREEMENT.
NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THIS WARRANT AND
THE SHARES REPRESENTED BY THIS WARRANT ARE SUBJECT TO THAT CERTAIN STOCKHOLDERS
AGREEMENT DATED AS OF FEBRUARY 11, 1997 BY AND AMONG THE COMPANY, AMR
CORPORATION, ZELL/CHILMARK FUND L.P., WINGS AIRCRAFT FINANCE, INC., DEBIS
AIRFINANCE B.V., JAMES H. GOODNIGHT AND JOHN P. SALL.
Dated: February 11, 1997
MIDWAY AIRLINES CORPORATION
By: /s/ Robert R. Ferguson
--------------------------------
Name: Robert R. Ferguson III
Title: President and Chief Executive
Officer
Attest:
By: /s/ Tina M. Gerlach
------------------------------
Name Tina M. Gerlach
Title Assistant Secretary
-11-
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED _____________ hereby sells, assigns and
transfers unto ________ the within Warrant and does hereby irrevocably
constitute and appoint ________________ , Attorney, to transfer the said Warrant
on the books of the within named corporation with MI power of substitution in
the premises.
Dated: ______________
NOTICE: The signature to this assignment
must correspond with the name as written
upon the face of the Certificate, in every
particular, without alteration or
enlargement or any change whatever.
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<PAGE>
SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER IF HE
DESIRES TO EXERCISE THIS WARRANT
----------------------------------
The undersigned hereby exercises the right to purchase Shares
covered by this Purchase Warrant according to the conditions thereof and
herewith makes payment of the purchase of such Shares in full.
______________________________
Signature
______________________________
Address
______________________________
Number of Shares to Be
Purchased
Dated: _____________
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<PAGE>
EXHIBIT 10.28
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS
EXHIBIT. THE CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED
BY [***]. THE CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION.
V2500^R
GENERAL TERMS OF SALE
BETWEEN
IAE INTERNATIONAL AERO ENGINES AG
AND
MIDWAY AIRLINES CORPORATION
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INDEX
Commencement
Recitals
CLAUSE 1 DEFINITIONS
CLAUSE 2 SALE OF PURCHASED ITEMS
2.1 Intent
2.2 Agreement to Place Orders
2.3 Type Approval and Changes in Specification
2.4 Inspection and Acceptance
2.5 Delivery, Shipping, Title and Risk of Loss or Damage
2.6 Price
2.7 Payment
CLAUSE 3 SPARE PARTS PROVISIONS
3.1 Intent and Term
3.2 ATA Standards
3.3 Initial Provisioning
3.4 Change in Initial Provisioning Data
3.5 Discontinuance of Initial Provisioning Data, Use of
Procurement Data
3.6 Stocking of Spare Parts by IAE
3.7 Lead Times
3.8 Ordering Procedure
3.9 Modifications to Spare Parts
3.10 Inspection
3.11 Delivery and Packing
3.12 Prices
3.13 Payment
3.14 Resale of Surplus Spare Parts
3.15 Purchase by Midway from Others
3.16 Special Tools, Ground Equipment and Consumable Stores
3.17 Conflict
CLAUSE 4 WARRANTIES, GUARANTEES AND LIABILITIES
CLAUSE 5 PRODUCT SUPPORT
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CLAUSE 6 MISCELLANEOUS
6.1 Delay in Delivery
6.2 Patents
6.3 Credit Reimbursement
6.4 Non-Disclosure and Non-Use
6.5 Taxes
6.6 Amendment
6.7 Assignment
6.8 Exhibits
6.9 Headings
6.10 Law
6.11 Notices
6.12 Exclusion of Other Provisions and Previous Understandings
6.13 Termination
EXHIBIT A CONTRACT SPECIFICATION
EXHIBIT B PURCHASED ITEMS, PRICE, ADJUSTMENT FORMULA AND DELIVERY
EXHIBIT C PRODUCT SUPPORT
EXHIBIT D WARRANTIES, GUARANTEES AND PLANS
D-1 ENGINE AND PARTS SERVICE POLICY
D-2 NACELLE SERVICE POLICY
D-3 NON-INSTALLATION ITEMS WARRANTY
D-4 RELIABILITY GUARANTEE
D-5 INFLIGHT SHUTDOWN GUARANTEE
D-6 EXHAUST GAS TEMPERATURE GUARANTEE
D-7 FUEL CONSUMPTION RETENTION GUARANTEE
D-8 DELAY AND CANCELLATION
D-9 FLEET HOUR AGREEMENT
3
<PAGE>
THIS CONTRACT is made this 17 day of May, l995
BETWEEN
IAE INTERNATIONAL AERO a joint stock company organized and existing
ENGINES AG under the laws of Switzerland, whose
registered office is at Stampfenbachstrasse
73, 8035 Zurich, Switzerland (hereinafter
called "IAE") and
MIDWAY AIRLINES CORPORATION a corporation organized and existing under
the laws of Illinois, whose registered
office is at 5713 South Central Avenue,
Chicago, Illinois 60638 (hereinafter called
"Midway")
WHEREAS:
A. Pursuant to an Airbus A320-200 Purchase Agreement dated 17 March 1995
between A.V.S.A S.A.R.L ("Airbus Industrie") and Midway (the "Aircraft
Purchase Agreement"), Midway has agreed to purchase four firm and has
acquired the option to purchase four Airbus A320 aircraft to be powered by
IAE V2527-A5 propulsion systems from Airbus Industrie.
B. Midway has also agreed to lease four firm Airbus A320 aircraft from Orix
Aviation Systems Limited ("Orix") and intends to lease another Airbus A320
aircraft from Kawasaki Leasing International ("Kawasaki"), all to be
powered by V2500-A1 propulsion systems.
C. IAE is prepared to supply to Midway V2500 engines, modules, spare parts,
special tools, ground equipment, product support services and consumable
stores for the support and operation of the V2500 propulsion systems.
NOW THEREFORE IT IS AGREED AS FOLLOWS:-
CLAUSE 1 DEFINITIONS
In this Contract unless the context otherwise requires:-
1.1 "Aircraft" shall mean collectively the new A320 Firm Aircraft and if
Midway's option is exercised, the Option Aircraft specified below, powered by
new V2527-A5 propulsion systems and being purchased by Midway from Airbus
Industrie scheduled for delivery as follows:
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<PAGE>
"Firm Aircraft":
One (1) in December 1998
One (1) in January 1999
One (1) in February 1999
One (1) in December 1999
"Option Aircraft":
One (1) in January 2000
One (1) in February 2000
One (1) in November 2000
One (1) in December 2000
1.2 "Leased Aircraft" shall mean collectively A320 Firm Leased Aircraft and
Option Leased Aircraft specified below, powered by V2500-A1 propulsion systems
leased by Midway scheduled for delivery as follows:
Orix "Firm Leased Aircraft":
Two (2) in April 1995
Two (2) in May 1995
Kawasaki "Option Leased Aircraft":
One (1) in June 1995
1.3 "Aircraft Manufacturer" shall mean Airbus Industrie.
1.4 "Basic Contract Price" shall mean the basic price of each of the Purchased
Items as specified in Exhibit B to this Contract.
1.5 "Certification Authority" shall mean the regulatory authority responsible
for the type certification of the Engine, referred to in Exhibit A.
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<PAGE>
1.6 "Engine(s)" shall mean the IAE V2527-A5 aero engine described in the
Specification.
1.7 "Initial Provisioning" shall mean the establishment by Midway of an
initial stock of Spare Parts.
1.8 "Initial Provisioning Data" shall mean information supplied by IAE to
Midway for Initial Provisioning purposes.
1.9 "Initial Provisioning Orders" shall mean orders for Spare Parts for
Initial Provisioning purposes.
1.10 "Installation Items" shall mean Engines, modules, accessories, exhaust
systems, nacelles and all ancillary equipment therefor described in the
Specification which are being supplied pursuant to this Contract for
installation in the Aircraft.
1.11 "Lead Time" shall mean the period between acceptance by IAE of an order of
Midway and commencement of delivery.
1.12 "Non-Installation Items" shall mean jigs, tools, handling and
transportation equipment and all equipment whatsoever to be supplied
pursuant to this Contract for use with the Installation Items and not for
installation in the Aircraft.
1.13 "Other Supplies" shall mean special tools, ground equipment and
consumable stores (e.g. oils, greases, dyes and penetrants).
1.14 "Procurement Data" shall mean information supplied by IAE to Midway about
Spare Parts required to replenish the initial stock.
1.15 "Purchased Items" shall mean those Installation Items and Non-Installation
Items specified in Exhibit B to this Contract.
1.16 "Service Bulletins" shall mean those service bulletins containing advice
and instructions issued by IAE to Midway from time to time in respect of
Engines.
1.17 "Spare Parts" shall mean spare parts for Engines excluding the items
listed in the Specification as being items of supply by Midway.
1.18 "Spare Parts Catalog" shall mean the catalog published by IAE from time to
time providing a description, Lead Time and price at a part number level,
for Spare Parts, tools and Vendor Parts available from IAE.
6
<PAGE>
1.19 "Specification" shall mean the IAE Contract Specification No. IAE S27A5
which forms Exhibit A to this Contract.
1.20 "Vendor Parts" shall mean Spare Parts described in Initial Provisioning
Data or Procurement Data which are not manufactured pursuant to the
detailed design and order of IAE.
1.21 "Supplies" shall mean Installation Items, Non-Installation Items, Spare
Parts and any other goods or services supplied pursuant to this Contract.
CLAUSE 2 SALE OF PURCHASED ITEMS
2.1 Intent
Subject to the provisions of this Contract, IAE agrees to sell to Midway and
Midway agrees to buy from IAE, the Purchased Items as set forth herein.
2.2 Agreement to Place Orders
2.2.1 Midway has agreed to purchase from the Aircraft Manufacturer in
accordance with the terms of the Aircraft Purchase Agreement at least four
firm and has procured from the Aircraft Manufacturer four options to
purchase new Aircraft powered by new V2527-A5 propulsion systems for
delivery as set forth in Clause 1.1 above.
2.2.2 Midway has agreed to lease from Orix in accordance with the terms of
four aircraft lease agreements at least the four Firm Leased Aircraft and
it intends to enter into an option to lease the one Option Leased Aircraft
powered by V2500-A1 propulsion systems for delivery as set forth in Clause
1.2 above.
2.2.3 Midway hereby enters into a firm and unconditional agreement with
IAE for the purchase of one new V2527-A5 spare Engine for delivery as set
forth in Exhibit B to this Contract.
7
<PAGE>
2.2.4 If Midway exercises the option to purchase the Option Aircraft,
Midway agrees to enter into a firm and unconditional agreement with IAE
for the purchase of one new V2527-A5 spare Engine to support all the
Option Aircraft purchased and accepted by Midway in addition to the four
Firm Aircraft. Should Midway purchase some but not all four of the Option
Aircraft, then Midway agrees to ensure spare Engine support of the actual
option aircraft purchased to levels which will be determined mutually
between IAE and Midway.
2.3 Type Approval and Changes in Specification
2.3.1 IAE will cause the Purchased Items to be manufactured to the
Specification. After the date of this Contract the Purchased Items
may be varied from time to time by Change Orders in writing which
shall set forth in detail:
2.3.1.1 The changes to be made in the Purchased Items and
2.3.1.2 The effect (if any) of such changes on the Specification
(including but not limited to performance and weight),
on interchangeability of the Purchased Items in the
airframe, on prices and on dates of delivery of the
Purchased Items.
Change Orders shall not be binding on either party until signed by IAE and
Midway but upon being so signed shall constitute amendments to this Contract.
2.3.2 IAE may make any changes in the Purchased Items which do not
adversely affect the Specification, (including but not limited to
performance and weight), interchangeability of the Purchased Items
in the airframe, prices or dates of delivery of the Purchased Items.
In the case of such permitted changes, a Change Order shall not be
required.
2.3.3 At the time of delivery of the Purchased Items there is to be in
existence a Type Approval Certificate in accordance with the
provisions of the Specification.
2.3.4 The Specification has, however, been drawn with a view to the
requirements of the Certification Authority and the official
interpretations of such requirements in existence at the date of
this Contract (such requirements and interpretations being
hereinafter referred to as "Current Rules"). Subject to Clause 2.3.2
above IAE and Midway agree that they will execute an appropriate
Change Order in respect of any change required to the Purchased
Items to enable such Purchased Items to conform to the requirements
of the Certification Authority and the official interpretations of
such requirements in force at the date of delivery of such Purchased
Items.
8
<PAGE>
2.3.5 The price of any Change Order is to be borne:
2.3.5.1 in the case of changes required to conform to the
Current Rules - by IAE; and
2.3.5.2 in the case of changes required to enable such
Purchased Items to conform to the requirements of the
Certification Authority and the official
interpretations of such requirements in force at the
date of delivery of such Purchased Items and where
such changes have not resulted in IAE increasing its
engine list price in existence at the date of this
Contract for such change then the price of such
changes will be borne by IAE; and
2.3.5.3 in any other case - by Midway.
2.4 Inspection and Acceptance
2.4.1 Conformance to the Specification of Purchased Items which are
Installation Items will be assured by IAE through the maintenance of
procedures, systems and records approved by the Certification
Authority. Conformance documentation will be issued and signed by
personnel authorized for such purposes.
2.4.2 Conformance to the Specification of Purchased Items which are
Non-Installation Items will be assured by IAE conformance
documentation.
2.4.3 Upon issue of conformance documentation pursuant to Clause 2.4.1 or
Clause 2.4.2 above, Midway shall be deemed to have accepted the
Purchased Items and that the Purchased Items conform to the
Specification. IAE shall, subject to the permission of the
appropriate governmental authorities, arrange for Midway to have
reasonable access to the appropriate premises in order to examine
the Purchased Items prior to the issue of conformance documentation
and to witness Engine acceptance tests.
2.4.4 Unless separately agreed in accordance with Clause 6.6, if the
Purchased Items are in accordance with the requirements of this
Contract and IAE is not in material breach of its obligations
hereunder, if Midway refuses or hinders delivery, or if IAE at
Midway's written request agrees to delay delivery of any of the
Purchased Items, Midway shall nevertheless pay or cause IAE to be
paid therefor as if, for the purposes of payment only, the Purchased
Items had been delivered.
9
<PAGE>
2.4.5 In any of the cases specified in Clause 2.4.4 above, Midway shall
also pay to IAE such reasonable sum as IAE shall require in respect
of storage, maintenance and insurance of those Purchased Items.
2.5 Delivery, Shipping, Title and Risk of Loss or Damage
2.5.1 IAE will deliver the Purchased Items, at its option, either
ex-works Connecticut, U. S. A. or ex-works Derby, England, in
accordance with the delivery schedule set out in Exhibit B to
this Contract.
2.5.2 Upon such delivery, title to and risk of loss of or damage to the
Purchased Items shall pass to Midway.
2.5.3 Midway will notify IAE at least four (4) weeks before the time for
delivery of the Purchased Items of its instructions as to the
marking and shipping of the Purchased Items.
2.6 Price
The Purchase Price for each of the Purchased Items shall be the Basic Contract
Price, amended pursuant to Clause 2.3 above, and adjusted in accordance with the
adjustment formula contained in Exhibit B to this Contract.
2.7 Payment
2.7.1 Midway will make payment in United States Dollars as follows:
2.7.1.1 Upon signature of this Contract, Midway shall pay to IAE
a deposit of ten percent (10%) of the Estimated Purchase
Price of the Purchased Items.
2.7.1.2 Eighteen months before the scheduled delivery of each of
the Purchased Items, Midway shall pay to IAE a further
deposit of ten percent (10%) of the Estimated Purchase
Price of such item.
2.7.1.3 Twelve months before the scheduled delivery of each of
the Purchased Items, Midway shall pay to IAE a further
deposit of ten percent (10%) of the Estimated Purchase
Price of such item.
2.7.1.4 On delivery of each of the Purchased Items, Midway shall
pay to IAE the balance of the Purchase Price of such
item.
2.7.2 IAE shall have the right to require Midway to make additional
deposits in respect of price changes arising from the provisions of
Clause 2.3 above on a similar basis to that specified in Clause
2.7.1 above.
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2.7.3 Midway undertakes that IAE shall receive the full amount of payments
falling due under this Clause 2.7, without any set-off or deduction
whatsoever.
2.7.4 All payments under this Clause 2.7 shall be made by cable or
telegraphic transfer and shall be deposited not later than the due
date of payment with the following bank for the account of IAE:
National Westminster Bank, N.A.
175 Water Street
New York, NY 10038
Account No. 2982008199
ABA No. 021000322
2.7.5 For the purpose of this Clause 2.7 "payment" shall only be deemed to
have been made to the extent cleared or good value funds are
received in the numbered IAE bank account specified in Clause 2.7.4
above.
2.7.6 If Midway fails to make any payment for any Purchased Item on or
before the date when such payment is due, then, without prejudice to
any of IAE's other rights, IAE will be entitled to charge interest
on the overdue amount, at the rate of 1.5% per month, from the date
such payment was due to the date such payment is made.
2.7.7 For the purpose of this Clause 2.7, the "Estimated Purchase Price"
of any of the Purchased Items shall be calculated in accordance with
the following formula.
P = B x (1.06)^N
where:
P is the Estimated Purchase Price
B is the applicable Basic Contract Price
N is the year of scheduled delivery minus the
year for which the Basic Contract Price is defined.
CLAUSE 3 SPARE PARTS PROVISIONS
3.1 Intent and Term
3.1.1 For as long as Midway owns and operates one or more Aircraft in
regular commercial service and complies with its obligations to IAE
under the Contract, IAE shall provide that reasonably adequate
supplies of Spare Parts are available for sale to Midway under this
Contract. In consideration thereof, IAE shall sell
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<PAGE>
to Midway and, except as hereinafter provided, Midway shall buy from
IAE, Midway's requirements of the following Spare Parts:
3.1.1.1 All Spare Parts manufactured pursuant to the detailed
design and order of IAE where IAE is the only source
from which Midway can purchase such Spare Parts in an
unused condition and in quantities sufficient to meet
Midway's requirements; and
3.1.1.2 Vendor Parts for which direct supply arrangements
between the manufacturers of such Vendor Parts and
Midway cannot be established. Except for the purposes of
Initial Provisioning pursuant to Clause 3.3 below,
Midway shall notify IAE in writing not less than twelve
(12) months before scheduled delivery that Midway
intends to purchase such Vendor Parts from IAE.
3.1.2 In an emergency, IAE shall sell to Midway Vendor Parts which it is
not obliged to sell under this Contract, but which it has in stock
or otherwise has reasonably available to it.
3.2 ATA Standards
The parties to this Contract shall comply with the requirements of ATA
Specifications 200 and 300, provided that any of the parties shall be entitled
to negotiate reasonable changes in those procedures or requirements of the said
specifications which, if complied with exactly, would result in an undue
operating burden or unnecessary economic penalty.
3.3 Initial Provisioning
3.3.1 To assist Midway's Initial Provisioning, IAE shall supply Midway
with Initial Provisioning Data in accordance with ATA Specification
200, subject to Clause 3.2 above.
3.3.2 Details of the format and precise nature of the said Initial
Provisioning Data, including the applicable revision numbers of ATA
Specification 200, definition of Spare Parts Categories, and Lead
Times, and agreement on technical publications shall be agreed
between IAE and Midway at a preliminary meeting held for this
purpose at a time and place to be agreed.
3.3.3 The said Initial Provisioning Data shall cover all Spare Parts,
including agreed Vendor Parts, which may be reasonably required for
Midway's operation of the Installation Items.
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3.3.4 Before Midway places Initial Provisioning Orders, a conference shall
be held for the review of Initial Provisioning Data supplied by IAE
under Clause 3.3.1 above. The said conference shall be held
approximately 18 months before first Aircraft delivery and shall be
attended by the personnel of each party directly responsible for
Initial Provisioning.
3.4 Change In Initial Provisioning Data
IAE shall, free of charge, progressively and promptly revise Initial
Provisioning Data in accordance with ATA Specification 200 to take into account
any changes which may materially affect provisioning decisions.
3.5 Discontinuance of Initial Provisioning Data - Use of Procurement Data
3.5.1 Use of Initial Provisioning Data shall be discontinued on a date to
be agreed by the parties hereto, but in any event no later than the
date of delivery of the last Aircraft firmly ordered by Midway at
the date of this Contract. On or before the said date IAE shall
furnish Midway with Procurement Data complying with ATA
Specification 200 and shall revise the said Procurement Data as a
matter of routine thereafter.
3.5.2 Procurement Data shall be used to enable Midway to continue to order
Spare Parts to support the Installation Items.
3.6 Stocking of Spare Parts
Upon request, Midway shall provide IAE with information reasonably required to
enable IAE to organize the manufacture and stocking of Spare Parts efficiently.
3.7 Lead Times
3.7.1 Spare Parts for Initial Provisioning shall be delivered on or before
the dates specified in Midway's orders, provided that the said dates
comply with the terms of this Contract and do not call for delivery
more than three (3) months before the scheduled date of delivery of
the first Aircraft to Midway and provided further that delivery of
the total Initial Provisioning quantity shall be effected against a
schedule commensurate with Midway's fleet build up and Aircraft
utilization.
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3.7.2 Save as herein provided, replenishment Spare Parts shall be
delivered within the Lead Time specified in the IAE Spare Parts
Catalog, except for certain major Spare Parts which shall be
designated in Initial Provisioning Data and Procurement Data as
being available at prices and lead times to be quoted upon request.
3.7.3 If any order for replenishment Spare Parts shall call for a quantity
materially in excess of Midway's normal requirements, IAE shall
notify Midway and may request a special delivery schedule. If Midway
confirms that the full quantity ordered is required, delivery of the
order shall be effected at delivery dates specified by IAE and the
Lead Times provided by this Clause shall not apply.
3.7.4 In an emergency, IAE shall endeavor to deliver Spare Parts,
including certain major Spare Parts referred to in Clause 3.7.2
above, within the time limits specified by Midway. The action to be
taken on such orders shall be advised as follows within the
following time periods from IAE's receipt of such notice:
3.7.4.1 AOG orders - within 4 hours;
3.7.4.2 other emergency orders - within 24 hours;
3.7.4.3 orders for items of which Midway is out-of-stock -
within 7 days.
3.8 Ordering Procedure
3.8.1 After receipt of Initial Provisioning Data, Midway shall place its
Initial Provisioning Orders in sufficient time to allow IAE to
commence delivery prior to delivery of the first Aircraft. Midway
shall use its best efforts to give priority to ordering major items
designated in the Initial Provisioning Data.
3.8.2 Subsequent orders for Spare Parts shall be placed by Midway from
time to time as may be appropriate. Midway shall give IAE as much
notice as possible of any change in its operation, including, but
not limited to, changes in maintenance or overhaul arrangements
affecting its requirements of Spare Parts, including Vendor Parts.
3.8.3 IAE shall promptly acknowledge receipt of each order for Spare Parts
in accordance with ATA Specification 200 procedure. Unless
qualified, such acknowledgment, subject to variation in accordance
with Clause 3.7.3 above, shall constitute an acceptance of the order
under the terms of this Contract.
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3.8.4 Subject to Clause 3.12.2 below, IAE shall accept "control shipdates"
as defined in ATA Specification 200 in orders for Spare Parts
provided that such dates allow IAE its applicable Lead Times in
making shipment and are not subject to cancellation by Midway at
less than twelve (12) calendar months' notice.
3.8.5 If IAE notifies Midway that certain Spare Parts are packed in
standard package quantities (hereinafter called "SPQ's") or that a
minimum sales quantity (hereinafter called "MSQ") applies, Midway's
subsequent orders for such Spare Parts shall be for SPQ's or
multiples thereof with a minimum of one MSQ.
3.8.6 Unless Midway shall have specified "Total Quantity Required" on its
orders, IAE shall be entitled to consider an order for inexpensive
Spare Parts complete if at least 90% of the quantity ordered is
delivered. For the purpose of this Clause the term "inexpensive"
shall mean a price listed in the IAE Spare Parts Catalog at less
than Ten U.S. Dollars ($10) per unit, but shall be subject to review
by IAE from time to time.
3.8.7 Not later than the time of placing Initial Provisioning Orders,
Midway shall provide IAE with full shipping instructions applicable
to both Initial Provisioning Orders and to subsequent standard
replenishment orders for Spare Parts to be placed by Midway.
3.9 Modifications to Spare Parts
3.9.1 IAE shall be entitled to make modifications or changes to the Spare
Parts ordered by Midway hereunder. IAE shall promptly inform Midway
by means of Initial Provisioning Data, Procurement Data and Service
Bulletins when such modified Spare Parts (or Spare Parts introduced
by a repair scheme) become available for supply hereunder.
Notification of such availability shall be given to Midway before
delivery.
3.9.2 Modified Spare Parts may be supplied unless the modifications stated
in Service Bulletins, in the recommended or optional category are
considered by Midway to be unacceptable and Midway so states in
writing to IAE within 90 days of the transmittal date of a Service
Bulletin, in which case Midway shall be entitled to place a single
order for Midway's anticipated total requirement of pre-modified
Spare Parts, at a price and delivery schedule to be agreed.
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3.9.3 Unless Midway notifies IAE in writing under the provisions of Clause
3.9.2 hereof IAE may supply at the expense of Midway a modification
of any Spare Part ordered (including any additional Spare Part
needed to ensure interchangeability), provided that the said
modification has received the approval of the Certification
Authority. The delivery of such Spare Parts shall begin on dates
indicated by Service Bulletin. The delivery schedule shall be agreed
at the time when orders for modifications are accepted by IAE.
3.9.4 If Spare Parts required for incorporation of a modification are not
ordered as a kit, Midway's orders must distinguish them from normal
replacement Spare Parts in accordance with ATA Specification 200.
3.10 Inspection
3.10.1 Conformance to the Specification of Installation Items will be
assured by IAE through the maintenance of procedures, systems and
records approved by the Certification Authority. Conformance
documentation will be issued and signed by personnel authorized for
such purpose.
3.10.2 Conformance of Non-Installation Items will be assured by IAE
conformance documentation.
3.10.3 Upon the issue of conformance documentation in accordance with
Clauses 3.10.1 or 3.10.2 above, Midway shall be deemed to have
accepted the Installation Items and Non-Installation Items and that
such Items conform to specification.
3.11 Delivery and Packing
3.11.1 IAE shall deliver Spare Parts and Other Supplies ex-works, the IAE
point of manufacture. Shipping documents and invoices shall be in
accordance with ATA Specification 200.
3.11.2 Upon such delivery, title to and risk of loss of or damage to the
said Spare Parts and Other Supplies shall pass to Midway.
3.11.3 In accordance with ATA Specification 200 requirements, Midway shall
advise IAE at time of order of its instructions as to the marking
and shipping of the Spare Parts and Other Supplies.
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3.11.4 The packaging of Spare Parts shall normally be in accordance with
ATA Specification 300 Category 2 standard and shall be free of
charge to Midway. Category 1 standard packaging if required by
Midway shall be paid for by Midway.
3.12 Prices
3.12.1 Subject to Clause 3.7.2 above, prices of all Spare Parts shall be
quoted in U.S. Dollars, in the IAE Spare Parts Price Catalog,
Initial Provisioning Data and Procurement Data. Such prices shall
represent net unit prices, ex-works the IAE point of manufacture.
3.12.2 Prices applicable to each order placed by Midway hereunder shall be
the prices in effect on the date IAE receives such order, except
when delivery of Spare Parts against any order is scheduled to take
place after the Lead Time stated in the IAE Spare Parts Price
Catalog, in which event the prices for such items shall be those
prices in effect ninety (90) days prior to the scheduled time for
delivery in accordance with Clause 3.12.3 below.
3.12.3 IAE may from time to time adjust its prices for Spare Parts upon
not less than ninety (90) days notice to Midway, except that prices
for Spare Parts quoted in Initial Provisioning Data shall be firm,
provided that:
3.12.3.1 Orders are placed within three (3) months of receipt
by Midway of Initial Provisioning Data, and
3.12.3.2 Ordered quantities are agreed by IAE, such agreement
not to be unreasonably withheld by IAE, and
3.12.3.3 Deliveries are scheduled to be made prior to the
scheduled date for delivery of the first Aircraft as at
the date of supply by IAE of Initial Provisioning Data.
If for any reason orders are placed or subsequently rescheduled to specify
delivery more than six months after the date of first Aircraft delivery as
scheduled at the date of supply by IAE of Initial Provisioning Data, then the
prices for such items shall be those prices in effect ninety (90) days prior to
the scheduled time for delivery of such items against a schedule commensurate
with Midway fleet build up and Aircraft utilization. Notwithstanding the above,
individual price errors in the calculation of prices may be adjusted without
advance notice to Midway.
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3.12.4 On request by Midway, prices of Spare Parts or other materials not
included in the Spare Parts Price Catalog shall be quoted within a
reasonable time by IAE.
3.13 Payment
3.13.1 Payment for all purchases under this Clause 3 shall be made by
Midway to IAE within 30 days after the date of delivery.
3.13.2 Midway undertakes that IAE shall receive payment in U.S. Dollars of
the full amount of payments falling due under this Clause 3.13,
without any set-off or deduction whatsoever.
3.13.3 All payments under this Clause 3.13 shall be made by cable or
telegraphic transfer to, and shall be deposited not later than the
due date of payment with:
National Westminster Bank, N.A
175 Water Street
New York, NY 10038
Account No. 2982008199
ABA No. 021000322
3.13.4 For the purpose of this Clause 3.13, payment shall only be deemed
to have been made to the extent immediately available funds are
received in the numbered IAE bank account specified in sub-clause
3.13.3 above.
3.13.5 Notwithstanding Clause 3.13.1 above, payments for all purchases
shall be due from Midway upon delivery, or at IAE's option prior to
delivery of the purchased items upon the occurrence of any of the
following events: (a) a receiver or trustee is appointed of any of
Midway's property, or (b) Midway is adjudicated or voluntarily
becomes a bankrupt under any bankruptcy or winding up laws or other
similar legislation, or (c) Midway becomes insolvent or makes an
assignment for the benefit of creditors, or (d) an execution is
issued pursuant to a judgment rendered against Midway, or (e) Midway
is unable or refuses to make payment to IAE in accordance with any
of Midway's obligations to IAE.
3.13.6 If Midway fails to make any payment for any Spare Parts or Other
Supplies on or before the date when such payment is due, then,
without prejudice to any of IAE's other rights, IAE will be entitled
to charge interest on the overdue amount, at the rate of 1.5% per
month, from the date such payment was due to the date such payment
is made.
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3.14 Resale of Surplus Spare Parts
3.14.1 IAE is prepared at any time to consider the repurchase of Spare
Parts from Midway, if they are surplus to Midway's requirements.
3.14.2 Spare Parts to be resold shall be identified on lists submitted by
Midway to IAE at the time of resale and shall be delivered at
Midway's cost to IAE, at the factory of the Manufacturer or other
mutually agreed location.
3.14.3 Prices for Spare Parts resold to IAE under Clause 3.14.1 above
shall be the unit net prices paid therefor by Midway. All payments
made by IAE under this Clause 3.14 shall be by way of credit note to
Midway's account at IAE.
3.15 Purchase by Midway from Others
3.15.1 Midway may purchase from another A320-200 operator Spare Parts,
which by virtue of Clause 3.1 above are required to be purchased
from IAE:
3.15.1.1 on an occasional basis; or
3.15.1.2 where the said operator has excessive stock holdings
of the Spare Parts concerned; or
3.15.1.3 pursuant to a pooling arrangement or joint use agreement
between Midway and the said operator.
3.15.2 Subject to the conditions specified below, in the following
circumstances Midway may obtain from established and approved
sources, other than IAE or other A320-200 operators, Spare Parts
which by virtue of Clause 3.1 above are required to be purchased
from IAE:
3.15.2.1 as a temporary expedient in the event of a temporary
but material failure by IAE to supply Spare Parts as
required herein; or
3.15.2.2 during any period when IAE is hindered or prevented from
delivering Spare Parts due to circumstances beyond its
control provided Midway is thereby able to obtain the
Spare Parts it requires sooner than IAE is able to
supply them, and provided further that Midway will not
unreasonably thereby increase its stock of the Spare
Parts; or
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3.15.2.3 where IAE identifies a Spare Part as a standard part.
Midway's rights under Clause 3.15.2 above are subject to Midway being
unable to satisfy its requirements for Spare Parts under the provisions
of Clause 3.15.1 above.
3.15.3 Nothing in this Clause 3.15 shall be deemed to extend the
obligations of IAE or to diminish the limitations upon such
obligations under the Warranties referred to in Clauses 4.1 and 4.2
below.
3.15.4 Notwithstanding any extension of the time of delivery in accordance
with the provisions of Clause 6.1.1 below, Midway shall be entitled
to cancel all or part of any order on IAE for Spare Parts which,
pursuant to the terms of Clauses 3.15.2.1 and 3.15.2.2 are purchased
from another source by giving reasonable notice of cancellation of
the said order.
3.15.5 In the event that Midway purchases Spare Parts under this Clause
3.15, Midway shall give written notice to IAE of the extent of such
purchase supported by any other technical information which IAE may
reasonably require.
3.16 Special Tools. Ground Equipment and Consumable Stores
IAE shall sell Other Supplies to Midway subject to the terms and conditions of
this Contract, but the detailed procedures of this Contract with regard to
Initial Provisioning, Procurement Data, prices, stocking and Lead Time shall not
apply. Technical data for special tools and ground equipment shall be in
accordance with ATA Specification 101.
3.17 Conflict
In the event of any conflict between the provisions of this Contract and the
provisions of ATA Specifications 101, 200 and 300, the provisions of this
Contract shall prevail.
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CLAUSE 4 WARRANTIES, GUARANTEES AND LIABILITIES
4.1 IAE warrants to Midway that at the time of delivery, the Supplies sold
hereunder such Supplies will be free of defects in material and
manufacture and will conform substantially to IAE's applicable
specifications as stipulated in this Contract. IAE's liability and
Midway's remedies under this warranty are limited to the repair or
replacement, at IAE's election, of Supplies or parts thereof returned to
IAE at the factory of the manufacturer which are shown to IAE's
reasonable satisfaction to have been defective; provided, that written
notice of the defect shall have been given by Midway to IAE within ninety
(90) days after the first operation or use of the Supplies (or if the
Supplies are installed in new Aircraft, within ninety (90) days after
acceptance of such Aircraft by its first operator) but in no event later
than one (1) year after the date of delivery of such Supplies by IAE.
Transportation charges for the return of defective Supplies to IAE
pursuant to this Clause 4.1 and their reshipment to Midway and the risk of
loss thereof will be borne by IAE only if the Supplies are returned in
accordance with IAE's written reasonable and normal shipping instructions.
4.2 In addition, IAE grants and Midway accepts the following:
4.2.1 V2500 Engine and Parts Service Policy
4.2.2 V2500 Nacelle and Parts Service Policy
4.2.3 V2500 Non-Installation Items Warranty
4.2.4 V2500 Reliability Guarantee
4.2.5 V2500 Inflight Shutdown Guarantee
4.2.6 V2500 Exhaust Gas Temperature Guarantee
4.2.7 V2500 Fuel Consumption Retention Guarantee
4.2.8 V2500 Delay and Cancellation
4.2.9 V2500 Fleet Hour Agreement
The Service Policies, Warranties and Guarantees referred to in this Clause
4.2 are hereinafter called the "Warranties." The above Service Policies,
Warranties and Guarantees together form Exhibit D to this Contract.
The Firm Aircraft and the firm spare Engine as described in Exhibit B will
be covered by and be eligible for the service policies and guarantees
described in Clause 4.2.
4.3 The parties agree that those of the Warranties set out in Clauses 4.2.1
and 4.2.2 above wherein Midway may be referred to as the "Operator" shall
also apply to any equipment which falls within the categories of equipment
referred to in the Warranties manufactured, supplied or inspected by IAE
howsoever and whenever (whether before, on or after the date first above
written) acquired by Midway from whatsoever source including but not
limited to any V2500 aero engines and any associated equipment therefor,
and any parts for such engines and associated equipment which form part of
any aircraft acquired from the manufacturer.
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4.4 The Warranties are personal to Midway and the obligations of IAE
thereunder shall only apply insofar as Midway has ownership and possession
of the Supplies covered thereunder.
4.5 Midway shall inform any person to whom it intends to sell, lease, loan or
otherwise dispose of any of the Supplies or equipment referred to in
Clause 4.3 above that such person may obtain from IAE a direct warranty
agreement incorporating those of the Warranties set out in Clauses 4.2.1
and 4.2.2. Midway shall also use its reasonable endeavors to ensure that
such person shall enter into a direct warranty agreement with IAE prior to
delivery of any of the Supplies or such equipment to such person.
4.6 IAE and Midway agree that the intent of the Warranties provided in Clause
4.2 is to provide specified benefits or remedies to Midway as a result of
specified events. It is not the intent however to duplicate benefits or
remedies provided to Midway by IAE or another source, e.g., another
equipment manufacturer or lessor, as a result of the same event.
Therefore, the terms of the Warranties notwithstanding, Midway agrees that
it shall not be eligible to receive benefits or remedies from IAE if it
stands to receive or has received benefits or remedies from IAE or another
source as a result of the same event.
4.7 Midway accepts that the Warranties granted to Midway under Clauses 4.1,
4.2 and 4.3 above together with the express remedies provided to Midway in
respect of the Supplies in accordance with this Contract are expressly in
lieu of, and Midway hereby waives, all other remedies, conditions and
warranties, expressed or implied including without limitation, ANY IMPLIED
WARRANTIES OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE, and
all other obligations and liabilities whatsoever of IAE and of its
shareholders whether in contract or in tort or otherwise for any defect,
deficiency, failure, malfunctioning or failure to function of any item of
the Supplies or of the equipment referred to in Clause 4.3 above,
howsoever and whenever acquired by Midway from whatever sources and Midway
agrees that neither IAE nor any of its shareholders shall be liable to
Midway upon any claim therefor or upon any claim howsoever arising out of
the manufacture or supply or inspection by IAE of any item of the Supplies
or of such equipment or any other item of whatever nature, whether in
contract or in tort or otherwise, except as expressly provided in the said
Warranties, and Midway agrees that IAE shall not be liable to Midway
except as set forth above.
4.8 IAE and Midway agree that this Clause 4 has been the subject of discussion
and negotiation, is fully understood by the parties and the price of the
Supplies and other mutual agreements of the parties set forth in this
Contract are arrived at in consideration of:
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4.8.1 the express Warranties of IAE and Midway's rights thereunder; and
4.8.2 the exclusions, waivers and limitations set forth in Clause 4.7
above.
CLAUSE 5 PRODUCT SUPPORT SERVICES
5.1 IAE will make available to Midway the Product Support Services described
in Exhibit C to this Contract. Except when identified in such Exhibit as
requiring separate contractual arrangements, such Product Support Services
shall be supplied at no additional charge to Midway and subject to the
provisions of this Contract. IAE may delegate the performance of product
support services to an affiliated company.
CLAUSE 6 MISCELLANEOUS
6.1 Delay in Delivery
6.1.1 If IAE is hindered or prevented from delivering any of the Supplies
within the time for delivery specified in this Contract (as such
time may be extended pursuant to the provisions of this Contract) by
reason of:
6.1.1.1 any cause beyond the reasonable control of IAE, or
6.1.1.2 fires, industrial disputes or introduction of
essential modifications
the time for delivery shall be extended by a period equal to the
period for which delivery shall have been so hindered or prevented,
and IAE shall not be under any liability whatsoever in respect of
such delay.
6.1.2 If, by reason of any of the causes embraced by Clause 6.1.1 above,
IAE is hindered or prevented from or delivering any goods (which are
the same as and include the Supplies) to purchasers (including
Midway) then IAE shall have the right to allocate such goods, as
they become available, at its own discretion among all such
purchasers and IAE shall not be under any liability whatsoever to
Midway for delay in delivery to Midway resulting from such
allocation by IAE and the time for delivery shall be extended by a
period equal to the delay resulting from such allocation by IAE.
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6.1.3 Should IAE inexcusably delay delivery of any item of the Supplies
beyond the time for delivery specified in this Contract (as such
time may be extended pursuant to the provisions of this Contract),
then in respect of the first two months of such delay, IAE shall not
be under any liability whatsoever and thereafter in respect of any
further delay in delivery the damages recoverable by Midway from IAE
as Midway's sole remedy shall not exceed 1/2% (one half percent) of
the purchase price of the item of Supplies so delayed in respect of
each month of such further delay (and prorata for any period of less
than one month) subject to an overall maximum of 3 1/2% (three and
one half percent) of the purchase price of the item of the Supplies
so delayed. In the alternative, should Midway require a spare Engine
due to a V2527-A5 engine removal from the Aircraft to maintain the
Aircraft operational and IAE has a suitable spare Engine available
for lease, then Midway may lease such a spare engine in accordance
with IAE's Standard Terms of Business. For such a lease IAE will
waive the daily rate normally chargeable, however Midway will pay
the hourly charge associated with the lease. In the event of such a
lease, Midway will not be eligible for the financial remedy
specified above in this clause 6.1.3.
6.1.4 The right of Midway to claim damages shall be conditional upon the
submission of a written notice by Midway that it intends to make a
claim therefor, within thirty days from the date on which IAE
notifies Midway that the item of the Supplies so delayed is ready
for delivery, or from the date on which Midway exercises the right
of cancellation in respect of such item conferred in accordance with
Clause 6.1.5 below, whichever date shall first occur and the receipt
by IAE of a written claim from Midway within thirty days of delivery
to Midway of such item of Supplies so delayed or the date of
cancellation in accordance with Clause 6.1.5 above as appropriate.
6.1.5 Should IAE inexcusably delay delivery of any item of the Supplies
beyond the time for delivery specified in this Contract for a period
of 12 (twelve) months then, in addition to the right of Midway under
Clause 6.1.3, Midway shall be entitled to refuse to take delivery of
such item on giving IAE notice in writing within one month after the
expiration of such period of 12 (twelve) months. Upon receipt of
such notice IAE shall be free from any obligation in respect of such
item except that IAE shall refund to Midway any deposits made in
respect of the purchase price of such item of the Supplies.
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6.1.6 Should IAE excusably delay delivery of a spare Engine beyond the
time of delivery specified in this contract and should Midway
require a spare Engine due to a V2527-A5 engine removal from the
Aircraft to maintain the Aircraft operational, and IAE has a
suitable spare Engine available for lease, then Midway may lease
such a spare Engine in accordance with IAE's Standard Terms of
Business. For such a lease IAE will waive the daily rate normally
chargeable, however Midway will pay the hourly charge associated
with the lease. Should IAE excusably delay delivery of any item of
the Supplies beyond the time for delivery specified in this Contract
for a period of 15 (fifteen) months and IAE has not provided the
support specified above in this clause 6.1.6, Midway shall be
entitled to refuse to take delivery of such item on giving IAE
notice in writing within one month after the expiration of such
period of 15 (fifteen) months. Upon receipt of such notice IAE shall
be free from any obligation in respect of such item except that IAE
shall refund to Midway any deposits made in respect of the purchase
price of such item of the Supplies. Where IAE has to refund deposits
to Midway due to delay which has been solely attributable to
excusable delay as specified in Clause 6.1.1 above, and IAE has not
provided a lease as set forth above in this Clause 6.1.6, then IAE
will also refund such deposit with interest at a per annum rate of
one-half of the New York Citibank Prime rate calculated from the
later of the scheduled delivery date specified in this Contract or
the date such deposit was paid to IAE to the date of Midways notice
to IAE of its refusal to take delivery.
6.2 Patents
6.2.1 IAE shall, subject to the conditions set out in this Clause and as
the sole liability of IAE in respect of any claims for infringement
of industrial property rights, indemnify Midway against any claim
that the use of any of the Supplies by Midway within any country to
which at the date of such claim the benefits of Article 27 of the
Convention on International Civil Aviation of 7th December 1944 (The
Chicago Convention) apply, infringes any patent, design, or model
duly granted or registered provided, however, that IAE shall not be
liable to Midway for any consequential damage or any loss of use of
the Supplies or of the Aircraft in which the Supplies may be
incorporated arising as a result directly or indirectly of any such
claim.
6.2.2 Midway will give immediate notice in writing to IAE of any such
claim whereupon IAE shall have the right at its own expense to
assume the defense of or to dispose of or to settle such claim in
its sole discretion. IAE will discuss any such disposal or
settlement of a claim with Midway so it will not have an adverse
effect on Midway. Midway will give IAE all reasonable assistance and
will not by any act or omission do anything which may directly or
indirectly prejudice IAE in connection with the defense.
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6.2.3 IAE shall have the right to substitute for any allegedly infringing
Supplies substantially equivalent non-infringing supplies.
6.2.4 The indemnity contained in Clause 6.2.1 above shall not apply to
claims for infringement in respect of (i) Supplies manufactured to
the specific design instructions of Midway; (ii) Supplies not of IAE
design (but IAE shall in the event of any claim for infringement
pass on to Midway so far as it has the right to do so the benefits
of any indemnity given to IAE by the designer, manufacturer or
supplier of such Supplies); (iii) the manner or method in which any
of the Supplies is installed in the Aircraft; or (iv) any
combination of any of the Supplies with any item or items other than
Supplies.
6.3 Credit Reimbursement
Should Midway not take delivery of the four Firm Aircraft in accordance
with the schedule described in Clause 1.1 or not take delivery of the
Purchased Items in accordance with the schedule described in Exhibit B,
unless extended or changed by mutual agreement between Midway and IAE
which such agreement shall not be unreasonably withheld, then, without
prejudice to IAE's other rights under this Contract, the value of any
credits, hardware or other concessions received by Midway pursuant to this
Contract (including any Side Letters and amendments) will be readjusted so
that for each of the four Firm Aircraft which Midway does not take
delivery of in accordance with the applicable scheduled delivery, then
Midway's total value of fleet introductory assistance credit and V2500
inventory credit will be reduced by an amount of [ * * * ] per Firm
Aircraft not taken as set forth above and by an amount of [ * * *]
if the Purchased Items are not taken as set forth above. If at the time of
such adjustment, the credits, hardware values or value of other
concessions which have been received by Midway exceed the final adjusted
amounts, Midway will promptly reimburse IAE in an amount equal to such
excess plus interest on the excess amounts calculated from the time each
respective amount was applied or value received until reimbursement.
Interest will be calculated to the lesser of 1.25 times the New York
Citibank prime rate or the New York Citibank prime rate plus three and a
one half a percent in effect at the time each respective amount was
applied or value was received. If Midway is in default of any payment
obligations under the terms of this Contract, IAE will without prejudice
to any of its other rights be entitled to offset any unused IAE credit in
Midway's account with IAE against such outstanding amount.
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6.4 Non-Disclosure and Non-Use
6.4.1 Subject to Clause 6.4.3 below, Midway agrees to hold in confidence
any Information which it acquires directly or indirectly from IAE
and agrees not to use the same other than for the purpose for which
it was disclosed without the written approval of IAE. The expression
"Information" in this Clause 6.4.1 includes but is not limited to
all oral or written information, know-how, data, reports, drawings
and specifications, and all provisions of this Contract.
6.4.2 Midway shall be responsible for the observance of the provisions of
Clause 6.4.1 above by its employees.
6.4.3 The provisions of Clause 6.4.1 above shall not apply to information
which is or becomes generally known in the aero engine industry nor
shall the provisions of Clause 6.4.1 above prevent any necessary
disclosure of information to enable Midway itself to operate,
maintain or overhaul Supplies. 6.4.4 Midway shall be responsible for
obtaining any required authorization including an export license,
import license, exchange permit or any other governmental
authorization required in connection with the transactions
contemplated under this Contract. Midway shall restrict disclosure
of all information and data furnished thereto under this Contract
and shall ship the direct product of such information and data to
only those destinations permitted under such governmental
authorization.
6.4.5 In the event that any of the Information as described in Clause
6.4.1 is required to be disclosed by Midway through a valid
governmental, judicial or regulatory agency order, Midway agrees to
limit the disclosure to only those portions of the Information
specifically required to be disclosed by such order, and to maintain
the confidentiality of as much of the Information as legally
possible.
6.5 Taxes
6.5.1 Subject to Clause 6.5.2 below, IAE shall pay all imposts, duties,
fees, taxes and other like charges levied by the governments of the
United Kingdom, the United States of America, the Federal Republic
of Germany, Japan and Italy or any agency thereof in connection with
the Supplies prior to their delivery.
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6.5.2 All amounts stated to be payable by Midway pursuant to this Contract
exclude any value added tax, sales tax or taxes on turnover. In the
event that the supply of goods or services under this Contract is
chargeable to any value added tax, sales tax or taxes on turnover
such tax will be borne by Midway. To ensure so far as possible that
Midway is not charged with European Community value added tax
("VAT"), Midway will within 30 days of signature hereof, inform IAE
of its VAT Code (if any) for inclusion on IAE's invoices.
6.5.3 Except as otherwise set forth in this Section 6.5 and except for
taxes imposed on or with respect to the overall gross or net income,
profits or gains or capital or net worth of IAE (including but not
limited to withholding taxes imposed by the Federal Government of
the United States of America), Midway shall pay all other imposed
duties, fees, taxes and other like charges by whomsoever levied.
6.6 Amendment
This Contract shall not be amended in any way other than by agreement in
writing, entered into by the parties hereto after the date of this
Contract, which is expressly stated to amend this Contract.
6.7 Assignment
Except as provided under Clause 5 above, neither party may assign any of its
rights or obligations hereunder without the written consent of the other party
(except that IAE may assign its rights to receive money hereunder). Any
assignment made in violation of this Clause 6.7 shall be null and void.
6.8 Exhibits
In the event of any conflict or discrepancy between the Exhibits (which are
hereby expressly made a part of this Contract) and Clauses of this Contract then
the Clauses shall prevail.
6.9 Headings
The Clause headings and the Index do not form a part of this Contract and shall
not govern or affect the interpretation of this Contract.
6.10 Law
This Contract shall be subject to and interpreted and construed in accordance
with the laws of the State of Connecticut, United States of America. The parties
agree to exclude the application of the United Nations Convention on Contracts
for the International Sale of Goods (1980).
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6.11 Notices
Any notice to be served pursuant to this Contract is to be sent by registered
post or by telex:
In the case of IAE:
IAE International Aero Engines AG
628 Hebron Avenue
Glastonbury, Connecticut 06033-2595 U.S.A.
Telex No. 4436031 INTLAERO
Attention: Business Director & Chief Legal Officer
In the case of Midway:
Midway Airlines Corporation
5713 South Central Avenue
Chicago
Illinois, 60638 U.S.A
Telecopy No: 312 838 2069
Attention: President
or in each case to such other place of business as may be notified from
time to time by the receiving party.
6.12 Exclusion of Other Provisions and Previous Understandings
6.12.1 This Contract contains the only provisions governing the sale and
purchase of the Supplies and shall apply to the exclusion of any
other provisions on or attached to or otherwise forming part of any
order form of Midway, or any acknowledgment or acceptance by IAE, or
of any other document which may be issued by either party relating
to the sale and purchase of the Supplies.
6.12.2 The parties agree that neither of them have placed any reliance
whatsoever on any representations, agreements, statements or
understandings made prior to the signature of this Contract, whether
orally or in writing, relating to the Supplies, other than those
expressly incorporated in this Contract, which has been negotiated
on the basis that its provisions represent their entire agreement
relating to the Supplies and shall supersede all such
representations, agreements, statements and understandings.
29
<PAGE>
6.13 Termination
Either party shall have the option, at its sole discretion, to terminate
this Contract upon the occurrence of any of the following events: (a) a
receiver or trustee is appointed for any of the other party's property,
or (b) the other party is adjudicated or voluntarily becomes a bankrupt
under any bankruptcy or winding up laws or other similar legislation, or
(c) the other party becomes insolvent or makes an assignment for the
benefit of creditors.
30
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IN WITNESS WHEREOF the parties hereto have caused this Contract to be signed on
their behalf by the hands of their authorized officers the day and year first
before written.
For IAE International Aero Engines AG /s/ [ILLEGIBLE]
-------------------
In the presence of /s/ [ILLEGIBLE]
-------------------
For Midway Airlines Corporation /s/ [ILLEGIBLE]
-------------------
In the presence of /s/ [ILLEGIBLE]
-------------------
31
<PAGE>
EXHIBIT A
CONTRACT SPECIFICATION
32
<PAGE>
V2500 TURBOFAN ENGINE MODEL SPECIFICATION
FAA Commercial Type Certificate E40NE Model V2527 - A5
Spec. No. IAE S27A5
SEA LEVEL RATINGS
(With Ideal Inlet and Exhaust Systems - See GENERAL NOTES)
Net
Thrust
lb
------
Takeoff Rating (Static) 24,800
Takeoff Rating (at 0.2 Mn) 22,020
Maximum Continuous Rating 22,240
DESCRIPTION
Type - An axial flow, two spool, turbofan engine with fan and multistage
compressors driven by multistage reaction turbines and designed for operation
with fixed area mixed exhaust system.
Installation Drawing No. 4W6199. The Engine Installation Drawing shows the
Engine envelope and provides dimensions and data for the engine installation
interfaces.
FUEL AND OIL
Fuel - Specification MIL-T-5624, MIL-T-83133 or ASTM-D-1655
Oil - Specification MIL-L-23699 Type II
Oil Consumption, Maximum (As measured over a 10-Hour Period) 0.15 U.S. gal/hr
STANDARD EQUIPMENT
Included in Engine Price
(Partial List Comprised of Major Items)
FUEL SYSTEM AND CONTROL SYSTEM:
LP/HP Fuel Pump, Fuel Filter Element, Fuel Temperature Sensor, Fuel
Diverter/Back to Tank Valve, Fuel Distribution Valve, P2T2 Relay Box, Electronic
Engine Control (EEC), Dedicated Generator, P4.9 Sensors and Manifold, Fuel
Metering Unit, Fuel Supply Pipe, Fuel Nozzles.
IGNITION SYSTEM:
Ignition Exciter, Igniter Plug, Ignition Lead (2 each) (without power
source).
AIR SYSTEM:
No. 4 Bearing Compartment Heat Exchanger, HP/LP Active Clearance Control Valve,
Active Clearance Control Valve Actuator, LP Compressor Bleed Valve Master
Actuator, LP Compressor Bleed Valve Slave Actuator, Variable Stator Vane
Actuator, HP Compressor Bleed Valves, HP Compressor Bleed Valve Solenoids, HPT
Cooling Valve and Solenoid.
ENGINE INDICATING SYSTEM:
33
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Exhaust Gas Temperature (EGT) Thermocouples, EGT Harness and Junction Box, No. 4
Bearing Scavenge Pressure Transducer, Fuel Filter and Scavenge Differential
Pressure Switches, Scavenge Oil Temperature Sensor, Oil Pressure Transmitter,
Low Oil Pressure Switch, Vibration Transducers and Harness, Oil Quantity
Transmitter, Magnetic Chip Detectors, Fuel Flowmeter.
OIL SYSTEM:
Oil Tank, Air Cooled Oil Cooler, Fuel Cooled Oil Cooler, Pressure Oil Filter
Element, Air Cooled Oil Cooler Modulating Valve, Scavenge Oil Filter Housing
Assembly and Element, No. 4 Bearing Compartment Scavenge Valve, Electrical Power
Generator Fuel Cooled Oil Cooler.
MISCELLANEOUS:
EEC Harnesses Fan and Core, Ignition Supply Harness, General Service Harness,
Nose Spinner, Core Fuel Drains, Airframe Accessory Mounting Pads and Drives,
Various Brackets on working flanges for attachment of Nacelle and Aircraft
Equipment Electrical Power Generator Piping to Cooler, P2T2 Probe.
ADDITIONAL EQUIPMENT
Available at Increased Price
Shipping Stand
Engine Condition Monitoring Instrumentation
Items of ADDITIONAL EQUIPMENT should be ordered at the time of Engine
procurement in order to assure availability of this equipment at the time of
Engine shipment.
34
<PAGE>
GENERAL NOTES
The specified Sea Level Static Ratings are ideal and are based on U.S. Standard
Atmosphere 1962 conditions, the specified fuel and oil, an ideal inlet pressure
recovery, no fan or compressor air bleed or load on accessory drives, a mixed
exhaust system having no internal pressure losses and with a mixed primary
nozzle velocity coefficient equal to 1.0.
Takeoff rating is the maximum thrust certified for takeoff operation. The
specified takeoff thrust is available at and below ISA + 56(degree)F
(31(degree)C) ambient temperature.
Maximum Continuous Rating is the maximum thrust certified for continuous
operation. The specified thrust is available at and below ISA + 18(degree)F
(10(degree)C) ambient temperature.
Maximum Climb Rating is the maximum thrust approved for normal climb operation.
Maximum Cruise Rating is the maximum thrust approved for normal cruise
operation.
Guaranteed Calibration Stand Performance values for specific engine applications
are provided in Appendix A to this specification.
Unless otherwise specified, engines will be supplied with the STANDARD EQUIPMENT
listed.
The Electrical Power Generator Fuel Cooled Oil Cooler and any drains, brackets
and Electrical Power Generator piping, and other external hardware supplied with
the Engine are certified by the FAA-NER to FAR Part 33 requirements.
35
<PAGE>
V2500 TURBOFAN ENGINE MODEL SPECIFICATION
Appendix A
FOR A COMPLETE PROPULSION SYSTEM INCLUDING ENGINE AND NACELLE
TO BE INSTALLED IN THE AIRBUS INDUSTRIE A320 AIRPLANE
GUARANTEED CALIBRATION STAND PERFORMANCE
Sea Level Static
----------------
Net Max. Specific.
Thrust Fuel Consumption
lb. lb/hr/lb Thrust
Takeoff Rating 24,200 TBD
Maximum Continuous Rating 21,750 TBD
90% of Maximum Continuous Rating 19,570 TBD
See GENERAL NOTES of the basic specification for rating definitions.
The ratings specified in this Appendix are attainable on the test stand at U.S.
Standard Atmosphere 1962 conditions, with the specified fuel and oil, the air
inlet and exhaust system described below, and without fan or compressor air
bleed for aircraft systems, or load on accessory drives.
The air inlet and exhaust system are shown on Propulsion System Drawing No.
745-7000 and consist of the air inlet duct assembly, fan duct assembly, mixed
nozzle assembly and other associated V2500 Nacelle System hardware as would be
installed in the Airbus Industrie A320 airplane. The specified calibration stand
performance represents installed performance and is based on fuel having a LHV
of 18,400 Btu/lb.
The maximum thrust specific fuel consumption values will he determined based on
the production acceptance to inflight correlation established after the
completion of airplane certification.
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The following items are included in establishing the specified performance
guarantees:
(a) Air inlet duct contours
(b) Air inlet duct acoustic treatment
(c) Fan duct and mixed nozzle contours
(d) Fan reverser blocker doors and drag links
(e) Fan duct and mixed nozzle acoustic treatment
(f) Fan duct bleed openings except that the precooler bleed duct is shut off
(g) Fan air leakage with the exhaust system conforming to that shown on the
Engine Installation Drawing
(h) Fan air bleed for component cooling and nacelle ventilation
37
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EXHIBIT B
PURCHASED ITEMS, PRICE,
ADJUSTMENT FORMULA AND DELIVERY
Firm Spare Engine
- -----------------
Purchased Basic Contract Price Qty. Delivery
Item No.: U.S. Dollars (July 1988) --- Date
- ------------------------------------------- ----
1. [ * * * ] 1 November 1998
Option Spare Engine
- -------------------
Purchased Basic Contract Price Qty. Delivery
Item No.: U.S. Dollars (July 1988) --- Date
- ------------------------------------------- ----
1. [ * * * ] 1 November 1999
38
<PAGE>
ADJUSTMENT FORMULA
1. Any Basic Contract Price or other Sum expressed to be subject to
Adjustment from a Base Month to a month of delivery or other date of
determination will be subject to adjustment in accordance with the
following formula:
P = Pb (0.60L + 0.30M + 0.10E)
Lo Mo Eo
Where:
P = The Invoiced Purchase Price or Adjusted Sum rounded to the nearest
dollar.
Pb = The Basic Contract Price or other Sum.
Lo = The "Average Hourly Earnings of Aircraft Engine and Engine Parts
Production Workers" SIC Code 3724 published by the Bureau of Labor
Statistics in the U.S. Department of Labor for the month preceding
the Base Month by four months.
L = The "Average Hourly Earnings of Aircraft Engine and Engine Parts
Production Workers" SIC Code 3724 for the month preceding the month
of delivery or other date of determination by four months.
Mo = The "Producer Price Index, Code 10, For Metals and Metal Products"
published by the Bureau of Labor Statistics in the U.S. Department
of Labor for the month preceding the Base Month by four months.
M = The "Producer Price Index, Code 10, For Metals and Metal Products"
for the month preceding the month of delivery or other date of
determination by four months.
Eo = The "Producer Price Index, Code 5, For Fuel and Related Products
and Power" published by the Bureau of Labor Statistics in the U.S.
Department of Labor for the month preceding the Base Month by four
months.
E = The "Producer Price Index, Code 5, For Fuel and Related Products
and Power" for the month preceding the month of delivery or other
date of determination by four months.
39
<PAGE>
2. The values of the factors 0.60L and 0.30 M and 0.10 E
Lo Mo Eo
respectively, shall be determined to the nearest fourth decimal place. If
the fifth decimal is five or more, the fourth decimal place shall be
raised to the next higher number.
3. If the U.S. Department of Labor ceases to publish the above codes or
modifies the basis of their calculation, then IAE may substitute, with
Midays agreement which shall not be unreasonably withheld any officially
recognized and substantially equivalent statistics.
4. The Basic Contract Prices contained in this Exhibit B are subject to from
a Base Month of July 1988 to the month of delivery using Lo, Mo and Eo
values for March 1988.
5. If the application of the formula contained in this Exhibit B results in a
Purchase Price which is lower than the Basic Contract Price, the Basic
Contract Price will be deemed to be the Purchase Price for such Supplies.
40
<PAGE>
EXHIBIT C
PRODUCT SUPPORT PLAN
41
<PAGE>
PRODUCT SUPPORT
FOR THE
V2500 ENGINE
IAE INTERNATIONAL AERO ENGINES AG
Issue No. 4
<PAGE>
TABLE OF CONTENTS
I. INTRODUCTION .......................................................... ii
II. CUSTOMER SUPPORT ...................................................... 1
o Customer Support Manager
o Customer Support Representatives
o Customer Training
o Engine Maintenance Management
o Operations Monitoring
o Special Programs
III. BUSINESS SUPPORT ...................................................... 6
o Engine Warranty Services
o Maintenance Center Support
o Maintenance Facilities Planning Service
o Engine Reliability and Economic Forecasts
o Logistics Support Studies
o Lease Engine Program
IV. TECHNICAL SERVICES .................................................... 9
o Technical Services
o Powerplant Maintenance
o Customer Performance
o Diagnostic Systems
o Human Factors
o Flight Operations
o Repair Services
o Tooling and Support Equipment Services
o Product Support Technical Publications
V. SPARE PARTS ........................................................... 20
o Spare Parts Support
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<PAGE>
I. INTRODUCTION
International Aero Engines AG (IAE) will make the following support personnel
and services available to the V2500 engine customer: Flight Operations, Customer
Performance, Customer Support Representatives, Customer Maintenance Support,
Technical Services, Powerplant Maintenance, Service Data Analysis, Human
Factors, Repair Services, Warranty Administration, Maintenance Facilities
Planning, Tooling and Support Equipment Services, Product Support Technical
Publications, Customer Training, Spare Parts Support and Maintenance Center
Support.
To make these support services readily available to you, our customer, in the
most efficient manner, the Customer Support Group has been established and
assigned primary responsibility within IAE for customer liaison. A Customer
Support Manager is assigned to maintain direct liaison with each individual
Customer. A description of the various product support services available to
each customer follows.
IAE reserves the right to withdraw or modify the services described herein at
any time at its sole discretion. No such withdrawal or modification shall
diminish the level of services and support which the Customer may be entitled to
receive with respect to V2500 engines for which an acceptable order has been
placed with IAE or with respect to aircraft with installed V2500 engines for
which a firm and unconditional order has been placed with the aircraft
manufacturer, prior to the announcement of any such withdrawal or modification.
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<PAGE>
II. CUSTOMER SUPPORT
CUSTOMER SUPPORT MANAGER
The Customer Support Manager provides a direct liaison between the airline
customer's Engineering, Maintenance, Operations, Logistics, Commercial and
Financial organizations and the corresponding functions within IAE. The Customer
Support Manager assigned to each airline is responsible for coordinating and
monitoring the effort of the Product Support Department functional organization
to achieve timely and responsive support for the airline. The Customer Support
Manager provides the following specific services to the airline customer:
- - Readiness Program and planning prior to EIS
- - Technical recommendations and information.
- - Engine Maintenance Management Plans
- - Refurbishment, Modification and Conversion program planning assistance.
- - Coordination of customer repair, maintenance and logistics requirements
with the appropriate Product Support functional groups.
- - Assist with critical engine warranty/service policy claims.
The Customer Support Manager will represent the airline customer in IAE internal
discussions to ensure that the best interests of the customer and IAE are
considered when making recommendations to initiate a program, implement a change
or improvement in the V2500 engine.
CUSTOMER SUPPORT REPRESENTATIVE
IAE Customer Support Representatives provide the following services to the
airline customer:
- - 24 Hour Support
- - Maintenance Action Recommendations
- - Daily Reporting on Engine Technical Situations
- - On-The-Job Training
- - Service Policy Preparation Assistance
- - Prompt Communication with IAE
ENGINE MAINTENANCE SUPPORT SERVICE
Customer Support Representatives assist airline customer personnel in the
necessary preparation for engine operation and maintenance. The Representative,
teamed with a Customer Support Manager will work closely with the airplane
manufacturer's support team particularly during the initial period of aircraft
operation. Representatives are in frequent contact with the IAE offices on
technical matters. Information and guidance received from the home office is
transmitted promptly to the airline which allows the airline to share in all
related industry experience.
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The practice permits immediate use of the most effective procedures and
avoidance of unsuccessful techniques. The IAE office contact ensures that IAE
Representatives know, in detail, the latest and most effective engine
maintenance procedures and equipment being used for maintenance and overhaul of
V2500 engines. They offer technical information and recommendations to airline
personnel on all aspects of maintenance, repair, assembly, balancing, testing,
and spare parts support of IAE.
ON-THE-JOB TRAINING
Customer Support Representatives will conduct on-the-job training for the
airline's maintenance personnel. This training continues until the maintenance
personnel have achieved the necessary level of proficiency. Training of new
maintenance personnel will be conducted on a continuing basis.
SERVICE POLICY ADMINISTRATION
Customer Support Representatives will provide administrative and technical
assistance in the application of the IAE Engine and Parts Service Policy to
ensure expeditious and accurate processing of airline customer claims.
CUSTOMER TRAINING
IAE Customer Training offers airline customers the following support:
- - Technical Training at Purpose Built Facilities
- - On-site Technical Training
- - Technical Training Consulting Service
- - Training Aids and Materials
TRAINING PROGRAM
The IAE Customer Training Center has an experienced full-time training staff
which conducts formal training programs in English for airline customers'
maintenance, training and engineering personnel. The standard training programs
are designed to prepare customer personnel, prior to the delivery of the first
aircraft, to operate and maintain the installed engines. Standard courses in
engine operation, line maintenance, modular maintenance, performance and
trouble-shooting are at so available throughout the production life of the
engine. The courses utilize the latest teaching technology, training aids and
student handouts. IAE Customer Support will coordinate the scheduling of
specific courses as required. The following is the curriculum of standard
courses available. On-site technical training, technical training consulting
services and customized courses may be provided upon customer request and
subject to separate contractual arrangements.
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General V2500 Familiarization
This two day course is designed for experienced gas turbine personnel who will
be responsible for planning, provisioning and maintenance of the V2500 engine.
This course is also designed to appropriately familiarize key staff, supervisory
and operations planning personnel and flight crews. Discussions are concentrated
in the following subject areas:
- - Engine construction features internal and external hardware.
- - Engine systems operation, major components accessibility for
removal/replacement.
- - Operational procedures
- - Performance characteristics
- - Maintenance concepts, repair and replacement requirements and special
tooling.
The course is normally conducted in preparation for fleet introductory
discussions in the provisioning of spares and tooling, training and line
maintenance areas to acquaint the customer with the engine, its systems,
operations and procedures.
Line Maintenance and Troubleshooting
This course is designed for key line maintenance and troubleshooting personnel
who have not received previous formal training on the V2500 engine. The
classroom phases provide the student with the information essential for timely
completion of line maintenance activities and the procedures for effective
troubleshooting and correction of malfunctions in the V2500 engine systems and
the engine/airframe interfaces. Classroom and shop training are provided for in
the following areas:
- - Engine Description
- - Systems Operation
- - Applied Performance
- - Ground Operations
- - Troubleshooting Procedures
- - Practical Phase Line Maintenance Tasks
V2500 Familiarization and Modular Maintenance
Provides experienced heavy maintenance personnel with engine modular disassembly
and assembly training. The training is concentrated in the following subject
areas:
- - Engine Description Overview
- - Engine Systems Overview
- - Heavy Maintenance Tasks *
* Course duration and "hands-on" coverage are contingent on the
availability of an engine and required tooling.
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ENGINE MAINTENANCE MANAGEMENT PLANS
Planning documents, tailored for individual operators, are developed to serve as
Engine Maintenance Management Program criteria. These are directed toward the
objective of ensuring cost-effective operation with acceptable post-repair test
performance, providing engine reliability to achieve maximum time between shop
visits, and minimizing the adverse effects to operation of inflight shutdowns
and delays/cancellations. Through the institution of specific maintenance
recommendations, proper engine performance, durability, and hot section parts
lives can be achieved.
OPERATIONS MONITORING
The following information is available to the airline customer from the IAE
Product Information Process (IP)^2 Group:
OPERATION EXPERIENCE REPORTS
IAE maintains V2500 Service Data System (SDS) data base from which selected
engine operations and reliability summary reports will be developed and made
available on a scheduled basis to each airline customer. Data reported by IAE
Customer Support Representatives serve as input to this data base. This
computerized data maintenance and retrieval system will permit:
- - A pooling and exchange of service experience for the benefit of the
entire airline industry.
- - A common statistical base.
- - The selective querying of computer data files for answers to customer
inquiries.
In addition to providing operations and reliability reports, SDS serves in-house
programs directed at improving engine design and enhancing overall customer
support, including spare parts provisioning and warranty administration.
SPECIAL PROGRAMS
ENGINE HARDWARE RETROFIT PROGRAMS
Engine Retrofits are carried out to provide modification of engine hardware
configuration when required on delivered engines. This involves assisting in the
marshalling of hardware, special tools, manpower and the scheduling of engine
and material to modification sites.
CONTROLLED SERVICE USE PROGRAMS AND MATERIAL SUPPORT
IAE shall assume responsibility for the planning, sourcing, scheduling and
delivery of Controlled Service Use material, warranty replacement material,
service campaign, material and program support material subject to the terms of
special contracts with customers.
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Urgent customer shipments, both inbound and outbound, are monitored, traced,
routed and expedited as required. The receipt and movement of customer owned
material returned to IAE is carefully controlled, thus assuring an accurate
accounting at all times.
-5-
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III. BUSINESS SUPPORT
The Business Support Group is dedicated to providing prompt and accurate
assistance to you, our V2500 airline customer. This Group provides the following
categories of assistance and support to the V2500 airline customer:
o Engine Warranty Services
o Maintenance Support
o Lease Engine Program
o Engine Reliability and Economic Forecasts
o Logistic Support Studies
ENGINE WARRANTY SERVICES
Engine Warranty Services will provide the following support for the V2500 engine
airline customer:
- - Prompt administration of claims concerning Engine Warranty, Service
Policy, other support programs and Guarantee Plans.
- - Investigation of part condition and part failure.
- - Material provisioning administration for Controlled Service Use
programs and other material support.
PROMPT ADMINISTRATION
Each airline customer is assigned a Warranty Analyst whose job is to provide
individual attention and obtain prompt and effective settlements of Warranty and
Service Policy claims. A typical claim properly submitted is generally settled,
including issuance of applicable credit memo, within thirty days. Experience
generated by much of the data derived from such claims often enables IAE to
monitor trends in operating experience and to address and often eliminate
potential problems.
INVESTIGATION AND REPORTS
Parts returned to IAE pursuant to the terms of the Service Policy are
investigated in appropriate detail to analyze and evaluate part condition and
cause of part failure. A report of findings is prepared and forwarded to the
airline customer and to all IAE departments involved. In the case of vendor
parts, the vendor is promptly informed. Reports often include recommendations to
preclude repetition of the problem.
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MAINTENANCE CENTER SUPPORT
IAE has arranged for the establishment of Maintenance Centers which are
available to accomplish repairs, modifications and conversions, as well as the
complete overhaul of the V2500 engine subject to IAE's standard terms and
conditions for such work.
Through the use of the IAE established Maintenance Centers and their
capabilities, an operator can minimize or eliminate the need for investment in
engine support areas depending on the level of maintenance he elects the
Maintenance Center to perform. Savings in specific engine support areas, such as
spare parts inventory, maintenance and test tooling, support equipment and test
facilities, can be demonstrated. Use of Maintenance Centers can also minimize
the need for off-wing maintenance and test personnel with their associated
overhead.
MAINTENANCE FACILITIES PLANNING SERVICE
Maintenance Facilities Planning Service offers the following support to IAE
customer:
- - General Maintenance Facility Planning Publications
- - Customized Facility Plans
- - Maintenance Facility and Test Cell Planning Consultation Services
Maintenance Facilities Planning Service provides general and customized facility
planning data and consultation services. Facility Planning Manuals for the V2500
engine will present the maintenance tasks, facility equipment and typical
departments floor plans showing arrangement of equipment required to accomplish
the tasks for all levels of maintenance. The Facility Equipment Manual is a
catalog of standard facility equipment such as lathes, process tanks, hoists,
cranes, etc., which is suitable for use in the maintenance and testing of IAE
engines.
Customized facility planning services and consulting services are offered
subject to separate contractual arrangements. Customized facility plans are
developed to meet the requirements of customers' specific fleet sizes,
activities and growth plans. The plans identify floor space, facility equipment,
utilities and manpower requirements. On-site surveys are conducted as a part of
customized plan development to determine the adaptability of existing facilities
and equipment for the desired maintenance program. These plans provide floor
plan layouts to show recommended locations for work stations, major equipment,
marshalling and storage areas, workflow patterns, and structural and utility
requirements to accommodate all the engine models that are maintained in the
customer's shop. The Maintenance Facilities Planning Service also provides
consultant services which are specifically related to the development of engine
test cells, and the adaptation of existing maintenance facilities to accommodate
expanding production requirements and/or new or additional IAE models.
-7-
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ENGINE RELIABILITY AND ECONOMIC FORECASTS
Engine reliability and economic forecasts in the forms of predicted shop visit
rates and maintenance costs can be provided to reflect the airline customers'
operating characteristics. Additionally, various analyses can be conducted to
establish life probability profiles of critical engine parts, and to determine
optimum part configuration and engine operating procedures.
LOGISTICS SUPPORT STUDIES
As required, logistics studies are conducted to assist in the planning of engine
operational support. Such studies may include spare engine and spare module
requirements forecasts, level of maintenance analyses, engine type economic
evaluations and life cycle cost estimates.
LEASE ENGINE PROGRAM
An engine lease program will be made available to V2500 Airline Customers
subject to IAE's standard terms and conditions of lease. Pool spares will be
stationed at selected locations to assure emergency protection against
aircraft-on-ground (AOG) situations or to provide supplemental support during
"zero spares" conditions. The lease engines will incorporate the highest
maintenance standards and configuration levels. Availability will be subject to
prior demand, however, the program logistics will be continually reviewed to
assure the most effective deployment of available pool engines.
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IV. TECHNICAL SERVICES
The Technical Services Group provides the following categories of technical
support to the airline customer:
- Technical Services
- Powerplant Maintenance
- Customer Performance
- Diagnostic Systems
- Human Factors
- Flight Operations
- Repair Services
- Tooling and Support Equipment Services
- Technical Publications
TECHNICAL SERVICES
Technical Services is responsible for the overall technical support to the
customers. The following services are provided:
- Technical Problem Identification/Corrective Action Implementation
- Technical Communication
- Engine conversion Program Definition and Management
- Engine Upgrade and Commonality Studies
- Engine Incident Investigation Assistance
TECHNICAL SERVICES
Technical information supplied through IAE Customer Support Representatives,
Customer Support Managers, customer correspondence and direct meetings with
airlines' representatives permits assessment of the factors involved in
technical problems and their impact on engine reliability and operating costs.
Resolution of these problems is coordinated with responsible groups within IAE
and the necessary corrective action is defined. In certain situations the
corrective action involves the establishment of Service Evaluation programs for
proposed modifications, and the establishment of warranty assistance programs in
conjunction with the IAE Warranty Administration Group. Technical Services will
assist customers in the implementation of recommended corrective action and
improvements principally through official IAE technical communications, and
direct customer contact.
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TECHNICAL COMMUNICATIONS
Technical Services is responsible for the release of technical communications.
Primary communication modes involves release of limits and procedures through
engine and maintenance manual revisions and the requirements associated with
engine upgrade and/or conversion, durability and performance improvements, and
problem resolution through Service Bulletins is provided by All Operator Letters
and/or wires or direct technical written response to individual customer
inquiries.
ENGINE CONVERSION PROGRAMS
Technical Services defines minimum configuration levels for conversion of
service engine models. They serve to assist the customer with the implementation
of conversion programs into existing fleets by providing preliminary planning
cost estimates and technical planning information regarding tooling, material
and instructional requirements. Conversion programs are monitored for problem
areas and Technical Services initiates and implements corrective action as may
be necessary.
ENGINE INCIDENT INVESTIGATION ASSISTANCE
Assistance is provided to an airline in conducting engine incident
investigations in responding to the requirements of the appropriate Air
Worthiness authority.
LINE MAINTENANCE AND TROUBLESHOOTING
Line Maintenance and Troubleshooting Seminars can be conducted at the IAE
Training Center with the objective of improving line maintenance effectiveness
fleetwide. Specialized training on V2500 line maintenance and troubleshooting
can be provided through on-site workshops by special contractual arrangement.
Troubleshooting support is provided primarily through powerplant troubleshooting
procedures which are published in IAE and airframe manufacturers manuals. When
an airline encounters an engine problem and corrective action taken has not been
effective, more direct support in troubleshooting and maintenance can also be
provided to the customers line maintenance personnel. Instructions on V2500
powerplant troubleshooting and maintenance can also be provided to customers
line maintenance personnel.
AIRLINE SHOP MAINTENANCE
Reviews of shop practices and procedures of individual airlines can be conducted
to determine the most efficient and cost-effective methods for maintenance and
repair of the V2500 in the environment in which the airline must maintain that
engine.
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POWERPLANT MAINTENANCE
Powerplant Maintenance covers responsibility for maximizing engine
maintainability, establishing maintenance concepts and requirements and
providing maintenance support plant for IAE. This group provided the following
services:
- - Definition of Maintenance Tasks and Resource Requirements
- - Planning Guides
Powerplant Maintenance conducts design reviews and comprehensive maintenance
analysis of new engine designs and engine design changes to maximize engine
maintainability consistent with performance, reliability, durability and life
cycle cost considerations. Maintenance concepts, requirements and tasks are
established to minimize maintenance costs. This group represents the customer's
maintainability interests in internal IAE operations and upon request will
assist the customer in resolving specific maintenance task problems.
PROGRESSIVE MAINTENANCE PLANNING
Powerplant Maintenance also provides Planning Guides based upon Maintenance Task
Analysis. The. guides present engine maintenance requirements, their subordinate
tasks and the required resources to accomplish on-aircraft engine maintenance
and the off-aircraft repair of engines by modular section/build group
replacement. Maintenance requirements are also presented for the refurbishment
of modular section/build group by parts replacement, the complete repair of
parts, the refurbishment of accessory components and for engine testing. The
data in the Planning Guides is presented in a manner that is primarily intended
to assist new operators by providing a phased introduction of new engines into
their shops and to capitalize on the design maintainability features for the
engine when they are developing their maintenance plans.
Powerplant Maintenance Engineering will assist new operators in planning a
gradual, technically feasible, and economically acceptable expansion from line
maintenance of installed engines through the complete repair of parts and
accessory components.
CUSTOMER PERFORMANCE
Customer Performance provides for the following types of technical assistance to
the airline customer:
- - Engine Performance Analysis Computer Programs for Test Cell Use
- - Test Cell Correlation Analysis and Correction Factors
- - Engine Stability Procedures and Problem Analysis
Although much of the above support is provided in the form of procedures, data
and recommendations in various publications, the group also answers inquiries of
a performance nature which are forwarded to IAE by individual customers.
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<PAGE>
ENGINE PERFORMANCE ANALYSIS
Technical support is provided in a number of areas related to operational
suitability including the development of the test requirements and performance
limits for the Adjustment and Test Section of the Engine Manual. Computer
programs that will assist the operator in analyzing engine performance using
test cell data can be provided subject to IAE then current standard license fees
and Terms and Conditions.
TEST CELL CORRELATION
Technical assistance is provided to the customer for developing appropriate
corrections to be used for specific test configurations at customer owned test
cell facilities. Reports are provided presenting correlation analyses and IAE
recommended test cell corrections which permit comparison of the performance of
customer tested engines with the respective Engine Manual limits and guarantee
plan requirements.
ENGINE STABILITY
Technical support is provided to ensure that engine stability and starting
reliability are maintained. Service evaluation programs for proposed
improvements are initiated and monitored to determine their effectiveness. In
addition, problems relating to engine control systems which impact engine
stability and performance are analyzed.
DIAGNOSTIC SYSTEMS
Diagnostic Systems is responsible for the technical support of customer
acquisition of inflight engine data and the assessment of engine performance
through the use of that data. Diagnostic Systems personnel provide the following
services:
- - Guidance to help customers define their engine monitoring system
requirements.
- - Development of hardware specifications and computer programs (by separate
contractual arrangement) to satisfy engine diagnostic requirements.
- - Coordination of all IAE airborne diagnostic support activity.
GUIDANCE IN DEFINING ENGINE MONITORING SYSTEMS REQUIREMENTS
Diagnostic Systems can provide consultation services to assist the customer in
defining his engine condition and performance monitoring requirements and in
selection of appropriate hardware and software systems to meet those
requirements and options between the customer, airframe manufacturer, and
Airborne Integrated Data System (AIDS) manufacturer.
DEVELOPMENT AND COORDINATION
Diagnostic Systems personnel can develop hardware specification and make
computer software available to accomplish Engine Condition Monitoring (ECM) and
performance analysis of
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<PAGE>
engine modules using AIDS data. Engine condition monitoring procedures, of both
the manual and computerized variety can also be developed and provided in
support of the customer's selected method of engine condition monitoring.
Computer software will be provided to the customer subject to IAE's then current
standard license fees and Terms and Conditions.
Diagnostic Systems personnel also coordinate activities of cognizant functional
groups at IAE to provide engine related information to the customer, airframe
manufacturer, and AIDS equipment vendor during the planning, installation, and
operation of AIDS.
HUMAN FACTORS
Human Factors supplies data on task time and skill requirements necessary for
accomplishing maintenance procedures.
Task data provided includes estimates of the man-hours, elapsed time and job
skills necessary to accomplish maintenance tasks as described in IAE's Manual
and Service Bulletins. Data is supplied for "on" and "off"' aircraft maintenance
tasks up to modular disassembly/assembly. Additional selected task data can be
supplied on disassembly/assembly to the piece part level and on parts repair. In
addition, the group can help solve problems related to skill requirements, body
dimensions, or excessive man-hours encountered in accomplishing maintenance
tasks.
FLIGHT OPERATIONS
Flight Operations provides the airline customer with the following technical
assistance concerning installed engine operations:
- - Introduction of new equipment
- - Problem resolution and assistance with in-service equipment
- - Contractual commitment and development program support
- - Publication of engine operations literature and performance aids
NEW EQUIPMENT
In accordance with customer needs, Flight Operations can provide on-site
assistance in the training of operations personnel and help in solving engine
operational problems that might arise during the initial commercial service
period. Such assistance can include participation in initial delivery flights,
engine operational reviews, and flight crew training activity.
PROBLEM RESOLUTION - IN-SERVICE EQUIPMENT
In accordance with a mutually agreed upon plan, Flight Operations can perform
cockpit observations to identify or resolve engine operating problems and to
assess installed engine performance.
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<PAGE>
CONTRACTUAL SUPPORT AND DEVELOPMENT PROGRAMS
As required, Flight Operations can assist in evaluating installed engine
performance relative to contractual commitments and engine improvements which
have an impact on engine operations.
PUBLICATION SUPPORT
Flight Operations is responsible for the issuance of Propulsion System Operating
Instructions and correspondence pertaining to inflight engine operations. Such
material is coordinated with the airframe manufacturers as required. Special
Presentations and Reports are also issued, as required, to support the activity
described above.
REPAIR SERVICES
Repair Services provides the following support to the airline customers:
- - Coordinated Repair Development Activity
- - Customer Assistance on Repair Procedures and Techniques
- - Qualification of Repair Sources
- - Repair Workshops
- - Repair Development List
COORDINATION OF REPAIR DEVELOPMENT
Repair Services provide direct contact with all sources that initiate repair
schemes. The Group coordinates with representatives of Engineering and Support
Services disciplines in identifying repair needs, evaluating various repair
options and establishing repair development procedures and schedules. The Group
participates in setting repair evaluation and approval requirements. When the
repair is approved and substantiating data is documented, Repair Services
releases the repair to the Engine Manual.
TECHNICAL ASSISTANCE
Repair Services provides daily communications with airline customers via
technical responses to inquiries direct from the airline or through our Customer
Support Representative office at the airline facility. In addition, Repair
Services make periodic visits to airline repair facilities to discuss new
repairs under development, answer specific questions posed by the particular
facility and review actual parts awaiting a repair/scrap decision. Occasionally,
Repair Services make special visits to customer facilities to assist in training
customer personnel in accomplishing particularly complex repairs.
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<PAGE>
QUALIFICATION OF REPAIR SOURCES
Repair Services coordinates the qualification of repair sources for repairs
proprietary to IAE or to an outside repair agency. They also perform a review of
the qualifications of repair sources for critical, nonproprietary repairs for
which a source demonstration is deemed necessary. The group participates in
negotiation of the legal and business agreements associated with these
qualification programs.
TOOLING AND SUPPORT EQUIPMENT SERVICES
The Tooling and Support Equipment Services Group assists the customer by
providing the following services:
- - Support Equipment Manufacturing/Procurement Documentation
- - Engine Accessory Test Equipment and Engine Transportation Equipment
Specifications
- - Support Equipment Logistics Planning Assistance
SUPPORT EQUIPMENT DOCUMENTATION
The tooling and Support Equipment Services Group designs the special support
equipment required to disassemble, assemble, inspect, repair and test IAE
engines. Special support equipment design-drawings and Support Equipment Master
Data Sheets, which describe how to use the support equipment, are supplied to
customers in the form of 35mm aperture cards. Support equipment designs are kept
current with engine growth, and tool Bulletins are issued to customers as part
of continuing configuration management service. Updated Design and Master Data
Sheets Aperture Cards and Tool Bulletins are periodically distributed to all IAE
customers.
ENGINE ACCESSORY TEST EQUIPMENT AND ENGINE TRANSPORTATION EQUIPMENT
REQUIREMENTS
Engine accessory test equipment and engine transportation equipment general
requirements and specifications are defined and made available to IAE customers.
If requested, the Tooling and Support Equipment Group will assist customers in
the definition of engine accessory test and engine transportation equipment
required for specific IAE needs.
SUPPORT EQUIPMENT LOGISTICS PLANNING ASSISTANCE
The Tooling and Support Equipment Group will provide, at the customer's request,
special support equipment lists which reflect the customer's unique requirements
such as mix of engine models and desired level of maintenance to aid in support
equipment requirements planning.
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<PAGE>
TECHNICAL PUBLICATIONS
IAE and its subcontractors make available the required publications and
maintenance information as described below to support the maintenance and
modification requirements of the airline customer. The publications are prepared
in general accordance with Air Transport Association of America (ATA)
Specification No. 100 and will be available to the airline customer prior to the
delivery of the first aircraft. Customization services and media options will be
available for procurement at established prices.
ON-WING MAINTENANCE DATA
IAE supplies the airplane manufacturer with all the necessary information
required to perform "On-Aircraft" engine maintenance, troubleshooting, and
servicing. This information is developed through close coordination between the
airplane manufacturer and IAE and is integrated by the airplane manufacturer
into his maintenance publications.
TECHNICAL PUBLICATIONS
Listed and described below are the publications that will be made available to
support the airline customer's maintenance program:
Engine Manual
The Engine Manual is a document which will be structured in accordance with ATA
100 section 2-13-0 with JEMTOSS applied in accordance with section 2-13-14.
Potential customer applications will be applied. The manual will provide in one
place the technical data requirements for information needed to maintain the
engine and the maximum potential number of parts that could, regardless of
design responsibility, remain with the engine when it is removed from the
airplane. Additionally the manual includes coverage of interrelated parts (e.g.
thrust reverser, cowlings, mounts, etc.) that can stay with the airplane when
the engine is removed or can be removed for maintenance purpose in lieu of
individual component maintenance manuals. Customized Engine Manuals can be
prepared to incorporate customer originated material related to data or
procedures originated by or peculiar to a specific IAE customer. Such customized
Manuals are provided by separate contractual arrangements. Customer material
authorized by the appropriate Airworthiness Authorities can be incorporated into
customized Manuals and will be identified in the margin by the customer's
initials.
Standard Practices Manual
The Standard Practices Manual supplements the Engine Manual by providing, in a
single document, all IAE recommended or approved general procedures covering
general torques, riveting, lockwiring, cleaning policy, inspection policy
standard repairs, etc., and marking of parts.
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<PAGE>
Illustrated Parts Catalog
The Illustrated Parts Catalog will be structured in accordance with ATA 2-l4-0
and is a document which is used in conjunction with the Engine Manual for the
identification and requisitioning of parts and assemblies. Its ATA structure is
to be compatible with the Engine Manual Structure. Additionally the manual
includes coverage of interrelated parts (e.g. thrust reverser, cowlings, mounts,
etc.) that can stay with the airplane when the engine is removed or can be
removed for maintenance purpose in lieu of individual component maintenance
manuals.
IAE Proprietary Component Maintenance Manuals
These manuals will be structured in accordance with ATA 2-5-0 and will cover
data for chapters other than 71, 72, and 78.
Subcontractor Component Maintenance Manuals
These manuals will be structured in accordance with ATA 2-5-0 and are prepared
directly by the accessory manufacturers. All accessory data is subject to IAE
prepublication review and approval.
Engine and Accessory Component service Bulletins
Each Engine and Accessory Component Service Bulletin will be produced in
accordance with ATA 2-7-0. They will cover planning information, engine or
component effectivity, reason for Bulletin, recommended compliance, manpower
requirements, and tooling information relating to parts repair or modification.
Subcontractor prepared Accessory Component Service Bulletins are reviewed by IAE
prior to issuance. Alert Service Bulletins will be issued on all matters
requiring the urgent attention of the airline customer and will generally be
limited to items affecting safety. The Bulletin will contain all the necessary
information to accomplish the required action.
Operating Instructions
Engine operating instructions are presented in the form of General Operating
Instructions supplemented by V2500 Specific Engine Operating Instructions which
provide operating information, procedures, operating curves and engine
limits.
Facilities Planning and Facility Equipment Manuals
The Facilities Planning Manual outlines the requirements for engine/component
overhaul, maintenance, and test facilities in terms of basic operations,
processes, time studies and equipment. The Facility Equipment Manual lists and
describes the facility equipment used for engine maintenance, overhaul and
repair.
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<PAGE>
Support Equipment Numerical Index
The Indexes, prepared for each major engine model, provide a listing, in numeric
sequence, by maintenance level, of all IAE ground support equipment required to
maintain and overhaul the engine. The Listings are cross-indexed to the
applicable engine dash model and to the chapter and section of the Engine
Manual.
Publications Index
This index contains a listing of available technical manuals covering components
of the V2500 Nacelle.
Service Bulletin Index
This index will be in a format and on a revision schedule as determined by IAE.
Computer Software Manual
Data, will be supplied in accordance with ATA 102 revision 2 except where such
data are prohibited due to proprietary or Government restrictions.
Composite Engine Parts List
The Composite Engine Parts List, a compilation of all saleable and nonsaleable
engine parts incorporated in production engines, describes the configuration of
each engine and identifies those engine parts for which engineering changes,
service bulletins and service instructions have been issued.
Industry Item Lists
An Industry Item List, consisting of a computer retrievable magnetic tape and a
hard copy printout, is provided after delivery of each new engine to identify
specific parts by part number and serial number which the airline customer may
choose to monitor during the engine operational life. Listed parts represent
approximately 80 percent of engine total value.
Service Bulletin Incorporation Lists
Lists are provided that identify all Service Bulletins which were not
incorporated and, separately, those which were incorporated during initial build
of each new engine.
REVISION SERVICES
Regular, temporary, and "as required" revisions to technical publications will
be made during the service life of IAE equipment. The utilization of advanced
techniques and equipment provides the airline customer with expedited revision
service.
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<PAGE>
DISTRIBUTION MEDIA OPTIONS
The primary medium for available IAE technical publications is roll microfilm at
24:1 reduction or magnetic tape. Media options such as microfilm at 36:1
reduction, microfiche, and two side or one-sided paper copy of reproducible
quality will be available for procurement at established prices.
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<PAGE>
V. SPARE PARTS
SPARE PARTS SUPPORT
the Spare Parts Group provides the following categories of spare parts support
to airline customers:
- - Individual Customer Account Representatives
- - Provisioning
- - Planning
- - Order Administration
- - Spare Parts Inventory
- - Effective Expedite Service
- - Worldwide Distribution
ACCOUNT REPRESENTATIVE
An Account Representative is assigned to each customer using IAE equipment. This
representative provides individualized attention for effective spare parts order
administration, and is the customer's interface on all matters pertaining to new
part planning and procurement. Each representative is responsible for monitoring
each assigned customer's requirements and providing effective administrative
support. The Account Representatives are thoroughly familiar with each
customer's spare parts ordering policies and procedures and are responsible for
ensuring that all customer new parts orders are processed in an effective
manner.
SPARE PARTS PROVISIONING PLANNING
Prior to delivery of the first new aircraft to an airline customer, preplanning
discussions will be held to determine the aircraft/engine program, and engine
spare parts provisioning and order plans. Mutually agreed upon provisioning
target dates are then established and on-time completion tracked by the Customer
Account Representative with the assistance of logistics specialists in Spare
Parts Provisioning and Inventory Management. Meetings are held with airline
customers at a mutually agreeable time to review suggested spare parts
provisioning lists prepared by spare parts Provisioning. These lists are
designed to support each customer's particular fleet size, route structure and
maintenance and overhaul program.
ORDER ADMINISTRATION
IAE subscribes to the general principles of Air Transport Association of America
(ATA) Specification No. 200, Integrated Data Processing - Supply. The procedures
of Air Transport Association of America (ATA) Specification No. 200 may be used
for Initial Provisioning, (Chapter II) Order Administration (either Chapter III
or Chapter VI) Invoicing (Chapter IV).
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<PAGE>
A spare parts supply objective is to maintain a 90 percent on-time shipment
performance record to our published lead times. The lead time for replenishment
spare parts is identified in the IAE spare Parts Price Catalog. Initial
provisioning spare parts orders should be placed at least six months prior to
required delivery, while conversions and major modifications require full
manufacturing lead times.
The action to be taken on emergency requests will be answered as follows:
- - Aircraft-On-Ground (AOG) - within four hours (in these instances every
effort is made to ship immediately).
- - Critical (Imminent Aircraft-On-Ground (AOG) or Work Stoppage) - Within
24 hours.
- - Stock Outage - Within seven working days (these items are shipped as per
customer request).
SPARE PARTS INVENTORY
To ensure availability of spare parts in accordance with published lead time,
spare parts provisioning maintains a modern, comprehensive requirements planning
and inventory management system which is responsive to changes in customer
demand, special support programs and engineering design. Organized on an engine
model basis, this system is intended to maintain part availability for delivery
to customers consistent with published lead times.
A majority of parts in the spare parts inventory are continually controlled by
an Automatic Forecasting and Ordering System. Those parts which do not lend
themselves to automatic control due to supercedure, unusual usage or conversion
requirements are under the direct manual control of Spares Planning personnel.
As additional protection against changes in production lead time or unpredicted
demand, certain raw materials are also inventoried. Successful inventory
management is keyed to accurate requirements planning. In support of the
requirements planning effort, a wide ranging data retrieval and analysis program
is offered. This program concerns itself both with the customer logistics and
technical considerations as follows:
- - Forecasts of life limited parts requirements are requested and received
semi-annually from major customers.
- - Engine technical conferences are held frequency within IAE to assess the
impact of technical problems on parts.
- - For a selected group of parts a provisioning conference system is offered
which considers actual part inventory change, including usage and
receipts, as reported monthly by participating customers.
INITIAL PROVISIONING PARTS BUY-BACK
IAE offers an initial provisioning parts buy-back service, the details of which
are contained in individual customer spare parts contracts.
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<PAGE>
PACKAGING
All material is packaged in general compliance with Air Transport Association of
America (ATA) Specification No. 300.
WORLD AIRLINE SUPPLIERS' GUIDE
IAE subscribes to the supply objectives set forth in the World Airlines
Supplier's Guide published by the Air Transport Association of America (ATA).
IAE requires that its proprietary component vendors also perform in compliance
with the precepts of the World Airline Suppliers' Guide.
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<PAGE>
EXHIBIT D
WARRANTIES, GUARANTEES AND PLANS
42
<PAGE>
EXHIBIT D
WARRANTIES, GUARANTEES AND PLANS
IAE INTERNATIONAL AERO ENGINES AG
WARRANTY FOR SPECIAL TOOLS AND GROUND EQUIPMENT
1. If it is shown that a defect in material or workmanship has become
apparent in any item of special tooling and ground equipment within one
year from the date of receipt of such item by the Operator, then IAE will
either as it may in its sole discretion determine repair or exchange such
item free of charge.
2. The obligations of IAE under this Warranty are subject to the following
terms and conditions.
2.1 The defect must not be due to misuse, negligence of anyone other than
IAE, accident or misapplication.
2.2 Such item shall not have been used, maintained, modified, stored or
handled other than in a manner approved by IAE and as set forth in
IAE's maintenance and operations manuals.
2.3 Any claim under this Warranty shall be made in writing to IAE within
90 days of the discovery of the defect and the defective item shall be
made available or sent to IAE for inspection as it may require.
3. IAE shall not be liable for any incidental, consequential or resultant
loss or damage howsoever occurring, nor for Labor costs involved in
removal or replacement of parts.
46
<PAGE>
EXHIBIT D-1
ENGINE AND PARTS SERVICE POLICY
43
<PAGE>
IAE
INTERNATIONAL AERO ENGINES AG
V2500 ENGINE AND PARTS SERVICE POLICY
Issued: October 25, 1985
Revised: September 9,1988
<PAGE>
IAE
INTERNATIONAL AERO ENGINES AG
V2500 ENGINE AND PARTS SERVICE POLICY
This Engine and Parts Service Policy ("Service Policy") is a statement of the
terms and conditions under which IAE International Aero Engines AG ("IAE") will
grant the Operators of new V2500 Engines certain Allowances and adjustments in
the event that Parts of such Engines suffer Failure in Commercial Aviation Use,
or in the event that a Parts Life Limit is established or reduced. This Service
Policy becomes effective for the Operator's first new V2500 Engine.
This Service Policy is divided into seven sections:
Section I describes the Credit Allowances which will Page 1
be granted should the Engine suffer a Failure.
Section II describes the Credit Allowances which will be Page 4
granted should a Primary Part Suffer a Failure.
Section III lists the Class Life for those Primary Parts Page 5
for which Credit Allowances will be granted.
Section IV describes the Credit Allowances which will be Page 7
granted when the establishment or reduction of
a Parts Life Limit is mandated.
Section V describes the Credit Allowances and adjustments Page 9
which will be granted when IAE declares a
Campaign Change.
Section VI contains the definitions of certain words and terms Page 12
used throughout this Service Policy. These words
and terms are identified in the text of this Service
Policy by the use of initial capital letters for
such words and terms.
Section VII contains the general conditions governing the Page 18
application of this Service Policy.
<PAGE>
I. ENGINE FAILURE CREDIT ALLOWANCES
A. First Run Engine, Module and Part
1. A First Run Engine is an Engine with 3,000 hours or less Engine
Time, a First Run Module is a Module with 3,000 hours or less Module
Time, and a First Run Part is a Part with 3,000 hours or less Parts
Time operating in a First Run Engine or a First Run Module.
2. If a First Run Part suffers Direct Damage or Resultant Damage, and
provided that the Part causing Resultant Damage is also a First Run
Part, IAE will grant to the Operator:
a. A 100 percent Parts Credit Allowance for any First Run Part
Scrapped, or
b. A 100 percent Labor Credit Allowance for any First Run Part
Repaired.
3. If such Damage of a First Run Part requires the removal of the
Engine or a Module from the Aircraft, IAE will, in addition to
Subparagraph A.2. above, grant to the Operator:
a. A 100 percent Labor Credit Allowance for disassembly,
reassembly and necessary testing of the Engine or Module
requiring Reconditioning as a result of such Damage of the
First Run Part, and
b. A 100 percent Parts Credit Allowance for those Expendable
Parts required in the Reconditioning of the Engine or
Module.
4. If such Damage of a First Run Part requires the removal of the
Engine or a Module from the Aircraft, IAE will arrange, upon
request by the Operator, to Recondition the Engine or Module or
accomplish the Parts Repair at no charge to the Operator rather
than providing the above Credit Allowances. Such work will be
accomplished at a V2500 Maintenance Center designated by IAE.
Transportation charges to and from the Maintenance Center shall
be paid by the Operator.
B. Extended First Run Engine. Module and Part
1. An Extended First Run Engine is an Engine with more than 3,000 hours
Engine Time but not more than 3,500 hours Engine Time, an Extended
Run Module is a Module with more than 3,000 hours Module Time, but
not more than 3,500 hours Module Time, and an Extended First Run
Part is a Part with 3,500 hours or less Parts Time operating in an
Extended First Run Engine or an extended First Run Module.
<PAGE>
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 2
2. If an Extended First Run Part suffers Direct Damage or
Resultant Damage, and provided that the Part causing Resultant
Damage is also an Extended First Run Part, IAE will grant to
the Operator:
a. A pro rata Parts Credit Allowance for any Extended First
Run Part Scrapped, or
b. A pro rata Labor Credit Allowance for any Extended First
Run Part Repaired.
If the Extended First Run Part is a Primary Part (Section
III), the pro rata Credit Allowances will be based on 100
percent at 3,000 hours Engine Time which then decreases, pro
rata, to zero percent at 3,500 hours Engine Time, or, 100
percent to 2,000 hours Parts Time which then decreases, pro
rata, to zero percent at the end of its Class Life (Section
III), whichever is greater.
If the Extended First Run Part is not a Primary Part, the pro
rata Credit Allowances will be based on 100 percent at 3,000
hours Engine Time which then decrease, pro rata, to zero
percent at 3,500 hours Engine Time.
3. If such Damage of an Extended First Run Part requires the
removal of the Engine or a Module from the Aircraft, IAE will,
in addition to Subparagraph B.2. above, grant to the Operator:
a. A pro rata Labor Credit Allowance for disassembly,
reassembly and necessary testing of the Engine or Module
requiring Reconditioning as a result of such Damage of
the Extended First Run Part, and
b. A pro rata Parts Credit Allowance for those Expendable
Parts required in the Reconditioning of the Engine or
Module.
The pro rata Credit Allowances will be based on 100 percent at
3,000 hours Engine Time, which then decreases, pro rata, to
zero percent at 3,500 hours Engine Time.
Note: Section VI, Paragraph D. contains the formulas to be used for
computing the Credit Allowances described above.
<PAGE>
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 3
C. Engine or Module Failure Credit Allowances Illustration
[Graphic Omitted]
Note: The Primary Parts Credit Allowances Illustration (Section II,
Paragraph B) is also applicable to the Credit Allowances which are
based on Parts Time as described in Section I, Subparagraph B.2.
<PAGE>
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 4
II. PRIMARY PARTS CREDIT ALLOWANCE
A. Primary Parts Other Than First Run Parts or Extended First Run Parts
1. Primary Parts are limited to those Parts listed in Section III
while such Parts are within the Class Life indicated in
Section III.
2. The Primary Parts Credit Allowances described in Subparagraph
A.3 below will be based on 100 percent to 2,000 hours total
Parts Time which then decreases, pro rata, to zero percent at
the end of the applicable hourly Class Life.
3. If a Primary Part suffers Direct Damage or Resultant Damage,
and provided that the Part causing Resultant Damage is also a
Primary Part, IAE will grant to the Operator:
a. A Parts Credit Allowance for any Primary Part Scrapped,
or
b. A Labor Credit Allowance for any Primary Part Repaired
in accordance with a Parts Repair designated in writing
by IAE as being eligible for a Credit Allowance under
this Section II, Paragraph A.
Note: Section VI, Paragraph D. contains the formulas to be used for
computing the Credit Allowances described above.
B. Primary Parts Credit Allowances Illustration
[Graphic Omitted]
A = CLASS A PRIMARY PARTS (Page 5)
B = CLASS B PRIMARY PARTS (Page 6)
C = CLASS C PRIMARY PARTS (Page 6)
<PAGE>
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 5
III IDENTIFICATION OF PRIMARY PARTS
The following Parts are defined as Primary Parts while such Parts are
within the Class Life indicated. Class Life is the period, expressed in
either hours or Parts Time or number of Parts Cycles during which IAE will
grant Credit Allowances for Primary Parts which suffer Direct Damage or
Resultant Damage, or for which a Parts Life Limit is established or
reduced.
CLASS A (4,000 HOURS PARTS TIME)
Cold Section Rotating Parts
LP Compressor Inlet Cone - Spinner
LP Compressor 1st Stage Blade - Fan
LP Compressor 1st Stage Blade Annulus Fillers
LP Compressor 2nd Stage Blade
Radial Drive Bevel Gear
Tower Shaft
HP Compressor 3 through 12th Stage Blades
HP Compressor Front and Rear Rotating Airseals
LP Turbine Shaft Coupling Nut
Cold Section Static Parts
Fan Splitter Fairing
LP Compressor Stage 2 Inlet and Exhaust Stator Assembly
HP Compressor Stage 3 to Stage 6 Variable Stator Assembly
Fan Aerodynamic OGV's
HP Compressor Stage 6 to II Stator Assembly
HP Compressor Exit Stator
Hot Section Rotating Parts
HP Turbine Stage 1 and 2 Blade
HP Turbine Gage Spacer
HP Turbine Lock Nut
LP Turbine Stage 3 to 7 Blades
LP Turbine Lock Nut
Hot Section Static Parts
Fuel Injector
Combustion Chamber Assembly
HPT First Stage Cooling Duct Assembly (TOBI Duct)
HPT 1st and 2nd Stage Nozzle Guide Vane Assembly
<PAGE>
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 6
HPT 1st and 2nd Stage Outer Airseal Assembly
HP to LP Turbine Transition Duct (Inner & Outer)
LPT Stage 3 to 7 Nozzle Guide Vane Assembly
LPT Stage 3 to 7 Outer Airseal Assembly
Main and Angle Gearbox
Gearshafts and Bearings
Lay Shaft
All Accessory Drive Shafts
Gearbox Oil Pumps (Pressure and Scavenge)
CLASS B (8,000 HOURS PARTS TIME)
Fan Case Assembly (Includes Intermediate Case)
HP Compressor Front Casings (Split Casings)
HP Compressor Rear Casings
Diffuser Case
HP Turbine Case
LP Turbine Case
Turbine Exhaust Case
Main Gearbox Casing
Oil Tank
CLASS C (20,000 HOURS PARTS TIME FOR DAMAGE
15,000 PARTS CYCLES FOR LIFE LIMIT REDUCTION)
Fan Disk
LPC Drum
HPC 1 to 6 Drum
HPC 7 to l0 Drum
HP Turbine Stage 1 and 2 Disks
HP Turbine Spacer Disk
HP Turbine Stage 1 Front Rotating Airseal
HP Turbine 2nd Stage Disk Rear Seal
LP Turbine Stage 3-7 Disks
LP Turbine Stage 3-7 Rotating Airseals
Shafts
<PAGE>
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 7
IV PARTS LIFE LIMIT ALLOWANCES
A. A Parts Life Limit is the maximum allowable Parts Time or Parts
Cycles for specific Parts as established by IAE and the United
States Federal Aviation Administration.
B. Credit Allowances
1. Class A and Class B Primary Parts
If a Parts Life Limit is established which results in Part
Scrappage at less than 4,000 hours Parts Time for a Class A
Primary Part or less than 8,000 hours Parts Time for a Class B
Primary Part, IAE will grant for each such Primary Part
Scrapped as a result thereof, a Parts Credit Allowance based
on 100 percent to 2,000 hours total Parts Time which then
decreases, pro rata, to zero percent at the end of 4,000 hours
total Parts Time for a Class A Primary Part or 8,000 hours
total Parts Time for a Class B Primary Part.
2. Class C Primary Parts
If a Parts Life Limit is established for a Class C Primary
Part which results in Part Scrappage in less than 15,000 total
Parts Cycles, IAE will grant for each such Primary Part
Scrapped as a result thereof, a Parts Credit Allowance based
on 100 percent to 10,000 total Parts Cycles which then
decreases, pro rata, to zero percent at 15,000 total Parts
Cycles.
In addition, IAE will grant a similarly calculated Labor
Credit Allowance and Parts Credit Allowance for that labor and
those Expendable Parts which are solely related to the removal
and replacement of such Class C Primary Parts and is
additional to other maintenance being performed on the Engine
or Module.
Note: Section VI, Paragraph D. contains the formulas to be used for
computing the Credit Allowances described above.
<PAGE>
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 8
C. Parts Life Limit Credit Allowances Illustrations
[Graphic Omitted]
A = CLASS A PRIMARY PARTS (Page 5)
B = CLASS B PRIMARY PARTS (Page 6)
[Graphic Omitted]
C = CLASS C PRIMARY PARTS (Page 6)
<PAGE>
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 9
V CAMPAIGN CHANGE CREDIT ALLOWANCES AND ADJUSTMENTS
A. A Campaign Change is an IAE program, so designated in writing, for
the Reoperation, replacement, addition, or deletion of a Part(s).
IAE will grant the Credit Allowances and Adjustments specified in
this Section V to the Operator when Campaign Change recommendations
are complied with by the Operator.
B. Standard Allowances
1. A 100 percent Parts Credit Allowance for the replacing Parts
specified in the Campaign Change for installed Parts or
serviceable shelf stock Parts which are Scrapped with 3,000
hours or less total Parts Time.
2. A pro rata Parts Credit Allowance for the replacing Parts
specified in the Campaign Change for installed Parts or
serviceable shelf stock Parts which are Scrapped with more
than 3,000 hours total Parts Time but less than 3,500 hours
total Parts Time. The pro rata Parts Credit Allowance will be
based on 100 percent at 3,000 hours total Parts Time which
then decreases, pro rata, to 50 percent at 3,500 hours total
Parts Time.
3. A 50 percent Parts Credit Allowance for the replacing Parts
specified in the Campaign Change for installed Parts or
serviceable shelf stock Parts which are Scrapped with more
than 3,500 hours total Parts Time.
4. A 100 percent Labor Credit Allowance for Reoperation of
installed Parts or serviceable shelf stock Parts with 3,000
hours or less total Parts Time which are Reoperated in
accordance with the Campaign Change.
5. A pro rata Labor Credit Allowance for Reoperation of installed
Parts or serviceable shelf stock Parts with more than 3,000
hours total Parts Time but less than 3,500 hours total Parts
Time which are Reoperated in accordance with the Campaign
Change. The pro rata Labor Credit Allowance will be based on
100 percent at 3,000 hours total Parts Time which then
decreases, pro rata, to 50 percent at 3,500 hours total Parts
Time.
6. A 50 percent Labor Credit Allowance for Reoperation of
installed Parts or serviceable shelf stock Parts with more
than 3,500 hours total Parts Time which are Reoperated in
accordance with the Campaign Change.
<PAGE>
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 10
7. A 100 percent Labor Credit Allowance for disassembly and
reassembly of the Engine or Module, if the disassembly of the
Engine or Module is recommended by IAE for accomplishment of
the Campaign Change and such disassembly is performed solely
for the purpose of accomplishing the Campaign Change.
Note: Section VI, Paragraph D. contains the formulas to be used for
computing the Credit Allowances described above.
C. Campaign Change Credit Allowances Illustration
[Graphic Omitted]
Note: The Labor Credit Allowance for Engine or Module disassembly and
reassembly remains at a constant 100%.
D. Optional Credit Allowances and Adjustments
1. When IAE declares a Campaign Change, IAE, at its sole option,
may grant to the Operator Credit Allowances and adjustments,
such as, but not necessarily limited to:
a. No Charge material.
b. Specifically priced material.
c. Single credit settlements for the Operators' fleet.
d. Fixed Credit Allowance support for each Engine.
<PAGE>
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 11
2. These optional Credit Allowances and Adjustments may be
provided:
a. Instead of the standard Credit Allowances of Section V,
Paragraph B.,
b. In addition to the standard Credit Allowances of Section
V, Paragraph B or
c. As a portion of the standard Credit Allowances of
Section V, Paragraph B.
3. In no event shall the worth to the Operator, as reasonably
determined by IAE, be less than the amount that would have
been granted to the Operator as a standard Campaign Change
Credit Allowance, per Section V, Paragraph B. In considering
the use of these optional Credit Allowances and adjustments,
IAE will attempt to minimize the financial and administrative
impact on the Operator.
<PAGE>
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 12
VI DEFINITIONS
A. CAMPAIGN CHANGE is an IAE program, so designated in writing, for the
Reoperation, replacement, addition or deletion of Part(s) and is
characterized by the granting of certain Credit Allowances to the
Operator when such program recommendations are complied with by the
Operator.
B. CLASS LIFE is the period, expressed in either hours of Part Time or
number of Parts Cycles, during which IAE will grant Credit
Allowances for Primary Parts which suffer Direct Damage or Resultant
Damage, or for which a Parts Life Limit is established or reduced.
C. COMMERCIAL AVIATION USE is the operation of Engines in Aircraft used
for commercial, corporate or private transport purposes. The
operation of Engines by government agencies or services is normally
excluded except that IAE will consider written requests for the
inclusion of such Engines under the provisions of this Service
Policy.
D. CREDIT ALLOWANCES
1. PARTS CREDIT ALLOWANCES is an amount determined in accordance
with the following formulas:
a. 100 percent Parts Credit Allowance = P
b. 50 percent Parts Credit Allowance = P/2
c. Pro rata Parts Credit Allowance =
(1) For a Primary Part which suffers Direct or
Resultant Damage, or a Class A or Class B Primary
Part for which a Parts Life Limit is established:
(L(t) - T)/(L(t)) x P
(2) For a Class C Primary Part for which a Parts Life
Limit is established, which is greater than 10,000
total Parts Cycles but is less than 15,000 total
Parts Cycles:
L(c) - C/L(c) x P
<PAGE>
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 13
(3) For replacement of a Part because of a Campaign
Change, when such a Part has more than 3,000 hours
Parts Time but less than 3,500 hours Parts Time:
(4,000 - T)/1,000 x P
d. Extended First Run Parts Credit Allowance -
(3,500-E)/500 x P or (L(t) - T)/(L(t) x P)
2. LABOR CREDIT ALLOWANCE is an amount determined in accordance
with the following formulas, except that in no event shall the
amount to be granted for repair of Parts exceed the amount of
the Parts Credit Allowance which would have been granted if
the Part had been Scrapped:
a. 100 percent Labor Credit Allowance = H x R
b. 50 percent Labor Credit Allowance = H/2 x R
c. Pro rata Labor Credit Allowance =
(1) For a Primary Part which suffers Direct or
Resultant Damage, or a Class A or Class B Primary
Part for which a Parts Life Limit is established:
(L(t)-T)/(L(t)) x H x R
(2) For a Class C Primary Part for which a Parts Life
Limit is established which is greater than 10,000
total Parts Cycles but is less than 15,000 total
Parts Cycles:
(L(c) - C)/(L(c)) x H x R
<PAGE>
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 14
(3) For replacement of a Part because of a Campaign
Change, which such a Part has more than 3,000
hours Parts Time but less than 3,500 hours Parts
Time:
(4,000-T)/1,000 x H x R
d. Extended First Run Labor Credit Allowance =
(3,500 - E)/500 x H x R or (L(t) - T)/(L(t)) x H x R
3. The variables used in calculating the above allowances are
defined as:
P = a. For a Part Scrapped because of Direct Damage,
Resultant Damage or a Parts Life Limit being
established, the IAE commercial price of the Part
Scrapped current at the time of either the Engine
removal or Part removal, whichever occurs sooner,
or
b. For replacement of a Part because of a Campaign
Change, the IAE commercial price of the replacing
Part specified in the Campaign Change current at
the time of notification to the Operator of the
Campaign Change.
T = a. For a Primary Part which has suffered Direct
Damage or Resultant Damage, the actual Parts Time
on the Part minus 2,000 hours, or
b. For a Class A or Class B Primary Part for which a
Parts Life Limit is established, the actual Parts
Time on the Part minus 2,000 hours, or the Parts
Life Limit minus 2,000 hours, whichever is
greater, or
c. For replacement of a Part because of a Campaign
Change, when such a Part has more than 3,000 hours
Parts Time but less than 3,500 hours Parts Time,
the actual Parts Time on the Part.
<PAGE>
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 15
C = For a Class C Primary Part for which a Parts Life
Limit is established which is greater than 10,000 Total
Parts Cycles but less than 15,000 Total Parts Cycles,
the greater of either:
a. The actual Parts Cycles on the Part minus 10,000
cycles, or
b. The new Parts Life Limit minus 10,000 Cycles.
L(t)= Either:
a. For a Primary Part which has suffered Direct
Damage or Resultant Damage, the hours indicated in
Section III minus 2,000 hours, or
b. For a Class A or Class B Primary Part for
which a Parts Life Limit is established, the
hours indicated in Section III minus 2,000
hours.
L(c)= For a Class C Primary Part for which a Parts Life
Limit is established which is greater than 10,000 total
Parts Cycle, 5,000 Cycles.
H = The man-hours required to accomplish the work as
established in writing by IAE.
R = The labor rate, expressed in U.S. Dollars per hour,
which will be determined as follows:
a. If the labor is performed at the Operator's
facility, or its subcontractor's facility, the
labor rate will be the greater of the Operator's
labor rate or the subcontractor's labor rate,
where the labor rates were determined in
accordance with IAE Form ____ and provided to the
Operator in writing, or
b. If the labor is performed by IAE, the labor rate
will be the then current labor rate of IAE.
E = Actual Engine Time on an Extended First Run Engine.
E. DIRECT DAMAGE is the damage suffered by a Part itself upon its
failure.
<PAGE>
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 16
F. ECONOMICALLY REPAIRABLE shall generally mean that the cost of the
repair as determined by IAE, exclusive of modification and
transportation costs, will be equal to or less than 65 percent of
the IAE commercial price of the Part at the time the repair is
considered, or, shall be as otherwise reasonably determined by IAE.
G. ENGINE(S) means those V2500 Engine(s), as described by IAE
Specifications, sold by IAE for Commercial Aviation Use, whether
installed as new equipment in aircraft by the manufacturer thereof
and delivered to the Operator or delivered directly to the Operator
from IAE for use as a spare Engine. An Engine which has been
converted or upgraded in accordance with IAE instructions shall
continue to qualify for Credit Allowances and Adjustments under the
provisions of this Service Policy.
H. ENGINE OR MODULE TIME is the total number of flight hours of
operation of an Engine or a Module.
I. EXPENDABLE PARTS means those nonreusable Parts, as determined by
IAE, which are required to be replaced during inspection or
Reconditioning, regardless of the condition of the Part.
J. EXTENDED FIRST RUN ENGINE OR MODULE is an Engine or Module with more
than 3,000 hours Engine or Module Time but not more than 3,500 hours
Engine or Module Time.
K. EXTENDED FIRST RUN PART means a Part with 3,500 hours or less Parts
Time operating in an Extended First Run Engine.
L. FAILURE (FAILED) is the breakage, injury, or malfunction of a Part
rendering it unserviceable and incapable of continued operation
without corrective action.
M. FIRST RUN ENGINE OR FIRST RUN MODULE is an Engine or Module with
3,000 hours or less Engine or Module Time.
N. FIRST RUN PART is an Engine Part with 3,000 hours or less Parts Time
operating in a First Run Engine.
0. MODULE(S) means any one or more of the following assemblies of
Parts:
Fan Assembly and Low Pressure Compressor Assembly
High Pressure Compressor Assembly
High Pressure Turbine Assembly
Low Pressure Turbine Assembly
Main gearbox
Any other Assembly of Parts so designated by IAE
<PAGE>
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 17
P. OPERATOR is the owner of one or more Engines operated for Commercial
Aviation Use, the lessee if such Engine(s) is the subject of a
long-term financing lease or as otherwise reasonably determined by
IAE.
Q. PART(S) means Engine parts sold by IAE and delivered to the Operator
as original equipment in an Engine or Engine parts sold and
delivered by IAE to the Operator as new spare parts in support of an
Engine.
R. PARTS CYCLE(S) means the aggregate total number of times a Part
completes an Aircraft takeoff and landing cycle, whether or not
thrust reverser is used on landing. As pilot training will involve
extra throttle transients such as touch and go landings and
takeoffs, IAE shall evaluate such transients for Parts Cycle
determination.
S. PARTS LIFE LIMIT is the maximum allowable total Parts Time or total
Parts Cycles for specific Parts, including Reoperation if
applicable, as established by IAE or by the United States Federal
Aviation Administration. Parts Life Limits are published in the Time
Limits Section (Chapter 05) of the applicable V2500 Series Engine
Manual.
T. PARTS REPAIR means the IAE designated restoration of Failed Parts to
functional serviceable status, excluding repair of normal wear and
tear, as determined by IAE.
U. PARTS TIME is the total number of flight hours of operation of a
Part.
V. PRIMARY PART(S) are limited to those Parts listed in Section III
while such Parts are within the Class Life indicated in Section III.
W. RECONDITIONING means the restoration of an Engine or Module allowing
substitution of new or serviceable used Parts, to the extent
necessary for continued operation of the Engine or Module as a
serviceable unit. When such Reconditioning is performed by IAE, the
Parts Time or Parts Cycles, as applicable, of the replaced Part
shall, for the purpose of this Service Policy, be applicable to the
substituted new or serviceable used Part. Said replaced Part shall
become the property of IAE.
X. REOPERATION is the alteration to or modification of a Part.
Y. RESULTANT DAMAGE is the damage suffered by a Part because of the
Failure of another Part within the same Engine.
Z. SCRAPPED PARTS (SCRAP, SCRAPPED, SCRAPPAGE) shall mean those Parts
determined by IAE to be unserviceable and not Economically
Repairable. The Operator shall cause such Parts to be mutilated or
disposed of in such a manner as to preclude any possible further use
as an Engine Part.
<PAGE>
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 18
VII GENERAL CONDITIONS
The following general conditions govern the application of this Service
Policy:
A. Records and Audit
The Operator shall maintain adequate records for the administration
of this Service Policy and shall permit IAE to audit such records at
reasonable intervals.
B. Scrapping of Parts
1. Scrappage Verification
Any Part for which a Parts Credit Allowance is requested shall
be verified as Scrapped prior to the issuance of the Parts
Credit Allowance. Verification of Scrappage shall occur as
follows:
a. At the Operator's, or its subcontractor's, facility.
Such verification shall be accomplished by the IAE Field
Representative.
b. At IAE, provided that IAE concurs that the Part is to be
Scrapped. Sufficient information to identify the Part,
the Engine from which the Part was removed, and the
reason for its return shall be provided.
2. Return of Parts
IAE, at its sole option, may require the Operator to return to
IAE any Part for which a Parts Credit Allowance is requested.
Such return shall be a condition for the issuance of a Parts
Credit Allowance.
3. Transportation Expenses
Transportation expenses shall be at the expense of the
Operator if such Parts are shipped to and from IAE for
examination and verification; except that IAE shall pay the
expense if such Parts as are shipped at the request of IAE.
<PAGE>
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 19
4. Title
Title to such Parts returned to IAE shall vest in IAE:
a. Upon determination by IAE that the Operator is eligible
for a Parts Credit Allowance. If it is determined that
the Parts are scrapped Parts but are not eligible for
Service Policy coverage, the Operator will be notified
of the decision and the Parts returned at the Operator's
expense if the Operator so requests; otherwise, the
Parts will be disposed of by IAE without any type of
adjustment, or
b. Upon shipment, when such Parts are determined to be
Scrap at the Operator's facility and are shipped to IAE
at the request of IAE.
C. Repairability Requirements
The Operator shall set aside and exclude from the operation of this
Service Policy for a period of six months any Part for which IAE
states it has, or plans to initiate, an active program to achieve a
repair, corrective Reoperation or Parts Life Limit extension. In the
event IAE has not released a repair procedure, corrective
Reoperation, or Parts Life Limit extension by the expiration of this
six month period, such Part shall be retained by the Operator and
excluded from the operation of this Service Policy for additional
periods beyond the expiration of said six month period only if
agreed to by the Operator.
D. Exclusions from Service Policy
This Service Policy will not apply to any Engine, Module or Part if
it has been determined to the reasonable satisfaction of IAE that
said Engine, Module or Part has Failed because it:
1. Has not been properly installed or maintained in accordance
with IAE recommendations unless such improper installation or
maintenance was performed by IAE, or
2. Has been used contrary to the operating and maintenance
instructions or recommendations authorized or issued by IAE
and current at the time, or
3. Has been repaired or altered other than by an IAE designated
V2500 Maintenance Center in such a way as to impair its
safety, operation or efficiency, or
<PAGE>
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 20
4. Has been subjected to:
a. Misuse, neglect, or accident, or
b. Ingestion of foreign material, or
5. Has been affected in any way by a part not defined as a Part
herein, or
6. Has been affected in any way by occurrences not associated
with ordinary use, such as, but not limited to, acts of war,
rebellion, seizure or other belligerent acts.
E. Payment Options
IAE at its option may grant any Parts Credit Allowance as either a
credit to the Operator's account with IAE or as a Part replacement.
F. Presentation of Claims
Any request for a Credit Allowance must be presented to IAE not
later than 180 days after the removal from service of the Engine or
Part for which the Credit Allowance is requested. If IAE disallows
the request, written notification will be provided to the Operator.
The Operator shall have 90 days from such notification to request a
reconsideration of the request for Credit Allowance. IAE shall have
the right to refuse any request for a Credit Allowance which is not
submitted within the stated time periods.
G. Duration of Service Policy
This Service Policy will normally cease to apply to all Parts in any
Engine that is more than ten years old as measured from the date of
shipment of the Engine from the factory. Unless advised to the
contrary by IAE, this Service Policy shall, however, continue to be
applicable to individual Engines after the expiration of the ten
year period on a year to year basis so that the Operator may
continue to receive the benefits of the Service Policy on the Parts
in these Engines.
<PAGE>
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 21
H. General Administration
On matters concerning this Service Policy, the Operator is requested
to address all correspondence to:
IAE International Aero Engines AG
Corporate Center II
628 Hebron Avenue
Glastonbury, Connecticut 06033-2595 USA
Attention: Warranty Administration
I. Limitation of Liability
1. The express provisions of this Service Policy set forth the
maximum liability of IAE with respect to any claims relating
to this Service Policy. In the event of any conflict or
inconsistency between the express provisions of this Service
Policy and any Illustrations contained herein, the express
provisions shall govern.
2. Except to the extent that the Credit Allowances and
adjustments expressly set forth in this Service Policy may
exceed the limitations of the corresponding portions of any
warranties or representations included in any sales
agreements, the provisions of this Service Policy do not
modify, enlarge or extend in any manner the conditions
governing the sale of its Engines and Parts by IAE.
3. IAE reserves the right to change or retract this Service
Policy at any time at its sole discretion. No such retraction
or change shall diminish the benefits which the Operator may
be entitled to receive with respect to Engines for which an
acceptable order has been placed with IAE or with respect to
aircraft with installed Engines for which a firm unconditional
order has been placed with the aircraft manufacturer prior to
the announcement of any such retraction or change.
J. Assignment of Service Policy
This Service Policy shall not be assigned, either in whole or in
part, by either party. IAE will, however, upon the written request
of the Operator consider an extension of Service Policy Credit
Allowances and adjustments to Engines, Modules and Parts sold or
leased by an Operator to another Operator, to the extent only,
however, that such Credit Allowances and adjustments exist at the
time of such sale or lease and subject to the terms and conditions
of the Service Policy. IAE shall not unreasonably withhold such
extension of such Credit Allowances.
<PAGE>
EXHIBIT D-2
NACELLE SERVICE POLICY
44
<PAGE>
IAE
INTERNATIONAL AERO ENGINES AG
V2500 NACELLE AND PARTS SERVICE POLICY
Issued: November 16, 1988
<PAGE>
IAE
INTERNATIONAL AERO ENGINES AG
V2500 NACELLE AND PARTS SERVICE POLICY
This Nacelle and Parts Service Policy (Service Policy) is a statement of the
terms and conditions under which IAE International Aero Engines AG ("IAE") will
grant the Operators of its V2500 Nacelles certain Allowances and adjustments in
the event that Parts of such Nacelles suffer Failure in service.
This Service Policy is divided into four sections:
Section I describes the Allowances and adjustments Page 1
which will be granted should the Nacelle
or Part(s) suffer a Failure.
Section II describes the Allowances and adjustments Page 3
which will be granted when IAE declares a
Campaign Change.
Section III contains the definitions of certain words Page 5
and terms used throughout this Service
Policy. These words and terms are
identified in the text of this Service
Policy by the use of initial capital
letters for such words and terms.
Section IV contains the general conditions governing Page 9
the application of this Service Policy.
<PAGE>
I ALLOWANCES AND ADJUSTMENTS
A. First Run Nacelle and Part
1. A First Run Nacelle is a Nacelle with 6,000 hours or less
Nacelle Time and a First Run Part is a Part with 6,000 hours
or less Parts Time operating in a First Run Nacelle.
2. If a First Run Part suffers Direct Damage or Resultant Damage,
and provided that the Part causing Resultant Damage is also a
First Run Part:
a. IAE will grant to the Operator:
(1) A 100 percent Parts Credit Allowance for any such
First Run Part Scrapped, and
(2) A 100 percent Labor Allowance for Parts Repair of
any First Run Part requiring Parts Repair.
b. If such Damage of a First Run Part causes the removal of
the Nacelle from the Aircraft, IAE will, in addition to
Subparagraph a. above, grant to the Operator:
(1) A 100 percent Labor Allowance for disassembly,
reassembly and necessary testing of the Nacelle
requiring Reconditioning as a result of such
Damage of the First Run Part, and
(2) A 100 percent Parts Credit Allowance for those
Expendable Parts required in the Reconditioning of
the Nacelle.
c. If such Damage of a First Run Part causes the removal of
the Nacelle from the Aircraft, IAE will arrange, upon
request by the Operator, to Recondition the Nacelle or
accomplish the Parts Repair at no charge to the Operator
rather than providing the above Allowances. Such work
will be accomplished at a V2500 Maintenance Center
designated by IAE. Transportation charges to and from
the Maintenance Center shall be paid by the operator.
<PAGE>
V2500 NACELLE AND PARTS SERVICE POLICY PAGE 2
B. Primary Part
1. A Primary Part is a Part other than a First Run Part but
having not more than 6,000 hours Parts Time.
2. Primary Parts not eligible for those Allowances granted to
First Run Parts are eligible for Allowances under this Section
I, Paragraph B., provided that the Primary Part suffers Direct
Damage or Resultant Damage and Provided that the Part causing
Resultant Damage is also a Primary Part.
3. IAE will grant to the Operator a Parts Credit Allowance for
such a Primary Part Scrapped or a Labor Allowance for such a
Primary Part for which a Parts Repair is designated in writing
by IAE as being eligible for adjustment under this Section I,
Paragraph B. Such Allowance will be based on 100 percent to
1,000 hours total Parts Time which then decreases, pro rata,
to zero percent at 6000 hours Parts time.
<PAGE>
V2500 NACELLE AND PARTS SERVICE POLICY PAGE 3
II CAMPAIGN CHANGE ALLOWANCES AND ADJUSTMENTS
A. A Campaign Change is an IAE program, so designated in writing, for the
Reoperation, replacement, addition, or deletion of a Part(s). IAE will
grant the Allowances and adjustments specified in this Section II to the
Operator when Campaign Change recommendations are complied with by the
Operator.
B. Standard Allowances
1. A 100 percent Parts Credit Allowance for the replacing Parts
specified in the Campaign Change for installed or serviceable shelf
stock Nacelle Parts which are Scrapped with 6,000 hours or less
total Parts Time.
2. A 50 percent Parts Credit Allowance for the replacing Parts
specified in the Campaign Change for installed or serviceable shelf
stock Nacelle Parts which are Scrapped with more than 6,000 hours
total Parts Time.
3. A 100 percent Labor Allowance for Reoperation of installed or
serviceable shelf stock Nacelle Parts with 6,000 hours or less total
Parts Time, which are Reoperated in accordance with the Campaign
Change.
4. A 50 percent Labor Allowance for Reoperation of installed or
serviceable shelf stock Nacelle Parts with more than 6,000 hours
total Parts Time, which are Reoperated in accordance with the
Campaign Change.
5. A 100 percent Labor Allowance for disassembly and reassembly of the
Nacelle, if the disassembly is recommended by IAE for accomplishment
of the Campaign Change and such disassembly is performed solely for
the purpose of accomplishing the Campaign Change.
C. Optional Allowances and Adjustments
1. When IAE declares a Campaign Change, IAE, at its sole option, may
grant to the Operator allowances and adjustments, such as, but not
necessarily limited to:
a. No charge material
b. Specially priced material
c. Single payment settlements for the Operators' fleet
d. Fixed allowance support for each Nacelle.
<PAGE>
V2500 NACELLE AND PARTS SERVICE POLICY PAGE 4
2. These optional allowances and adjustments will be provided either:
a. Instead of the standard Allowances of Paragraph B.,
b. In addition to the standard Allowances of Paragraph B., or
c. As a portion of the standard Allowances of Paragraph B.
3. In no event shall the worth to the Operator, as reasonably
determined by IAE, be less than the amount that would have been
granted to the Operator as a standard Campaign Change Allowance, per
Paragraph B. In considering the use of these optional allowances and
adjustments, IAE will attempt to minimize the financial and
administrative impact on the Operator.
<PAGE>
V2500 NACELLE AND PARTS SERVICE POLICY PAGE 5
III DEFINITIONS
A. ALLOWANCES
1. PARTS CREDIT ALLOWANCE is an amount determined in accordance with
the following formula:
a. 100 percent Parts Credit Allowance = P
b. 50 percent Parts Credit Allowance = P/2
c. Pro rata Parts Credit Allowance = (6,000 - T/5000) x P
2. LABOR ALLOWANCE is an amount determined in accordance with the
following formulas, except that in no event shall the amount to be
granted for repair of Parts exceed the amount of the Parts Credit
Allowance which would have been granted if the Part had been
Scrapped.
a. 100 percent Labor Allowance = H x R
b. 50 percent Labor Allowance = H/2 x R
c. Pro rata Labor Allowance = (6,000 - T)/5,000 x H x R
3. The variables used in calculating the above Allowances are defined
as:
P = for a Part Scrapped because of Direct Damage or Resultant
Damage, the IAE commercial price of the Part Scrapped current
at the time of either the Nacelle removal or Part removal,
whichever occurs sooner, or
for replacement of Parts because of a Campaign Change, the IAE
price of the replacing Part specified in the Campaign Change
current at the time of notification to the Operator of the
Campaign Change.
T = actual Parts Time hours on a Part which has suffered Direct
Damage or Resultant Damage or the Parts Life Limit as
established for the Part.
<PAGE>
V2500 NACELLE AND PARTS SERVICE POLICY PAGE 6
H = the man-hours required to accomplish the work as established
in writing by IAE.
R = the labor rate, expressed in dollars per hour, which will be
determined as follows:
a. If the labor is performed at the Operator's facility, or
its subcontractor's facility, the labor rate will be the
greater of the Operator's labor rate or the
subcontractor's labor rate, where the labor rates were
determined in accordance with IAE Form and provided to
the Operator in writing, or
b. If the labor is performed at a V2500 Maintenance Center
designated by IAE, the labor rate will be the then
current labor rate at that Center.
B. CAMPAIGN CHANGE is an IAE program, so designated in writing, for the
Reoperation, replacement, addition or deletion of a Part(s) and is
characterized by the granting of certain Allowances to the Operator
when such recommendations are complied with by the Operator.
C. COMMERCIAL AVIATION USE is the operation of Nacelles in Aircraft
used for commercial, corporate or private transport purposes. The
operation of Nacelles by Government Agencies or Services is normally
excluded except that IAE will consider written requests for the
inclusion of such Nacelles under the provisions of this Service
Policy.
D. DIRECT DAMAGE is the damage suffered by a Part itself upon its
Failure.
E. ECONOMICALLY REPAIRABLE shall generally mean that the cost of the
repair as determined by IAE exclusive of modification and
transportation costs, will be equal to or less than 65 percent of
the IAE commercial price of the Part at the time the repair is
considered, or, shall be as otherwise reasonably determined by IAE.
F. EXPENDABLE PARTS means those nonreusable Parts, as determined by
IAE, which are required to be replaced during inspection or
Reconditioning, regardless of the condition of the Part.
G. FAILURE (FAILED) is the breakage, injury, or malfunction of a Part
rendering it unserviceable and incapable of continued operation
without corrective action.
<PAGE>
V2500 NACELLE AND PARTS SERVICE POLICY PAGE 7
H. FIRST RUN NACELLE is a Nacelle with 6,000 hours or less Nacelle
Time.
I. FIRST RUN PART is a Nacelle Part with 6,000 hours or less Parts Time
operating in a First Run Nacelle.
J. NACELLE(S) means V2500 nacelle(s) and thrust reverser, as described
in IAE Specifications referenced below, as such Specifications may
be revised from time to time, sold by IAE for Commercial Aviation
Use, whether installed as new equipment in aircraft by the
manufacturer thereof and delivered to the Operator or delivered
directly to the Operator from IAE for use as a spare nacelle. A
Nacelle which has been converted or upgraded in accordance with IAE
instructions shall continue to qualify for Allowances and
adjustments under the provisions of this Service Policy.
Model No. Specification No. Specification Date
--------- ----------------- ------------------
V2500 -- ___________, 198__
K. NACELLE TIME is the total number of flight hours of operation of a
Nacelle.
L. OPERATOR is the owner of one or more Nacelles operated for
Commercial Aviation use, the lessee if such Nacelle(s) is the
subject of a long-term financing lease or as otherwise reasonably
determined by IAE.
M. PART(S) means Nacelle parts sold by IAE and delivered to the
Operator as original equipment in a Nacelle or Nacelle parts sold
and delivered by IAE to the Operator as new spare parts in support
of a Nacelle.
N. PARTS LIFE LIMIT is the maximum allowable Parts Time, for specific
Parts as established by IAE or by the Federal Aviation
Administration in an Airworthiness Directive.
0. PARTS REPAIR means the IAE designated restoration of Failed Parts to
functional serviceable status, excluding repair of normal wear and
tear, as determined by IAE.
P. PARTS TIME is the total number of flight hours of operation of a
Part.
Q. PRIMARY PART means a Part other than a First Run Part but not having
more than 6,000 hours Parts Time.
<PAGE>
V2500 NACELLE AND PARTS SERVICE POLICY PAGE 8
R. RECONDITIONING means the restoration of a Nacelle allowing
substitution of new or serviceable used Parts, to the extent
necessary for continued operation of the Nacelle as a serviceable
unit. When such Reconditioning is performed by IAE designated V2500
Maintenance Center, the Parts Time, of the replaced Part shall, for
the purpose of this Service Policy, be applicable to the substituted
new or serviceable used Part. Said replaced Part shall become the
property of IAE.
S. REOPERATION is the alternation to or modification of a Part.
T. RESULTANT DAMAGE is the damage suffered by a Part because of the
Failure of another Part within the same Nacelle.
U. SCRAPPED PARTS (SCRAP, SCRAPPED, SCRAPPAGE) shall mean those Parts
determined by IAE to be unserviceable and not Economically
Repairable. The Operator shall cause such Parts to be mutilated or
disposed of in such a manner as to preclude any possible further use
as a Nacelle Part.
<PAGE>
V2500 NACELLE AND PARTS SERVICE POLICY PAGE 9
IV GENERAL CONDITIONS
The following general conditions govern the application of this Service
Policy:
A. Records and Audit
The Operator shall maintain adequate records for the administration
of this Service Policy and shall permit IAE to audit such records at
reasonable intervals.
B. Scrapping of parts
1. Scrappage Verification
Any Part for which a Parts Credit Allowance is requested shall
be verified as Scrapped prior to the issuance of the
Allowance. Verification of Scrappage shall occur as Follows:
a. At the Operator's, or its subcontractor's, facility.
Such verification shall be accomplished by the IAE Field
Representative.
b. At a V2500 Maintenance Center designated by IAE,
provided that IAE concurs that the Part is to be
Scrapped. Sufficient information to identify the Nacelle
from which the Part was removed, and the reason for its
return shall be provided.
2. Return of Parts
IAE, at its sole option, may require the Operator to return to
IAE any Part for which a Parts Credit Allowance is requested.
Such return shall be a condition for the issuance of a Parts
Credit Allowance.
3. Transportation Expenses
Transportation expenses shall be at the expense of the
Operator if such Parts are shipped to and from a V2500
Maintenance Center designated by IAE for examination and
verification; except, that IAE shall pay the expense of
transport of such Parts as are shipped at the request of IAE.
<PAGE>
V2500 NACELLE AND PARTS SERVICE POLICY PAGE 10
4. Title
Title to such Parts returned to IAE shall vest in IAE.
a. Upon determination by IAE that the Operator is eligible
for a Parts Credit Allowance. If it is determined that
the Parts are scrapped Parts but are not eligible for
Service Policy coverage, the Operator will be notified
of the decision and the Parts returned at the Operator's
expense if the Operator so requests; otherwise, the
Parts will be disposed of by IAE without any type of
adjustment, or
b. Upon shipment, when such Parts are determined to be
Scrap at the Operator's facility and are shipped to IAE
at the request of IAE.
C. Repairability Requirements
The Operator shall set aside and exclude from the operation of this
Service Policy for a period of six months any Part for which IAE
states it has, or plans to initiate, an active program to achieve a
repair, corrective Reoperation or Parts Life Limit extension. In the
event IAE has not released a repair procedure, corrective
Reoperation, or Parts Life Limit extension by the expiration of this
six month period, such Part shall be retained by the Operator and
excluded from the operation of this Service Policy for additional
periods beyond the expiration of said six month period only if
agreed to by the Operator.
D. Exclusions from Service Policy
This Service Policy will not apply to any Nacelle, or Part if it has
been determined to the reasonable satisfaction of IAE that said
Nacelle or Part has Failed because it:
1. Has not been properly installed or maintained in accordance
with IAE recommendations unless such improper installation or
maintenance was performed by IAE or at any V2500 Maintenance
Center designated by IAE.
2. Has been used contrary to the operating and maintenance
instructions or recommendations authorized or issued by IAE
and current at the time, or
3. Has been repaired or altered outside any V2500 Maintenance
Center in such a way as to impair its safety, operation or
efficiency, or
<PAGE>
V2500 NACELLE AND PARTS SERVICE POLICY PAGE 11
4. Has been subjected to:
a. Misuse, neglect, or accident, or
b. Ingestion of foreign material, or
5. Has been affected in any way by a part not defined as a Part
herein, or
6. Has been affected in any way by occurrences not associated
with ordinary use, such as, but not limited to, acts of war,
rebellion, seizure or other belligerent acts.
E. Payment Options
IAE at its option may grant any Parts Credit Allowance as either a
credit to the Operator's account or as a Part replacement.
F. Presentation of Claims
Any request for an Allowance must be presented to IAE not later than
180 days after the removal from service of the Engine or Part for
which the Allowance is requested. If IAE disallows the request,
written notification will be provided to the Operator. The Operator
shall have 90 days from such notification to request a
reconsideration of the request for Allowance. IAE shall have the
right to refuse any request for an Allowance which is not submitted
within the stated time periods.
G. Duration of Service Policy
This Service Policy will normally cease to apply to all Parts in any
Nacelle that is more than ten years old as measured from the date of
shipment of the Nacelle from the factory. This Service Policy shall,
however, continue to be applicable to individual Nacelles after the
expiration of the ten year period on a year to year basis so that
the Operator may continue to receive the benefits of the Service
Policy on the Parts in these Nacelles.
H. General Administration
On matters concerning this Service Policy, the Operator is requested
to address all correspondence to:
<PAGE>
V2500 NACELLE AND PARTS SERVICE POLICY PAGE 12
IAE International Aero Engines AG
Corporate Center II
628 Hebron Avenue
Glastonbury, Connecticut 06033-2595 USA
Attention: Warranty Administration
I. Limitation of Liability
1. The express provisions of this Service Policy set forth the
maximum liability of IAE with respect to any claims relating
to this Service Policy.
2. Except to the extent that the Allowances and adjustments
expressly set forth in this Service Policy may exceed the
limitations of the corresponding portions of any warranties or
representations included in any sales agreements, the
provisions of this Service Policy do not modify, enlarge or
extend in any manner the conditions governing the sale of its
Nacelles and Parts by IAE.
3. IAE reserves the right to change or retract this Service
Policy at any time at its sole discretion. No such retraction
or change shall diminish the benefits which the Operator may
be entitled to receive with respect to Nacelles for which a
acceptable order has been placed with IAE or with respect to
aircraft with installed Nacelles for which firm orders have
been placed or options obtained with the aircraft manufacturer
prior to the announcement of any such retraction or change.
J. Assignment of Service Policy
This Service Policy shall not be assigned, either in whole or in
part, by either party. IAE will, however, upon the written request
of the Operator consider an extension of Service Policy Allowances
and adjustments to Nacelles and Parts sold or leased by an Operator
to another Operator, to the extent only, however, that such
Allowances and adjustments exist at the time of such sale or lease
and subject to the terms and conditions of the Service Policy. IAE
shall not unreasonably withhold such extension of such Allowances.
<PAGE>
EXHIBIT D-3
NON-INSTALLATION ITEMS WARRANTY
45
<PAGE>
EXHIBIT D-4
RELIABILITY GUARANTEE
47
<PAGE>
V2500 RELIABILITY GUARANTEE
I INTRODUCTION
IAE assures Midway that by the end of the five (5) year period commencing
with Midway's first commercial operation of Aircraft powered by V2500
Engines, the cumulative Engine Shop Visit Rate will not exceed a
Guaranteed Rate of 0.110 per 1000 Eligible Engine flight hours. Under this
Guarantee, if the cumulative Engine Shop Visit Rate exceeds the Guaranteed
Rate, IAE will credit Midway's account with IAE an amount of $30,000 U.S.
Dollars for each Eligible Engine Shop Visit determined to have been in
excess of the Guaranteed Rate.
II GUARANTEE
A. Period of Guarantee
The Period of Guarantee will start on the date Midway initiates
commercial operation of its first Aircraft powered by Eligible
Engines and will terminate five (5) years from that date.
B. Eligible Engines
The Engines that will be Eligible under this Guarantee shall be new
installed and new spare Engines which are owned or operated by
Midway during the Period of Guarantee and which have been acquired
pursuant to the Proposal or Contract to which this Guarantee is
attached and the related proposal or contract for delivery of
Aircraft. The Engines shall remain Eligible provided that Midway or
its authorized maintenance facility maintains them in accordance
with the IAE instructions and recommendations contained in the
applicable IAE publications including the latest Maintenance
Management Plan for Midway.
C. Eligible Shop Visits
Eligible Shop Visits shall comprise the shop visits of Eligible
Engines required for the following reasons:
1. a Failure of a Part in such Eligible Engines;
2. foreign object damage caused by the ingestion of birds,
hailstones or runway gravel;
<PAGE>
V2500 RELIABILITY GUARANTEE (Continued)
Page 2
3. an Airworthiness Directive issued by the applicable
Certification Authority; and
4. maintenance as recommended by IAE.
D. Reporting of Engine Shop Visits and Engine Flight Hours
Eligible Shop Visits shall be reported to IAE by Midway within
thirty days after the date of such Engine Shop Visit using IAE Form
TED together with such other information as may be needed to
determine the Eligibility of the Engine Shop Visit. Each such Form
shall be verified by an authorized IAE Representative before
submission. Should it be necessary for him to disqualify a reported
Engine Shop Visit, supporting information will be furnished.
Flight hours accumulated by Eligible Engines during each month
during the Period of Guarantee shall be reported by Midway within
thirty days after each month's end to IAE on IAE Form TED unless
other procedures are established for the reporting of flight hours.
E. Credit Allowance Calculation
A credit of $30,000 U.S. Dollars will be granted by IAE for each
Eligible Engine Shop Visit determined as calculated below to be in
excess of the Guaranteed Rate during the Period of Guarantee. An
annual calculation will be made no later than sixty days after each
yearly anniversary of the commencement of the Period of Guarantee
provided that the necessary Engine Shop Visit records and Eligible
Engine flight hour information have been reported to IAE.
Each annual calculation will be made using data that will be
cumulative from the start of the Period of Guarantee. An interim
credit will be granted, if necessary, following the annual
calculations for the second year and each subsequent year of the
Period of Guarantee. If subsequent annual calculations show that on
a cumulative basis, a previous interim credit (or portion thereof)
was excessive, such excess amount shall be subject to repayment
which will be effected by IAE issuing a debit against Midway's
account with IAE. Credits and debits will be applied to Midway's
account with IAE not later than thirty days following a calculation
for the second year and each subsequent year of the Period of
Guarantee, as applicable.
<PAGE>
V2500 RELIABILITY GUARANTEE (Continued)
Page 3
Credit Allowance = (AR - GR) x $30,000 U.S. Dollars
where:
AR = Total Eligible Engine Shop Visits during the period of
the calculation.
GR = 0.110/1,000 x total Engine flight hours accumulated on
Eligible Engines during the period of the calculation.
(NOTE: GR will be rounded to the nearest whole number.)
III DEFINITIONS AND GENERAL CONDITIONS
All of the Definitions and General Conditions of the V2500 Engine and
Parts Service Policy shall apply to this Guarantee. Engines and Engine
Shop Visits excluded by the General Conditions of the Policy shall be
excluded from this Guarantee except that Engine Shop Visits resulting from
ingestion of birds, hailstones or runway gravel shall be included as
Eligible under this Guarantee.
IV SPECIFIC CONDITIONS
A. The Guaranteed Rate is predicated on the use by Midway of:
1. An average flight cycle of no less than 1.5 hours;
2. Thrust levels which are derated an average of 10 percent for
Takeoff and Climb relative to full Takeoff and Climb ratings;
3. An average Aircraft utilization equal to or less than 3160
flight hours per year; and
4. An Aircraft and Engine delivery schedule in respect of four
(4) firm Aircraft and one (1) spare Engines as described in
the Proposal or Contract to which this Guarantee is attached.
B. IAE reserves the right to make appropriate adjustments to the
Guaranteed Rate if there is, during the Period of Guarantee, a
variation from the conditions upon which the Guaranteed Rate is
predicated or a discontinuation of ownership by Midway of any Engine
or any V2500 powered Aircraft subsequent to delivery to Midway.
<PAGE>
V2500 RELIABILITY GUARANTEE (Continued)
Page 4
C. In the event credits are issued under Section II, such credits will
be dedicated to the procurement of Parts aimed at correction of the
situations contributing to excess Engine Shop Visits. Accordingly,
Midway and IAE will establish jointly the modifications or Parts to
be selected, and Midway will incorporate the changes into Eligible
Engines.
V EXCLUSION OF BENEFITS
The intent of this Guarantee is to provide specified benefits to Midway as
a result of the failure of Eligible Engines to achieve the reliability
level stipulated in the Guarantee. It is not the intent, however, to
duplicate benefits provided to Midway under any other applicable
guarantee, sales warranty, service policy, or any special benefit of any
kind as a result of the same failure. Therefore, the terms and conditions
of this Guarantee notwithstanding, if the terms of this Guarantee should
make duplicate benefits available to Midway from IAE or any third-party,
Midway may elect to receive the benefits under this Guarantee or under any
of the other benefits described above, but not both.
<PAGE>
EXHIBIT D-5
INFLIGHT SHUTDOWN GUARANTEE
<PAGE>
V2500 INFLIGHT SHUTDOWN GUARANTEE
I INTRODUCTION
IAE assures Midway that by the end of the five (5) year period commencing
with Midway's first commercial operation of Aircraft powered by V2500
Engines, the cumulative Engine Inflight Shutdown Rate will not exceed a
Guaranteed Rate of 0.020 per 1000 Eligible Engine flight hours. Under this
Guarantee, if the cumulative Eligible Inflight Shutdown Rate is determined
to have exceeded the Guaranteed Rate over the Period of Guarantee, IAE
will credit Midway's account with IAE an amount of $10,000 U.S. Dollars
for each Eligible Inflight Shutdown determined to have been in excess of
the Guaranteed Rate.
II GUARANTEE
A. Period of Guarantee
The Period of Guarantee will start on the date Midway initiates
commercial operation of its first Aircraft powered by Eligible
Engines and will terminate five (5) years from that date.
B. Eligible Engines
The Engines that will be Eligible under this Guarantee shall be new
installed and new spare Engines which are owned or operated by
Midway during the Period of Guarantee and which have been acquired
pursuant to the Proposal or Contract to which this Guarantee is
attached and the related proposal or contract for delivery of
Aircraft. The Engines shall remain Eligible provided that Midway or
its authorized maintenance facility maintains them in accordance
with the IAE instructions and recommendations contained in the
applicable IAE publications including the latest Maintenance
Management Plan for Midway.
C. Eligible Inflight Shutdowns
Eligible Inflight Shutdowns shall comprise the inflight shutdown of
an Eligible Engine during a scheduled revenue flight which is
determined to have been caused by a Failure of a Part of such
Engine. Multiple inflight shutdowns of the same Engine during the
same flight leg for the same problem will be counted as one Eligible
Inflight Shutdown. A subsequent inflight shutdown on a subsequent
flight leg for the same problem because corrective action has not
been taken will be excluded.
<PAGE>
V2500 INFLIGHT SHUTDOWN GUARANTEE (Continued)
Page 2
D. Reporting of Eligible Inflight Shutdowns
Eligible Inflight Shutdowns shall be reported to IAE by Midway
within thirty days after the date of such Inflight Shutdown using
IAE Form TBD together with such other information as may be needed
to determine the Eligibility of the Inflight Shutdown. Each such
Form shall be verified by an authorized IAE Representative before
submission. Should it be necessary for him to disqualify a reported
Inflight Shutdown, supporting information will be furnished.
Flight hours accumulated by Eligible Engines during each month
during the Period of Guarantee shall be reported by Midway within
thirty days after each month's end to IAE on IAE Form TBD unless
other procedures are established for the reporting of flight hours.
E. Credit Allowance Calculation
A credit of $10,000 U.S. Dollars will be granted by IAE for each
Eligible Inflight Shutdown determined as calculated below to be in
excess of the Guaranteed Rate during the Period of Guarantee. An
annual calculation will be made no later than sixty days after each
yearly anniversary of the commencement of the Period of Guarantee
provided that the necessary Inflight Shutdown records and Eligible
Engine flight hour information have been reported to IAE.
Each annual calculation will be made using data that will be
cumulative from the start of the Period of Guarantee. An interim
credit will be granted, if necessary, following the annual
calculations for the second year and each subsequent year of the
Period of Guarantee. If subsequent annual calculations show that on
a cumulative basis, a previous interim credit (or portion thereof)
was excessive, such excess amount shall be subject to repayment
which will be effected by IAE issuing a debit against Midway's
account with IAE. Credits and debits will be applied to Midway's
account with IAE not later than thirty days following a calculation
for the second year and each subsequent year of the Period of
Guarantee, as applicable.
The Credit Allowance = (AI - GD) x $10,000 U.S. Dollars
Where:
AI = Total Eligible Inflight Shutdowns during the period of
the calculation;
GI = (0.020/1,000) x total Engine flight hours accumulated
on Eligible Engines during the period of the
calculation.
(NOTE: GI will be rounded to the nearest whole number.)
<PAGE>
V2500 INFLIGHT SHUTDOWN GUARANTEE (Continued)
Page 3
III DEFINITIONS AND GENERAL CONDITIONS
All of the Definitions and General Conditions of the V2500 Engine and
Parts Service Policy shall apply to this Guarantee. Engines and Inflight
Shutdowns excluded by the General Conditions of the Policy shall be
excluded from this Guarantee.
IV SPECIFIC CONDITIONS
A. The Guaranteed Rate is predicated on the use by Midway of:
1. An average flight cycle of no less than 1.5 hours;
2. Thrust levels which are derated an average of 10 percent for
Takeoff and Climb relative to full Takeoff and Climb ratings;
3. An average Aircraft utilization equal to or less than 3160
flight hours per year;
4. An Aircraft and Engine delivery schedule in respect of four
(4) firm Aircraft and one (1) spare Engines as described in
the Proposal or Contract to which this Guarantee is attached.
B. IAE reserves the right to make appropriate adjustments to the
Guaranteed Rate if there is, during the Period of Guarantee, a
variation from the conditions upon which the Guaranteed Rate is
predicated or a discontinuation of ownership by Midway of any Engine
or any V2500 powered Aircraft subsequent to delivery to Midway.
C. In the event credits are issued under Section II, such credits will
be dedicated to the procurement of Parts aimed at correction of the
situations contributing to excess Inflight Shutdowns. Accordingly,
Midway and IAE will establish jointly the modifications or Parts to
be selected, and Midway will incorporate the changes into Eligible
Engines.
V EXCLUSION OF BENEFITS
The intent of this Guarantee is to provide specified benefits to Midway as
a result of the failure of Eligible Engines to achieve the reliability
level stipulated in the Guarantee. It is not the intent, however, to
duplicate benefits provided to Midway under any other applicable
guarantee, sales warranty, service policy, or any special benefit of any
kind as a result of the same failure. Therefore, the terms and conditions
of this Guarantee notwithstanding, if the terms of this Guarantee should
make duplicate benefits available to Midway from IAE or any third-party,
Midway may elect to receive the benefits under this Guarantee or under any
of the other benefits described above, but not both.
<PAGE>
EXHIBIT D-6
EXHAUST GAS TEMPERATURE GUARANTEE
<PAGE>
V2500 EXHAUST GAS TEMPERATURE GUARANTEE
I INTRODUCTION
IAE assures Midway that during the first 4000 hours of operation of each
V2500 Engine, the maximum stabilized takeoff exhaust gas temperature will
not exceed the Certified Limit. Under this Guarantee if it is confirmed
that the Certified Limit has been exceeded, IAE will credit Midway's
account with IAE in the amount of $50,000 USD. For the purpose of this
Guarantee, the Certified Limit is exceeded if the Engine will not achieve
the specified engine pressure ratio for takeoff thrust without exceeding
the Certified Limit for its Exhaust Gas Temperature.
II GUARANTEE
A. Period of Guarantee
The Period of Guarantee for each Eligible Engine will start on the
date Midway initiates commercial operation of its first Aircraft
powered by such Engine and will terminate five (5) years from that
date or upon the expiration of the first 4000 hours of operation of
such Engine, whichever is the sooner.
B. Eligible Engine
The Engines that will be Eligible under this Guarantee shall be new
installed and new spare Engines which are owned or operated by
Midway during the Period of Guarantee and which have been acquired
pursuant to the Proposal or Contract to which this Guarantee is
attached and the related proposal or contract for delivery of
Aircraft. The Engines shall remain Eligible provided that Midway or
its authorized maintenance facility maintains them in accordance
with the IAE instructions and recommendations contained in the
applicable IAE publications including the latest Maintenance
Management Plan for Midway.
C. Restoration of Installed Engine
If during the Period of Guarantee, the maximum stabilized takeoff
exhaust gas temperature of an Eligible Engine installed in an
Aircraft operated by Midway exceeds the Certified Limit, Midway
shall undertake on-wing Engine maintenance recommended by IAE, with
technical assistance provided by IAE, to restore the performance of
that Engine.
<PAGE>
V2500 EXHAUST GAS TEMPERATURE GUARANTEE (Continued)
Page 2
D. Calibration of Removed Engine
If the performance of an installed Eligible Engine cannot be
restored by, the maintenance recommended under Section II, Paragraph
C, Midway shall promptly remove such Engine from the Aircraft and
dispatch it at its cost for calibration in an IAE designated test
cell. If such calibration verifies that the exhaust gas temperature
of the Engine is not in excess of the Certified Limit or it is
established that any excess is due to causes which are excluded by
the General Conditions in Section III, then the cost of such test
cell calibration and associated transportation will be borne by
Midway.
E. Credit Allowance
A credit of $50,000 USD will be granted by IAE for each event not
meeting the requirements set forth in Section I of this guarantee
and as verified by Section II, Paragraph D. above.
III. SPECIFIC CONDITIONS
A. This EGT Guarantee is predicated on the use by Midway of:
1. An average flight cycle of 1.5 hours;
2. Thrust levels which are derated an average of 10 percent
relative to the full Takeoff and Climb ratings;
3. An average Aircraft utilization equal to or less than 3160
flight hours per year;
4. An Aircraft and Engine delivery schedule in respect of four
(4) firm Aircraft and one (1) firm spare Engines as described
in the Proposal or Contract to which this Guarantee is
attached.
B. IAE reserves the right to make appropriate adjustments to the
Guarantee if there is, during the Period of Guarantee, a variation
from the conditions upon which the Guarantee is predicated or a
discontiuation of ownership by Midway of any Engine or any V2500
powered Aircraft subsequent to delivery to Midway.
<PAGE>
V2500 EXHAUST GAS TEMPERATURE GUARANTEE (Continued)
Page 3
IV DEFINITIONS AND GENERAL CONDITIONS
All of the Definitions and General Conditions of the V2500 Engine and
Parts Service Policy shall apply to this Guarantee. Engines excluded by
the General Conditions of the Policy shall be excluded from this
Guarantee.
V EXCLUSION OF BENEFITS
The intent of this Guarantee is to provide specified benefits to Midway as
a result of the failure of Eligible Engines to achieve the performance
level stipulated in the Guarantee. It is not the intent, however, to
duplicate benefits provided to Midway under any other applicable
guarantee, sales warranty, service policy, or any special benefit of any
kind as a result of the same failure. Therefore, the terms and conditions
of this Guarantee notwithstanding, if the terms of this Guarantee should
make duplicate benefits available to Midway from IAE or any third-party,
Midway may elect to receive the benefits under this Guarantee or under any
of the other benefits described above, but not both.
<PAGE>
EXHIBIT D-7
FUEL CONSUMPTION RETENTION GUARANTEE
50
<PAGE>
V2500 FUEL CONSUMPTION RETENTION GUARANTEE
I INTRODUCTION
IAE assures Midway that at the end of the five (5) year period commencing
with Midway's first commercial operation of Aircraft powered by V2500
Engines, the fleet average cruise fuel consumption for Eligible Engines
will not have increased by more than a Guaranteed Margin of 2.0%. Under
this Guarantee, if the fleet average cruise fuel consumption for Eligible
Engines exceeds the Guaranteed Margin at the end of the Guarantee Period,
IAE will credit Midway's account with IAE an amount in respect of excess
fuel consumed.
II GUARANTEE
A. Period of Guarantee
The Period of Guarantee will start on the date Midway initiates
commercial operation of its first Aircraft powered by Eligible
Engines and will terminate five (5) years from that date.
B. Eligible Engines
The Engines that will be Eligible under this Guarantee shall be new
installed and new spare Engines which are owned or operated by
Midway during the Period of Guarantee and which have been acquired
pursuant to the Proposal or Contract to which this Guarantee is
attached and the related proposal or contract for delivery of
Aircraft. The Engines shall remain Eligible provided that Midway or
its authorized maintenance facility maintains them in accordance
with the IAE instructions and recommendations contained in the
applicable IAE publications including the latest Maintenance
Management Plan for Midway.
C. Fuel Consumption Measurement
The inflight data required for administration of this Guarantee will
be obtained by Midway during steady state cruise conditions using
methods which will be mutually agreed between Midway and IAE. Steady
state cruise conditions are defined as a minimum of five minutes at
the same altitude, Mach number and thrust setting Engine Pressure
Ratio in clear, smooth air with normal bleed and power extraction
and autothrottle disengaged (unless flight evaluation shows this
disengagement to be unnecessary). Data points falling within the
following envelope of altitude, Mach number and Engine Pressure
Ratio: Mach No. -- TBD to TBD, Altitude - TBD to TBD feet, Engine
Pressure Ratio - TBD to TBD will be deemed to be Acceptable Data
Points, provided that:
<PAGE>
V2500 FUEL CONSUMPTION RETENTION GUARANTEE (Continued)
Page 2
a) the fuel consumption data for any Eligible Engine on which the
engine parameters indicate a possible malfunction (including
associated Aircraft systems), other than normal gas path
deterioration, that is subsequently confirmed by maintenance
action will not be considered acceptable data, and
b) data which is obviously inaccurate under normal engine
monitoring practices will not be considered acceptable data;
this type of data will be rejected unless Midway validity
checks have established that Total Air Temperature, Fuel Flow
Aircraft and Engine Bleed Systems and other Aircraft
parameters are within normal operating ranges.
The data to be recorded will be that normally recorded for
Engine Condition Monitoring purposes and will include the
following:
Altitude
Mach Number
Total Air Temperature (TAT)
Indicated Airspeed (IAS)
Engine Pressure Ratio (EPR)
Fuel Flow
Low Compressor Rotor Speed (N(1))
High Compressor Rotor Speed (N(2))
Exhaust Gas Temperature (EGT)
Bleed Air Configuration
Engine Fuel flow measurements will be referred to in the
Standard Engine Fuel Flow-Engine Pressure Ratio Relationship
which will be defined for installed Engines by the Aircraft
manufacturer during the Aircraft flight test certification
program.
D. Base Fuel Flow
The Base Fuel Flow shall be the initial fuel flow level of each
Eligible Engine on commencement of its commercial service. This
shall be the average of the cruise fuel flow values for the first
ten Acceptable Data Points recorded for each Eligible Engine. Base
Fuel Flow is represented as a percentage deviation from the Standard
Engine Fuel Flow-Engine Pressure Ratio Relationship.
<PAGE>
V2500 FUEL CONSUMPTION RETENTION GUARANTEE (Continued)
Page 3
E. Cruise Fuel Flow
The Cruise Fuel Flow shall be the average of the cruise fuel flow
values for ten Acceptable Data Points for each installed Eligible
Engine at any time after that Engine's Base Fuel Flow is
established. Cruise Fuel Flow will also be expressed as a percent
deviation from the Standard Engine Fuel Flow-Engine Pressure Ratio
Relationship.
F. Engine Cruise Fuel Flow Deterioration
The Cruise Fuel Flow Deterioration for an Eligible Engine shall be
the difference between its Cruise Fuel Flow and the Base Fuel Flow
expressed in percentage points.
G. Periodic Fleet Average Cruise Fuel Consumption Deterioration
The Periodic Fleet Average Cruise Fuel Consumption Deterioration
shall be the average of the Cruise Fuel Flow Deterioration for all
installed Eligible Engines for a 30 day reporting period. This is to
be reported to IAE every 30 days.
H. Final Fleet Average Cruise Fuel Consumption Deterioration
The Final Fleet Average Cruise Fuel Consumption Deterioration is the
average of the Periodic Fleet Average Cruise Fuel Consumption
Deterioration values for all 30 day periods during the Period of
Guarantee.
I. Operational Data
Midway shall provide the following data to IAE as indicated during
the Period of the Guarantee:
1. Total quantity of fuel consumed by Eligible Engines during the
Period (U.S. Gallons), every thirty days.
2. Average cost of fuel to Midway over the Period of Guarantee
(U.S. Dollars per U.S. Gallon), every thirty days.
3. Individual Eligible Engine operating hours for each 30 day
period during the Period of Guarantee identified by engine
serial number, annually.
4. Engine maintenance action information, as requested.
<PAGE>
V2500 FUEL CONSUMPTION RETENTION GUARANTEE (Continued)
Page 4
J. Excess Fuel Consumption Credit Calculation
If at the end of the Period of Guarantee the Final Fleet Average
Fuel Consumption Deterioration exceeds the Guaranteed Margin, IAE
will grant Midway a credit in respect to excess fuel consumption
calculated in accordance with the following formula:
C = (D-GM)% YHF
where:
C = the amount of the credit in U.S. dollars
D = the Final fleet Average Fuel Consumption Deterioration
GM = the Guaranteed Margin
Y = average cruise fuel flow of new Eligible Engines
expressed in U.S. gallons per hour
H = the total of all flight hours flown by Midway's
Eligible Engines during the Period of Guarantee
F = The average net cost to Midway in U.S. Dollars per U.S.
Gallon (after deduction of subsidies or government or
other allowances received by Midway), of aviation fuel
consumed by Midway during the Period of Guarantee.
III DEFINITIONS AND GENERAL CONDITIONS
All of the Definitions and General Conditions of the V2500 Engine and
Parts Service Policy shall apply to this Guarantee. Engines excluded by
the General Conditions of the Policy shall be excluded from this
Guarantee.
IV SPECIFIC CONDITIONS
A. The Guaranteed Rate is predicated on the use by Midway of:
1. An average flight cycle of no less than 1.5 hours;
2. Thrust levels which are derated an average of 10 percent for
Takeoff and Climb relative to full Takeoff and Climb ratings;
<PAGE>
V2500 FUEL CONSUMPTION RETENTION GUARANTEE (Continued)
Page 5
3. An avenge Aircraft utilization equal to or less than 3162
flight hours per year;
4. An Aircraft and Engine delivery schedule in respect of four
(4) firm Aircraft and one (1) spare Engines as described in
the Proposal or Contract to which this Guarantee is attached.
B. IAE reserves the right to make appropriate adjustments to the
Guaranteed Rate if there is, during the Period of Guarantee, a
variation from the conditions upon which the Guaranteed Rate is
predicated or a discontinuation of ownership by Midway of any Engine
or any V2500 powered Aircraft subsequent to delivery to Midway.
V EXCLUSION OF BENEFITS
The intent of this Guarantee is to provide specified benefits to Midway as
a result of the failure of Eligible Engines to achieve the performance
level stipulated in the Guarantee. It is not the intent, however, to
duplicate benefits provided to Midway under any other applicable
guarantee, sales warranty, service policy, or any special benefit of any
kind as a result of the same failure. Therefore, the terms and conditions
of this Guarantee notwithstanding, if the terms of this Guarantee should
make duplicate benefits available to Midway from IAE or any third-party,
Midway may elect to receive the benefits under this Guarantee or under any
of the other benefits described above, but not both.
<PAGE>
EXHIBIT D-8
DELAY AND CANCELLATION
51
<PAGE>
V2500 DELAY AND CANCELLATION
I INTRODUCTION
IAE assures Midway that by the end of the five (5) year period commencing
with Midway's first commercial operation of Aircraft powered by V2500
Engines, the cumulative Engine-caused Delay and Cancellation Rate will not
exceed a Guaranteed Rate of 0.180 per 100 Aircraft departures. Under this
Guarantee, if the cumulative Engine-caused Delay and Cancellation Rate is
determined to have exceeded the Guaranteed Rate over the Period of
Guarantee, IAE will credit Midway's account with IAE an amount of $10,000
U.S. Dollars for each excess Eligible Delay and Cancellation determined to
have been in excess of the Guaranteed Rate.
II GUARANTEE
A. Period of Guarantee
The Period of Guarantee will start on the date Midway initiates
commercial operation of its first Aircraft powered by Eligible
Engines and will terminate five (5) years from that date.
B. Eligible Engines
The Engines that will be Eligible under this Guarantee shall be new
installed and new spare Engines which are owned or operated by
Midway during the Period of Guarantee and which have been acquired
pursuant to the Proposal or Contract to which this Guarantee is
attached and the related proposal or contract for delivery of
Aircraft. The Engines shall remain Eligible provided that Midway or
its authorized maintenance facility maintains them in accordance
with the IAE instructions and recommendations contained in the
applicable IAE publications including the latest Maintenance
Management Plan for Midway.
C. i) Eligible Delay
An Eligible Delay shall occur when by a Failure of a Part in an
Eligible Engine installed in an Aircraft is the sole cause of a
delay in the final Departure of that Aircraft by more than fifteen
minutes after its programmed Departure in either of the following
instances:
1) an originating flight departing later than its scheduled
Departure time; or
2) a through flight or a turnaround flight remaining on the
ground longer than its scheduled ground time.
<PAGE>
V2500 DELAY AND CANCELLATION (Continued)
Page 2
C. ii) Eligible Cancellation
A single Cancellation shall occur when a Failure of a Part in an
Eligible Engine installed in an Aircraft is the sole cause of the
elimination of a Departure in either of the following instances:
1) cancellation of a trip comprising a single flight leg; or
2) cancellation of any or all of the flight legs of a multiple
leg trip.
C. iii)
A Departure which is cancelled after an Eligible Delay shall be an
Eligible Cancellation not an Eligible Delay.
C. iv)
Consecutive Delays and Cancellations for the same problem because
corrective action had not been taken will be excluded.
D. Departure
A Departure comprises the movement of an Aircraft from the blocks
for the purpose of an intended scheduled revenue flight provided
that there can be only one Departure for each intended flight.
E. Reporting of Eligible Delays and Cancellations
Eligible Delays and Cancellations shall be reported to IAE by Midway
within thirty days after the date of such Delay or Cancellation
using IAE Form TBD together with such other information as may be
needed to determine the Eligibility of the Delay or Cancellation.
Each such Form shall be verified by an authorized IAE Representative
before submission. Should it be necessary for him to disqualify a
reported Delay or Cancellation, supporting information will be
furnished.
Departures accumulated by Eligible Engines during each month during
the Period of Guarantee shall be reported by Midway within thirty
days after each month's end to IAE on IAE Form TBD unless other
procedures are established for the reporting of Departures.
<PAGE>
V2500 DELAY AND CANCELLATION (Continued)
Page 3
F. Credit Allowance Calculation
A credit of $10,000 U.S. Dollars will be granted by IAE for each
Eligible Delay and Eligible Cancellation determined as calculated
below to be in excess of the Guaranteed Rate during the Period of
Guarantee. An annual calculation will be made no later than sixty
days after each yearly anniversary of the commencement of the Period
of Guarantee provided that the necessary records of Delays,
Cancellation and Departure have been reported to IAE.
Each annual calculation will be made using data that will be
cumulative from the start of the Period of Guarantee. An interim
credit will be granted, if necessary, following the annual
calculations for the second year and each subsequent year of the
Period of Guarantee. If subsequent annual calculations show that on
a cumulative basis, a previous interim credit (or portion thereof)
was excessive, such excess amount shall be subject to repayment
which will be effected by IAE issuing a debit against Midway's
account with IAR. Credits and debits will be applied to Midway's
account with IAE not later than thirty days following a calculation
for the second year and each subsequent year of the Period of
Guarantee, as applicable.
Credit Allowance = (ADC - GDC) x $10,000 U.S. Dollars
Where:
ADC = Total qualifying actual Engine Caused Delays and
Cancellations claimed and accepted as eligible during the
applicable period of the calculation.
GDC = (0.180/100) x total Departures accumulated on Eligible
Engines during the applicable period of calculation.
III DEFINITIONS AND GENERAL CONDITIONS
All of the Definitions and General Conditions of the V2500 Engine and
Parts Service Policy shall apply to this Guarantee. Delays and
Cancellation excluded by the General Conditions of the Policy shall be
excluded from this Guarantee.
<PAGE>
V2500 DELAY AND CANCELLATION (Continued)
Page 4
IV SPECIFIC CONDITIONS
A. The Guaranteed Rate is predicated on the use by Midway of:
1. An average flight cycle of no less than 1.5 hours;
2. Thrust levels which are derated an average of 10 percent for
Takeoff and Climb relative to full Takeoff and Climb ratings;
3. An avenge Aircraft utilization equal to or less than 3160
flight hours per year;
4. An Aircraft and Engine delivery schedule in respect of four
(4) firm Aircraft and one (1) spare Engines as described in
the Proposal or Contract to which this Guarantee is attached.
B. IAE reserves the right to make appropriate adjustments to the
Guaranteed Rate if there is, during the Period of Guarantee, a
variation from the conditions upon which the Guaranteed Rate is
predicated or a discontinuation of ownership by Midway of any Engine
or any V2500 powered Aircraft subsequent to delivery to Midway.
C. In the event credits are issued under Section II, such credits will
be dedicated to the procurement of parts aimed at correction of the
situations contributing to excess Delays and Cancellation.
Accordingly, Midway and IAE will establish jointly the modifications
or Parts to be selected, and Midway will incorporate the changes
into Eligible Engines.
V EXCLUSION OF BENEFITS
The intent of this Guarantee is to provide specified benefits to Midway as
a result of the failure of Eligible Engines to achieve the reliability
level stipulated in the Guarantee. It is not the intent, however, to
duplicate benefits provided to Midway under any other applicable
guarantee, sales warranty, service policy, or any special benefit of any
kind as a result of the same failure. Therefore, the terms and conditions
of this Guarantee notwithstanding, if the terms of this Guarantee should
make duplicate benefits available to Midway from IAE or any third-party,
Midway may elect to receive the benefits under this Guarantee or under any
of the other benefits described above, but not both.
<PAGE>
EXHIBIT D-9
FLEET HOUR AGREEMENT
52
<PAGE>
V2500
ENGINE MAINTENANCE SERVICE PLAN
(FLEET HOUR AGREEMENT)
FOR
Midway
This document contains matter of a proprietary nature and is delivered on the
express condition that it is not to be disclosed or reproduced in whole or in
part without the written consent of IAE International Aero Engines AG. This
restriction does not limit the right to disclose information obtained from other
sources.
<PAGE>
V2500
ENGINE MAINTENANCE SERVICE PLAN
FOR
Midway
I. INTRODUCTION
This Maintenance Service Plan (Plan), provided by TAE International Aero
Engines AG (IAE) through the IAE Designated Maintenance Center
(Maintenance Center), is offered in support of V2500 Engines owned and
operated by Midway. The Plan, expressed as a Maintenance Service Rate per
Engine Flight Hour, covers those off-wing maintenance services set forth
in Section IV, Paragraph C, hereof when performed exclusively by the
Maintenance Center.
For the purpose of this Plan, the term "Engine" shall mean the basic V2500
Engine, together with the neutral Quick Engine Change (QEC) parts,
components and assemblies required to install that engine into the V2500
powered Aircraft nacelle.
II. DESCRIPTION
A. Period of the Plan
The Period of the Plan will commence on the date Midway initiates
commercial operation of its first Aircraft powered by Eligible
Engines and will terminate ten (10) years from that date.
B. Eligible Engines
The Engines that will be eligible for coverage under this Plan shall
be the eight (8) new installed Engines and one (1) new spare V2500
Engines which are owned or operated by Midway in support of four (4)
Aircraft during the Period of the Plan.
The first Engine eligible for coverage under this Plan shall be the
first Engine removed from Midway's Aircraft on or after the date of
commencement of the Plan. The last Engine eligible for coverage
under this Plan shall be the last Engine requiring removal from
Midway Aircraft on or before the date of termination of the Plan.
C. Specifications
Midway's V2500 Engines will be repaired, modified, inspected and
tested in accordance with the manufacturer's applicable Engine
Manuals, the Maintenance Center V2500 Maintenance and Build Standard
Manual, Service Bulletins and other approved maintenance procedures
then in effect at the Maintenance Center.
<PAGE>
V2500 ENGINE MAINTENANCE SERVICE PLAN FOR MIDWAY PAGE 2
III. TECHNICAL SUPPORT
The technical support services to be provided by the Maintenance Center
during the Period of the Plan are described below:
A. Program Manager
IAE will arrange for the Maintenance Center to assign a Program
Manager who will be the point of contact for Midway in respect of
services described in this Plan.
The Program Manager, in agreement with Midway, will be responsible
for defining to the shop the work to be accomplished on Engines at
each shop visit, the internal processing of Warranty Claim forms on
behalf of Midway's Eligible Engines, securing from IAE Warranty
Administration its authority to process Engines in accordance with
any applicable Guarantees, periodic engineering updates and overall
Program review.
B. Engineering Support
1. The Maintenance Center shall provide engineering support
services for Eligible Engines. These services shall comprise:
a. Analysis of IAE Service Bulletins to determine those
which are applicable to Midway's Engines;
b. Providing required documentation including but not
limited to, FAA Form 337, V2500 Time Parts Status
Report, Engine test logs and a Major Parts Record Change
List for each Engine returned by the Maintenance Center
to Midway;
c. Providing a written report stating any damage detected
and repair(s) accomplished, including any technical
conclusions as to the cause of such damage; and,
d. Providing, upon request, accident and damage disassembly
reports, including pictures.
IV. MAINTENANCE SERVICES
This section describes the maintenance services to be provided by the
Maintenance Center for Engines during the Period of the Plan.
Each Engine that is returned by Midway to the Maintenance Center for major
or minor repair will be accompanied by an acceptable purchase order
referencing this Plan, which must include Engine and Life Limited Part
total time, date of Engine removal, reason for removal and authorization
for the work to be accomplished.
<PAGE>
V2500 ENGINE MAINTENANCE SERVICE PLAN FOR MIDWAY PAGE 3
A. Planned Engine Stop Visits
Engines shipped to the Maintenance Center for planned shop visits
will be processed in accordance with the specifications set forth in
Section II, Paragraph C, hereof. The following factors shall also be
considered:
1. Operating time since the last scheduled visit and time, since
the last unscheduled maintenance on the various Engine
sections;
2. Present Parts condition;
3. The number of hours planned for the next Engine Shop Visit
interval or as determined by the remaining life on the Life
Limited Parts;
4. The planned maintenance interval for Hot Section Inspection;
5. The requirement for incorporation of recommended IAE Service
Bulletins;
6. The instructions contained in the Midway purchase order.
B. Unplanned Engine Shop Visits
Based upon the review of the Engine's maintenance history,
maintenance will consist of repair or replacement of damaged
assemblies or Parts, if any, and of other deteriorated Parts as
necessary.
C. Maintenance Services Included Under the Plan
The maintenance services to be included under the Maintenance
Service Rate (MSR), defined in Section V, shall be limited to the
following when performed by the Maintenance Center on Eligible
Engines removed from service during the Period of the Plan:
1. All labor, material and material handling charges and any
vendor fees required to perform basic Engine reconditioning
and repair to make the Engine serviceable to the
specifications established in accordance with the provisions
of Section II, Paragraph C, hereof, except the following
charges, which will be invoiced separately if such items are
required):
a. Labor, material and material handling charges associated
with the replacement of disks and shafts solely for
reasons of life limitation.
b. Labor, material, material handling charges and any fees
associated with vendor proprietary accessories (other
than labor expended in the removal or installation of
such accessories for reasons of Engine access).
<PAGE>
V2500 ENGINE MAINTENANCE SERVICE PLAN FOR MIDWAY PAGE 4
c. Labor or material for QEC repair or replacement.
d. Gold or silver (or their alloys) consumed in repairs.
e. Fuel and oil consumed at Engine test.
2. All labor, material handling charges and any vendor fees
required in the event that reduction of a Parts Life Limit (as
defined in the V2500 Engine and Parts Service Policy) renders
a Part unserviceable.
3. All labor, material, material handling charges and any vendor
fees required to repair or replace Engine Parts as required by
Airworthiness Directives issued by the U.S. Federal Aviation
Administration.
4. All labor, material, material handling charges and any vendor
fees required for incorporation of IAE Service Bulletins
having Compliance Codes 1 through 6, or equivalent, in
accordance with the recommendation in the applicable Service
Bulletin.
5. All labor, material, material handling charges and any vendor
fees required to incorporate those IAE Service Bulletins
having Compliance Code 7 or 8, or equivalent, as may be
recommended by the Maintenance Center.
6. All labor to perform the required Engine testing as designated
by the Maintenance Center.
7. All labor, material, material handling charges and any vendor
fees required to repair damage caused by ingestion of birds,
hailstones or runway gravel.
8. All labor to perform QEC disassembly and post-test reassembly
as required to accomplish the above and material limited to
expendable Parts, i.e., 0-rings, gaskets, packings and similar
items etc., required for QEC reinstallation.
D. Maintenance Services Not Included Under the Plan
All other services not specifically included in Paragraph C, above,
are excluded from coverage under the Maintenance Service Rate and
will be accomplished as Excess Work, subject to the rates and
charges in effect at the Maintenance Center during the time of work
performance.
Further, all labor, material and other charges related to
Maintenance Center performance of maintenance services described in
Section IV, Paragraph C, will be identified as Excess Work if it has
been determined to IAE's reasonable satisfaction that such Engine:
1. Requires repairs for recoverable insured inflight and/or
ground accident damage; or
2. Was not maintained and operated in accordance with maintenance
recommendations included in the Maintenance Manuals, the
specifications established in accordance with
<PAGE>
V2500 ENGINE MAINTENANCE SERVICE PLAN FOR MIDWAY PAGE 5
Section II, Paragraph C, and the specific operational
recommendations described in Section V; or
3. Has been used contrary to the operating or maintenance
instructions or recommendations authorized or issued by IAE or
Airbus Industrie and current at the time; or
4. Has been subjected to misuse, neglect, accident or maintenance
error by other than the Maintenance Center; or
5. Has been affected by a Part not originally delivered to Midway
by the Maintenance Center, IAE or a source approved by the
IAE; or
6. Has been affected by occurrences not associated with ordinary
use, such as, but not limited to, acts of war, rebellion,
seizure or other belligerent acts.
The Maintenance Center's current rates and charges applicable to
Excess Work performed in conjunction with this Plan are presented in
Attachment I hereto and incorporated herein.
V. MAINTENANCE SERVICE RATE (MSR)
A. The MSR for the ten (10) year period of the Plan is $98.00 U.S.
Dollars per hour of Eligible Engine operation. The MSR, expressed in
U.S. Dollars, is subject to escalation from a base month of January,
1995 in accordance with the IAE Escalation Formula.
The MSR shall be limited to those maintenance services specified in
Section IV, Paragraph C, and shall apply to Eligible Engines
processed in accordance with the Plan.
The MSR shall apply to each flight hour and/or fraction thereof,
rounded to the nearest one-tenth (1/10) hour, that an Eligible
Midway V2500 Engine has been engaged in flight operations for
whatever reason.
Midway shall keep records in form and detail sufficient for accurate
and expeditious administration of the terms of the Plan and shall
permit IAE Field Engineering Representatives access to such records
for inspection and audit at reasonable intervals. Records maintained
by IAE shall include all Aircraft Engine logs containing hours and
cycles accumulated on Eligible Engines from the date of commencement
of the Plan.
On the tenth day following the first thirty (30) calendar days of
the Plan and continuing every thirty (30) calendar days thereafter,
Midway will forward to the Maintenance Center the actual flight
hours, flight cycles and thrust usage data accumulated on Eligible
Engines during the preceding thirty (30) day period as verified by
the TAR Representative. The format for such reporting by Midway
shall be as presented in an Exhibit hereto.
Provided that the conditions in item V. B. are met, the Maintenance
Center shall calculate the maintenance service charge for that
period and will, within thirty (30) calendar days following the
receipt of such data, render an invoice to Midway, which shall be
equal to
<PAGE>
V2500 ENGINE MAINTENANCE SERVICE PLAN FOR MIDWAY PAGE 6
the hours of flight operation for that reporting period multiplied
by the MSR, including escalation in accordance with the IAE
Escalation Formula. Payment is due within thirty days of the date of
invoice.
B. The MSR is predicated on the use by Midway of:
1. An average flight cycle of no less than 1.5 hours;
2. Thrust levels which are derated an average of 10 percent for
takeoff and climb relative to full takeoff and climb ratings;
and
3. An average aircraft utilization equal to or less than 3160
flight hours per year.
C. IAE reserves the right to make appropriate adjustments to the MSR if
there is, during the Period of the Plan, a variation from the
conditions upon which the MSR is predicated or a discontinuation of
ownership by Midway of any V2500 powered Aircraft subsequent to
delivery to Midway.
VI. TURNAROUND TIME
The following average turnaround times FOB Maintenance Center, are
provided to assist Midway in its scheduling of the V2500 Engines. Actual
turnaround time will vary depending upon the actual condition of the
Engine received by the Maintenance Center.
Calendar Days
-------------
A. Major Engine Disassembly and Repair TBD
B. Hot Section Inspection and Combustion
Area Repairs TBD
Subject to the foregoing, the Maintenance Center will exercise reasonable
efforts to complete the turnaround of any given Engine within the average
turnaround time shown above and give consideration to Midway's scheduling
requirements for that Engine. Subject to Section X, entitled "Material
Support", the Maintenance Center, as Part of its efforts, shall utilize
Midway inventory Parts, if available, to maintain that schedule.
VII. INVOICING AND PAYMENT
A. Maintenance Services Included Under the Plan
Charges for maintenance services included under the Plan shall be
invoiced to Midway by IAE on a monthly basis in accordance with the
provisions of Section V hereof
B. Excess Work
Payment by Midway of all Excess Work charges shall be made to IAE in
U.S. Dollars, Net Cash.
<PAGE>
V2500 ENGINE MAINTENANCE SERVICE PLAN FOR MIDWAY PAGE 7
Notwithstanding the above payment terms, if IAE determines that
Midway's financial condition has materially changed, IAE shall have
the right to specify alternative payment terms which shall, upon IAE
giving written notice to Midway, supersede the payment terms herein
contained.
The monthly indices reported by the U.S. Department of Labor are
published three (3) months after the applicable month's end,
therefore, the actual average index for each annual period cannot be
calculated until three (3) months subsequent to the end of each
period. An estimated escalation factor will be utilized to escalate
the base period MSR for invoicing purposes. As soon as the published
indexes are available, a final calculation will be performed for
each annual period of the Plan, and an invoice will be issued to
adjust the invoices which utilized the estimated rates.
VIII. OTHER SERVICES
The Maintenance Center will from time to time, upon request of Midway,
dispatch to Midway's line stations a salaried supervisor to assist Midway
in certain Engine maintenance requirements. The rates and charges for such
on-site assistance shall be defined in an attachment hereto and shall, in
all instances, be considered as Excess Work.
IX. TRANSPORTATION
Midway shall provide transportation stands in suitable condition as may be
required to ship Engines to the Maintenance Center for maintenance under
this Agreement. The Maintenance Center shall upon completion of work,
reinstall Midway's Engines into Midway's transportation stands for
reshipment.
Transportation charges for Engines shipped to or delivered from the
Maintenance Center shall, except as provided in the IAE Standard Terms and
Conditions of Sale for Overhaul and Repair, be the responsibility of
Midway. The FOB point for all shipments and deliveries shall be the IAE
Maintenance Center facility.
X. MATERIAL SUPPORT
If original Parts cannot be reinstalled because of long lead time repair,
scrap condition, supersedure, or similar circumstances, the following
material support services will be utilized by the Maintenance Center.
A. Maintenance Center New Parts
Maintenance Center New Parts may be used to replace long lead time
repairable items or scrap and superseded materials. When a New Part
is used to replace a repairable Midway Part, the repaired Part will
be placed in an Midway segregated inventory for future use in
Midway's maintenance requirements. The New purchased Part shall be
subject to the terms and conditions contained in an Attachment.
B. Condemned/Superseded Materials
<PAGE>
V2500 ENGINE MAINTENANCE SERVICE PLAN FOR MIDWAY PAGE 8
Parts removed from Midway's Engines which cannot be reinstalled
because of scrap or superseded condition shall remain the property
of Midway. Midway agrees that it will provide the Maintenance Center
with its instructions for disposition of such Parts within sixty
(60) days following delivery of the refurbished Engine from which
they were removed.
The rates and charges for materials not included under the Plan
shall be as presented in an Attachment.
XI. TERMS AND CONDITIONS
A. The IAE Standard Terms and Conditions of Sale for Overhaul and
Repair shall apply to all work accomplished by the Maintenance
Center on V2500 Engines or Parts thereof under this Plan.
B. All terms and conditions appearing on or attached to Midway's
purchase orders which are in addition to or in conflict with the
provisions of this Plan shall not apply.
C. This Plan and the right to receive credits or payment hereunder
shall not be assigned, either in whole or in Part, without the prior
written consent of the other party; such consent shall not be
unreasonably withheld.
D. All of the definitions and general conditions of the V2500 Engine
and Parts Service Policy shall apply to the Plan, except that Parts
damaged by ingestion of birds, hailstones and runway gravel shall be
included under the Plan.
XII. TERMINATION
Midway may terminate this Plan for cause following the first twelve (12)
months in which the Plan has been in effect upon six (6) month's written
notification to the Maintenance Center of such intent to terminate. This
termination shall become effective retroactive to the most recent past
anniversary date of the Plan.
All orders issued by Midway from such retroactive effective date shall be
time and material orders, and all work performed shall be invoiced to
Midway at the then current published rates and charges in effect at the
Maintenance Center.
XIII. EXCLUSION OF BENEFITS
IAE reserves the right to exclude from any credit due, amounts incurred as
the result of a failure by Midway to comply with any of the requirements
specified in the Plan, provided that Midway fails to cure such default
within thirty (30) days after written notice of such default.
XIV. ORDER OF PRECEDENCE
In the event that there are any conflicts or inconsistencies between the
provisions of this Plan and the Attachments hereto, the provisions of this
Plan shall govern.
XV. GOVERNING LAW
This Agreement shall be construed and the performance thereof shall be
determined in accordance with the laws of Switzerland.
<PAGE>
V2500 ENGINE MAINTENANCE SERVICE PLAN FOR MIDWAY PAGE 9
This Plan will remain available for Midway's acceptance until TBD. If you concur
with the terms and conditions offered, please have an authorized official of
Midway sign the two duplicate originals and return one of them on or before TBD
to the attention of:
IN WITNESS WHEREOF, the parties hereto have hereunto caused their hands and
seals to be set hereto and to a duplicate this TBD day of TBD.
Witnesses: Midway
____________________________ by _________________________
____________________________ Title ______________________
Witnesses: IAE INTERNATIONAL AERO ENGINES AG
____________________________ by _________________________
____________________________ Title ______________________
<PAGE>
Attachment I
Labor Rates and
Charges for Services
for Excess Work
<PAGE>
Labor Rates and
Charges for Services
The Maintenance Center agrees to charge Customer for services performed under
this Agreement at Designated Maintenance Center's published rates and handling
charges in effect at the time of work performance. The rates and charges through
_______________, are presented below. Rates and charges for annual periods
subsequent to _______________, will be published by the Maintenance Center at a
later date.
Maintenance Center Labor Rate ....................... $____U.S. Dollars Per Hour
New Engine Parts
New Engine Parts will be charged at the IAE then current commercial price
(manufacturer's list price).
Material Handling Charges
The then current IAE commercial spare Part price (manufacturer's list price)
will be used as the basis for establishment of the handling charges listed
below.
o Any life-limited Part as designated by IAE, new or
customer-furnished ........................................ ______ Percent
o Any other Part with an extended line item value of 30,000.00 U.S. Dollars
and under:
o New ................................................. ______ Percent
o Customer-Furnished .................................. ______ Percent
o Any Part with an extended line item value of 30,000.01 U.S.
Dollars and over:
o New .................................................. ______ U.S. Dollars
o Customer-Furnished ................................... ______ U.S. Dollars
<PAGE>
LABOR RATES AND CHARGES FOR SERVICES PAGE 2
Rates and Charges for On-Site Work
The daily and hourly U.S. Dollar rates for each of the Designated Maintenance
Center's employees engaged in the performance of on-site work through
________________, are as follows:
Each
Minimum Rate Additional Hour
o Regular Workday (8 Hours) ______ ______
o Saturdays (4 Hour-Minimum)
o Sundays (4-Hour Minimum)
The above rates are predicated upon a portal-to-portal basis and apply to days
or portions of days spent in transit. Subsistence costs (meals, hotel and ground
transportation when applicable), as well as air fare charges, shall be in
addition to the on-site rates presented above and charged to the customer at the
Designated Maintenance Center's actual cost.
Tooling shall, upon request, be provided by the Maintenance Center for the
Designated Maintenance Center's use in the performance of on-site work. Charges
to the Customer for tooling when used by Maintenance Center's personnel shall be
limited to transportation, insurance and packaging costs.
<PAGE>
Attachment II
IAE International Aero Engines AG
Standard Terms and Conditions
of Sale for Overhaul and Repair
<PAGE>
IAE INTERNATIONAL AERO ENGINES AG
STANDARD TERMS AND CONDITIONS OF SALE
FOR OVERHAUL AND REPAIR
1. DELIVERY, TITLE AND SHIPPING
Goods delivered to IAE International Aero Engines AG (hereinafter referred
to as the Seller), for overhaul or repair hereunder shall be redelivered
to Midway (hereinafter referred to as the Buyer) FOB Seller's facility, or
to an agent of Buyer, including a common carrier, flyaway, or warehouse as
hereinafter provided. Thereafter, Buyer shall have all risk of loss for
such goods, including new parts incorporated therein by Seller. Wherever
transportation rates and carrier's liability for damage depend upon the
value of the shipment as declared by shipper, Seller will declare such
value as will entitle Buyer to have goods shipped at the lowest
permissible transportation rates unless otherwise instructed in writing by
Buyer. Buyer will furnish written shipping instructions for all goods as
promptly as possible. In the absence of such instructions, Seller may, at
any time beginning ten (10) days after forwarding notice to Buyer by mail
or otherwise that the goods are ready for shipment, do either of the
following for the account and at the expense and risk of the Buyer:
Arrange for shipment of the goods by a carrier of its own selection to
Buyer's place of business or other destination reasonably believed to be
suitable, or warehouse the goods. Buyer will not hold Seller liable for
loss or damage attributed to negligence, either in selection of the
carrier or the warehouse or in agreeing with either of them to contract
terms on Buyer's behalf.
2. INSPECTION
If, upon receipt of the goods by Buyer at destination, the same shall
appear not to have been overhauled or repaired in accordance with this
order, Buyer shall within thirty (30) days after receipt thereof notify
Seller of such condition and afford Seller a reasonable opportunity to
inspect the goods and make any appropriate adjustment or replacement. The
remedies afforded Buyer under the paragraph hereof entitled "Warranties,
Remedies and Limitation" shall be exclusive for defects discovered upon
inspection but shall not be cut off by reason of Buyer's failure to
discover the defects within the inspection period provided in this
paragraph. Buyer shall not delay payment for the overhaul and repair of
the goods pending their inspection.
3. WARRANTIES, REMEDIES AND LIMITATIONS
a. Services -- Seller warrants to Buyer that at the time of delivery of
overhauled or repaired goods, the overhaul and repair services
performed by Seller will have been performed in a workmanlike
manner. Seller's liability and Buyer's remedy under this warranty
are limited to the Seller correcting at the Seller's facility such
services as are shown to Seller's reasonable satisfaction to have
been defective; provided that written notice of the defect shall
have been given by Buyer to Seller within ninety (90) days after
first operation or use of the goods, or within one (1) year after
the date of delivery of such goods by Seller, whichever shall first
occur. Transportation charges
<PAGE>
IAE INTERNATIONAL AERO ENGINES AG, STANDARD TERMS AND CONDITIONS OF
SALE FOR OVERHAUL AND REPAIR Page 2
for the return of defectively serviced goods to Seller and their
reshipment to Buyer and risk of loss thereof will be borne by Seller
only if returned in accordance with written shipping instructions
from Seller.
b. New Parts -- The warranties and remedies for new parts utilized in
such overhaul or repair services shall be as set forth below:
(1) Defects -- Seller warrants to Buyer that at the time of delivery of
the overhauled or repaired goods, the new parts utilized will be
free from defects in material and manufacture and will conform
substantially to Seller's applicable specifications as stipulated in
this order. Seller's liability and Buyer's remedy under this
warranty are limited to the repair or replacement, at Seller's
election, of new parts or components thereof returned to Seller
which are shown to Seller's reasonable satisfaction to have been
defective; provided that written notice of the defect shall have
been given by Buyer to Seller within ninety (90) days after the
first operation or use of the goods but in no event later than one
(1) year after the date of delivery of such goods by Seller.
Transportation charges for the return of defective new parts to
Seller and their reshipment to Buyer and the risk of loss thereof
will be borne by Seller only if returned in accordance with written
shipping instructions from Seller.
(2) Title-- Seller warrants to Buyer that it will convey good title to
the new parts sold hereunder. Seller's liability and Buyer's remedy
under this warranty are limited to the removal of any title defect
or, at the election of the Seller, to the replacement of the new
parts or components thereof which are defective in title; provided,
however, that the rights and remedies of the parties with respect to
patent infringement shall be limited to the provisions of
subparagraph (3) below.
(3) Patent Infringement -- Seller shall conduct, at its own expense, the
entire defense of any claim, suit or action alleging that, without
further combination, the use or resale by Buyer or any subsequent
purchaser or user of the new parts delivered hereunder directly
infringes any United States patent, but only on the conditions that
(a) Seller receives prompt written notice of such claim, suit or
action and full opportunity and authority to assume the sole defense
thereof, including settlement and appeals, and all information
available to Buyer and defendant for such defense; (b) said new
parts are made according to a specification or design furnished by
Seller or, if a process patent is involved, the process performed
with such parts is recommended in writing by the Seller; and (c) the
claim, suit or action is brought against Buyer or one expressly
indemnified by Buyer. Provided all of the foregoing conditions have
been met, Seller shall, at its own expense, either settle said
claim, suit or action or shall pay all damages, excluding
consequential damages, and costs awarded by the court therein,
<PAGE>
IAE INTERNATIONAL AERO ENGINES AG, STANDARD TERMS AND CONDITIONS OF
SALE FOR OVERHAUL AND REPAIR Page 3
and if the use or resale of such new parts is finally enjoined,
Seller shall, at Seller's option (i) procure for defendant the right
to use or resell the new parts, (ii) replace them with equivalent
non infringing parts, (iii) modify them so they become non
infringing but equivalent, or (iv) remove them and refund the
purchase price (less a reasonable allowance for use, damage and
obsolescence). If a claim, suit or action is based on a design or
specification furnished by Buyer or on the performance of a process
not recommended in writing by Seller, or on the use or sale of the
new parts delivered hereunder in combination with other new parts
not delivered to Buyer by Seller, Buyer shall indemnify and save
Seller harmless therefrom.
c. EXCLUSIVE WARRANTIES AND REMEDIES - THE FOREGOING WARRANTIES ARE
EXCLUSIVE AND ARE GIVEN AND ACCEPTED IN LIEU OF (i) ANY AND ALL
OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION,
THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE; AND (ii) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM
OR REMEDY IN CONTRACT, TORT OR STRICT LIABILITY AGAINST SELLER OR
ITS SHAREHOLDERS, WHETHER OR NOT ARISING FROM THE NEGLIGENCE,
ACTUAL OR IMPUTED, OF SELLER OR ITS SHAREHOLDERS. THE REMEDIES OF
THE BUYER SHALL BE LIMITED TO THOSE PROVIDED HEREIN TO THE EXCLUSION
OF ANY AND ALL OTHER REMEDIES INCLUDING, WITHOUT LIMITATION,
INCIDENTAL OR CONSEQUENTIAL DAMAGES. NO AGREEMENT VARYING OR
EXTENDING THE FOREGOING WARRANTIES, REMEDIES OR THIS LIMITATION
WILL BE BINDING UPON SELLER UNLESS IN WRITING, SIGNED BY A DULY
AUTHORIZED OFFICER OF SELLER.
4. EXCUSABLE DELAYS
Buyer acknowledges that the goods called for hereunder are to be
manufactured, overhauled or repaired by or for Seller to fulfill this
order and that the delivery dates are based on the assumption that there
will be no delay due to causes beyond the reasonable control of Seller.
Seller shall not be charged with any liability for delay or non delivery
when due to delays of suppliers, acts of God or the public enemy,
compliance in good faith with any applicable foreign or domestic
governmental regulation or order whether or not it proves to be invalid,
fires, riots, labor disputes, unusually severe weather or any other cause
beyond the reasonable control of the Seller. To the extent that such
causes actually retard deliveries on the part of Seller, the time for the
performance shall be extended for as many days beyond the delivery date as
is required to obtain removal of such causes. This provision shall not,
however, relieve Seller from using its best efforts to avoid or remove
such causes and continue performance with reasonable dispatch whenever
such causes are removed.
<PAGE>
IAE INTERNATIONAL AERO ENGINES AG, STANDARD TERMS AND CONDITIONS OF
SALE FOR OVERHAUL AND REPAIR Page 4
5. CHANGES
No modification of this order shall be binding unless agreed to in writing
and signed by both Buyer and Seller excepting, however, that unless Buyer
expressly provides to the contrary in writing, Seller may proceed prior to
receipt of such written modification with all work necessary to repair,
overhaul or modify the articles furnished by Buyer although such order
may, through error or oversight, (1) erroneously identify the articles to
be serviced, or (2) fail to specify all service work necessary, in
Seller's opinion, which is required to put the articles in usable
condition.
6. TAXES
In addition to the agreed purchase price of this order, any and all taxes
(not including any income or excess profit taxes) which may be imposed by
any taxing authority, arising from the sale, delivery or use of Seller's
products and for which Seller may be held responsible for collection or
payment, either on its own behalf or that of Buyer, shall be paid by Buyer
to Seller upon Seller's demand.
7. COMPLIANCE WITH FAIR LABOR STANDARDS ACT
Seller hereby certifies that all services performed in and all parts
produced or manufactured in the United States of America and utilized in
performing overhaul or repair work hereunder are performed, produced or
manufactured, as the case may be, in compliance with the Fair Labor
Standards Act of 1938, as amended (29 U.S. Code 201-219). All
requirements as to the certificate contemplated in the October 26, 1949,
amendment to the Fair Labor Standards Act of 1938 shall be considered as
satisfied by this certification.
8. MATERIAL DISPOSITION
Goods and parts thereof received from Buyer, which in the opinion of
Seller have no value other than as scrap because they cannot be repaired
to a serviceable condition, will be disposed of by Seller, and no
accountability or liability therefor will be imposed on Seller by Buyer.
Seller agrees, however, to return to Buyer parts which are either scrap,
superseded or uneconomical to repair if so indicated on the face of the
Buyer's purchase order or supplement thereto; these parts will be returned
at Buyer's expense. To assist Buyer in identification of scrap parts
returned at his request, such scrap will be shipped in an altered state
which will indicate that it is clearly unfit for service use. Parts for
which there are currently no repair procedures and which, in the opinion
of Seller, have potential to be repaired to a serviceable condition
sometime in the future, will be returned to the Buyer at Buyer's expense.
<PAGE>
IAE INTERNATIONAL AERO ENGINES AG, STANDARD TERMS AND CONDITIONS OF
SALE FOR OVERHAUL AND REPAIR Page 5
9. BUYER'S FINANCIAL STATUS
If before completion of performance of this order by Seller a receiver or
trustee is appointed of any of Buyer's property, or Buyer be adjudicated a
bankrupt, or application for reorganization under the Bankruptcy Act be
filed by or against Buyer which shall not be dismissed within thirty (30)
days, or if Buyer becomes insolvent or makes an assignment for the benefit
of creditors, or takes, or attempts to take, the benefit of any insolvency
acts, or an execution be issued pursuant to a judgment rendered against
Buyer, or should Buyer be unable or refuse to make payment to Seller in
accordance with any of its obligations to Seller, Seller may, at its
option in any of such events, terminate this order by giving to Buyer a
written notice of its intention so to do, and Seller shall thereupon be
relieved of any further obligations to Buyer, and Buyer shall reimburse
Seller for its termination costs and expenses and a reasonable allowance
for profit.
10. LIABILITY LIMITATION
The price allocable in this order to any product or service alleged to be
the cause of any loss or damage to the Buyer shall be the ceiling limit on
Seller's liability, whether founded in contract, tort (including
negligence) or strict liability, arising out of or resulting from (i) this
order or the performance or breach thereof, (ii) the design, manufacture,
delivery, sale, overhaul, repair, replacement, or (iii) the use of any
such product or the furnishing of any such service. In no event shall
Seller have any liability for any incidental or consequential damages.
11. APPLICABLE LAWS, CONSTRUCTION AND CAPTIONS
This order shall be interpreted in accordance with, and the construction
thereof shall be governed by, the laws of the State of Connecticut.
Captions, as used in these terms and conditions, are for convenience of
reference only and shall not be deemed or construed as in any way limiting
or extending the language of the provisions to which such captions may
refer.
<PAGE>
Attachment III
IAE International Aero Engines AG
Standard Escalation Formula
<PAGE>
Exhibit A
Monthly Statement of Thrust
Usage and Hour/Cycle Utilization
<PAGE>
Exhibit A
Monthly Statement of Thrust
Usage and hour/Cycle Utilization
During the thirty (30) day period of the Engine Maintenance Service Plan,
beginning __________ and ending _________________, the average thrust usage for
takeoff and climb were as indicated below:
Average Thrust Percentage of Flights
Flight Mode Rating Reduction at Full Rating
- ----------- ------ --------- --------------
Takeoff
Climb
Average utilization per Aircraft during this reporting period _________hours.
(Actual fleet Total Hours - Number of Aircraft)
Average flight cycle: _______ hours
_____________________
Authorized Customer
Signature
_____________________
IAE Field Engineering
Representative
<PAGE>
[Letterhead of International Aero Engines]
17 May 1995
Midway Airlines Corporation
5713 South Central Avenue
Chicago, Illinois 60638
Subject: Side Letter Number 1 to the V2500 Support Contact between Midway
Airlines Corporation and IAE International Aero Engines AG dated 17 May
1995.
Gentlemen,
We refer to the V2500(R) Support Contact dated 17 May 1995 between Midway
Airlines Corporation ("Midway") and IAE International Aero Engines AG ("IAE")
(hereinafter referred to as the "Contract"). Terms used herein shall have the
same meaning as those given to them in the Contract.
This Side Letter No. 1 provides Midway with certain credits in respect of the
spare Engine and the V2527-A5 propulsion systems for the Firm Aircraft.
1. Fleet Introductory Assistance Credit
To assist Midway with introducing the spare Engine and the V2527-A5
propulsion systems for the Aircraft into its fleet, IAE will credit
Midway's account with IAE in the amount of [***] at January, 1995
levels for each of the four Firm Aircraft. This credit will be issued
to Midway on delivery of the corresponding Firm Aircraft to and
acceptance by Midway of such Firm Aircraft. This credit may be used by
Midway for the purchase of V2500 Spare Parts from IAE. Alternatively,
with the consent of Airbus Industrie, IAE will, upon Midway's written
notice to IAE at least ninety days prior to the delivery of the
applicable Firm Aircraft, consent to the assignment of part or all of
such credit to Airbus Industrie, to be applied toward the payment for
the V2527-A5 propulsion systems for the corresponding Firm Aircraft.
<PAGE>
2. Fleet Expansion Assistance Credit
To assist Midway with expanding its V2527-A5 powered Aircraft fleet,
IAE will credit Midway's account with IAE in the amount of [***] at
January, 1995 levels for each of the four Option Aircraft. This credit
will be issued to Midway on delivery of the corresponding Option
Aircraft to and acceptance by Midway of such Option Aircraft. This
credit may be used by Midway for the purchase of V2500 Spare Parts from
IAE. Alternatively, with the consent of Airbus Industrie, IAE will,
upon Midway's written notice to IAE at least ninety days prior to the
delivery of the applicable Option Aircraft, consent to the assignment
of part or all of such credit to Airbus Industrie, to be applied toward
the payment for the V2527-A5 propulsion systems for the corresponding
Option Aircraft.
3. Right to Convert to A319 Aircraft
Subject to consent from Airbus Industrie, Midway may upon written notice
to IAE at least twenty-four months prior to scheduled delivery, convert
any of the Option Aircraft to A319 aircraft powered by V2524-A5
propulsion systems ("Converted Aircraft").
In place of the credit set forth in Clause 2 above, to assist Midway with
introducing the V2524-A5 powered Converted Aircraft into its fleet, IAE
will credit Midway's account with IAE in the [***] at January 1995
levels per Converted Aircraft. This credit will be issued to Midway on
delivery of the corresponding Converted Aircraft to and acceptance by
Midway of such Converted Aircraft. This credit may be used by Midway for
the purchase of V2500 Spare Parts from IAE. Alternatively, with the
consent of Airbus Industrie, IAE will, upon Midway's written notice to IAE
at least ninety days prior to the delivery of the applicable Converted
Aircraft, consent to the assignment of part or all of such credit to
Airbus Industrie, to be applied toward the payment for the V2524-A5
propulsion systems for the corresponding Converted Aircraft.
4. Credit Adjustment
The credits described in Clause 1, 2 and 3 of this Side Letter are subject
to Adjustment in accordance with the formula established in Exhibit B to
the Contract. The Adjustment will be applicable from the base month of
January 1995 to the earlier of:
-2-
<PAGE>
4.1 the date of applicable Aircraft delivery as established in Clause 1.1
of the Contract, or
4.2 the actual delivery date of the corresponding Aircraft if delivered
prior to the delivery date set forth in Clause 1. 1 of the Contract.
5. Customer Support Representative
IAE will assign a Customer Support Representative to Midway, at no charge,
to assist Midway in preparing for V2500 Engine operation, for a period of
one year as of the date such a customer support representative is placed
with Midway.
6. Extended Payment Terms for Spare Engine
The payment terms described in Clause 2.7.1 of the Contract are amended
for payments relative to the first firm spare engine, scheduled for
delivery in November 1998 as specified in Exhibit B to the Contract (the
"Spare Engine") as follows:
"2.7.1 Midway will make payment in United States Dollars as follows:
2.7.1.1 Upon signature of this Contract, Midway shall pay to
IAE a deposit of [***].
2.7.1.2 On or prior to [***], Midway shall pay to IAE a deposit
of [***].
2.7.1.3 On or prior to [***], Midway shall pay to IAE a deposit
of [***].
2.7.1.4 On or prior to [***], Midway shall pay to IAE a deposit
of [***].
-3-
<PAGE>
2.7.1.5 On or prior to [***] Midway shall pay to IAE a further
deposit of [***] of the Estimated Purchase Price of the
Spare Engine.
2.7.1.6 On or prior to [***] Midway shall pay to IAE a further
deposit of [***] of the Estimated Purchase Price of the
Spare Engine.
2.7.1.7 On delivery of the Spare Engine, Midway shall pay to
IAE the balance of the Purchase Price of such item."
7. V2500-A1 Inventory Lease and Credit
IAE will provide Midway with a lease of line maintenance tooling
and line replaceable units ("LRU's") up to a maximum value of
[***] at IAE's then current spare parts catalogue prices. Midway
may not take additional material on lease under the terms of this
facility following delivery of the first Firm Aircraft in
accordance with Exhibit A to the Contract. Terms of this lease
are attached hereto as Attachement 1, which Midway agrees to
comply with.
IAE will issue a credit to Midway's account with IAE in the fixed
amount of [***] per Firm Aircraft upon delivery to and acceptance by
Midway of each of the four Firm Aircraft in accordance with Exhibit
A of the Contract. Such credit will be used to purchase on a per
Firm Aircraft basis, one quarter of the new part purchase value of
the line maintenance tooling and LRU's described in this paragraph 7
above. Any credit balance may be used by Midway as described below.
Midway will pay IAE [***] payable on delivery of each of the four
Firm Aircraft in accordance with Exhibit A, due in respect of the
lease charge for the loan of the line maintenance tooling and
LRU's. Such payment may be made to IAE in cash or by the
utilization of any excess credits available to Midway described
within this paragraph 7 or by utilizing part of its credit
available in paragraph 1 (the Fleet Introductory Assistance
Credit). The remaining value of any credits due to Midway under
paragraph 1 would then be reduced accordingly.
-4-
<PAGE>
If the total value of the parts purchased to support the lease
inventory for Midway plus the lease charges defined above are
less than [***], and Midway and IAE mutually agree that the level
of inventory purchased is sufficient to cover the Midway V2500-A1
powered leased aircraft, then the balance of the credit may be
used by Midway to reduce the net price of the Firm Aircraft.
Except as revised by this Side Letter No. 1, the provisions of the Contract
shall continue in full force and effect.
Yours faithfully,
for IAE INTERNATIONAL AERO ENGINES AG
By [Illegible]
------------------------------------
Title V P Business
Date 17 May 95
Agreed and accepted on behalf of
MIDWAY AIRLINES CORPORATION
By J S Waller
------------------------------------
Title Vice President
Date May 17, 1995
-5-
<PAGE>
Attachment A
V2500-A1 Inventory Lease - General Terms
IAE is prepared to lease to Midway certain items of equipment in accordance with
the following terms:
1. The items of equipment, hereinafter referred to as the "Equipment",
to be loaned to Midway are listed on the Schedule listed below in
paragraph 6.
2. The loan period will begin and end on the dates specified in the
Schedule.
3. At the commencement of the loan period, IAE will deliver the
Equipment to Midway ex-works IAE's facility.
4. Title to the Equipment shall remain with IAE (unless such Equipment
is purchased by Midway), but Midway shall assume all risk of loss
and damage to the Equipment throughout the loan period and shall be
responsible for all transportation and insurance costs during the
loan period.
5. Midway agrees:
5.1 to insure the Equipment in an amount sufficient to cover the
insurable value as set forth in the Attachment hereto, and
will provide IAE with a certificate of insurance which
verifies the designation of IAE as loss payee as its interest
may appear,
5.2 to use the Equipment exclusively in conjunction with its own
normal V2500 operations,
5.3 to reasonably protect the Equipment from any conditions which
may cause deterioration or damage,
5.4 to maintain the Equipment at its own expense in accordance
with any instructions and maintenance practice recommendations
issued by IAE,
5.5 to pay all imposts, duties, fees, taxes and other like charges
levied in connection with the Equipment or the loan thereof
without any set-off or deduction whatsoever,
-6-
<PAGE>
5.6 to indemnify and hold IAE and its Shareholders harmless from
any and all claims, demands, actions, suits and any other
liability whatsoever which may arise out of or in connection
with the use, handling, possession or operation of the
Equipment and Midway will procure and maintain in a form
acceptable to IAE an adequate legal liability insurance policy
to cover in an amount of not less than seven hundred and fifty
thousand United States Dollars (U.S$750,000) which names IAE
as additional insured and as additional loss payee. At the
request of IAE, Midway will provide within 14 days evidence to
IAE's satisfaction, that such a policy exists and IAE's
interests are covered. The policy will provide that it may not
be canceled or materially altered without 28 days written
notice to IAE. IAE will not be liable for any premiums, and
5.7 unless such equipment is purchased by Midway, to redeliver the
Equipment at the end of the loan period to IAE's designated
location in the same condition as when received, fair wear and
tear excepted,
5.8 to maintain nameplates, if any, affixed to the Equipment
indicating IAE's title to such Equipment, and not to alter or
amend the information on such nameplates without IAE's express
written consent.
-7-
<PAGE>
6 SCHEDULE TO V2500-A1 INVENTORY LEASE
LIST OF SUPPLIES
<TABLE>
<CAPTION>
DESCRIPTION QTY PLACE OF DATE OF PLACE OF TERM INSURANCE
DELIVERY DELIVERY REDELIVERY VALUE
<S> <C> <C> <C> <C> <C> <C>
Fuel Metering 1 Ex-works To be Ex-works To be confirmed US$188,230
Unit ("FMU") IAE facility confirmed IAE facility
PIN FMU
5OOMK1
Electronic 1 Ex-works To be Ex-works To be confirmed US$291,330
Engine Control IAE facility confirmed IAE facility
("EEC")
P/N 808050-4-
045
Starter Motor I Ex-works To be Ex-works To be confirmed US$35,125
P/N 790425-2 IAE facility confirmed IAE facility
</TABLE>
Note: The insurable value is shown at January 1995 U.S Dollar value and is
subject to escalation adjustment.
<PAGE>
Exhibit A
[Letterhead of International Aero Engines]
5 February 1997
Midway Airlines Corporation
Suite 1200
300 West Morgan Street
Durham, NC 27701
Subject: Side Letter No. 2 to the V2500(R) Support Contract between Midway
Airlines Corporation and IAE International Aero Engines AG dated 17 May
1995
Gentlemen,
We refer to the V2500(R) Support Contract dated 17 May 1995 between Midway
Airlines Corporation ("Midway") and IAE International Aero Engines AG ("IAE")
(hereinafter referred to as the "Contract"). Capitalized terms used herein shall
have the same meaning as those given to them in the Contract.
This Side Letter No. 2 amends certain terms related to the following provisions
of the Contract: (1) Aircraft delivery dates; (2) Spare Engine delivery dates;
(3) payment terms for Spare Engine; (4) Spare Engine delivery schedule
adjustment; (5) payment terms for Supplies; (6) bank account information; (7)
the mailing addresses for Notices, and (8) V2500-A1 Inventory Lease.
1. The Aircraft Delivery Schedule
The delivery dates for Firm Aircraft as set forth in Clause 1.1 of the
Contract is hereby amended, subject to a similar amendment in the contract
between Midway and Aircraft Manufacturer, to read as follows:
One (1) in December 2005
One (1) in January 2006
One (1) in February 2006
One (1) in December 2006
<PAGE>
The delivery dates for Option Aircraft as set forth in Clause 1.1. of the
Contract is hereby amended, subject to a similar amendment in the contract
between Midway and Aircraft Manufacturer, to read as follows:
One (1) in January 2007
One (1) in February 20007
One (1) in November 2007
One (1) in December 2007
2. Spare Engines Delivery Dates
The delivery date set forth in Exhibit B to the Contract for the Firm
Spare Engine is hereby amended to read as follows:
November 2005
The delivery date set forth in Exhibit B to the Contract for the Option
Spare Engine is hereby amended to read as follows:
November 2006
3. Payment terms for Spare Engine
The payment terms relative to the Firm Spare Engine pursuant to Clause
2.7.1.2 thru 2.7.1.7 of the Contract, as described in Section 6 of Side
Letter No. 1 are hereby deleted and revised as follows:
2.7.1.2 On or prior to [ * * * ], Midway shall pay to IAE a
non-refundable deposit of [ * * * ] of the Estimated
Purchase Price of the Spare Engine.
2.7.1.3 On or prior to [ * * * ], Midway shall pay to IAE a
non-refundable deposit of [ * * * ] of the Estimated
Purchase Price of the Spare Engine.
2.7.1.4 On or prior to [ * * * ], Midway shall pay to IAE a
non-refundable deposit of, [ * * * ] of the
Estimated Purchase Price of the Spare Engine.
2.7.1.5 On or prior to [ * * * ], Midway shall pay to IAE a
non-refundable deposit of [ * * * ] of the Estimated
Purchase Price of the Spare Engine.
-2-
<PAGE>
2.7.1.6 On delivery of the Spare Engine, Midway shall pay to IAE the
balance of the Purchase Price of such item.
4. Spare Engine Delivery Schedule Adjustment
Midway will have the right to accelerate delivery of the Firm Spare Engine
by up to twenty four (24) months, subject to:
(a) Midway providing IAE written notice of such acceleration at least
eighteen (18) months prior to the accelerated delivery date of the Spare
Engine; and
(b) the accelerated delivery date shall be subject to IAE's industrial
contraints at the time of Midway's request and reasonable contraints
regarding outstanding proposals for sales campaigns in process at the time
of the acceleration request; and
(c) Midway providing IAE payment of non-refundable deposit of ten percent
(10%) of the Estimated Purchase Price of the Spare Engine eighteen (18)
months prior to the accelerated delivery date of the Spare Engine.
Thereafter, Midway shall provide IAE payment of non-refundable deposit of
five percent (5%) of the Estimated Purchase Price of the Spare Engine
twelve (12) months and (6) months before the scheduled delivery of the
Spare Engine.
5. Payment Terms for Supplies
Payment for purchases of Supplies and Other Supplies up to a credit limit
of [ * * * ] shall be payable by Midway on net 30 day terms. Payment for
purchases of Supplies and Other Supplies in excess of [ * * * ], or in
the event that the credit limit has been or will be exceeded by such
purchases, shall be payable cash on delivery.
6. Bank Account Information
Delete Clause 3. 13.3 of the Contract in its entirety and replace by the
following:
All payments under this Clause 3.13 shall be made by cable or telegraphic
transfer to, and shall be deposited not later than the due date of payment
with:
Fleet Bank, N.A.
175 Water Street
New York, NY 10038-4924
Account No. 2-982-00819-9
ABA No. 021200339
-3-
<PAGE>
7. Change of Address for Notices
IAE address as set forth in Clause 6. 11 of the Contract is amended to
read as follows:
IAE International Aero Engines AG
400 Main Street, M/S 121-10
East Hartford, CT 06108 USA
Facsimile No: (860) 565-5220
Attention: Business Director & Chief Legal Officer
Midway address as set forth in Clause 6. 11 of the Contract is amended to
read as follows:
Midway Airlines Corporation
300 W. Morgan Street, Suite 1200
Durham, NC 27701
Facsimile No: (919) 956-4801
Attention: President
8. V2500-A1 Inventory Lease
Delete Section 7 of Side Letter No. 1 and Attachment A to Side Letter No.
I in their entirety and replace by the following:
Terms of inventory lease of V2500-A1 line maintenance tooling and line
replaceable units, up to a maximum value of [ * * * ], will be subject
of a separate agreement between IAE and Midway.
IAE will issue a credit to Midway's account with IAE in the fixed amount
of [ * * * ] per Firm Aircraft upon delivery to and acceptance by Midway
of each of the four Firm Aircraft in accordance with revised Clause 1.1
of the Contract. Such credit may be used by Midway to purchase eligible
Spare Parts pursuant to the Contract.
-4-
<PAGE>
Except as revised by this Side Letter No. 2, the provisions of the Contract
shall continue in full force and effect.
Yours faithfully,
for IAE INTERNATIONAL AERO ENGINES AG
By [Illegible]
------------------------------------
Title TREASURER
Date 2/21/97
Agreed and accepted on behalf of
MIDWAY AIRLINES CORPORATION
By J S Waller
------------------------------------
Title Senior Vice President
Date 2/11/97
-5-
<PAGE>
[Letterhead of International Aero Engines]
VIA COURIER
February 21, 1997
Jonathan S. Waller
Senior Vice President and General Counsel
Midway Airlines
300 W. Morgan Street, Suite 1200
Durham, NC 27701
Re: STOBL Termination
Dear John:
With the completion of inspection of Engine V0020 which was returned by Midway
pursuant to the IAE Standard Terms of Business for Lease between IAE and Midway,
dated 27 June 1995, as amended (STOBL), and Midway's payment of Invoice No.
9702-19 as final settlement of amounts due under the STOBL, IAE and Midway
agreed to terminate the STOB, as amended. Accordingly, this notice provides for
termination of the STOBL effective immediately.
In the event Midway desires to enter into a separate emergency lease agreement
with IAE, we have submitted for your consideration on February 5, 1997 a revised
lease agreement which will be subject of a separate agreement between IAE and
Midway.
In addition, for your records, we enclosed herein original executed copies of
Side Letter No. 2 to the V2500 Support Contract between Midway and IAE dated 17
May 1995 and Lease Agreement for V2500-Al Supplies between IAE and Midway.
Sincerely yours,
IAE International Aero Engines AG
/s/ Mutahare S. Engin
Mutahare S. Engin
Counsel
Enclosure
<PAGE>
EXHIBIT 10.29
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF
THIS EXHIBIT. THE CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND
DENOTED BY [***]. THE CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
debis
PROMISSORY NOTE
Dated as of January 31, 1997
FOR VALUE RECEIVED, Midway Airlines Corporation, a corporation duly organized
and existing under the laws of the State of Delaware ("Borrower"), with its
principal office at 300 W. Morgan Street, Suite 1200, Durham, North Carolina
27701, hereby unconditionally promises to pay to the order of debis
AirFinance B.V. ("Lender") at its office at Triport 1, ruimte 7140, Evert van
de Beekstraat 22, 1118 CL Luchthaven Schiphol, Amsterdam Airport Schiphol,
The Netherlands, the principal sum of U.S. Dollars [***] together with, to
the extent permitted by applicable law, interest of 8% percent per annum
thereon ("Interest Rate") from the date hereof until its payment to Lender in
full, computed on the basis of a 365-day year and the actual number of days
elapsed.
1. Payments. Each payment due under this Note shall be made in immediately
available funds at the office of Lender or to such account as Lender may
designate to Borrower without any setoff, withholding or deduction of any
kind. [***]Thereafter, principal and interest shall be paid in installments
of [***]or the first Business Day of each month, [***] until the entire
indebtedness evidenced hereby is fully paid, except that any remaining
indebtedness, if not sooner paid, shall be due and payable on [***]. For the
purposes hereof, Business Day shall mean a day (other than a Saturday or
Sunday) on which banks are open for business in New York. This Note together
with interest accrued thereon may be prepaid in whole or in part at any time
before it is payable under this Note.
2. Representations. Borrower represents and warrants that (a) Borrower has full
power and authority, not restricted by any law or governmental regulation, to
execute and deliver this Note to perform its obligations as contemplated hereby,
(b) upon execution and delivery of this Note to Lender, it will evidence a valid
and legally binding obligation of Borrower, enforceable in accordance with its
terms, and (c) the execution and delivery of this Note is not in violation
<PAGE>
debis
of, nor is it an event of default, or an event which with the passage of time or
service of notice may become an event of default, under any agreement or
instrument to which Borrower is a party.
3. Acceleration. If any of the following events ("Events of Default") shall
occur, namely
(a) Borrower fails to pay to Lender any amount due hereunder within five (5)
Business Days after the date when such payment is due and payable hereunder;
(b) Any event of default (however defined) occurs under any aircraft operating
lease agreement between Borrower, as lessee, and a lessor, for the benefit,
directly or indirectly, of debis AirFinance B.V., Daimler-Benz Aerospace A.G.,
or any affiliate of either of them, or any successor or assign of either of
them, which event of default results in termination of such aircraft operating
lease agreement, either automatically or after the giving of notice thereof to
the lessee; or
(c) Any Event of Default (as defined therein) occurs under the Promissory Note
dated as of January 31, 1997 in the principal amount of $3,264,719.80 which has
been executed by Borrower in favor of Daimler-Benz Aerospace A.G.; or
(d) If Borrower makes any prepayment in respect of the Secured Promissory
Note dated February 7, 1997 in the principal amount of [***],
or an note given in substitution therefor, whether held by [***]
or any successor or assign thereof [***], or amends the [***] to provide for
terms more favorable to the payee therof (including, without limitation, any
increase in the interest rate or acceleration of payment), or if any
obligation evidenced by the [***] shall become due before its originally
stated due date, whether because of a Change in Control or an Event of
Default (as those terms are defined in the [***], or for any other reason;
thereupon, without the necessity of any service of notice thereof upon Borrower,
(i) every liability of Borrower to Lender of whatever kind, whether absolute or
contingent, shall forthwith become payable, both as to principal and interest,
and (ii) interest shall accrue on the outstanding principal balance of this Note
until the date of its payment in full (A) at a rate of 18% per annum, or (B) if
it shall be less, to the maximum extent as may be allowed by applicable law.
-2-
<PAGE>
debis
4. Governing Law; Resolutions of Disputes. This Note shall be construed in
accordance with and governed by the internal laws of the State of New York
without regard to any conflict of law rules. In connection with any dispute
which may arise under this Note, Borrower hereby irrevocably submits to,
consents to, and waives any objection to, the non-exclusive jurisdiction of the
courts of the United States and of the State of New York located in the County
of New York, waives any objection to the laying of venue in such a court, and
waives any right to trial by jury.
5. Other Provisions. Borrower waives demand, presentment, protest, notice of
dishonor and all forms of notice required to hold Borrower liable on this Note.
Borrower shall reimburse Lender upon request for any out-of-pocket expenses,
including reasonable fees and disbursements of legal counsel, incurred in
connection with the enforcement of, or maintenance of its rights under, this
Note.
Borrower has not relied upon any representation of Lender in giving this Note.
This Note may not be amended except by an instrument or instruments in writing
signed by the person or entity against whom enforcement of any such amendment is
sought; the waiver by Lender of any condition of, or any breach of any term or
provision of, this Note shall be limited to such instance and shall not be
construed as a waiver of the conditions generally or of any subsequent breach.
In the event any one or more of the provisions contained in this Note shall be
invalid, illegal or unenforceable in any respect, the remaining provisions shall
not for that reason be affected or impaired in any way.
This Note shall inure to the benefit of, and shall be binding upon, Lender and
Borrower, their respective successors and Lender's assigns.
MIDWAY AIRLINES CORPORATION
Borrower
By: /s/ Jonathan S. Waller
--------------------------
Name: Jonathan S. Waller
Title: Senior Vice President
-3-
<PAGE>
EXHIBIT 10.30
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS
EXHIBIT. THE CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY
[***]. THE CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
DASA
PROMISSORY NOTE
Dated as of January 31, 1997
FOR VALUE RECEIVED, Midway Airlines Corporation, a corporation duly organized
and existing under the laws of the State of Delaware ("Borrower"), with its
principal office at 300 W. Morgan Street, Suite 1200, Durham, North Carolina
27701, hereby unconditionally promises to pay to the order of Daimler-Benz
Aerospace A.G., Project and Sales Finance, Postal Code 81663, Postfach 80 11
09, 81663 Munich, Germany, the principal sum of U.S. Dollars [***] together
with, to the extent permitted by applicable law, interest of 8% percent per
annum thereon ("Interest Rate") from the date hereof until its payment to
Lender in full, computed on the basis of a 365-day year and the actual number
of days elapsed.
1. Payments. Each payment due under this Note shall be made in immediately
available funds at the office of Lender or to such account as Lender may
designate to Borrower without any setoff, withholding or deduction of any
kind. [***] be added to the principal balance of the Note, with the result
that the principal balance of the Note, on the date which is one year from
the date of this Note, shall be [***] on the first Business Day of each
month, [***], until the entire indebtedness evidenced hereby is fully
paid, except that any remaining indebtedness, if not sooner paid, shall be
due and payable on [***]. For the purposes hereof, Business Day shall mean a
day (other than a Saturday or Sunday) on which banks are open for business in
New York. This Note together with interest accrued thereon may be prepaid in
whole or in part at any time before it is payable under this Note.
2. Representations. Borrower represents and warrants that (a) Borrower has
full power and authority, not restricted by any law or governmental
regulation, to execute and deliver this Note to perform its obligations as
contemplated hereby, (b) upon execution and delivery of this Note to Lender,
it will evidence a valid and legally binding obligation of Borrower,
enforceable in accordance with its terms, and (c) the execution and delivery
of this Note is not in violation
<PAGE>
DASA
of, nor is it an event of default, or an event which with the passage of time
or service of notice may become an event of default, under any agreement or
instrument to which Borrower is a party.
3. Acceleration. If any of the following events ("Events of Default") shall
occur, namely
(a) Borrower fails to pay to Lender any amount due hereunder within five (5)
Business Days after the date when such payment is due and payable hereunder;
(b) Any event of default (however defined) occurs under any aircraft
operating lease agreement between Borrower, as lessee, and a lessor, for the
benefit, directly or indirectly, of debis AirFinance B.V., Daimler-Benz
Aerospace A.G., or any affiliate of either of them, or any successor or
assign of either of them, which event of default results in termination of
such aircraft operating lease agreement, either automatically or after the
giving of notice thereof to the lessee; or
(c) Any Event of Default (as defined therein) occurs under the Promissory
Note dated as of January 31, 1997 in the principal amount of [***] which has
been executed by Borrower in favor of debis AirFinance B.V.; or
(d) If Borrower makes any prepayment in respect of the Secured Promissory
Note dated February 7, 1997 in the principal amount of [***], or any note
given in substitution therefor, whether held by [***] or any successor or
assign thereof, or amends the [***] to provide for terms more favorable to
the payee therof (including, without limitation, any increase in the interest
rate or acceleration of payment), or if any obligation evidenced by the [***]
shall become due before its originally stated due date, whether because of a
Change in Control or an Event of Default (as those terms are defined in the
[***]), or for any other reason;
thereupon, without the necessity of any service of notice thereof upon
Borrower, (i) every liability of Borrower to Lender of whatever kind, whether
absolute or contingent, shall forthwith become payable, both as to Principal
and interest, and (ii) interest shall accrue on the outstanding principal
balance of this Note until the date of its payment in full (A) at a rate of
18% per annum, or (B) if it shall be less, to the maximum extent as may be
allowed by applicable law.
-2-
<PAGE>
DASA
4. Governing Law; Resolutions of Disputes. This Note shall be construed in
accordance with and governed by the internal laws of the State of New York
without regard to any conflict of law rules. In connection with any dispute
which may arise under this Note, Borrower hereby irrevocably submits to,
consents to, and waives any objection to, the non-exclusive jurisdiction of
the courts of the United States and of the State of New York located in the
County of New York, waives any objection to the laying of venue in such a
court, and waives any right to trial by jury.
5. Other Provisions. Borrower waives demand, presentment, protest, notice of
dishonor and all forms of notice required to hold Borrower liable on this
Note.
Borrower shall reimburse Lender upon request for any out-of-pocket expenses,
including reasonable fees and disbursements of legal counsel, incurred in
connection with the enforcement of, or maintenance of its rights under, this
Note.
Borrower has not relied upon any representation of Lender in giving this
Note. This Note may not be amended except by an instrument or instruments in
writing signed by the person or entity against whom enforcement of any such
amendment is sought; the waiver by Lender of any condition of, or any breach
of any term or provision of, this Note shall be limited to such instance and
shall not be construed as a waiver of the conditions generally or of any
subsequent breach.
In the event any one or more of the provisions contained in this Note shall
be invalid, illegal or unenforceable in any respect, the remaining provisions
shall not for that reason be affected or impaired in any way.
This Note shall inure to the benefit of, and shall be binding upon, Lender
and Borrower, their respective successors and Lender's assigns.
MIDWAY AIRLINES CORPORATION
Borrower
By: /s/ Jonathan S. Waller
--------------------------
Name: Jonathan S. Waller
Title: Senior Vice President
-3-
<PAGE>
EXHIBIT 10.38
[GE LOGO]
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY [***]. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
GE Aircraft Engines
- --------------------------------------------------------------------------------
Kenneth D. Nusky General Electric International, Inc.
Manager-Turboprop/Turbofan Sales 1000 Western Avenue, M/D 34007 Lynn, MA 01910
Small Commercial Engines Phone: (781) 594-5540
Fax: (787) 594-5769
September 12, 1997
Mr. Thomas Duffy, Jr.
Vice President Of Maintenance and Engineering
Midway Airlines Corporation
300 W. Morgan Street, Suite 1200
Durham, NC 27701
SUBJECT: General Electric CF34-3B1 Support Proposal
Proposal No. CF34-0897-065
Revision 2
Dear Tom.
General Electric Aircraft Engine's Small Commercial Turbofan Department is
pleased to provide this CF34-3B1 Turbofan Engine support proposal in support of
Bombardier's proposal to Midway Airlines for ten (10) firm, ten (10) conditional
orders and ten (10) option Canadair Regional Jets. This proposal outlines the
support program, warranty, concessions and additional special guarantees which
GE will provide Midway Airlines in conjunction with a Canadair Regional Jet
aircraft purchase.
I. ASSUMPTIONS
A. Aircraft Deliveries - 10 Firm, 10 conditional and 10 option with
aircraft delivery dates beginning in November 1997 and completion of
firm orders by February 1999.
B. Utilization - 3000 flight hours per year per aircraft average with
baseline mission of 460NM (1.3 hours). A reduced takeoff power
program is in place and being utilized to the maximum extent
consistent with approved operating procedures.
C. Maintenance - An on-condition maintenance plan. One maintenance base
with line maintenance capability.
-1-
<PAGE>
II. ENGINE CHARACTERISTICS
The CF34-3B1 installed in the Canadair Regional Jet Series 200B is flat
rated at 8729 lbs. of normal takeoff thrust (SLS to 73(degrees)) 9220 lbs.
Automatic Power Reserve (SLS to 85(degrees)F). These ratings also apply to
spare engines sold by General Electric to Midway Airlines.
III. SPARES SUPPORT
GE specialists will work with Midway Airlines to develop detailed
provisioning recommendations based on Midway Airlines' finalized delivery
schedule, utilization and level of maintenance.
A. Spare Engines
For planning purposes, GE recommends provisioning of one (1) spare
engines in support of each five firm Canadair Regional Jet aircraft
(10% spares ratio).
The price for a spare CF34-3B1 engine in 1997 U.S Dollars for 1997
delivery Ex-Works GE'S facility in Lynn, MA, USA is [***]. A
shipping container is provided for each spare engine at no
additional charge.
For spare engines ordered by [***] by Midway Airlines in
support of the ten (10) firm Canadair Regional Jets, General
Electric will maintain 1997 base price protection for all such spare
engines delivered through, 1998. Price adjustment for escalation to
year of delivery would apply and is described in Attachment B. Spare
engines ordered after [***] will be subject to price in
effect at time of order.
B. Spare Parts
For initial planning purposes, spare parts provisioning levels for
Level I maintenance in support of the ten firm Canadair Regional Jet
aircraft are enclosed in Attachment E.
The listed spare parts prices are based on the current GE CF34 Spare
Parts Catalog. Actual purchase price would be based on the then
current CR34 Spare Parts Catalog in effect at time of order
placement.
IV. WARRANTY
GE provides a comprehensive warranty for new installed and spare CF34-3B1
Engines as outlined below (specific details are in attached Warranty
booklet):
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<PAGE>
Period Coverage
------ --------
New Engine/Module [***] [***]
New Parts 1000-8000 [***] hrs for specific major
flight hours scrap parts as defined in the
Warranty booklet
Ultimate Life 15000 cycles Pro-rata for LCF life limited
parts permanently removed
from service (scrap)
Campaign Change Continuous [***] labor allowance as defined
Warranty Pass-on Transferable to subsequent
owners
V. SPECIAL ENGINE SERVICE POLICY
This Special Engine Service Policy provides supplemental coverage and
provisions to Midway Airlines in addition to the warranty contained in the
enclosed Attachment and is provided as a part of the Agreement between
Midway Airlines and GE. The provisions of the Special Engine Service
Policy are subject to the limitation of the warranty contained in the
Airline Operator Warranty Booklet. This Special Service Policy applies to
Midway Airlines and is not transferable without the written consent of GE.
A. New Engine/Module Warranty
Under this special Engine Policy, [***] coverage for parts
and labor on new Engines/modules is extended to [***] flight
hours or twelve months from delivery to Midway Airlines, whichever
comes later. Replacement parts used for repairs under this guarantee
will be new or time compatible as appropriate.
B. New Parts Warranty
Under this Special Engine Service Policy, [***] coverage for new
parts purchased directly from GE is extended to [***] of
operation; pro rata 3,000 - 8,000 hours for specific major scrap
parts as defined in the Airline Operator Warranty Booklet.
-3-
<PAGE>
C. Campaign Change
Under this Special Engine Service Policy, GE will grant [***]
at the warranty labor rate as established between Airline
and GE for disassembly, reassembly, modification, testing, or
inspection of GE supplied CF34-3B1 engines, modules, or parts
therefor when such action is required to comply with a mandatory
time compliance GE Service Bulletin or FAA and/or Transport Canada
Airworthiness Directive. [***] is extended to [***],
whichever occurs later, [***] or pro rata warranty credit,
whichever is greater, thereafter.
A labor allowance will be granted by GE for other GE issued Service
Bulletins if so specified in such Service Bulletins.
VI. SPECIAL GUARANTEES
GE will provide the following special guarantees to Midway Airlines. The
basis for these guarantees are described in Attachment C.
A. Shop Maintenance Cost
GE guarantees that during the initial [***] of CF34-3B1
operation commencing with the delivery of the first Canadair
Regional Jet to Midway Airlines, cumulative average shop maintenance
costs for Midway Airlines' fleet of CF34-3B1 engines will not exceed
[***] per engine flight hour for scrapped parts and labor (which
includes shop labor for repair, test and outside processes), (1997
U.S. Dollars subject to escalation per Attachment B hereof). This is
based on a cruise speed of .74Mn when appropriate, an on-condition
maintenance program and shop labor rate being no greater than [***]
per hour. This Shop Maintenance Cost Guarantee will apply to all new
installed and spare CF34-3B1 Engines purchased by Midway Airlines in
support of Canadair Regional Jet aircraft delivered during the
ten-year guarantee period. Should this Shop Maintenance Cost
Guarantee be exceeded, GE will provide a credit against future
CF34-3B1 engine related purchases of spare engines or spare parts
from GE in the amount of 75% of the overrun.
The Shop Maintenance Cost for purposes of this guarantee is a net
cost of labor and scrapped engine parts purchased originally from GE
Small Commercial Turbofan Department after deducting warranty
credits, material credits from all other guarantees offered herein,
and other program considerations. The Shop Maintenance material and
labor costs associated with repair of Line Replacement Units and the
replacement of Life Limited Parts during the Guarantee period are
included.
-4-
<PAGE>
Excluded from this guarantee are flight line labor and parts and
repair of QEC, reverser, and nacelle. Also excluded from the
guarantee are material handling charges or surcharges by repair
agencies and the cost of transportation, taxes, duties, and
insurance. Events and costs resulting from Foreign Object Damage
(FOD), accident, negligence, maintenance or operational error are
also excluded.
Scrapped parts are those parts determined by GE or GE authorized
repair agency to be unserviceable and beyond economic repair.
Service Bulletin compliance, scrap parts and labor are included in
the guarantee for GE Service Bulletins that are recommended by GE.
Settlement of this Shop Maintenance Cost Guarantee will be made at
the end of the guarantee period; however, an accounting may be
performed jointly, based on data provided by Midway Airlines at the
end of the fourth and eighth year to determine the status of the
guarantee. Should the guarantee be exceeded at either of these
interim points, credits amounting to [***] of the overrun will be
provided to Airline. If credits are provided to Midway Airlines by
GE at either of these interim points, and at the end of the ten (10)
year guarantee period, the guarantee excess is reduced, Airline will
promptly reimburse GE for all such excess credits. The reimbursement
will include payment to GE for all credits utilized by the Midway
Airlines as well as nullification of any remaining credits under
this guarantee.
B. Shop Visit Rate Guarantee
GE guarantees that the initial five year cumulative average CF34-3B1
engine caused shop visit rate for Midway Airlines' total fleet of
CF34-3B1 engines will not exceed [***] events per [***] engine
flight hours. The guarantee period shall commence from delivery
of the first Canadair Regional Jet. If, at the end of the guarantee
period, the guarantee level is exceeded, GE will provide Midway
Airlines a credit against future CF34-3B1 related purchases of
engines or spare parts from GE in the amount of U.S. [***] for
each acceptable shop visit in excess of the guarantee. Criteria
for shop visits acceptable under this guarantee are listed in
Attachment C.
C. In-Flight Shutdown (IFSD) Rate Guarantee
GE guarantees that the initial five year cumulative average CF34-3B1
engine-caused IFSD rate for Midway Airlines' total fleet of CF34-3B1
engines will not exceed [***] events per 1000 EFH. The guarantee
period shall commence upon delivery of the first Canadair Regional
Jet to Midway Airlines. If, at the end of the guarantee period, the
guarantee level is exceeded, GE will provide Midway Airlines a
credit against future CF34-3B1 related purchases of engines or spare
parts from GE in the amount of U.S. [***] for each IFSD in excess
of the guaranteed rate.
-5-
<PAGE>
E. Fuel Consumption Guarantee
GE will guarantee Midway Airlines that the fuel flow of each
CF34-3B1 engine will not increase to a value [***] greater than the
value stated in the engine model specification at maximum cruise
power setting, sea level static during the first [***] engine flight
hours or two years or revenue service, whichever shall last occur.
If Midway Airlines engine fuel flow exceeds the guaranteed rate and
upon Midway Airlines request, GE will analyze Midway Airlines data
and provide recommendations relative to the correction of the excess
fuel usage. If the engine fuel flow exceeds the guaranteed rate
within the guarantee period, GE will reimburse Midway Airlines for
the excess fuel consumed for that portion of the guaranteed period
during which the guarantee is exceeded from the time GE is notified
(the cost will be computed based on Midway Airlines average monthly
cost of fuel). Criteria for measurement of this guarantee is
described in Attachment C.
F. Performance Retention Guarantee
GE guarantees that the cumulative fleet average cruise fuel
consumption deterioration of new CF34-SB1 Engines will not exceed an
average of [***] greater than the value stated in the
Engine Model Specification at maximum cruise power setting, sea
level static during the first [***] of Midway Airlines'
revenue service. This guarantee includes installed and spare Engines
to support all aircraft delivered during the period of this
guarantee and will also include Engines which have undergone shop
refurbishment during the guarantee period. Method of measurement for
this guarantee is described in Attachment C.
If at the end of the guarantee period, the fleet average guarantee
level is exceeded, GE will reimburse Midway Airlines for the excess
fuel consumption for that portion of the guarantee period during
which the guarantee is exceeded, computed at Midway Airlines'
average monthly cost of fuel. Reimbursement will be in the form of
credits against CF34 related purchases from GE.
VII. Exhaust Gas Temperature (EGT) Deterioration Guarantee
GE guarantees that each new installed CF34-3B1 Engine in Midway Airlines'
aircraft delivered within five years of initial aircraft delivery, will be
capable of operating the first [***] flight hours without removal from an
aircraft solely for the reason of being unable to reach rated power within
temperature limits. If this is verified by GE, GE will pay 100% labor and
material for the first [***] hours and a pro rata share beyond [***] hours
of the cost of those parts and labor necessary to restore the Engine
performance. Payment will be in the form of
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credits against CF34 related purchases from GE. The pro rata will be on
straight line basis with [***] hours and zero percent at [***]. Available
on-aircraft restoration techniques to regain EGT margin are to be
accomplished prior to engine removal under this guarantee unless
engine fails to demonstrate margin within limits on a ground run with
ambient temperature less than 10(degrees) Celsius and reduced power or
derivative engine takeoff rating program cannot be utilized to continue in
service.
Criteria for measuring this guarantee is described in Attachment C.
VII. SPECIAL CONCESSIONS
A. Spare Engine Allowance
To assist in the provisioning of Spare Engines and Spare Parts,
General Electric will provide a special allowance of [***],
in the form of credits to be applied against CF34-3B1 related spare
parts purchases, for each spare engine purchased directly from GE in
support of firm aircraft deliveries. If desired, credits may be
applied against the purchase price of specific spare engines
purchased.
B. Spare Parts Allowance
General Electric will provide Midway Airlines a spare parts credit
allowance to be applied toward future purchase of CF34-3B1 spare
parts from GE in the amount of [***] of the delivered value of
Initial Provisioning Spare Parts ordered in support of firm
aircraft deliveries.
VIII. PRODUCT SUPPORT SERVICES
A full complement of GE product support services will be provided for the
CF34-3B1 Engine as defined in Attachment A hereof.
IX. PAYMENT
Payment will be made by wire transfer as follows:
a. For spare engines and modules:
- [***]
- Balance net 30 days after delivery of each item to
Midway Airlines (Ex-Works GE's facility Lynn, MA, USA)
b. For spare parts or other products provided, [***] payment of
the selling price shall be made net 30 days from delivery of
each item to Midway Airlines (Ex-Works GE's facility Lynn, MA,
USA.).
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X. CONDITIONS OF SALE
The contents of this proposal are intended for the exclusive use of Midway
Airlines and are to be considered as proprietary between GE and Midway
Airlines. This proposal is subject to GE and Midway Airlines establishing
credit terms and a mutually acceptable General Terms Agreement (GTA)
and/or ECMP Agreement which contains terms and conditions consistent with
those contained in Attachment F. GE will forward a GTA to Midway Airlines
under separate cover at a later date.
XI. VALIDITY
This proposal remains valid until October 30, 1997, unless extended in
writing by GE
Yours truly,
/s/ Kenneth D. Nusky
Kenneth D. Nusky, Manager
Turboprop/Turbofan Sales
Small Commercial Turbofan Dept
Tel.: 617-594-5540/Fax: 617-594-5769
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PROPOSAL ACCEPTANCE
Midway Airlines hereby accepts GE's CF34-3B1 proposal dated September 12, 1997
for the sale of spare engines and associated equipment and for the Support
Program proposed by GE for Midway Airlines for ten (10) firm, ten (10)
conditional and (10) option Canadair Regional Jet Aircraft.
Accepted and agreed to this 16th day of September 1997.
GE Aircraft Engines Midway Airlines Corporation
By /s/ Bruce B. Bromby By /s/ Jonathan S. Waller
----------------------------- -----------------------------
Bruce B. Bromby Jonathan S. Waller
- -------------------------------- --------------------------------
Typed Name Typed Name
GE International
Attorney-in-Fact
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ATTACHMENT A
CF34-3B1 PRODUCT SUPPORT SERVICES
GE will provide a comprehensive product support program for Midway Airlines
which will include the following:
I. CUSTOMER SERVICE
A. A Customer Service Manager (CSM) will be assigned to Midway Airlines
and will serve as its representative at GE's factory. The CSM will
direct all aspects of GE CF34-3B1 support. The CSM will meet with
Midway Airlines in advance of aircraft delivery to participate in
planning preparations for engine support and on a continuing basis.
B. GE will provide a full-time, on-site Technical Representative at
Midway Airlines' main maintenance base for a minimum of one year
from delivery of initial aircraft, with extensions beyond this
period by mutual agreement. Follow-on technical representative
services will be provided, when such services are mutually
determined to be required, at no additional charge to Midway
Airlines.
II. COMMUNICATIONS
Communications with Midway Airlines will be conducted on a personal
basis by the GE CSM and the assigned technical representative, as
well as by electronic communications, newsletters, coordination
meetings, maintenance seminars and periodic operator seminars.
Twenty-four hours/seven days a week emergency technical and spare
parts assistance is maintained.
III. FLIGHT OPERATIONS
GE Flight Operations personnel, with Midway Airlines permission,
would fly as observers with the Airline's flight crews, conduct crew
seminars and participate in initial and recurrent operational
training while enhancing flight crew's ability to operate the
CF34-3B1 with maximum reliability and optimum operating costs. In
addition, assistance will also be provided in developing
engine-oriented General Operating Manuals, check lists and in house
training capabilities.
IV. PRODUCT SUPPORT ENGINEERING
Factory based engineers who are specialized in powerplant
engineering problems are available to make visits to Midway Airlines
as mutually agreed. These engineers will coordinate with the CF34
design engineers and Midway Airlines powerplant maintenance group.
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V. TECHNICAL TRAINING
GE will offer the below listed technical training classes, at GE's
facility conducted in the English language, to Midway Airlines at no
additional charge for a mutually agreed number of trainees. All
salaries, travel and living, medical expenses and other related
expenses of Midway Airlines personnel while receiving technical
training shall be paid by Midway Airlines.
- Familiarization (3 day course)
- Line Maintenance (5 day course)
- Minor Maintenance (8 day course)
In addition to the above technical training, GE will furnish to
Midway Airlines, at no additional charge, mutually agreed items and
quantities of technical training aids as used by GE, subject to
availability. GE will also loan audio visual aids to Midway Airlines
for reasonable periods of time. GE, on request, will provide a
written quotation for training at a non-factory site.
VI. TECHNICAL MANUAL
GE will furnish, at no additional charge, technical manuals,
including revisions thereof, to Midway Airlines. Technical manuals
shall be furnished by GE to Midway Airlines in mutually agreed upon
quantities. All technical manuals provided by GE shall be in the
English language and in accordance with mutually agreed upon
provisions of ATA Specification No. 100, and its subsequent
revisions.
VII. PERFORMANCE TREND MONITORING
GE will provide Midway Airlines with a performance trend monitoring
program using existing available instrumentation.
VIII. LEASE POOL ENGINE AVAILABILITY
GE will maintain a limited pool of back up lease CF34-3B1 engines.
These engines will be made available on a first come-first serve
basis to all of our operators for emergency situations. The daily
and flight hour lease rate for the CF34 engine will be $875 per day
and $90 per engine flight hour in 1997 U.S. Dollars and will be
subject to escalation.
In special consideration to Midway Airlines, commencing with
delivery of Midway Airlines' first CRJ aircraft, GE agrees to place
a lease engine at Midway Airlines' facility for use by Midway
Airlines on a non-exclusive basis. The lease engine will remain
on-site at Midway Airlines' facility for a period of one year from
delivery of Midway Airlines' tenth CRJ aircraft, or no later than
December 31, 1999, provided that Midway Airlines purchases and takes
delivery of two spare engines from GE within one year after delivery
of Midway Airlines' tenth CRJ aircraft, or December 1999. Should
additional lease engines be required to support airline requirements
during this period, these will be forwarded to airlines on an as
required basis.
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During the interim period that GE maintains a non-exclusive lease
pool engine(s) on site at Midway Airlines, in the event Airline
would require this engine(s), daily lease rate would be waived and
only the then current hourly lease rate would apply.
This lease rate represents a special rate which is contingent upon
Midway Airlines purchasing and taking delivery of two spare engines
per the schedule mentioned above. In the event that Midway Airlines
does not acquire the above required quantity of spare engines, the
lease rate will be the standard daily/hourly rate that which is in
effect at the time Midway Airlines requires a lease engine(s).
If a Midway Airlines' owned spare engine is available, Midway
Airlines agrees to utilize its spare engine in lieu of the above
mentioned GE owned lease engine.
IX. ENGINE TOOLlNG/GROUND SUPPORT EQUIPMENT
Pre-qualified drawings and specifications for special tooling/ground
support equipment designed by GE will be provided at no additional
charge so that Midway Airlines can manufacture or procure these
items locally.
This equipment will be offered for sale to Midway Airlines if Midway
Airlines prefers not to make this equipment.
X. SPARE PART PROVISIONING/ORDERING
In connection with Midway Airlines' initial provisioning of Spare
Parts, GE shall furnish Midway Airlines with data in accordance with
ATA 200 Specification using a revision mutually agreed to in writing
by GE and Midway Airlines.
GE supplied parts will be shipped in accordance to lead times
published in the then current spare parts catalog after initial
provisioning and receipt of purchase order and consistent with
requirements to meet authorized repair facility normal scheduled
turn times.
GE will agree to re-purchase after not less than one (1) year and
not longer than three (3) years after delivery of the first CF34
powered Canadair Regional Jet to Midway Airlines, at the original
invoice price, any initially provisioned spare parts purchased from
GE which GE recommended Midway Airlines purchase, in the event such
parts are found to be surplus to Midway Airlines needs. Parts must
be new and unused, shall meet GE inspection requirements, and shall
be returned to GE's plant Lynn, Mass. U.S.A. at Midway Airlines
expense. Parts which become surplus to Midway Airlines's needs by
reason of Midway Airlines' decision to upgrade or dispose of
equipment are excluded from this provision. Payment will be in the
form of credits toward purchase of GE Aircraft Engine CF34-3B1
related purchases of spare engines or parts from GE. Credit amounts
will be based on original invoice price for initial provisioning
parts.
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XI. ENGINE SERVICE - INSPECTION AND MAINTENANCE
In addition to the support level of maintenance which Midway
Airlines wishes to undertake, GE's Aircraft Engine Maintenance
Center - Strother Field, Arkansas City, Kansas and Lufthansa Aero
Services GmbH - Alzey, Germany are currently facilitized for minor
and major repairs of the CF34 engine family.
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ATTACHMENT B - ESCALATION
I. The base value for the Maintenance Cost Guarantee spare engine, lease
rates, ECMP and other prices subject to escalation shall be adjusted
effective 1 January 1998 and 1 January of each calendar year thereafter
pursuant to the provisions of this Exhibit.
II. The following three average indices as published in December of the year
prior to the applicable guarantee or price year shall be used to determine
the amount of adjustment upward or downward:
A. The twelve month average discussed below of the "Gross Hourly
Earnings of Aircraft Engine and Engine Parts Production Workers" as
published in "Employment and Earnings", U.S. Department of Labor,
Bureau of Labor Statistics, Table C-2, SEC Code 3724, to the second
decimal place.
B. The twelve month average discussed below of the wholesale price
index for "Industrial Commodities" as published in "Monthly Labor
Review", Bureau of Labor Statistics, to the second decimal.
C. The twelve month average discussed below of the wholesale price
index for "Metals and Metal Products", Code 10, as published in
"Monthly Labor Review". Bureau of Labor Statistics to the second
decimal place.
III. The twelve month average for each index described above shall be
determined for the base and current years. The base year shall be the
twelve months ended September 1995. The current year shall be the twelve
months ended September of the year preceding the year in which the
guarantee or price applies.
IV. Values for guarantees and prices in any calendar year subject to this
clause shall be adjusted by the average of the percentage change in each
average Index described above for the current over the base year.
Example - determine base price or guarantee rate for 1998:
Base Current %
Escalation Indices Weight in Indices Indices Changes Weighted
--------- ------- ------- ------- --------
1. Labor 33.3% 144.4 151.3 4.78% 1.59%
2. Metals 33.3% 119.3 122.8 2.93% 0.98%
3. Industrial Commodities 33.3% 116.9 120.7 3.25% 1.08%
-----
Total Escalation 3.65%
=====
Assume a base price or guarantee rate in 1997 $ of 100.
Calculate 1998 price or guarantee rate = $100 X 1.0365 = $103.65.
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ATTACHMENT B (Cont'd)
V. The guarantee rate or price shall be final and will not be subject to
further adjustments in the indices.
VI. In determining the adjustment to be added to the guarantee rate or price,
the percent increase shall be calculated to the nearest one-tenth of one
percent. If the next succeeding decimal place is five or more, the
preceding decimal figure shall be raised to the next higher figure.
VII. In the event that the indices specified herein are discontinued, or the
basis of their calculation is modified, equivalent indices shall be
substituted by GE to reflect increases in labor and material costs up to
the September of the year prior to scheduled delivery of the Equipment.
VIII. Should the above provisions become null and void by action of the U.S.
Government, the guarantee rate or price shall be adjusted due to increases
in the cost of labor and material which have occurred from the period
represented by the applicable Base Composite Price Index (B1) to September
of the year prior to the year applicable guarantee or price.
IX. In the event the U.S. Bureau of Labor Statistics publishes indexes using a
new base year, then the escalation shall be computed using such new
indices.
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ATTACHMENT C
BASIS FOR SPECIAL GUARANTEES
I. GENERAL
A. All guarantees are based on a fleet of at least ten (10) Canadair
Regional Jet aircraft to be delivered beginning in November, 1997,
with a flight length of 1.3 hours or greater, 5% reduced takeoff
power, maximum cruise speed of .74Mn. when appropriate, and an
average aircraft utilization 3000 hours per year. It is assumed that
an approved reduced power program is in place and being utilized to
the maximum extent consistent with approved operating procedures.
B. Operation under different conditions than those specified in A above
may require adjustment of the guaranteed values.
C. Engine operation and maintenance will be performed in accordance
with General Electric procedures and recommendations. Service
Bulletins will be incorporated in a timely manner.
D. Events and costs resulting from foreign object damage (FOD),
accident, negligence or maintenance error are excluded from all
guarantees.
E. Unless stated otherwise, these guarantees commence with delivery of
Midway Airlines' first Canadair Regional Jet and end five years from
delivery of the first aircraft.
F. If credits become available to Midway Airlines under more than one
specific guarantee or the Warranty, Midway Airlines will not receive
duplicate credits but will receive the credits most beneficial to
them under a single guarantee or the Warranty.
G. These special guarantees apply solely to Midway Airlines and are not
transferable to a third party without the prior written consent of
GE.
H. Substantiation of the fleet conditions described above will be
provided to General Electric by Midway Airlines.
I. All settlements of guarantees, if any, will be in the form of
credits toward the future Midway Airlines purchase of CF34-3B1
spare engines and/or parts from GE.
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J. These guarantees require that Midway Airlines and GE agree upon the
workscope necessary during each shop visit, that available on-wing
maintenance and performance restoration procedures are used to avoid
unnecessary shop visits, and that service bulletins agreed to
between Midway Airlines and GE are incorporated in a timely manner.
The guarantees shall not apply to repairs that are due to negligence
and/or improper operation and maintenance.
II. ENGINE-CAUSED SHOP VISIT RATE GUARANTEE-ACCEPTABLE SHOP VISITS
Engine shop visits will be accepted under the Shop Visit Rate Guarantee if
the shop visit meets any of the following criteria:
A. The shop visit was necessary to correct an engine-caused failure.
Shop visits for work that could have been performed with the engine
installed on the aircraft, but was performed in the shop for
convenience, are not acceptable.
B. The shop visit was necessary to comply with an Air worthiness
Directive issued by FAA, cognizant certifying authorities, or
recommendations contained in GE's mandatory compliance service
bulletins requiring compliance within a specified number of flight
hours or cycles.
C. The shop visit was necessary to comply with GE's written
recommendation to perform scheduled maintenance that requires the
shop visit of engines at scheduled intervals.
D. The shop visit will not be considered an Engine-Caused Shop Visit
under this guarantee when the shop visit is caused by FOD,
negligence or maintenance error.
III. ENGINE-CAUSED IN-FLIGHT SHUTDOWN RATE DEFINITION
An engine-caused in-flight shutdown (EC-IFSD) is defined as an event
occurring during engine operation while an aircraft is airborne that is
directly attributable to an engine part failure that requires the pilot to
shut down the engine, or which results in the engine's shutting itself
down. It will not be considered an EC-IFSD under this guarantee:
A. Unless it is determined to the reasonable satisfaction of GE that
engine part failure is the cause of the IFSD, or
B. When the IFSD is caused by FOD, negligence, maintenance error,
instrumentation, or pilot error.
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IV. FUEL CONSUMPTION GUARANTEE
A. Removal of any engine for SFC performance test under this guarantee
must be coordinated with GE's assigned representative. These
guarantees do not include SFC deterioration due to mechanical damage
which is differentiated from normal wear and tear.
B. When an engine is returned to a GE authorized service facility,
pursuant to this guarantee, an incoming performance check will be
made. If the engine does not exceed the guarantee rate at Maximum
Cruise Power Setting, SLS (Sea Level Static) then airline will pay
for test expenses. GE reserves the right to wash the engine and
perform such other appropriate line maintenance in accordance with
field maintenance procedures during the incoming test or inspection.
During the time the performance of the engine is being restored, the
airline may wish other maintenance, updates, or zero time hardware
to be incorporated. These will be charged to Midway Airlines.
V. PERFORMANCE RETENTION GUARANTEE
A. Fleet average base point for the fuel consumption guarantee is the
average of four (4) performance flight test data points mutually
agreed between GE and Bombardier plus the first 20 revenue flight
cruise points of all Engines covered by this Agreement following
delivery to Midway Airlines. For a valid base, the standard
deviation of the calculated fuel flow deltas must not exceed 1.0%.
B. The period covered by guarantee starts from the first revenue flight
of the first aircraft.
C. The minimum data required after the base point is established is ten
cruise points every 90 days for each installed Engine. GE also
requests access to any form of performance trending chosen by the
operator to be submitted on an as required basis. Digital Flight
Data Recorder (DFDR) readouts may be used to meet the data required.
D. Cruise data reported quarterly must include the following:
A/C Number; Engine Serial Number (ESN) Date; Flight Number;
Engine Position; Altitude; Mach Number; TAT (Total Air
Temperature);
and the following at Cruise Point; N(1) (Fan Speed); EGT; N(2)
(Core Speed: Fuel Flow; Bleed configuration.
E. Increase of fleet average cruise fuel consumption or trends
suggesting the fuel consumption guarantee level is approaching may
lead to the following:
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1. GE Flight Audits
2. Test cell confirmation runs on specific Engines adjusted
to sea level conditions plus nominal installation loss
for comparison purposes.
F. If, as a result of incorporation of Service Bulletins or other
modifications, the initially established relationship of engine fuel
flow, thrust and fan speed (N(1)) is altered, the measured,
calibrated fuel consumption shall be suitably corrected to give
effect to this change.
G. Airline is to maintain records of total fuel purchased and monthly
cost thereof (price per gallon) during the period of this guarantee
in substantiation of any claim hereunder.
VI. EXHAUST GAS TEMPERATURE (EGT) DETERIORATION GUARANTEE
A. Removal of any engine for EGT deterioration test under this
guarantee must be coordinated with GE's assigned representative.
This guarantee does not include EGT deterioration due to mechanical
damage which is differentiated from normal wear and tear.
B. When an Engine is returned to a GE authorized service facility,
pursuant to this guarantee, an incoming performance check will be
made at no cost to Airline. If the Engine does not exceed the
guarantee rate at Maximum Continuous Power Setting, SLS (Sea Level
Static) then Midway Airlines will pay for test expenses. GE reserves
the right to wash the Engine and perform such other appropriate line
maintenance in accordance with field maintenance procedures during
the incoming test or inspection.
During the time the performance of the Engine is being restored,
Midway Airlines may wish to have other maintenance, updates, or zero
time hardware to be incorporated. These will be charged to Midway
Airlines.
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EXHIBIT 10.39
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY [***]. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
OFFICE SPACE
DURHAM SUBLEASE AGREEMENT
<PAGE>
SUBLEASE
THIS SUBLEASE is dated as of June 30, 1995 by and between Peoples Security
Life Insurance Company, a North Carolina corporation, 300 West Morgan Street,
Durham, North Carolina 27702 ("Sublessor"), and Midway Airlines Corporation, a
Delaware Corporation, 5713 S. Central Avenue, Chicago, Illinois 60638
("Sublessee").
RECITALS
A. Sublessor is the lessee of certain premises (the "Leased Premises") at
the real property more particularly described on Exhibit A attached hereto as a
part hereof (the "Property") pursuant to a lease dated July 18, 1986, as amended
by a First Amendment to Office Lease dated as of June 2, 1992 a copy of which
lease, and the amendment is attached hereto as a part hereof as Exhibit B
(collectively the "Master Lease") between Sublessor, as tenant, and DCV Limited
Partnership (formerly known as Webb/Whittenberg Ventures), as landlord (the
"Prime Landlord").
B. Sublessor and Sublessee desire to enter into this Sublease pursuant to
which Sublessor shall lease 28974 rentable square feet of space being the 11th
and 12th floors at the Property ("Subleased Premises") to Sublessee, subject to
the terms and conditions of this Sublease.
ARTICLE I
TERMS AND CONDITIONS
1.1 Sublease of Property. Sublessor hereby leases the Subleased Premises
to Sublessee, and Sublessee hereby leases the Subleased Premises from Sublessor,
pursuant to the terms and conditions of this Sublease. The Subleased Premises
will be delivered by Sublessor and accepted by Sublessee in "as is" condition
with no fit up or build out required. The Sublessor
<PAGE>
also hereby grants Sublessee a right to use 120 parking spaces at the parking
lot bounded by Foster Street, Hunt Street, Seminary Street, and Rigsbee Street
in Durham, N.C. throughout the Term of this Sublease.
1.2 Term. The initial term of this Sublease shall begin on August 1, 1995
and shall end on July 31, 1998 (the "Initial Term"). Sublessee shall have the
option to extend the Initial Term of this Sublease two times for consecutive
extended terms of one year each ("Extended Term"). The Initial Term and, if
applicable, any Extended Term, shall be deemed the "Term" of this Sublease. Such
options may be exercised by written notice to Sublessor at least 120 days prior
to the next scheduled expiration date of the Term of this Sublease. Sublessor
will deliver 1000 square feet on the 12th floor of the Subleased Premises to
Sublessee on June 1, 1995, the use of which space by Sublessee will be rent free
until August 1, 1995.
1.3 Rent. During the Term of this Sublease, Sublessee shall pay rent
("Rent") to Sublessor on the first of each month at the address set out above in
accordance with the following schedule:
August 1, 1995 to January 31, 1997, [***]
February 1,1997 to July 31, 1998, [***]
First Extended Term, [***]
Second Extended Term, [***]
ARTICLE II
UTILITIES AND INSURANCE
2.1 Utilities. Sublessor shall make available to the Sublessee in the
Subleased Premises the use of all necessary utility services including
electrical service, telephone service, water and
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<PAGE>
sewer services, heating, ventilating and air conditioning services, gas and
other similar services. Sublessee shall also be responsible for paying for, any
and all electrical, gas, heating, ventilating and air conditioning usage or
service in connection with the Subleased Premises or Sublessee's use thereof,
[***] but subject to 4.2 and 5.1 below Sublessee shall not be responsible for
any costs to operate or maintain the common areas or any other portion of the
Property or the improvements thereon.
2.2 Insurance. Sublessee shall be responsible for obtaining the insurance
policies/coverages now required of the tenant under the Master Lease at its own
cost and shall name Sublessor as an additional insured on such policies.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF SUBLESSOR
Sublessor makes the following representations, warranties and covenants
for the benefit of and reliance on by Sublessee during the Term of this
Sublease:
(a) There are no existing or unexpired subleases, conveyances of any kind
or description affecting Sublessor's leasehold interest in the Subleased
Premises.
(b) The Master Lease is in full force and effect and there is no existing
event of default by Sublessor or the Prime Landlord under the Master Lease.
(c) Sublessor shall not enter into any amendment or modification of the
Master Lease or its terms with respect to the Subleased Premises without the
prior written consent of Sublessee, which consent will not be unreasonably
withheld if such amendment or modification is unrelated to the length of the
term of the Master Lease, the property covered hereby or the rent payable
thereunder
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(d) At all times prior to expiration or other termination of this Sublease
when an event of Default has not occurred and is continuing hereunder, Sublessor
shall ensure the Sublessee's peaceable and quiet possession and enjoyment of the
Subleased Premises. Sublessor shall deliver to Sublessee non-disturbance
agreements from the Prime Landlord and any party holding a mortgage on the
Property or entitled to the benefits of an assignment of rents and/or Leases, in
each case consistent with the terms of this clause (d).
ARTICLE IV
INDEMNIFICATION
4.1 Indemnification of Sublessor. Sublessee shall indemnify, and save and
hold harmless Sublessor against any and all claims asserted by or on behalf of
any person, firm, or corporation incurred without negligence or bad faith on the
part of Sublessor, arising out of, resulting from, or in any way connected with,
the act or omission of Sublessee, or the violation by Sublessee of any law,
ordinance, or statute, or resulting or arising out of any accident or other
occurrence arising from the use and occupancy of the Subleased Premises by
Sublessee, its agents, employees, tenants or invitees.
4.2 Indemnification of Sublessee. Sublessor shall indemnify, and save and
hold harmless Sublessee against any and all claims asserted by or on behalf of
any person, firm, or corporation incurred without negligence or bad faith on the
part of Sublessee, arising out of, resulting from, or in any way connected with,
the act or omission of Sublessor, or the violation by Sublessor of any law,
ordinance, or statute, or resulting or arising out of any accident or other
occurrence arising from the use and occupancy of the Subleased Premises by
Sublessor, its agents, employees, tenants or invitees.
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ARTICLE V
MAINTENANCE
5.1 Maintenance. Sublessor shall, at its own expense, enforce the Master
Lease so as to cause the Prime Landlord to maintain the Subleased Premises in
good condition, repair, and working order as required by the Master Lease, and
shall, at its own expense, cause the Prime Landlord to make or cause to be made
from time to time all necessary repairs, renewals, and replacements thereof,
ordinary wear and tear and obsolescence excepted; provided, however, in the
absence of such maintenance performance by the Prime Landlord, Sublessor shall
cause the Subleased Premises to be so maintained and further provided that
Sublessor shall not be responsible for any maintenance or repairs made necessary
by the negligence of Sublessee.
ARTICLE VI
RIGHT OF FIRST REFUSAL FOR ADDITIONAL SPACE
6.1 In the event Sublessor decides to offer for Sublease or accept an
offer to sublease any of the Leased Premises, Sublessor shall first notify
Sublessee of its intent to sublease all or part of the Leased Premises and
Sublessee shall have 20 days from the date it is notified by Sublessor of
Sublessor's intent to sublease all or part of the Leased Premises to elect to
sublease the said portion of the Leased Premises at the same rental rate and
upon the same terms and conditions as are contained in this Sublease. The terms
of this Section 6.1 shall also apply to any attempted assignment of Sublessor's
interest in the Leased Premises.
5
<PAGE>
ARTICLE VII
SECURITY
7.1 Security Guard. Sublessor has employed a security guard to escort its
employees to their cars between 5 p.m. and 7 p.m. each workday. Sublessor will
provide the same service to employees of Sublessee as long as Sublessor is
providing this service to its own employees.
ARTICLE VIII
TRAINING FACILITIES
8.1 Temporary Training Facilities. Sublessor will provide to Sublessee for
its use a temporary training area on the 10th floor of the Leased Premises so
long as provision of such space is consistent with Sublessor's training and
space needs. Sublessor makes no guarantee of the availability of the temporary
training space and reserves the right to retake possession of said space at any
time. Sublessor will entertain any reasonable proposal Sublessee may wish to
make for a more permanent and definitive subletting of training space.
ARTICLE IX
SECURITY DEPOSIT
Sublessee shall deposit with Sublessor the sum of [***] as security
for the performance of Sublessees obligations under this Sublease. Sublessee
shall retain said security deposit, with interest, throughout the term of this
Sublease. After any uncured default by Sublessee under this Sublease, Sublessor
may at its option apply said deposit to cure Sublessee's default, but, if prior
to the expiration of this Sublease, Sublessor depletes the deposit, in
accordance with this Sublease, Sublessee shall immediately restore the amount so
used by
6
<PAGE>
Sublessor. Unless the Sublessor uses the deposit to cure a default, or at the
conclusion of the Term of this Sublease, or Extended Term uses the deposit to
restore the Subleased Premises to substantially the same condition as of the
commencement of this Sublease, reasonable wear and tear excepted, Sublessor
shall, within thirty (30) days of the expiration of this Sublease, refund to
Sublessee the balance of the deposit held by Sublessor plus interest earned
thereon at the rate of 5.5% per annum.
ARTICLE X
ACTIONS AFFECTING TITLE TO PROPERTY
AND SUBLEASEHOLD ESTATE
10.1 Liens by Sublessee. Sublessee shall not create or permit the creation
of any lien, encumbrance, or charge upon the Subleased Premises or the Property
arising through Sublessee. Any liens, encumbrances, or charges so created or
permitted by Sublessee shall be immediately discharged by Sublessee.
10.2 Assignment and Subleasing. Sublessee may not assign this Sublease or
sublet the Subleased Premises or any portion thereof without the written consent
of Sublessor, which consent shall not be unreasonably withheld or delayed.
10.3. At the expiration of the Sublease Term or any Extended Term,
Sublessee shall return the Subleased Premises to Sublessor in substantially the
same condition as the Subleased Premises was on the date of Sublessee's initial
occupancy, ordinary wear and tear excepted.
7
<PAGE>
ARTICLE XI
FURTHER OBLIGATIONS OF SUBLESSEE
11.1 Compliance with Laws. Sublessee shall promptly comply or cause
compliance with all laws applicable in any way to the Subleased Premises for
which the Sublessor as "Tenant" is responsible under Section 18.01 of the Master
Lease.
11.2 Hazardous or Toxic Materials. Sublessee shall not permit any
hazardous or toxic wastes or materials to be located or stored on the Subleased
Premises in violation of applicable law.
ARTICLE XII
EVENTS OF DEFAULT AND REMEDIES
12.1 Events of Default. The occurrence of any of the following events
shall constitute an "Event of Default":
(a) Failure by Sublessee to pay any Rent within three (3) business days
following the time provided in this Sublease.
(b) Any breach by Sublessee of any representation, warranty, or covenant
made in this Sublease or failure by Sublessee to perform, within thirty (30)
days following notice from Sublessor, any obligation or observe any covenant or
condition on its part to be performed or observed pursuant to this Sublease.
12.2 Remedies upon Event of Default. Whenever any Event of Default shall
have occurred and be continuing, Sublessor shall have the right (i) to take
immediate possession of the Subleased Premises and the possession and estate of
Sublessee under this Sublease shall terminate forthwith, or (ii) re-enter and
take possession of the Subleased Premises without terminating this
8
<PAGE>
Sublease and re-let the Subleased Premises for the account of Sublessee, holding
Sublessee liable for the difference between the Rent and other amounts payable
by any Sublessee in such subleasing and the Rent payable by Sublessee hereunder.
12.3 Payment of Expenses After Event of Default. Upon an Event of Default
by Sublessee, Sublessee shall pay to Sublessor upon demand therefor all costs
and expenses, including reasonable counsel fees, lawfully incurred in obtaining
possession of the Subleased Premises, or in enforcing the performance or
observance of any obligation or condition by Sublessee under this Sublease.
12.4 Waivers and Limitation on Waivers. In the event any Event of Default
by Sublessee under this Sublease should be waived by Sublessor, such waiver
shall be limited to the particular Event of Default so waived and shall not be
deemed to waive any other Event of Default hereunder nor be deemed a waiver of
the same Event of Default on another occasion.
12.5 Delay in Exercise of Rights. No delay or omission to exercise any
right occurring upon any Event of Default shall impair any such right or shall
be construed to be a waiver thereof, but any such right may be exercised from
time to time as often as may be deemed expedient. In order to exercise any
remedy reserved to the Sublessor in this Sublease, it shall not be necessary to
give any notice other than such notice as may be herein expressly required.
9
<PAGE>
ARTICLE XIII
SUBLEASE SUBJECT TO MASTER LEASE
This Sublease is subject to the Master Lease. Except as may be
inconsistent with the terms hereof, all of the terms, covenants and conditions
in the Master Lease shall be applicable to this Sublease with the same force and
effect as if Sublessor was the lessor under the Master Lease and Sublessee was
the lessee thereunder. Sublessee shall not take, or fail to take, any action
that that if taken or not taken by the Sublessor as "Tenant" under the Master
Lease would constitute a default by Sublessor as "Tenant" under the Master
Lease, and Sublessee shall indemnify and hold Sublessor harmless from and
against all claims whatsoever by reason of any such action or failure to act by
Sublessee; provided, however the foregoing shall in no event apply in connection
with Sublessees' failure to pay Rent hereunder, the remedies for which are
provided in Section 12.2 above.
ARTICLE IX
MISCELLANEOUS
14.1 Notices. All notices, certificates, or other communications hereunder
shall be sufficiently given and shall be deemed given when mailed by registered
or certified mail, postage prepaid, return receipt requested, addressed to
Sublessee, or the Sublessor, as the case may be, at their respective addresses
as shown in the preamble to this Sublease, or hand delivered to the parties at
their respective addresses. Sublessor and Sublessee may by notice designate any
further or different addresses to which subsequent notices, certificates, or
communications shall be sent.
14.2 Amendment. No amendment to this Sublease shall be binding upon either
party hereto until such amendment is in writing and executed by both parties
thereto.
10
<PAGE>
14.3 Entire Agreement. This Sublease contains all agreements between the
parties and there are no other representations, warranties, promises,
agreements, or understandings, oral, written or inferred, between the parties,
unless reference is made thereto in this Sublease.
14.4 Binding Effect. This Sublease shall be binding upon the parties
hereto and upon their respective successors and assigns, and the words
"Sublessor" and "Sublessee" shall include the parties hereto and their
respective successors and assigns.
14.5 Severability. If any clause, provision, or section of this Sublease
be ruled invalid or unenforceable by any court of competent jurisdiction, the
invalidity or unenforceability of such clause, provision, or section shall not
affect any of the remaining clauses, provisions, or sections.
14.6 Captions. The captions or headings in this Sublease are for
convenience of reference only and in no way define, limit, or describe the scope
or intent of any provisions of this Sublease.
14.7 Governing Law. This Sublease shall be governed by and construed in
accordance with the laws of the State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have caused this Sublease to be
duly executed on the day and year first above written.
SUBLESSOR:
PEOPLES SECURITY LIFE INSURANCE COMPANY
By: /s/ [ILLEGIBLE]
--------------------------------------
Its:
-------------------------------------
Date Executed:
---------------------------
11
<PAGE>
SUBLESSEE
MIDWAY AIRLINES CORPORATION
By: /s/ Jonathan S. Waller
--------------------------------------
Its: Senior Vice President
Date Executed: August 21, 1995
Date:
THIS SUBLEASE IS ACKNOWLEDGED AND CONSENTED TO BY PRIME LANDLORD ON THIS 30 DAY
OF JUNE, 1995.
DCV Limited Partnership, a North Carolina limited partnership
By: DCV Property Company, general partner
By: /s/ Charles W. Henne
- --------------------------------
Charles W. Henne, Vice President
12
<PAGE>
EXHIBIT 10.40
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY {***}. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
ORLANDO MAINTENANCE FACILITY
SUBLEASE AGREEMENT
<PAGE>
[Letterhead of Greater Orlando Aviation Authority]
June 4, 1996
Mr. Tom Duffy VIA FEDERAL EXPRESS
Midway Airlines Corporation # 3526071146
300 W. Morgan Street
Durham, NC 27701
Dear Mr. Duffy:
RE: Sublease Agreement by and between Page Avjet Corporation ("Page") and
Midway Airlines Corporation ("Midway"), dated May 1, 1995, (the
"Sublease")
The purpose of this letter is to advise you that, in accordance with the
provisions of Article 28 of the Sublease, Page has assigned all of its rights
under the Sublease to the Greater Orlando Aviation Authority (the "Authority")
effective June 1, 1996. Please send all payments of rent and other
communications to the Authority as follows:
Payments of Rent:
Chief Financial Officer
Greater Orlando Aviation Authority
One Airport Boulevard
Orlando International Airport
Orlando, FL 32827-4399
Other Communications:
Executive Director
Greater Orlando Aviation Authority
One Airport Boulevard
Orlando International Airport
Orlando, FL 32827-4399
<PAGE>
Mr. Tom Duffy
Page 2
June 4, 1996
If you have any questions, please do not hesitate to call me.
Sincerely,
/s/ Thomas E. Wilke
Thomas E. Wilke
Assistant Director of Properties
TEW/cq
cc: Rosenberg & Liebentriff, P.C.
300 W. Morgan Street
Durham, NC 27701
Attention: J. S. Waller (via Federal Express)
Mark C. Extein, Esq.
J. Gordon Arkin, Esq.
Maureen Riley
<PAGE>
PAGE AVJET
May 31, 1996
Jonathan S. Waller
Vice President and General Counsel
Midway Airlines Corporation
5713 S. Central Avenue
Chicago, Illinois 60638
Re: Sublease between Page Avjet Corporation and Midway Airlines Corporation
dated May 1, 1995
Dear Jon:
Pursuant to our conversation of even date, this is to ratify and confirm the
obligation of Page Avjet Corporation, a Delaware corporation and Page Avjet
Holding Corporation, a Delaware corporation (hereinafter collectively referred
to as Page) under paragraph 5(f) of that certain Agreement of Sublease dated May
1, 1995 by and between Page and Midway Airlines Corporation, a Delaware
corporation, to provide exclusive usage of two (2) 115 volt, 400 cycle ground
power units and one (1) air compressor unit located on the leased premises.
By copy of this letter I will be advising the Greater Orlando Aviation Authority
that Page will remain obligated to fulfill the obligations of the Landlord under
the provisions of Article 5(f) of the Agreement of Sublease. As we discussed,
upon termination of the Sublease, Page will retake possession of the equipment.
Jon, thank you for your cooperation on this matter. As we discussed, I will be
contacting you shortly concerning various repairs requested by Midway.
Best regards.
Very truly yours,
/s/ Paul J. Mokris
Paul J. Mokris
Secretary
PJM/mm
cc: J. Gordon Arkin, Esquire
<PAGE>
PAGE AVJET
May 31, 1996
Jonathan S. Waller
Vice President and General Counsel
Midway Airlines Corporation
5713 S. Central Avenue
Chicago, Illinois 60638
Re: Sublease between Page Avjet Corporation and Midway Airlines Corporation
dated May 1, 1995
Dear Jon:
Pursuant to our conversation of even date, this is to ratify and confirm the
obligation of Page Avjet Corporation, a Delaware corporation and Page Avjet
Holding Corporation, a Delaware corporation (hereinafter collectively referred
to as Page) under paragraph 5(f) of that certain Agreement of Sublease dated May
1, 1995 by and between Page and Midway Airlines Corporation, a Delaware
corporation, to provide exclusive usage of two (2) 115 volt, 400 cycle ground
power units and one (1) air compressor unit located on the leased premises.
By copy of this letter I will be advising the Greater Orlando Aviation Authority
that Page will remain obligated to fulfill the obligations of the Landlord under
the provisions of Article 5(f) of the Agreement of Sublease. As we discussed,
upon termination of the Sublease, Page will retake possession of the equipment.
Jon, thank you for your cooperation on this matter. As we discussed, I will be
contacting you shortly concerning various repairs requested by Midway.
Best regards,
Very truly yours,
/s/ Paul J. Mokris
Paul J. Mokris
Secretary
PJM/mm
cc: J. Gordon Arkin, Esquire
<PAGE>
[Letterhead of Page Avjet Corporation]
December 19, 1995
Midway Airlines Corporation
Attention: Mr. Tom Duffy
5713 S. Central Avenue
Chicago, Illinois 60638
Re: Sublease by and between Page Avjet Corporation and Midway Airlines
Corporation dated May 1, 1995
Dear Mr. Duffy:
This letter is being sent to provide Midway Airlines Corporation with notice
that Page Avjet Corporation's notice address with respect to the
above-referenced Sublease has changed as follows:
Page Avjet Corporation
c/o BBA U.S. Holdings, Inc.
Suite 345
5850 T. G. Lee Boulevard
Orlando, Florida 32822
Attn: Kelly A. Cecconi, Controller
Should you have any questions, please do not hesitate to call me at (407)
648-7226.
Sincerely,
/s/ Maggie Mathwich
Maggie Mathwich
Legal Assistant
cc: Tom Sullivan
Kelly A. Cecconi
Rosenberg & Liebentritt, P.C.
<PAGE>
[Letterhead of Signature Flight Support]
May 1, 1995
Jon Waller, Esquire
Rosenberg & Liebentritt, P.C.
Two North Riverside Plaza
Suite 1515
Chicago, Illinois 60606
Re: Page Avjet Sublease with Midway Airlines
Dear Jon:
Enclosed please find one (1) original copy of the referenced Sublease, which has
been executed by Page Avjet Corporation. Please note that rather than initial
all the changes you requested, the changes were made and new pages were
inserted. The only modification made to your requested changes can be found in
Article 22.
Additionally, I have been advised that GOAA (rather than give its formal
approval by executing the Sublease) will prepare and forward their form of
consent to be executed by all parties. Upon receipt of same I will circulate for
signature.
If you have any questions, please feel free to call.
Sincerely,
/s/ Maggie Mathwich
Maggie Mathwich
Legal Assistant
enclosures
cc: Tom Sullivan (w/enclosure)
<PAGE>
SUBLEASE AGREEMENT
By and Between
PAGE AVJET CORPORATION
and
MIDWAY AIRLINES CORPORATION
at
Orlando International Airport
Orlando, Florida
Effective May 1, 1995
<PAGE>
INDEX
AGREEMENT OF SUB-LEASE
LANDLORD: PAGE AVJET CORPORATION
TENANT: MIDWAY AIRLINES CORPORATION
TERM: May 1, 1995 - April 30, 1998
COMMENCEMENT DATE: May 1, 1995
PAGE ARTICLE DESCRIPTION
- ---- ------- -----------
4 Article 1 Grant of Sub-Lease
4 Article 2 Master Lease Obligations
4,5 Article 3 Term
5 Article 4 Rent
5,6 Article 5 Improvements
6 Article 6 Taxes
6 Article 7 Utilities
6,7 Article 8 Tenant Insurance
7,8 Article 9 Liability
8 Article 10 Storage
8,9 Article 11 Maintenance
9 Article 12 Alterations
10 Article 13 Damage and Destruction
10 Article 14 Condemnation, Loss of Access
10,11 Article 15 Default/Early Termination
11 Article 16 Assignment and Subletting
11,12 Article 17 Use of Premises by Tenant
12 Article 18 Use of Premises by Landlord
13 Article 19 Estoppel Certificates
13 Article 20 Quiet Enjoyment
13 Article 21 Force Majeure
13 Article 22 Expiration
13 Article 23 Successors and Assigns
13 Article 24 Nonwaiver
14 Article 25 Holding Over
14 Article 26 Right of Entry
14 Article 27 Mechanic's Liens
14 Article 28 Transfer of Landlord's Interest
15 Article 29 Security Deposit
16 Article 30 Curing Tenant's Defaults
16 Article 31 Limitation of Landlord's Liability
16 Article 32 Sign Control
16 Article 33 Relocation of Premises
2
<PAGE>
INDEX (Continued)
AGREEMENT OF SUB-LEASE
PAGE ARTICLE DESCRIPTION
- ---- ------- -----------
17 Article 34 Miscellaneous
18 Article 35 Recording
18 Article 36 Exclusive Rights of Landlord
18 Article 37 Notices
19 ---------- Execution
20 ---------- Airport Consent and Parties Notarization
21 Exhibit "A" Designated Premises
22 Exhibit "B" Master Lease
3
<PAGE>
AGREEMENT OF SUBLEASE
THIS AGREEMENT OF SUB-LEASE, made and executed as of the 1st day of May, 1995,
by and between PAGE AVJET CORPORATION, a Delaware corporation ("Landlord"), and
MIDWAY AIRLINES CORPORATION, a Delaware corporation ("Tenant").
WITNESSETH
WHEREAS, Page Avjet Corporation has entered into a Maintenance Hangar
Lease Agreement with the Greater Orlando Aviation Authority ("Authority") dated
the 4th day of April, 1988 ("Master Lease") under which it leased the
"Property" (as that term is subsequently defined herein), and
WHEREAS, subject to the terms and conditions contained herein and in the
Master Lease, Landlord desires to lease a portion of the Property ("Premises")
described herein, to Tenant and Tenant desires to lease said Premises from the
Landlord.
NOW THEREFORE, in consideration of the foregoing and the mutual promises
contained herein, the parties, intending to be legally bound, agree as follows:
ARTICLE 1. GRANT OF SUB-LEASE
Landlord hereby sub-leases to Tenant and Tenant hereby sub-leases from
Landlord, the Building No. 407 Maintenance Hangar Facility (North Hangar)
located within the Orlando Tradeport at the Orlando International Airport,
Orlando Florida and surrounding area designated as the premises (the "Premises"
or "Property") as shown hatched on Exhibit "A" attached hereto and made a part
hereof. Landlord and Tenant hereby agree that the Premises consist of
approximately 98,111 square feet of hangar deck space, office space, shop space,
as well as the contiguous ramp areas and vehicle parking lot.
ARTICLE 2. MASTER LEASE OBLIGATIONS
The Tenant acknowledges the receipt and review of a copy of the Master
Lease, a copy of which is attached hereto as Exhibit "B" and made a part of this
Agreement. This Sub-Lease is expressly subject to and conditioned upon all of
the terms and conditions of the Master Lease. As a material inducement to
Landlord to enter into this Sub-Lease, Tenant covenants that it will comply with
all of the terms and conditions of the Master Lease which, by their terms, are
intended to govern the rights and duties of Landlord's Sub-Tenants.
ARTICLE 3. TERM
The term of this Lease (the "Term") shall commence on May 1, 1995 (the
"Commencement Date"), as hereinafter defined and terminate on April 30, 1998.
Tenant shall be permitted to terminate this Sub-Lease at the completion of
twenty four (24) months of the Term or any time thereafter by paying to Landlord
a sum equal to fifty percent (50%) of the rent that would have otherwise become
due if the Sub-Lease
4
<PAGE>
had not been so terminated. Tenant agrees to forward ninety (90) days advance
written notification to Landlord of such request to terminate.
ARTICLE 4. RENT
A. Tenant shall pay Landlord as "Base Rent" or "rent" for the Premises
the amount of {***} per month during the term of this Agreement. The Base
Rent includes amounts allocated to land rent, the rent for all personal
property or improvements in or comprising the Premises and real estate taxes
due hereunder but is exclusive of applicable Florida state sales tax and
personal property taxes, as more fully described in Article 6.
B. Tenant shall also pay to Landlord together with the Base Rent any
excise, sales, use, gross receipts or other tax imposed on or measured by such
rent, or imposed on account of the leasing of the Property (other than a tax
imposed on Landlord's income, capital or net worth) and which Landlord may be
required to pay or collect under any law now in effect or hereafter enacted.
C. Each monthly installment shall be due and payable to Landlord in
advance on the first day of each month during the Term at its notice address, or
such other place as Landlord may designate by written notice to Tenant.
D. If any part of the rent (including any additional rent) is not paid
within five (5) days after it is due, Tenant shall pay Landlord a late charge
equal to one and one-half percent (1.5%) of the amount due.
ARTICLE 5. IMPROVEMENTS
A. All fixtures, equipment, improvements and appurtenances attached to or
built into the Premises, or other personal property in the Premises on the
Commencement Date (collectively hereinafter "Leasehold Improvements") are
subject to the terms of this Sublease, but (i) shall be and remain a part of the
Premises; (ii) shall be deemed the property of Landlord; and (iii) shall not be
removed by Tenant.
B. All movable partitions, other business and trade fixtures, furnishings,
furniture, machinery and equipment, communications equipment, and other personal
property of a similar nature located in the Premises and acquired by or for the
account of Tenant, without expense to Landlord, which can be removed without
damage to the Building (collectively sometimes hereinafter called "Tenant's
Property"), shall be and shall remain the property of Tenant and may be removed
by it at any time during the Term. Tenant shall pay the cost of repairing any
damage to the Premises or to the Building resulting from such removal.
C. The rights, duties and obligations of the parties under this Lease
shall be effective upon the Commencement Date.
D. Prior to occupancy, representatives of the Landlord and Tenant shall
perform a thorough joint inspection of the Premises for purposes of establishing
Premises
5
<PAGE>
acceptability. It is mutually agreed that the Tenant shall accept the Premises
in an "as is" condition.
E. If Landlord gives Tenant permission to enter into possession of the
Premises prior to the Commencement Date, such possession shall be deemed to be
upon all the terms, covenants, conditions and provisions of the Sub-Lease,
including payment of the rent.
F. Landlord grants Tenant exclusive usage of two (2) 115 volt, 400 cycle
ground power units (collectively, "GPU") and one (1) air compressor unit
positioned on the Premises, with each GPU possessing the capability to
accommodate the electrical requirements of two (2) Tenant aircraft. Landlord
agrees to furnish the GPU and air compressor unit in good and proper working
condition commensurate with the effective date of this Sub-Lease. Thereafter,
Tenant shall be solely responsible for all maintenance and repair costs
associated therewith. Upon the termination of this Sub-Lease, Tenant agrees to
return the GPU and air compressor unit in good and proper working condition,
excepting reasonable wear and tear.
ARTICLE 6. TAXES
Tenant shall pay all taxes levied against personal property and
trade fixtures placed by Tenant in or about the Premises. If any such taxes are
levied against Landlord or Landlord's property and if Landlord pays same, Tenant
shall promptly and upon demand pay to Landlord the amount so paid by Landlord.
ARTICLE 7. UTILITIES
Subject to the terms of Article 18 below, Tenant shall pay all charges
against the Premises for any and all utility service furnished to or consumed on
the Premises as well as, any and all costs associated with installation and
removal.
ARTICLE 8. TENANT INSURANCE
A. In conjunction with the provisions set forth in Article IX of the
Master Lease, the Tenant shall procure and keep in full force and effect the
following insurance coverage:
MINIMUM LIMITS PER OCCURRENCE
-----------------------------
Commercial General Liability: $25,000,000.00
Combined Single Limit per occurrence
and annual aggregate for Bodily/Persona
Injury and Broad Form Property Damage, including
but not limited to, Premises/Operations, Underground,
Explosion and Collapse Hazard, Products/Completed
Operations, Contractual and Independent Contractors.
6
<PAGE>
Comprehensive Automobile Liability $25,000,000.00
Combined Single Limit per occurrence
and annual aggregate for Bodily
Injury and Property Damage (any vehicle, including
owned vehicles, non-owned vehicles and hired vehicles)
Hangarkeeper's Liability Insurance and
Garage Liability Insurance $25,000,000.00
Worker's Compensation Statutory Limits
Tenant acknowledges that its potential liability is not limited to
the amount of liability insurance coverage it maintains, nor to the limit
required herein.
B. All insurance provided for in this Article shall be effected under
valid and enforceable policies issued by insurers of recognized responsibility
and which are licensed to do business in the State of Florida.
C. All policies of insurance provided for in this Article shall name
Landlord and the Authority as additional insured. Each such policy shall contain
an agreement by the insurer that such policy shall not be canceled without at
least thirty (30) days prior written notice to Landlord.
D. At the commencement of the term of this Sub-Lease, Tenant shall deliver
to Landlord certificates of the insurance required to be maintained hereunder.
Tenant shall also deliver at least thirty (30) days prior to the expiration date
of such policy or policies (or of any renewal policy or policies), certificates
for the renewal of such policies of such insurance.
E. Landlord and Tenant on behalf of themselves and all others under them,
including any insurer, waive their rights of subrogation against the other for
damage to their respective property from perils insured under the standard form
fire and extended coverage policy.
ARTICLE 9. LIABILITY
A. Except as provided in Article 8 above or in Article 18 below, except
for Landlord's negligence or its acts of omission or commission, Tenant shall
indemnify and save harmless Landlord, the Premises, and the Authority from and
against any and all claims, liabilities, damages or losses resulting from injury
or death of any person or damage to property occurring on or about the Premises
or in any manner in conjunction with the use and occupancy of the Premises or
any part thereof by Tenant.
B. Except for Tenant's negligence or its acts of omission or commission,
Landlord shall indemnify and save harmless Tenant, the Premises and the
Authority from and against any and all claims, liabilities, damages or losses
resulting from injury or death of any person or damage to property occurring on
or about the Premises or in any manner in conjunction with the use and occupancy
of the Premises or any part thereof by Landlord.
7
<PAGE>
C. The parties hereby agree that under no circumstances shall either party
be liable to the other for indirect, consequential, special or exemplary damage,
whether contract or tort (including strict liability and negligence), such as,
but not limited to, loss of revenue or anticipated profits.
ARTICLE 10. STORAGE
Storage of any material, equipment or other Tenant property outside
of the Premises is specifically prohibited except with the express written
consent of Landlord and the Authority.
ARTICLE 11. MAINTENANCE
A. Tenant shall, at Tenant's expense, repair and maintain the
mechanical, electrical, plumbing, heating and ventilating systems serving the
Premises (hereinafter the "Mechanical Systems") {***}. Notwithstanding the
above, Tenant shall be liable for all expenses, repairs and maintenance of
the Mechanical Systems which are occasioned by its negligence, abuse or
misuse of same.
Landlord represents that all of the mechanical, electrical,
plumbing, heating and ventilating systems are in good operating condition on the
date of beneficial occupancy.
B. Subject to the terms of Clause A above, Tenant shall maintain, repair
and replace as necessary, and take good care of the Premises (including without
limitation all windows, doors, signage, light fixtures, ballasts, and bulbs) and
Tenant's Property.
C. Landlord shall, at Landlord's expense, repair and maintain the Premises
structure and shall also comply with the other terms of this Article 11.
D. Tenant shall promptly respond to and clean up any release or threatened
release of any hazardous or contaminating substances into the premises, the
sanitary sewers, stormwater drainage systems, floors, soils, groundwater or
atmosphere, arising as a result of Tenant's activities in the Premises in a safe
manner in accordance with all applicable laws and as authorized or directed by
any federal, state, local and/or Authority agencies having authority to regulate
the permitting, handling, and clean up of such substances.
E. Tenant shall be responsible for the proper removal and disposal of all
regulated substances as defined by State and Federal Regulation (which ever is
applicable) generated by the Tenant as result of Tenant's activities on the
Premises. Such removal and disposal shall include, but not be limited to, the
Tenant manifesting such regulated substances under the Tenant's assigned
Environmental Protection Agency Identification Number and ensuring that removal
of such hazardous materials from the Premises and Landlord's Leasehold is
accomplished in accordance with Authority, local, state and federal guidelines.
8
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Additionally, environmental contamination which impacts the Premises
as a result of Tenant's improper storage, handling, or leakage of any Tenant's
stored regulated substances on the Premises, shall be the sole responsibility of
Tenant. Tenant shall also be responsible for the proper removal of all regulated
substances used on the Premises by Tenant following the termination of this
Agreement.
Tenant shall indemnify and save harmless Landlord, The Authority and
the Premises from and against any and all environmental claims, liabilities,
damages or losses, including but not limited to any penalty or fine imposed by
any governmental agency and the expense of cleaning up or disposing of any such
hazardous waste or materials, but only when such claims, liabilities, etc. stem
from the Tenant's use and occupancy of the Property after the Commencement Date.
Tenant shall have no responsibility for any retroactive claims and liabilities
and/or latent claims or liability including any type of environmental claims
which preceded or followed Tenant's occupancy.
F. Tenant shall give Landlord prompt written notice of any damage to or
defective condition in any part or appurtenance of the Premises.
G. Except as provided herein, Landlord shall have no liability to Tenant
nor shall Tenant's covenants and obligations under this Sub-Lease be reduced or
abated in any manner whatsoever by reason of any inconvenience, annoyance,
interruption or injury to business arising from Landlord's making any repairs or
changes which Landlord is required or permitted by this Sub-Lease, the Master
Lease or required by law to make in or to any portion of the Premises, provided
such repairs or changes are made at a time when the Premises are not being
utilized for work by the Tenant or are otherwise made in a manner which does not
interfere with Tenant's use of the Premises. Landlord shall nevertheless use its
best efforts to minimize any interference with Tenant's business in the
Premises.
H. Notwithstanding anything to the contrary contained in this Agreement,
Tenant shall have no responsibility or obligation or be required to indemnify
the Landlord for any maintenance obligation where such obligation is not caused
by Tenant's use and occupancy of the Premises or where the obligation is caused
by other parties such as other tenants of the Landlord or the Landlord, its
agents, employees or guests.
ARTICLE 12. ALTERATIONS
Tenant shall make no modifications, alterations or additions to the
Premises, without the prior written consent of Landlord and the Authority. Any
modifications, additions or alterations made with Landlord's and the Authority's
prior written consent shall be made in a workmanlike manner so as not to weaken
the structure of the Building or the Premises or to invalidate any roof,
equipment or other warranty or to lessen the Building's value. All such
alterations and improvements shall become and remain the property of Landlord,
provided, however, that Landlord may, at Landlord's option, require Tenant at
Tenant's expense to remove any such modifications, additions or alterations at
the termination of this Sub-Lease and to restore the Premises to its original
condition at the Commencement Date of this Sub-Lease.
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ARTICLE 13. DAMAGE AND DESTRUCTION
If, during the term of this Sub-Lease, the Premises, or any part thereof,
are damaged or destroyed by fire or other casualty, Landlord shall, subject to
Authority approval, within a reasonable period of time after notice of the
damage or destruction and receipt of insurance proceeds, repair and restore the
Premises to substantially the same condition as prior to such casualty, to the
extent that insurance proceeds are made available therefor. If such damage or
destruction renders the Premises or any portion thereof unusable, the rent shall
be equitably abated in direct proportion to the percentage of total space
rendered untenable for the period from the date of such damage or destruction to
the date the Premises are repaired or restored.
ARTICLE 14. CONDEMNATION, LOSS OF ACCESS
A. If all or part of the Premises shall be taken or condemned by a
competent authority for a public or quasi-public use or purpose or if there is a
negotiated purchase by such authority under threat of such taking, and if the
loss of that part so taken substantially interferes with the use of the Premises
by Tenant, Tenant may then terminate this Sub-Lease by giving Landlord written
notice within thirty (30) days from the occurrence of such taking and
termination shall be effective as of the date of such taking.
B. If part of the premises is so taken without substantially interfering
with the use of the Premises by Tenant, or if Tenant elects not to terminate
this Sub-Lease pursuant to Paragraph 14.A. above, this Sub-Lease shall not be
terminated. Landlord shall restore any damage to the Premises caused thereby in
a manner consistent with the remaining condition of the Premises and the rent
for the Premises shall be proportionately reduced commencing on the date when
possession of the part so taken is surrendered by Tenant.
ARTICLE 15. DEFAULT/EARLY TERMINATION
A. The following shall be events of default under this Sub-Lease: (i) if
Tenant defaults in payment of any monetary amount due hereunder; (ii) if Tenant
fails to perform any other term, covenant, condition or obligation of Tenant
under this Sub-Lease and fails to cure such default within fifteen (15) days (or
if such default specified by Landlord is not capable of cure within such 15 day
period, if Tenant fails immediately after notice from Landlord to commence to
cure such default, diligently to pursue completion of such cure, and to complete
such cure within ninety (90) days after such notice); or, (iii) if Tenant
abandons or vacates the Premises, or if the Premises remain unoccupied for a
period of thirty (30) days or more.
B. Upon any such event of default, Landlord may without prejudice to its
other rights hereunder, do any one or more of the following: (i) terminate this
Sub-Lease and reenter and take possession of the Premises; (ii) recover
possession of the Premises (with or without terminating this Sub-Lease, at
Landlord's option) in the manner prescribed by any statute relating to summary
process, (iii) Landlord may relet the Premises as Landlord may see fit without
thereby avoiding or terminating this Sub-Lease, and for the purpose of such
reletting, Landlord is authorized to make such repairs to the Premises as may be
necessary
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to conform with the terms of this Sub-Lease and if a sufficient sum is not
realized from such reletting (after payment of all costs and expenses of such
repairs and the expense of such reletting and the collection of rent accruing
therefrom) each month to equal the sums due from Tenant hereunder, then Tenant
shall pay such deficiency upon demand therefor; and (iv) Landlord may declare
immediately due and payable all the remaining installments of the rent and such
amount, less the fair rental value of the Premises for the remainder of the
Term, shall be construed as liquidated damages and shall constitute a debt
provable in bankruptcy or receivership. In computing such liquidated damages,
there shall be added to such deficiency any reasonable expenses as Landlord may
incur in connection with reletting, such as court costs, attorneys' fees and
disbursements, brokerage fees, and for putting and keeping the Premises in the
condition required upon termination pursuant to the terms of this Sub-Lease. The
failure of Landlord to relet the Premises or any part thereof after recovery of
possession shall not release or affect Tenant's liability for damages. Landlord
shall in no event be liable in any way whatsoever for failure to relet the
Premises, or in the even that the Premises are relet, for failure to collect the
rent under such reletting. All of the damages which are specified in this
Sub-Lease are in addition to all other damages and costs to which Landlord may
be entitled under the laws of the State of Florida.
C. After default, the acceptance of the rent (or any portion thereof) by
Landlord shall not be held to be a waiver of its rights to terminate this
Sub-Lease, and Landlord may re-enter and take possession of the Premises as if
no rent had been accepted after such default. All of the remedies given to
Landlord in this Sub-Lease in the event of default by Tenant shall be deemed
cumulative and the election of one shall not be deemed a waiver of any other or
further rights or remedies.
D. If Tenant shall file a voluntary petition pursuant to the Bankruptcy
Code or any successor thereto, or take the benefit of any insolvency act, or be
dissolved, or if an involuntary petition be filed against Tenant pursuant to the
Bankruptcy Code or any successor thereto, or if a receiver shall be appointed
for its business or its assets and the appointment of such receiver is not
vacated within thirty (30) days after such appointment, or if it shall make an
assignment for the benefit of its creditors, then and forthwith thereafter
Landlord shall have all of the rights provided In this Article in the event of
non-payment of the rent.
ARTICLE 16. ASSIGNMENT AND SUBLETTING
Except for assignment to its parent or subsidiary, Tenant may not assign
this Sub-Lease in whole or in part or sublet any part of the Premises without
Landlord's and the Authority's prior written consent, such consent not to be
unreasonably withheld or delayed if the use is for Airport-related activities.
No such assignment or subletting shall relieve Tenant from performing its
obligations hereunder. An unauthorized assignment shall be void and of no
effect.
ARTICLE 17. USE OF PREMISES BY TENANT
A. The Premises shall be used by the Tenant for the parking and storage of
aircraft and the performance of aircraft maintenance for those aircraft owned,
operated
11
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and/or leased by the Tenant and associated support purposes of same, consistent
with Tenant's, industry and all governmental rules, regulations and guidelines
and for no other purposes. The Landlord represents such functions can lawfully
be conducted on the Premises. Tenant, at Tenant's sole cost and expense, shall
comply with all such requirements of insurers, restrictive covenants, laws,
governmental rules, regulations and orders, present or future, including but not
limited to making any alterations, additions or improvements to the Premises
which may be required for Tenant's use of the Premises during the term of this
Sub-Lease.
B. It is expressly agreed and understood by the Tenant that at no time
shall painting activity of any kind be permitted in, around or on the Premises.
C. Tenant shall not place a load upon any floor of the Premises which
exceeds the load per square foot which such floor was designed to carry, nor
install business machines or mechanical equipment which cause excessive noise or
vibrations. Landlord represents the existing load bearing capacity of the hangar
deck floor portion of the Premises is sufficient for all Tenant's permitted uses
herein set forth.
ARTICLE 18. USE OF PREMISES BY LANDLORD
A. Upon notice given to Tenant as far in advance as is possible, Landlord
may from time to time request Tenant's consent for Landlord's use of up to Ten
Thousand (10,000) square feet of usable hangar deck floor space of the Premises
on a non-dedicated, ad-hoc and temporary basis. Tenant will not withhold its
consent to such request(s) for use by Landlord so long as the Tenant reasonably
determines that the same will not interfere with Tenant's use of the Premises in
any material manner. Tenant's consent to such request(s) however, may be
conditioned upon the imposition of reasonable use restrictions as to the length
and frequency of such usage by Landlord and the payment of any out-of-pocket
costs estimated to be incurred by Tenant in connection with the Landlord's use
of electricity or other utilities serving the Premises.
B. As consideration for this Sub-Lease and subject to the other terms of
this Article 18, it is mutually agreed Landlord's use of the Premises shall be
at no charge to Landlord; however, in consideration of Landlord's usage of the
Premises at no charge, Landlord agrees that any and all economic benefit derived
from such usage, including but not limited to, hangar storage fees, shall be
paid in cash to the Tenant and Landlord shall charge its customers a standard
and customary fee for such usage.
C. Landlord warrants and represents to Tenant that it shall maintain
adequate, prudent and/or statutory comprehensive General Liability,
Hangarkeeper's Liability, Automobile Liability and Worker's
Compensation/Employer's Liability Insurance at all times in conjunction with
Landlord's use and occupancy of the Premises.
D. Except for Tenant's negligence or acts of omission or commission,
Landlord shall indemnify and save harmless Tenant, the Premises and the
Authority from and against any and all claims, liabilities, damages or losses
resulting from injury or death of any person or damage to property occurring on
or about the Premises or in any manner in conjunction with the use and occupancy
of the Premises or any part thereof by Landlord.
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ARTICLE 19. ESTOPPEL CERTIFICATES
When requested by Landlord, Tenant shall execute an estoppel certificate
to evidence the existence of any default by Landlord or of any prepayment of
rent or other facts with respect to this Sub-Lease as Landlord may reasonably
require.
ARTICLE 20. QUIET ENJOYMENT
Landlord covenants that it has the full right and authority to make this
Sublease and that if Tenant pays the rent and performs all of the terms of this
Sub-Lease, Tenant may peaceably and quietly enjoy and possess the Premises
throughout the term hereof, subject only to the conditions herein set forth,
including the applicable terms of the Master Lease.
ARTICLE 21. FORCE MAJEURE
The time allowed for the performance of either Party's covenants
hereunder, except for the payments of rents and fees if necessary, shall be
extended by an amount of time equal to any delay caused by tornado, windstorm,
other casualties or acts of God, strikes, labor difficulties, walkouts, riots,
governmental regulation, unavailability of labor or materials, delays caused by
either Party relating to approvals or otherwise, or any other cause beyond the
reasonable control of either Party.
ARTICLE 22. EXPIRATION
Upon the expiration or earlier termination of this Sub-Lease, Tenant shall
surrender to Landlord the Premises in substantially the same condition and
repair, ordinary wear and tear excepted, as existed on the Commencement Date.
No spill, deposit, emission, leakage or other release of any hazardous or
contaminating substance caused by Tenant, its invitees, agents or subcontractors
in the Premises or the drainage systems, soils or groundwaters associated
therewith shall be deemed "ordinary wear and tear". Tenant shall be responsible
to promptly and completely clean up any such release and shall surrender the
Premises free of any contamination.
ARTICLE 23. SUCCESSORS AND ASSIGNS
The covenants and agreements in this Sub-Lease of Landlord and Tenant
shall bind and inure to the benefit of their successors and permitted assigns.
ARTICLE 24 NONWAIVER
No waiver of any condition or covenant of this Sub-Lease by either party
shall be deemed to imply or constitute a further waiver of the same or any other
condition or covenant nor shall be construed to be a waiver on the part of
Landlord of any right or remedy in law or otherwise.
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ARTICLE 25. HOLDING OVER
Any holding over beyond the expiration of the term of this Sub-Lease shall
be as a tenancy from month to month at one and one-half (1.5) times the monthly
rental rate that was paid during the last month of the Lease Term, and shall
otherwise be on the same terms and conditions as herein specified. Such holdover
shall be conditional in part upon Authority's extension of the Master Lease.
Tenant agrees to vacate the Premises upon thirty (30) days advance written
notice from Landlord.
ARTICLE 26. RIGHT OF ENTRY
Landlord shall have the right to enter the Premises to examine the
condition thereof or to make repairs which Landlord and/or the Authority deems
necessary for the safety, preservation or improvement of the Premises, to show
the same, and to place upon the Premises any signs desired by Landlord. Each
such entry by Landlord in accordance with this Article 26 shall be made during
normal business hours (except in case of emergency) and otherwise in accordance
with Sub-Article 11(G) above.
ARTICLE 27. MECHANICS' LIENS
Tenant shall defend, indemnify and save harmless Landlord from and against
any and all mechanics' and other liens and encumbrances filed by any person
claiming through or under Tenant, including security interests in any materials,
fixtures, equipment or any other improvements or appurtenances installed in and
constituting part of the Premises and against all costs, expenses and
liabilities (including reasonable attorney's fees) incurred in connection with
any such lien or encumbrance or any action or proceeding brought thereon. Tenant
at its expense shall procure the satisfaction or discharge of record of all such
liens and encumbrances within twenty (20) days after the filing thereof. Under
no circumstances shall the interest of Landlord in and to the Property be
subject to liens for improvements made by Tenant or subject to any mechanic's,
laborer's or material man's liens or any other lien or charge on account of or
arising from any contract or obligation of Tenant.
ARTICLE 28. TRANSFER OF LANDLORD'S INTEREST
Landlord may assign, in whole or in part, subject to approval of the
Authority, its rights and obligations under this Sub-Lease and its rights and
obligations in and to the Property. The term "Landlord" as used in this
Sub-Lease, shall be limited to mean and include only the owner or owners of
Landlord's interest in this Sub-Lease at the time in question. Upon any transfer
of such interest, Landlord herein named (and in case of any subsequent transfer,
the then transferor) shall thereafter be relieved of all liability for the
performance of any covenants or agreements on the part of Landlord contained in
this Sub-Lease.
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ARTICLE 29. SECURITY DEPOSIT
A. At Tenant's option, it shall either deposit with Landlord the sum of
{***} or obtain, maintain and subsequently deliver to Landlord prior to the
Commencement Date, an original Letter of Credit in the amount of {***} as
security for the full and faithful performance of Tenant's obligations under
this Sub-Lease (individually and collectively, "Security Deposit"). Such
Letter of Credit shall be drawn upon a United States Bank, in favor of the
interests of the Landlord.
B. At any time after the establishment of the Security Deposit should any
portion of Tenant's rent balance due Landlord become more than thirty (30) days
past due, Landlord shall have the right, without prior notification or
authorization of Tenant, to draw upon said Security Deposit in an amount
sufficient to cause Tenant's balance due to once again become current.
C. In the event Landlord shall be compelled to utilize Tenant's
established Security Deposit, Landlord shall have the right to request a
replacement Security Deposit to be furnished by Tenant within five (5) business
days from such request, for either the previous specified amount or an increased
amount, should Tenant's payment history warrant such action.
D. In the event Tenant forwards the Security Deposit in cash, Landlord
agrees to place such funds in an interest-bearing money market account, at a
federally insured bank or savings and loan institution. Any and all interest
earned thereon shall be deemed part of the Security Deposit and available for
refund to the Tenant at the termination of this Sublease, provided Tenant is in
full compliance with the terms and conditions set forth herein.
E. If Tenant defaults with respect to any provision of this Sub-Lease,
including payment of the rent, Landlord may use, apply or retain all or any part
of the Security Deposit for the payment of any rent, or to compensate Landlord
for any other loss, cost or damage which Landlord may suffer by reason of
Tenant's default. If any portion of the Security Deposit is so used or applied,
Tenant shall, within five days after notice thereof, deposit cash with Landlord
in an amount sufficient to restore the Security Deposit to its original amount,
and Tenant's failure to do so shall be a default of this Sub-Lease. If Tenant
shall fully and faithfully perform every provision of this Sub-Lease, the
Security Deposit or any balance thereof shall be returned to Tenant (or, at
Landlord's option, to the last transferee of Tenant's interest hereunder) at the
expiration of the Term and upon Tenant's vacation of the Premises. If the
Property is sold, the Security Deposit may be transferred to the new owner, who
shall assume all obligations with respect thereto in writing and Landlord shall
be discharged from further liability with respect thereto. The Security Deposit
shall in no event be considered an advance rental payment, nor a measure of
Landlord's damage.
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ARTICLE 30. CURING TENANT'S DEFAULTS
A. If Tenant defaults in the performance of any of its obligations under
this Sub-Lease, Landlord without waiving such default may (but shall not be
obligated to) perform the same for the account and at the expense of Tenant,
without notice in a case of emergency, and in any other case only if such
default continues after the expiration of the later of; (i) ten (10) days from
the date Landlord gives Tenant notice of its intention so to do; or (ii) the
expiration of the applicable grace period provided in this Sub-Lease for cure of
such default.
B. In the event of a default by Tenant, any expenses incurred by Landlord,
including reasonable attorneys' fees involved in collection of the rent or any
part thereof or enforcing any rights against Tenant, including the rights set
forth in this Article, or curing or endeavoring to cure any default of Tenant
under or in connection with this Sub-Lease, including any costs or expenses
involved in instituting and prosecuting summary proceedings, shall be due and
payable within ten (10) days of Landlord's demand as additional rent.
ARTICLE 31. LIMITATION OF LANDLORD'S LIABILITY
Landlord's obligations hereunder shall be binding upon Landlord only for
the period of time that Landlord is in ownership of the Property. Upon
termination of that ownership, Tenant, except as to any obligations which have
then matured, shall look solely to Landlord's successor in interest in the
Property for the satisfaction of each and every obligation of Landlord
hereunder.
ARTICLE 32. SIGN CONTROL
Except for such signs, awnings, signals, or advertisements preapproved by
the Landlord prior to beneficial occupancy, which approval shall not be
unreasonably withheld or delayed, Tenant shall not affix, paint, erect or
inscribe any sign, projection, awning, signal or advertisement of any kind to
any part of the Building or the Premises, including the inside or outside of the
windows or doors, without the written consent of Landlord. Landlord shall have
the right to withdraw such consent at any time and to require Tenant to remove
any sign, projection, awning, signal or advertisement affixed to the Building or
the Premises. If such work is done by Tenant without the express written consent
of Landlord and the Authority, Landlord shall have the right to remove the same
without being liable to Tenant and to charge the cost of such removal to Tenant
as additional rent, payable within ten (10) days of Landlord's demand.
ARTICLE 33. RELOCATION OF PREMISES
In the event Landlord locates a Tenant who is desirous of subleasing the
Premises on a long term basis or a buyer for the Premises, Landlord reserves the
right to relocate the Tenant to an alternate hangar facility of sufficient size
on the same or better economic conditions and meeting the existing facility
requirements of Tenant. In such event, Landlord agrees to reimburse Tenant its
reasonable relocation expenses, including without limitation, moving costs,
brokers fees, etc. and shall provide Tenant with a minimum of 60 days advance
written notification.
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ARTICLE 34. MISCELLANEOUS
A. If Tenant is a corporation or partnership, each individual executing
this Sub-Lease on behalf of said corporation or partnership represents and
warrants that he is duly authorized to execute and deliver this Lease on behalf
of said corporation or partnership in accordance with the duly adopted
resolution of the Board of Directors of said corporation or with the bylaws of
said corporation or under pertinent partnership agreements, that any required
consents or approvals of third parties have been obtained, and that this
Sub-Lease is binding upon said corporation or partnership.
B. In any action or proceeding which Landlord or Tenant may be required to
prosecute or enforce its respective rights hereunder, the unsuccessful party
agrees to pay all costs incurred by the prevailing party therein, including
reasonable attorneys' fees (including on any appeal).
C. Should any clause or provision of this Lease become unenforceable
because of present or future laws or any regulation of any governmental entity,
the parties hereto agree that the remaining parts of this Sub-Lease shall not be
affected thereby unless such clause or provision is, in the reasonable
determination of either Party, essential and material to its rights, in which
event either Party shall have the right to terminate this Sub-Lease by notice to
the other.
D. Tenant and Landlord both waive a trial by jury of any issues arising in
any action or proceeding between the parties hereto or their successors, under
or connected with this Sub-Lease.
E. This Sub-Lease shall be deemed to have been made in and shall be
construed in accordance with the laws of the State of Florida.
F. This Sub-Lease represents the final resolution of all prior discussions
between Landlord and Tenant and sets forth all of the covenants, promises,
agreements, conditions and understandings between them. There are no covenants,
promises, agreements, conditions or understandings, either oral or written
between Landlord and Tenant other than as are herein set forth. No subsequent
alteration, amendment, change or addition to this Sub-Lease shall be binding
upon Landlord or Tenant unless made in writing and signed by each.
G. The captions appearing within the body of this Sub-Lease have been
inserted as a matter of convenience only and in no way define, limit or enlarge
the scope or meaning of this Sub-Lease or of any provision hereof.
H. No payment by Tenant or receipt by Landlord of a lesser amount than the
rent payment herein stipulated shall be deemed to be other than on account of
the rent, nor shall any endorsement or statement on any check or payment as rent
be deemed an accord and satisfaction (unless Landlord expressly agrees to an
accord and satisfaction in a separate agreement duly accepted by Landlord), and
Landlord may accept such check or payment without prejudice to Landlord's right
to recover the balance of such rent or pursue any other remedy provided in this
Sub-Lease.
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ARTICLE 35. RECORDING
Tenant shall not record this Sub-Lease without Landlord's prior written
consent. However, either party shall, upon written request of the other,
execute, acknowledge and deliver to the other a "short form" memorandum of this
Sub-Lease for recording purposes.
ARTICLE 36. EXCLUSIVE RIGHTS OF LANDLORD
Tenant understands and acknowledges that Landlord has acquired through the
execution of its lease and operating agreement with the Authority, certain
rights to conduct specific aviation-related activities, ("Activities"). Such
Activities include line services (including all fueling), ground handling,
aircraft parking and storage and the provision of office space. Tenant expressly
agrees not to engage in any of the listed Activities on Landlord's Premises,
other than those described in Article 17, herein, which would infringe upon
Landlord's duly acquired rights as granted by the Authority.
ARTICLE 37. NOTICES
All notices to be given to either party shall be deemed given if made in
writing and deposited in the United States mail, postage prepaid, return receipt
requested, or overnight courier service and addressed to the parties at the
following address:
Landlord's Address: Page Avjet Corporation
C/O Signature Flight Support Corporation
Attention: General Manager
Orlando International Airport
9909 Benford Road
Orlando, Florida 32827
and
Signature Flight Support Corporation
Attention: Corporate Contracts Manager
Signature Plaza
201 S. Orange Avenue
Suite 1100
Orlando, Florida 32801
Tenant's Address: Midway Airlines Corporation
Attention: Mr. Tom Duffy
5713 S. Central Avenue
Chicago, Illinois 60638
with a copy to: Rosenberg & Liebentritt, P.C.
2 North Riverside Plaza #16C
Chicago, Illinois 60606
Attention: J.S. Waller
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IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the
day and year first above written.
LANDLORD:
PAGE AVJET CORPORATION
Signed and acknowledged
the presence of:
/s/ [ILLEGIBLE] By: /s/ Elizabeth A. Haskins
- --------------------------- --------------------------------
/s/ [ILLEGIBLE] Its: Senior Vice President
- --------------------------- --------------------------------
APPROVED AS TO FORM
/s/ [ILLEGIBLE]
--------------------------
LEGAL DEPT.
TENANT:
Signed and acknowledged MIDWAY AIRLINES CORPORATION
in the presence of:
/s/ [ILLEGIBLE] By: /s/ Jonathan S. Waller
- --------------------------- --------------------------------
/s/ [ILLEGIBLE] Its: Vice President
- --------------------------- --------------------------------
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The Greater Orlando Aviation Authority hereby consents to this Sublease.
ATTEST: GREATER ORLANDO AIRPORT AUTHORITY
________________________ _________________________________
APPROVED this ____ day of ____________, 19__.
________, GREATER ORLANDO AVIATION AUTHORITY - GENERAL COUNSEL
By:
--------------------------------------
Greater Orlando Aviation Authority - General Counsel
THE STATE OF FLORIDA
COUNTY OF ORANGE
This instrument was acknowledged before me on May 1, 1995 by Elizabeth A.
Haskins, (Title) Senior Vice President of Page Avjet Corporation, a Delaware
corporation, on behalf of said corporation.
/s/ Diana Basch Kelly
-------------------------------
Notary Public, State of Florida
-----------------
SEAL
DIANA BASCH KELLY -------------------------------
----------------- Printed or Typed Name of Notary
My commission expires: ________
THE STATE OF ILLINOIS
COUNTY OF COOK
This instrument was acknowledged before me on the 26th day of April, 1995
by Jonathan S. Waller, (Title) Vice President of Midway Airlines Corporation, a
Delaware corporation, on behalf of said corporation.
/s/ Tina M. Gerlach
-------------------------------
Notary Public, State of Illinois
-----------------
SEAL
TINA M. GERLACH /s/ Tina M. Gerlach
----------------- -------------------------------
Printed or Typed Name of Notary
My commission expires: February 4, 1997
20
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EXHIBIT "A"
SKETCH OF LAND DESCRIPTION
[MAP OMITTED]
<PAGE>
[MAP OMITTED]
<PAGE>
EXHIBIT 10.41
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY {***}. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
CONFIDENTIAL
AAIRPASS AGREEMENT
This AAirpass Agreement, dated as of the date set forth below, is made by
and between American Airlines, Inc., a Delaware corporation, having its
principal place of business at 4333 Amon Carter Boulevard, Fort Worth, Texas
76155 ("American"), and Midway Airlines Corporation, a Delaware corporation,
having its principal place of business at 300 W. Morgan Street, 12th Floor,
Durham, North Carolina 27701 ("Carrier").
In consideration of the mutual covenants and promises in this Agreement,
American and Carrier hereby agree as follows:
Section 1. Supplemental Definitions
In addition to the definitions set forth elsewhere in this Agreement, for
all purposes of this Agreement, the following capitalized terms shall have the
following meanings:
"AAdvantage Agreement" means the AAdvantage Participating Carrier
Agreement between American and Carrier dated January 18, 1995.
"AAirpass" means American's AAirpass program under which individuals
("members") may purchase travel on American for various periods, for example, 2
years, 5 years and lifetime.
"AAirpass Carriage" means Carrier's carriage of AAirpass members and their
companions in accordance with the terms of this Agreement.
"Actual Miles" means the United States Department of Transportation
approved non-stop mileage between origination and destination cities.
"Affiliate" means, with respect to any Person, any other Person directly
or indirectly controlling or controlled by or under common control with such
Person. For purposes of this definition, "control" (including, without
limitation "controlled by" and "under common control with") shall mean the
power, directly or indirectly, to direct or cause the direction of the
management and policies of such Person whether through the ownership of voting
securities or by contract or otherwise.
"Agreement" means this AAirpass Agreement, as it may, from time to time,
be amended or modified in writing in accordance herewith.
"Applicable Law" means all applicable laws of any jurisdiction, including,
without limitation, securities laws, tax laws, tariff and trade laws,
ordinances, judgments, decrees, injunctions, writs and orders or like actions of
any Competent Authority and the rules, regulations, orders, interpretations,
licenses and permits of any Competent Authority.
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"Business Day" means any day other than a Saturday, Sunday or other day on
which banks in Fort Worth, Texas are required or authorized by law, regulation
or executive order to close.
"Carrier Flight" means (i) any on-line, regularly scheduled, passenger air
travel service operated by Carrier under the Carrier designator code on any O&D
city pair that includes RDU as a connecting point, origination point or
destination point, including the O&D city pairs specified on Attachment A, and
(ii) any Codeshare Flight specified on Attachment A, if any.
"Codeshare Flight" means a flight operated by a third party air carrier
providing regularly scheduled, commercial passenger air transportation services
and marketed under Carrier's "JI" designator code.
"Competent Authority" means any national, federal, state, county, local or
municipal government body, bureau, commission, board, board of arbitration,
instrumentality, authority, agency, court, department, inspectorate, minister,
ministry, official or public or statutory person (whether autonomous or not)
having jurisdiction over this Agreement or any of the parties to this Agreement.
"First Class" means a class of service higher and better than coach class
on an aircraft which offers two distinct classes of service, regardless of the
actual name Carrier may assign to such higher class of service.
"O&D" when used in the context of city pairs means origination and
destination.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization, group or
government, or any group, agency, authority or political subdivision thereof.
"RDU Sublease" means that certain Agreement of Sublease, dated as of
January 18, 1995, by and between American and Carrier.
"Upgrade Sticker" means a sticker (i) issued by American to AAirpass
members, on either a complimentary basis or for consideration, which complies
with such other requirements as American may provide to Carrier at the time
Carrier introduces a First Class service, and (ii) which sticker may be
exchanged by a AAirpass member at the time of check-in for a reserved or
instantaneous (depending on the sticker) one-class class of service upgrade from
coach class on, among other flights designated by American, any Carrier flight
with more than one class of service, or any two or more such Carrier Flights to
be flown consecutively under a single flight coupon. American may discontinue
the use of Upgrade Stickers by AAirpass members at any time at its discretion.
Section 2. AAirpass Carriage; Price and Terms
a. Reservations/Acceptance. American hereby grants to Carrier the right to
carry AAirpass members and their companions on Carrier Flights in accordance
with this Agreement. Carrier hereby accepts such grant and agrees to book
AAirpass Carriage in Y class in Carrier's seat inventory (or whatever class is
Carrier's highest coach class seat inventory) on Carrier
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Flights. If a coach seat is available for sale on a Carrier Flight at the time
an AAirpass member wishes to book a reservation for the member and, if
applicable, a companion, Carrier must book and accept AAirpass Carriage for such
AAirpass member and companion, if applicable. On each Carrier Flight that
Carrier has a First Class service, Carrier agrees to book AAirpass Carriage in F
class in Carrier's seat inventory (or whatever class is Carrier's highest First
Class seat inventory) on Carrier Flights for any AAirpass member and companion,
if applicable, who wishes to book First Class. If a First Class seat is
available for sale on a Carrier Flight at the time an AAirpass member wishes to
book a First Class reservation for the member and, if applicable, a companion,
Carrier must book and accept First Class AAirpass Carriage for such member and
companion, if applicable. Carrier shall engage in AAirpass Carriage only with
respect to a Carrier Flight.
b. Carrier New Routes; Discontinued Routes
i. In the event that Carrier desires to introduce a new Codeshare
Flight, which is not included in Attachment A of this Agreement, Carrier
may request, in writing, that such new Codeshare Flight be eligible as a
Carrier Flight under this Agreement and added to Attachment A. American
shall have thirty (30) days from the receipt of the request to evaluate
Carrier's request and American shall, at its sole discretion, decide
whether or not to add the Codeshare Flight to Attachment A, and under what
conditions (including, without limitation, if an addition to Attachment A,
what price will be paid by American for AAirpass Carriage by Carrier on
such Codeshare Flight); if American approves Carriers request, such
Codeshare Flight shall be made subject to this Agreement upon such new or
additional terms as the parties shall agree in writing. Neither party,
however, shall be obligated to make any additions to Attachment A to this
Agreement or to agree to terms applicable to such additions.
ii. In the event Carrier introduces new Carrier-operated service on
an O&D city pair or to a destination, or a new Codeshare Flight, which is
not included in Attachment A of this Agreement, Carrier shall promptly
give American written notice thereof.
iii. Notwithstanding anything to the contrary in this Agreement,
Carrier shall have the right at any time, in its sole judgment and
discretion, to cease to operate service on any Carrier Flight; provided
however, that Carrier shall provide American at least sixty (60) days
prior written notice of the scheduled termination and the termination date
for service. For the purposes of this Section 2b.iii, the off-season
suspension of seasonal service, which service has not otherwise been
permanently terminated, shall not be considered a cessation of service for
which notice must be given.
c. Price. American shall pay Carrier for each of the Actual Miles of (i)
coach class AAirpass Carriage, 22.25(cents) and (ii) First Class AAirpass
Carriage booked in F inventory, 30.03(cents). As an example, Attachment A shows
the payment (each way) to be made by American to Carrier for coach class and
First Class AAirpass Carriage booked in F inventory on a Carrier Flight.
American shall pay Carrier based upon the Actual Miles between the origin and
final destination cities for AAirpass Carriage that is a RDU through flight or a
RDU connecting flight and not based upon the Actual Miles between RDU and the
origin and destination cities. All payments above 50(cents) shall be rounded to
the next higher dollar and all payments of 50(cents) or less shall be rounded to
the next lower dollar.
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d. Companion Travel. Certain AAirpass members have a companion feature, as
designated by a "C" in the three digit code on the AAirpass card. If the code
has a "C" in it, companion travel is allowed, whereby the AAirpass member is
allowed to take one companion per flight, provided that the companion is
included in the same reservation and is traveling the same itinerary as the
AAirpass member. If the three digit code does not have a "C" in it, companion
travel is not allowed. For companion travel that complies with the foregoing
rules, Carrier shall issue the companion an AAirpass flight coupon imprinted
with the AAirpass member's card. For companion travel that complies with the
foregoing rules, American shall pay Carrier for the companion's travel in the
same manner and at the same rate as the AAirpass member.
e. Reaccommodation. If an AAirpass member has a confirmed reservation on a
Carrier Flight and Carrier cancels such flight for any reason, Carrier will be
responsible for accommodating the AAirpass member and companion travelling on an
AAirpass flight coupon, if applicable, on another air carrier at Carrier's
expense (in the same manner as any other revenue passenger of Carrier). In such
instance, American will pay Carrier based on the original AAirpass flight coupon
issued for travel on Carrier.
f. Pre-Boarding. Carrier shall offer AAirpass members pre-boarding on all
Carrier Flights. Carrier agents will include AAirpass members in Carrier's
pre-board announcement.
g. Upgrade Stickers. On each Carrier Flight that Carrier has a First Class
service, and for as long as American permits AAirpass members to use Upgrade
Stickers, Carrier will accept all Upgrade Stickers and upgrade the member
tendering such Upgrade Sticker by one class of service for Carrier Flights with
First Class service, if space is available, pursuant to the procedures stated in
or established pursuant to the AAdvantage Agreement and subject to the other
terms and conditions, including American's obligation to pay Carrier for such
acceptance, as stated in the AAdvantage Agreement.
h. Offset. If at any time any monies are past due and owing from Carrier
to American under the RDU Sublease, the AAdvantage Agreement or any other
agreement between Carrier and American or American's Affiliates, American may
withhold any monies it may owe to Carrier pursuant to this Agreement and may
apply all or a portion of such withheld monies in partial offset and
satisfaction (or, if such withheld monies are sufficient, in total offset and
satisfaction) of the monies owed to American or American's Affiliates under the
RDU Sublease, the AAdvantage Agreement or such other agreements; provided,
however, that American shall give written notice to Carrier immediately upon
taking such action, which notice shall include a statement of the amounts so
offset.
i. On-Board Amenities. If the AAirpass member identifies himself/herself
to Carrier as an AAirpass member and presents his/her AAirpass card to Carrier,
Carrier will offer AAirpass members traveling in coach complimentary drinks and
complimentary headsets if/when Carrier offers headsets on-board its flights.
j. Ticketing. AAirpass flight coupons may be issued at a Carrier ATO or
via a travel agency. Carrier and Carrier's handling agents must accept only
those AAirpass flight coupons that are properly completed with the following
information: passenger name, airline code (Carrier) and flight number, class of
service and date. The passenger must sign the flight coupon
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and the AAirpass member must present the AAirpass card with one form of
identification. Carrier shall check this identification. Carrier shall validate
with the AAirpass card the flight coupon of the member and also the companion,
if a companion may travel with the member in accordance with the terms of
Section 2d hereof. American reserves the right not to pay Carrier for AAirpass
Carriage if Carrier or Carrier's handling agents accepted improperly completed
flight coupons for such AAirpass Carriage or if the ticketing procedures set
forth herein are not properly followed with respect to such AAirpass Carriage
and in each such case American is therefore unable to properly account for the
flight coupons under the AAirpass program after making reasonable efforts to do
so.
k. Post Departure Procedures. Carrier shall separate AAirpass flight
coupons from the normal ticket lift and shall give such flight coupons daily to
the Carrier station manager in each station. The Carrier station managers in all
cities except RDU shall forward the AAirpass flight coupons a minimum of two
times per week to the Carrier station manager in RDU. On each Tuesday, the
Carrier station manager in RDU shall send AAirpass flight coupons from the
previous week's (Sunday through Saturday) flights via Federal Express to
American in Barbados at the following address:
Caribbean Data Services - LIST PREP
Harbour Industrial Park
Harbour Road
St. Michael, Barbados
West Indies
Attention: Mary Anne Artilles
l. Payment Procedures. Carrier shall submit all lifted AAirpass Carriage
flight coupons to American each month in a single batch. To be eligible for
payment, a lifted flight coupon must be submitted not later than the second
calendar month immediately following the month that the AAirpass travel (one
way) was completed. For example, if the first leg of an AAirpass Carriage
BOS-RDU roundtrip itinerary is completed May 31, Carrier shall submit to
American the lifted flight coupon for BOS-RDU not later than the batch of lifted
flight coupons submitted in July. American shall pay Carrier for AAirpass
Carriage not later than thirty (30) days after receipt of lifted flight coupons.
American reserves the right not to pay Carrier for AAirpass Carriage flight
coupons that are not submitted within the time frame specified above. Payment
from American to Carrier will be via wire transfer or other means acceptable to
both parties. In the event the date for any payment required under this
Agreement is not a Business Day, such payment shall be due and payable on the
next succeeding Business Day. Not later than thirty (30) days following the end
of each month, American will send to Carrier (for audit purposes) a report in a
form acceptable to both parties of such month's AAirpass Carriage. This report
will be sent to the following address:
Controller
Midway Airlines Corporation
300 W. Morgan Street, 12th Floor
Durham, North Carolina 27701
m. Use of Names. Neither party hereto shall use the name of the other
party (or any of its Affiliates), or any trademark, service mark, or trade name
of the other party (or of any of its
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Affiliates) in any art work, copy, advertising, promotional materials, direct
mail, press releases, newsletters or other public or promotional communications,
or any other publicity to be issued in connection with the AAirpass program
without first obtaining the other party's written consent. Each party hereto (a
"Referenced Party") shall have the right to review and approve or disapprove,
prior to publication, the portion of any and all art work, copy, advertising,
promotional materials, direct mail, press releases, newsletters or other public
or promotional communications, or any other publicity published, circulated,
distributed or otherwise communicated by the other party hereto (or at its
direction or authorization) in connection with the AAirpass program that names
or references the Referenced Party (or any of its Affiliates) or this Agreement,
or uses any trademark, service mark or trade name of the Referenced Party or any
of its Affiliates. Each party acknowledges and agrees that all trademarks,
service marks, or trade names of the other party or any of its Affiliates, are
and shall remain the sole property of the other party.
n. AAdvantage Miles. AAirpass members will earn AAdvantage Miles (as
defined in the AAdvantage Agreement) for AAirpass Carriage and Carrier shall pay
for such AAdvantage Miles in accordance with the terms of the AAdvantage
Agreement.
Section 3. Confidentiality
a. Confidential Information. Carrier and American expressly acknowledge
and agree that the terms and conditions of this Agreement constitute
confidential information of both parties (the "Confidential Information"),
whether or not marked or expressly indicated as confidential, and American and
Carrier each agrees to keep such information confidential, using the same degree
of care with respect to such Confidential Information as it uses in protecting
its own proprietary information, trade secrets and similar items, and not to
disclose such information to any third party, except as permitted hereby.
Notwithstanding the foregoing, Confidential Information shall not include any
information which is in the public domain; is placed in the public domain,
through no violation of this Agreement; or is lawfully obtained from another
source free of restriction.
b. Use of Confidential Information. Except as expressly provided below,
neither party shall sell, transfer, publish, disclose, display or otherwise make
available the Confidential Information to any third party (and third parties
shall be deemed also to include Affiliates of the party so restricted), except
as may be required by Applicable Law (including, without limitation, requirement
by oral questions, interrogatories, subpoenas, civil investigative demands or
similar processes), in which case the party from whom disclosure is sought (or,
if applicable, who is seeking to make disclosure as required by Applicable Law)
shall promptly notify the other party and shall provide the other party (if the
other party so requests) with a copy of the information proposed to be disclosed
and all related descriptions thereof within a reasonable period (which period
shall generally be at least five days) in advance of the proposed disclosure. To
the extent that the other party objects to disclosure of such Confidential
Information, the party from which disclosure is sought (or, if applicable, who
is seeking to make disclosure as required by Applicable Law) shall (i) use
reasonable and lawful efforts to resist making any disclosure of such
Confidential Information, (ii) use reasonable and lawful efforts to limit the
amount of such Confidential Information to be disclosed (and, in connection
therewith, shall reasonably consider all modifications, deletions and additions
to such information, and related descriptions, proposed by the other party), and
(iii) use all reasonable efforts to obtain a protective order or other
appropriate relief to minimize the further dissemination of any Confidential
Information to be
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disclosed. In addition, neither party shall disclose the Confidential
Information received to any of its directors, officers, employees, Affiliates,
or professional advisors (collectively, "Representatives") except on a
need-to-know basis for the purposes of implementing and giving effect to this
Agreement: provided, however, that prior to any such disclosure, the party shall
inform all such Representatives of the confidential nature of the information,
and that it is subject to this non-disclosure obligation, and shall further
instruct such Representatives to treat such information confidentially. American
and Carrier each agrees to be responsible for any breach of this Section by
their respective Representatives.
c. No Adequate Remedy. Each party acknowledges and agrees that the other
party will have no adequate remedy at law if there is a breach or threatened
breach of this Section and, accordingly, that such other party shall be entitled
to an injunction or other equitable or preventative relief against the allegedly
breaching party or its Representatives for such breach or threatened breach.
Nothing herein shall be construed as a waiver of any other legal or equitable
remedies which may be available to the non-breaching party in the event of a
breach or threatened breach of this Section, and the non-breaching party may
pursue any other such remedy, including, without limitation, the recovery of
damages.
d. Survival. The provisions of this Section shall survive the execution,
expiration or termination of this Agreement and the consummation of the
transactions contemplated hereby.
Section 4. Indemnification
Carrier shall indemnify, defend and hold harmless American, its Affiliates
and each of their respective directors, officers, employees and agents
(individually, an "American Indemnified Party") from all liabilities, losses,
damages, claims, suits, actions, recoveries, awards, judgments or executions of
any nature or kind whatsoever (including, without limitation, costs of
investigation, litigation costs, court costs, expert witness fees, litigation
support services costs, settlement costs and reasonable attorneys' fees) which
may be made, asserted, had, brought, or recovered by any third party against an
American Indemnified Party by reason of or in any way arising out of (i) travel
on Carrier, (ii) use of Carrier's facilities, (iii) Carrier's performance,
failure to perform or improper performance of this Agreement, or (iv) any claims
or statements made by Carrier in its advertising or promotional activities which
are in conflict or inconsistent with the terms of this Agreement.
American shall indemnify, defend and hold harmless Carrier, its Affiliates
and each of their respective directors, officers, employees and agents
(individually, a "Carrier Indemnified Party") from all liabilities, losses,
damages, claims, suits, actions, recoveries, awards, judgments or executions of
any nature or kind whatsoever (including, without limitation, costs of
investigation, litigation costs, court costs, expert witness fees, litigation
support services costs, settlement costs and reasonable attorneys' fees) which
may be made , asserted, had, brought or recovered by any third party against a
Carrier Indemnified Party by reason of or in any way arising out of (i)
American's performance, failure to perform or improper performance of this
Agreement or (ii) any claims or statements made by American in its advertising
or promotional activities which are in conflict or inconsistent with the terms
of this Agreement.
If an American Indemnified Party or a Carrier Indemnified Party, as the
case may be, seeks indemnification hereunder, it will inform Carrier or American
as the case may be, promptly
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after receipt of notice of any claim with respect to which such indemnity is
asserted, in which case, Carrier or American, as the case may be, will assume
and shall control the defense or settlement of such claim; provided, however,
that counsel selected by Carrier or American as the case may be, shall be
reasonably acceptable to American or Carrier, as the case may be. No compromise
or settlement of any such claim may be effected by Carrier or American as the
case may be, without the prior written consent of the relevant American
Indemnified Party or the Carrier Indemnified Party, as the case may be.
The provisions of this Section shall survive the termination of this
Agreement and the performance and completion of the transactions contemplated
hereunder.
Section 5. Insurance
Carrier will carry and maintain in effect, or cause to be carried and
maintained in effect, at its own cost and expense, with an established insurer
or insurers in the passenger aviation industry, (i) comprehensive airline
liability insurance, including but not limited to, aircraft liability, passenger
liability, cargo liability and comprehensive general liability insurance, with
combined single limits for each and every loss and each aircraft of not less
than Two Hundred Fifty Million Dollars ($250,000,000), all such policies of
insurance to be of such types, terms and, if applicable, higher amounts, as are
customarily carried by prudent major domestic air carriers, similarly situated
to Carrier, operating aircraft of similar size on similar schedules and routes,
and (ii) all risk hull insurance in an amount at least equal to the current
insured value. Each and any policy of insurance carried in accordance with this
Section, and each and any policy obtained in substitution or replacement for any
of such policies shall (A) designate American and its assigns as an additional
insured (but without imposing upon American any obligation imposed upon the
insured, including, without limitation, the liability to pay any premiums for
any such policies), (B) expressly provide that, in respect of the interests of
American and its assigns, the insurance shall not be invalidated as to an
insured by any act or omission of Carrier or any other insured and shall insure
American its assigns, regardless of any breach or violation by Carrier or any
other insured of any warranty, declaration or condition contained in such
policies, (C) provide that the insurer(s) waive any and all rights they may or
could have against American, (D) provide that the insurer(s) accept and insure
the indemnification provision included in this Letter Agreement, and (E) provide
that if such insurance is canceled for any reason whatsoever, or is changed in
any adverse way with respect to the interests of American or if such insurance
is allowed to lapse for non-payment of premium, such cancellation, change or
lapse shall not be effective as to American and its assigns, until thirty (30)
days (or such lesser period of time as is customarily available at the time in
the case of any war risk and allied perils coverage), after notice to American
from such insurer or insurers, of such prospective cancellation, change or
lapse. Each such liability policy shall be primary without right of contribution
from any other insurance which may be carried by American or its assigns, and
shall expressly provide that all of the provisions thereof shall operate in the
same manner as if there were a separate policy covering each insured.
Section 6. Representations and Warranties
a. Of Carrier. In order to induce American to enter into this Agreement,
Carrier hereby represents and warrants for the benefit of American as follows,
which shall be true and correct as of the date hereof and as of each date
Carrier provides AAirpass Carriage:
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Carrier is a duly incorporated and validly existing corporation, in good
standing under the laws of the State of Delaware. The execution and delivery of,
and the performance by Carrier of its obligations under this Agreement have been
duly authorized by all necessary corporate action, and no other corporate
proceedings are necessary in conjunction therewith. This Agreement has been duly
executed and delivered by Carrier, and, assuming due authorization, execution
and delivery by American, this Agreement constitutes the legal, valid and
binding obligation of Carrier, enforceable against Carrier in accordance with
the terms and conditions hereof, except as enforcement may be limited by
bankruptcy, insolvency, moratorium or other laws affecting creditors' rights
generally, and the application of general principles of equity (regardless of
whether such enforceability is considered a proceeding in equity or law).
b. Of American. American hereby represents and warrants for the benefit of
Carrier as follows, which shall be true and correct as of the date hereof and as
of each date Carrier provides AAirpass Carriage:
American is a duly incorporated and validly existing corporation, in good
standing under the laws of the State of Delaware. The execution and delivery of,
and the performance by American of its obligations under this Agreement have
been duly authorized by all necessary corporate action, and no other corporate
proceedings are necessary in conjunction therewith. This Agreement has been duly
executed and delivered by American, and, assuming due authorization, execution
and delivery by Carrier, this Agreement constitutes the legal, valid and binding
obligation of American, enforceable against American in accordance with the
terms and conditions hereof, except as enforcement may be limited by bankruptcy,
insolvency, moratorium or other laws affecting creditors' rights generally, and
the application of general principles of equity (regardless of whether such
enforceability is considered a proceeding in equity or law).
Section 7. Term
Unless sooner terminated in accordance with this Agreement, this Agreement
shall terminate on March 1, 2000.
Section 8. Default and Termination
a. Breach.
i. General. In the event of a breach of any term, representation, or
warranty of this Agreement by American or Carrier (other than a breach of
a payment obligation under Section 2.m. hereof, the failure to pay any
other sums owed hereunder, or any other event separately covered elsewhere
in this Section 8), the non-breaching party may terminate this Agreement
without further liability on providing at least thirty (30) days prior
written notice to the other party, which notice shall describe, with as
much particularity as reasonably practicable, the alleged breach.
Termination under this Section 8.a.i. shall not be effective, however, if
the allegedly breaching party shall, within fifteen (15) days following
receipt of such notice, completely cure such breach.
ii. Payment Obligations. In the event of a breach of a payment
obligation under Section 2.m. or the failure to pay any other sums owed
hereunder, the non-breaching party may terminate this Agreement without
further liability on providing at least
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fifteen (15) days prior written notice to the other party, which notice
shall describe, with as much particularity as reasonably practicable, the
alleged breach and the total sums due and owing. Termination under this
Section 8.a.ii. shall not be effective, however, if the allegedly
breaching party shall, within fifteen (15) days following receipt of such
notice, cure the breach by making the full payment described in the
notice.
iii. Cross Defaults: Cross-Termination.
(1) If (A) any material breach or default (including, without
limitation, the failure to pay any indebtedness or obligations as
they become due) occurs under the RDU Sublease or the AAdvantage
Agreement, and (B) such breach or default is not cured within the
applicable cure period (if any) specified in the relevant agreement
or any other cure period which may be permitted or mutually agreed
upon by the parties to the agreement, then and in any such event,
for a period of thirty (30) days following a party's receipt of
notice of such event or at any time thereafter that such breach or
default may be continuing, Carrier or American, whichever is the
non-breaching party, may elect to terminate this Agreement upon
providing at least thirty (30) days prior written notice to the
other party.
(2) If (A) any breach or default occurs under any other
agreements (not described in Subsection 8.a.iii.(1) above) under
which Carrier may be obligated, directly or indirectly, as borrower,
installment purchaser, lessee, sublessee, guarantor or otherwise,
and which agreements involve: (y) the borrowing of money or the
extension of credit in excess of Two Hundred Fifty Thousand Dollars
($250,000) in the aggregate, or (z) any lease or sublease of real or
personal property pursuant to which Carrier's monetary obligations
in the nature of rent or similar obligations exceed either Twenty
Thousand Dollars ($20,000) per month in the aggregate or Two Hundred
Fifty Thousand Dollars ($250,000) in the aggregate for the remaining
term of the affected lease and/or sublease, (B) such breach or
default consists of failure to pay any indebtedness or other
obligation when due or if such breach or default permits or causes
(or upon notice or lapse of time or both would permit or cause) the
acceleration of any indebtedness or other obligation, or the
termination of any lease, agreement or commitment to lend, and (C)
such breach or default is not cured within the applicable cure
period (Ii any) specified in the relevant agreement, then, in any
such event and at any time thereafter, American may elect to
terminate this Agreement upon providing at least thirty (30) days
prior written notice to Carrier.
(3) If the AAdvantage Agreement is terminated by either party
or expires or terminates for any reason, this Agreement shall
automatically terminate without notice or further act of either
party effective as of the effective date of termination or
expiration of the AAdvantage Agreement.
b. Standard of Service. Subject to Section 8.f., American may, upon not
less than 30 days prior written notice to Carrier, terminate Carrier's right and
obligation to provide AAirpass Carriage with respect to any or all Carrier
Flights or immediately upon written notice with respect to any Codeshare Flight,
if, in American's judgment, the standard of service provided by Carrier
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or a Codeshare Flight carrier to AAirpass members is materially less than the
standard of service provided by American to AAirpass members.
c. Carrier Assignment to Benefit Creditors. If Carrier either (i) makes an
assignment for the benefit of its creditors, (ii) suspends the payment of,
admits in writing its inability to pay, or generally fails to pay its debts as
they become due, (iii) has suspended its transactions with banks and other
financial institutions, (iv) has issued against it any writ, execution, process,
or abstract of judgment which may have a Material Adverse Effect on Carrier and
which is not dismissed, satisfied or stayed within sixty (60) days, or (v) files
a petition for bankruptcy, corporate reorganization, corporate liquidation,
arrangement or special liquidation proceedings under any Applicable Law, then
American may, at its option, immediately terminate this Agreement upon written
notice to Carrier.
d. American Assignment to Benefit Creditors. If American either (i) makes
an assignment for the benefit of its creditors, (ii) suspends the payment of,
admits in writing its inability to pay, or generally fails to pay its debts as
they become due, (iii) has suspended its transactions with banks and other
financial institutions, (iv) has issued against it any writ, execution, process,
or abstract of judgment which may have a Material Adverse Effect on American and
which is not dismissed, satisfied or stayed within sixty (60) days, or (v) files
a petition for bankruptcy, corporate reorganization, corporate liquidation,
arrangement or special liquidation proceedings under any Applicable Law, then
Carrier may, at its option, immediately terminate this Agreement upon written
notice to American.
e. Bankruptcy Petition. In the event (i) either party petitions for or is
granted relief under Title 11 of the United States Code (the "Bankruptcy Code")
or files a petition or initiates analogous proceedings under any similar
Applicable Law, (ii) an involuntary bankruptcy petition is commenced or any
comparable proceeding initiated against either party under the Bankruptcy Code
or any Applicable Law, or (iii) either party exercises its rights under or is
made subject to any federal, state or other bankruptcy, reorganization,
insolvency or analogous laws of any applicable jurisdiction, and if this
Agreement has not otherwise terminated, then the other party may suspend all
further performance of this Agreement until such party assumes or rejects this
Agreement pursuant to Section 365 of the Bankruptcy Code or any successor
statute, or otherwise acknowledges its obligations under this Agreement under
any similar (or successor) provision of Applicable Law. Any such suspension of
further performance by the other party pending assumption, rejection, or other
acknowledgment shall not be deemed a breach of this Agreement and shall not
affect the other party's right to pursue or enforce any of its rights under this
Agreement or otherwise.
f. Effect. On and after expiration or termination for any reason of this
Agreement, Carrier shall, upon request of American in writing, subject to and in
accordance with the terms of this Agreement, honor any one or more AAirpass
Carriage reservations made on or prior to the date of expiration or termination
of this Agreement.
Section 9. Notices
All notices, invoices and other communications required or permitted to be
given hereunder by one party to the other shall be in writing, and shall be
considered as properly given if addressed as provided below and either (i)
delivered in person; (ii) sent by a commercial
11 CONFIDENTIAL
<PAGE>
express or overnight courier delivery service which provides a signed
acknowledgment of receipt; (iii) deposited in the U.S. mail, certified or
registered first-class mail, postage prepaid, return receipt requested
(provided, however, that any invoice may be sent by first-class mail alone); or
(iv) transmitted by facsimile (upon receipt by sender thereof of evidence that a
complete transmission of such copy was made to the recipient thereof) and, if
sent by facsimile, confirmed by (a) telephone call contemporaneously made to the
person entitled to receive such notice or to such person's secretary, or (b)
dispatching a hard copy of such notice by first-class U.S. mail, postage
prepaid, or any of the methods set forth in (i), (ii) or (iii) above. Unless
otherwise expressly set forth in this Agreement, all notices shall be effective
upon receipt. For the purposes of notice, the addresses of the parties shall be
as follows; provided, however, that either party shall have the right to change
its address for notice hereunder by giving at least thirty (30) days prior
written notice to the other party in the manner set forth above.
By Mail & By Hand: Midway Airlines Corporation
300 W. Morgan Street, 12th Floor
Durham, North Carolina 27701
Attention: President
Phone: (919) 956-4800
Facsimile: (919) 956-7568
With a copy to: Jonathan S. Waller
Senior V.P. & General Counsel
300 West Morgan Street, Suite 1200
Durham, North Carolina 27701
Phone: (919) 956-4810
Facsimile: (919) 956-7568
By Mail: American Airlines, Inc.
Managing Director - Marketing Programs
P.O. Box 619616, MD 5321
Dallas/Ft. Worth Airport, Texas 75261-9616
By Hand: 4333 Amon Carter Boulevard, MD 5321
Fort Worth, Texas 76155
Phone: (817) 967-2777
Facsimile: (817) 967-3037
Section 10. Governing Law
a. Choice of Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by and construed in accordance with the laws
of the State of Texas, without regard to conflict of law principles.
12 CONFIDENTIAL
<PAGE>
b. Jurisdiction. Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the United States District Court for the Northern
District of Texas and, if such court does not have jurisdiction, of the courts
of the State of Texas in Tarrant County for the purposes of any suit, action or
other proceeding arising out of this Agreement or the subject matter hereof
brought by any other party. American and Carrier each agrees that neither of
them will bring any suit, action or other proceeding arising out of this
Agreement, the subject matter hereof, or any of the transactions described
herein, in any jurisdiction other than the jurisdiction described above.
c. Waiver of Defenses. To the extent permitted by Applicable Law, each
party hereby waives and agrees not to assert, by way of motion, as a defense or
otherwise, in any such suit, action or proceeding, any claim (i) that it is not
personally subject to the jurisdiction of the above-named courts, (ii) that the
suit, action or proceeding is brought in an inconvenient forum, (iii) that it is
immune from any legal process with respect to itself or its property, (iv) that
the venue of the suit, action or proceeding is improper, or (v) that this
Agreement or the subject matter hereof may not be enforced in or by such courts.
d. Service of Process. Each party agrees that, even if at any time during
the term of this Agreement Carrier is not qualified to do business as a foreign
corporation in the State of Texas, Carrier shall and does hereby irrevocably
designate and appoint the Secretary of State of the State of Texas as its agent
for service of process in any action, suit or proceeding with respect to any
matter as to which it submits to jurisdiction as set forth above, it being
agreed that any method of service upon such agent, with a copy sent to Carrier
in the manner set forth in Section 9 above, shall constitute valid service upon
Carrier. American designates CT Corporation as its agent for service of process
in Texas. American and Carrier each agrees that the submission to jurisdiction
and designation of an agent for service of process set forth above is made for
the express benefit of the other party and is effective solely for purposes of
this Agreement.
e. Enforcement of Judgment. Final judgment against a party hereto in any
suit in any court of competent jurisdiction shall be conclusive, and may be
enforced in other jurisdictions, to the extent permitted by Applicable Law, by
suit on the judgment, a certified and true copy of which, to the extent
permitted by Applicable Law, shall be conclusive evidence of the fact and the
amount of any indebtedness or liability of the party therein described.
f. Waiver of Immunity. To the extent that any party or any of its property
is or becomes entitled at any time to any immunity on the grounds of sovereignty
or otherwise, from any legal action, suit, arbitration or other proceeding, from
setoff or counterclaim, from the jurisdiction of any competent court (including
the courts referred to above), from service of process, from attachment prior to
judgment, from attachment in aid of execution, from execution prior to judgment,
from judgment, from jurisdiction, or from other legal process in any
jurisdiction, that party for itself and its property does hereby irrevocably and
unconditionally waives, and agrees not to plead or claim, any such immunity with
respect to its obligations, liabilities or any other matter arising out of or in
connection with this Agreement or the subject matter hereof. Such waiver and
agreement regarding immunity shall be irrevocable and not subject to withdrawal
in any and all jurisdictions including under the Foreign Sovereign Immunities
Act of 1976 of the United States of America.
13 CONFIDENTIAL
<PAGE>
Section 11. Miscellaneous.
a. Assignment. Neither party may assign or otherwise convey this
Agreement, or any of such party's rights under this Agreement, or delegate any
of its duties hereunder, without the prior written consent of the other party.
Any attempted assignment or delegation which violates the terms of this Section
10.a. shall be null and void.
b. No Waiver. No failure to exercise and no delay in exercising, on the
part of any party, any right, remedy, power or privilege hereunder, shall
operate as a waiver thereof or be construed as a waiver or relinquishment for
the future of such right, remedy, power or privilege; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges herein provided
are cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law. No waiver by any party of any term or provision of this
Agreement shall be deemed to have been made unless expressed in writing and
signed by an officer of the waiving party.
c. Construction. The captions appearing in this Agreement have been
inserted as a matter of convenience and in no way define, limit or enlarge the
scope of this Agreement or any of the provisions hereto. This Agreement is the
product of negotiations between Carrier and American, and no provision shall be
construed for or against any party by reason of ambiguity in language, rules of
construction against the draftsman, or similar doctrine.
d. Force Majeure. Except with respect to the performance of a party's
payment obligations under this Agreement, neither party shall be liable for a
delay or failure in its performance hereunder to the extent that such delay or
failure of performance is caused by any act of God, war, strike, natural
disaster, lockout, labor dispute, work stoppage, fire, act of government, or any
other cause, whether similar or dissimilar, beyond the control of that party.
e. Independent Contractor. Each of Carrier and American is an independent
contractor. Nothing in this Agreement is intended or shall be construed to
create or establish any agency, partnership, joint venture or fiduciary
relationship between the parties. Neither Carrier nor any of its Affiliates has
any authority to act for or to incur any obligations on behalf of or in the name
of American or any of its Affiliates.
f. Successor and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the permitted successors and assigns of each party
hereto.
g. Entire Agreement. This Agreement (including any attachments hereto)
constitutes the entire agreement between the parties relating to the subject
matter hereof, and, as of the date first written above, terminates and
supersedes all prior or contemporaneous agreements, discussions, undertakings,
and understandings, whether written or oral, express or implied relating to such
subject matter. This Agreement may not be amended or modified except in writing
signed by an authorized officer of each party hereto.
14 CONFIDENTIAL
<PAGE>
h. No Third Party Beneficiaries. All rights, remedies and obligations of
the parties under this Agreement shall accrue or apply solely to the parties
hereto or their permitted successors or assigns and there is no intent to
benefit any third parties.
i. Time. Time is of the essence with respect to the performance of the
material provisions hereunder.
j. Further Assurances. Each party hereto shall do and perform such further
acts and execute and deliver such further instruments as may be required by
Applicable Law or reasonably requested by the other party to carry out and
effectuate this Agreement and the transactions contemplated hereunder.
k. Severability. If any clause, sentence, paragraph or part of this
Agreement, or the application thereof to any Person, shall for any reason be
adjudged by a court of competent jurisdiction to be invalid, or determined to be
in violation or contravention of any applicable statutory legislation, then such
clause, sentence, paragraph or part of this Agreement shall be deemed to be
automatically amended only to the extent necessary to bring this Agreement
within said judgment or determination, as applicable, effective as of the date
thereof, and such judgment or determination shall not affect the remainder of
this Agreement which shall continue in full force and effect.
l. Taxes. Carrier shall be responsible for, and shall indemnify and
reimburse American for, all present and future taxes (if any) imposed, assessed,
levied or collected on or in respect of AAirpass Carriage and this Agreement or
any payments made hereunder (including, without limitation, all excise, sales,
use, and value added taxes), excluding, however, any U.S. taxes imposed on or
measured by the net income of American. Such indemnification (if any) shall be
made by Carrier on an after-tax basis, taking into account any income taxes,
including U.S. federal and state taxes, imposed on the amount paid as the
indemnity. Carrier's obligations pursuant to this Section shall survive the
execution, expiration or termination of this Agreement and the consummation of
the transactions contemplated hereunder.
m. Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument. Confirmation of the execution of this Agreement by a telefax of
a facsimile signature page or pages executed by Carrier and American shall be
binding upon the parties hereto.
n. Exclusion of Consequential Damages. EXCEPT FOR THE INDEMNIFICATION
OBLIGATIONS SET FORTH IN SECTION 4 ABOVE (INCLUDING, WITHOUT LIMITATION, ANY
DAMAGES ARISING THEREUNDER OR IN CONNECTION THEREWITH) WHICH SHALL NOT BE
LIMITED BY ANY PROVISION OF THIS AGREEMENT, NEITHER PARTY WILL BE LIABLE FOR ANY
INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT LIMITATION LOST REVENUES,
LOST PROFITS, OR LOST PROSPECTIVE ECONOMIC ADVANTAGE, ARISING FROM ANY
PERFORMANCE OR FAILURE TO PERFORM UNDER THIS AGREEMENT, EVEN IF SUCH PARTY KNEW
OR SHOULD HAVE KNOWN OF THE EXISTENCE OF SUCH DAMAGES, AND EACH PARTY HEREBY
RELEASES AND WAIVES ANY CLAIMS AGAINST THE OTHER PARTY FOR SUCH DAMAGES.
15 CONFIDENTIAL
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
March 2, 1995.
MIDWAY AIRLINES CORPORATION AMERICAN AIRLINES, INC.
By: /s/ J. S. Waller By: /s/ Michael K. Pettis
Name: JONATHAN S. WALLER Name: MICHAEL K. PETTIS
Title: SENIOR VICE PRESIDENT Title: AAIRPASS SALES MANAGER
GENERAL COUNSEL
16 CONFIDENTIAL
<PAGE>
ATTACHMENT A TO AAIRPASS AGREEMENT
{***} (2 pages omitted)
A-1 CONFIDENTIAL
<PAGE>
EXHIBIT F
FIRST AMENDMENT TO AAIRPASS
AGREEMENT
This First Amendment to AAirpass Agreement ("First Amendment"), dated as
of February 10, 1997, by and between American Airlines, Inc. ("American") and
Midway Airlines Corporation ("Carrier").
WHEREAS, American and Carrier have entered into an AAirpass Agreement (the
"Agreement") dated as of the March 2, 1995, pursuant to which American has
granted Carrier the right to carry AAirpass members and their companions on
Carrier Flights in accordance with the terms of the Agreement; and
WHEREAS, concurrently herewith, American and Carrier are entering into a
certain Letter Agreement providing the terms and conditions under which American
has agreed to participate in a financial restructuring of Carrier; and
WHEREAS, in connection with such restructuring, Carrier has requested and
American has agreed to make certain amendments to the Agreement, subject to the
terms and conditions set forth in this First Amendment.
NOW, THEREFORE, in consideration of the mutual covenants and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, American and Carrier agree to amend the Agreement as follows:
1. Section 7 is amended in its entirety to read as follows:
"Unless sooner terminated in accordance with this Agreement, this
Agreement shall terminate on April 30, 2001."
2. This First Amendment together with the Agreement constitutes the entire
agreement of the parties with respect to its subject matter and supersedes all
prior agreements or understandings, whether written or oral, if any, concerning
the subject matter. All defined terms used herein without definition shall have
the meanings set forth in the Agreement. As modified hereby, the Agreement is
ratified and confirmed and shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have caused this First Amendment to be duly
executed and delivered as of the date and year first above written.
MIDWAY AIRLINES CORPORATION AMERICAN AIRLINES, INC.
By: /s/ J. S. Waller By: /s/ Andrew A. Cuomo
------------------------- --------------------------------
Jonathan S. Waller Andrew A. Cuomo
Managing Director
Its: Senior Vice President Airline Management Services, Inc.
<PAGE>
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY [***]. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
ENGINE LEASE AGREEMENT
DATED September 11, 1997
AMONG
RRPF ENGINE LEASING LIMITED
and
MIDWAY AIRLINES CORPORATION
Rolls-Royce Tay 650-15 Spare Engine
Manufacturer's Serial Number [* *]
<PAGE>
INDEX
Clause Page
No. Heading No.
- --------------------------------------------------------------------------------
1. DEFINITIONS.................................................. 1
2. REPRESENTATIONS AND WARRANTIES............................... 8
3. CONDITIONS PRECEDENT......................................... 10
4. LEASE, AND LEASE PERIOD AND PURCHASE OPTION.................. 12
5. DELIVERY..................................................... 13
6. EXCLUSION CLAUSE............................................. 15
7. MANUFACTURER'S WARRANTIES.................................... 16
8. PAYMENTS..................................................... 17
9. GENERAL TAX INDEMNITY........................................ 20
10. LESSOR'S SECURITY INTERESTS; QUIET ENJOYMENT................. 25
11. CORPORATE UNDERTAKINGS....................................... 25
12. OPERATIONAL UNDERTAKINGS..................................... 26
13. INSURANCE.................................................... 36
14. TOTAL LOSS................................................... 42
15. REQUISITION FOR HIRE......................................... 44
16. INDEMNITY.................................................... 45
17. TERMINATION BY LESSOR........................................ 47
18. TERMINATION PAYMENTS......................................... 50
19. REDELIVERY................................................... 51
20. MISCELLANEOUS................................................ 53
i
<PAGE>
SCHEDULE 1 THE ENGINE................................................... 57
SCHEDULE 2A FORM OF LEGAL OPINION OF FULLBRIGHT & JAWORSKI,
SPECIAL COUNSEL TO LESSEE.................................... 58
SCHEDULE 2B FORM OF LEGAL OPINION OF LESSEE'S LEGAL DEPARTMENT........... 62
SCHEDULE 2C FORM OF LEGAL OPINION OF DAUGHERTY, FOWLER , SPECIAL
AND PEREGRIN, COUNSEL TO LESSEE.............................. 64
SCHEDULE 3 ACCEPTANCE CERTIFICATE....................................... 66
SCHEDULE 4 TERMS OF SALE................................................ 67
SCHEDULE 5 ASSUMED RENT AND RENTAL ADJUSTMENT FACTOR.................... 68
SCHEDULE 6 STIPULATED LOSS VALUE........................................ 69
SIGNATORIES .............................................................. 71
ii
<PAGE>
ENGINE LEASE AGREEMENT
LEASE AGREEMENT made on the September 11, 1997, among RRPF ENGINE LEASING
LIMITED whose registered office is at 65 Buckingham Gate, London SW1E 6AT
("Lessor"); and MIDWAY AIRLINES CORPORATION whose office is at 300 W. Morgan
Street, Suite 1200, Durham, NC 27701 USA ("Lessee").
WHEREBY IT IS AGREED as follows:
1. DEFINITIONS
1.1 In this Agreement:
"Acceptance Certificate" means the Acceptance Certificate in the
form set out in Schedule 3 which is to be signed by the Lessee in
accordance with Clause 5.1 (Delivery);
"Agent" means such institution or institutions as may from time to
time advise the Lessee;
"Aircraft" means the aircraft upon which the Engine or any Part is
installed from time to time;
"Approved Air Operator" means an air operator of good repute
approved in writing by Lessor, such approval not to be unreasonably
withheld;
"Approved Broker" "Approved Underwriter" each have the meaning set
out in Clause 13.1 (Insurance Definitions);
"Assumed LIBOR" means [***] per annum;
"Assumed Rent" means the amount set forth on Schedule 5.1 or 5.2, as
the case may be, as Assumed Rent, as adjusted on the Delivery Date
in accordance with the provisions of Schedule 5;
"Aviation Authority" means the Aviation Authority of the State of
Registration and all authorities, government departments, committees
or agencies which under the laws of the State of Registration may
from time to time:
(a) have control or supervision of civil aviation in the State of
Registration; or
(b) have jurisdiction over the registration, airworthiness or
operation of, or other matters relating to, the Engine;
"Banks" means such financial institutions which from time to time
may finance the Engine for Lessor and/or for whose benefit security
over, or rights relating to, the Engine and/or this Agreement may be
granted by Lessor or at Lessor's request;
"Base List Price" means the list price for the Engine quoted by the
Engine Manufacturer, as escalated by the Engine Manufacturer to the
Delivery Date
1
<PAGE>
"Borrowings" means:
(a) moneys borrowed or raised and interest thereon;
(b) any liability for rentals, interest, termination sums or other
payments under finance leases and operating leases;
(c) any liability under any debenture, note or other security or
under acceptance credit facilities; or
(d) any liability in respect of an installment payment due in
connection with the conditional sale or credit sale agreement
for the acquisition cost of assets to the extent payable after
the time of acquisition or possession thereof by the party
liable;
"Business Day", when used in relation to LIBOR, means any day, other
than a Saturday or Sunday, on which commercial banks in London are
open for business and quoting rates for Dollar deposits, and
otherwise means a day, other than a Saturday or Sunday on which
business of the kind contemplated by this Agreement is carried on in
England and the State of Registration or, where used in relation to
a payment, which is also a day on which banks are open for business
in the place of payment;
"Compulsory Acquisition" includes requisition of the Engine for
title, other compulsory acquisition of the Engine (otherwise than by
requisition for use or hire not involving requisition of title and
not otherwise a Total Loss), condemnation, seizure, capture,
nationalization, appropriation, expropriation, detention,
deprivation or confiscation for any reason of the Engine by any
governmental authority (whether civil, military or de facto);
"CRAF" has the meaning given that term in Clause 12.12(a)
(Subleasing and Repairs);
"Cycle" means one take-off and landing by the Aircraft to which the
Engine is attached;
"Damage Notification Threshold" means US$250,000;
"Default Rate" means the rate of interest referred to in Clause 8.6
(Default Interest);
"Delivery" means the tendering for delivery of the Engine by Lessor
to the Lessee under this Agreement.
"Delivery Date" means the date on which delivery takes place;
"Deposit" means the amount set out in Clause 8.1;
"Dollars" and "$" means the lawful currency of the United States of
America;
"Engine" means
(a) Rolls-Royce plc model Tay 650-15 Spare Engine, having
manufacturers' serial number as notified by the Engine
Manufacturer
2
<PAGE>
to Lessor and Lessee and specified in the Acceptance
Certificate to be delivered by Lessee pursuant to Clause
5.1(b), as more particularly described in Schedule 1 hereto
together with all Parts installed thereon at Delivery and
includes, where the context admits, the Technical Documents
and the transportation stand; and
(b) all substituted, renewed and replacement parts at any time
installed thereon,
"Engine Management Programme" means the latest issue of the
Management Programme for the Tay 650-15 Spare Engine agreed between
the Engine Manufacturer and Lessee and all service bulletins issued
by the Engine Manufacturer with a compliance category of 2A or
higher;
"Engine Manufacturer" means Rolls-Royce plc;
"Engine Manual" means the latest issue by the Engine Manufacturer of
the Tay 650-15 Engine Manual
"Excluded Withholdings" means any Tax collectible by means of a
withholding to the extent that such Taxes would not have been
imposed on Lessee but for the failure of any Tax Indemnitee to
comply with any of the provisions of this Agreement;
"FAA" means the Federal Aviation Administration of the United States
of America and any successor thereof;
"Flight Hour" means each hour or part thereof elapsing from the
moment the Aircraft takes off to the moment it touches down;
"Force Majeure" means delay due to or arising out of acts of God or
public enemy, war, civil war, insurrection or riot, fire, flood,
explosion, earthquake, act of government, governmental priority or
regulation affecting directly or indirectly the Engine and/or the
Aircraft, or Lessor or any facilities or labor dispute causing
cessation, slowdown or interruption of work, inability after best
endeavors to procure equipment, data or materials from suppliers, or
any other cause to the extent that such cause is beyond the control
of Lessor;
"Indemnitee" means each of Lessor and its permitted assigns, the
Security Trustee, the Agent, each of the Banks, and each of their
respective affiliates, directors, officers, agents, servants and
employees (but excluding, in any event the Engine Manufacturer and
any vendor, subcontractor or supplier thereof with respect to claims
made against them in such capacity);
"Indemnifiable Taxes" has the meaning set out in Clause 9 (General
Tax Indemnity);
"Insurances" means all contracts and policies of insurance which are
from time to time required to be taken out or effected in respect of
the Engine pursuant to Clause 13 (Insurance);
"Insurers" has the meaning set out in Clause 13.1 (Insurance
Definitions);
"Lease Period" means the period from the Delivery Date, until the
Term Date or the date of any earlier termination pursuant to this
Agreement;
3
<PAGE>
"Lessor's Security Interest" means any Security Interest created by
or attributable to the Lessor, the Security Trustee, the Agent
and/or the Banks other than the rights of Lessor under this
Agreement;
"Liability Insurances" has the meaning set out in Clause 13.1
(Insurance Definitions);
"LIBOR" means the number which is the arithmetic mean (rounded
upward, if necessary, to the nearest 1/16 of one per cent.) of the
rates of interest per annum appearing on the Reuters Screen "LIBO"
page at or about 11.00 a.m. (London time) on the Quotation Date for
the offering by leading banks in the London interbank market of
Dollar deposits on the second Business Day following such day for a
period of six months;
"Loss Proceeds" has the meaning set out in Clause 14.1 (Total Loss
Definitions);
"Maintenance Manual" means the latest issue of the Fokker 100
Aircraft Maintenance Manual;
"Maintenance Programme" means a maintenance programme for the Engine
approved by the Aviation Authority;
"Part" means (except as otherwise provided herein):
(a) any of the parts installed on the Engine at Delivery;
(b) any part with which the Lessee replaces a Part pursuant to
this Agreement and which becomes or should have become the
property of Lessor;
(c) any part, wherever located, which has been removed from the
Engine but which has not been replaced by a part which becomes
the property of Lessor in accordance with the provisions of
this Agreement; and
(d) any part installed on the Engine pursuant to Clause 12.16
(Modifications), but excluding any replacement parts;
"Permitted Lien" means:
(a) any Security Interest for Taxes either not assessed or, if
assessed, not yet due and payable or being contested in good
faith by appropriate proceedings; or
(b) any Security Interest of a materialman, mechanic, worker,
employee, repairer, carrier, hangar keeper or other similar
Security Interest arising in the ordinary course of business
or by operation of law in respect of any obligation which is
being contested in good faith by appropriate proceedings.
provided that (in the case of both (a) and (b)):
(i) adequate reserves have been provided by the Lessee for
the
4
<PAGE>
payment of such Taxes and obligations, and
(ii) such proceedings, or the continued existence of such
Security Interest is held, or any interest in such
asset, being sold, forfeited or otherwise lost; or
(c) any Lessor's Security Interest; and
(d) the rights of the parties under this Agreement and the right
of others to the extent permitted under this Agreement.
"Potential Termination Event" means any event which, with the giving
of notice or lapse of time, determination of materiality or
fulfillment of any other condition, might constitute a Termination
Event;
"Property Damage" has the meaning set out in Clause 13.1 (Insurance
Definitions);
"Purchase Option" means the option set out in Clause 4.2
"Quotation Date" means the day two (2) Business Days before each
Rental Adjustment Date;
"Rent" means all amounts payable under Clause 8.2 (Payments);
"Rent Date" means the 11th day of each calendar month following the
Delivery Date during the Lease Period;
"Rental Adjustment Date" has the meaning set out in Clause 8.2(b)
(Rental Adjustment);
"Required Amount" has the meaning set out in Clause 13.1 (Insurance
Definitions);
"Required Liability Amount" has the meaning set out in Clause 13.1
(Insurance Definitions);
"Scheduled Delivery Date" means 15 February 1998;
"Security Interest" includes any mortgage, charge, pledge,
encumbrance, lien, right of set-off, assignment, hypothecation,
title retention, preferential right or trust arrangement or other
security interest or arrangement or agreement the effect of which is
the creation of security howsoever created or arising;
"Security Trustee" means such institution or institutions as Lessor
shall from time to time advise Lessee;
"State of Registration" means the United States of America or if the
Engine is sub-leased under Clause 12.12 such other country in which
registration of the Aircraft has been effected;
"Stipulated Loss Value" means the amount stated in Schedule 6
opposite the Rent Date specified;
5
<PAGE>
"Sub-lessee" means any sub-lessee permitted under Clause 12.12
(Subleasing and Repairs);
"Subsidiary" means an entity from time to time of which the Lessee
owns directly or indirectly more than 50 per cent of the voting
share capital or similar right of ownership;
"Tax Indemnitee" means Lessor and its permitted assigns, the
Security Trustee, the Agent, each of the Banks, and each of their
respective affiliates, directors, officers, agents, servants and
employees (but excluding, in any event the Engine Manufacturer and
any vendor, subcontractor or supplier thereof with respect to Taxes
imposed upon them in such capacity);
"Taxes" includes all present and future income, turnover, sales,
value added, license, registration, stamp, documentary and other
taxes, levies, duties, imposts, deductions, fees, charges,
compulsory loans and withholdings of whatever nature together with
interest thereon and penalties and additions to tax with respect
thereto, if any, and any payments made on or in respect thereof and
"Taxation" will be construed accordingly;
"Taxing Authority" means any federal, state or local government or
other taxing authority in the United States, any foreign government
or any political subdivision or taxing authority thereof, any
international taxing authority or any territory or possession of the
United States or any taxing authority thereof;
"Technical Documents" means all manuals, logs, technical records,
technical data and other materials and documents (whether kept or to
be kept in compliance with any regulation of the Aviation Authority,
Maintenance Programme or otherwise), whether in documentary form or
not relating to the Engine or any Part including, without
limitation, the following:
(i) all mandatory orders or directives compliance records;
(ii) all service bulletin compliance records, module cards and
details of the time since new, cycles since new, time since
overhaul, cycles since overhaul records in respect of each
module;
(iii) log book;
(iv) performance data in accordance with the specifications set out
in the latest issue of the Aircraft maintenance manual; and
(v) all manufacturer's concessions including Rolls-Royce Technical
Variances.
"Term Date" means, the day immediately preceding the numerically
corresponding date falling 7 years after the Delivery Date;
"Termination Event" means any event listed in Clause 17.1
(Termination Events);
"Termination Sum" means such amount as is due from the Lessee to
Lessor
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in accordance with the terms of Clause 18.1 (Termination Payments
due on termination of Lease Period);
"Total Loss" has the meaning set out in Clause 14.1 (Total Loss
Definitions);
"Total Loss Date" has the meaning set out in Clause 14.1 (Total Loss
Definitions);
"Total Loss Payment Date" has the meaning set out in Clause 14.1
(Total Loss Definitions);
"U.S.-U.K. Treaty" means The Convention Between the Government of
the United States of America and the Government of the United
Kingdom of Great Britain and Northern Ireland for the Avoidance of
Double Taxation and Prevention of Fiscal Evasion With Respect to
Taxes on Income and Capital Gains, dated March 25, 1980;
1.2 unless the context otherwise indicates, any reference in this
Agreement to:
"part" means, in respect of the Engine, any module, any component,
instrument, accessory, reverser, nacelle, equipment or other item or
equipment of any kind whether similar to any of the foregoing or
not;
a "person" includes any person, firm, company, corporation,
government, state or agency of a state or any association or
partnership (whether or not having separate legal existence) of two
or more of the foregoing;
a "regulation", includes any present or future directive, regulation
request, requirement or voluntary credit restraint programme but,
if not having the force of law, the compliance with which is in
accordance with the general practice of persons to whom it is
addressed;
any "agreement", "license" or other instrument includes any
agreement, license or other instrument as varied, novated or
replaced from time to time (but without prejudice to any
restrictions on such variation, novation or replacement);
reference to a party hereunder or other person also includes a
reference to its predecessors in interest and its successors and
permitted assigns;
a Clause or Schedule is a reference to a clause of or a schedule to
this Agreement; and
a word importing the singular number includes the plural and vice
versa.
each of the "Agent", "Bank", "Banks" or "Security Trustee" (or any
combination of the foregoing) at any time after Lessor has advised
Lessee that there is no such relevant institution or institutions,
will be construed as being references to "Lessor" until such time as
Lessor may, in accordance with this Agreement, advise Lessee to the
contrary.
1.3 Headings in this Agreement are for ease of reference only and will
not affect the interpretation of this Agreement.
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2. REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties. The Lessee represents and warrants
to the Lessor that:
(a) Status. The Lessee is a corporation duly organized and validly
existing under the laws of the State of Delaware, possessing
perpetual corporate existence and the capacity to sue or be
sued in its own name and the Lessee has the power to own its
property and assets and carry on its business as it is now
being conducted and is the holder of all certificates,
licenses and permissions required for the use and operation of
the Engine and/or the Aircraft;
(b) Power and authority. The Lessee has the power to enter into
and perform and has taken all necessary action to authorize
the entry into, performance and delivery of this Agreement and
the transactions contemplated by this Agreement;
(c) Legal validity. This Agreement constitutes legal, valid and
binding obligations of the Lessee enforceable in accordance
with its terms and would be so treated in the courts of the
State of Registration, subject to bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar
laws affecting the rights of creditors generally and general
principles of equity;
(d) Non-conflict with laws. The entry into and performance of this
Agreement and the transactions contemplated by this Agreement
do not and will not conflict with:
(i) any law or regulation or any official or judicial order;
or
(ii) the certificate of incorporation or bylaws of the
Lessee; or
(iii) any agreement or document to which the Lessee is a party
or which is binding upon the Lessee or any of its
respective assets, nor result in the creation or
imposition of any Security Interest on its assets
pursuant to the provisions of any such agreement or
document to which it is a party;
(e) Consents. All authorizations, consents, registrations,
notifications and other matters, official or otherwise,
required in connection with the entry into or performance of
this Agreement by Lessee have been obtained or effected and
are in full force and effect to the extent required to be in
full force and effect;
(f) Litigation. No litigation, arbitration or administrative
proceedings are current or pending or, to the knowledge of the
Lessee, threatened in writing, to an officer of Lessee, which
if adversely determined are likely to have a material adverse
effect on the general financial condition of the Lessee or its
ability to perform its obligations under this Agreement;
(g) Taxes. Lessee has filed or caused to be filed all material tax
returns, reports and statements that are required to be filed
and has paid or
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caused to be paid or is paying all taxes shown to be due and
payable by such returns, reports or statements and any tax
assessments received by Lessee to the extent that such taxes
have become due and payable (except to the extent being
contested in good faith and for the payment of which adequate
reserves have been provided).
(h) Pari Passu. The obligations of the Lessee under this Agreement
rank at least pari passu with all other present and will rank
at least pari passu with all future unsecured and
unsubordinated obligations (including contingent obligations)
of the Lessee with the exception of such obligations as are
mandatorily preferred by law and not by contract;
(i) No immunity.
(i) The Lessee is subject to civil and commercial law with
respect to its obligations under this Agreement;
(ii) neither the Lessee nor any of its assets enjoys any
right of immunity from set-off, suit or execution in
respect of its obligations under this Agreement;
(j) Stamp duties. No stamp or registration duty or similar taxes
or charges are payable in the State of Registration in respect
of this Agreement;
(k) Accounts. Its audited consolidated financial statements for
the financial year ending 31 December 1996 supplied to Lessor
prior to the Delivery Date fairly present, in accordance with
United States generally accepted accounting principles
("GAAP") the financial condition and results of operations of
Lessee and its consolidated subsidiaries as of such date and
for the year then ended and there has been no material adverse
change in its financial condition since such date; and
(l) Termination Events. No Termination Event or Potential
Termination Event has occurred and is continuing.
2.2 Repetition. The representations and warranties set out in
sub-clauses (a), (b), (c), (d), (e), (h), (i) and (l) of Clause 2.1
above will survive the execution of this Agreement and Delivery and
will be deemed to be repeated on each Rent Date during the Lease
Period, with reference to the facts and circumstances then
subsisting, as if made at each such time.
2.3 Lessor's Warranties. Lessor represents and warrants to the Lessee
that:
(a Status. Lessor is a company duly incorporated and validly
existing under the laws of England, possessing the capacity to
sue or be sued in its own name and Lessor has the power to own
its property and assets and carry on its business as it is now
being conducted;
(b) Power and authority. Lessor has the power to enter into and
perform and has taken all necessary action to authorize its
entry into and performance of this Agreement and the
transactions contemplated by this Agreement;
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(c) Legal validity. This Agreement constitutes legal, valid and
binding obligations of Lessor, subject to bankruptcy,
insolvency, reorganization, receivership, moratorium and other
similar laws affecting the rights of creditors generally and
general principles of equity;
(d) Non-conflict with laws. So far as concerns Lessor, the entry
into and performance of this Agreement and the transactions
contemplated by this Agreement do not and will not conflict
with:
(i) any law or regulation or any official or judicial order;
or
(ii) the constitutional documents of Lessor;
(e) Consents. All authorizations, consents, registrations,
notifications and other matters, official or otherwise,
required in connection with the entry into or performance of
this Agreement by Lessor have been obtained or effected and
are in full force and effect to the extent required to be in
full force and effect.
3. CONDITIONS PRECEDENT
3.1 Documentary Conditions Precedent. The obligation of Lessor to
deliver the Engine to Lessee under Clause 5 of this Agreement is
subject to the condition that Lessor has received all of the
following:
(a) no later than three (3) Business Days prior to the Scheduled
Delivery Date:
(i) Certificate of Incorporation and By-laws a copy of the
Certificate of Incorporation and By-laws of the Lessee,
certified by the Secretary of Lessee;
(ii) Authorizations a copy of all corporate authorizations
and resolutions required for the execution, delivery and
performance of this Agreement by Lessee, including
resolutions of the Board of Directors of Lessee, or a
committee thereof, certified by the Secretary of Lessee,
authorizing the lease by the Lessee of the Engine
hereunder and authorising a specified person to execute
this Agreement;
(iii) Consents a copy of all other authorizations, approvals,
consents, licenses and registrations in form and
substance reasonably satisfactory to Lessor necessary in
connection with the execution, performance and delivery
by, and validity and enforceability against, the Lessee
of this Agreement (including but without prejudice to
the generality of the foregoing, any necessary export
and/or import licenses in respect of the Engine) or in
the case of registrations which will only be available
on Delivery evidence that the same will have been
obtained on Delivery;
(iv) Process Agent Acceptance a letter from the process agent
referred to in Clause 20.17, irrevocably accepting
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appointment as the same on behalf of Lessee;
(v) Fees and Duties evidence that all registration fees,
customs duties and other taxes, fees, duties and charges
payable to the governmental authorities and agencies in
the State of Registration with respect to the Engine
have been paid in full (or if the same are not yet
payable that arrangements satisfactory to Lessor have
been made for the payment thereof by the Lessee);
(vi) Insurances a copy of a certificate or certificates
evidencing the Insurances to be maintained pursuant to
Clause 13 (Insurances) and a broker's undertaking in
respect of such certificate(s) in form and substance
reasonably satisfactory to Lessor;
(vii) Maintenance Programme a copy of the current Maintenance
Programme;
(viii) Air Operator's Certificate and Air Transport Licence a
certified copy of the current Air Operator's Certificate
and Air Transport Licence issued by the Aviation
Authority to the Lessee with respect to aircraft of the
type to which the Engine will be attached;
(ix) Legal Opinion legal opinions from Fulbright & Jaworski,
LLP and the Lessee's General Counsel and Daugherty,
Fowler & Peregrin substantially to the effect set out in
Schedules 2A, 2B and 2C; and
(x) Accounts The Lessee's management accounts for the year
to 31 December 1997 indicating a minimum operating
income of [***] and a minimum cash (for the
purposes of this sub-clause cash shall be deemed to
include certificates of deposit provided that the Lessee
is not restricted from accessing and withdrawing the
cash represented by such certificates of deposit in any
way other than the payment of certain fees of the
issuer) balance of [***] and an additional
minimum cash equivalents balance of [***] (for
the purposes of this sub-clause, cash equivalents shall
be deemed to include pre-delivery payments made in
respect of aircraft) together with the latest available
audited accounts of the Lessee;
(b) prior to Delivery:
(i) a closing certificate signed by an authorized officer of
Lessee confirming that the representations and
warranties of Lessee are true and correct in all
material aspects on and as of the Delivery Date;
(ii) evidence that a precautionary Uniform Commercial Code
financing statement or statements describing the Engine
and this Agreement shall have been executed and
delivered by the Lessee, as lessee, and that such
financing statement or
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statements shall have been duly filed with the Secretary
of State of the State of North Carolina; and
(iii) evidence that this Agreement shall have been duly filed
for recording with the FAA.
3.2 General Conditions Precedent. The obligation of Lessor to deliver
the Engine to Lessee under Clause 5 of this Agreement are subject to
the further conditions precedent that:
(a) on the Delivery Date no Termination Event or Potential
Termination Event has occurred and is continuing or might
result from the leasing of the Engine; and
(b) Lessee shall have paid the Deposit pursuant to Clause 8.1(a).
3.3 Conditions to Lessee's Obligations. The obligation of Lessee to
accept delivery of the Engine under this Agreement is subject to the
conditions precedent that on or prior to the Delivery Date, the
Lessee has received:
(a) a certificate signed by an authorized officer of Lessor
confirming that the representations and warranties of Lessor
are true and correct in all material respects on and as of the
Delivery Date;
(b) a JAA Form 1; and
(c) evidence that the Engine has successfully passed a test cell
run showing the Engine to be within Engine Manual limits and
to be in accordance with the requirements of FAR Part 34.
3.4 [***]
4. LEASE, LEASE PERIOD AND PURCHASE
4.1 Lease and Lease Period. Lessor will lease to the Lessee, and the
Lessee will lease from Lessor, the Engine on the terms of this
Agreement during the Lease Period.
4.2 Purchase.
(a) Subject to paragraph (b) below, the Lessee will have the
option to purchase the Engine on the Term Date for US$1 (the
"Purchase Price") on the terms and conditions set out in
Schedule 4 ("Purchase Option").
(b) The Purchase Option is conditional on the following matters:
(i) the leasing of the Engine to the Lessee under this
Agreement
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will not have terminated for any reason prior to the
Term Date (and the Lessee agrees that the Purchase
Option will be immediately cancelled, upon such
termination); and
(ii) the Lessee will have complied in full with all its
accrued monetary obligations under this Agreement,
except that Lessor will waive compliance by the Lessee
of its obligations pursuant to Clause 19.2 (Redelivery
Condition).
(c) If the conditions precedent in (b) above:
(i) have either been satisfied or waived in writing by
Lessor, Lessee and Lessor will complete the sale and
purchase of the Engine on the Term Date on the terms set
forth in Schedule 4; or
(ii) have not either been satisfied or waived in writing by
Lessor by the Term Date (as the case may be) (or such
later date as is agreed), the Purchase Option will be
immediately cancelled.
(d) The Lessee agrees to discharge when due, at no expense to
Lessor, all applicable Taxes (other than Lessor Taxes) payable
in connection with the sale and purchase of the Engine to
Lessee under this Agreement pursuant to the Purchase Option,
Clause 14.3 or Clause 18.1(c).
4.3 Termination by Lessee.
Lessee may terminate this Agreement and obtain title to the Engine,
in accordance with Clause 4.2 above, effective on any Rent Date
during the Lease Period upon not less than 30 days prior written
notice to Lessor, provided that upon such effective date Lessee pays
to Lessor such sum or sums (by way of agreed compensation for loss
of bargain and not as a penalty) as will equal the aggregate of:
(a) all out of pocket costs and expenses incurred by Lessor for
de-registering its interest in the Engine and/or the filing of
releases of Lessor's Security Interests in the Engine;
(b) all amounts of Rent and other sums due and payable to Lessor
at the date of such termination by Lessee under this
Agreement, together with interest thereon as provided herein;
and
(c) a sum equal to the Stipulated Loss Value as of the Rent Date
upon which such termination becomes effective, together with
an amount equal to the instalment of Rent which, but for such
termination, would be due on such date.
For the purposes of this Clause 4.3 where the "Term Date" is
referred to in Clause 4.2 above it shall mean the Rent Date on which
this Agreement is due to be terminated by Lessee.
5. DELIVERY
5.1 Delivery.
(a) Delivery will take place at Rolls-Royce, Derby, England or at
such
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other location in the United Kingdom as may be agreed between
Lessor and the Lessee.
(b) On tender of the Engine by Lessor for Delivery pursuant to
this Agreement and the satisfaction or written waiver of the
conditions precedent set out in Clause 3.3, the Lessee will
procure that an authorized officer will execute and deliver to
Lessor the Acceptance Certificate which will, inter alia,
without the necessity for any further action being taken,
constitute:
(i) delivery and irrevocable acceptance by the Lessee of the
Engine for lease hereunder without any qualification or
reservation and further; and
(ii) as between the parties hereto, the Lessee's confirmation
that the Engine is in good working order and repair
without defect or inherent vice in condition, design,
operation or fitness for use.
(c) As between the parties hereto, after Delivery the Engine will
be in every respect at the sole risk of the Lessee, who will
bear all risk of loss, theft, damage or destruction to the
Engine from any cause whatsoever.
5.2 Inspection.
(a) The Lessee may at its own cost and risk inspect the Engine
prior to the Delivery Date at the Delivery Location.
(b) If the Lessee notifies Lessor of any defect or non-conformity
with Schedule 1 forthwith following the inspection of the
Engine, then except to the extent otherwise agreed, Lessor
shall procure the rectification of the defect or
non-conformity at Lessor's cost and, without any other
liability accruing to Lessor (which the Lessee expressly
acknowledges), Delivery will be postponed until notification
by Lessor to the Lessee of the rectification.
5.3 Lessor's Late Delivery. If:
(a) Delivery has not occurred prior to the 90th day after the
Scheduled Delivery Date by reason of Force Majeure; or
(b) any of the conditions precedent set out in Clause 3.3 have not
been fulfilled by the 90th day following the Scheduled
Delivery Date for any reason whatsoever; or
(c) Lessor fails to satisfy the terms of Clause 5.2(b) within 90
days of the Lessee providing the Lessor with written notice of
the defect,
then Lessee will be entitled, by notice given in writing to the
Lessor not later than 60 days following the expiration of any of the
time periods set forth in clauses (a), (b) or (c) above, as the case
may be, to cancel this Agreement without any liability accruing to
any party other than the Lessor's obligation to refund the Deposit
to the Lessee.
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5.4 Lessee's Failure to Accept Delivery, Satisfy Conditions Precedent.
(a) If, due to the Lessee's failure to satisfy any of the
Conditions Precedent set out in Clause 3.1 or 3.2 or the
Lessee's failure to execute and deliver to Lessor an
Acceptance Certificate in accordance with Clause 5.1(b),
delivery has not occurred by the Scheduled Delivery Date and
where Lessor has notified Lessee that it is immediately able
to tender the Engine to Lessee for delivery in accordance with
this Agreement but for such reason, Lessee will pay to Lessor
a non refundable commitment fee equal to an installment of
Rent (such installment as adjusted in accordance with Clause
8.2(b)), in consideration for the Lessor continuing to make
the Engine available for lease to Lessee, for each 30 day
period (or part thereof, on the basis that the commitment fee
accrues on a daily basis) after the Scheduled Delivery Date
that Delivery does not occur. It is agreed that any such
commitment fee paid by Lessee is a reasonable pre-estimate of
loss and not a penalty and will be in full and final
settlement of any claims Lessor may have in respect of the
period to which such commitment fee relates. Nothing in this
Clause will be construed as limiting Lessor's right to make
the election referred to in Clause 5.4(b) below.
(b) If, due to the Lessee's failure to satisfy any of the
Conditions Precedent set out in Clause 3.1 or 3.2 or the
Lessee's failure to execute and deliver to Lessor an
Acceptance Certificate in accordance with Clause 5.1(b),
delivery has not occurred within 90 days of the Lessor
notifying the Lessee that it is immediately able to tender the
Engine for delivery in accordance with this Agreement, Lessor
may cancel the Agreement without any liability accruing to any
party.
6. EXCLUSION CLAUSE
6.1 Exclusion of Liability. The Lessee ACKNOWLEDGES AND AGREES THAT:
(a) the Engine is to be leased on an "AS IS, WHERE IS" basis as at
the Delivery Date;
(b) SAVE AS EXPRESSLY STATED IN THIS AGREEMENT, LESSOR HAS NOT
MADE NOR SHALL BE DEEMED TO MAKE AND THERE SHALL BE HEREBY
EXPRESSLY EXCLUDED ANY REPRESENTATION OR WARRANTY OR COVENANT
OR CONDITION, EXPRESS OR IMPLIED, AS TO TITLE, AIRWORTHINESS,
VALUE, CONDITION, DESIGN, QUALITY, PURPOSE, MERCHANTABILITY,
DURABILITY, OPERATION OR FITNESS FOR USE OR OPERATION OF THE
ENGINE OR ANY PART OR AS TO THE ELIGIBILITY OR SUITABILITY FOR
ANY PARTICULAR USE OR OPERATION OR ANY OTHER REPRESENTATION OR
WARRANTY OR COVENANT OR CONDITION OF ANY KIND WHETHER SIMILAR
TO ANY OF THE FOREGOING OR NOT, EXPRESS OR IMPLIED, WITH
RESPECT TO THE ENGINE OR ANY PART;
(c) Delivery of the Engine to the Lessee under this Agreement will
be
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conclusive proof, as between Lessor and the Lessee that the
Engine is at that time 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
the Lessee as of the Delivery Date, and free and clear of all
Lessor's Security Interests, and in every way satisfactory to
the Lessee.
6.2 Waiver.
(a) THE LESSEE HEREBY WAIVES, AS BETWEEN ITSELF AND LESSOR, ALL
ITS RIGHTS IN RESPECT OF ANY WARRANTY OR CONDITION EXPRESS OR
IMPLIED (AND WHETHER STATUTORY OR OTHERWISE) ON THE PART OF
LESSOR WHENEVER THE SAME MIGHT ARISE AT ANY TIME, IN RESPECT
OF THE CONDITION OF THE ENGINE OR ANY PART OR ARISING OUT OF
THE OPERATION OR PERFORMANCE OF THE ENGINE OR ANY PART.
(b) IN PARTICULAR, AND WITHOUT PREJUDICE TO THE GENERALITY OF THE
FOREGOING, NEITHER THE LEASE OF THIS ENGINE HEREUNDER NOR THE
SALE THEREOF PURSUANT TO CLAUSE 4.2 (PURCHASE OPTION) WILL
EXPOSE LESSOR TO ANY LIABILITY TO LESSEE WHATEVER AND
HOWSOEVER ARISING IN RESPECT OF THE INJURY, DEATH, LOSS,
DAMAGE OR DELAY OF OR TO THE ENGINE OR ANY PERSON (WHICH
EXPRESSION INCLUDES, WITHOUT PREJUDICE TO THE GENERALITY
THEREOF, STATES, GOVERNMENTS, MUNICIPALITIES AND LOCAL
AUTHORITIES) OR PROPERTY WHATEVER EXCEPT THAT TO THE EXTENT
THAT LESSOR MAY BE PRECLUDED BY STATUTE OR OTHER RULE OF LAW
FROM EXCLUDING OR LIMITING ITS LIABILITY FOR DEATH OR INJURY
TO ANY PERSON LESSOR SHALL REMAIN LIABLE TO SUCH PERSON FOR
SUCH DEATH OR INJURY BUT SHALL BE FULLY INDEMNIFIED IN RESPECT
OF SUCH LIABILITY BY THE LESSEE.
(c) Notwithstanding anything to the contrary contained herein,
nothing contained in this Agreement shall constitute or be
deemed or construed to:
(i) be a waiver by Lessee of any rights, remedies or claims
it may have against Engine Manufacturer or any vendor,
subcontractor or supplier thereof; or
(ii) create any rights, waivers, immunities or indemnities in
favor of Engine Manufacturer or any vendor,
subcontractor or supplier thereof.
7. MANUFACTURER'S WARRANTIES
7.1 Assignment. Lessor hereby assigns to Lessee any and all warranties
and rights relating to the Engine, to the extent that such rights
are assignable, as against the Engine Manufacturer or any vendor,
subcontractor or supplier thereof, whether arising under any
agreements with the Engine Manufacturer, by operation of law or
otherwise and related to the Engine,
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but not any other engine.
7.2 Reassignment. In the event that the Purchase Option is not exercised
pursuant to Clause 4.2, the benefit of any warranty or right
assigned by Lessor to Lessee pursuant to Clause 7.1 will be
re-assigned automatically to Lessor at the end of the Lease Period.
The Lessee's rights under such warranties, including Lessee's claims
and rights to payments there under, will revert to Lessor except to
the extent arising prior to the expiration of the Lease Period.
Lessee will, at its own expense, do all such things and execute such
documents as may be required for this purpose.
7.3 Proceeds.
(a) Except as provided in 7.2 and 7.3(b), all proceeds of any
claim arising under warranties or other matters referred to in
7.1 will be paid over to Lessee promptly following receipt by
any other person, including Lessor.
(b) If and to the extent that a claim in Clause 7.3(a) relates to
defects affecting the Engine the proceeds referred to in
Clause 7.3(a) will be paid to Lessee by Lessor, or retained by
Lessee (as the case may be) provided that such payment shall
not be made so long as a Termination Event has occurred and is
continuing, and shall not be made until Lessor's receipt of
evidence reasonably satisfactory to Lessor that the Lessee has
rectified, in all material respects, the relevant defect.
7.4 Warranty Claims
Lessee may pursue any valid claims it may have against the Engine
Manufacturer and others under any and all warranties with respect to
the Engine and will provide notice of the same to Lessor.
7.5 Replacement Parts
Except to the extent Lessor otherwise agrees in a particular case,
the Lessee will procure that all components or equipment provided by
the manufacturer, vendor, subcontractor or supplier in replacement
of a defective Part pursuant to the terms of any warranty will be
installed promptly by the Lessee and on installation will be deemed
to be a Part as applicable and that title to the above will pass to
Lessor on installation.
8. PAYMENTS
8.1 Deposit
(a) Lessee will pay to Lessor on the date of this Agreement by way
of deposit $50,000 ("Deposit") receipt of which is hereby
acknowledged.
(b) The Deposit is for Lessor's complete and unrestricted use and
any interest earned on such Deposit will be for the Lessor's
account.
(c) Upon the Delivery Date the $50,000, and all interest earned
thereon calculated at a rate of LIBOR less 1%, shall cease to
be a deposit and
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shall form part of the first installment of Rent payable
pursuant to Clause 8.2(a)(i).
8.2 Obligation to pay Rent.
(a) The Lessee will pay to Lessor:
(i) on the Delivery Date, the first installment of Rent in
advance equal to the Assumed Rent, as adjusted in
accordance with Clause 8.2(b) together with either
[***] of the Base List Price or [***] of the Base List
Price if Clause 3.4 applies less [***] and the interest
earned thereon pursuant to Clause 8.1 above; and
(ii) throughout the Lease Period an installment of Rent in
advance on each Rent Date equal to the Assumed Rent, as
adjusted in accordance with Clause 8.2(b).
(b) Rental Adjustment. On the Delivery Date, on the 11th day of
either the month of February or August (which ever falls just
after the Delivery Date), and on the 11th day of each
successive 6 calendar monthly period during the Lease Period
thereafter (each a "Rental Adjustment Date") the Assumed Rent
shall be adjusted in accordance with the provisions of
Schedule 5.1 or 5.2 as may be appropriate, (such adjustment
shall be upwards if such product is positive, or downwards if
such product is negative, as the case may be) by the following
amount:
[***]
For the purposes of the above formula:
A = Assumed Rent adjusted in accordance with Schedule 5 to
reflect the actual Base List Price
R = Rental Adjustment Factors adjusted in accordance with
Schedule 5 to reflect the actual Base List Price
(c) Notice. Lessor will notify the Lessee not later than the
Quotation Date of the amount of Rent payable from the next
Rental Adjustment Date. Any determination of such adjustment
to the Assumed Rent is, in the absence of manifest error,
prima facie evidence of the matters to which it relates.
8.3 Obligations Absolute.
(a) The Lessee's obligations to make payments pursuant to Clause
8.2(a) will be absolute during the Lease Period irrespective
of any contingency whatsoever, including (but not limited to):
(i) any set-off, counterclaim, recoupment, defence or other
right which any party hereto may have against any other;
(ii) any unavailability or interruption of use of the Engine,
for any reason, including (but not limited to), its
requisition, any
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prohibition or other restriction against its use,
operation or possession, or any other interference with
its use, operation or possession;
(iii) any lack or invalidity of title or any other defect in
the title, airworthiness, condition, design, operation
or fitness for use or purpose of the Engine, any embargo
on or the ineligibility of the Engine for any particular
use or trade;
(iv) any lack or invalidity of or any other defect in any
related documentation or the registration of any related
documentation or the Engine under the laws of any
country;
(v) the Total Loss of or any damage to the Engine;
(vi) any failure, breach or delay on the part of any party
hereto however fundamental whether with or without fault
on its part, in performing or complying with any of the
terms or covenants hereunder;
(vii) any insolvency, bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution, liquidation or
similar proceedings by or against Lessor or the Lessee;
(viii) any invalidity or unenforceability or lack of due
authorization of or other defect in this Agreement or
any other of the documents involved in the transaction
of which this Agreement forms part;
(ix) any other cause which but for this provision would or
might have the effect of terminating, frustrating or in
any way affecting any obligation of the Lessee
hereunder, it being the declared intention of the
parties that the provisions of this Clause and the
obligations of the Lessee to make the payments pursuant
to Clause 8.1(a) and Termination Sum and any other
amounts provided hereunder will survive any frustration
and that save as expressly provided in this Agreement no
moneys payable hereunder by the Lessee to Lessor will in
any event or circumstances be repayable to the Lessee.
(b) Nothing set forth in this Section 8.3 shall be construed to
prohibit Lessee from separately pursuing any claim that it may
have from time to time against Lessor or any other person or
entity.
8.4 Funds, Place and Currency. All payments of Rent, interest and other
moneys under this Agreement (of any kind whatsoever) will be in
immediately available funds and will be paid in Dollars to such
account in the continental United States and in such manner as
Lessor may direct.
8.5 Non Business Days. If any day for the payment of Rent or any amount
payable under this Agreement is not a Business Day the due date for
payment of the same will be the next succeeding Business Day.
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8.6 Default Interest.
(a) The Lessee will pay interest on sums not paid on the due date
under this Agreement over the period from the due date until
the date of actual payment (as well after as before judgment)
at a rate per annum equal to the Default LIBOR plus 3 per
cent. ("Default Rate"); for the purposes of this Clause
8.6(a), "Default LIBOR" means the number which is the
arithmetic mean (rounded upward to the nearest 1/16 of one per
cent.) of the rates of interest per annum appearing on the
Reuters Screen "LIBO" page at or about 11.00 a.m. (London
time) on the relevant date for the offering by leading banks
in the London interbank market of Dollar deposits on such date
for a period of one week.
(b) Interest under this Clause 8.6 will be calculated on the basis
of a 365 day year and for the actual number of days elapsed
and will be compounded monthly and will be payable on demand
from time to time.
8.7 Taxes.
(a) All payments by the Lessee under or in connection with this
Agreement will be made without set-off or counter-claim, free
and clear of and without deduction or withholding for or on
account of any Taxes, except Excluded Withholdings.
(b) All Indemnifiable Taxes in respect of this Agreement and
payments hereunder, will be for the account of and will be
paid by the Lessee for its own account prior to the date on
which penalties attach thereto.
(c) All Taxes required by law to be deducted or withheld by the
Lessee from any amounts paid or payable under this Agreement
shall be paid by the Lessee prior to the date on which
penalties attach thereto and the Lessee shall, within 15 days
of the payment being made, deliver to the Lessor evidence
satisfactory to it (including all relevant tax receipts) that
the payment has been duly remitted to, and received by, the
appropriate authority.
8.8 Appropriations.
(a) In the case of a partial payment, Lessor may appropriate the
payment towards such of the obligations of the Lessee under
this Agreement, which are then due, as Lessor may decide.
(b) Any such appropriation will override any appropriation made by
the Lessee.
9.1 GENERAL TAX INDEMNITY
9.1 Taxes Covered. Except as expressly otherwise provided in Clause 9.2
and Clause 8.7, the Lessee shall indemnify, defend, and hold
harmless each Tax Indemnitee from any and all Taxes, howsoever
imposed, assessed or collected by any taxing jurisdiction upon, with
respect to, in connection with, or based upon or measured by, in
whole or in part:
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(i) this Agreement
(ii) the Engine or any Part thereof or any interest in the Engine
or any Part thereof;
(iii) the receipts, earnings or other amounts arising from the
Engine or this Agreement; and
(iv) the purchase, acceptance, delivery, possession, use,
operation, presence, storage, registration, deregistration,
modification, maintenance, repair, overhaul, testing, leasing,
subleasing, return, sale or other disposition of the Engine or
any Part thereof, or interests therein.
As used in this Agreement, "Indemnifiable Taxes" shall mean any
Taxes for which the Lessee has agreed to provide any indemnity
pursuant to this Clause 9.1 except to the extent expressly excluded
or expressly limited anywhere in Clause 8.7 or Clause 9.2.
9.2 Exclusions. The indemnity for Taxes provided in Clause 9.1 above
shall not extend to any of the following:
(a) Taxes on, based on, or measured by, net income (including
minimum taxes and any taxes measured by items of tax
preference) or that are franchise taxes, taxes on doing
business or taxes measured by capital or the net worth of the
Tax Indemnitee (any of the above "Income Taxes") that are
imposed by a Taxing Authority except any withholding tax
imposed by a Taxing Authority if:
(i) Lessor qualifies at all relevant times during the Lease
Period as "residents of the United Kingdom" for purposes
of the U.S.-U.K Treaty as in effect of the date hereof;
(ii) such tax is imposed for a reason other than Lessor's
maintenance of a permanent establishment in the United
States; and
(iii) such tax is imposed as a result of a change in
applicable law after the Delivery Date;
(b) Income Taxes that are imposed by any taxing authority other
than the United Kingdom or the United States (a "Foreign
Taxing Jurisdiction") except any Income Taxes imposed on a Tax
Indemnitee by a Foreign Taxing Jurisdiction if and to the
extent that such Taxes would not have been imposed but for:
(i) the operation or presence in such jurisdiction of the
Engine and/or (ii) the presence of the Lessee in, or the
Lessee making payments under this Agreement from, such
jurisdiction;
(c) Taxes to the extent such Taxes would not have been imposed but
for transfer (other than any transfer that occurs as a result
of an Event of Default that has occurred and its continuing or
as a result of the substitution, replacement, modification or
improvement of the Engine or any Part or any transfer of the
Engine to Lessee pursuant
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to the terms of this Agreement) by any Tax Indemnitee, of all
or any portion of its interest in the Engine;
(d) Taxes imposed on a Tax Indemnitee to the extent that such
Taxes would not have been imposed but for the failure of any
Tax Indemnitee to comply with requirements (including
reporting, information and documentation) of the jurisdiction
imposing such Taxes, if (i) such compliance is required by
statute or regulation as a precondition to relief or exemption
from such Taxes, (ii) Lessee has provided such Tax Indemnitee
with a timely request to comply with such requirements and has
provided such information as the Tax Indemnitee may require to
comply with such requirements, (iii) such Tax Indemnitee was
eligible and reasonably able to comply with such requirements
and (iv) there is no material adverse consequence to the Tax
Indemnitee of such compliance which is not satisfactorily
indemnified by the Lessee;
(e) imposed with respect to any period after the earlier of:
(i) the expiration or earlier termination of the Lease
Period and, if required pursuant to the terms of this
Agreement, the return of possession of the Engine to
Lessor and the satisfaction of all of Lessee's
obligations under this Agreement (but, in the case of
the time period after termination or expiration of the
Lease Period and before such satisfaction, Lessee will
have liability only with respect to Taxes imposed in
connection with the satisfaction of or failure to
satisfy such obligations); or
(ii) the discharge in full of all Lessee's obligations under
this Agreement
unless, (I) such Taxes relate to events, obligations or other
matters arising or occurring prior to or coincidental with
such expiration, return or payment, as the case may be, or
(II) a Termination Event shall have occurred and be
continuing;
(f) Any documentary, stamp or similar tax imposed by the United
Kingdom.
9.3 Procedure.
(a) Time of Payment. Any amount payable to a Tax Indemnitee
pursuant to Clause 8.7 or 9.1 shall be paid within thirty (30)
days after receipt by Lessee of a written demand therefor from
such Tax Indemnitee describing in reasonable detail the basis
for such indemnity and the computation of the amount so
payable.
(b) Verification. Within 15 days following Lessee's receipt of the
computation of the amount due, Lessee may (at it's own cost)
request that an accounting firm selected jointly by such Tax
Indemnity and Lessee verify whether the computation of the Tax
Indemnitee are correct. Such verification shall be binding.
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9.4 Contest.
(a) Notice of Claim. If a written claim is made against a Tax Indemnitee
for Taxes with respect to which the Lessee is or may be liable for
payment or indemnity hereunder (a "Claim"), such Tax Indemnitee
shall give the Lessee written notice of such Claim within 60 days
after its receipt and shall furnish Lessee with any reasonable
requests for information it receives with respect to such Claim. The
failure of a Tax Indemnitee to provide such notice shall not affect
the Lessee's obligations hereunder except to the extent that such
failure adversely affects the ability of the Tax Indemnitee or
Lessee to contest such Claim successfully.
(b) Manner of Contest. Notwithstanding Clause 9.3 above, if the Lessee
requests in writing within 30 days of the date of the notification
pursuant to Clause 9.4(a) above and provided that such Claim would
(if sustained) not have a material adverse effect on the Tax
Indemnitee's business of financial affairs, the Tax Indemnitee
shall, at Lessee's sole expense, contest the Claim in the name of
the Tax Indemnitee, or if permitted by law and so requested by the
Lessee, permit the Lessee to contest in the name of the Lessee, the
validity, applicability or amount of such Claim by:
(i) resisting payment thereof, if practical;
(ii) not paying the same, except under protest; or
(iii) if payment is to be made, using diligent efforts to obtain a
refund thereof in appropriate administrative or judicial
proceedings.
(c) Conditions Precedent. A Tax Indemnitee shall not be required to take
any administrative or judicial action with respect to a Claim unless
prior thereto:
(i) the Lessee shall have agreed in writing to pay such Tax
Indemnitee on demand all reasonable out-of-pocket expenses
which such Tax Indemnitee may incur in connection with
contesting such Claim and acknowledged, in writing, the
Lessee's liability hereunder;
(ii) if such contest shall involve the payment of the Claim, Lessee
shall advance the amount thereof (to the extent indemnified
hereunder) plus interest, penalties, and additions to tax with
respect thereto that are required to be paid prior to the
commencement of such contest on an interest-free after-Tax
basis to such Tax Indemnitee.
(iii) the action to be taken will not, in the reasonable opinion of
the Tax Indemnitee, result in a material risk of a sale,
forfeiture, loss of or the creation of any lien on the Engine
except if the Lessee shall have adequately bonded any lien
that results from such risks or otherwise made adequate
provision reasonably satisfactory to such Tax Indemnitee nor
subject the Tax Indemnitee to criminal prosecution; and
(iv) no Termination Event or Potential Termination Event shall have
occurred and be continuing, unless Lessee has provided
security for its obligations hereunder by advancing to such
Tax Indemnitee,
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before proceeding or continuing with such contest, the amount
of the Tax being contested plus any interest and penalties and
an amount estimated in good faith by such Tax Indemnitee for
expenses and Lessor shall be receiving all amounts of Rent in
full when due, without reduction by reason of such Tax; and
(v) the Tax Indemnitee shall have received a legal opinion (at the
expense of the Lessee) from counsel reasonably satisfactory to
such Tax Indemnitee indicating that a reasonable basis for
such contest exists.
(d) Settlement and Waiver. Notwithstanding the foregoing provisions of
this Clause 9.4, if at any time a Tax Indemnitee waives its right of
indemnification under this Clause 9 in respect of a Claim or if,
after having received payment of indemnification from Lessee
hereunder in respect of such Claim, a Tax Indemnitee tenders such
payment to Lessee, then the Lessee shall not be entitled to contest,
or to continue to contest, any such Claim.
9.5 Refunds or Credits. If a Tax Indemnitee shall receive a refund of
any Taxes as to which Lessee has made payment or indemnity, or shall
actually receive a reduction of any Tax (other than an Indemnifiable
Tax) then otherwise payable by it (either as a result of a credit or
a deduction) by reason of the payment by Lessee of any Tax or
indemnity pursuant to this Agreement, such Tax Indemnitee shall pay
to the Lessee an amount which, after addition of any further tax
savings such Tax Indemnitee realizes as a result of the payment
thereof, shall be equal to the net tax benefit to such Tax
Indemnitee of such refund or reduction provided that such payment to
Lessee shall not exceed the amounts paid by Lessee under this
Agreement with respect to such taxes (including costs, fees, etc.)
and provided further that such Tax Indemnitee is not thereby placed
in a worse position than it was prior to Lessee's payment of the
withholding.
9.6 Forms and Reports.
(a) Lessee Filings. While this Agreement is in effect, Lessee may
prepare and file all property tax returns with respect to the
Engine which the Lessee is permitted to file under applicable
law.
(b) Other Filings. If so requested by Lessee, at Lessee's sole
expense, the Lessor will file all property tax returns with
respect to the Engine which the Lessee is not permitted to
file, in form reasonably satisfactory to Lessee.
(c) Withholding Taxes. Lessor will provide to Lessee on the date
hereof and, upon request of Lessee within 60 days prior
thereto, every three years thereafter a Form 1001 (or its
successor) stating that it is eligible for the benefits of the
US.-U.K Treaty with respect to payments under this Agreement.
(d) Lessee will provide such information as may be requested by a
Tax Indemnitee to enable such Tax Indemnitee to fulfill its
tax filing requirements with respect to the transactions
contemplated hereby.
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10. LESSOR'S SECURITY INTERESTS; QUIET ENJOYMENT
10.1 Lessor will not directly or indirectly create, incur, assume or
suffer to exist any Lessor's Security Interest on the Engine or any
part or Lessor's interest therein, except the Security Interest
which may from time to time exist in favor of the Security Trustee;
it being agreed by Lessor that the Security Trustee will have
delivered to Lessee a letter of quiet enjoyment from the Security
Trustee in form and substance reasonably satisfactory to Lessee on
or prior to the date that any such Security Interest in favor of the
Security Trustee is created.
10.2 Lessor will not (nor shall it permit any person or entity claiming
through or under Lessor to) interfere with the quiet use, possession
and enjoyment of the Engine by the Lessee (or any Sub-lessee) but
the exercise by Lessor of its rights under this Agreement after the
occurrence and during the continuance of a Termination Event will
not constitute such an interference.
11. CORPORATE UNDERTAKINGS
11.1 Duration. The undertakings in this Clause will remain in force
during the Lease Period.
11.2 Information. The Lessee will furnish to Lessor:
(i) as soon as practicable (and in any event within 90 days after
the close of each of its financial years) the audited
consolidated accounts of the Lessee and its consolidated
Subsidiaries for that year (a copy of Lessee's Annual Report
on Form 10-K filed with the SEC shall be deemed to satisfy the
requirements of this sub-clause (i));
(ii) as soon as practicable (and in any event within 60 days of the
end of the first six months of each financial year) the
unaudited consolidated accounts of the Lessee and its
consolidated Subsidiaries for that six months (a copy of
Lessee's Quarterly Report on Form 10-Q filed with the SEC
shall be deemed to satisfy the requirements of this sub-clause
(ii));
(iii) promptly, all notices or other documents dispatched by the
Lessee to the Lessee's creditors as a whole (or any class
thereof);
(iv) promptly such further information (the disclosure of which is
not prohibited by law) in the possession or control of the
Lessee or any or its Subsidiaries regarding the financial
condition and operations of the Lessee or any of its
Subsidiaries as the Lessor may reasonably request (unless
Lessee reasonably deems the same to be commercially sensitive
or confidential).
(v) details of all material litigation, material arbitration or
material administrative proceedings which affect the Lessee or
any of its Subsidiaries as soon as the same are instituted.
All accounts required by (i) and (ii) above will be prepared in
accordance with GAAP consistently applied (or if not consistently
applied accompanied by details of the inconsistencies) and will
fairly represent the
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consolidated financial position of the Lessee and its consolidated
Subsidiaries.
11.3 Notification of Termination Events or Potential Termination Events.
The Lessee will notify Lessor in writing of any Termination Event or
any Potential Termination Event forthwith upon the occurrence
thereof.
11.4 Consents. The Lessee will obtain and promptly renew from time to
time, and will promptly furnish certified copies to Lessor of, all
such authorizations, approvals, consents, licenses, registrations
and exemptions as may be required under any applicable law or
regulation to enable Lessee to perform its obligations under this
Agreement or required for the validity or enforceability of this
Agreement against Lessee and the Lessee will comply with the terms
of the same.
12. OPERATIONAL UNDERTAKINGS
12.1 Duration. The undertakings in this Clause will remain in force and
effect during the Lease Period (unless the Engine is a Total Loss in
which case such undertakings will remain in force up to and
including the date upon which Lessor beneficially receives payment
of the Loss Proceeds).
12.2 Information. The Lessee will:
(a) as soon as reasonably possible after becoming aware thereof
notify Lessor with full details of the occurrence of any
accident, casualty or other event involving the Engine which:
(i) has caused or resulted in or may cause or result in the
Engine being or becoming a Total Loss; or
(ii) will or is likely to involve an amount in excess of the
Damage Notification Threshold; or
(iii) must be notified to the Aviation Authority.
(b) (i) as soon as reasonably possible after provide Lessor,
upon its written request, with such information
regarding the location, operation, maintenance, physical
state and condition of the Engine and any or all of the
Parts as Lessor may from time to time reasonably
require;
(ii) promptly after becoming aware thereof, give notice to
Lessor if a valid certificate of airworthiness issued by
the Aviation Authority in respect of the Engine ceases
to be in effect;
(iii) provide to Lessor upon its written request all such
information as Lessor may reasonably require regarding
the employment and engagements of the Engine and any or
all of the Parts, including copies of all contracts
relating thereto which concern it or them.
(iv) prior to the installation of the Engine on any Aircraft,
the Lessee undertakes to notify Lessor in writing
stating the owner of the Aircraft concerned and the
Security Interest, if any, to which the
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Aircraft is subject and such notice shall give such
further or other details in respect of the Aircraft as
Lessor may request; and for so long as the Engine is so
installed the Lessee shall continue to supply Lessor
with such information as Lessor may require at intervals
of 30 days; and
(c) as soon as reasonably possible following Lessor's request
deliver to Lessor copies or computer print-outs of all the
records, logs, manuals, technical data and other materials and
documents including the Technical Documents relating to the
Engine which are from time to time kept or maintained by the
Lessee in relation thereto pursuant to Clause 12.19 (Technical
Documents);
(d) promptly upon becoming aware thereof give notice to Lessor of:
(i) any dispute which exists between it or any Sub-lessee or
charterer and the Aviation Authority or any other
governmental agency or regulatory body in relation to
the Engine and any Part; and
(ii) any incident or maintenance issue involving the Engine
or any Part about which the Lessee must by law or
regulation notify the Aviation Authority.
12.3 Inspection.
(a) The Lessee will permit Lessor or its agent, at all times
reasonably determined by Lessee and upon reasonable notice
from Lessor, except in the case of emergency, to enter upon
any land or premises where the Engine or Part is situated or
upon any Aircraft to inspect or survey the condition of the
Engine or any Part (including all Technical Documents and all
technical reports or recordings made in connection with any
borescope inspection performed by Lessee);
(b) The cost of such inspections and surveys will be paid by the
Lessor, unless such inspection reveals that Lessee is not in
material compliance with the terms of this Agreement, in which
case, such cost will be paid by Lessee.
(c) Lessor will have no duty to make any such inspection and will
not incur any liability or obligation by reason of making or
not making such inspection.
12.4 Lawful and Safe Operation. The Lessee will:
(a) not use or operate the Aircraft, the Engine or any Part:
(i) in violation of any applicable law or regulation or in
violation of any applicable airworthiness certificate,
license or registration or mandatory requirement issued
by or on behalf of the Aviation Authority or any other
country or authority which may for the time being be
applicable to the Aircraft or the Lessee; or
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(ii) in the case of the Engine and any Parts, for any purpose
for which it is not designed or reasonably suited, or
outside the tolerances and limitations for which it was
designed and Lessee will ensure that the Engine is
operated in accordance with the Technical Documents and
any regulation of the Aviation Authority; or
(iii) so as to cause or permit the Aircraft, Engine or any
Part to be employed in any manner or to be located or
operated in any country which would render it liable to
confiscation, forfeiture, seizure or destruction
except, in the case of both (i) and (ii), for immaterial or
non-recurring violations with respect to which prompt
corrective measures are taken upon Lessee's discovery thereof;
(b) not cause or permit the Engine or any Part or the Aircraft to
be located in or operated:
(i) in any area excluded from coverage by insurance required
by Clause 13, except in the case of a requisition by the
State of Registration or any agency or instrumentality
thereof where Lessee obtains an indemnity in lieu of
insurance from such State of Registration, agency or
instrumentality; or
(ii) in any recognized or threatened area of hostilities
unless fully covered by war-risk insurance required by
Clause 13.
(c) ensure that neither the Engine nor any Part nor the Aircraft
is employed at any time in carrying goods which are illegal,
illicit, prohibited or contraband in any country in which it
is located or operated from time to time.
12.5 Manufacturers' and Suppliers' Warranties. The Lessee will not do or
omit to doing anything which may prejudice any right which Lessor
may have in respect of the Engine or any Part against the
manufacturer or supplier of the same.
12.6 Holding Out. The Lessee will not at any time represent or hold out
Lessor, the Security Trustee or the Agent (and will use its best
endeavors to procure that none of Lessor, the Security Trustee or
the Agent is at any time represented or held out by any Sub-lessee)
as being in any way connected or associated with any operation of
the Aircraft, the Engine or any Part or any operation of carriage
undertaken by the Lessee or any Sub-lessee or as in any other way
having any interest in the Engine except as owner or mortgagee or
lessor.
12.7 Title, Registration, Certification and Consents.
(a) Title to the Engine will remain vested in Lessor during the
Lease Period.
(b) Except as otherwise expressly provided herein, title to each
Part wherever located will remain vested in Lessor until
replaced by a
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part which fulfills the requirements for replacements of
Clause 12.14 (Obligation to Replace) and has become the
property of Lessor free from all Security Interests (except
Permitted Liens).
(c) The Lessee will ensure that, unless otherwise permitted
hereby, the Aircraft is registered in the national register of
civil aircraft in the State of Registration and the Lessee
will not do and will use all reasonable endeavours to procure
that no third party does any act or thing which might
prejudice or cancel such registrations.
(d) The Lessee will at all times maintain in full force and effect
and, if necessary, will procure that any operator of the
Engine will at all times maintain in full force and effect all
necessary certificates, licenses, permits and authorizations
("Licenses") required by applicable laws and regulations for
the use and operation of the Aircraft and/or Engine,
including, without limitation, a Certificate of Airworthiness
in the public transport (passenger) category issued by the
Aviation Authority in respect of the Engine and/or the
Aircraft. Notwithstanding the foregoing sentence, where the
Aviation Authority has withdrawn any such Certificate of
Airworthiness in respect of all aircraft of the same model as
the Aircraft, Lessee will comply with all directions of the
Aviation Authority imposed upon it in relation to such
withdrawal.
12.8 Disposal of and Security Interest over the Engine.
The Lessee shall not attempt or hold itself out as having any power
to sell, charge, lease or otherwise encumber or dispose of the
Engine (save as provided in Clause 12.12 (Sub-Leasing and Repairs),
nor create, incur or suffer to exist any Security Interest or
possessory claim over the Engine or any Part (other than Permitted
Liens).
12.9 Prevention of Arrest and Discharge of Security Interests.
(a) The Lessee shall not do, and will use its best endeavours to
prevent, any act which could reasonably be expected to result
in the Engine, any Part or the Aircraft, being arrested,
confiscated, seized, taken in execution, impounded, forfeited,
subjected to distress, detained in exercise or purported
exercise of any possessory lien or other claim or otherwise
taken from the possession of the Lessee.
(b) If the Engine becomes subject to arrest, confiscation,
seizure, taking, impounding, forfeiture, subjection, or
detention occurs and unless arising by, through or under
Lessor, the Lessee will give the Lessor immediate notice
thereof, and will, at the Lessee's expense take prompt steps
to secure the release of the Engine, any Part concerned or the
Aircraft, and the Lessee will be responsible for discharging
promptly each and every liability in connection with any such
process, claim or lien without regard to whether or not the
Lessee is in possession of the Engine, Part or Aircraft.
12.10 No pledging of credit. The Lessee will not pledge the credit of
Lessor, the Security Trustee, the Agent or any Bank for any
maintenance, service, repairs, overhauls of, modifications to,
changes or alterations in the Engine, any Part or the Aircraft or
for any other purpose whatsoever.
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12.11 Protection of rights in the Engine.
(a) The Lessee will not do or permit to be done any act or thing
which might reasonably be expected to jeopardise the title,
rights and interest of Lessor, the Security Trustee, the Agent
or the Banks in the Engine or any Part and/or omit to carry
out any act which might prevent that title and those rights
and interest from being jeopardised.
(b) Without prejudice to the generality of the foregoing, the
Lessee will at its own cost and expense, do all acts and
things which Lessor may require to preserve the title, rights
and interest of Lessor to and in the Engine and each Part and,
in particular, but without limitation, in the event of any
law, regulations or treaties being made or becoming operative
in the State of Registration relating to recognition of rights
in engines and which may apply to the Engine, the Lessee will,
at no cost to Lessor, promptly do and join with Lessor in
doing all such acts or things as may be necessary to perfect
recognition of the title, rights and interest of Lessor, the
Security Trustee in respect of the Engine.
12.12 Subleasing and Repairs.
(a) The Lessee shall:
(i) not sub-lease, charter or otherwise deliver, transfer or
relinquish possession of the Engine except in the
following circumstances:
(1) Repairs and Modifications where the Engine is
delivered to the Engine Manufacturer or to any
other person for testing, overhaul, service,
repair or maintenance work to be carried out upon
it or for modification, alterations or changes
permitted under this Agreement to be carried out
thereon (it being understood that delivery may be
accomplished by qualified common carrier);
(2) Sub-leases where the Engine is sub-leased in
compliance with clause 12.12(b);
(3) CRAF where possession of the Engine is transferred
to the United States government pursuant to the
Civil Reserve Air Fleet Program established
pursuant to 10 U.S.C. ss. 9511-13 or any similar
or substitute program ("CRAF"), provided that
Lessee has given Lessor prompt written notice of
such transfer;
(4) Installation where the Engine is installed on an
airframe owned by or conditionally sold or leased
to Lessee or any Sub-lessee, provided that (A)
Lessee shall have provided to Lessor, prior to
installation of the Engine, relevant extracts from
any lease, conditional sales agreement, mortgage
or any other agreement pursuant to which the
airframe is owned, conditionally sold, mortgaged
or leased to Lessee or
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any Sub-lessee certified by an authorized officer
of Lessee, whereby the lessor, seller, mortgagee
or other party holding an interest in the airframe
as the case may be, agrees for the benefit of
Lessor that neither it nor its successors or
assigns will acquire or claim any right, title or
interest in, or lien on, the Engine by reason of
the Engine being installed on such airframe or (B)
if Lessee or such Sub-lessee fails prior to
installation of the Engine to provide such
extracts thereof to Lessor, the Engine will be
deemed to have suffered a Total Loss as of the
date of such installation; and
(5) Transfer to U.S. Government where possession of
the Engine is transferred to the United States
government pursuant to a sub-lease that complies
with clauses (b)(i), (ii) and (iii) below and
where the Sub-lessee's obligations are in effect
guaranteed or supported by the full faith and
credit of the United States of America.
(ii) ensure that no Part is removed from the Engine except
where the Part has become unserviceable, worn out, lost,
destroyed, damaged beyond reasonable repair or otherwise
unfit for use or which, in accordance with the Engine
Management Programme or the Engine Manual (as the case
may be) has become time expired or which requires
repair, overhaul, modification or testing if the Lessee
is to fulfill its obligations under Clause 12.13
(Maintenance) and 12.14 (Obligation to replace or repair
etc.) or which has been confiscated but only in each
case if it is promptly replaced by a part complying with
Clause 12.14 (Obligation to replace and repair etc.)
(b) The Lessee will not (and will procure that any Sub-Lessee does
not) sub-lease the Engine pursuant to sub-paragraph (a)(i)(2)
above unless the sub-lease is in form and substance reasonably
acceptable to Lessor or:
(i) Consistency of Terms the terms and conditions of the
sub-lease are, taking account of the term of the
sub-lease and other prevailing circumstances, consistent
with those contained in this Agreement (provided that
the sub-lease will not permit further sub-leasing) and,
without limiting the generality of the foregoing, the
term of the sub-lease (including any option of the
Sub-lessee to renew or extend such term) is so expressed
that it cannot exceed the Lease Period;
(ii) Subordination of Sub-Lease the sub-lease is expressly
subject and subordinate to this Agreement and the
interests of the Sub-lessee are subject and subordinate
to the interests of Lessor, in particular but without
limitation the sub-leasing of the Engine thereunder will
not prevent or prejudice the
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due performance by the Lessee of its obligations in
respect of the return of the Engine to Lessor pursuant
to Clause 19 (Re-Delivery);
(iii) Protection of Lessor's interest in the Engine the Lessee
demonstrates to Lessor's reasonable satisfaction, if
required to do so, that the priority, validity and
enforceability of Lessor's rights, title and interest in
the Engine or any Part will not be adversely affected by
the sub-lease and that all reasonable steps have been
taken to ensure the continued priority, validity and
enforceability of such right, title and interest
including recording such sub-lease as necessary or
appropriate in the State of Registration to evidence and
protect Lessor's interest;
(iv) Insurances the Insurances are in full force and effect
in accordance with the terms of Clause 13 (Insurance)
and, if the Sub-lessee is to maintain the Insurances
during the term of the sub-lease, the Lessee will have
furnished and from time to time will furnish to Lessor
all such documents, evidence and information relating to
such Insurances which the Lessee is required to furnish
or cause to be provided under this Agreement and which
Lessor may reasonably require in order to confirm that
the Insurances are being so maintained by such
Sub-lessee and are in full force and effect; and
(v) English Law the sub-lease is governed by English Law;
(vi) Good Repute the Sub-lessee is an Approved Air Operator.
(c) The rights of any Sub-lessee will be subject and subordinate
to the ownership interest of the Lessor, and to all terms of
this Agreement and the Lessee shall notwithstanding any
sub-lease remain liable to Lessor in respect of all the
Lessee's obligations, undertakings and liabilities hereunder
to the same extent as if such sub-lease had not occurred.
(d) The Lessee agrees that Lessor may require that all rent and
other sums payable and all rights under such sub-lease be
assigned to Lessor as collateral security for the obligation
of Lessee hereunder, provided that so long as no Termination
Event or Potential Termination Event has occurred and is
continuing, Lessee may retain all rent and other sums (or
Lessor shall pay over same to Lessee promptly following its
receipt thereof) and may exercise all rights in respect
thereof).
(e) Any "wet lease" of the Aircraft to which the Engine is
installed shall not violate this Clause 12.12, provided that
Lessee retains operational control of the Aircraft thereunder.
12.13 Maintenance. The Lessee will at its own expense at all times during
the Lease Period procure that the Engine and all the Parts is/are
operated, maintained, serviced, repaired, overhauled, inspected,
tested and modified by personnel properly qualified by the Aviation
Authority so as to:
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(a) be in accordance with the Maintenance Programme and the Engine
Maintenance Programme;
(b) keep the Engine and the Parts in as good an operating
condition as at Delivery, (ordinary wear and tear excepted) so
that, in any event, its/their condition would comply with the
requirements for a valid Certificate of Airworthiness for the
Aircraft issued by the Aviation Authority;
(c) comply with all maintenance, service, repair, overhaul,
inspection and testing regulations, directives and
instructions that are made mandatory by the Aviation Authority
and the Engine Manufacturer and all other similar requirements
that are applicable to the Engine and any of the Parts and all
of the same will be due in accordance with the applicable
manuals and bulletins published by the relevant manufacturer;
(d) comply with all applicable laws and regulations of the State
of Registration and any other country or territory to, from,
in or over which the Aircraft may be operated or in which the
Aircraft may be operated or in which the Engine or any Part be
located from time to time except for immaterial or
non-recurring violations with respect to which prompt
corrective measures are taken upon the Lessee's discovery
thereof; and
(e) remedy any defect shown to be required by any inspection or
survey carried out under Clause 12.3 (Inspection) so as to
ensure that the Engine is placed in the condition required by
this Clause 12.13;
12.14 Obligation to Replace.
(a) Lessee will promptly replace (or cause to be replaced) any
Part which has become unserviceable, worn out, lost,
destroyed, damaged beyond reasonable repair or otherwise unfit
for use, time expired, or which requires repair, overhaul,
modification, repetitive inspections or testing, if the Lessee
is to fulfill its obligations under Clause 12.14
(Maintenance), or which has been confiscated, with an item of
the same make and model or an improved or advanced version
thereof, and having the same or greater value and utility to
the Part replaced assuming such replaced Part were in the
condition and repair required to be maintained by the terms
hereof.
(b) Lessee will procure that all replacements made under paragraph
(a) above will become the property of the Lessor free of all
Security Interests (except Permitted Liens) on or before
installation on the Engine.
(c) The Lessee will not without the prior written consent of the
Lessor:
(i) transfer or relinquish possession, custody or control of
any Part; or
(ii) install any Part in any engine unless such engine is
owned by the Lessor unless the relevant Part has been
replaced by a part
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which fulfills the requirements of sub-paragraph (a) and
(b) above.
(d) All Parts removed from the Engine will remain the property of
the Lessor no matter where located until such time as they are
replaced in accordance with Clauses 12.14(a) and (b).
12.15 Transportation and Storage of non-installed Engine and Parts. Lessee
will ensure that the Engine or any Part which is not installed on
the Aircraft or in the Engine, as the case may be, is properly and
safely transported or stored in accordance with the Maintenance
Manual and kept free from Security Interests (other than Permitted
Liens).
12.16 Modifications. The Lessee may carry out such additions to the
Engine, with the approval of the Aviation Authority and in the case
of a modification with the prior approval of Lessor, as the Lessee
considers desirable in the conduct of its business, provided that no
such addition materially or adversely alters the specifications or
structure of the Engine, impairs the performance, utility or
condition of the Engine, is contrary to the Engine Manufacturer's
specifications, prejudices the Insurances or recovery thereunder,
adversely affects the ability to replace or interchange parts, or is
made with parts which cannot be removed without impairing the
condition or airworthiness of the Engine or materially diminishing
the value or altering the specification or structuring of the
Engine.
12.17 Notices of Title.
(a) Form of Notice The Lessee will maintain an engraved fire-proof
notice of title on the Engine of reasonable size and shape
containing the following words:
"This Engine is owned by RRPF Engine Leasing Limited."
The parties agree that the placard appearing on the Engine at
Delivery will be deemed to satisfy this Clause 12.17 if it is
so maintained throughout the Lease Period.
(b) Concealment of Notices The Lessee will ensure that the notice
referred to in paragraph (a) above is legible and not covered,
painted over or otherwise concealed.
(c) Other names or notices
The Lessee will procure that except for:
(i) the notice of title referred to in this Clause 12.17;
and
(ii) the colours and insignia of the Lessee or the Engine
Manufacturer,
the name of no other person will be placed anywhere on the
Engine or any Part in such a way as might reasonably be
supposed to indicate that that person owns or has an interest
in the Engine or that Part
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12.18 Technical Documents
(a) The Lessee will maintain accurate, complete and current
records (including performance related information and trend
monitoring data from time to time required by the Engine
Management Programme) of all flights by the Aircraft and of
all maintenance, modifications and repairs carried out to the
Engine and any Part, and will maintain all other records, logs
and documents which are required to be maintained in respect
of the Engine by the Aviation Authority.
(b) The records so kept will conform with the requirements from
time to time in force of the Aviation Authority.
(c) The records so kept will be part of the Technical Documents
and will be the property of Lessor and at the end of the Lease
Period the Lessee will (if so required) by any purchaser in
accordance with normal practice) deliver the same to Lessor.
Lessee will be entitled to make a copy of the same.
(d) Each Technical Document will be in English (or accompanied by
an English translation certified as accurate by an authorised
officer of the Lessee.)
12.19 Non-Discrimination
In complying with the provisions of this Clause 12 the Lessee will not
discriminate against the Engine or any Part in favour of any other engines
or parts of the same type which are in the possession of and/or which are
used by the Lessee.
12.20 Replacement of Part
Lessee may install any part upon the Engine not meeting the terms of
Clause 12.14 above, where it would result in an unreasonable disruption of
the operation of an Aircraft and/or the business of Lessee to ground an
Aircraft until a part meeting the terms of Clause 12.14 above becomes
available for installation on the Aircraft provided:
(i) the owner and/or lessor as owner and lessor of that part and the
mortgagee, as mortgagee of the part, has agreed in writing for the
benefit of Lessor (not specifically, but generally as a lessor of
the Engine to Lessee) that it will not acquire or claim, as against
Lessor, any right, title or interest in the Engine as a result of
such part being installed on the Engine at any time while the Engine
is subject to this Lease; and
(ii) as soon as reasonably possible after installation of the part on the
Engine, Lessee removes any such part and replaces it with the Part
replaced by it or by a part complying with the terms of Clause
12.14.
If the part meets the terms of this Clause 12.20, Lessor agrees that
neither this Lease nor any Lessor Security Interest will prejudice the
interests of the owner, lessor or mortgagee of such part.
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12.21 Removal of Part
Lessee may remove any Part from the Engine for installation on an
engine of the same make and model number owned or leased by Lessee
when there is not then available to Lessee at the time and in the
place a part identical to the Part for installation on such engine
and it would result in an unreasonable disruption of the operation
of an aircraft and/or the business of Lessee to ground an aircraft
until such a part becomes available for installation on such engine;
provided, however, the owner or lessor of such engine or the
aircraft upon which such engine is installed has agreed in the
relevant lease or similar document that the installation of such
Part on such engine or aircraft will not, upon such installation,
become the property of such lessor or subject to any Security
Interest and provided further that the Lessee remove such part from
such engine and re-install it upon the Engine as soon as reasonably
possible.
13. INSURANCE
13.1 Insurance definitions. In this Agreement:
(a) "Approved Broker" means a nationally recognized insurance
broker designated by Lessee;
(b) "Approved Underwriter" means an insurer of internationally
recognized reputation and responsibility with substantial
capacity for insurance underwriting;
(c) "Hull Insurances" means the Insurances required by the terms
of Clauses 13.3(b) and (c);
(d) "Insurers" means the underwriters or insurance companies with
whom any of the Insurances is effected;
(e) "Liability Insurances" means the insurances required by the
terms of Clause 13.3(d).
(f) "Property Damage" includes injury to, destruction of, or the
loss of use of property;
(g) "Required Amount" means [***]
(h) "Required Liability Amount" means $350,000,000; and
(g) "Spare Engine Insurance" means the Insurances required by the
terms of Clause 133(a).
13.2 Scope of Insurances. On or before Delivery and throughout the Lease
Period and in the case of any products (completed operations)
liability insurance for an additional period of two years after the
termination of the Lease Period for whatever reason (except that
Lessee's obligation with respect to products (completed operations)
liability insurance during such additional period shall be only to
have each Indemnitee named as an additional insured under whatever
products liability insurance it then maintains), the Lessee will, at
its expense, take out and at all times maintain
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in fun force and effect insurances through Approved Brokers with
Approved Underwriters in the names of Lessor and Lessee as their
interests may appear against
(a) loss or damage to the Engine; and
(b) any liability for:
(i) injury (including bodily injury and personal injury) to
passengers and third parties;
(ii) damage (including Property Damage) to baggage, cargo,
mail, public and private property (whether owned by
cargo consignors or third parties); and
(iii) any other claims customarily insured against under
comprehensive airline legal liability insurance.
13.3 Types of Policy. Without prejudice to the generality of sub-clause
13.2 (a) above, the Lessee will effect and maintain or will procure
that there is effected and maintained:
(a) At all times when the Engine is not insured as part of the
Aircraft under Clause 13.3(b) and (c) spare engines all risks
insurance (including war and allied perils to the extent
commonly available and customarily carried by major U.S.
commercial air carriers) covering all risks of physical loss
or damage howsoever occasioned in respect of the Engine or any
Parts (whether installed on the Engine or, for the time being,
removed from the Engine), in an amount not less than the
Required Amount on an agreed value basis, whether or not the
Engine or any Part is running or being worked upon at the time
of such physical loss or damage;
(b) at all times when the Engine is installed on an Aircraft, an
aviation hull all risks cover on the Engine for its use on the
Aircraft for an amount in addition to the agreed value of the
Aircraft which will cover the Engine for not less than the
Required Amount on an agreed value basis; and
(c) at all times when the Engine is installed on an Aircraft if
Lessee (or any Sub-lessee) shall at any time operate or
propose to operate such Aircraft in any area of recognized or
threatened hostilities, or if war-risk, hijacking or allied
perils insurance is maintained by Lessee (or such Sub-lessee)
with respect to other aircraft owned or operated by Lessee (or
such Sub-lessee) on the same routes or in such areas, or if
such Aircraft is operated outside the United States or Canada,
war-risk, hijacking and related perils insurance of
substantially the same type carried by major United States
commercial air carriers operating the same or comparable
models of aircraft on similar routes or in such areas and in
no event in an amount less than (x) the Required Liability
Amount with respect to liability coverage and (y) the values
stated in Clause 13.3(b) with respect to hull coverage, and
such insurance shall, to the extent available, cover the
perils of (i) war, invasion acts of foreign enemies,
hostilities (whether war be declared or not), civil war,
rebellion, revolution, insurrection,
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martial law, military or usurped power or attempts at
usurpation of power; (ii) strikes, riots, civil commotion or
labor disturbances; (iii) 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; (iv) any malicious act
or act of sabotage; (v) confiscation, nationalization,
seizure, restraint, detention, appropriation, requisition for
tide or use by or under the order of any government (whether
civil, military or de facto) or public or local authority; and
(vi) hijacking or any unlawful seizure or wrongful exercise of
control of such Aircraft or the Engine or of crew in flight
(including any attempt at such seizure or control) made by any
person or persons on board such Aircraft acting without the
consent of Lessee (or such Sub-lessee); and
(d) comprehensive airline legal liability including general third
party legal liability cover being coverage including but not
limited to bodily injury, personal injury and Property Damage
for passengers and third parties and also including products
liability for not less than the Required Liability Amount
covering each Indemnitee. In addition the cover shall include,
to the extent commonly available and customarily carried by
major U.S. commercial air carriers, all claims for risks
excluded by the War Hijacking and Other Perils Exclusion
Clause AVN48B (or any equivalent clause).
13.4 General Provisions of all Insurances. Lessee will procure that each
insurance policy specified in Clause 13.3:
(a) covers at least such risks as are customarily insured against
in the airline business under such policy;
(b) is in accordance with sound United States domestic airline
practice;
(c) waives any rights the Insurers may have to set-off or
counterclaim against or reduce any insurance proceeds due and
payable to the Lessor (or, is applicable, the Security
Trustee) as loss payee other than unpaid premiums in respect
of the Engine;
(d) contains a provision waiving any and all rights of subrogation
the Insurers have or may acquire against any Indemnitee and a
provision requiring the Insurers not to exercise rights of
subrogation against any third party without the consent of the
Indemnitees, such consent not to be unreasonably withheld;
(e) contains a provision whereby such policy in respect of any
Indemnitee 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 such policy provided that the
Indemnitee so protected has not caused contributed to or
knowingly condoned the said act or omission;
(f) contains a provision requiring the Insurers to provide the
Agent and Lessor with a written notice of any cancellation of
such insurance or any material modification of such insurance
and that such cancella-
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tion or modification will not be effective as to the interest
and/or benefits of any Indemnitee for 30 days (but 7 days or
such lesser period as may be customarily available as respects
war risks insurance) after the written notice of such
cancellation or modification is received by the Agent and the
Lessor as the case may be; and
(g) operates on a world wide basis, subject to war exclusions.
13.5 Provisions of Spares Insurance and Hull Insurance Lessee will
procure that each insurance policy specified in Clause 13.3(a), (b)
and (c):
(a) notes the interest of the Lessor (and, if notified by Lessor
names the Security Trustee, the Agent and the Banks) as
additional insureds without obligation to pay, but with the
right to pay, premiums and premium installments;
(b) contains an endorsement naming the Lessor (or, if notified, by
Lessor, Security Trustee) as sole loss payee for the Required
Amount of the Engine, if the amount payable by the Insurers
upon any claim is less than $250,000, the Lessee will be loss
payee unless and until the Agent notifies the Approved Broker
or the Insurers that a Termination Event has occurred and is
continuing;
(c) provides in the event of separate insurances being arranged to
cover the "All-Risk" hull insurance and the "War-Risk" and
related insurance, that the underwriters subscribing to such
insurances agree to a 50/50 claims funding arrangement in the
event of any dispute as to which insurance is applicable; and
(d) provides for deductibles which are not in excess of the
standard in the airline industry available to major United
States commercial air carriers.
13.6 Provisions of Liability Insurances. Lessee will procure that
insurance policy specified in Clause 13.3(d):
(i) names each of the Indemnitees as additional insured without
obligation to pay, but with the right to pay, premiums and
premium installments thereunder;
(ii) contains a severability of interests clause which provides
that the policy or policies will operate in all respects (save
only for the limit of liability) as if a separate policy had
been issued to each insured thereunder;
(iii) is primary without right to contribution from any other
insurance; and
(iv) has deductibles in respect of passengers' baggage and in
respect of cargo, not in excess of standard deductibles in the
airline industry available to major United States airlines.
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13.7 Insurance Covenants. During the Lease Period the Lessee will:
(a) not without the prior consent of the Lessor consent or agree
to any act or omission which renders any of the Insurances
invalid, void, voidable or unenforceable;
(b) not cause or permit the Engine or the Aircraft to be used for
any purpose or in any manner inconsistent with the provisions
of any warranties, express or implied, outside the
geographical limits of or otherwise outside the cover provided
by, any Insurance or to be used or kept for any purpose or, in
the case of the Aircraft, to carry any cargo in any manner or
in any place not permitted by any Insurances or in either case
in any manner contrary to applicable law;
(c) comply with the terms of each Insurance and duly pay all
premiums, calls, contributions or other sums of money from
time to time payable in respect of the Insurances;
(d) on request of Lessor in advance of any renewal date, procure
that the Approved Brokers will promptly confirm in writing to
the Agent and the Lessor as and when the renewal of all the
Insurances is effected, and in any case, no later than the
relevant renewal date;
(e) forthwith upon (and in any event no later than 5 days after)
the effecting of any Insurances, produce certificates
evidencing and describing in reasonable detail those
Insurances;
(f) if it receives payment of any moneys in respect of Insurances
and the Engine save as provided in this Agreement, forthwith
pay over the appropriate amount, if any, to the Lessor and
until paid over such moneys will be held in trust for the
Lessor by the Lessee;
(g) procure that the Approved Brokers will furnish the Agent and
the Lessor with a letter or letters of undertaking and a
certificate or certificates of insurance in such form as may
from time to time be reasonably required by the Lessor in
accordance with market practice for aircraft and jet engine
financings for major United States airlines; and
(g) comply with all legal requirements as to insurance of the
Aircraft and the Engine which may be imposed by the laws of
the State of Registration or any state to, from or over which
the Aircraft shall be flown insofar as they affect or concern
the operation of the Aircraft and in particular those
requirements compliance with which is necessary to ensure that
(i) the Aircraft or Engine is not in danger of detention or
forfeiture; (ii) the Insurances remain valid and in full force
and effect and (iii) the interests of the Indemnitees in the
Insurances and the Engine or any Part thereof are not thereby
materially prejudiced.
13.8 Application of insurance proceeds.
(a) Any proceeds of Hull Insurances and Spares Insurances in
respect of the Engine will be applied as follows:
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(i) In the case of a Total Loss, so much of such payments as
shall be required to fulfill Lessee's obligation under
Section 14.2 shall be paid as provided therein and the
balance, if any, of such payment remaining thereafter
shall be paid to Lessee.
(ii) In the case of damage not constituting a Total Loss,
such payment shall be applied in payment (or to
reimburse Lessee) for repairs or for replacement
property in accordance with the terms of this Lease, if
not already paid for by Lessee, and any balance
remaining after compliance therewith with respect to
such loss shall be paid to Lessee provided that, prior
to the repair of the Engine, Lessor may, but shall have
no obligation to, disburse insurance proceeds held by it
to Lessee.
(b) Any amount referred to in sub-Clause (a) above which is
payable or creditable to or retainable by Lessee shall not be
paid or credited to or retained by Lessee if, at the time of
such payment, credit or retention, a Termination Event or
Potential Termination Event shall have occurred and be
continuing hereunder but shall be paid to and held by Lessor
as security for the obligations of Lessee under this Lease and
applied against Lessee's obligations hereunder as and when
due, and at such time as there shall not be continuing any
such Termination Event or Potential Termination Event, such
amount shall be paid to Lessee to the extent not previously
applied in accordance with the terms hereof.
13.9 Additional Insurances. Nothing herein shall limit or prohibit Lessee
from maintaining additional insurance provided that no such
insurance may be maintained that would limit or prejudice the
coverage of any Insurance required to be maintained by Lessee
hereunder.
13.10 Power of Lessor to Ground Aircraft and to Insure. If the Lessee
fails to effect or maintain in full force and effect in accordance
with the provisions of this Clause 13 any of the Insurances required
to be effected by the Lessee hereunder, or if the Lessee operates
the Engine in a manner outside the scope of the Insurances: (1) the
Lessor may by written notice to the Lessee require the Lessee to
ground the Aircraft and/or cease to operate it in such manner;
and/or (2) the Lessor, the Agent or the Security Trustee will be
entitled (but not bound):
(a) to pay any premiums or to effect any such Insurances which the
Lessee has so far failed to effect or otherwise to remedy such
failure in such manner as Lessor or the Security Trustee
considers appropriate or to effect any additional insurances
which the Agent or the Security Trustee may consider necessary
to protect the interests of the Indemnitees under this
Agreement and in the Engine and any amount expended by Lessor
or the Agent or the Security Trustee in effecting such
Insurances or such additional insurances will be repayable by
the Lessee to Lessor together with interest thereon at the
Default Rate from the date of such expenditure to the date of
payment thereof by the Lessee (both before and after any
relevant judgment); and/or
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(b) to require the Aircraft or the Engine to remain at any airport
or (as the case may be) to proceed to and remain at any
airport designated by Lessor until such failure is remedied to
the satisfaction of Lessor.
13.11 Currency. All insurances and reinsurances effected pursuant to this
Clause 13 and all premiums in respect thereof shall be payable in
dollars.
13.12 Indemnification by Government in Lieu of Insurance. During any
period that the Engine shall have been requisitioned for use by, or
possession of the Engine shall have been transferred to, the United
States government, Lessor agrees to accept, in lieu of insurance
against any risk with respect to the Engine described in Clause 13,
indemnification from, or insurance provided by, the United States
government against such risk in any amount that, when added to the
amount of insurance, if any, against such risk that Lessee (or any
Sub-lessee) may continue to maintain, in accordance with this Clause
13, during the period of such requisition or transfer, shall be at
least equal to the amount of insurance against such risk otherwise
required by this Clause 13. Any such indemnification or insurance
provided by the United States government shall provide protection no
less favorable to the Lessor, after taking into account any
insurance the Lessee or any Sub-lessee may continue to maintain,
than insurance coverage that would comply with the terms of this
Clause 13. Lessee shall promptly furnish to Lessor any information,
documentation or certificates relating to such indemnity or
insurance as Lessor shall reasonably request.
14. TOTAL LOSS
14.1 Total Loss Definitions. In this Agreement
(a) "Total Loss" means:
(i) the actual, constructive, arranged, agreed or
compromised total loss of the Engine (including any
damage to the Engine which results in an insurance
settlement on the basis of total loss); or
(ii) the destruction to, or the damage beyond repair to or
the rendering permanently unfit for normal use for any
reason whatsoever of the Engine; or
(iii) the Compulsory Acquisition of the Engine; or the
requisition for use or hire of the Engine by any
governmental authority other than the United States
government for a period exceeding 60 days; or
(iv) the hi-jacking of the Aircraft, the theft or
disappearance of the Engine, resulting in loss of
possession by the Lessee for a period exceeding 30 days;
or
(v) an event described in Clause 12.12(a)(i)(5);
(b) "Total Loss Date" means the earlier of the date upon which
Loss Proceeds not less than the Required Amount have been
received by Lessor or the Security Trustee with respect to a
Total Loss and:
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(i) in the case of an actual total loss or destruction,
damage beyond repair, or being rendered permanently
unfit, noon (London time) on the date on which such
loss, destruction, damage or rendition occurs (or, if
the date of loss or destruction is not known, the date
on which the Engine or the Aircraft upon which the
Engine has been installed was last heard of);
(ii) in the case of a constructive, arranged, agreed or
compromised total loss, whichever will be the earlier of
(1) the date on which notice claiming such total loss is
issued to the Insurers or Approved Brokers, and (2) the
date on which such loss is agreed or compromised by the
Insurers;
(iii) in the case of Compulsory Acquisition or requisition for
use or hire, the expiration of the said period of 60
days (or, if earlier, the date on which the Insurers
make payment on the basis of a total loss);
(iv) in the case of hi-jacking of an Aircraft upon which the
Engine has been installed, theft or disappearance, the
final day of the said period of 30 days; or
(v) in the case of an event described in Clause
12.12(a)(i)(5), the date on which such event has
occurred;
(c) "Total Loss Payment Date" has the meaning set out in Clause
14.2;
(d) "Loss Proceeds" means the proceeds of any insurance or any
compensation for requisition or similar payment and in respect
of a Total Loss, less any expenses incidental to the
collection thereof.
14.2 Payment on Total Loss. If the Engine becomes a Total Loss during the
Lease Period, the Lease Period will terminate on the Total Loss Date
(but without prejudice to the continuing obligations of the Lessee
in respect of payments and indemnities and otherwise) and the Lessee
will upon the earlier of the following dates ("Total Loss Payment
Date"):
(a) the date on which the Loss Proceeds are received by the Lessor
or Security Trustee, as the case may be; or
(b) 30 days after the Total Loss Date,
pay or procure the payment to Lessor of an amount equal to all
amounts of Rent and any other sums due to Lessor as of the Total
Loss Payment Date and all amounts of Rent that would have fallen due
after the Total Loss Payment Date and during the Lease Period but
for termination as aforesaid (assuming Rent accrued on a daily basis
hereunder and that each installment of Rent is calculated at the
amount prevailing for the Rent Period immediately prior to the Total
Loss Date) less the amount of the Loss Proceeds actually
beneficially received by Lessor or the Security Trustee, as the case
may be, as at that date and less a discount on such sum for early
settlement at a rate equal to LIBOR plus 0.86%.
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14.3 Proceeds. Upon the receipt of the Loss Proceeds by the Lessor or the
Security Trustee, as the case may be, (i) Lessor shall promptly pay
(or procure that the Security Trustee pays) to Lessee the amount, if
any, that the Loss Proceeds exceeds any amount remaining to be paid
to Lessor by Lessee pursuant to Clause 14.2, or (ii) if the Lessee
has already paid to Lessor the amounts required by Clause 14.2,
Lessor will promptly pay to the Lessee the amount of the Loss
Proceeds. Promptly after the date that Lessor or the Security
Trustee, as the case may be, has received the amounts required by
Clause 14.2, Lessor will sell the Engine to Lessee in accordance
with the terms set out in Schedule 4
14.4 Claim. Each of Lessor and the Lessee will, upon the request of the
other, promptly execute such documents as may be required to enable
the other to abandon the Engine to the Insurers and/or claim a
constructive total loss and will give all possible assistance in
pursuing the said claim.
14.5 Continuation of Payment of Rent. Notwithstanding anything to the
contrary contained in this Agreement, and notwithstanding
termination of the Lease Period pursuant to Clause 14.2 (Payment on
Total Loss), if the Engine becomes a Total Loss the Lessee will
continue to pay to Lessor amounts equal to the Rent payable under
Clause 8.1 (Obligation to pay Rent) at the times therein mentioned
until payment of the amounts payable under Clause 14.2 (Payment on
Total Loss) in full as if the Lessee had continued to have the use
of the Engine until such payment.
14.5 Surviving Parts. If a Total Loss of the Engine occurs where any Part
or Parts (in this Clause 14.5 "Surviving Parts") have not become a
Total Loss, Lessor will, subject to any rights of the Insurers, at
the request of the Lessee, but subject always to any applicable
rights of salvage, if all amounts due and payable to Lessor under
this Agreement have been paid, transfer title to those Surviving
Parts to the Lessee, free and clear of all Lessor's Security
Interest.
15. REQUISITION FOR HIRE
Notwithstanding any other terms of this Agreement and to the exclusion of
any implication to contrary effect it is agreed that:
(a) if the Engine or the Aircraft is requisitioned for hire by any
governmental or other competent authority during the Lease Period
then, unless and until such requisition results in the Engine
becoming a Total Loss and the Lessee has paid in full all amounts
due under Clause 14.2 (Payment on Total Loss), this Agreement will
(subject to the provisions of Clause 17 germination by Lessor))
continue in full force and effect for the remainder of the Lease
Period subject however to the following provisions that:
(i) the Lessee will be entitled to all requisition hire paid to
Lessor or to the Lessee by such governmental or other
competent authority on account of such requisition provided
that it has paid in full the amount referred to above;
(ii) Lessor will, provided the Lessee has paid all amounts then due
and payable to Lessor and no Termination Event or Potential
Termination Event has occurred, pay any such hire to the
Lessee immediately upon receipt;
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(iii) Lessor will be entitled to all compensation payable in respect
of any change in the structure or condition of the Engine
arising during the period of requisition for hire. Lessor
will, provided the Lessee has paid all amounts then due and
payable to Lessor and no Termination Event or Potential
Termination Event has occurred, apply such compensation in
reimbursing the Lessee for the cost of complying with its
obligations under sub-Clause (iii) above;
(b) if the Engine is under requisition for hire at the Term Date:
(i) this Agreement will (unless otherwise agreed between the
parties hereto) nevertheless be terminated at such end but
without prejudice to the accrued rights of the parties and the
Lessee's obligations in respect of payment and indemnities and
Lessor will be entitled to receive and retain any requisition
hire payable in respect of the period from the expiry of the
Lease period;
(ii) the Lessee will, if it is prevented by reason of the
requisition for hire from redelivering the Engine in
accordance with Clause 19 (Redelivery), be relieved from its
obligation so to do but will consult with Lessor as to the
most convenient method of enabling Lessor to obtain redelivery
of the Engine when the Engine is released from such
requisition.
except that, if Lessee at the Term Date has complied with its
obligations hereunder, Lessor will sell the Engine to the Lessee on
the terms set out in Schedule 4.
16. INDEMNITY
16.1 Indemnity. Subject to the terms of Clause 16.2 below, the Lessee
hereby undertakes and assumes liability for and hereby agrees
(whether or not Delivery occurs) to keep each Indemnitee fully
indemnified at all times (whether during or after the Lease Period)
from and against
(a) any and all losses, liabilities, actions, suits, demands,
claims, proceedings, penalties, fines, damages, judgments and
other sanctions including, but without limitation, in respect
of the bodily injury or personal injury to any person or
Property Damage to or loss of the property of any person or
any loss of any other nature suffered by any person (but
excluding consequential, incidental or special damages and
loss of anticipated profits),
(b) any and all out-of-pocket costs, expenses and disbursements
(including without limitation out-of-pocket legal fees and
expenses and costs of investigations and inspections and the
removal of obstructions) and any costs incurred by any
Indemnitee in the exercise by or of any of its rights and
powers following a Termination Event (but excluding, in any
event, any overhead expenses or salaries),
of whatsoever kind and nature which may be imposed on, suffered by,
incurred by, or asserted at any time (whether before, during or
after the Lease Period) against any Indemnitee (collectively,
"Expenses"), the Engine
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or any Part as a result of or in any way connected with or arising
directly or indirectly from:
(v) this Agreement;
(w) any act or omission which invalidates any of the Insurances
(except to the extent any such invalidation arises from an act
or omission of any Indemnitee);
(x) the design, manufacture, testing, maintenance, repair,
performance, transportation, refurbishment, condition,
service, overhaul, modification, change, alteration, loss,
damage, removal or storage, purchase, ownership, delivery,
non-delivery, import, export, possession, use, operation,
management, control, charging, registration, non-registration,
leasing, of the Engine, the Technical Documents or any Part or
any part installed on the Engine or in any Part (either in the
air or on the ground and whether or not attributable to a
defect in the Engine or any Part thereof or to the design
testing or use thereof or otherwise);
(y) the retaking of possession of the Engine or any Part and
entering upon any premises and the detention of and entry upon
any aircraft for this purpose following a Termination Event.
16.2 Exceptions. Notwithstanding anything contained in Clause 16.1,
Lessee shall not be required to keep any Indemnitee fully
indemnified pursuant to Clause 16.1 with respect to any one or more
of the following:
(a) For any Taxes or loss of Tax benefits or increase in Tax
liability, whether or not covered by Clause 9, or an Expense
the cost of which such Indemnitee has agreed in writing to
bear notwithstanding the provisions hereof;
(b) For any Expense to the extent caused by acts or events
occurring prior to the Delivery of the Engine to Lessee
(unless caused by Lessee during its inspection of the Engine)
or after (but not attributable to acts, events or conditions
occurring or existing prior to) the earlier of the expiration
of the Lease Period or the Lessor's repossession of the
Engine;
(c) For any Expense resulting from, or that would not have been
imposed but for, any Lessor's Security Interest;
(d) For any Expense directly or indirectly attributable to any
transfer (voluntary or involuntary) by or on behalf of Lessor
or any other Indemnitee of any interest in the Engine (except
pursuant to Clause 17) or this Agreement or
(e) For any Expense directly or indirectly attributable to the
gross negligence or willful misconduct of, or the breach of
any representation, warranty or covenants by, or any default
by, any Indemnitee (or their respective directors, officers,
agents, servants or employees acting on behalf of such
Indemnitee).
16.3 Gross-Up. The Lessee agrees that if it is required to make any
payment of
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any kind to any person pursuant to this Clause 16 the Lessee will
make such payment by paying to such person a sum which, after taking
into account all Taxes required to be paid by such person in respect
of the receipt of such payment under the law of any Taxing Authority
(net of any savings in Taxes realized by such person as a result of
the event giving rise to such payment) will be equal to the amount
of such payment required to be made to such person. If any person
receiving a payment from the Lessee pursuant to this Clause 16
realizes a savings in Taxes as a result of the event giving rise to
such payment, and such savings have not taken into account pursuant
to the preceding sentence, such person shall pay to the Lessee an
amount equal to such savings in Taxes plus any additional Tax
savings realized as a result of payment to Lessee pursuant to this
sentence.
17. TERMINATION BY LESSOR
17.1 Termination Events. The parties hereby agree that if any of the
following events occur, it will constitute a "Termination Event
under this Agreement:
(a) Breach by Lessee
(i) the Lessee fails to pay within two (2) Business Day of
the due date any amount payable by it under this
Agreement; or
(ii) any representation or warranty in this Agreement made by
Lessee was on the date hereof untrue in any respect; or
(iii) the Lessee fails to comply with any other provision of
this Agreement applicable to Lessee and (except in the
case of paragraph (c) below or clause (i) above or any
failure which is not capable of being cured) such
failure is not remedied for a period in excess 15
Business Days; or
(b) Insurance
(i) Insurance is not maintained in accordance with the
provisions of this Agreement; or
(ii) the Engine or the Aircraft is operated at a time when
the Insurances are not in effect;
(c) [***]
(d) Consents any authorization, approval, consent of licence or
registration required by the Lessee to be obtained and renewed
by the Lessee to act
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as an air carrier or to operate the Engine and the Aircraft is
adversely modified, withheld, revoked, suspended, withdrawn,
not renewed or cancelled (an "Authorization Default") and such
Authorization Default has a material adverse effect on the
Lessee's ability to perform its obligations hereunder or
materially affects the interest of the Lessor in the Engine;
or
(e) Insolvency the Lessee, or any Subsidiary is deemed for the
purposes of any relevant law to be unable to pay its debts, or
the Lessee or any Subsidiary becomes unable to pay its debts
as they fall due or the value of its assets falls to less than
the amount of its current liabilities, or the Lessee or any
Subsidiary otherwise becomes insolvent, or the Lessee or any
Subsidiary suspends making payments (whether of principal or
interest) with respect to all or any class of its debts or
announces an intention to do so; or
(f) Administration an application for an administration order in
relation to the Lessee or any Subsidiary is presented to the
court by the Lessee or any Subsidiary or its respective
directors, the supervisor of a voluntary arrangement relating
to the Lessee or any Subsidiary, as the case may be, or any
other enactment, or such an order is made on the application
of a creditor or creditors of the Lessee or any Subsidiary as
the case may be or any meeting of the Lessee, or any
Subsidiary is convened for the purpose of considering any
resolution to present an application for such an order; or
(g) Scheme of Arrangements etc. any formal steps are taken with a
view to proposing (under any enactment or otherwise) any kind
of composition, scheme of arrangement, compromise or
arrangement involving the Lessee or any Subsidiary and its
respective creditors generally (or any class of them); or
(h) Appointment of Administrative Receiver any administrative or
other receiver or any manager of the Lessee or any Subsidiary
or any of its respective property is appointed or the
directors of the Lessee or any Subsidiary requests any person
to appoint such a receiver or manager; or
(i) Winding Up any meeting of the Lessee or any Subsidiary is
convened for the purpose of considering any resolution for (or
to petition for) its winding up, the Lessee or any Subsidiary
passes such a resolution, or the Lessee or any Subsidiary or
any other person (except its creditors) presents any petition
for the Lessee's or any Subsidiary's winding up, or an order
for the Lessee's or any Subsidiary's winding up is made on the
petition of any of its creditors; or
(j) Steps taken with a view to dissolution any steps are taken
with a view to the dissolution of the Lessee or any
Subsidiary; or
(k) Corresponding events in other jurisdictions there occurs, in
relation to the Lessee or any Subsidiary, in any country or
territory in which it carries on business or to the
jurisdiction of whose courts it or any of its property is
subject any event which appears to Lessor to be analogous in
that country or territory to any of those mentioned in
paragraphs (f) to (k) inclusive above or the Lessee or any
Subsidiary otherwise
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becomes subject, in any such country or territory, to any law
relating to insolvency, bankruptcy or liquidation and in each
case the same has a material adverse effect on the Lessee's
ability to perform its obligations hereunder; or
(l) Cessation of Business the Lessee ceases or threatens to cease
to carry on all or a substantial part of the business
conducted by it at the date hereof; or
(m) Illegality it becomes impossible or unlawful or contrary to
any regulation for the Lessee to fulfill any of the material
terms of this Agreement or for Lessor to exercise any material
right or power vested in it under this Agreement.
(n) State of Registration and Place of Incorporation any
circumstances occur or are threatened in relation to the State
of Registration or the place of incorporation of the Lessee
which in the opinion of Lessor may imperil the interests of
Lessor under this Agreement unless other arrangements
satisfactory to Lessor are made to remove such imperilment
17.2 Lessor's rights following a Termination Event. If a Termination
Event has occurred, Lessor may at its option (and without prejudice
to any of its other rights under this Agreement), at any time
thereafter:
(a) by notice to the Lessee and with immediate effect terminate
the Lease Period (without prejudice to any of its rights and
the continuing obligations of the Lessee under this
Agreement); and/or
(b) proceed by appropriate court action to enforce performance of
this Agreement and/or to recover damages for the breach of
this Agreement; and/or
(c) take possession of the Engine and/or detain the Aircraft or
any Part for the purposes of taking the steps necessary to
remove the Engine therefrom, for which purpose Lessor may
enter any premises belonging to or in the occupation of or
under the control of Lessee where the Engine or Aircraft may
be located and Lessor is hereby irrevocably by way of security
for the Lessee's obligations under this Agreement appointed
attorney for the Lessee in causing the redelivery of the
Engine and will have all the powers and authorizations
necessary for taking that action; and/or
(d) sell or cause to be sold the Engine at public or private sale,
as the Lessor may determine, free of any rights of the Lessee.
17.3 Limitations under CRAF. Notwithstanding the provisions of Clause 17,
during any period that the Engine is subject to CRAF in accordance
with the provisions hereof and in the possession of the U.S.
Government, Lessor shall not, as a result of any Termination Event,
exercise its remedies hereunder in such manner as to limit Lessee's
control under this Lease (or any Sub-lessee's control under any
Sub-lease) of the Aircraft, Airframe or such Engine, unless at least
30 days' (or such other period as may then be applicable under CRAF)
written notice of default hereunder shall have been given by Lessor
by registered or certified mail to Lessee (and any
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Sub-lessee) with a copy to the Contracting Officer Representative or
Representatives for the Military Airlift Command of the United
States Air Force to whom notices must be given under the contract
governing Lessee's (or any Sub-lessee's) participation in CRAF with
respect to the Aircraft, Airframe or any Engine.
17.4 Total Loss. Notwithstanding the provisions of Clause 17.1, any event
of condition that constitutes a Total Loss shall not constitute a
Termination Event.
18. TERMINATION PAYMENTS
18.1 Termination Payments due on termination of Lease Period.
(a) Upon termination of the Lease Period in accordance with Clause
17 (Termination by Lessor) the Lessee will pay to Lessor such
sum or sum's (by way of agreed compensation for loss of
bargain and not as a penalty) as will equal the aggregate of:
(i) all costs and expenses incurred by Lessor arising out of
such termination including but without limitation any
amounts incurred in recovering possession of the Engine
or any Part;
(ii) all amounts of Rent and other sums due and payable to
Lessor at the date of such termination under this
Agreement, together with interest thereon as provided
herein; and
(iii) whether or not the Lessor shall have exercised its right
to repossess or sell the Engine, or shall thereafter at
any time exercise such right, a sum equal to the excess,
if any, of the Stipulated Loss Value as of the Rent Date
immediately preceding the date of such Termination Event
over the net proceeds, if any, received by Lessor from
the sale of the Engine and any Parts.
(b) Upon termination of the Lease Period in accordance with Clause
14 (Total Loss) the Lessee will pay to Lessor all amounts of
Rent and other sums due to Lessor as at the date on which Rent
ceases to accrue in accordance with Clause 14.
(c) In the event that after a Termination Event and Lessor's
termination of this Agreement or its repossession of the
Engine, Lessee has paid to Lessor in full all amounts payable
under Clause 18.1(a) to it hereunder, Lessor shall sell the
Engine to Lessee in accordance with the terms of Schedule 4,
but for the purposes of this Clause 18.1(c) only references
made to the "Term Date" in Schedule 4 shall mean the date upon
which Lessee has paid to Lessor in full all amounts payable
under Clause 18.1(a).
18.2 Cost of Effecting Compliance. If the Lessee fails to comply with any
of its obligations under this Agreement, Lessor may, without being
in any way obliged so to do, or responsible for so doing, and
without prejudice to the ability of Lessor to treat non compliance
as a Termination Event, effect compliance on the Lessee's behalf and
if Lessor incurs any expenditure in effecting such compliance,
Lessor will be entitled (without prejudice to
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Clause 18.1 (Termination Payments)) to recover such expenditure from
the Lessee together with interest thereon at the Default Rate from
the date upon which such expenditure was incurred by Lessor until
the date of reimbursement thereof by the Lessee (both before and
after any relevant judgment).
19. REDELIVERY
19.1 Method of Redelivery. Except in the event of a Total Loss of the
Engine or purchase of the Engine by Lessee pursuant to this
Agreement, the Lessee will on the termination of the Lease Period
howsoever caused, if requested so to do by Lessor, redeliver the
Engine to Lessor free of all Security Interests (other than any
Lessor's Security Interests) and Lessor will accept such redelivery
at Rolls-Royce Derby, England or such other location as may be
mutually agreed between the parties or, in the event of a
termination of this Agreement by Lessor pursuant to Clause 17
(Termination by Lessor), at such location in the United States of
America or in the United Kingdom as Lessor may require.
19.2 Redelivery Condition
The Lessee will at the Lessee's expense redeliver the Engine in a
condition so as to demonstrate that the Lessee has in all respects
complied with its obligations under Clause 12.13 and 12.14 as to
maintenance, repair and general upkeep of the Engine and in
particular:
(a) General Conditions
The Engine will:-
(i) have been maintained and repaired in accordance with the
Maintenance Programme and the Engine Management
Programme, and shall be certified by Lessee as being
serviceable in accordance with FAA requirements;
(ii) have all of its equipment, components and systems
functioning in accordance with their intended use;
(iii) shall be in compliance with all applicable mandatory
airworthiness directives applicable to the Engine as
issued by the FAA and all mandatory manufacturer's
service bulletins applicable to the Engine with a due
date for compliance on or before the Term Date, provided
that the necessary service bulletin and are available to
the Lessee prior to the Term Date;
(iv) have had accomplished on it all outstanding deferred
maintenance items. All replacement Parts shall have been
installed on the Engine in accordance with Clause 12.12
(Obligation to Repair); and
(v) have, and be in compliance with, a valid serviceable tag
issued by a party authorized by the Aviation Authority.
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(b) Condition of Controlled Components
(i) Engine Cycle controlled components (Group A parts) at
the date of redelivery shall have remaining as a minimum
3000 Cycles of the declared life quoted in the latest
issue of the time limits manual issued by the Engine
Manufacturer.
(ii) Any components controlled by Flight Hours shall have as
a minimum 4,000 Flight Hours remaining before scheduled
removal for refurbishment, test, disassembly or
replacement.
(iii) All components controlled on a calendar basis shall have
remaining at least 12 months before scheduled removal
for refurbishment, test, disassembly or replacement.
(c) Condition of the Engine At the time of redelivery of the
Engine each module or non modular component fitted to the
Engine shall have at least 50% of Soft Time life remaining
until refurbishment would be required by Soft Time limitation
if a shop visit was to occur. In addition, the Engine shall
have had a borescope inspection immediately prior to
redelivery and Lessee shall have rectified all defects
revealed by such inspection that are beyond the limits set out
in the relevant manual; and the Engine shall be capable of
certificated, full-rated performance without limitations
throughout the entire operating envelope as defined in the
relevant Airplane Flight Manual.
(d) Technical Documents
At the date of redelivery the Lessee shall deliver to Lessor a
copy of the Technical Documents (including current revisions
thereto) which shall, for the purposes of this Clause,
include:
(i) the last Shop Visit Work Package for each module and any
documents/records that are pertinent to the Engine,
including the life limited parts status list and the
historical records substantiating the life limited parts
current status "back to birth" records; and
(ii) a statement of the stage which has been reached in the
Maintenance Programme.
The information described in the Technical Documents shall be
provided to Lessor in the form and manner in which the Lessee
maintains such information, and shall include data peculiar to
the Engine. All Technical Documents provided to Lessor at the
date of redelivery shall be listed and described by the
Lessee's title or description. All Technical Documents
provided to Lessor shall be in good condition, readable and
capable of being reproduced using standard reproduction
processes, complete, up to date and accurate as to content.
Further, the Lessee shall provide to Lessor, if requested by
Lessor such advance copies of any of the Technical Documents
as Lessor may reasonably desire or require in order to plan or
accomplish recertification, modification, sale, lease or
otherwise dispose of or utilise
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the Engine upon receipt of the Engine by Lessor.
19.3 Non-compliance
If the condition of the Engine does not comply with this Agreement
at the time of redelivery, Lessee will at its option either:
(a) immediately rectify the non-compliance and the Lease Period
will be automatically extended and this Agreement will remain
in force until the non-compliance has been rectified; or
(b) redeliver the Engine to Lessor and indemnify Lessor, and
promptly pay to Lessor such amount as Lessor must pay for
putting the Engine into the condition required by this
Agreement.
20. MISCELLANEOUS
20.1 Transferability. Lessor covenants and agrees for the benefit of the
Lessee as follows:
(a) Lessee agrees that Lessor will be entitled at any time to
transfer title to the Engine subject to and with the benefit
of this Agreement to any other person, provided that any such
transferee shall not be entitled to any greater rights under
this Agreement than those enjoyed by Lessor prior to any such
transfer and that any out of pocket costs incurred by the
Lessee in preparation or execution of any waivers, discharges,
amendments or other documents which the Lessee may reasonably
be required to enter into in respect of such transfer of title
or the grant of any security interest over the Engine and the
benefit of this Agreement shall be borne by the Lessor.
(b) No assignment or transfer may be made by the Lessee of all or
any of its rights in respect of the Engine or this Agreement
without the prior written consent of Lessor.
20.2 Further Assurance. The Lessee agrees from time to time, and at the
Lessee's expense, 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 Lessor to establish,
maintain and protect the rights and remedies of Lessor and to carry
out and effect the intent and purpose of this Agreement.
20.3 Expenses
The Lessee will reimburse Lessor:
(a) for all charges and expenses incurred in the registration of
the Agreement and all waivers, discharges, amendments and
other documents in connection therewith (including the fees
and expenses of legal advisers and any value added tax
thereon); and
(b) for all charges and expenses incurred by Lessor in
contemplation of or in connection with the enforcement of or
preservation of any rights under the Agreement (including the
fees and expenses of legal advisers
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and any value added tax thereon).
20.4 Stamp duties
The Lessee will pay or procure the payment when due of all present
and future registration fees, stamp duties, documentary taxes and
other imposts in relation to the Agreement and keep Lessor
indemnified against any failure or delay in paying the same.
20.5 Accounts
The accounts kept by Lessor will constitute prima fade evidence of
the amounts owing to Lessor under this Agreement.
20.6 Notices.
(a) All notices under this Agreement will be given to the intended
recipient at the address or facsimile number set out on the
execution page of this Agreement (or such other address, or
facsimile number as either party may specify to the other in
writing from time to time).
(b) Any communication from one party to the others under this
Agreement will be effective:
(i) if by letter, when delivered, and
(ii) if by facsimile, when full transmission has been
separately confirmed by telephone by the transmitting
party.
20.7 Set-off
Lessor may set off any matured obligation owed by the Lessee under
this Agreement against any obligation (whether or not matured) owed
by Lessor to the Lessee, regardless of the place of payment or
currency. If the obligations are in different currencies, Lessor may
convert either obligation at the market rate of exchange available
in London for the purpose of the set-off. If an obligation is
unascertained or unliquidated, Lessor may in good faith estimate
that obligation and set off in respect of the estimate, subject to
the relevant party accounting to the other when the obligation is
ascertained or liquidated. Lessor will not be obliged to pay any
amounts to the Lessee under this Agreement so long as any sums which
are then due from the Lessee under this Agreement remain unpaid and
any such amounts which would otherwise be due will fall due only if
and when the Lessee paid all such sums except to the extent Lessor
otherwise agrees or sets off such amounts against such payment
pursuant to the foregoing.
20.8 Currency indemnity
The Lessee will indemnify Lessor against losses (including losses
flowing from fluctuations in rates of exchange) to Lessor as a
result of payment in any currency other than that payable or as a
result of any order, proof or claim being expressed or payable under
this Agreement in a different currency.
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20.9 Waiver, remedies cumulative.
(a) No delay on the part of Lessee or Lessor in exercising any of
its rights, powers or privileges under this Agreement will
operate as a waiver thereof nor will any single or partial
exercise of any right, power or privilege preclude any other
or further exercise thereof, or the exercise of any other
right power or privilege.
(b) The rights and remedies herein and therein provided are
cumulative and not exclusive of any rights or remedies
provided by law.
20.10 Time of Essence
The time stipulated in this Agreement for all payments payable by
the Lessee (subject to any periods of grace in respect thereof
pursuant to Clause 17 (Termination by Lessor)) and for the
performance of the Lessee's other obligations under this Agreement
will be of the essence of this Agreement.
20.11 Indemnitee
All rights expressed to be granted to each Indemnitee under this
Agreement (other than Lessor) are given to Lessor on behalf of the
Indemnitee.
20.12 Severability of Provisions. If any provision of this Agreement is
prohibited or unenforceable in any jurisdiction, such prohibition or
unenforceability will not invalidate the remaining provisions hereof
or affect the validity or enforceability of such provisions in any
other jurisdiction.
20.13 No Third Party Beneficiary. Except as expressly provided in Clause 9
with respect to Tax Indemnitees and Clause 16 with respect to
Indemnitees, and except as expressly provided herein with respect to
the Security Trustee, no person or entity (other than Lessor and
Lessee and their respective successor and permitted assigns) shall
have any right or interest in this Agreement
20.14 Counterparts. This Agreement may be executed in any number of
counterparts and all of such counterparts taken together will be
deemed to constitute one and the same instrument.
20.15 Determination. The determination or expiry of this Agreement will
not affect the right of Lessor or Lessee to recover damages for any
antecedent breach of this Agreement or to recover any sum otherwise
due to such party under the terms of this Agreement and will be
without prejudice to any right or action of Lessor or Lessee.
20.16 Governing law. This Agreement will be governed by and construed in
accordance with the laws of England.
20.17 Forum.
(a) For the benefit of Lessor only, the Lessee irrevocably submits
to the jurisdiction of the English courts and in relation to
this Agreement
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<PAGE>
irrevocably appoints Law Debenture Corporate Services Limited
whose registered office is at Princes House, 95 Gresham
Street, London, EC2V 7LY as its agent to accept service in
relation to such English courts and agrees that service on
such agent will be deemed due service for the purposes of
proceedings in such courts without prejudice to any other mode
of service.
(b) Such submission to the English courts will be non-exclusive,
except to the extent that such non-exclusivity prejudices such
submission.
20.18 Amendments. The Lease Agreement may only be amended by a written
instrument executed by each of Lessee and Lessor.
AS WITNESS the hands of the duly authorized representatives of the parties
hereto the day and year first above written.
57
<PAGE>
SCHEDULE 1 THE ENGINE
Engine Manufacturer: Rolls-Royce plc
Model: Tay 650-15 Dressed Spare Engine as defined in contract
specification 3004-S Issue 1, as amended, including
transportation stand.
Serial Number [* *]
58
<PAGE>
SCHEDULE 2A
Form of Legal Opinion of Fullbright & Jaworski, LLP
Special Counsel to Lessee
_______, 199_
To: RRPF Engine Leasing Limited
65 Buckingham Gate
London
SW1E 6AT
England
Lease of Rolls Royce Model Tay 650-15 Spare Engine
with Manufacturer's Serial Number [ ]
Gentlemen:
We have been requested by Midway Airlines Corporation, a Delaware corporation
(the "Company"), to act as special counsel with respect to, and to render this
opinion letter in connection with, the transactions contemplated by the Engine
Lease Agreement dated as of ___________, 1997 (the "Lease Agreement") among RRPF
Engine Leasing Limited ("Lessor") and the Company. Capitalized terms used herein
and not otherwise defined herein have the respective meanings given those terms
in the Lease Agreement.
In connection with this opinion letter we have examined, among other things,
originals or copies certified or otherwise identified to our satisfaction of the
Lease Agreement. We have also examined and relied upon such other documents and
such other corporate records, certificates and other statements and
representations of governmental officials and corporate officers and other
representatives of the Company as we have deemed necessary or appropriate for
the purposes of this opinion. The opinions expressed herein are subject to the
following exceptions, assumptions, qualifications and limitations:
(a) The opinions set forth below are limited to the laws of the State of
New York, the federal laws of the United States of America and the
General Corporation Law of the State of Delaware, except that we
express no opinion with respect to (i) the laws, regulations or
ordinances of any county, town or municipality or governmental
subdivision or agency thereof, (ii) state securities or blue sky
laws or federal securities laws, including the Securities Act of
1933, as amended (the "Securities Act") and the Investment Company
Act of 1940, as amended, (iii) any federal or state tax, antitrust
or fraudulent transfer or conveyance laws, (iv) the Employee
Retirement Income Security Act of 1974, as amended, or (v) except as
expressly provided in paragraph 4 below, Subtitle VII of Title 49 of
the United States Code (the "Aviation Act"), or any other laws,
rules or regulations governing, regulating or relating to the
acquisition, ownership, registration, use or sale of an aircraft
airframe or aircraft
59
<PAGE>
engine or to the particular nature of the equipment to be subject to
the Lease Agreement.
(b) The opinion set forth in paragraph 3 below is subject to (i)
limitations on enforceability arising from applicable bankruptcy,
insolvency, reorganization, moratorium, receivership, fraudulent
conveyance, fraudulent transfer, preferential transfer and similar
laws relating to or affecting the rights and remedies of creditors
or lessors generally and the effect of general principles of equity,
including, without limitation, laches and estoppel as equitable
defenses and concepts of materiality, reasonableness, good faith and
fair dealing (regardless of whether such enforceability is
considered or applied in a proceeding in equity or at law) and
considerations of impracticability or impossibility of performance,
and defenses based upon unconscionability of otherwise enforceable
obligations in the context of the factual circumstances under which
enforcement thereof is sought and (ii) the qualification that the
remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be
brought. In addition, certain remedial and procedural provisions of
the Lease Agreement are or may be unenforceable in whole or in part
but the inclusion of such provisions does not affect the validity
thereof and does not, in our opinion, make the remedies provided
therein, or otherwise available under applicable law, inadequate for
the practical realization of the substantive benefits purported to
be provided thereby, except for the economic consequences resulting
from any delay imposed by, or any procedure required by, applicable
laws, rules, regulations and by constitutional requirements. We
express no opinion as to any provision contained in the Lease
Agreement (a) providing for indemnification or exculpation of any
Person for such Person's gross negligence, wilful misconduct
recklessness or unlawful conduct or in respect of liabilities under
the Securities Act (b) late payment charges or an increase in
interest rate upon delinquency in payment or the occurrence of a
default or other specified event but only to the extent such
provision is deemed to constitute a penalty or liquidated damages
provision, (c) as such provision relates to the subject matter
jurisdiction of federal courts or the waiver of inconvenient forum
with respect to proceedings in federal courts, (d) that purports to
establish (or may be construed to establish) evidentiary standards
or (e) providing for the waiver of any statutory right or any
broadly or vaguely stated rights or unknown future rights, or any
waiver which is against public policy considerations. Under certain
circumstances the requirement that the provisions of the Lease
Agreement may be modified or waived only in writing or only in a
specific instance and provisions to the effect that failure or delay
in exercising any right, remedy, power and/or privilege will not
impair or waive such right, remedy, power and/or privilege may be
unenforceable to the extent that an oral agreement has been effected
or a course of dealing has occurred modifying such provisions. A
court may modify or limit contractual agreements regarding
attorneys' fees.
(c) To the extent that our opinions expressed herein involve conclusions
as to the matters set forth in the opinion dated the date hereof of
Crowe & Dunlevy being delivered to you on the date hereof, we have
assumed,
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without independent investigation, the correctness of the matters
set forth in such opinion.
(d) We have assumed the due authorization, and, except as to the
Company, execution and delivery, of the Lease Agreement by each of
the parties thereto, that Lessor has the power and authority to
execute, deliver and perform the Lease Agreement and has obtained or
made all necessary consents, approvals, filings and registrations in
connection therewith (except any required under New York law by the
Company), and that such execution, delivery and performance does not
violate either of its charters, by-laws or similar instruments.
(e) We have assumed that all signatures on documents examined by us are
genuine, that all persons signing such documents have legal
capacity, that all documents submitted to us as originals are
authentic and that all documents submitted to us as copies or
specimens conform with the originals, which facts we have not
independently verified.
(f) We express no opinion as to (i) any provision in the Lease Agreement
that is contrary to Section 9-311, or Part 5 of Article 9, of the
Uniform Commercial Code as in effect in the state of New York (the
"UCC"), or (ii) whether or not the Lease constitutes a "security
interest" within the meaning of Section 1-201(37) of the UCC.
(g) We have not made any examination of, and express no opinion with
respect to (and to the extent relevant have assumed the accuracy and
sufficiency of), (i) descriptions of, the legal or beneficial
ownership of, or the title or condition of title to, the Engine or
any other property covered by the Lease Agreement, (ii) the
existence, creation, validity or attachment of any security interest
thereon, (iii) the perfection of any security interest thereon and
(iv) the priority or enforcement of any security interest thereon.
(h) In giving an opinion regarding the valid existence and good standing
of the Company, we have relied solely upon certificates of public
officials.
(i) The opinions expressed herein are given as of the date hereof. We
assume no obligation to advise you of any facts or circumstances
that may come to our attention, or any changes in law that may occur
after the date hereof, which may affect the opinion expressed
herein.
(j) With respect to this opinion given in paragraph 5 below, we have
assumed that the Company is an "air carrier" as defined in the
Aviation Act holding an air carrier operating certificate issued by
the Secretary of Transportation pursuant to the Aviation Act.
Based on and subject to the foregoing, we are of the opinion that:
1. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware.
2. The Company has all necessary corporate power to execute,
deliver and perform its obligations under the Lease Agreement
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<PAGE>
and the execution, delivery and performance by the Company of
the Lease Agreement have been duly authorized by all necessary
corporate action on the part of the Company. Neither the
execution nor delivery of the Lease Agreement by the Company
nor the consummation of the transactions contemplated thereby
will result in any violation of (A) its Restated Certificate
of Incorporation or By-laws or (B) subject to paragraph (a)
above any law, governmental rule or regulation known to us to
be applicable to, or binding on, the Company, or requires the
approval of the stockholders of the Company.
3. The Lease Agreement has been duly executed and delivered by
the Company and constitutes the valid and binding obligation
of the Company and is enforceable against the Company in
accordance with its terms.
4. Except for (i) the filing and recordation in accordance with
the Aviation Act as amended ("the Act") of the Lease Agreement
and assuming that at the time of such filing no other
unrecorded document relating to the Engine has been filed
pursuant to the Aviation Act and (ii) the filing of Financing
Statements referred to in Clause 3.1(b)(iii) of the Lease
Agreement and the filing of periodic continuation statements
with respect thereto, no approval, authorization or other
action by or filing with any governmental authority is
required for the execution and delivery by the Company of the
Lease Agreement and for the consummation of the transactions
contemplated thereby to occur on the Delivery Date.
5. So long as the Company continues to be an "air carrier" as
defined in the Aviation Act holding an air carrier operating
certificate issued by the Secretary of Transportation pursuant
to the Aviation Act, upon consummation of the transactions
contemplated by the Lease Agreement to occur on the Delivery
Date, the Lessor, as lessor under the Lease, will be entitled
to the benefits of Section 1110 of Title 11 of the United
States Code with respect to the Engine in connection with any
case commenced by or against the Company under Chapter 11 of
Title 11 of the United States Code.
This opinion is being delivered pursuant to Clause 3.1(a)(xi) of the Lease
Agreement. This opinion may be relied upon by you (and any permitted Transferee
under Clause 20.1(a) of the Lease Agreement) in connection with the matters set
forth herein and, without our prior written consent may not be relied upon for
any other purpose and may not be furnished to any other Person for any purpose.
Very truly yours,
FULLBRIGHT & JAWORSKI L.L.P.
By:
----------------------------
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<PAGE>
SCHEDULE 2B
Form of Legal Opinion of Lessee's Legal Department
_________, 199_
To Each of the Addressees Listed in
Schedule I Attached hereto:
Lease of Rolls Royce Model Tay 650-15 Spare Engine
with Manufacturer's Serial Number
Gentlemen:
This Opinion Letter is being delivered by Midway Airlines Corporation, a
Delaware corporation ("Lessee"), by its General Counsel in his capacity as an
officer of the Lessee in connection with the transactions contemplated by the
Engine Lease Agreement dated as of __________, 199_ (the "Lease Agreement")
among RRPF Engine Leasing Limited ("Lessor") and the Lessee. All capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings given those terms in the Lease Agreement. This Opinion Letter is being
furnished to you pursuant to Clause 3.1(a)(vi) of the Lease Agreement.
In giving the following Opinions, the undersigned has reviewed the Lease
Agreement and has relied upon originals, or copies certified or otherwise
identified to his satisfaction, of such records, documents, certificates and
other instruments as in his judgment are necessary or appropriate to enable him
to render the Opinions expressed below.
Based on the foregoing, and subject to the assumptions and limitations contained
herein, the undersigned is of the opinion that:
(_) Lessee is an "air carrier" within the meaning of the Federal
Aviation Act operating under a "certificate of convenience and
necessity" issued under Section 401 or 418 of such Act, is a
"citizen of the United States" as such term is defined in Section
101(16) of such Act and holds all authority, necessary licenses and
certificates under such Act and the rules and regulations
promulgated thereunder necessary for the conduct of its business and
to perform its obligations under the Lease Agreement.
(_) The execution, delivery and performance by Lessee of the Lease
Agreement do not to the undersigned's knowledge, breach or result in
a default under any indenture, mortgage, deed of trust, credit
agreement, conditional sale contract or other loan agreement to
which Lessee is a party or by which Lessee or its property may be
bound.
(_) There are no pending or, to the best of the undersigned's knowledge,
threatened actions, suits or proceedings before any court or
administrative agency or arbitrator against or involving Lessee that
question the validity of the Lease Agreement or that would have been
required to have been disclosed in the Lessee's most recently filed
Form 10-K Annual Report, if
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pending or threatened on the date of such filing, except such as are
therein disclosed.
This Opinion Letter is furnished to you for the purposes indicated above, and
may not be relied upon by any other Person or for any other purpose without our
written consent. This opinion may be relied upon by you (and any permitted
Transferee under Clause 20.1(a) of the Lease Agreement) in connection with the
matters set forth herein and, without our prior written consent may not be
relied upon for any other purpose and may not be furnished to any other Person
for any purpose.
Very truly yours,
Midway Airlines Corporation Legal
Department
SCHEDULE I
RRPF Engine Leasing Limited
65 Buckingham Gate
London SW1E 6AT
England
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<PAGE>
SCHEDULE 2C
Form of Legal Opinion of Daugherty, Fowler & Peregrin,
Special Counsel to Lessee
__________, 199_
To Each of the Addressees Listed in
Schedule I Attached hereto:
Rolls-Royce Model Tay 650-15 Spare Engine
with Manufacturer's Serial Number [ ] (the "Engine")
Ladies and Gentlemen:
This letter confirms that we filed for recordation with the Federal Aviation
Administration (the "FAA") today at _____ P.M., C.D.T., the Engine Lease
Agreement dated _____________, 199_ (the "Lease"), among RRPF Engine Leasing
Limited ("Lessor") and [ ] ("Lessee"). Capitalized terms used herein without
definition shall have the meanings set forth in the Lease.
Based upon our examination of the Lease and of such records of the FAA as we
deemed necessary to render this opinion and as were made available to us by the
FAA, it is our opinion that:
(a) the Lease is in due form for recordation by and has been duly filed
for recordation with the FAA pursuant to and in accordance with the
provisions of the Federal Aviation Act of 1958, as amended;
(b) the Engine is free and clear of any liens, security interests or
encumbrances of record with the FAA other than such as are created
by the Lease; and
(c) the rights of the Lessor and the Lessee under the Lease with respect
to the Engine are perfected.
No opinion is herein expressed as to laws other than the federal laws of the
United States. Since our examination was limited to records maintained by the
FAA Aircraft Registry, our opinion does not cover liens which are perfected
without the filing of notice thereof with the FAA, such as federal tax liens,
liens arising under Section 1368(a) of Title 29 of the United States Code and
possessory artisans' liens. In rendering this opinion, we were subject to the
accuracy of FAA personnel in the filing, indexing and recording of instruments
filed with the FAA and in the search for encumbrance cross-reference index cards
for the Engine.
Very truly yours,
---------------------------
For the Firm
65
<PAGE>
SCHEDULE I
RRPF Engine Leasing Limited
65 Buckingham Gate
London SW1E 6AT
England
[ ]
66
<PAGE>
SCHEDULE 3
ACCEPTANCE CERTIFICATE
To: RRPF Engine Leasing Limited
65 Buckingham Gate
London SW1E 6AT
Reference is made to the Engine Lease Agreement dated [* *], 199[**] ("Lease")
between RRPF Engine Leasing Limited and Midway Airlines Corporation ("Lessee")
regarding one Rolls Royce Tay 650-15 Spare Engine as defined in contract
specification 3004-S Issue I with Engine Manufacturer's Serial Number [* *]
together with Transportation Stand ("Engine").
The Lessee hereby certifies that
1. On [* *], 199[**] at [* *][* *] time the Lessee accepted delivery of the
Engine and that pursuant to the terms of the Lease the Lessee confirms
that the Engine is and will henceforward be subject to all the terms and
conditions contained in the Lease.
2. The Lessee confirms that having made an inspection of the Engine pursuant
to Clause 5.2(a) of the Lease by its duly authorised technical experts,
the Engine is on the date hereof in good working order and repair without
defects or inherent vice in condition, design, operation or fitness for
use and that it conforms to the Lessee's requirement.
3. The representations and warranties of the Lessee contained in the Lease
are true and accurate in all material respects on and as of the date of
this Certificate.
4. No Termination Event or Potential Termination Event (as defined in the
Lease) has occurred and is continuing at the date of this Certificate or
is likely to result from any circumstances of which we are unaware.
5. The Lessee confirms that the placard referred to in Clause 12.17 of the
Lease has been affixed to the Engine.
6. The Lessee hereby confirms that all the parts listed in the contract
specification referred to in Schedule 1 of the Lease were installed on the
Engine at delivery.
SIGNED the 199[**]
For and on behalf of
MIDWAY AIRLINES CORPORATION
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SCHEDULE 4
TERMS OF SALE
The terms and conditions applicable to a sale and purchase of the Engine
pursuant to this Agreement are as follows:
1. Sale. Save as provided below, Lessor will sell (free and clear of all
Lessor's Security Interests) to the Lessee and the Lessee will purchase
from Lessor the Engine for the Purchase Price at such location as may be
agreed, in an "as is where is" condition on the Term Date. On completion
of the sale of the Engine Lessor shall sign and deliver to Lessee a bill
of sale with warranty of title and Lessee shall sign and deliver to Lessor
an acceptance certificate, in each case in a form reasonably acceptable to
the parties.
2. Exclusion of Liability and Waiver. Lessee expressly agrees and
acknowledges that Lessor has not made nor shall be deemed to make and
there shall be hereby expressly excluded any representation or warranty or
covenant or condition express or implied, as to the airworthiness, value,
condition, design, quality, purpose, merchantability, durability,
operation or fitness for use or operation of the Engine or any part or as
to the eligibility or suitability for any particular use or operation or
any other representation or warranty or covenant or condition of any kind
whether similar to any of the foregoing or not express or implied, with
respect to the Engine or any part, except that Lessor shall represent and
Warrant that it has conveyed to Lessee good title to the Engine, free and
clear of all Lessor's Security Interests.
Delivery of the acceptance certificate to Lessor will be conclusive proof,
as between Lessor and the Lessee, that the Engine is at that time 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 the
Lessee as of the Term Date.
3. Waiver. The Lessee confirms that, as except as provided in paragraph 2
above, the waiver contained in Clause 6.2 of the Agreement shall survive
the termination of the Agreement
4. Delivery. The sale of the Engine will not impose on Lessor any obligation
to transport the Engine to the agreed delivery location.
5. Registration. Lessor shall at the Lessee's expense execute and deliver to
Lessee such certificates, documents, and/or other items as may be
necessary to fully record Lessee's ownership of the Engine and/or to
release or terminate any interest of Lessor or any Indemnitee in the
Engine.
68
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SCHEDULE 5
[***]
69
<PAGE>
SCHEDULE 6
[***]
70
<PAGE>
SIGNATORIES
SIGNED by }
for and on behalf of RRPF ENGINE } /s/ [ILLEGIBLE]
LEASING LIMITED }
Address: 65 Buckingham Gate
London SW1E 6AT
Facsimile No: (071) 233 1915
Attention: the Secretary
SIGNED by }
for and on behalf of MIDWAY AIRLINES CORPORATION } /s/ JS Waller
Address: 300 W. Morgan Street Suite 1200, Durham, NC 27701
Facsimile No: 00 919 956 7568
Attention: Senior Vice President and General Counsel
JONATHAN S. WALLER
SENIOR VICE PRESIDENT
GENERAL COUNSEL
71
<PAGE>
Exhibit 10.48
[LOGO]
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY [***]. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
AGREEMENT
BETWEEN
ROLLS-ROYCE CANADA LIMITEE
AND
MIDWAY AIRLINES CORPORATION
RELATING TO THE REPAIR OF
ROLLS-ROYCE TAY ENGINES
Une filiale d'Industries Rolls-Royce Canada Inc.
A Rolls-Royce Industries Canada Inc. Company
<PAGE>
[LOGO]
THIS AGREEMENT is made this day of 1997
BETWEEN
ROLLS-ROYCE CANADA LIMITEE Hereinafter called RRC having a place of
business at 9500 Cote de Liesse Road at
Lachine, Quebec, Canada H8T 1A2
AND
MIDWAY AIRLINES CORPORATION Hereinafter called THE OPERATOR whose
registered office is at 300 West Morgan
Street, Suite 1200 Durham, North Carolina,
USA, 27701
WHEREAS
A. THE OPERATOR has acquired certain ROLLS-ROYCE TAY engines for use by THE
OPERATOR in Fokker 100 aircraft manufactured by Fokker BV.
B. RRC maintains an overhaul and repair facility for such aircraft engines at
Lachine, Quebec, Canada which is approved by Rolls-Royce plc and Transport
Canada;
C. THE OPERATOR requires work to be carried out by RRC from time to time on
the aforementioned engines and modules as enumerated in Appendix A.
D. RRC is willing to undertake such work subject to the terms and conditions
herein set forth.
NOW, IT IS HEREBY AGREED AS FOLLOWS:
Une filiale d'Industries Rolls-Royce Canada Inc.
A Rolls-Royce Industries Canada Inc. Company
<PAGE>
[LOGO]
INDEX
RECITALS
- --------
Clause 1 Definitions
Clause 2 Exclusion of Other Terms and Previous Understandings
Clause 3 Subject of Contract
Clause 4 Delivery
Clause 5 Standard
Clause 6 Charges
Clause 7 Payment
Clause 8 Turn Round Time and Delay in Delivery
Clause 9 General Provisions
Clause 10 Warranty and Liability
Clause 11 Patents
Clause 12 Additional Levies
Clause 13 Assignment
Clause 14 Termination
Clause 15 Amendment
Clause 16 Conflict
Clause 17 Notices
Clause 18 Term of Agreement
Clause 19 Headings
Clause 20 Law
APPENDIX "A" Description and List of Engines
APPENDIX "B" Planned Operating Parameters
Une filiale d'Industries Rolls-Royce Canada Inc.
A Rolls-Royce Industries Canada Inc. Company
<PAGE>
[LOGO]
Clause 1 DEFINITIONS
In this Agreement unless the context otherwise requires:
1.1 The term "Engines" shall mean all the ROLLS-ROYCE engines
listed and described in Appendix "A" to this Agreement.
1.2 The term "Part" shall mean any part of an Engine acquired from
ROLLS-ROYCE or from a source approved by ROLLS-ROYCE.
1.3 The term "Supplies" shall mean Engines, Parts and any other
items of associated equipment delivered to RRC by THE
OPERATOR.
1.4 "Running Time" shall mean the number of hours flown by an
Engine as logged under the standards and procedures employed
by THE OPERATOR at the date of this Agreement and acceptable
to the Federal Aviation Authority.
1.5 "Take-Offs" shall mean the number of take-offs by an Engine as
logged under the standards and procedures employed by THE
OPERATOR at the date of this Agreement and acceptable to the
Federal Aviation Authority.
1.6 "Flight Cycle" shall mean one operation of an Engine to
achieve one aircraft take-off and subsequent landing.
1.7 "Engine Management Program" shall mean the Engine Management
Program agreed between Rolls Royce Canada, the Manufacturer
and THE OPERATOR, and which may be amended from time to time
by mutual written agreement between the parties. This program
will define the Engineering responsibilities and practices.
1.8 The term "Scheduled Repair" shall mean the Work required in an
Overhaul Base following the removal of an Engine, Part or
assembly of Parts to comply with the Engine Management Program
and such other Work as may then be necessary to enable such
Engine, Part or assembly of Parts to be released for further
operation in service.
1.9 The term "Unscheduled Repair" shall mean Work other than
Scheduled Repair which is required when an Engine, Part or
assembly of Parts has become unserviceable and which enables
such Engine, Part or assembly of Parts to be released for
further operation in service.
Une filiale d'Industries Rolls-Royce Canada Inc.
A Rolls-Royce Industries Canada Inc. Company
<PAGE>
[LOGO]
1.10 The term "Repair" shall mean Schedule Repair or Unscheduled
Repair as the case may be.
1.12 "Work" shall mean Overhaul, Repair or any other work in
respect of which in each case RRC accepts orders from THE
OPERATOR pursuant to this Agreement.
1.13 "Overhaul Base" shall mean the Overhaul Base in Continental
U.S.A. and/or Canada, as stipulated by RRC, from time to time
during the period of this Agreement.
Clause 2 EXCLUSION OF OTHER TERMS AND PREVIOUS UNDERSTANDINGS
2.1 This Agreement (including the Appendices annexed hereto which
are expressly made part of this Agreement) represents the only
conditions governing the repair of the Supplies between
Operator and RRC. Accordingly, this Agreement supersedes all
prior representations, agreements, statements and
understandings, whether oral or in writing relating to the
Supplies. It is hereby agreed that neither the Operator nor
RRC places any reliance on any representations, agreements,
statements or understandings made at any time whether oral or
in writing, other than those representations, agreements,
statements and understandings which have been expressly
incorporated in this Agreement.
2.2 Whatever may be the import of any set of standard terms or
conditions on or attached to or otherwise forming part of the
order form of the Operator or of any other document which may
be issued by the Operator relating to the Engines such
standard terms of conditions shall not be binding upon RRC and
shall be of no effect unless accepted in writing by RRC.
2.3 The Agreement is personal to the Operator and RRC and shall
not be assigned by either party except with the express
written approval of the other party. Any assignment in
violation of this clause shall be void.
Clause 3 SUBJECT OF CONTRACT
3.1 The parties hereto agree that RRC will carry out Repair
described in clauses 6.2.1 through 6.2.5 to all Engines and
Parts which develop a requirement for Repair during the Term
of the Agreement.
Une filiale d'Industries Rolls-Royce Canada Inc.
A Rolls-Royce Industries Canada Inc. Company
<PAGE>
[LOGO]
Clause 4 DELIVERY
4.1 THE OPERATOR will deliver Engines and Parts requiring Repair
to the Overhaul Base, Rolls-Royce Canada Limitee, Lachine,
Quebec, at its own expense.
4.2 THE OPERATOR will, not later than the time of delivery of
Engines and Parts pursuant to Sub-clause 4.1 above, also
deliver to RRC the completed Engine Log Book (or such other
Log Book as may be applicable).
4.4 Following Work, RRC will re-deliver Supplies to THE OPERATOR
F.O.B. RRC Lachine, Quebec, Canada (Incoterms 1990).
4.5 A sufficient number of packing cases, stands and
transportation parts for use in transporting Supplies to and
from the Overhaul Base shall be procured and maintained in
usable condition by THE OPERATOR at THE OPERATOR's expense.
Clause 5 STANDARD
5.1 Unless otherwise mutually agreed, RRC will carry out Work on
Supplies in accordance with the Engine Management Program in a
professional and workmanlike manner.
5.2 Unless otherwise agreed, RRC will carry out Repairs to the
modification standard generally recommended by ROLLS-ROYCE for
Engines of the same type and model as the Engines.
5.3 In the event that Engines are delivered to RRC by THE OPERATOR
which do not contain each Part described in the Engine Receipt
List attached hereto as Part 1, Section 1 (Appendix "A")
above, then RRC will advise THE OPERATOR of those missing
Parts exceeding US Dollars 500 at the then current RRC
Catalogue value and unless otherwise instructed by THE
OPERATOR, RRC reserves the right to replace any missing Parts
and shall be entitled to charge THE OPERATOR for the same at
the RRC commercial prices and rates current at the date of
presentation of RRC's invoice.
5.4 Any Parts incorporated in the course of Repair pursuant to
this Agreement shall be deemed to have been sold to The
Operator, and title to and risk of loss of and damage to such
Parts subject to the terms of Clause 10 below, shall pass to
The Operator upon re-delivery of the Supplies by RRC to THE
OPERATOR pursuant to Sub-clause 4.4 above.
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5.5 RRC reserves the right at its sole discretion to fit new or
repaired replacement Parts in the course of Repair pursuant to
this Agreement at no additional cost to THE OPERATOR unless
pursuant to Clause 5.3 above, such new or replacement parts to
be in as good operating condition, have substantially similar
hours available until the next Scheduled Repair and have the
same interchangeable modification standard. Title to and risk
of loss of or damage to any Parts so replaced whether scrap or
repairable shall pass to RRC upon removal from the engine or
from the assembly of Parts.
5.6 The Repair of Supplies shall be deemed to have been accepted
by THE OPERATOR on its signature of the relevant Release
Note/Approved Certificate of Inspection. Such acceptance shall
not be deemed a waiver of any rights or remedies of THE
OPERATOR including without limitation any claim for warranty
under Clause 10 hereof.
Clause 6 CHARGES
6.1 In respect of Running Time and Take-Offs of the Engines during
the period of this Agreement, THE OPERATOR shall pay to RRC:
(as adjusted in accordance with the provisions of sub-clause
6.6) multiplied by the Running Time of the Engines.
6.1.1 an amount equal to [***] United States Dollars for the
period 01 July 1997 to 30 June 1998 (12 payments)
6.1.2 an amount equal to [***] United States Dollars for the
period 01 July 1998 to 30 June 1999 (12 payments).
6.1.3. an amount equal to [***] United States Dollars for the
period 01 July 1999 to 30 June 2002 (36 payments)
6.2 The Basic Charges under clause 6.1 above are in consideration
of RRC undertaking to carry out:
6.2.1 Scheduled Repairs
6.2.2 Unscheduled Repairs arising from failures of Engines or
Parts caused by the breakdown or deterioration of the
Engines or Parts due to defects in design, material or
workmanship in the manufacture or repair of the Engine
or Part.
6.2.3 Unscheduled Repairs arising from failures of Engines or
Part caused by the breakdown or deterioration of the
Engines or Parts due to foreign object damage.
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6.2.4 Repairs arising from the introduction of "Mandatory
Modifications" as defined by the Engine Manufacturer or
Regulatory Authority or any other recognized authority.
6.2.5 Repairs arising from Engine removals generally
recommended by ROLLS-ROYCE with respect to the same type
and model of Engine as the Engines.
6.3 THE OPERATOR shall pay RRC at the RRC normal commercial rates
current at the date of presentation of RRC's invoice for
Repairs arising from failures of Engines or Parts due to
causes outside the reasonable control of RRC including but not
limited to failures of Engines or Parts, which:
6.3.1 have been caused by misuse, negligence, improper
operation or failures due to negligent foreign object
damage.
6.3.2 have been caused by THE OPERATOR failure to properly
store, install, maintain, utilize or pack for transport
such Engine and/or Part in accordance with the then
current RRC written recommendations, or
6.3.3 have been caused by the primary breakdown or
deterioration of any constituent or component which was
not acquired by THE OPERATOR from RRC or through
channels specifically approved in writing by
ROLLS-ROYCE, unless such constituent or component Part
was installed by RRC.
6.4 With the exception of the obligation provided for in Clause
10.5, RRC shall not be liable for any expenses, costs or
liabilities sustained in connection with the removal of an
Engine or Part from, or the replacement in an aircraft or the
removal of a Part from, or the replacement in an Engine other
than those sustained by RRC in carrying out Repairs pursuant
to this Agreement at the Overhaul Base.
6.5 In respect of Parts supplied pursuant to sub-clause 5.4 above,
THE OPERATOR shall pay RRC at the RRC commercial prices and
rates current at the installation of such Parts.
6.6 The Basic Charges shown in sub-clause 6.1 are based on 1997
values and will be subject to annual variation prospectively
on 01 July 1998 and each 01 July thereafter in accordance with
the following:
Estimated Labour 35% Estimated Material 65%
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Percentage changes, if any, in the Average Hourly Earning
Standard Industrial Code 3724 for the Industrial Group
Aircraft Engines and Engine Parts published by the US
Government Department of Labor Statistics for February of the
previous year over the same index for February of that year.
Prices for new and used serviceable parts are subject to
change without notice based on changes in relevant RR
catalogues; however, RRC shall endeavor to give (30) thirty
days written notice prior to the effective date of such
change. In all cases, prices for Parts shall be as of the date
of issue from inventory at RRC.
If the indices herein specified be discontinued or should the
basis of their calculations be modified proper and
substantially equivalent indices shall be substituted by
mutual agreement of the parties.
6.7 It is understood that the charges specified in sub-clause 6.1
above have been calculated with regard to the overall
operation of the Engines by THE OPERATOR as detailed in
Appendix "B".
In the event that THE OPERATOR should take any action or any
event should occur which is reasonably likely to materially
change the overall operation of the Engines such that the
basis upon which such charges were calculated no longer
remains the same, including without limitation the sale or
other disposition of any of the Engines or the use of the
Engines on routes other than as described in Appendix "B",
then RRC may at its discretion reasonably revise the charges
specified in sub-clause 6.1 in accordance with its customary
standards.
Clause 7 PAYMENT
7.1 Within ten days of the end of each month of operation of the
Engines, THE OPERATOR will supply to RRC a certified statement
of actual Running Time and Take-Off's by Engine serial number
for the previous month.
7.2 Payment of charges pursuant to clause 6.1:
7.2.1 shall be made in US Dollars within 14 days of the end of
the month to which the charges apply and for any amount
due pursuant to clause 6.3 or 6.5 within 14 days of
redelivery of the Engine or Part concerned.
7.3 Subject to Clause 12 below, THE OPERATOR undertakes that RRC
shall receive in Montreal, Quebec, Canada, the full amount of
payments falling
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due under this Agreement without any withholding or deduction
whatsoever.
7.4 All payments under clause 7.3 above shall be made by
telegraphic transfer to the following address:
Toronto Dominion Bank
3773 Cote Vertu Road
St. Laurent, Quebec, Canada
H4R 1R2
US Account No.: 7304507
Transit No.: 42961
ABA No.: 026-003243
Clause 8 TURN ROUND TIME AND DELAY IN DELIVERY
8.1 Subject to sub-clause 8.2 below and provided THE OPERATOR
delivers Engines and if the Work is to be performed on a Part,
then such Part to the Overhaul Base for Work at a reasonably
consistent rate, RRC will carry out Work in accordance with
the following turn round times which will commence when the
Engine or Part reaches the Overhaul Base and which will end
when such Engine or part is available fully prepared for
dispatch ex-works at the Overhaul Base.
8.1.1 Engines returned for Repair not requiring defect
investigation - 8 (eight) weeks.
8.1.2 Engines returned for Repair due to unusual failures
requiring defect investigation or life development
purposes - 10 (ten) weeks.
8.1.3 Engines returned for Repair not requiring disassembly of
any Module - 4 (four) weeks.
8.1.4 Parts returned for Repair or Overhaul - to be quoted by
RRC on request.
8.2 In the event that the actual turn round time in respect of any
Engine exceeds the turn round time agreed pursuant to
Sub-clause 8.1 above (as such period may be extend pursuant to
Sub-clasue 8.3 below) and THE OPERATOR is unable to operate an
aircraft due to such delay, RRC will either provide a lease
engine subject to availability and waive any daily rental
charges or be responsible for charges incured by THE OPERATOR
for the daily rental of a lease engine until such times as
such delayed Engine is returned to THE OPERATOR. Such
Une filiale d'Industries Rolls-Royce Canada Inc.
A Rolls-Royce Industries Canada Inc. Company
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responsibility for charges incurred by THE OPERATOR will not
exceed those generally charged by RRC, provided that THE
OPERATOR proves that it has suffered such damage and provided
that THE OPERATOR makes claims hereunder within three (3)
months after delivery.
8.3 If RRC is hindered or prevented from carrying out Work or
re-delivering any of the Supplies within the time for
re-delivery specified in Sub-clause 8.1 above by reason of:
8.3.1 any cause beyond the reasonable control of RRC, or
8.3.2 fires or industrial disputes or introduction of
mandatory modifications,
the time for re-delivery shall be extended by a period
equal to the period during which the Work or re-delivery
shall have been so hindered or has been prevented and
provided RRC uses its best efforts to promptly complete
the Work, RRC shall be under no liability whatsoever in
respect of such delay.
Clause 9 GENERAL PROVISIONS
9.1 THE OPERATOR shall keep records of Engine operation,
maintenance, Running Time and Take-Offs and shall permit RRC
to inspect such records. THE OPERATOR shall submit to RRC each
month a certified statement of Running Time and Take-Offs
listed by Engine serial number in respect of the previous
month
9.2 If any Supplies delivered to RRC are lost, destroyed or
damaged during the time between such delivery and return by
RRC to THE OPERATOR then RRC will either:
9.2.1 repair such damage free of charge, or
9.2.2 pay to THE OPERATOR the value of such Supplies which has
been agreed between RRC and THE OPERATOR provided that
in the absence of agreement the liability of RRC shall
not exceed the original RRC sale price of the Supplies
provided always that RRC will at THE OPERATOR's request use
its best endeavors to provide an adequate replacement for any
such Supplies lost or destroyed. In the event that a
replacement Engine is provided, such Engine shall be
substituted for the Engine lost or destroyed and Appendix "A"
hereto shall be amended accordingly.
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9.3 THE OPERATOR shall operate the Engines in accordance with the
Flexible Take-Off Thrust Procedures as recommended by Fokker
BV.
9.4 THE OPERATOR shall have the right to appoint a representative
at the Overhaul Base to consult with RRC representatives with
respect to technical matters arising in the course of the
Work.
Clause 10 WARRANTY AND LIABILITY
10.1 Subject to sub-clause 10.2 below in respect of all Parts
incorporated in the course of Repair pursuant to this or any
other Agreement or incorporated as spares in service, the
Warranty as stipulated in Appendix C attached herein shall
apply subject to all the provisions contained therein.
10.2 THE OPERATOR shall not be entitled to receive any benefit
whatsoever whether by way of repair, replacement, parts cost
allowance, labour charges or otherwise under the Warranty in
relation to Scheduled Repairs and any failures of Engines or
Parts which are covered by the charges under sub-clause 6.1
above and are specified in sub-clause 6.2 above, but save as
expressly provided above the Warranty shall remain in full
force and effect.
10.3 THE OPERATOR accepts that the express benefits provided to THE
OPERATOR by virtue of the charges under sub-clause 6.1 above,
together with the express remedies provided to THE OPERATOR in
respect of the Supplies in accordance with this Agreement and
Warranty represent the entire responsibility and liability of
RRC to THE OPERATOR in respect of all terms, conditions and
warranties express or implied whether statutory or otherwise
and any other obligations and liabilities whatsoever of RRC
relating to the Repair of Supplies or any other goods or
services to be supplied pursuant to this Agreement.
10.4 The following Warranty benefits will apply for the purpose on
sub-clause 6.1 hereof:
10.4.1 In respect of all Parts incorporated in the course of
Work pursuant to this Agreement, the Warranty shall
apply subject to all the provisions contained therein.
10.4.2 Subject to the "Governing Conditions" section of the
Warranty, if it is shown to the reasonable satisfaction
of RRC that before the expiration of twelve months from
the date of redelivery or within six months or 1,500
hours flown from the date of installation of an Engine
or Part into an aircraft, whichever is the sooner, a
defect, deficiency, failure, malfunction or failure to
function shall have become apparent in an Engine or
Part due in all or in part to the use
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by RRC of faulty workmanship during the last Repair then
RRC shall Repair such Engine or Part and grant THE
OPERATOR a 100% credit against the Repair cost.
10.5 In the event of a valid Warranty claim, RRC will be
responsible for reasonable charges incurred by THE OPERATOR
for removal, installation and transportation from and to THE
OPERATOR's base in Raleigh, North Carolina, USA for Engines
removed pursuant to clause 10.4 above.
Clause 11 PATENTS
11.1 RRC shall have the right to substitute for any allegedly
infringing Parts substantially equivalent non-infringing
Parts.
11.2 The indemnity contained in Sub-clause 11.1 shall not apply to
and RRC shall have no liability in respect of claims for
infringement in respect of;
11.2.1 Parts manufactured to the specific design instructions
of THE OPERATOR, or
11.2.2 Parts not of RRC design but RRC shall, in the event of
any claim for infringement, pass on to THE OPERATOR so
far as it has the right to do so the benefits of any
indemnity given to RRC by the designer, manufacturer or
supplier of such Parts, or
11.2.3 the manner or method in which any of the Parts is
installed in the aircraft, or
11.2.4 any combination of any of the Parts with any item or
items other than Parts.
Clause 12. ADDITIONAL LEVIES
12.1 All and any applicable taxes and import duties, fees are
to the account of THE OPERATOR
Clause 13 ASSIGNMENT
Neither party may assign any of its rights or obligations hereunder
without the written consent of the other party except that;
13.1 RRC may assign its rights to receive money hereunder and
13.2 RRC reserves the right, in its discretion, to sub-contract any
part of the Work requested to be performed by it hereunder.
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Clause 14 TERMINATION
If THE OPERATOR makes any agreement with creditors compounding
debts, enters into liquidation whether compulsory or voluntary
(otherwise than for the purpose of amalgamation or re-construction)
becomes insolvent, suffers a receiver of the whole or part of its
assets to be appointed, or commits a breach of any of its
obligations under this Agreement (provided that, except in the case
of breach in respect of payment obligations, THE OPERATOR shall be
allowed 30 (thirty) days in which to remedy such breach) RRC shall
have the right, without prejudice to its other rights or remedies:
14.1 to stop any Repair or Overhaul already commenced and to refuse
to commence any further Repair or Overhaul, and
14.2 to revise the charges under Clause 18 to take account of any
cessation or change in the overall operation of the Engines
resulting from any of the events covered by this Clause 14,
and
14.3 to declare and require that notwithstanding Clause 7 above,
all amounts due on the date of termination referred to in
Clause 18 shall become immediately due and payable.
Clause 15 AMENDMENT
This Agreement shall not be amended in any way other than by
agreement in writing executed by the parties hereto after the date
of this Agreement, which is expressly stated to amend this
Agreement.
Clause 16 CONFLICT
In the event of any conflict or discrepancy between the Appendices
forming part of this Agreement and any other part of this Agreement,
then the latter shall prevail.
Clause 17 NOTICES
Any notice to be served pursuant to this Agreement is to be sent by
registered post or by telex:
In the case of RRC to:
ROLLS-ROYCE CANADA LIMITEE
Repair and Overhaul Manager - Spey and Tay
9500 Cote de Liesse Road
Lachine, Quebec Canada H8T 1A2
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or such other place of business as may be notified in writing by RRC
to THE OPERATOR from time to time.
In this case of THE OPERATOR to:
Midway Airlines Corporation
300 West Morgan Street
Suite 1100
DURHAM
North Carolina USA 27701
for the attention of Vice President Maintenance
or such other place of business as may be notified in writing by THE
OPERATOR to RRC from time to time.
Clause 18 TERM OF AGREEMENT
The Term of this Agreement shall be for a period commencing October
1, 1997 and terminating September 30, 2002 provided that either
party shall have the right to terminate this Agreement at any time
by written notice to the other party in the event of material breach
or non-performance by such other party of any of its obligations
herein not cured within thirty (30) days after receipt of written
notice of such breach or non-performance.
Clause 19 HEADINGS
The clause "Headings" and the Index do not form part of this
Agreement and shall not affect the interpretation of this Agreement.
Clause 20 LAW
This Agreement shall be subject to and interpreted and construed in
accordance with the Laws of the Province of Quebec, Canada.
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IN WITNESS WHEREOF the parties hereto have caused this Agreement to be entered
into on the day and year first before written.
For ROLLS-ROYCE CANADA LIMITEE
By: /s/ [Illegible]
----------------------------
V. P. Aero Business
Date: 13.11.97
By: /s/ [Illegible]
----------------------------
President
Date: Nov. 14th, 1997
For MIDWAY AIRLINES CORPORATION
By: /s/ Jonathan S. Waller
----------------------------
JONATHAN S. WALLER
SENIOR VICE PRESIDENT
GENERAL COUNSEL
Date: 9/30/97
By: /s/ Thomas Duffy, Jr.
----------------------------
V.P. Maintenance
Date: 9/30/97
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APPENDIX "A"
DESCRIPTION AND LIST OF THE ENGINES
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APPENDIX "A"
1. LIST OF ENGINES
The following RRC Tay Mk 650-15 Engines serially numbered:
17329, 17354, 17525, 17588, 17610, 17611, 17630, 17631, 17634, 17636,
17690, 17691, 17704, 17706, 17717, 17721, and another engine, TSN: Zero,
S/N to be advised.
Description: Turbofan Engine incorporating a single fan and a three stage
intermediate compressor driven by a three stage turbine, a
twelve stage high pressure compressor driven by a two stage
turbine, and a turbo annular split combustion chamber
containing ten straight flow flame tubes and an internal
mixer unit.
2. MODULES
Each Engine comprises the following modules:
01 LP Compressor
02 IP Compressor
03 HP Compressor
04 Combustion Assembly and HP Turbine
05 LP Turbine
06 High Speed Gearbox
07 Intermediate Casing
Together with these items the definitive basic specification includes the
following:
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ENGINE RECEIPT LIST
TAY ENGINE
PART 1 SECTION 1
Item
Fig. Number Description Qty. ATA Ref
- ---- ------ ----------- ---- -------
1 1 AFCR assembly 1 75-32-02
1 2 TCPL phial assembly 1 75-32-40
1 3 Micro switch and actuator 1 36-11-01
1 4 12th stage BV micro switch housing assy 1 75-32-33
1 5 12th stage air off-take cover 1 72-71-01
1 6 7th stage air off-take cover 1 72-71-01
1 7 Fuel temp transmitter 1 77-42-02
1 8 Oil cooler case assembly 1 79-22-01
1 9 Oil temperature transmitter 1 77-47-02
1 10 HP filter housing assembly 1 79-21-01
1 11 LP FWS assembly 1 73-34-01
1 12 Fuel filter assembly 1 73-11-03
1 13 LP tacho generator 1 77-43-01
2 14 Throttle relay lever transmitter 1 76-11-02
2 15 Fuel flow regulator 1 73-21-01
2 16 LP governor assembly 1 73-21-02
2 17 HP fuel shut-off valve assembly 1 73-11-07
2 18 AFC rpm signal transmitter assembly 1 75-32-20
2 19 Fuel diff pressure switch 1 77-42-03
2 20 HP fuel pump 1 73-11-05
2 21 Oil tank assembly 1 79-10-01
2 22 Oil tank level indicator 1 79-10-01
2 23 LP warning switch 1 79-32-01
2 24 Oil pressure trans assembly 1 77-47-01
2 25 Ejector pump unit 1 73-11-01
2 26 Fuel drain tank collector assembly 1 71-71-01
2 27 IDG surface oil cooler 1 24-13-01
2 28 Thermocoup1e terminal 1 77-45-03
2 29 Cooling air outlet switch assembly 1 75-21-02
2 30 Oil diff pressure switch 1 77-47-02
2 31 Oil diff pressure switch housing 1 77-47-02
2 32 Oil pump assembly 1 72-61-30
2 33 HP tacho generator 1 77-43-01
2 34 LP fuel pump assembly 1 73-11-04
2 35 Fuel inlet tube to LP fuel pump clamp assy 1 73-21-06
2 36 Fuel solenoid valve assembly 1 73-21-06
3 39 Engine rating, ID plug 1 72-71-03
3 40 Electrical harness 1 71-50-01
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APPENDIX B
PLANNED OPERATING PARAMETERS
Stage Length: Average (take-off to touch down) of not less than 45 minutes.
Environment: Canada and the United States of America for 70% of Flight
Hours of the Engines.
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